SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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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 0-11877
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ELXSI CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 77-0151523
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
4209 Vineland Road, Suite J-1, Orlando, Florida 32811
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 849-1090
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
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(Title of 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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing price of the Common
Stock on March 14, 1997, as reported by NASDAQ, was $21,490,000. On March 14,
1997, the Registrant had outstanding 4,660,866 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 22, 1997 are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
ELXSI Corporation (the "Company") is a Delaware corporation that was formed in
September 1980 as Trilogy Limited, a Bermuda corporation. The Company changed
its name to ELXSI Ltd. in January 1987, and changed its incorporation from
Bermuda to Delaware and became known as ELXSI Corporation in August 1987. A
public company since November 1983, the Company acquired ELXSI ("ELXSI"), a
California corporation, in October 1985. In December 1987, the Company's other
California subsidiary, Trilogy Systems Corporation was merged into ELXSI.
In September 1989 and January 1990, the Company entered into Stock and Note
Purchase Agreements (the "Stock Purchase Agreement") with and among, The Airlie
Group L.P. ("Airlie"), Continental Illinois Equity Corporation ("CIEC") and
Milley & Company ("M&C") (hereinafter referred to collectively as the "Buyers")
whereby the Buyers acquired 960,000 shares, par value $.001 per share ("Common
Stock"), $2,000,000 aggregate principal amount of the Company's notes and
warrants to purchase 1,204,000 shares (adjusted for a 1-for-25 reverse stock
split effected in May 1992) of the Company's common stock. Subsequent to these
transactions, the Company announced its intention of pursuing a program of
identifying, acquiring and managing middle-market companies. The Company is not
limiting its opportunities to any single industry.
On July 1, 1991, ELXSI acquired 30 restaurants operating under the Bickford's or
Bickford's Family Fare names and 12 Howard Johnson's restaurants operating under
the Howard Johnson's name, which were located in Massachusetts, Vermont, New
Hampshire, Rhode Island and Connecticut, from Marriott Family Restaurants, Inc.
("Marriott") for a purchase price of approximately $23,867,000 (including
transaction fees and costs).
Between 1991 and 1995, ELXSI sold six of its Howard Johnson's restaurants and
converted five of the remaining six Howard Johnson's into Bickford's Family
Restaurants. During the same period, ELXSI opened seven new Bickford's Family
Restaurants and acquired sixteen Abdow's Family Restaurants ("Abdow's"). ELXSI
subsequently converted two Abdow's into Bickford's Family Restaurants. During
1996, ELXSI converted an additional seven Abdow's into Bickford's Family
Restaurants, opened one additional Bickford's, sold one Abdow's and closed one
Abdow's. At December 31, 1996 ELXSI operated fifty-two Bickford's Family
Restaurants ("Bickford's"), five Abdow's and one Howard Johnson's Restaurant, in
its Bickford's Family Restaurant division (the "Bickford's Division" or
"Restaurant Division"). As used herein the term "Restaurants" refers to the
Bickford's, Abdow's and Howard Johnson's restaurants owned and operated in the
Restaurant Division.
On October 30, 1992, ELXSI acquired Cues, Inc., of Orlando, Florida and its two
wholly-owned subsidiaries, Knopafex, Ltd., of Toronto, Canada, and Cues B.V., of
Maastricht, The Netherlands. The Cues business in the United States is owned and
operated as a division of
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ELXSI, and such division, Knopafex Ltd. and Cues B.V. are hereinafter
collectively referred to as "Cues" or the "Cues Division". Cues is principally
engaged in the manufacture and servicing of video inspection and rehabilitation
equipment for wastewater and drainage systems primarily for governmental
municipalities, service contractors and industrial users.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Reference is made to the information set forth in Note 12 (Segment Reporting) to
the Consolidated Financial Statements included herein, which information is
hereby incorporated by reference herein.
RESTAURANT DIVISION
The Restaurant Division sales were $61,283,000, $54,270,000 and $43,391,000 in
1996, 1995 and 1994, respectively. Restaurant Division sales represented 74.1%,
72.7% and 69.5% of the total sales of the Company during 1996, 1995 and 1994,
respectively.
The Restaurants are family-oriented and offer full service and relatively
inexpensive meals. Featuring a breakfast menu available throughout the day, the
Restaurants appeal to customers who are interested in a casual, low-to
moderately-priced meal. The Company has been successful in marketing the
breakfast menu concept to customers regardless of the time of day, and has
expanded lunch and dinner patronage by also offering improved traditional lunch
and dinner items. Most menu items are priced between $2.79 and $7.49, with the
average customer check being approximately $5.24, $5.12 and $4.96 in 1996, 1995
and 1994, respectively. Major categories of menu items are pancakes, waffles and
french toast, eggs and omelettes, "country" dinners, soups and side orders,
salads, hamburgers and sandwiches, and desserts. Breakfast items and coffee
accounted for approximately 70% of food sales in each of the past three fiscal
years.
Each Restaurant is open seven days a week, with most generally open from 7:00
a.m. to 11:00 p.m. during the week and later on weekends and with some open
twenty-four hours on the weekends. Some Restaurants are open twenty-four hours
every day. Approximately 60% of weekly sales volume has been generated Friday
through Sunday in each of the past three fiscal years.
While the Company believes that the Restaurants appeal to a wide variety of
customers, they primarily cater to senior citizens and families which are
attracted to the high-quality, low-to moderately-priced meals. Each Restaurant
generally draws its customers from within a five-mile radius and, consequently,
repeat business is extremely important to the Restaurant Division's success. The
Company believes that repeat business has accounted for a majority of the
Restaurant sales.
Each of the original 30 Bickford's consists of a free standing building that
covers approximately 2,700 to 7,000 square feet, and they are typically located
adjacent to major roads and highways and shopping malls. Nearly all contain two
dining areas, smoking and non-smoking. At
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December 31, 1996, 12 of the Restaurant buildings were owned, while the
remaining 46 restaurants were either leased or owned buildings on leased land.
Each Restaurant has a kitchen equipped with grill space and ovens for service of
baked foods. Seating capacity ranges from 100 to 200 people. Five of the
Bickford's Restaurants provide counter service.
Restaurant Expansion and Renovation
The acquisition by ELXSI provided an opportunity to renovate the existing
Restaurants and to acquire additional locations. Capital expenditures during the
years ended December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Expansion $ 483,000 $ 221,000 $ 485,000
Conversions 747,000 243,000 86,000
Purchase Leased Property -- -- 346,000
Renovation 384,000 415,000 95,000
Replacement due to fire loss 249,000 -- --
Refurbishment & Equipment 1,028,000 1,088,000 1,003,000
----------- ----------- -----------
$ 2,891,000 $ 1,967,000 $ 2,015,000
=========== =========== ===========
Acquisition of Abdow's $ -- $ 2,575,000 $ --
=========== =========== ===========
</TABLE>
All of the above capital expenditures except for the 1995 acquisition of
Abdow's, were funded by earnings from operations. The acquisition of Abdow's in
1995, was funded by an increase in ELXSI's then existing line of credit with
Bank of America Illinois.
The Company currently plans to spend $1,950,000 for renovations, refurbishments
and equipment replacements and $800,000 for Restaurant expansion during 1997.
Management believes that earnings from operations will be sufficient to fund
this planned program in addition to other funding requirements.
The Company believes that increased profitability of the Restaurants will come
mainly from gaining market share by continuing its programs to improve food
products and service, and through its programs of refurbishing existing units,
opening new units, and to a lesser extent, from price increases. The Company
believes that it is partially due to the foregoing that sales at the original 30
Bickford's have increased.
Sales at 29 of the original Bickford's Restaurants, (excluding from 1996 the
Brockton, MA Restaurant, which was damaged by fire during 1996) increased 1.6%
in 1996, 1.3% in 1995 and 6.1% in 1994 (including a 53rd week), over the prior
year's sales; customer counts at these 29 Bickford's Restaurants were flat in
1996, increased 1.8% in 1995 and increased 1.5% in 1994 (including a 53rd week),
over the prior year's counts; sales at same Restaurants, including the five
converted and one remaining Howard Johnson's units, increased 0.7% in 1996, 0.4%
in 1995 and
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5.8% in 1994 (including a 53rd week), over the prior year's sales, and customer
counts at same Restaurants decreased 0.8% in 1996, decreased 3.4% in 1995 and
increased 1.2% in 1994 (including a 53rd week), over the prior year's counts.
The foregoing comparisons are impacted by the fact that the Restaurant
Division's 1994 fiscal year comprised 53 weeks, as compared to 52 for each of
1995 and 1996. See the second paragraph of "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Results of Operations"
herein.
The Company takes an opportunistic approach to Restaurant Division expansion.
Management evaluates both purchase and lease opportunities, and, in most
instances, the Company favors opening new Restaurants utilizing leased
properties. The Company will generally open a new Restaurant only if it can
reasonably be expected to meet the Company's return on investment criteria,
which is generally an annual return on the investment of approximately 25% to
30%.
Restaurant Management and Supervision
Each Restaurant has a manager and one to three assistant managers, at least one
of whom must be on duty at all times during restaurant hours. The managers are
responsible for hiring all personnel at the Restaurant level, managing the
payroll and employee hours and ordering necessary food and supplies. The
Bickford's Division has nine district managers who, between them, cover all the
Restaurants. The district managers are responsible for the complete operation of
the Restaurants located in assigned geographical areas, including responsibility
for sales, profits and compliance with all operational policies and procedures.
The district managers, managers and assistant managers are all salaried
personnel, but are also compensated with performance incentives which can
provide a significant portion of their total compensation. Bonuses paid under
the program are based principally upon monthly sales volume, attainment of
certain cost targets and store profitability.
Sources and Availability of Materials
Food supplies are distributed by various Company-approved wholesalers and
purveyors, which deliver directly to each Restaurant based on the quoted cost of
individual food items. Essential supplies and raw materials are available from
several sources, and the Company is not dependent upon any one supplier for its
food supplies. These purchases from suppliers are generally done on a
verbal-purchase-order basis and without any long-term commitments or contracts.
The Company does not maintain or engage in any warehousing or commissary
operations.
Seasonality
The Restaurants experience slightly higher revenues in the summer months.
Customers
The Restaurants are not dependent upon a single customer or group of customers,
although a large portion of each Restaurant's customers live within a five mile
radius thereof and,
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accordingly, repeat customers are important to the Bickford's Division's
success. See the fourth paragraph of "Restaurant Division" above.
Competition
The Restaurants are in direct competition with many local restaurants providing
family-oriented meals, some of which are owned, operated and/or franchised by
national and regional chains, many of whom are larger and have greater financial
resources than the Company. The restaurant business is highly competitive with
respect to price, service, location and food quality. The Company believes that
its attention to quality and service, along with its low-to moderately-priced
menu items, will continue to attract customers. In 1995, the Company noticed an
increase in the number of restaurants offering buffet-style dining in New
England. The Company believes that the freshness of its food and its reasonable
pricing compare favorably to these buffet concepts.
Employees
At December 31, 1996, the Restaurant Division employed approximately 2,650
persons, of whom approximately 2,200 were part-time hourly employees,
approximately 230 were full-time hourly employees and approximately 220 were
salaried personnel. This represents an increase since December 31, 1995 of
approximately 150 persons, consisting mainly of part-time employees. None of the
Restaurant Division's employees are represented by a union.
Environmental Matters
The Restaurant Division is subject to various federal, state and local laws,
rules and regulations relating to the protection of the environment that are
typical for companies in its industry. Management believes that compliance
therewith will have no material effect on its capital expenditures, earnings or
competitive position.
CUES DIVISION
The Cues Division sales were $21,460,000, $20,404,000 and $19,032,000 in 1996,
1995 and 1994, respectively. Cues Division sales represented 25.9%, 27.3% and
30.5% of the total sales of the Company during 1996, 1995 and 1994,
respectively.
Cues manufactures systems which utilize closed circuit television and highly
specialized rehabilitation equipment to inspect and repair underground sewer
lines. The infiltration of groundwater into sewer pipelines through leaking
joints and pipe fractures unnecessarily burdens the capacity of sewage treatment
plants by increasing the volume of fluids being treated. Leaking joints and pipe
fractures can also contribute to sewer line damage that can be repaired, in
severe cases, only by costly excavation. Cues installs its systems in specially
designed trucks and vans which are sold as mobile units. Cues also provides
product servicing and replacement parts for its customers and distributes
chemical grout sealants used in connection with its sealing equipment.
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The principal customers of Cues are municipalities and contractors engaged in
sewer inspection and repair. Cues is not engaged in the service business of
maintaining and repairing sewer lines.
Inspection and Rehabilitation Equipment
Cues's inspection and sealing equipment constitutes an integrated system that
combines the capability of inspecting underground sewer lines with remote
control television cameras and creating a permanent maintenance record of the
condition of the sewer lines; pressure testing sewer line joints; and applying
chemical sealants to repair leaking joints and small pipe fractures. In
addition, Cues manufactures and sells a line of remotely operated robotic
cutting devices. These devices reinstate or open the laterals sewer lines, which
are smaller diameter pipes leading from residences or businesss into the main
sewer pipes, after the laterals have been blocked by the material used in
relining the main sewer pipe's interior surface.
Cues's inspection, cutting and sealing systems are placed in sewer lines through
manholes. The television camera, positioned using either a motorized transporter
or pulled on a skid assembly, relays a television picture of the interior of
that sewer line via cable to a monitoring station in a mobile unit above ground.
The television inspection system employs a three-inch-diameter color camera that
can be remotely adjusted for close-up viewing of problem areas. By recording the
position of the camera as it moves through the sewer lines, the Cues's
inspection and sealing equipment gives the customers a permanent record of the
condition of their sewer lines. If the television camera inspection of the sewer
lines discloses a leaking joint or pipe fracture, sealing equipment can be
introduced and positioned through use of the camera to make the repair. Once the
sealing module is positioned, inflatable packers seal off the line at either end
of the damaged area and a chemical sealant is applied that penetrates the leak
or fractures as well as the earth surrounding the pipe, hardening to seal the
line. The sealing module may also be used to determine the structural integrity
of the joint by applying air or water pressure against the walls of the joint.
This pressure test enables the customers to detect leaking joints that may not
be easily detected visually.
The sealing module manufactured by Cues is used to repair sewer lines where
infiltration or inflow of water occurs through leaking joints and pipe
fractures. Repairs can last 20 years or more, depending upon the structural
soundness of the sewer line or repaired joints. Cues's sealing equipment is not
designed to repair a severely damaged or collapsed pipe, which must be excavated
and replaced in the traditional manner or repaired by the use of other sewer
line repair technologies such as relining. However, Cues's Kangaroo cutting
system is often used to inspect and repair, through its cutting capabilities,
structurally deficient or collapsed sewer lines. Cues has also developed a line
of equipment for use in the inspection, but not the repair, of underground water
wells, dams, industrial pipe, potable water lines and large-pipe storm drains.
Cues also manufactures and sells a line of portable television inspection
equipment used primarily for inspection of lateral pipes ranging in size from 2
to 6 inches.
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Product Servicing, Replacement Parts and Chemicals
Cues provides product servicing and repairs at its facilities in Orlando,
Florida; Toronto, Canada and Maastricht, The Netherlands. In Orlando, Cues also
maintains an inventory of replacement parts for distribution and sale to
customers. Cues generally warrants that all parts, components and equipment that
it manufactures will be free from defects in material and workmanship under
normal and intended use for a period of twelve months from the date of shipment
to the customer. Major items of equipment such as vehicles, generators, etc.,
furnished to, but not manufactured by, Cues, are covered under the warranty of
the third-party manufacturer of such equipment. Cues recorded warranty expense
of approximately $287,000, $255,000 and $196,000, during the years 1996, 1995
and 1994, respectively.
Product Development
Cues has an ongoing program to improve its existing products and to develop new
products. During the twelve months ended December 31, 1996, 1995 and 1994,
approximately $248,000, $311,000 and $287,000, respectively, was expended by
Cues for product development, (excluding, in each case, the compensation and
benefits expense of engineering department personnel, which comprises a
significant portion of research and development efforts). Although Cues holds
United States patents for components of its products, management believes the
expiration or invalidity of any or all of such patents will not have a material
adverse effect on its business. For 1997, Cues currently plans to spend
approximately $300,000 (exclusive of such personnel expenses) for product
development activities.
Source and Availability of Raw Materials
Cues manufactures certain components of its system and purchases others
including, television camera modules, monitors, video recorders, vehicles, which
are readily available from a number of sources. These purchases from suppliers
are done on a purchase order basis and without any long-term commitments or
contracts.
Cues has agreements with Orlando, Florida truck dealers to deliver truck bodies
that are used in the manufacture of Cues's mobile units. Under these agreements,
Cues reimburses the dealers' floor plan financing costs for those vehicles held
by the dealer until delivery. Cues does not have any other commitments or
contracts with its truck dealers. Management believes that alternative sources
for truck chassis are available and that the loss of any current dealer would
not have a material adverse effect on Cues.
Marketing
Cues markets its products and services in the United States though nine direct
salesmen. In certain geographic areas of the country, Cues markets it products
and services through independent representatives which are non-exclusive (to
Cues), none of whom accounted for more than 5% of the Cues Division's revenues
in any of the last three years. The Company believes that the loss of any of
these salesman or representatives would not have a material
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adverse effect on the Cues Division. Cues also employees technical service
representatives located in Orlando, Toronto and Maastricht. Cues's major
customers include municipalities and contractors engaged in sewer line
inspection and repair as well as privately-owned sewer systems. No customer
accounted for more the 5% of Cues's 1996, 1995 or 1994 sales. Cues participates
in trade shows and uses trade magazine advertising in the marketing of its
products and services. The Cues name is well-established, affording it and its
products wide recognition within its industry.
Outside North America, Cues markets its products in five continents, either
directly or through non-exclusive (to Cues) independent distributors, agents or
dealers, none of whom accounted for more than 5% of the Cues Division's revenue
in any of the last three years. During 1996, 1995 and 1994, export sales to
foreign countries represented approximately 16%, 14% and 16% of total Cues
sales, respectively. The vast majority of equipment sales to customers in
foreign countries are arranged under U.S. dollar-denominated letters of credit
agreements and therefore the currency and payment risk are minimized.
The Cues Division historically has not experienced any material problems or
risks in distributing and selling products outside the United States, other than
those normally associated with such efforts (e.g., language barriers, time
differences, customs regulations and complications relative to the conforming of
equipment to local electronic, video, vehicle and other standards).
Competition
Competition for the type of products sold by Cues is based mostly on price, and
also service and reliability. Management believes that it competes effectively
in each of these respects. Management also believes that there are six companies
which produce and sell products which are competitive with those produced by
Cues. A significant portion of sales are generated through a bidding process
initiated by municipalities. This process is extremely price sensitive,
requiring Cues to meet or beat competitors' bids in order to secure sales.
Employees
At December 31, 1996 Cues had 128 full and part-time employees. This includes
five employees of Knopafex, Ltd. and four employees of Cues B.V. None of the
Cues Division employees are represented by a union.
Environmental
The Cues Division is subject to various federal, state and local laws, rules and
regulations relating to the protection of the environment that are typical for
companies in its industry. Management believes that compliance therewith has had
no material effect on its capital expenditures, earnings or competitive
position.
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ITEM 2. PROPERTIES
ELXSI leases land and/or buildings at 46 of its 58 restaurants, under lease
agreements expiring (including extension options) on various dates through 2032.
The majority of these leases require ELXSI to pay taxes, maintenance, insurance
and other occupancy expenses related to the leased premises. The rental payments
for a majority of the Restaurant locations are based upon minimum annual rental
payments and a percentage of their respective sales.
Below is a summary of the Restaurant properties as of December 31, 1996.
Howard
Bickford's Johnson's Abdow's Total
---------- --------- ------- -----
Massachusetts: Owned 8 -- -- 8
Leased 25 1 3 29
Connecticut: Owned 2 -- -- 2
Leased 5 -- 2 7
Rhode Island: Owned -- -- -- --
Leased 5 -- -- 5
New Hampshire: Owned 2 -- -- 2
Leased 5 -- -- 5
Total: Owned 12 -- -- 12
Leased 40 1 5 46
ELXSI also owns a 4,000 square foot building in Boston, Massachusetts, which is
used for its Restaurant Division management and administrative headquarters, and
a 26,000 square foot office and manufacturing facility in Orlando, Florida for
its Cues Division. In addition, Cues B.V. owns an office and manufacturing
facility in Maastricht, The Netherlands, and Knopafex, Ltd. rents office and
manufacturing space in Toronto, Canada.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings (other than ordinary routine
litigation incidental to the business) to which the Company or its Subsidiary or
of which any of their respective properties is the subject, nor are there any
proceedings known to be contemplated by governmental authorities against the
Company or its Subsidiary.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to vote of shareholders during the fourth
quarter of 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's Common Stock is traded in the over-the-counter market and quoted
in the automated quotation system of the National Association of Securities
Dealers, Inc.- National Market System ("NASDAQ"), under the symbol ELXS. The
following table sets forth high and low closing sales prices for the fiscal
quarters indicated, as reported by NASDAQ.
1996 1995
----------------- -----------------
High Low High Low
---- --- ---- ---
First Quarter $6.88 $5.50 $7.38 $5.00
Second Quarter 7.63 5.25 7.13 5.63
Third Quarter 6.63 4.88 7.81 5.88
Fourth Quarter 6.63 4.88 6.50 4.88
On March 14, 1997, the reported last sale price for the Company's Common Stock
in NASDAQ was $6.50 per share. The above quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Holders
As of March 14, 1997 there were 5,882 holders of record of the Company's Common
Stock.
Dividend History
The Company has never paid any dividends, nor is there current intention to pay
any dividends in 1997, however management will consider paying dividends in the
future.
Stock Transfer Agent
The Company's stock transfer agent is Continental Stock Transfer and Trust Co.,
2 Broadway, New York, New York 10004, (212) 509-4000.
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ITEM 6. SELECTED FINANCIAL DATA
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 82,743 $ 74,674 $ 62,423 $ 55,682 $ 38,139
Costs and Expenses:
Cost of sales (66,603) (58,347) (47,440) (41,338) (29,168)
General and administrative (7,362) (7,484) (6,630) (6,406) (2,761)
Depreciation and amortization (2,775) (2,206) (1,794) (1,589) (1,138)
Interest income 111 125 8 -- --
Interest expense (1,495) (1,767) (1,426) (1,653) (1,496)
Other income (expense) 432 65 (41) (80) 222
Benefit (provision) for income taxes 2,332 (514) (366) (348) (260)
---------- ---------- ---------- ---------- ----------
Net income $ 7,383 $ 4,546 $ 4,734 $ 4,268 $ 3,538
========== ========== ========== ========== ==========
Net income per common share
Primary $ 1.51 $ 0.89 $ 0.79 $ 0.72 $ 0.68
========== ========== ========== ========== ==========
Fully diluted $ 1.51 $ 0.89 $ 0.79 $ 0.69 $ 0.68
========== ========== ========== ========== ==========
Weighted average number of common
and common equivalent shares
Primary 4,902 5,093 6,014 5,947 5,212
========== ========== ========== ========== ==========
Fully diluted 4,902 5,093 6,014 6,234 5,211
========== ========== ========== ========== ==========
Other Data:
Working capital $ 8,649 $ 2,438 $ (423) $ 471 $ (1,391)
Total assets 59,478 47,699 40,516 38,520 35,202
Capitalized leases and long term debt 20,704 14,924 12,304 12,016 13,541
Stockholders' equity 28,913 22,714 19,398 18,126 13,885
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
See Note 1 to the Consolidated Financial Statements for background on the
Company. The Company's focus continues to be identifying, acquiring, managing
and operating selected middle market companies.
Both the Company's corporate functions and Cues Division have fiscal years
consisting of four calendar quarters ending on December 31. The Restaurant
Division's fiscal years consist of four 13-week quarters (and, accordingly, one
52-week period) ending on the last Saturday in December; this requires that
every six or seven years the Restaurant Division add an extra week at the end of
the fourth quarter and fiscal year. This was the case in the fourth quarter of
1994.
YEAR ENDED DECEMBER 31, 1996
The Company's 1996 revenues and expenses resulted from the operation of ELXSI's
Restaurant and Cues Divisions and the Company's corporate expenses
("Corporate").
Restaurant Division. The Restaurants had sales of $61,283,000, cost of sales of
$50,990,000, selling, general and administrative expenses of $1,956,000 and
depreciation and amortization expense of $2,318,000, which yielded operating
income of $6,019,000. In addition, the Restaurants had $246,000 of interest
expense related to the amortization of deferred financing fees and capital
leases, and other income of $227,000 related mainly to a gain on the replacement
of assets lost in a Restaurant fire, resulting in income before taxes of
$6,000,000.
Cues Division. Cues had sales of $21,460,000, cost of sales of $15,613,000,
selling, general and administrative expenses of $4,056,000 and depreciation and
amortization expense of $457,000, which yielded operating income of $1,334,000.
In addition, Cues had $42,000 of interest expense, $5,000 of other income and
$45,000 of tax expense, resulting in income before taxes of $1,252,000.
Corporate. Corporate general and administrative expenses were $1,350,000. The
major components of these expenses were the compensation accrual related to the
Bickford's Phantom Stock Option Plan (see the Company's proxy statement for
further information), management fees paid to Cadmus Corporation ("Cadmus")
under a management agreement (see NOTE 6 to the Consolidated Financial
Statements of the Company), legal expenses, Corporate and Bickford's audit
expenses, and stockholder services and financial reporting expenses.
The terms of the Cadmus management agreement provide for Cadmus to provide the
Company with advice and services with respect to the Company's business and
financial management and long-range planning. Specific examples of services
historically rendered to the Company under
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this management agreement include: (a) ongoing hands-on evaluation of Company
and division management; (b) direct management of a portfolio of restaurants;
(c) preparing and reviewing division operating budgets and plans; (d) evaluating
new restaurant locations and menu changes; (e) identifying, and assisting in the
divestiture of, under-performing assets; (f) evaluating financing options and
negotiating with lenders; (g) assisting in the compliance with securities laws
and other public reporting requirements; (h) communicating with stockholders;
(i) negotiating and arranging insurance programs; (j) monitoring tax compliance;
(k) evaluating and approving capital spending; (l) cash management services; (m)
preparing market research; (n) developing and improving management reporting
systems; and (o) identifying and evaluating acquisition candidates and
investment opportunities. It is through the Cadmus management agreement that the
Company is provided the non-director services of: Mr. Milley (except in his
capacity as President of Cues, for which he is directly compensated by ELXSI),
the Company's Chairman of the Board, President and Chief Executive Officer;
Thomas R., Druggish, the Company's Vice President, Treasurer and Secretary; and
Kevin P. Lynch, a Vice President and Director of the Company.
Corporate interest expense was $1,207,000, consisting of senior bank debt
interest of $1,045,000 and senior subordinated note interest of $162,000. The
Company's senior bank debt lender is Bank of America Illinois; NOTE 7 to
Consolidated Financial Statements of the Company includes information regarding
the terms of the bank debt.
During 1996, the Company recorded a current consolidated tax provision of
$504,000 and a deferred tax benefit of $2,881,000, resulting in a net income tax
benefit of $2,332,000 at the corporate level. The deferred tax benefit was
recorded in accordance with Statement of Accounting Standards Number 109
"Accounting For Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of other
assets and liabilities. Management evaluated the likelihood of future earnings
during the remaining life of the net operating loss carryforwards and the
anticipated realization of the tax loss carryforwards in determining the amount
of the deferred tax asset to record. The utilization of the Company's net
operating loss and tax credit carryforwards may be impaired or reduced under
certain circumstances. Events which may affect these carryforwards include, but
are not limited to, cumulative stock ownership changes of 50% or more over a
three-year period, as defined, and the timing of the utilization of the tax
benefit carryforwards. Such changes in ownership would significantly restrict
the Company's ability to utilize loss and credit carryforwards in accordance
with sections 382 and 383 of the Internal Revenue Code ("IRC"). Management
recognizes that it is limited in its ability to prevent such cumulative changes
in ownership from occurring. If a change of ownership were to occur, factors
such as the number of common shares issued and outstanding, the market price of
such shares, short term treasury rates, etc., are used under the current tax
laws to determine the amount of the tax loss carryforward that can be utilized
each year. In the event that a change in ownership does not take place, the
Company may be able to recognize the benefit of additional loss carryforwards.
At December 31, 1995, the Company maintained a 100% valuation allowance to
account for the potential limitations imposed by IRC 382 and 383, as well as to
give effect to uncertainties
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surrounding the future success of restaurant acquisitions and manufacturing
consolidations undertaken during the year.
During 1996, a portion of the valuation allowance was released based upon the
success of restaurant conversions and manufacturing consolidations which had
begun in 1995. Accordingly, the Company recognized a $2,881,000 net deferred tax
asset. The net deferred tax asset represents the amount of net operating loss
and credit carryforwards which management believes are more likely than not to
be realized in the future. At the end of 1996 and 1995, the Company believed
that it would have a change of ownership of 50% or more.
Recording the deferred tax benefit in 1996 resulted in an increase in net income
and earnings per share of $2,881,000 and $.59, respectively. It is uncertain,
due to the unpredictable nature of the factors involved in determining the
deferred tax asset, what impact SFAS 109 will have on future results.
Earnings Per Share. Earnings per share and the weighted average number of shares
outstanding were $1.51 and 4,902,000, respectively. This compares to $0.89 per
share for 1995, when there were 5,093,000 shares outstanding (on a weighted
average basis). The average stock price during 1996 and 1995 was $5.83 and
$6.12, respectively. The market price at December 31, 1996 and 1995 was $6.63
and $6.125, respectively.
YEAR ENDED DECEMBER 31, 1995
The Company's 1995 revenues and expenses resulted from the operation of ELXSI's
Restaurant and Cues Divisions and the Company's corporate expenses
("Corporate").
Restaurant Division. The Restaurants had sales of $54,270,000, cost of sales of
$43,729,000, selling, general and administrative expenses of $1,620,000 and
depreciation and amortization expense of $1,833,000, which yielded operating
income of $7,088,000. In addition, the Restaurants had $297,000 of interest
expense related to the amortization of deferred financing fees and capital
leases, resulting in income before taxes of $6,791,000.
Cues Division. Cues had sales of $20,404,000, cost of sales of $14,618,000,
selling, general and administrative expenses of $4,425,000 and depreciation and
amortization expense of $373,000, which yielded operating income of $988,000. In
addition, Cues had $22,000 of interest expense, $2,000 of interest income,
$68,000 of other income and $4,000 of tax expense adjustments, resulting in
income before taxes of $1,032,000.
Corporate. Corporate general and administrative expenses were $1,439,000. The
major components of general and administrative expenses include the compensation
accrual related to the Bickford's Phantom Stock Option Plan, the management fees
paid to Cadmus, legal expenses, corporate and Bickford's audit expenses, and
stockholder services and financial reporting expenses. Interest expense was
$1,448,000, consisting of senior bank debt interest of $1,275,000 and senior
subordinated note interest of $173,000. In addition, the Company recorded
interest
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income of $123,000, other expense of $3,000 and a consolidated tax provision of
$510,000 at the corporate level.
Earnings Per Share. Earnings per share and the weighted average number of shares
outstanding for the year ended December 31, 1995 were $0.89 and 5,093,000,
respectively. The average stock price during 1995 was $6.12 and the market price
at December 31, 1995 was $6.125.
YEAR ENDED DECEMBER 31, 1994
The Company's 1994 revenues and expenses resulted from the operation of ELXSI's
Restaurant and Cues Divisions and the Company's corporate expenses
("Corporate").
Restaurant Division. The Restaurants had sales of $43,391,000, cost of sales of
$34,234,000, selling, general and administrative expenses of $1,293,000 and
depreciation and amortization expense of $1,460,000, which yielded operating
income of $6,404,000. In addition, the Restaurants had $266,000 of interest
expense related to the amortization of deferred financing fees and capital
leases, resulting in income before taxes of $6,138,000.
The fifty-third week included in the 1994 results added approximately $810,000
in sales and, management estimates, approximately $200,000 in operating income.
Cues Division. Cues had sales of $19,032,000, cost of sales of $13,206,000,
selling, general and administrative expenses of $4,146,000 and depreciation and
amortization expense of $334,000, which yielded operating income of $1,346,000.
In addition, Cues had $32,000 of interest expense, $27,000 of other expense and
$5,000 of tax adjustments resulting in income before taxes of $1,282,000.
Corporate. Corporate general and administrative expenses were $1,191,000 in
1994. The major components of general and administrative expenses were the
management fees paid to Cadmus, the compensation accrual related to the
Bickford's Phantom Stock Option Plan, legal expenses, corporate and Bickford's
audit expenses, and stockholder services and financial reporting expenses.
Interest expense was $1,128,000, consisting of senior bank debt interest of
$418,000 and subordinated note interest of $710,000. In addition, the Company
recorded interest income of $8,000, other expense of $14,000 and a consolidated
tax provision of $361,000 at the corporate level.
Earnings Per Share. Earnings per share and the weighted average number of shares
outstanding for the year ended December 31, 1994 were $0.79 and 6,014,000,
respectively. The average stock price during 1994 was $5.42 and the market price
at December 31, 1994 was $5.25.
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COMPARISON OF 1996 RESULTS TO 1995 RESULTS
The 1996 sales increased by $8,069,000, or 10.8%, gross profit decreased by
$187,000, or 1.1%, selling, general and administrative expense decreased by
$122,000, or 1.6%, and depreciation and amortization increased by $569,000, or
25.8%, resulting in an operating income decrease of $634,000, or 9.6%, in each
case as compared to 1995. Interest expense decreased by $272,000, or 15.4%,
interest income decreased by $14,000, other income increased by $367,000. In
1996, the Company recorded an income tax benefit of $2,332,000 compared to an
income tax expense of $514,000 in 1995. The above changes resulted in a increase
in net income of $2,837,000, or 62.4%.
Restaurant Division. Restaurant sales increased by $7,013,000, or 12.9%, in
1996. The sales increase is attributable to an increase in the same store sales
of $309,000 and an increase in sales at new restaurants of $7,807,000, which
were partially offset by a decrease in sales of $1,103,000 at a fire-damaged
Bickford's and the sale of one and closing of another Abdow's. The 1996 sales
increase due to new restaurants consisted of $3,372,000 from the five purchased
Abdow's, $3,563,000 from the nine converted Abdow's and $872,000 from other new
Bickford's. Same store restaurant sales increased by $309,000, or 0.7%, mainly
as a result of a $483,000, or 1.6%, sales increase in the original Bickford's
acquired in 1991 (29 locations; excluding the fire damaged site). This increase
was partially offset by a sales decreases of $107,000, or 0.9%, and $67,000, or
4.5%, at the eleven other comparable Bickford's and the one remaining Howard
Johnson's unit, respectively.
The original 29 Bickford's (excluding the fire damaged site) had flat customer
counts while the 11 other comparable Bickford's and the one Howard Johnson's had
decreases in customer counts of 2.6% and 3.0%, respectively. Overall comparable
customer counts decreased by 0.8% in 1996 compared to 1995 primarily due to the
severe winter weather in the first quarter of 1996. The one Howard Johnson's
Restaurant is located near one of the three Bickford's that are licensed to an
unrelated third party, and under the applicable license agreement, may not be
converted into a Bickford's. Management is continuing to focus on improving
sales at all Restaurants through attention to customer service, food quality,
new menu items and Restaurant refurbishments.
Restaurant gross profit decreased by $248,000 and the gross profit as a
percentage of sales decreased from 19.4% in 1995 to 16.8% in 1996. The main
factor in the 2.6% decline in the gross profit percentage was an increase in
labor costs. Labor costs as a percentage of sales increased by 2.0%, from 34.4%
in 1995 to 36.4% in 1996, due to higher labor costs as a percentage of sales at
the nine converted and five remaining Abdow's and the $355,000 of start-up
training costs in 1996 related primarily to the conversion of the nine Abdow's
into Bickford's restaurants. The 14 Abdow's Restaurants (including the nine
converted into Bickford's) had labor costs as a percentage of sales of 40.8%.
Management does not intend to reduce the labor costs immediately at the
converted Abdow's as it does not wish to compromise their excellent service
reputation. Food costs decreased by 0.3% in 1996 as compared to 1995, while
variable costs increased by 0.4% during the same period. The food costs decrease
was mainly due to an increase in cash rebates related to the increased volume of
food purchases associated with the addition of new Restaurants, including the
Abdow's. Upon conversion of an Abdow's into a
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Bickford's Restaurant, food cost as a percentage of sales tend to decline to the
average Bickford's level. The Bickford's food costs increased as a percentage of
sales as a result of the sale of higher-cost dinner items and an increase in the
cost of individual food items, including eggs, bacon and sausage, partially
offset by a decline in coffee costs. In addition, fixed costs as a percentage of
sales increased by 0.6% in 1996, due to higher rents related to the inclusion of
the Abdow's Restaurants for twelve months in 1996 as compared to six months in
1995. Management currently intends to keep the present five Abdow's Restaurants
operating under that concept, which has generally lower margins than Bickford's,
and therefore the overall margins will continue to be negatively affected.
Restaurant selling, general and administrative expense increased by $336,000
during 1996 over 1995 mainly as a result of adding additional support personnel
as a result of the acquisition of Abdow's.
Restaurant depreciation and amortization increased by $485,000 during 1996 as
compared to 1995. Restaurant depreciation and amortization will continue to
increase each year with the addition of new Restaurants, or until such time as
assets valued and recorded at the date of the Bickford's acquisition in July
1991 become fully depreciated. The equipment acquired in that acquisition has a
seven-year useful life, and will become fully depreciated in 1998.
As a result of the above, Restaurant Division operating income decreased by
$1,069,000 in 1996 compared to 1995.
Cues Division. Cues's sales increased by $1,056,000, or 5.2%, in 1996 compared
to 1995. As a result of this increase and a 1.1% decrease in Cues's gross profit
percentage in 1996 compared to 1995, gross profit increased by $61,000.
Operating income was positively impacted by a decrease in selling, general and
administrative expenses of $369,000 partially offset by a increase in
depreciation and amortization expense of $84,000. The decrease in selling,
general and administrative expenses resulted primarily from the consolidation of
Canadian operations into Orlando and the restructuring of the Cues west coast
sales effort to become more efficient. As a result of the above, operating
income increased by $346,000 in 1996 as compared to 1995. Management anticipates
that gross margins will continue to experience pressure in 1997 due to the fact
that Cues's customers continue to stress pricing factors in awarding contracts
through the competitive bidding process.
Corporate. Corporate's general and administrative expenses decreased by $89,000
during 1996 compared to 1995, partially due to a decrease in the Bickford's
management compensation accrual related to its Phantom Stock Option Plan.
Interest expense decreased by $241,000 in 1996 compared to 1995 due to a
decrease in interest rates and a lower average debt balance in 1996. The bank
interest rate applicable to Company borrowings at December 31, 1996 was either
prime (8.25%) or 2% over the London Eurodollar rate, then approximately 7.68%.
The Company has the option of designating a portion of the bank line of credit
as London Eurodollar rate financing for 30, 60 or 90-day periods. The bank
interest rate available to the Company at December 31, 1995 was 1% above prime,
or 9.5%. In addition, the Company prepaid the remaining $1,199,000 of its senior
subordinated notes during 1996. These notes had interest rates of 15% and 14.5%.
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On December 30, 1996, ELXSI purchased three revolving notes with a face value of
$6,650,000 from Bank of America Illinois, its lending bank, for $5,850,000. The
Company recorded this $800,000 discount as a reduction in the face amount of the
notes on the balance sheet. The face value of the notes, payable by three wholly
owned subsidiaries of Azimuth Corporation; (collectively, the "Azimuth
Subsidiaries"), bear interest at 15% per annum payable in arrears on the 1st and
16th of each month and mature on June 30, 1998. The notes are fully
collateralized by all of the assets of Azimuth Corporation and the Azimuth
Subsidiaries, including accounts receivable and inventory. Two of the Azimuth
Subsidiaries design and manufacture trade show booth displays; the other is a
distributor of electrical fuses and fasteners. Certain of the officers and
directors and stockholders of Azimuth Corporation are officers and directors of
the Company and/or ELXSI. In addition, ELXSI recorded a $225,000 closing fee
receivable due from the Azimuth Subsidiaries under the Recapitalization
Agreement, and accrued certain legal and bank fees payable. ELXSI recorded the
net fees in accounts receivable within the accompanying consolidated financial
statements. ELXSI will amortize this discount and the net closing fees over the
life of the Azimuth Subsidiary Notes utilizing the effective interest method of
amortization.
The purpose of the transactions described above and in this paragraph was to
prudently utilize the Company's debt capacity to earn a return not generally
available in the marketplace for the commensurate risk. The knowledge of the
Azimuth Corporation credit and the short time frame required to respond to Bank
of America Illinois made ELXSI unique in its ability to capture such an
attractive opportunity. Under the relevant agreements, the Azimuth Subsidiaries
have the right to prepay in full their revolving notes held by ELXSI at a price
(or for a payment) equal to (i) the combined principal amount outstanding on the
date of prepayment (which may be as much as $9,965,000) plus (ii) all accrued
but unpaid interest thereon less (iii) if purchased in April, May or June 1997 a
discount of $275,000, $175,000 and $75,000, respectively. Therefore, if the
Azimuth Subsidiary notes are not satisfied before July 1, 1997, ELXSI will have
fully earned the $800,000 discount applied to the purchase. As a result of the
transactions, described in this paragraph, ELXSI became the senior revolving
credit lender to the Azimuth Subsidiaries. Funding for ELXSI's purchase of the
Azimuth Subsidiary notes, as well, as for any further revolving credit loans
that may be made by ELXSI to the Azimuth Subsidiaries, was provided by Bank of
America Illinois under an amendment and restatement of its existing credit
agreement with ELXSI. The Company's return on investment from the foregoing
transactions is in the form of net interest (i.e., the difference between the
Azimuth's Subsidiaries' 15% interest rate and the Company's cost of borrowing),
the discount earned by the Company and the closing fee described above.
COMPARISON OF 1995 RESULTS TO 1994 RESULTS
The 1995 sales increased $12,251,000, or 19.6%, gross profit increased
$1,344,000, or 9.0%, selling, general and administrative expense increased
$854,000, or 12.9%, and depreciation and amortization increased $412,000, or
23.0%, resulting in an operating income increase of $78,000, or 1.2%, in each
case as compared to 1994. Interest expense increased by $341,000, or 23.9%,
interest income increased by $117,000, other income and expense increased from
expense of
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$41,000 in 1994 to income of $65,000 in 1995, and income taxes increased by
$148,000, or 40.4%, resulting in a decrease in net income of $188,000, or 4.0%.
Restaurant Division. Restaurant sales increased by $10,879,000, or 25.1%, in
1995. The sales increase was attributable to a decrease in the same store sales
of $152,000, offset by the addition of new restaurants that added $11,031,000 to
1995 sales. The 1995 sales increase due to new restaurants consisted of
$8,112,000 from 14 purchased Abdow's, $873,000 from the two Abdow's converted in
1995 and $2,046,000 from other new Bickford's. Same store restaurant sales
decreased by $152,000, or 0.4%, mainly due to the inclusion of a 53rd week in
1994, which added $763,000 to those restaurants 1994 sales. The original 30
Bickford's acquired in 1991 had a sales increase of $405,000, or 1.3%, the nine
other comparable Bickford's (including the five converted Howard Johnson's) had
a sales decrease of $494,000, or 5.1%, while the one remaining Howard Johnson's
unit had a sales decline of $63,000, or 4.1%. Included in the above comparisons
is the effect of the fifty-third week in 1994, which added sales of $582,000,
$155,000 and $26,000 to the original thirty Bickford's, the nine other
comparable Bickford's and the one remaining Howard Johnson Restaurant,
respectively. Excluding the 53rd week from 1994 sales, the same store Restaurant
sales increased by $611,000, or 1.5%.
The original thirty Bickford's, the nine other comparable Bickford's and the one
Howard Johnson's Restaurant had a decrease in customer counts of 1.8%, 7.6% and
9.8%, respectively. Excluding the 53rd week from 1994, the original thirty
Bickford's, the nine other comparable Bickford's and the one Howard Johnson's
Restaurant had an increase (decrease) in customer counts of 0.1%, (6.2)% and
(8.3)%, respectively, during 1995.
Restaurant gross profit increased by $1,384,000 but declined as a percentage of
sales from 21.1% in 1994 to 19.4% in 1995. The main factor in the 1.7% decline
in the gross profit percentage was a 1.5% increase in food costs as a percentage
of sales, primarily attributable to the Abdow's units. The Bickford's food costs
increased as a percentage of sales, as a result of the sale of higher-cost
dinner items, and an increase in the cost of individual food items, including
eggs, bacon and sausage, partially offset by a decline in coffee costs. In
addition to the food cost increase, variable costs as a percentage of sales
increased by 0.4% in 1995. Labor costs as a percentage of sales declined by
0.2%, from 34.6% to 34.4%, despite higher labor costs as a percentage of sales
at the 16 Abdow's. The 16 Abdow's (including the two converted into Bickford's)
had labor costs as a percentage of sales of 37.2% in 1994.
Restaurant selling, general and administrative expenses increased by $327,000
during 1995 over 1994 mainly as a result of adding additional support personnel
as a result of the acquisition of Abdow's.
Restaurant depreciation and amortization increased by $373,000 during 1995 as
compared to 1994.
As a result of the above, Restaurant Division operating income increased by
$684,000 in 1995 compared to the 53 weeks ended December 31, 1994. Management
estimates that the inclusion of a 53rd week in 1994 added approximately $200,000
to operating income that year.
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Cues Division. Cues's sales increased by $1,372,000, or 7.2%, in 1995 as
compared to 1994. As a percentage of sales, Cues's gross profit declined by 2.3%
in 1995 compared to 1994, causing gross profit to decrease by $40,000. Operating
income was negatively impacted by an increase in selling, general and
administrative expense of $279,000 and an increase in depreciation and
amortization expense of $39,000. As a result of the above, operating income
decreased by $358,000 in 1995, as compared to 1994.
Corporate. Corporate general and administrative expenses increased by $248,000
during 1995 as compared to 1994 mainly due to an increase in the Bickford's
management compensation accrual related to its Phantom Stock Option Plan.
Interest expense increased by $320,000 in 1995 as compared to 1994, due to a
higher average debt balance in 1995, partially offset by a decrease in interest
rates in 1995. The higher average debt balance in 1995 was the result of
spending approximately $3.8 million to purchase Abdow's Restaurants and $7.4
million to repurchase Company common stock, warrants to purchase common stock
and senior subordinated notes at the end of 1994 and beginning of 1995. The bank
interest rate applicable to Company borrowing was 1% above the prime lending
rate (9.5%, at December 31, 1995), and 1.5% above the prime lending rate,
(10.0%, at December 31, 1994).
ACQUISITIONS
On July 3, 1995, ELXSI acquired 16 Abdow's Family Restaurants from Abdow
Corporation of Springfield, MA, for a price of approximately $3,800,000
(including transaction fees and expenses of approximately $300,000). The
transaction included the leasing of the 16 restaurant sites and the purchase of
associated assets located in western Massachusetts and central Connecticut. The
acquisition was financed by an increase in ELXSI's existing line of credit with
Bank of America Illinois. On February 1, 1996, ELXSI completed its sale of the
Vernon, Connecticut Abdow's Restaurant for net proceeds of $1,225,000. During
1996, ELXSI closed one under-performing Abdow's Restaurant.
INCOME TAXES AND INFLATION
In 1996, the Company recorded a provision for current federal alternative
minimum taxes of $105,000 (after the benefit of federal net operating loss
carryforwards of $1,616,000), a state income tax provision of $444,000 and a
deferred tax benefit of $2,881,000, resulting in an income tax benefit of
$2,332,000 (see "Year Ended December 31, 1996 - Corporate" above).
In 1995, the Company recorded a provision for federal alternative minimum taxes
of $118,000 (after the benefit of federal net operating loss carryforwards of
$1,619,000), and a state income tax provision of $396,000.
In 1994, the Company recorded a provision for federal alternative minimum taxes
of $88,000 (after the benefit of federal net operating loss carryforwards of
$1,526,000), and a state income
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tax provision of $278,000 (after the benefit of state net operating loss
carryforwards). Approximately one-half of ELXSI's consolidated taxable income is
apportioned to Massachusetts. The final year that the net operating loss was
available to ELXSI to offset Massachusetts taxable income was 1994 because the
five year Massachusetts carryforward period expired in 1995. During 1994, ELXSI
would have recorded a provision for additional state income taxes of $190,000
had the Massachusetts net operating loss carryforwards not been available.
At December 31, 1996, the Company had approximately $216,000,000 in federal net
operating loss carryforwards, which begin to expire in 1998 and fully expire in
2005 if not used. In addition, the Company had $6,500,000 in investment tax
credit and research and development credit carryforwards available to reduce
future federal income taxes. (see "Year Ended December 31, 1996 - Corporate"
above).
Inflation and changing prices have not had a material impact on the Company's
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Available Resources. The Company's consolidated unrestricted cash positions at
December 31, 1996 and 1995 were $0. The Company has a cash management system
whereby cash generated by operations is immediately used to reduce debt. The
immediate reduction of outstanding debt provides the Company with a reduction in
interest expense greater than the interest income that the cash could safely
earn from alternative investments. Working capital needs, when they arise, are
met by daily borrowings.
During 1996, the Company had cash flow from operations of $4,200,000 which,
along with the $1,075,000 proceeds from the sale of the Vernon, Connecticut
Abdow's Restaurant and net borrowings of $7,112,000 on the bank line of credit,
funded the purchase of property, plant and equipment totalling $3,108,000
(including the one new Restaurant opened in 1996), a loan to ELX Limited
Partnership ("ELX") totalling $909,000, the purchase of related party debt with
a face amount of $6,650,000 from Bank of America Illinois for $5,850,000;
principal payments of long-term 14.5% and 15% senior subordinated notes
totalling $1,199,000; the repurchase of Common Stock and Warrants to purchase
Common Stock for $1,146,000; and principal payments on capital leases of
$139,000. During 1996, current assets increased by $4,249,000 primarily due to
an increase in Cues's inventory, the recording of a deferred tax asset, an
increase in Bickford's and Corporate's accounts receivable related to an
insurance settlement related to a Restaurant fire in 1996, partially offset by a
decrease in the asset held for sale due to the sale of the Vernon, Connecticut
Abdow's restaurant. Inventory increased due to the introduction and development
of new products, a general increase in component parts used in production and an
increase in finished assemblies. Current liabilities decreased in 1996 by
$750,000 (excluding the current portion of the long-term debt and current
portion of long-term capital leases).
During 1995, the Company had cash flow from operations of $4,003,000, which
along with net borrowings of $2,334,000 in long-term debt funded the purchase of
property, plant and equipment totalling $2,357,000 (including the one new
Restaurant opened in 1995); the net cost
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of acquiring the fifteen Abdow's totalling $2,575,000; the repurchase of Common
Stock of $1,224,000; the payment of bank fees of $125,000; and the principal
payments on capital leases of $56,000. During 1995, current assets increased by
$4,034,000, primarily due to an increase in Cues's inventory and the recording
of an asset held for sale at December 31, 1995 related to the Vernon,
Connecticut Abdow's restaurant. The Restaurant was sold on February 1, 1997 for
cash. Inventory increased due to the introduction and development of new
products and an increase in equipment used for demonstrations. The increase in
current assets was partially offset by an increase in current liabilities of
$647,000 (excluding the current portion of the long-term debt and current
portion of long-term capital leases).
During 1994, the Company had cash flow from operations of $6,871,000, which
along with a net borrowing of $225,000 in long-term debt funded the acquisition
of property, plant and equipment totalling $2,363,000 (including the two new
Restaurants opened in 1994); a loan to ELX of $1,156,000; the repurchase of
Common Stock and Series A Warrants to purchase Common Stock of $3,499,000; and
the payment of bank fees of $109,000. During 1994, current assets increased by
$286,000, primarily due to an increase in Cues's inventory partially offset by a
decline in Cues's accounts receivable and a decrease in Bickford's Division
prepaid expenses. Inventory increased due to increased monthly production volume
caused by increased sales orders at Cues and the introduction and development of
new products. The increase in current assets was partially offset by an increase
in current liabilities of $136,000 (excluding the current portion of the
long-term debt and current portion of long-term capital leases).
Future Needs For and Sources of Capital. Management believes that cash generated
by operations is sufficient to fund current operations including the interest
payments on the bank debt. With bank approval, excess funds are available under
the Company's loan agreement to finance additional acquisitions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company for each of the fiscal
years in the three-year period ended December 31, 1996, together with the report
thereon of Price Waterhouse LLP dated March 20, 1997, are included in this
report commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company did not change its independent accountants during 1996 nor were
there any disagreements with such accountants on accounting principals or
practices, financial disclosure or auditing scope or procedure.
23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1996 for the annual Meeting of Stockholders to be held May 22,
1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1996 for the annual Meeting of Stockholders to be held May 22,
1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1996 for the annual Meeting of Stockholders to be held May 22,
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated herein by reference
from the ELXSI Corporation Proxy Statement to be filed within 120 days after
December 31, 1996 for the annual Meeting of Stockholders to be held May 22,
1997.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
Index to Consolidated Financial Statements
- ------------------------------------------
Page
Number(s)
---------
1. Financial Statements
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets at December 31, 1996 and 1995 F-2 to F-3
Consolidated Income Statements for the three years
ended December 31, 1996 F-4
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1996 F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996 F-6 to F-7
Notes to Consolidated Financial Statements F-8 to F-25
2. Financial Statement Schedules
Schedule
Number Description Page
------ ----------- ----
VIII Valuation and Qualifying Accounts and Reserves S-1
All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the Consolidated Financial
Statements or Notes thereto.
3. Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger by and among ELXSI Corporation, ELXSI,
Cadmus Corporation and Holdingcues, Inc. dated as of October 16, 1992,
including form of Series C Warrant. (Incorporated herein by reference
to Exhibit 2.7 of the Company's Current Report on Form 8-K as filed
November 13, 1992 (File No 0-11877)).
2.2 Family Restaurant Sale and Purchase Agreement, between Marriott Family
Restaurants, Inc. ("Marriott") and the Company dated February 28,
1991. (Incorporated herein by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K, dated July 16, 1991 (File No.
0-11877)).
25
<PAGE>
2.3 Side Letter to the Family Restaurant Sale and Purchase Agreement
between Marriott and the Company dated February 28, 1991.
(Incorporated herein by reference to Exhibit 2.2 of the Company's
Current Report on Form 8-K, dated July 16, 1991 (File No. 0-11877)).
2.4 Assignment and Guaranty of Family Restaurants Sale and Purchase
Agreement and Side Letter, between the Company, Marriott and ELXSI
dated June 29, 1991. (Incorporated herein by reference to Exhibit 2.3
of the Company's Current Report on Form 8-K, dated July 16, 1991 (File
No. 0-11877)).
2.5 Closing Side Letter Agreement Regarding Family Restaurants Sale and
Purchase Agreement between ELXSI and Marriott dated July 1, 1991.
(Incorporated herein by reference to Exhibit 2.4 of the Company's
Current Report on Form 8-K, dated July 16, 1991 (File No. 0-11877)).
2.6 Real Estate Closing Side Letter Agreement Regarding Family Restaurants
Sale and Purchase Agreement between ELXSI and Marriott dated July 1,
1991. (Incorporated herein by reference to Exhibit 2.5 of the
Company's Current Report on Form 8-K, dated July 16, 1991 (File No.
0-11877)).
2.7 Agreement Concerning Massachusetts and Connecticut Liquor Licenses
between ELXSI and Marriott dated July 1, 1991. (Incorporated herein by
reference to Exhibit 2.6 of the Company's Current Report on Form 8-K,
dated July 16, 1991 (File No. 0-11877)).
3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated herein by reference to Exhibit 3.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1989
(file No. 0-11877)).
3.2 Certificate of Amendment of Restated Certificate of Incorporation of
the Company dated May 27, 1992. (Incorporated herein by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
3.3 Bylaws of the Company. (Incorporated herein by reference to Exhibit
3.1 of the Company's Registration Statement on Form S-4, as amended.
(file No. 0-11877)).
4.1 Series A Warrant No. A-7 to purchase 50,000 shares of Common Stock
issued to Eliot Kirkland L.L.C. ("EKLLC").
4.2 Form of Allonge and Amendment to Series A Warrants of ELXSI
Corporation, with respect to the foregoing Warrant.
4.3 Series A Warrant No. A-6 to purchase 150,500 shares of Common Stock
issued to the Alexander M. Milley Irrevocable Trust I U/A dated May 9,
1994. (Incorporated herein by reference to Exhibit 4.2 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
4.4 Form of Allonge and Amendment to Series A Warrants of ELXSI
Corporation, with respect to the foregoing Warrant.
4.5 Series B Warrant No. B-1 to purchase 604,656 shares of Series A
Non-Voting Convertible Preferred Stock issued to Continental Illinois
Equity Corporation ("CIEC") (now named BankAmerica Capital Corporation
("BACC")). (Incorporated herein by reference to Exhibit 4.6 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989 (file No. 0-11877)).
26
<PAGE>
4.6 Series C Warrant No. C-3 to purchase 68,762 shares of Common Stock
issued to EKLLC.
4.7 Form of Allonge and Amendment to Series C Warrants of ELXSI
Corporation, with respect to the foregoing Warrant.
4.8 Amended and Restated Registration Rights Agreement dated as of January
23, 1990 among the Company, Milley & Company ("M&C") and CIEC.
(Incorporated herein by reference to Exhibit 4.7 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1989
(file No. 0-11877)).
4.9 Exercise of Option and Assignment of Registration Rights executed by
ELX Limited partnership ("ELX") and The Airlie Group, L.P. ("Airlie")
dated November 30, 1994. (Incorporated herein by reference to Exhibit
4.6 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
4.10 15% Senior Subordinated Note issued by the Company to CIEC in the
amount of $401,765.00. (Incorporated herein by reference to Exhibit
10.18 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (file No. 0-11877)).
4.11 14.5% Senior Subordinated Note issued by the Company to CIEC in the
amount of $502,206.25 dated June 27, 1991. (Incorporated herein by
reference to Exhibit 4.8 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0-11877)).
4.12 Amended and Restated Loan and Security Agreement, dated as of December
30, 1996, between ELXSI and Bank of America Illinois ("BAI").
4.13 Warrant Purchase and Senior Subordinated Note termination Agreement,
dated as of December 30,1996, between BACC and the Company.
4.14 14.5% Senior Subordinated Note issued by the Company to Pan Fixed
Income Fund, Ltd., dated as of November 16, 1993 in the amount of
$250,000. (Incorporated herein by reference to Exhibit 4.12 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
4.15 14.5% Senior Subordinated Note issued by the Company to Rona Jaffe,
dated as of November 16, 1993 in the amount of $100,000. (Incorporated
herein by reference to Exhibit 4.13 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file No.
0-11877)).
4.16 14.5% Senior Subordinated Note issued by the Company to Anne Strassler
A.C.S.W. P.C., dated as of November 16, 1993 in the amount of $25,000.
(Incorporated herein by reference to Exhibit 4.14 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.1 The Company's 1987 Incentive Stock Option Plan as amended.
(Incorporated by reference to Exhibit 10.1 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987 (file
No. 0-11877)).
10.2 The Company's 1987 Supplemental Stock Option Plan as amended.
(Incorporated by reference to Exhibit 10.2 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987 (file
No. 0-11877)).
10.3 The Company's 1993 Incentive Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.3 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (file No. 0-11877)).
27
<PAGE>
10.4 The Company's 1995 Incentive Stock Option Plan (Incorporated herein by
reference to Exhibit 4.1 to the Company's Form S-8 Registration
Statement filed November 14, 1995 (Registration No. 033-64205)).
10.5 The Company's 1996 Incentive Stock Option Plan (Incorporated herein by
reference to Exhibit 4.1 to the Company's Form S-8 Registration
Statement filed December 2, 1996 (Registration No. 333-17131)).
10.6 The ELXSI 1991 Phantom Stock Option Plan for the management of the
Bickford's Division. (Incorporated herein by reference to Exhibit 10.4
of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.7 Amendment No. 1 to the ELXSI 1991 Phantom Stock Option Plan for the
management of the Bickford's Division. (Incorporated herein by
reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0-11877)).
10.8 Non-Qualified Stock Option Agreement issued to Robert C. Shaw for the
purchase of 12,500 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.7 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.9 Non-Qualified Stock Option Agreement issued to John C. Savage for the
purchase of 10,000 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.8 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.10 Non-Qualified Stock Option Agreement issued to Farrokh K. Kavarana for
the purchase of 10,000 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.9 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.11 Non-Qualified Stock Option Agreement issued to Kevin P. Lynch for the
purchase of 20,000 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.10 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.12 Non-Qualified Stock Option Agreement issued to Alexander M. Milley for
the purchase of 30,000 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.11 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.13 Non-Qualified Stock Option Agreement issued to Thomas R. Druggish for
the purchase of 12,500 shares of Common Stock, dated October 30, 1992.
(Incorporated herein by reference to Exhibit 10.12 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(file No. 0-11877)).
10.14 Stock and Note Purchase Agreement dated as of August 31, 1989 by and
among the Company, Airlie and M&C. (Incorporated herein by reference
to Exhibit 2.1 of the Company's Current Report on Form 8-K as filed
October 3, 1989 (File No 0-11877)).
28
<PAGE>
10.15 Stock and Note Purchase Agreement dated as of January 23, 1990 among
Airlie, CIEC and M&C. (Incorporated herein by reference to Exhibit
10.14 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
10.16 Management Agreement ("Management Agreement") between Winchester
National, Inc. (d/b/a as M&C) and the Company dated September 25,
1989. (Incorporated herein by reference to Exhibit 10.21 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 (file No. 0-11877)).
10.17 Assignment of Management Agreement dated June 28, 1991 among the
Company, Winchester National, Inc., ELXSI and MMI. (Incorporated
herein by reference to Exhibit 10.16 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.18 Management Agreement Extension dated September 25, 1992 between ELXSI
and MMI. (Incorporated herein by reference to Exhibit 10.17 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (file No. 0-11877)).
10.19 Assignment to Cadmus Corporation ("Cadmus"), dated January 1, 1994 of
MMI's rights under the extended Management Agreement dated September
25, 1992, as amended between ELXSI and MMI. (Incorporated herein by
reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No. 0-11877)).
10.20 Promissory Note of ELX payable to the Company dated December 8, 1994
in the amount of $1,155,625.00 due December 8, 1997. (Incorporated
herein by reference to Exhibit 10.6 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.21 Form of Stock Purchase and Option Exercise Agreement, dated as of
December 30, 1996, between BACC and ELX (Incorporated herein by
reference to Exhibit D to the Amendment No. 10 to the Schedule 13D of
Alexander M. Milley, MMI, ELX, Cadmus and EKLLC, dated January 7,
1997, filed in respect of the Company's Common Stock).
10.22 Form of Promissory Note of ELX payable to the Company, dated December
30, 1996, in the amount of $909,150 due on December 30, 1999
(Incorporated herein by reference to Exhibit E to the Amendment No. 10
to the Schedule 13D of Alexander M. Milley, MMI, ELX, Cadmus and
EKLLC, dated January 7, 1997, filed in respect of the Company's Common
Stock).
10.23 Form of Recapitalization Agreement, dated as of December 30, 1996,
among Azimuth Corporation ("Azimuth"), Delaware Electro Industries,
Inc. ("DEI"), Contempo Design, Inc. ("CDI"), Contempo Design West,
Inc. ("CDW"), ELXSI and BAI (Incorporated herein by reference to
Exhibit F to the Amendment No. 10 to the Schedule 13D of Alexander M.
Milley, MMI, ELX, Cadmus and EKLLC, dated January 7, 1997, filed in
respect of the Company's Common Stock).
10.24 Second Amended and Restated Loan and Security Agreement, dated as of
October 9, 1995, between Azimuth and BAI.
10.25 Loan and Security Agreement, dated as of October 9, 1995, between DEI
and BAI.
10.26 Loan and Security Agreement, dated as of October 9, 1995, between CDI
and BAI.
10.27 Loan and Security Agreement, dated as of October 9, 1995, between CDW
and BAI.
29
<PAGE>
10.28 First Omnibus Amendment, dated as of August 9, 1996, among Azimuth,
DEI, CDI, CDW and BAI.
10.29 Second Omnibus Amendment, dated as of September 23, 1996, among
Azimuth, DEI, CDI, CDW and BAI.
10.30 Third Omnibus Amendment, dated as of November 27, 1996, among Azimuth,
DEI, CDI, CDW and BAI.
10.31 Second Amended and Restated Guaranty, dated as of October 9, 1995,
made by DEI, CDI and CDW in favor of BAI.
10.32 Second Amended and Restated Pledge Agreement, dated as of October 9,
1995, among Azimuth, DEI, CDI, CDW and BAI.
21.1 Subsidiaries of the Company. (Incorporated by reference to Exhibit
22.1 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990 (file No. 0-11877)).
23.1 Consent of Price Waterhouse LLP
27 Financial Data Schedule
(b) Reports on Form 8-K
None
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ELXSI CORPORATION
BY: /s/ Alexander M. Milley
--------------------------------
Alexander M. Milley
Chairman of the Board, President
and Chief Executive Officer
Dated: March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Alexander M. Milley Chairman of the Board, March 24, 1997
- ----------------------------------- President and Chief Executive
Alexander M. Milley Officer (Principal Executive Officer)
/s/ Robert C. Shaw Director and Vice President March 25, 1997
- -----------------------------------
Robert C. Shaw
/s/ Thomas R. Druggish Vice President, Treasurer March 24, 1997
- ----------------------------------- and Secretary (Chief
Thomas R. Druggish Accounting Officer and
Principal Financial Officer)
/s/ Kevin P. Lynch Director and Vice President March 24, 1997
- -----------------------------------
Kevin P. Lynch
/s/ Farrokh K. Kavarana Director March 24, 1997
- -----------------------------------
Farrokh K. Kavarana
/s/ Denis M. O'Donnell Director March 24, 1997
- -----------------------------------
Denis M. O'Donnell
</TABLE>
31
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
ELXSI Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 25, present fairly, in all
material respects, the financial position of ELXSI Corporation and its
subsidiary at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Orlando, Florida
March 20, 1997
F-1
<PAGE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
A S S E T S
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
-------------- -------------
Current assets:
<S> <C> <C>
Accounts receivable, less allowance for
doubtful accounts of $54 and $58 in 1996
and 1995, respectively $ 3,425 $ 2,776
Inventories 11,017 8,477
Prepaid expenses and other current assets 234 397
Note receivable - related party 1,156 --
Deferred tax asset 1,142 --
Asset held for sale -- 1,075
-------------- -------------
Total current assets 16,974 12,725
Property, buildings and equipment, net 27,677 27,458
Intangible assets, net 5,525 5,703
Deferred debt costs, net 76 212
Notes receivable - related party 6,759 1,156
Deferred tax asset - noncurrent 1,739 --
Other 728 445
-------------- -------------
Total assets $ 59,478 $ 47,699
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
ELXSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
-------------- -------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 3,266 $ 4,269
Accrued expenses 4,649 4,396
Capital lease obligations - current 142 137
Current portion of long-term debt 268 1,485
-------------- -------------
Total current liabilities 8,325 10,287
Capital lease obligations - non current 1,588 1,732
Long-term debt, net of discount 18,706 11,570
Other non current liabilities 1,946 1,396
-------------- -------------
Total liabilities 30,565 24,985
-------------- -------------
Commitments and contingencies (Note 8) -- --
-------------- -------------
Stockholders' equity:
Preferred Stock, Series A Non-voting
Convertible, par value $0.002 per share
Authorized--5,000,000 shares
Issued and outstanding--none -- --
Common Stock, par value $0.001 per share
Authorized--160,000,000 shares
Issued and outstanding--4,660,869
at December 31, 1996 and 4,792,353
at December 31, 1995 5 5
Additional paid-in-capital 228,520 229,666
Accumulated deficit (199,512) (206,895)
Cumulative foreign currency translation adjustment (100) (62)
-------------- -------------
Total stockholders' equity 28,913 22,714
-------------- -------------
Total liabilities and stockholders' equity $ 59,478 $ 47,699
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ELXSI CORPORATION
CONSOLIDATED INCOME STATEMENTS
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994
-------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 82,743 $ 74,674 $ 62,423
Costs and expenses:
Cost of sales 66,603 58,347 47,440
Selling, general and administrative 7,362 7,484 6,630
Depreciation and amortization 2,775 2,206 1,794
-------------- ------------- -------------
Operating income 6,003 6,637 6,559
Other income (expense):
Interest income 111 125 8
Interest expense (1,495) (1,767) (1,426)
Other income (expense) 432 65 (41)
-------------- ------------- -------------
Income before income taxes 5,051 5,060 5,100
Benefit (provision) for income taxes 2,332 (514) (366)
-------------- ------------- -------------
Net income $ 7,383 $ 4,546 $ 4,734
============== ============= =============
Net income per common share $ 1.51 $ 0.89 $ 0.79
============== ============= =============
Weighted average number of common
and common equivalent shares 4,902 5,093 6,014
============== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
Cumulative
<TABLE>
<CAPTION>
Foreign
Additional Accum- Currency
Common Paid-In- ulated Translation
Stock Capital Deficit Adjustment
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 5 $ 234,331 $ (216,175) $ (35)
Foreign currency translation
adjustment -- -- -- (21)
Purchase and retirement of 354,963
shares of Common Stock and
warrants to purchase 761,638
shares of Common Stock -- (3,499) -- --
Exercise of Common Stock options
to purchase 18,400 shares of
Common Stock -- 58 -- --
Net income -- -- 4,734 --
----------- ------------- ------------- -----------
Balance at December 31, 1994 5 230,890 (211,441) (56)
Foreign currency translation
adjustment -- -- -- (6)
Purchase and retirement of 240,000
shares of Common Stock -- (1,224) -- --
Net income -- -- 4,546 --
----------- ------------- ------------- -----------
Balance at December 31, 1995 5 229,666 (206,895) (62)
Foreign currency translation
adjustment -- -- -- (38)
Purchase and retirement of 131,500
shares of Common Stock and
warrants to purchase preferred
stock convertible into 241,862
shares of Common Stock -- (1,146) -- --
Net income -- -- 7,383 --
----------- ------------- ------------- -----------
Balance at December 31, 1996 $ 5 $ 228,520 $ (199,512) $ (100)
=========== ============= ============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1996 1995 1994
----------- ----------- -----------
Cash flows provided by operating activities:
<S> <C> <C> <C>
Net income $ 7,383 $ 4,546 $ 4,734
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,775 2,206 1,794
Amortization of deferred debt costs 166 213 126
Amortization of debt discount 12 19 90
Loss on disposal of equipment 292 54 7
Other (38) (6) (21)
(Increase) decrease in assets:
Accounts receivable (649) (498) 301
Inventories (2,540) (2,269) (794)
Prepaid expenses and other current assets 163 (192) 207
Deferred tax asset (2,881) -- --
Other (283) (242) (9)
(Decrease) increase in liabilities:
Accounts payable (1,003) 253 305
Accrued expenses 253 394 281
Other current liabilities -- -- (450)
Other non current liabilities 550 600 300
----------- ----------- -----------
Net cash provided by operating activities 4,200 5,078 6,871
----------- ----------- -----------
Cash flows used in investing activities:
Proceeds from sale of Abdow's Restaurant 1,075 -- --
Acquisition of asset held for sale -- (1,075) --
Acquisition of Abdow's Restaurants -- (2,575) --
Purchase of property, building and equipment (3,108) (2,357) (2,363)
Notes receivable - related party (6,759) -- (1,156)
----------- ----------- -----------
Net cash used in investing activities (8,792) (6,007) (3,519)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ELXSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1996 1995 1994
----------- ----------- -----------
Cash flows provided by (used in) financing activities:
<S> <C> <C> <C>
Net borrowings on line of credit 7,112 2,429 3,446
Payments of long-term senior subordinated debt (1,199) (83) (3,221)
Payments of long-term debt (6) (12) --
Purchase of Common Stock and warrants to
purchase Common Stock (1,146) (1,224) (3,499)
Proceeds from exercise of Common Stock
options -- -- 58
Payment of deferred bank fee (30) (125) (109)
Principal payments on capital lease obligations (139) (56) (27)
----------- ----------- -----------
Net cash provided by (used in) financing activities 4,592 929 (3,352)
----------- ----------- -----------
Decrease in cash and cash equivalents -- -- --
Cash and cash equivalents, beginning of period -- -- --
----------- ----------- -----------
Cash and cash equivalents, end of period $ -- $ -- $ --
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 1,411 $ 1,544 $ 1,324
Taxes 747 563 455
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
ELXSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE 1. The Company
General. Prior to 1990, ELXSI Corporation (together with its subsidiaries, the
"Company") operated principally through its wholly-owned California subsidiary,
ELXSI. During that period, the principal business of ELXSI was the design,
manufacture, sale and support of minisupercomputers. In July 1989, the Company
announced a major restructuring of its computer operations. In September 1989,
the Company discontinued all computer operations.
In September 1989 and January 1990, the Company entered into agreements with,
and between, The Airlie Group L.P. ("Airlie"), BankAmerica Capital Corporation
("BACC") (formerly named Continental Illinois Equity Corporation), and Milley &
Company ("M&C") (hereinafter referred to collectively as the "Buyers"); whereby
the Buyers acquired 960,000 shares of the Company's Common Stock for $3,000,000
in cash. In addition, the Buyers loaned the Company $2,000,000 (see Note 6).
Subsequent to these transactions, the Company announced its intention of
pursuing an active program of identifying, acquiring and managing middle market
companies.
On July 1, 1991, ELXSI acquired thirty Bickford's Restaurants and twelve Howard
Johnson's Restaurants from Marriott Family Restaurants, Inc. These Restaurants
are located in Massachusetts, Vermont, New Hampshire, Rhode Island and
Connecticut.
Between 1992 and 1995, ELXSI sold six of its Howard Johnson's Restaurants,
converted five others into Bickford's Restaurants, opened seven new Bickford's
Restaurants, acquired 16 Abdow's Family Restaurants ("Abdow's"), and converted
two of the Abdow's into Bickford's Restaurants. During 1996, ELXSI sold one
Abdow's, closed one Abdow's, converted seven Abdow's into Bickford's and opened
one new Bickford's Restaurant. At December 31, 1996, ELXSI operated 52
Bickford's Restaurants, five Abdow's and one Howard Johnson's Restaurant, (the
"Restaurants" or "Restaurant Division").
On October 30, 1992, ELXSI acquired Cues, Inc. of Orlando, Florida and its two
wholly-owned subsidiaries Knopafex, Ltd., a Canadian company, and Cues B.V., a
Dutch company, collectively referred to as "Cues".
Cues is engaged in the manufacture and servicing of video inspection and repair
equipment for wastewater and drainage systems primarily for governmental
municipalities, service contractors and industrial users.
NOTE 2. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the
accounts of ELXSI Corporation and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
Both the Company's corporate functions and Cues Division have fiscal years
consisting of four calendar quarters ending on December 31. The Restaurant
Division's fiscal year consists of four
F-8
<PAGE>
13-week quarters (one 52-week period) ending on the last Saturday in December;
this requires that every six or seven years the Restaurant Division add an extra
week at the end of the fourth quarter and fiscal year. This was the case for the
fourth quarter of 1994.
Cash and Cash Equivalents. The Company has a cash management system whereby cash
generated by operations is immediately used to reduce debt. Accordingly, the
Company generally maintains no cash or cash equivalents.
Fair Value of Financial Instruments. The carrying amount of accounts and note
receivable, asset held for sale, accounts payable, accrued expenses and
long-term debt approximates fair value because of the short maturity of those
instruments and the variable nature of the interest rates associated with the
debt.
Inventories. Inventories are stated at the lower of cost or market determined by
the first-in, first-out method.
Property, Buildings and Equipment. Property, buildings and equipment, including
buildings under capital leases, are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method. Buildings held pursuant to capital leases are amortized
over the shorter of the term of the respective lease (including extension
options) or the estimated useful life. The estimated lives used are:
Buildings and improvements 30 years
Equipment, furniture and fixtures 7 years
Depreciation and amortization expense for 1996, 1995 and 1994 was $2,597,000,
$2,018,000 and $1,614,000, respectively.
Impairment of Long-Lived Assets. In the event that facts and circumstances
indicate that the carrying value of a long-lived asset, including associated
intangibles may be impaired, an evaluation of recoverability is performed by
comparing the estimated future undiscounted cash flows associated with the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow is required. Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS 121"), was adopted by the Financial Accounting
Standards Board ("FASB") in March 1995 and has been implemented by the Company
in 1996. However, since the Company's previous accounting policy was consistent
with the provisions of SFAS 121, there was no impact as a result of adopting the
new standard.
Intangible Assets. The excess of cost over fair value of net assets acquired is
amortized over 35 years using the straight-line method. Amortization expense for
1996, 1995 and 1994 was $150,000, $153,000 and $151,000, respectively.
Management periodically reviews the potential impairment of intangible assets in
order to determine the proper carrying values as of each consolidated balance
sheet date.
Trademarks are amortized over 35 years using the straight-line method.
Amortization expense for 1996, 1995 and 1994 was $28,000, $35,000 and $29,000,
respectively.
F-9
<PAGE>
Deferred Debt Costs. Deferred debt costs are amortized over the term of the loan
to interest expense using the effective interest method. As of December 31, 1996
and 1995, $76,000 and $212,000, respectively, remained to be amortized over
future periods. Amortization expense in 1996, 1995 and 1994 was $166,000,
$213,000 and $126,000, respectively.
Use of Estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Concentration of Credit Risk. The Company's Cues division designs, manufactures
and markets a line of video inspection and repair equipment used by governmental
municipalities, service contractors and industrial users for underground sewer
lines. Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable and notes
receivable. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The allowance for non-collection of accounts receivable is based upon the
expected collectibility of all accounts receivable.
During 1996, ELXSI entered into an agreement pursuant to which it extended a
revolving line of credit in the amount of $9,650,000 at 15% annual interest to
subsidiaries of Azimuth Corporation, a related party (see NOTE 6). As of
December 31, 1996, the aggregate outstanding balance on the underlying revolving
notes was $6,650,000. The revolving notes are collateralized by substantially
all of the assets of Azimuth Corporation and its Subsidiaries, including
accounts receivable and inventories. The Company does not believe there exists a
substantial credit risk related to this transaction.
The Company does not rely on any one vendor or supplier for its raw materials
within each of its operating divisions, and management believes that other
suppliers could provide for the Company's needs on comparable terms.
Foreign Currency Translation. The assets and liabilities of the Canadian and
Dutch subsidiaries of Cues are translated into U.S. dollars at year-end exchange
rates, and revenue and expense items are translated at average rates of exchange
prevailing during the year. Resulting translation adjustments are accumulated in
a separate component of stockholders' equity.
Income Taxes. The Company has adopted Statement of Financial Accounting
Standards Number 109 "Accounting For Income Taxes" ("SFAS 109"). This Statement
provides for accounting for taxes under an asset and liability approach. This
approach requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of other assets and liabilities. Temporary differences
giving rise to deferred tax assets and liabilities include certain accrued
liabilities and net operating loss carryforwards. The provision for income taxes
includes the amount of income taxes payable for the year as determined by
applying the provisions of the current tax law to the taxable income for the
year and the net change during the year in the Company's deferred tax assets and
liabilities. In determining the amount of any valuation allowance required to
offset deferred tax assets, an assessment is made that includes anticipating
future income, in determining the likelihood of realizing deferred tax assets
(see NOTE 5).
F-10
<PAGE>
Advertising. Advertising costs, included in selling, general and administrative
expense, are expensed as incurred and totalled $975,000, $862,000 and $753,000
in 1996, 1995 and 1994, respectively.
Reclassification. The Company has recorded certain reclassifications in prior
years to be consistent with the current years presentation.
Accounting for Stock-Based Compensation. In October 1995, the FASB adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which governs the accounting for stock-based
compensation plans, including employee stock options. The statement allows
companies the choice of adopting a new fair value based method of accounting for
such plans that included expensing related compensation cost in the income
statement, or continuing to apply the method specified under preexisting
guidelines under which generally no compensation expense is recorded. If
companies elect to follow preexisting guidelines, the new statement requires
that the notes to the financial statements include pro forma information on net
income and earnings per share as if the fair value based method were being used.
The Company has elected to continue to measure compensation expense under the
preexisting guidelines. Pro forma information relating to stock-based
compensation is presented in Note 11.
Net Income Per Common Share. Net income per common share is computed using the
weighted average number of common shares and, when dilutive, common equivalent
shares outstanding during the respective periods.
NOTE 3. Acquisitions
On July 3, 1995, ELXSI acquired 16 Abdow's Family Restaurants from Abdow
Corporation of Springfield, MA, for approximately $3,800,000 (including expenses
of approximately $300,000). The acquisition was financed by an increase in
ELXSI's existing line of credit with the Bank of America Illinois. The
transaction involved the leasing of the 16 restaurant sites and the purchase of
associated assets located in western Massachusetts and central Connecticut.
ELXSI converted nine of the Abdow's locations into Bickford's Restaurants during
1995 and 1996. Shortly after the acquisition, ELXSI negotiated the sale of the
Vernon, Connecticut Abdow's Restaurant for a net sales price of approximately
$1,225,000, which approximated the fair market value of the Restaurant on the
date of its acquisition by ELXSI. The balance of the receivable from the sale is
reflected as an asset held for sale at December 31, 1995. The balance of the
purchase price of $2,575,000 was allocated to the equipment, leasehold
improvements and leasehold interests of the remaining 15 Abdow's restaurants.
The sale of the Vernon Connecticut, Abdow's Restaurant was consummated on
February 1, 1996. During 1996, ELXSI closed one under-performing Abdow's
Restaurant.
F-11
<PAGE>
NOTE 4. Composition of Certain Financial Statement Components
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Inventories:
Raw materials and finished goods $ 7,734,000 $ 5,715,000
Work in process 3,283,000 2,762,000
------------- -------------
$ 11,017,000 $ 8,477,000
============= =============
Property, buildings and equipment:
Land $ 7,298,000 $ 7,298,000
Buildings and improvements 14,817,000 14,696,000
Buildings held pursuant to capital leases 1,671,000 1,671,000
Equipment, furniture and fixtures 12,544,000 10,080,000
------------- -------------
36,330,000 33,745,000
Accumulated depreciation and amortization (8,653,000) (6,287,000)
------------- -------------
$ 27,677,000 $ 27,458,000
============= =============
Intangible assets:
Excess of cost over fair value of
net assets acquired $ 5,249,000 $ 5,249,000
Trademarks 1,030,000 1,030,000
Liquor licenses 85,000 85,000
------------- -------------
6,364,000 6,364,000
Accumulated amortization (839,000) (661,000)
------------- -------------
$ 5,525,000 $ 5,703,000
============= =============
</TABLE>
The excess of cost over fair value of net assets acquired, trademarks and liquor
licenses represent the value assigned to these intangible assets upon the
acquisition of the Restaurants and Cues by ELXSI.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1996 1995
------------ -------------
Accrued expenses:
<S> <C> <C>
Accrued salaries, benefits and vacation $ 1,513,000 $ 1,452,000
Other taxes 587,000 678,000
Accrued insurance 461,000 304,000
Accrued professional fees 301,000 146,000
Accrued utilities 293,000 306,000
Accrued rents 214,000 233,000
Warranty accrual 180,000 180,000
Other reserves 175,000 355,000
Accrued royalty 128,000 72,000
Accrued management fees - related party 119,000 18,000
State and federal income taxes 54,000 6,000
Accrued interest and bank fees 31,000 126,000
Accrued acquisition costs 26,000 56,000
Other accrued expenses 567,000 464,000
------------ -------------
$ 4,649,000 $ 4,396,000
============ =============
</TABLE>
F-12
<PAGE>
NOTE 5. Income Taxes
Pre-tax income for the years ended December 31, 1996, 1995 and 1994 is as
follows:
1996 1995 1994
------------- ------------- -------------
Domestic $ 5,000,000 $ 4,941,000 $ 4,911,000
Foreign 51,000 119,000 189,000
------------- ------------- -------------
Total $ 5,051,000 $ 5,060,000 $ 5,100,000
============= ============= =============
Income tax benefit (expense) for the years ended December 31, 1996, 1995 and
1994 is as follows:
Year Ended December 31,
---------------------------------------------
1996 1995 1994
------------- ------------- -------------
Current:
Federal $ (105,000) $ (118,000) $ (88,000)
State and local (444,000) (396,000) (278,000)
------------- ------------- -------------
(549,000) (514,000) (366,000)
------------- ------------- -------------
Deferred:
Federal 2,881,000 -- --
State and local -- -- --
------------- ------------- -------------
2,881,000 -- --
------------- ------------- -------------
Total $ 2,332,000 $ (514,000) $ (366,000)
============= ============= =============
Deferred tax (liabilities) assets are comprised of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Accrued expenses and other $ (1,245,000) $ (1,422,000)
------------- ------------
Gross deferred tax liabilities (1,245,000) (1,422,000)
------------- ------------
Syndication costs -- 1,662,000
Acquisition costs -- 421,000
Accrued expenses and other 814,000 1,380,000
Loss carryforwards 73,440,000 75,217,000
Credit carryforwards 6,851,000 6,730,000
------------- ------------
Gross deferred tax assets 81,105,000 85,410,000
------------- ------------
Deferred tax asset valuation allowance (76,979,000) (83,988,000)
------------- ------------
Net deferred taxes $ 2,881,000 $ --
============= ============
</TABLE>
At December 31, 1996 and 1995, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $216 million and $221 million,
respectively. The decrease in the net deferred tax asset primarily resulted from
the use of net operating loss carryforwards to offset 1996 estimated federal
taxable income. The net operating loss carryforwards begin to expire in 1998 and
fully expire in 2005. The Company also has investment tax credit carryforwards
of approximately $3.2 million, research and development tax credit carryforwards
of approximately $3.3 million and minimum tax credit carryforwards of
approximately $230,000.
F-13
<PAGE>
The investment tax credit and research and development tax credit carryforwards
expire between 1997 and 2003,and the minimum tax credit carryforwards have an
unlimited carryforward period.
The utilization of the Company's net operating loss and tax credit carryforwards
may be impaired or reduced under certain circumstances. Events which may affect
the Company's ability to utilize these carryforwards include, but are not
limited to, cumulative stock ownership changes of 50% or more over a three-year
period, as defined by Section 382 of the Internal Revenue Code ("IRC"), and the
timing of the utilization of the tax benefit carryforwards. Such changes in
ownership would significantly restrict the Company's ability to utilize loss and
credit carryforwards in accordance with sections 382 and 383 of the IRC. In the
event that a change in ownership does not take place, the Company may be able to
recognize the benefit of additional loss carryforwards. At the end of 1996 and
1995, the Company believed that it would have a change of ownership of 50% or
more.
At December 31, 1995, the Company maintained a 100% valuation allowance to
account for the potential limitations imposed by IRC 382 and 383, as well as to
give effect to uncertainties surrounding the future success of restaurant
acquisitions and manufacturing consolidations undertaken during the year.
During 1996, a portion of the valuation allowance was released based upon the
success of restaurant conversions and manufacturing consolidations which had
begun in 1995. Accordingly, the Company recognized a $2,881,000 net deferred tax
asset. The net deferred tax assets represents the amount of net operating loss
and credit carryforwards, which management believes are more likely than not to
be realized in the future.
A reconciliation of the statutory federal tax rate and the Company's effective
income tax rate for the years ended December 31, 1996, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1995 1994
-------- ------- ------
<S> <C> <C> <C>
Federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 8.6 7.7 5.3
Changes in valuation allowance for federal
deferred tax assets (57.1) -- --
Other 0.3 0.5 (0.1)
Recognition of net operating loss carryforward (32.0) (32.0) (32.0)
-------- ------- ------
Effective income tax rate (46.2)% 10.2% 7.2%
======== ======= ======
</TABLE>
NOTE 6. Long-Term Debt and Related Party Transactions
On September 25, 1989, the Company consummated a Stock and Note Purchase
Agreement ("Agreement") with Airlie and M&C, whereby Airlie and M&C loaned the
Company $1,750,000 and $250,000, respectively, for 15% senior subordinated
ten-year notes, and warrants to purchase 1,053,500 and 150,500 shares,
respectively, of the Company's Common Stock. The Company recorded as
paid-in-capital (relating to the warrants) a discount of $301,000 to reflect a
valuation of $0.25 per warrant, which was determined by the Company to represent
the estimated fair market value of the warrants at the inception of the
Agreement. These warrants originally had an exercise price of $3.125 per share,
were immediately exercisable, and originally expired on
F-14
<PAGE>
September 30, 1996. The notes bore interest at 15% payable quarterly, commencing
on November 15, 1989. Principal was to be repaid in five annual $400,000
installments commencing on September 25, 1995. In addition, Airlie purchased
960,000 shares of the Company's Common Stock for $3,000,000 in cash and granted
to ELX Limited Partnership ("ELX"), of which the President of the Company is the
sole general partner and other officers of the Company are limited partners, a
currently exercisable seven-year option to purchase up to 480,000 of the 960,000
shares of the Common Stock, at an exercise price of $3.125 per share.
In January 1990, BACC purchased from Airlie 220,400 shares of the Company's
Common Stock as well as $402,000 of the 15% senior subordinated ten-year notes.
In addition, the Company and Airlie modified the warrants, described above, for
the purchase of 1,053,500 shares of the Common Stock of the Company, in that
such warrants were exchanged for two warrants, one exercisable for 811,638
shares of Common Stock and the second exercisable for 604,156 shares of the
Company's Series A Non-Voting Convertible Preferred Stock, convertible, under
certain specified conditions, into 241,862 shares of the Common Stock. The
Series A Non-Voting Convertible Preferred Stock, which was never issued, was to
carry a liquidation preference of $0.002 per share and have no voting rights,
but otherwise were to have substantially the same rights as the Common Stock.
Following the issuance of the two warrants, the warrant for Series A Non-Voting
Convertible Preferred Stock was sold by Airlie to BACC. In addition, the option
to purchase up to 480,000 shares previously granted by Airlie to ELX was amended
to be exercisable for 369,800 shares of Common Stock, and an option to purchase
110,200 shares of Common Stock at a price of $3.125 per share was granted by
BACC to ELX.
On June 27, 1991, in connection with the Bickford's Restaurants purchase,
Airlie, BACC and M&C purchased an additional, $1,685,000, $502,000 and $313,000,
respectively, of the Company's senior subordinated notes. These notes bore
interest at 14.5% and were payable in five annual installments of $500,000
commencing on June 27, 1997.
On November 15, 1993, Airlie sold $500,000 of its 14.5% senior subordinated
notes. In connection with the sale, Milley Management Incorporated ("MMI"), a
management consulting firm, of which the President of the Company is the
President and majority stockholder, acquired 50,000 of the outstanding warrants
previously issued by the Company to Airlie. In addition, Cadmus Corporation
("Cadmus"), whose President and principal owner is Alexander M. Milley,
purchased $125,000 of the senior subordinated notes from Airlie. The remaining
$375,000 was purchased by three unrelated third parties.
On May 19, 1994, the Company purchased all of the 15.0% and 14.5% senior
subordinated notes held by MMI at their face value of approximately $250,000 and
$313,000, respectively. MMI waived all applicable prepayment penalties.
On December 8, 1994, the Company purchased all of the 15.0% and 14.5% senior
subordinated notes then held by Airlie at their face value of approximately
$1,348,000 and $1,185,000, respectively. Airlie waived all applicable prepayment
penalties and the Company agreed to cancel the remaining debt commitment due
from Airlie under the Agreement. In addition to the senior subordinated notes,
the Company purchased from Airlie 354,963 shares of the Company's Common Stock
at $5.25 per share and Airlie's remaining 761,638 warrants to purchase the
Company's common stock for $2.125 per share.
F-15
<PAGE>
In conjunction with the above transaction, the Company loaned ELX approximately
$1,156,000, the proceeds of which ELX used to exercise its option to purchase
the 369,800 shares of Common Stock held by Airlie under the existing option
granted to ELX at $3.125 per share. The note bears interest at 1/2% above the
Company's senior debt borrowing rate (see NOTE 7). Principal and interest are
due on December 8, 1997.
On December 8, 1994, Cadmus purchased 50,000 shares of the Company Common Stock
held by Airlie for $5.25 per share. The above transactions occurring on December
8, 1994 represented a complete divestiture of the Company's securities held by
Airlie. The source of the Company's funds was ELXSI's bank line of credit.
On December 30, 1996, the Company purchased all of the 15% and 14.5% senior
subordinated notes held by BACC at their face value of approximately $241,000
and $502,000, respectively. BACC waived all applicable prepayment penalties. In
addition to the senior subordinated notes, the Company purchased and retired
BACC's warrants to purchase the Company's Series A Non-Voting Convertible
Preferred Stock warrant, convertible into 241,862 shares of the Common Stock for
$478,000.
On December 30, 1996, the Company loaned ELX approximately $909,000, the
proceeds of which were used to exercise its option to purchase 110,200 shares
held by BACC under the existing option and to purchase the other 110,200 shares
of Common Stock held by BACC for $5.125 per share. The note bears interest at
1/2% above the Company's senior debt borrowing rate (see NOTE 7). Principal and
interest are due on December 30, 1999. The above transactions occurring on
December 30, 1996 represented a complete divestiture of the Company's securities
held by BACC. The source of the funds was ELXSI's then existing line of credit.
Transactions with Cadmus Corporation. In connection with the Agreement described
above, ELXSI (as assignee of ELXSI Corporation) entered into a management
agreement on September 25, 1989 with M&C, which has most recently been assigned
to Cadmus. The management agreement was extended in 1992 for a minimum of three
additional years and thereafter unless terminated by a majority vote of the
Board of Directors of either party. Certain of the Company's officers and
directors are affiliated with Cadmus. The management agreement provides for
Cadmus to receive, for management services rendered, compensation of $500,000
per year that commenced upon the Company having first achieved operating income
(as defined) of $1,250,000 for a fiscal quarter, plus reimbursement for
reasonable expenses. The fees may be discontinued following a year in which
operating income is less than $4,000,000, but will be reinstated following the
first fiscal quarter in which the Company again attains quarterly operating
income of at least $1,250,000. During 1996, 1995 and 1994, the Company was
charged management fees of $500,000 each year. Cadmus also provides the Company
with certain general and administrative services. During 1996, 1995 and 1994,
the Company was charged $36,000, $36,000 and $41,000, respectively, for such
items. At December 31, 1996 and 1995, accrued expenses include $119,000 and
$18,000, respectively, due to Cadmus under such management agreement.
Transactions with Azimuth Corporation and Subsidiaries. On December 30, 1996,
ELXSI entered into a Recapitalization Agreement with Azimuth Corporation and its
three wholly-owned subsidiaries: Contempo Design, Inc., Contempo Design West,
Inc., and Delaware Electro Industries, Inc. (collectively referred to as the
"Azimuth Subsidiaries"), of which certain of the officers, directors and Azimuth
stockholders are officers and directors of the Company. Under
F-16
<PAGE>
the Recapitalization Agreement, ELXSI purchased from BAI three Azimuth
Subsidiary revolving notes (the "Azimuth Subsidiary Notes") which were scheduled
to mature on December 31, 1996. The Notes had a combined face value of
$6,650,000 and were purchased by ELXSI at an $800,000 discount. Under the
Recapitalization Agreement, ELXSI received all contract rights and obligations
held by BAI in relation to the Azimuth Subsidiary Notes and, as a result, became
the provider of a working capital line of credit for the Azimuth Subsidiaries,
which ELXSI agreed to increase to $9,650,000 and extended through June 30, 1998.
The line of credit is collateralized by substantially all of the assets of
Azimuth Corporation.
As of December 30, 1996, the balance due to ELXSI from the Azimuth Subsidiaries
was $6,650,000. Loan balances outstanding from the Azimuth Subsidiaries bear
interest at 15% per annum, payable in arrears on the 1st and 16th of each month,
and mature on June 30, 1998. The $800,000 discount recorded upon purchase of the
Azimuth Subsidiary Notes from BAI has been recorded as a direct reduction to the
face amount of the Azimuth Subsidiary Notes in the accompanying financial
statements. In addition, ELXSI recorded a $225,000 closing fee receivable due
from the Azimuth Subsidiaries under the Recapitalization Agreement, and accrued
certain legal and bank fees payable. ELXSI recorded the net fees in accounts
receivable within the accompanying consolidated financial statements. The
Company will amortize this discount and the net closing fees over the life of
the Azimuth Subsidiary Notes utilizing the effective interest method of
amortization.
NOTE 7. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
1. ELXSI
Bank Line of Credit with BAI, $11,790,000 available, interest
due monthly at prime (8.25% at December 31, 1996) or 2% above
London Eurodollar rate (7.68% at December 31, 1996), maturing
on June 30, 1998. The line of credit provides for minimum
reductions in available credit of $2,250,000 annually. The
line is secured by assets of ELXSI, including real estate,
and the outstanding stock of ELXSI. The agreement provides
for commitment fees of 0.3% on the unused portion of the line
of credit. In addition, the agreement restricts the payment
of cash dividends by ELXSI to an amount not to exceed 50% of
the excess cash flow (as defined). 9,784,000 11,709,000
2. ELXSI
Supplemental Bank Line of Credit with BAI, $5,100,000
available, interest due monthly at prime (8.25% at December
31, 1996) or 2% above London Eurodollar rate (7.68% at
December 31, 1996), maturing on June 30, 1998. The line is
utilized to repurchase securities of the Company,
F-17
<PAGE>
including stock, warrants and notes and is secured by assets
of ELXSI, including real estate, and the outstanding stock of
ELXSI. The agreement provides for commitment fees of 0.3% on
the unused portion of the line of credit. 3,187,000 --
3. ELXSI
Additional Bank Line of Credit with BAI, $8,850,000
available, interest due monthly at prime (8.25% at December
31, 1996) or 2% above London Eurodollar rate (7.68% at
December 31, 1996), maturing on June 30, 1998. The line was
utilized to purchase the notes payable by the Azimuth
Subsidiaries and can be used to fund their future working
capital requirements of Azimuth (see NOTE 6). The line is
secured by assets of ELXSI, including real estate, and the
outstanding stock of ELXSI. The agreement provides for
commitment fees of 0.3% on the unused portion of the line of
credit. 5,850,000 --
4. ELXSI Corporation
Unsecured senior subordinated note payable with interest at
15% payable quarterly in arrears, commencing November 15,
1989. -- 310,000
5. ELXSI Corporation
Unsecured senior subordinated notes payable with interest at
14.5% payable quarterly in arrears, commencing August 15,
1991. -- 877,000
6. Cues
Mortgage payable at 8.25% on the land and building owned by
Cues B.V. 122,000 141,000
Other $ 31,000 $ 18,000
18,974,000 13,055,000
Less current portion (268,000) (1,485,000)
----------- -----------
Long-Term Debt $18,706,000 $11,570,000
=========== ===========
</TABLE>
The above bank debt agreements with BAI contain, among other provisions,
financial covenants related to the maintenance of ELXSI's minimum net worth,
restrictions on its capital expenditures and compliance with certain ratios
including liabilities to net worth, interest coverage and funded debt to
earnings before interest, taxes, depreciation and amortization.
F-18
<PAGE>
Aggregate maturities of long-term debt for the five years ending December 31,
2000 and thereafter are as follows:
1997 $ 268,000
1998 18,601,000
1999 24,000
2000 10,000
2001 10,000
Thereafter 61,000
-------------
$ 18,974,000
=============
NOTE 8. Commitments and Contingencies
ELXSI conducts a substantial portion of its operations utilizing leased
facilities. ELXSI leases land and/or buildings at 46 of its 58 restaurants under
terms of lease agreements expiring on various dates (including extension
options) through 2032. The majority of the leases require that ELXSI pay taxes,
maintenance, insurance, and other occupancy expenses related to leased premises.
The rental payments for a majority of the restaurant locations are based on a
minimum annual rental plus a percentage of sales, as defined in the relevant
agreements. Generally, the leases provide for renewal options and in most cases,
management expects that in the normal course of business, lease agreements will
be renewed or replaced by other leases.
Cues has several non-cancelable operating leases, primarily for certain office
and transportation equipment, that expire over the next three years and
generally provide for purchases or renewal options.
The following is a schedule of future minimum lease commitments for the five
years ending December 31, 2001 and thereafter:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
1997 $ 276,000 $ 2,722,000
1998 270,000 2,492,000
1999 175,000 2,441,000
2000 175,000 2,422,000
2001 175,000 2,301,000
Thereafter 2,543,000 16,957,000
----------- ------------
Total minimum lease payments 3,614,000 $ 29,335,000
============
Less - Amount representing interest (1,884,000)
-----------
Present value of net minimum capital lease payments 1,730,000
Less - current portion (142,000)
-----------
Noncurrent capital lease obligation $ 1,588,000
===========
</TABLE>
Rent expense charged to operations amounted to $2,852,000, $2,235,000 and
$1,701,000 during 1996, 1995, and 1994, respectively.
At December 31, 1996 and 1995, ELXSI had outstanding letters of credit totalling
$0 and $500,000, respectively.
F-19
<PAGE>
Cues has arrangements with truck dealers to deliver truck bodies which are used
in the manufacture of certain Cues products. Under these arrangements, Cues
reimburses the dealers' floor-plan financing costs for those vehicles held by
the dealers until delivery to Cues. The amount of this reimbursement for 1996,
1995 and 1994 was $61,000, $56,000 and $57,000, respectively. At December 31,
1996 and 1995, truck bodies held by the dealers under these arrangements were
valued at $643,000 and $688,000, respectively.
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, the resolution of these matters will not
have a material adverse effect on the Company's consolidated financial position
or results of operations.
NOTE 9. Thrift and Profit Sharing Plan
In 1986, Cues established a contributory trusteed thrift and profit sharing plan
covering all of its employees who have completed one year of eligible service.
The plan's enrollment dates are January 1, April 1, July 1, and October 1, of
each year. Participants have the option of making after-tax or deferred cash
contributions, not to exceed 6% of their annual compensation, which are
supplemented by employer matching contributions in the amount of 50% of the
participant's contribution. The participants may make additional voluntary
contributions to the plan which are not supplemented by employer contributions.
Participants partially vest in the employer's contributions after the second
year of service and are fully vested after the sixth year of service. Thrift and
profit sharing expense for 1996, 1995 and 1994 was $44,000, $48,000 and $40,000,
respectively.
During 1995, the Restaurant Division established a non-contributory trusteed
thrift and profit sharing plan covering all of its employees who are over the
age of 21 and have completed one year of eligible service.
NOTE 10. Common Stock
Activity in common stock shares for the years ended December 31, 1996, 1995 and
1994 was as follows:
1996 1995 1994
----------- ---------- ----------
Common Stock Issued:
Balance at beginning of year 4,792,353 5,032,333 5,368,870
Issuance of fractional shares 16 20 26
Options exercised -- -- 18,400
Shares repurchased and cancelled (131,500) (240,000) (354,963)
----------- ---------- ----------
Balance at end of year 4,660,869 4,792,353 5,032,333
=========== ========== ==========
NOTE 11. Common Stock Options and Warrants
Common Stock Options. At December 31, 1996 and 1995, the Company had a total of
769,587 and 644,587 common shares reserved for issuance under its stock option
plans, respectively. Options under the Company's plans are granted at prices
determined by the Board of Directors, which are generally not less than the fair
market value in the case of incentive stock options (or 75% of face market value
in the case of non-qualified options) of the Common Stock on the date of grant.
Options generally vest and become exercisable six months after the date of the
grant and expire ten years after the date of the grant.
F-20
<PAGE>
During 1996, stockholders approved the 1996 Incentive Stock Option Plan (the
"1996 Plan"), under which up to 125,000 shares may be issued. Under the 1996
Plan presently outstanding options to purchase 103,450 shares were granted at an
exercise price of $6.50 per share. The options became exercisable on November
23, 1996.
During 1995, stockholders approved the 1995 Incentive Stock Option Plan (the
"1995 Plan"), under which up to 125,000 shares may be issued. Under the 1995
Plan presently outstanding options to purchase 103,300 shares were granted at an
exercise price of $5.75 per share. These options became exercisable on November
19, 1995.
During 1993, stockholders approved the 1993 Incentive Stock Option Plan (the
"1993 Plan"), under which up to 300,000 shares may be issued. Under the 1993
Plan presently outstanding options to purchase 243,810 shares were granted at
exercise prices between $5.00 and $6.50 per share. These options became
exercisable beginning on March 8, 1994.
Weighted-
Number Average
of Shares Option Price
--------- ------------
Outstanding at December 31, 1993 220,600 5.13
Granted during 1994 115,000 5.75
Exercised during 1994 (18,400) 3.13
Cancelled during 1994 --
Outstanding at December 31, 1994 317,200 5.47
Exercisable at December 31, 1994 282,050 5.41
Available for grant at December 31, 1994 202,987
Granted during 1995 124,800 5.69
Exercised during 1995 (600) 3.13
Canceled during 1995 (4,190) 5.56
Outstanding at December 31, 1995 437,210 5.53
Exercisable at December 31, 1995 374,478 5.46
Available for grant at December 31, 1995 207,377
Granted during 1996 130,450 6.21
Exercised during 1996 --
Canceled during 1996 (15,900) 5.40
Outstanding at December 31, 1996 551,760 5.70
Exercisable at December 31, 1996 480,305 5.68
Available for grant at December 31, 1996 217,827
F-21
<PAGE>
The following table summarizes the stock options outstanding and exercisable at
December 31, 1996:
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------- ----------------------
Weighted-
Average Weighted- Weighted
Remaining Average Average
Range of Number of Contractual Exercise Number of Exercise
Exercise Prices Options Life Price Options Price
--------------- --------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
5.00 - 6.50 550,560 8 5.65 479,705 5.65
26.50 1,200 3 26.50 600 26.50
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS 123. During 1996,
1995 and 1994, no compensation expense has been recognized for the stock option
plans. Had compensation costs for the stock option plans been determined based
on the fair value at the date of grant for awards in 1996, 1995 and 1994
consistent with the provisions of SFAS 123, the Company's net income and
earnings per share would approximate the following pro forma amounts:
1996 1995 1994
------ ------ ------
Net income - as reported (000's) 7,383 4,546 4,734
Net income - pro forma (000's) 7,148 4,300 4,397
Earnings per share - as reported 1.51 0.89 0.79
Earnings per share - pro forma 1.46 0.84 0.73
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: No dividend yield; expected volatility of 10%; risk free interest
rate 6.26%; and expected lives of 7 years. The weighted-average fair value of
options granted during fiscal 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Number Exercise Fair
of Options Prices Values
------------------------------------
Fiscal 1996:
<S> <C> <C> <C>
Exercise price = market price at date of grant 130,450 6.21 2.24
Fiscal 1995:
Exercise price = market price at date of grant 104,800 5.75 2.07
Exercise price > market price at date of grant 20,000 5.38 1.81
-------
124,800
Fiscal 1994:
Exercise price = market price at date of grant 115,000 5.75 2.06
</TABLE>
F-22
<PAGE>
Warrants. At December 31, 1996 and 1995, the Company had a total of 269,262 and
511,124 common shares reserved for issuance pursuant to warrants as follows:
In connection with the acquisition of Cues, the Company issued a Series C
warrant to purchase 68,762 shares of the Company's Common Stock. This warrant
remained unexercised at December 31, 1996, and originally had an exercise price
and expiration date of $4.36 per share and January 31, 1997, respectively.
During 1997, this warrant's expiration date was extended until January 31, 1999
and the exercise price was increased to $5.23 per share.
In connection with the Stock and Note Purchase Agreement (see NOTE 6), the
Company issued warrants to acquire up to an aggregate of 1,204,000 shares of the
Company's Common Stock. On December 8, 1994, the Company repurchased 761,638 of
these Series A Warrants from Airlie for $1,635,000, or $2.125 per warrant. On
December 30, 1996, the Company repurchased all of the Series B warrants for
convertible preferred stock (convertible into 241,862 shares of Common Stock)
from BACC for $478,000, or $1.975 per underlying common share. The remaining
200,500 Series A Warrants remain unexercised at December 31, 1996, and
originally had an exercise price and expiration date of $3.125 and September 25,
1996, respectively. During 1996, these warrant's expiration date were extended
until September 30, 1998 and the exercise price was increased to $3.75 per
share.
Phantom Stock Option Plan. The phantom stock option plan was implemented in 1992
as a long-term incentive plan for four key executives of Bickford's Restaurants
(the "Group"). At the inception of the plan, the Group paid an initial
investment totalling approximately $116,000. Each Group member is entitled to
receive, upon exercise, a cash payment equal to his individual vested percentage
of the appraised value of Bickford's Restaurants, as defined, less the balance
of his exercise price payable upon exercise. Full vesting occurred on July 1,
1996, at which time the Group, as a whole, was entitled to 13.9% of the
appraised value of Bickford's Restaurants, as defined. Each Group member's
phantom stock options may be exercised at the earliest of July 1, 2001, the
termination of his employment, his death or the sale of the Restaurants.
The assumptions used in calculating the annual expense are set forth in the plan
agreement and include the use of a multiple of the Bickford's Restaurants
operating income, less certain Bickford's-related liabilities, a non-liquidity
discount, estimated taxes related to a gain on divestiture of the Restaurants,
sale transaction costs and the exercise price. During 1996, 1995 and 1994, the
Company recorded compensation expense related to the phantom stock option plan
of $550,000, $600,000 and $300,000, respectively. As of December 31, 1996 and
1995, $1,946,000 and $1,396,000, respectively is recorded in other non-current
liabilities, which represents 13.9% of the estimated appraised value of
Bickford's Restaurants , as defined, on those dates.
F-23
<PAGE>
NOTE 12. Segment Reporting
The Company operates in two segments, restaurant management and equipment
manufacturing. Summarized financial information by business segment for the
years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
Net Sales:
<S> <C> <C> <C>
Restaurants $ 61,283,000 $ 54,270,000 $ 43,391,000
Equipment 21,460,000 20,404,000 19,032,000
------------- ------------- -------------
$ 82,743,000 $ 74,674,000 $ 62,423,000
============= ============= =============
Operating Income:
Restaurants $ 6,019,000 $ 7,088,000 $ 6,404,000
Equipment 1,334,000 988,000 1,346,000
Corporate (1,350,000) (1,439,000) (1,191,000)
------------- ------------- -------------
$ 6,003,000 $ 6,637,000 $ 6,559,000
============= ============= =============
Total Assets:
Restaurants $ 29,780,000 $ 30,008,000 $ 25,989,000
Equipment 18,328,000 16,321,000 13,182,000
Corporate 11,370,000 1,370,000 1,345,000
------------- ------------- -------------
$ 59,478,000 $ 47,699,000 $ 40,516,000
============= ============= =============
Depreciation and Amortization:
Restaurants $ 2,318,000 $ 1,833,000 $ 1,460,000
Equipment 457,000 373,000 334,000
------------- ------------- -------------
$ 2,775,000 $ 2,206,000 $ 1,794,000
============= ============= =============
Capital Expenditures:
Restaurants $ 2,891,000 $ 1,967,000 $ 2,015,000
Equipment 217,000 390,000 348,000
------------- ------------- -------------
$ 3,108,000 $ 2,357,000 $ 2,363,000
============= ============= =============
</TABLE>
Capital expenditures exclude amounts in connection with acquisition and
divestitures.
There were no inter-segment sales or transfers during 1996, 1995, and 1994.
Operating income by business segment excludes interest income, interest expense,
and unallocated corporate expenses. Corporate assets consist principally of the
related party notes and interest receivable, the deferred tax asset and the
closing fee receivable due from the Azimuth Subsidiaries.
Foreign assets, revenues, and export sales each represents less than 10% of the
Company's totals. No material amount of the Company's sales are dependent upon a
single customer.
F-24
<PAGE>
NOTE 13. Quarterly Financial Data - (Unaudited) The following summarizes
quarterly financial data for 1996 and 1995 (in thousands, except per share
data):
<TABLE>
<CAPTION>
1996
-------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31,
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 19,820 $ 21,665 $ 21,242 $ 20,016
Gross profit 3,356 4,202 4,249 4,333
Income before income taxes 519 1,264 1,482 1,786
Net income $ 430 $ 1,124 $ 1,315 $ 4,514
Earnings per common share $ .09 $ .21 $ .27 $ .94
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31,
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 15,614 $ 16,914 $ 22,048 $ 20,098
Gross profit 3,410 3,903 4,504 4,510
Income before income taxes 833 1,222 1,591 1,414
Net income $ 745 $ 1,084 $ 1,432 $ 1,285
Earnings per common share $ .15 $ .21 $ .28 $ .25
</TABLE>
In the fourth quarter of 1996, the Company recorded a $2,881,000 credit to
benefit for income taxes as a result of the release of a portion of the
valuation allowance as discussed in NOTE 5.
F-25
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ELXSI CORPORATION AND SUBSIDIARIES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions
--------------------------------
Balance at Charged Charged to Balance
Beginning Costs and Other Deductions at End
of Period Expenses Accounts-describe Describe of Period
------------- ------------ ----------------- ----------- -----------
Year ended December 31, 1996
Account deducted from assets:
Reserve for doubtful accounts
<S> <C> <C> <C> <C> <C>
receivable $ 58 $ 28 $ 3 (C) (35) (A) $ 54
====== ====== ====== ====== ======
Inventory reserve $ 150 $ 400 $ -- -- (B) 550
====== ====== ====== ====== ======
Year ended December 31, 1995
Account deducted from assets:
Reserve for doubtful accounts
receivable $ 35 $ 23 $ 19 (C) (19) (A) $ 58
====== ====== ====== ====== ======
Inventory reserve $ 100 $ 54 $ -- (4) (B) 150
====== ====== ====== ====== ======
Year ended December 31, 1994
Account deducted from assets:
Reserve for doubtful accounts
receivable $ 77 $ 3 $ -- (45) (A) $ 35
====== ====== ====== ====== ======
Inventory reserve $ 262 $ 53 $ -- (215) (B) $ 100
====== ====== ====== ====== ======
(A) Uncollectible accounts written off during 1996, 1995 and 1994.
(B) Obsolete inventory written off during 1996, 1995 and 1994.
(C) Bad debt recoveries.
</TABLE>
S-1
<PAGE>
ELXSI Corporation
Exhibits Index
1996 - Form 10-K
Exhibit
Number Description Page No.
- ------ ----------- --------
2.1 Agreement and Plan of Merger by and among ELXSI Corporation,
ELXSI, Cadmus Corporation and Holdingcues, Inc. dated as of
October 16, 1992, including form of Series C Warrant.
(Incorporated herein by reference to Exhibit 2.7 of the
Company's Current Report on Form 8-K as filed November 13,
1992 (File No 0-11877)).
2.2 Family Restaurant Sale and Purchase Agreement, between
Marriott Family Restaurants, Inc. ("Marriott") and the
Company dated February 28, 1991. (Incorporated herein by
reference to Exhibit 2.1 of the Company's Current Report on
Form 8-K, dated July 16, 1991 (File No. 0-11877)).
2.3 Side Letter to the Family Restaurant Sale and Purchase
Agreement between Marriott and the Company dated February
28, 1991. (Incorporated herein by reference to Exhibit 2.2
of the Company's Current Report on Form 8-K, dated July 16,
1991 (File No. 0-11877)).
2.4 Assignment and Guaranty of Family Restaurants Sale and
Purchase Agreement and Side Letter, between the Company,
Marriott and ELXSI dated June 29, 1991. (Incorporated herein
by reference to Exhibit 2.3 of the Company's Current Report
on Form 8-K, dated July 16, 1991 (File No. 0-11877)).
2.5 Closing Side Letter Agreement Regarding Family Restaurants
Sale and Purchase Agreement between ELXSI and Marriott dated
July 1, 1991. (Incorporated herein by reference to Exhibit
2.4 of the Company's Current Report on Form 8-K, dated July
16, 1991 (File No. 0-11877)).
2.6 Real Estate Closing Side Letter Agreement Regarding Family
Restaurants Sale and Purchase Agreement between ELXSI and
Marriott dated July 1, 1991. (Incorporated herein by
reference to Exhibit 2.5 of the Company's Current Report on
Form 8-K, dated July 16, 1991 (File No. 0-11877)).
2.7 Agreement Concerning Massachusetts and Connecticut Liquor
Licenses between ELXSI and Marriott dated July 1, 1991.
(Incorporated herein by reference to Exhibit 2.6 of the
Company's Current Report on Form 8-K, dated July 16, 1991
(File No. 0-11877)).
3.1 Restated Certificate of Incorporation of the Company, as
amended. (Incorporated herein by reference to Exhibit 3.1 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (file No. 0-11877)).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company dated May 27, 1992.
(Incorporated herein by reference to Exhibit 3.2 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
<PAGE>
3.3 Bylaws of the Company. (Incorporated herein by reference to
Exhibit 3.1 of the Company's Registration Statement on Form
S-4, as amended. (file No. 0-11877)).
4.1 Series A Warrant No. A-7 to purchase 50,000 shares of Common
Stock issued to Eliot Kirkland L.L.C. ("EKLLC").
4.2 Form of Allonge and Amendment to Series A Warrants of ELXSI
Corporation, with respect to the foregoing Warrant.
4.3 Series A Warrant No. A-6 to purchase 150,500 shares of
Common Stock issued to the Alexander M. Milley Irrevocable
Trust I U/A dated May 9, 1994. (Incorporated herein by
reference to Exhibit 4.2 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file
No. 0-11877)).
4.4 Form of Allonge and Amendment to Series A Warrants of ELXSI
Corporation, with respect to the foregoing Warrant.
4.5 Series B Warrant No. B-1 to purchase 604,656 shares of
Series A Non-Voting Convertible Preferred Stock issued to
Continental Illinois Equity Corporation ("CIEC") (now named
BankAmerica Capital Corporation ("BACC")). (Incorporated
herein by reference to Exhibit 4.6 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1989 (file No. 0-11877)).
4.6 Series C Warrant No. C-3 to purchase 68,762 shares of Common
Stock issued to EKLLC.
4.7 Form of Allonge and Amendment to Series C Warrants of ELXSI
Corporation, with respect to the foregoing Warrant.
4.8 Amended and Restated Registration Rights Agreement dated as
of January 23, 1990 among the Company, Milley & Company
("M&C") and CIEC. (Incorporated herein by reference to
Exhibit 4.7 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 (file No. 0-11877)).
4.9 Exercise of Option and Assignment of Registration Rights
executed by ELX Limited partnership ("ELX") and The Airlie
Group, L.P. ("Airlie") dated November 30, 1994.
(Incorporated herein by reference to Exhibit 4.6 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
4.10 15% Senior Subordinated Note issued by the Company to CIEC
in the amount of $401,765.00. (Incorporated herein by
reference to Exhibit 10.18 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989 (file
No. 0-11877)).
4.11 14.5% Senior Subordinated Note issued by the Company to CIEC
in the amount of $502,206.25 dated June 27, 1991.
(Incorporated herein by reference to Exhibit 4.8 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
4.12 Amended and Restated Loan and Security Agreement, dated as
of December 30, 1996, between ELXSI and Bank of America
Illinois ("BAI").
<PAGE>
4.13 Warrant Purchase and Senior Subordinated Note termination
Agreement, dated as of December 30,1996, between BACC and
the Company.
4.14 14.5% Senior Subordinated Note issued by the Company to Pan
Fixed Income Fund, Ltd., dated as of November 16, 1993 in
the amount of $250,000. (Incorporated herein by reference to
Exhibit 4.12 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (file No. 0-11877)).
4.15 14.5% Senior Subordinated Note issued by the Company to Rona
Jaffe, dated as of November 16, 1993 in the amount of
$100,000. (Incorporated herein by reference to Exhibit 4.13
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
4.16 14.5% Senior Subordinated Note issued by the Company to Anne
Strassler A.C.S.W. P.C., dated as of November 16, 1993 in
the amount of $25,000. (Incorporated herein by reference to
Exhibit 4.14 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (file No. 0-11877)).
10.1 The Company's 1987 Incentive Stock Option Plan as amended.
(Incorporated by reference to Exhibit 10.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1987 (file No. 0-11877)).
10.2 The Company's 1987 Supplemental Stock Option Plan as
amended. (Incorporated by reference to Exhibit 10.2 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987 (file No. 0-11877)).
10.3 The Company's 1993 Incentive Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.3 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
10.4 The Company's 1995 Incentive Stock Option Plan (Incorporated
herein by reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement filed November 14, 1995 (Registration
No. 033-64205)).
10.5 The Company's 1996 Incentive Stock Option Plan (Incorporated
herein by reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement filed December 2, 1996 (Registration
No. 333-17131)).
10.6 The ELXSI 1991 Phantom Stock Option Plan for the management
of the Bickford's Division. (Incorporated herein by
reference to Exhibit 10.4 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file
No. 0-11877)).
10.7 Amendment No. 1 to the ELXSI 1991 Phantom Stock Option Plan
for the management of the Bickford's Division. (Incorporated
herein by reference to Exhibit 10.5 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994 (file No. 0-11877)).
10.8 Non-Qualified Stock Option Agreement issued to Robert C.
Shaw for the purchase of 12,500 shares of Common Stock,
dated October 30, 1992. (Incorporated herein by reference to
Exhibit 10.7 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (file No. 0-11877)).
<PAGE>
10.9 Non-Qualified Stock Option Agreement issued to John C.
Savage for the purchase of 10,000 shares of Common Stock,
dated October 30, 1992. (Incorporated herein by reference to
Exhibit 10.8 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (file No. 0-11877)).
10.10 Non-Qualified Stock Option Agreement issued to Farrokh K.
Kavarana for the purchase of 10,000 shares of Common Stock,
dated October 30, 1992. (Incorporated herein by reference to
Exhibit 10.9 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (file No. 0-11877)).
10.11 Non-Qualified Stock Option Agreement issued to Kevin P.
Lynch for the purchase of 20,000 shares of Common Stock,
dated October 30, 1992. (Incorporated herein by reference to
Exhibit 10.10 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.12 Non-Qualified Stock Option Agreement issued to Alexander M.
Milley for the purchase of 30,000 shares of Common Stock,
dated October 30, 1992. (Incorporated herein by reference to
Exhibit 10.11 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.13 Non-Qualified Stock Option Agreement issued to Thomas R.
Druggish for the purchase of 12,500 shares of Common Stock,
dated October 30, 1992. (Incorporated herein by reference to
Exhibit 10.12 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.14 Stock and Note Purchase Agreement dated as of August 31,
1989 by and among the Company, Airlie and M&C. (Incorporated
herein by reference to Exhibit 2.1 of the Company's Current
Report on Form 8-K as filed October 3, 1989 (File No
0-11877)).
10.15 Stock and Note Purchase Agreement dated as of January 23,
1990 among Airlie, CIEC and M&C. (Incorporated herein by
reference to Exhibit 10.14 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (file
No. 0-11877)).
10.16 Management Agreement ("Management Agreement") between
Winchester National, Inc. (d/b/a as M&C) and the Company
dated September 25, 1989. (Incorporated herein by reference
to Exhibit 10.21 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991 (file No.
0-11877)).
10.17 Assignment of Management Agreement dated June 28, 1991 among
the Company, Winchester National, Inc., ELXSI and MMI.
(Incorporated herein by reference to Exhibit 10.16 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
<PAGE>
10.18 Management Agreement Extension dated September 25, 1992
between ELXSI and MMI. (Incorporated herein by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (file No.
0-11877)).
10.19 Assignment to Cadmus Corporation ("Cadmus"), dated January
1, 1994 of MMI's rights under the extended Management
Agreement dated September 25, 1992, as amended between ELXSI
and MMI. (Incorporated herein by reference to Exhibit 10.18
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (file No. 0-11877)).
10.20 Promissory Note of ELX payable to the Company dated December
8, 1994 in the amount of $1,155,625.00 due December 8, 1997.
(Incorporated herein by reference to Exhibit 10.6 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (file No. 0-11877)).
10.21 Form of Stock Purchase and Option Exercise Agreement, dated
as of December 30, 1996, between BACC and ELX (Incorporated
herein by reference to Exhibit D to the Amendment No. 10 to
the Schedule 13D of Alexander M. Milley, MMI, ELX, Cadmus
and EKLLC, dated January 7, 1997, filed in respect of the
Company's Common Stock).
10.22 Form of Promissory Note of ELX payable to the Company, dated
December 30, 1996, in the amount of $909,150 due on December
30, 1999 (Incorporated herein by reference to Exhibit E to
the Amendment No. 10 to the Schedule 13D of Alexander M.
Milley, MMI, ELX, Cadmus and EKLLC, dated January 7, 1997,
filed in respect of the Company's Common Stock).
10.23 Form of Recapitalization Agreement, dated as of December 30,
1996, among Azimuth Corporation ("Azimuth"), Delaware
Electro Industries, Inc. ("DEI"), Contempo Design, Inc.
("CDI"), Contempo Design West, Inc. ("CDW"), ELXSI and BAI
(Incorporated herein by reference to Exhibit F to the
Amendment No. 10 to the Schedule 13D of Alexander M. Milley,
MMI, ELX, Cadmus and EKLLC, dated January 7, 1997, filed in
respect of the Company's Common Stock).
10.24 Second Amended and Restated Loan and Security Agreement,
dated as of October 9, 1995, between Azimuth and BAI.
10.25 Loan and Security Agreement, dated as of October 9, 1995,
between DEI and BAI.
10.26 Loan and Security Agreement, dated as of October 9, 1995,
between CDI and BAI.
10.27 Loan and Security Agreement, dated as of October 9, 1995,
between CDW and BAI.
10.28 First Omnibus Amendment, dated as of August 9, 1996, among
Azimuth, DEI, CDI, CDW and BAI.
10.29 Second Omnibus Amendment, dated as of September 23, 1996,
among Azimuth, DEI, CDI, CDW and BAI.
<PAGE>
10.30 Third Omnibus Amendment, dated as of November 27, 1996,
among Azimuth, DEI, CDI, CDW and BAI.
10.31 Second Amended and Restated Guaranty, dated as of October 9,
1995, made by DEI, CDI and CDW in favor of BAI.
10.32 Second Amended and Restated Pledge Agreement, dated as of
October 9, 1995, among Azimuth, DEI, CDI, CDW and BAI.
21.1 Subsidiaries of the Company. (Incorporated by reference to
Exhibit 22.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (file No. 0-11877)).
23.1 Consent of Price Waterhouse LLP
27 Financial Data Schedule
<PAGE>
EXHIBIT 4.1
SERIES A WARRANT
To Purchase Common Stock of
ELXSI CORPORATION
Series A Warrant No. A-7 (Post-Reverse Split)
No. of Shares of Common Stock: 50,000
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the document to which
it is attached, but is inserted for convenience only.
Page
----
1. DEFINITIONS............................................................. 1
2. EXERCISE OF WARRANT..................................................... 5
2.1. Manner of Exercise........................................... 5
2.2. Payment of Taxes............................................. 6
2.3. Fractional Share............................................. 6
2.4. Continued Validity........................................... 6
3. TRANSFER, DIVISION AND COMBINATION...................................... 7
3.1. Transfer..................................................... 7
3.2. Division and Combination..................................... 7
3.3. Expenses..................................................... 7
3.4. Maintenance of Books......................................... 7
4. ADJUSTMENTS............................................................. 7
4.1 Stock Dividends, Subdivisions and Combinations............... 8
4.2. Issuance of Additional Shares of Common Stock................ 8
4.3. Issuance of Warrants or Other Rights......................... 9
4.4. Issuance of Convertible Securities........................... 9
4.5. Superseding Adjustment....................................... 10
4.6. Other Provisions Applicable to Adjustments Under
this Section................................................. 11
4.7. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets....................... 13
4.8. Other Action Affecting Common Stock.......................... 14
4.9. Certain Limitations.......................................... 14
5. NOTICES TO WARRANT HOLDERS.............................................. 14
5.1. Notice of Adjustments........................................ 14
5.2. Accountants' Opinion......................................... 15
5.3. Notice of Certain Corporate Actions.......................... 15
6. NO IMPAIRMENT........................................................... 15
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY............................................................... 16
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS...................... 16
9. RESTRICTIONS ON TRANSFERABILITY......................................... 17
9.1. Restrictive Legend........................................... 17
- i -
<PAGE>
Page
----
9.2. Notice of Proposed Transfers; Requests for
Registration................................................ 17
9.3. Termination of Restrictions................................. 18
10. SUPPLYING INFORMATION.................................................. 19
11. LOSS OR MUTILATION..................................................... 19
12. OFFICE OF THE COMPANY.................................................. 19
13. FINANCIAL AND BUSINESS INFORMATION..................................... 19
13.1. Quarterly Information....................................... 19
13.2. Annual Information.......................................... 20
13.3. Filings..................................................... 20
14. REPURCHASE BY THE COMPANY OF WARRANT................................... 20
14.1. Obligation to Repurchase Warrant............................ 20
14.2. Determination and Payment of Repurchase Price............... 21
15. APPRAISAL.............................................................. 22
16. LIMITATION OF LIABILITY................................................ 22
17. MISCELLANEOUS.......................................................... 23
17.1. Nonwaiver and Expenses...................................... 23
17.2. Notice Generally............................................ 23
17.3. Remedies.................................................... 23
17.4. Successors and Assigns...................................... 23
17.5. Amendment................................................... 24
17.6. Severability................................................ 24
17.7. Headings.................................................... 24
17.8. Governing Law............................................... 24
- ii -
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 50,000 Warrant No. A-7
(Post-Reverse Split)
SERIES A WARRANT
To Purchase Common Stock of
ELXSI CORPORATION
THIS WARRANT CERTIFIES THAT ELIOT KIRKLAND L.L.C., or its
registered assigns, is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from ELXSI CORPORATION, a Delaware corporation
(the "Company"), 50,000 shares of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a Current Warrant Price of $3.125 per share, all on the
terms and conditions and pursuant to the provisions hereinafter set forth. The
number of shares of Common Stock purchasable under this Warrant and the Current
Warrant Price are subject to adjustment as provided in Section 4. This Warrant
was issued upon the transfer in August 1995 of one of a series of warrants
originally issued by the Company in September 1989 or January 1990 initially
exercisable for the purchase of an aggregate of 24,053,440 shares (before giving
effect to the Reverse Split (as hereinafter defined)) of Common Stock
(collectively, the "Series A Warrants"). In May 1992 the Company effected a
1-for-25 share reverse split of the Common Stock (the "Reverse Split"), with the
result that (among other things) the Series A Warrants became exercisable for
962,138 shares of Common Stock. The number of shares of Common Stock initially
purchasable upon exercise of this Warrant and the Current Warrant Price of
$3.125 per share, give effect to the Reverse Split.
1. DEFINITIONS
As used in this Warrant, the following terms shall have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Appraised Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the fair saleable value of such share
of Common Stock (determined without giving effect to the discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Company may have no class of equity security registered under the
Exchange Act) as of the last day of the immediately preceding fiscal month
unless such last day of the immediately preceding month is within 15 days of
such date specified, then as of the last day of the next
<PAGE>
preceding fiscal month, based on the value of the Company, as determined by an
investment banking firm selected in accordance with the terms of Section 15,
divided by the number of Fully Diluted Outstanding shares of Common Stock.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.001 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.7) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.7.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property,
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, (a) if there shall not then be a
public market for the Common Stock, the Appraised Value per share of Common
Stock as at such date, or (b) if there shall then be a public market for the
Common Stock, the average of the daily market prices for 30 consecutive Business
Days commencing 45 days before such date. The daily market price for each such
Business Day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange, (iii) if the Common Stock is not then listed or admitted to
trading on any stock exchange, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
National Association of Securities Dealers Automatic Quotation System or the
National Quotation Bureau, Inc., (iv) if neither such corporation at the time is
2
<PAGE>
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Majority Holders
and the Company or, if they cannot agree upon such selection, as selected by two
such members of the NASD, one of which shall be selected by the Majority Holders
and one of which shall be selected by the Company.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"Deferral Notice" shall have the meaning set forth in
Section 14.1(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean September 30, 1996.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, and all other
options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all Warrants, whether or not then
exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in
Section 4.7.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof
3
<PAGE>
is to be determined, all issued shares of Common Stock, except shares then owned
or held by or for the account of the Company or any subsidiary thereof, and
shall include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated 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).
"Purchase Agreement" shall mean the Stock and Note Purchase
Agreement dated as of August 31, 1989 by and among the Company, The Airlie Group
L.P. and Milley & Company.
"Registration Rights Agreement" shall mean that
Registration Rights Agreement among the Company, The Airlie Group
L.P. and Milley & Company.
"Repurchase Price" shall have the meaning set forth in
Section 14.2.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Reverse Split" shall have the meaning set forth in the first
paragraph of this Warrant.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Warrants" shall have the meaning set forth in the
first paragraph of this Warrant.
"Series A Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Series A Warrants upon the exercise thereof.
"Transfer" shall mean any disposition of any warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrants" shall mean this Warrant and all warrants
issued upon transfer, division or combination of, or in
substitution for, any thereof. All Warrants shall at all times be
4
<PAGE>
identical as to terms and conditions and date, except as to the number of shares
of Common Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Closing Date and
until 5:00 P.M., New York time, on the Expiration Date, Holder may exercise this
Warrant, on one or more occasions, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at 4209 Vineland
Road, Suite J-1, Orlando, Florida 32811 or at the office or agency designated by
the Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant.
Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be in such denomination or denominations as such
Holder shall request in the notice and shall be registered in the name of Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date on which the last of the
notice, the payment of the Current Warrant Price and this Warrant is received by
the Company as described above. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the
5
<PAGE>
contrary, the Company shall not be required to register shares in the name of
any Person who acquired this Warrant (or part thereof) or any Warrant Stock
otherwise than in accordance with this Warrant.
Payment of the Warrant Price shall be made at the option of
the Holder by certified or official bank check or by surrender of indebtedness
of the Company with a principal amount equal to the Warrant Price.
2.2. Payment of Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall have been
duly authorized and, upon issuance, validly issued and shall be fully paid and
nonassessable and without any preemptive rights. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issuance or delivery thereof, unless such
tax or charge is imposed by law upon Holder, in which case such taxes or charges
shall be paid by Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issuance of any certificate for shares of Common Stock issuable upon exercise of
this Warrant in any name other than that of Holder, and in such case the Company
shall not be required to issue or deliver any stock certificate until such tax
or other charge has been paid.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold pursuant
to a registration statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as Holder under Sections 9, 10
and 17 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
6
<PAGE>
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Sections 9 and 14,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of Exhibit B hereto duly executed by Holder or its agent or attorney
and if such transfer is not to be made pursuant to Section 14, funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to Section
9, execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. Division and Combination. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and
deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to
maintain, at its aforesaid office or agency, books for the
registration and the registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give each Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
7
<PAGE>
4.1. Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(c) combine its outstanding Shares of Common Stock
into a smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
Notwithstanding the foregoing, this Section 4.1 shall have no force and effect
with respect to the Reverse Split, inasmuch as this Warrant when issued
reflected the adjustments called under this Section 4.1 in respect thereof.
4.2. Issuance of Additional Shares of Common Stock. If
at any time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock to persons other than Buyers (as such term is
defined in the Purchase Agreement), Continental Illinois Equity Corporation
("CIEC") and their respective affiliates and associates (as such terms are
defined under the Securities Exchange Act of 1934, as amended) in exchange for
consideration in an amount per Additional Share of Common Stock less than the
Current Warrant Price at the time the Additional Shares of Common Stock are
issued, then (i) the Current Warrant Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by dividing (A) an amount equal to the sum of (X) the number of
shares of Common Stock Outstanding immediately prior to such issue or sale
multiplied by the then existing Current Warrant Price, plus (Y) the
consideration, if any, received by the Company upon such issue or sale to
persons other than Buyers, CIEC or their respective affiliates or associates, by
(B) the total number of shares of Common Stock Outstanding immediately after
such issue or sale (excluding the number of shares issued in the transaction to
Buyers, CIEC or their respective affiliates or associates) and (ii) the number
of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product obtained by multiplying the Current Warrant Price
in effect immediately prior to such issue or sale by the number of shares of
Common Stock for
8
<PAGE>
which this Warrant is exercisable immediately prior to such issue or sale and
dividing the product thereof by the Current Warrant Price resulting from the
adjustment made pursuant to clause (i) above.
4.3. Issuance of Warrants or Other Rights. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants or other rights to subscribe
for or purchase any Additional Shares of Common Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, then the number of shares of Common Stock for which
this Warrant is exercisable and the Current Warrant Price shall be adjusted as
provided in Section 4.2 on the basis that the maximum number of Additional
Shares of Common Stock issuable pursuant to all such warrants or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of the actual issuance of such warrants or other rights. No further
adjustments of the number of shares for which this Warrant is exercisable or the
Current Warrant Price shall be made upon the actual issue of such Common Stock
or of such Convertible Securities upon exercise of such warrants or other rights
or upon the actual issue of such Common Stock upon such conversion or exchange
of such Convertible Securities.
4.4. Issuance of Convertible Securities. If at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.2 on the basis
that the maximum number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such Convertible Securities. No adjustment of the number of shares for which
this Warrant is exercisable or the Current Warrant Price shall be made under
this Section 4.4 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 4.3. No
further adjustments of the number of shares of the Common Stock for which this
Warrant is exercisable or the Current Warrant Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and, if any issue or sale of such
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Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase or any warrant or other right to purchase any such
Convertible Securities for which adjustments of the number of shares of Common
Stock for which this Warrant is exercisable or the Current Warrant Price have
been or are to be made pursuant to other provisions of this Section 4, no
further adjustments of the number of shares of Common Stock for which this
Warrant is exercisable or the Current Warrant Price shall be made by reason of
such issue or sale.
4.5. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable shall have been made pursuant to Section 4.3 or Section 4.4 as the
result of any issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such Convertible Securities, shall expire, and all or a
portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such Convertible
Securities,as the case may be, shall not have been exercised, or
treated as having been exercised or otherwise cancelled or acquired by
the Company in connection with any settlement including, without
limitation, any cash settlement, of such warrants or rights, or the
right of conversion or exchange of such Convertible Securities, or
(b) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the terms of
such other Convertible Securities, shall be increased solely by virtue
of provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or
event,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(c) treating the number of Additional Shares of Common Stock
or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or any
such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually
received and receivable therefor, and
(d) treating any such warrants or rights or any such
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which shares of Common Stock or other
property are issuable under such
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warrants or rights or other Convertible Securities; whereupon a new
adjustment of the number of shares of Common Stock for which this
Warrant is exercisable shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
4.6. Other Provisions Applicable to Adjustments Under
this Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account
any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to
be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company. In
case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to.subscribe for or purchase
such Additional Shares of Common Stock or Convertible Securities shall
be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be
the fair value, as determined in good faith by the Board of Directors
of the Company, of such portion of the assets and business of the
non-surviving corporation as such Board in good faith shall determine
to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the case may be.
The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Company for issuing
such warrants or other rights plus the additional consideration payable
to the Company upon the exercise of such warrants or other rights. The
consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration received by the Company for issuing warrants or
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other rights to subscribe for or purchase such Convertible Securities,
plus the consideration paid or payable to the Company in respect of the
subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon exercise
of the right of conversion or exchange in such Convertible Securities.
In case of the issuance at any time of any Additional Shares of Common
Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company
shall be deemed to have received for such Additional Shares of Common
Stock or Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied. Whenever the Board of Directors of
the Company shall be required to make a determination in good faith of
the fair value of any consideration, such determination shall, if
requested by the Majority Holders, be supported by an opinion of an
investment banking firm of recognized national standing selected by the
Company and acceptable to such Holders.
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.1) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon
as such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum adjustment
or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments
under this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
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(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, and Holder exercises this
Warrant, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon
payment of the then Current Warrant Price. Notwithstanding any other
provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares
shall be cancelled by the Company and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination
in good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by Holder, and any
dispute shall be resolved by an investment banking firm of recognized
national standing selected by the Company and acceptable to such
Holder.
4.7. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its Common Stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
receivable upon or as a corporation, and reorganization,Property
reclassification, merger, result of such consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately reclassification, event. In case of any merger,
consolidation such reorganization, assets, or disposition of the successor or
acquiring corporation (if other than the Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of this
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Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.7 "common Stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.7 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.8. Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than any other action described in this Section 4, then, unless
such action will not have an adverse effect upon the rights of the Holders, the
number of shares of Common Stock or other stock for which this Warrant is
exercisable and the purchase price thereof shall be adjusted in such manner as
may be equitable in the circumstances in order to preserve and maintain the
economic interest and ownership interest of the Holders in and to the Common
Stock represented by this Warrant.
4.9. Certain Limitations. Notwithstanding anything
herein to the contrary, the Company agrees not to enter into any transaction
which, by reason of any adjustment hereunder, would cause the Current Warrant
Price to be less than the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company determined the fair
value of any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights referred to in
Section 4.6(a)), specifying the number of shares of Common Stock for which this
Warrant is exercisable and (if such adjustment was made pursuant to
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Section 4.7 or 4.8) describing the number and kind of any other shares of stock
or Other Property for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder in accordance with Section 17.2. The Company shall keep
at its office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
5.2. Accountants' Opinion. Upon each adjustment of the Current
Warrant Price or the number of shares for which this Warrant is exercisable, and
in the event of any change in the rights of the holder of this Warrant by reason
of other events herein set forth, then and in each such case, upon the written
request of the Majority Holders, the Company will promptly obtain an opinion of
a firm of independent certified public accountants selected by the Company's
Board of Directors and reasonably acceptable to such Majority Holders, stating
the adjusted Current Warrant Price and the new number of shares so issuable, or
specifying the other shares of stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company will promptly mail a copy of such accountants'
opinion to the registered holders this Warrant.
5.3. Notice of Certain Corporate Actions. The Holder shall
be entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body
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having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall have been duly and validly issued and shall be fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of any Warrant, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of any Warrant require registration or qualification with
any governmental authority under any federal or state law (otherwise than as
provided in the Registration Rights Agreement) before such shares may be so
issued, the Company will in good faith and as expeditiously as possible and at
its expense endeavor to cause such shares to be duly registered or qualified.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its
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stock transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and are
subject to the conditions specified in a certain Warrant dated
___________ originally issued by ELXSI Corporation. No transfer of the
shares. represented by this certificate shall be valid or effective
until such conditions have been fulfilled. A copy of the form of said
Warrant is on file with the Secretary of ELXSI Corporation. The holder
of this certificate, by acceptance or this certificate, agrees to be
bound by the provisions of such Warrant."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended, and may
not be transferred in violation of such Act, the rules and regulations
thereunder or the provisions of this Warrant."
9.2. Notice of Proposed Transfers; Requests for Registration.
Prior to any Transfer or attempted Transfer of any Warrants or any shares of
Restricted Common Stock, the holder of such Warrants or Restricted Common Stock
shall give ten days' prior written notice (a "Transfer Notice") to the Company
of such holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof, so
notify the holder of such Warrants or such Restricted Common Stock and such
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holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(a), and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
The holder of the Warrants or the Restricted Common Stock, as the case may be,
giving the Transfer Notice shall not be entitled to transfer such Warrants or
such Restricted Common Stock until receipt of notice from the Company under this
Section 9.2.
The holders of Series A Warrants and Series A Warrant Stock
shall have the right to request registration of such Series A Warrant Stock
pursuant to the Registration Rights Agreement.
9.3. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions imposed
by Section 9 shall terminate as to this Warrant, as hereinabove provided, the
Holder hereof shall be entitled to receive from the Company, at the expense of
the Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON
____________, 19__, AND ARE OF NO FURTHER FORCE AND
EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, and Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove proved, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
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10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Stock in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. If requested, the Company will
deliver to each Holder, as soon as practicable after the end of each of the
first three quarters of the Company's fiscal year, and in any event within 60
days thereafter, one copy of an unaudited consolidated balance sheet of the
Company and its subsidiaries as at the close of such quarter, and the related
unaudited consolidated statements of income and changes in financial position of
the Company for such quarter and, in the case of the second and third quarters,
for the portion of the fiscal year ending with such quarter, setting forth in
each case in comparative form the figures for the corresponding periods in the
previous fiscal year. Such financial statements shall be prepared by the Company
in accordance with GAAP and accompanied by the certification of the Company's
chief executive officer or chief financial officer that such financial
statements are complete and correct and present fairly the consolidated
financial position, results of operations and changes in financial position of
the Company and its subsidiaries as at the end of such quarter and for such
year-to-date period, as the case may be.
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13.2. Annual Information. If requested, the Company
will deliver to each Holder as soon as practicable after the end of
each fiscal year of the Company, and in any event within 90 days
thereafter, one copy of:
(i) an audited consolidated balance sheet of the
Company and its subsidiaries as at the end of such year,
and
(ii) audited consolidated statements of income,
retained earnings and changes in financial position of
the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and reasonably acceptable
to the Majority Holders, and (ii) a report of such independent certified public
accountants confirming any adjustment made pursuant to Section 4 during such
year.
13.3. Filings. The Company will file on or before the required
date all regular or periodic reports (pursuant to the Exchange Act) with the
Commission and will deliver to each Holder promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the Company
to its stockholders generally, and of each regular or periodic report (pursuant
to the Exchange Act) and any registration statement, prospectus or written
communication filed by the Company with (i) the Commission or (ii) any
securities exchange on which shares of Common Stock are listed.
14. REPURCHASE BY THE COMPANY OF WARRANT
14.1. Obligation to Repurchase Warrant. (a) If at any time
prior to the Expiration Date any Holder shall be unable to exercise all or any
portion of the Warrants without significant delay in accordance with the terms
hereof, as a consequence of any restriction imposed by any governmental
authority under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 or any
other United States antitrust law, or the rights incident to the shares of
Common Stock issuable on exercise of this Warrant would be on exercise of this
Warrant, in whole or in part, in any way impaired, modified or otherwise
limited, including, without limitation, any limitation on the voting rights of
such shares, as a result of any such restriction imposed by any governmental
authority, or under any applicable United States antitrust law and the Holder is
unable to sell this Warrant on terms reasonably acceptable to such Holder to any
third party who would not be subject to such restriction or law, then upon
written notice from any such Holder, the Company shall repurchase from such
Holder all or the portion of this Warrant designated in such notice, all in
accordance with the
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provisions of this Section 14.1, for an amount determined by multiplying (i) the
number of shares of Common Stock subject to this Warrant or portion thereof
being repurchased by (ii) the difference between the Current Market Price per
share of Common Stock as of the date of such notice and the Current Warrant
Price per share of Common Stock as of the date of such notice; provided,
however, that the Company shall have the right, upon delivery of a written
notice (the "Deferral Notice") to the Holder within 15 days following its
receipt of the repurchase notice, to satisfy its obligations under this Section
14.1 to repurchase this Warrant or a portion thereof by effecting, at the
Company's expense, within 90 days after the date of the Deferral Notice, an
underwritten public offering on a firm commitment basis of the shares of Common
Stock subject to the Warrant requested to be repurchased, the net proceeds
(after underwriting discounts and commissions) of which shall not be less than
the amount required for such repurchase, in which event such repurchase of the
Warrant shall be deferred and such underlying Common Stock shall be sold
pursuant to such public offering. Nothing herein shall preclude the exercise by
Holder of any portion of this Warrant exercisable at any time prior to such
repurchase.
(b) Notwithstanding the provisions of Section 14.1(a), if, at
any time during the period between the date on which any Holder shall have
exercised its rights under Section 14.1 to cause the Company to repurchase all
or a portion of such Holder's Warrant and, on or prior to the date of such
repurchase, the Company shall consolidate or merge with, or sell all or
substantially all of its property and assets to, any Person and the
consideration received by stockholders in connection with such merger,
consolidation or sale shall consist solely of cash, then, such Holder shall
(whether or not such Holder shall have previously surrendered such Holder's
Warrant for repurchase by the Company pursuant to this Section 14) be entitled
to receive, on the date of such repurchase, the higher of (i) the amount payable
to such Holder as determined pursuant to Section 14.1(a) and (ii) an amount
equal to the amount of cash such Holder would have received upon such
consolidation, merger or sale had such Holder's Warrant (or the portion thereof
being repurchased) been fully exercised immediately prior thereto less the
purchase price payable at such time for the purchase of the shares of Common
Stock then subject to such Holder's Warrant (or the portion thereof being
repurchased) and, if such consideration does not consist solely of cash, then
this Warrant shall become exercisable immediately.
14.2. Determination and Payment of Repurchase Price. (a) The
purchase price for any repurchase pursuant to this Section 14 (the "Repurchase
Price") shall be determined within 90 days of the date of the repurchase notice
received or given by the Company pursuant to Section 14.1, and shall be payable
in cash within 20 days following the date of such determination of the
Repurchase Price. On the date of any repurchase of Warrants pursuant to this
Section 14, each Holder shall assign to the Company such Holder's Warrant or
portion thereof being repurchased, as the case may be, without any
representation or warranty, by the surrender of such
21
<PAGE>
Holder's Warrant at the principal office of the Company referred to in Section
2.1 against payment therefor of the Repurchase Price by, at the option of such
Holder (i) wire transfer to an account in a bank located in the United States
designated by such Holder for such purpose or (ii) a certified or official bank
check drawn on a member of the New York Clearing House payable to the order of
such Holder. If less than all of any Holder's Warrant is being repurchased, the
Company shall, pursuant to Section 3, cancel such Warrant and issue in the name
of, and deliver to, such Holder a new Warrant for the portion not being
repurchased.
(b) Any repurchase by the Company of all or any portion of the
Warrant pursuant to Section 14.1 which is delayed by the failure of the Company
to determine the Repurchase Price within the time periods required in Section
14.2(a) shall be commenced within 10 days after the determination of the
Repurchase Price.
(c) In the event that the determination of the Repurchase
Price requires an opinion from an investment banking firm or accounting firm,
all costs and fees associated therewith shall be paid by the Company.
15. APPRAISAL
The determination of the Appraised Value per share of Common
Stock shall be made by an investment banking firm of nationally recognized
standing selected by the Company and acceptable to the Majority Holders. If the
investment banking firm selected by the Company is not acceptable to the
Majority Holders and the Company and the Majority Holders cannot agree on a
mutually acceptable investment banking firm, then the Majority Holders and the
Company shall each choose one such investment banking firm and the respective
chosen firms shall agree on another investment banking firm which shall make the
determination. The Company shall retain, at its sole cost, such investment
banking firm as may be necessary for the determination of Appraised Value
required by the terms of this Warrant.
16. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
17. MISCELLANEOUS
17.1. Nonwaiver and Expenses. No course of dealing or
any delay or failure to exercise any right hereunder on the part of
22
<PAGE>
Holder shall operate as a waiver of such right or otherwise prejudice Holder's
rights, powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
17.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at
its last known address appearing on the books of the Company
maintained for such purpose.
(b) If to the Company at
ELXSI Corporation
4209 Vineland Road, Suite J-1
Orlando, Florida 32811
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, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail.
17.3. Remedies. Each holder of this Warrant and Warrant Stock,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
17.4. Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant, and shall
be enforceable by any such Holder.
23
<PAGE>
17.5. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Majority Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the prior written consent of the Holder thereof.
17.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant 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 Warrant.
17.7. Headings. The headings used in this Warrant are
for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
17.8. Governing Law. This Warrant shall be governed by
the laws of the State of New York, without regard to the provisions
thereof relating to conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: August 1, 1995
ELXSI CORPORATION
By:__________________________________
Name:
Title:
Attest:
By:______________________________
Name:
Title:
24
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _______ Shares of Common Stock of
ELXSI Corporation, a Delaware corporation, and herewith makes payment therefor,
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to ___________ whose address is ____________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
____________________________________________
(Name of Registered Owner)
____________________________________________
(Signature of Registered Owner)
___________________________________________
(Street Address)
____________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
25
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ---------------
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of ELXSI Corporation maintained for the
purpose, with full power of substitution in the premises.
Dated:_______________ Print Name:__________________
Signature:___________________
Witness:_____________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
26
<PAGE>
EXHIBIT 4.2
ALLONGE AND AMENDMENT
to
SERIES A WARRANTS OF ELXSI CORPORATION
THIS ALLONGE AND AMENDMENT (this "instrument") to the Series A Warrant
to Purchase Common Stock of ELXSI Corporation, a Delaware corporation (the
"Company"), described hereinbelow (the "Subject Warrants Agreement"; and the
warrants evidenced thereby, the "Subject Warrants") is being executed by the
Company and the current holder (the "Holder") of the Subject Warrants, with the
intention and understanding that: (1) the amendments set forth herein shall be
binding upon the Company, the Holder and their respective successors and assigns
(including, without limitation, subsequent holders of the Subject Warrants); and
(2) this instrument shall be attached to, and form a part of, the Subject
Warrants Agreement or, in lieu thereof, that the amendments of the Subject
Warrants provided for herein shall be incorporated in any new Subject Warrants
Agreement that may be issued at a future date (including upon any transfer of
the Subject Warrants).
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, and intending to be legally
bound, it is hereby agreed as follows:
1. Increase in of Exercise Price. With the intention of increasing the
current exercise price of the Subject Warrants from $3.125 per share to $3.75
per share, the Subject Warrant Agreement is hereby amended by: (A) deleting the
"$3.125" both times it appears in the initial paragraph thereof; and (B)
inserting, in lieu thereof, "$3.75".
2. Extension of Expiration Date. With the intention of extending the
expiration date of the Subject Warrants by two years, the Subject Warrant
Agreement is hereby amended by: (A) deleting the "September 30, 1996" where it
appears in the definition of "Expiration Date" therein and; and (B) inserting,
in lieu thereof, the "September 30, 1998".
3. Miscellaneous. Except as expressly amended hereby, the Subject
Warrants Agreement shall remain in full force and effect in accordance with the
terms thereof. This instrument shall be governed by the laws of the State of New
York, without regard to the provisions thereof relating to conflict of laws.
Dated: , 1997 Subject Warrants:
---------------------- ----------------
Cert. No.: A-7
Dated: 8/1/95
No. Warrants: 50,000
Agreed and Accepted:
The Company: The Holder:
- ----------- ----------
ELXSI CORPORATION ELIOT KIRKLAND L.L.C.
By: By:
---------------------------- ---------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT 4.4
ALLONGE AND AMENDMENT
to
SERIES A WARRANTS OF ELXSI CORPORATION
THIS ALLONGE AND AMENDMENT (this "instrument") to the Series A Warrant
to Purchase Common Stock of ELXSI Corporation, a Delaware corporation (the
"Company"), described hereinbelow (the "Subject Warrants Agreement"; and the
warrants evidenced thereby, the "Subject Warrants") is being executed by the
Company and the current holder (the "Holder") of the Subject Warrants, with the
intention and understanding that: (1) the amendments set forth herein shall be
binding upon the Company, the Holder and their respective successors and assigns
(including, without limitation, subsequent holders of the Subject Warrants); and
(2) this instrument shall be attached to, and form a part of, the Subject
Warrants Agreement or, in lieu thereof, that the amendments of the Subject
Warrants provided for herein shall be incorporated in any new Subject Warrants
Agreement that may be issued at a future date (including upon any transfer of
the Subject Warrants).
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, and intending to be legally
bound, it is hereby agreed as follows:
1. Increase in of Exercise Price. With the intention of increasing the
current exercise price of the Subject Warrants from $3.125 per share to $3.75
per share, the Subject Warrant Agreement is hereby amended by: (A) deleting the
"$3.125" both times it appears in the initial paragraph thereof; and (B)
inserting, in lieu thereof, "$3.75".
2. Extension of Expiration Date. With the intention of extending the
expiration date of the Subject Warrants by two years, the Subject Warrant
Agreement is hereby amended by: (A) deleting the "September 30, 1996" where it
appears in the definition of "Expiration Date" therein and; and (B) inserting,
in lieu thereof, the "September 30, 1998".
3. Miscellaneous. Except as expressly amended hereby, the Subject
Warrants Agreement shall remain in full force and effect in accordance with the
terms thereof. This instrument shall be governed by the laws of the State of New
York, without regard to the provisions thereof relating to conflict of laws.
Dated: , 1997 Subject Warrants:
---------------------- ----------------
Cert. No.: A-6
Dated: 5/20/94
No. Warrants: 150,500
Agreed and Accepted:
The Company: The Holder:
- ------------ -----------
ELXSI CORPORATION ALEXANDER M. MILLEY IRREVOCABLE TRUST
TRUST I
By: By:
--------------------------- ---------------------------------
Name: Linda Milley, Trustee
Title:
By:
---------------------------------
Stephen A. Magida, Trustee
<PAGE>
EXHIBIT 4.6
SERIES C WARRANT
To Purchase Common Stock of
ELXSI CORPORATION
Series C Warrant No. C-3
No. of Shares of Common Stock: 68,762
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the document to which it
is attached, but is inserted for convenience only.
Page
----
1. DEFINITIONS............................................................. 1
2. EXERCISE OF WARRANT..................................................... 5
2.1. Manner of Exercise............................................ 5
2.2. Payment of Warrant Price...................................... 6
2.3. Payment of Taxes....................................................... 6
2.4. Fractional Shares............................................. 7
2.5. Continued Validity............................................ 7
3. TRANSFER, DIVISION AND COMBINATION..................................... 7
3.1. Transfer...................................................... 7
3.2. Division and Combination...................................... 8
3.3. Expenses...................................................... 8
3.4. Maintenance of Books.......................................... 8
4. ADJUSTMENTS........................................................ 8
4.1. Stock Dividends, Subdivisions and Combinations................ 8
4.2. Issuance of Additional Shares of Common Stock................. 9
4.3. Issuance of Warrants or Other Rights.......................... 9
4.4. Issuance of Convertible Securities............................ 10
4.5. Superseding Adjustment........................................ 11
4.6. Other Provisions Applicable to Adjustments Under
this Section....................................................... 12
4.7. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets............................. 14
4.8. Other Action Affecting Common Stock........................... 15
4.9. Certain Limitations........................................... 15
5. NOTICES TO WARRANT HOLDERS......................................... 15
5.1. Notice of Adjustments......................................... 15
5.2. Accountants' Opinion.......................................... 16
5.3. Notice of Certain Corporate Actions........................... 16
6. NO IMPAIRMENT...................................................... 16
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY.......................................................... 17
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS..................... 18
- i -
<PAGE>
9. RESTRICTIONS ON TRANSFERABILITY.................................... 18
9.1. Restrictive Legend............................................ 18
9.2. Notice of Proposed Transfers; Requests for
Registration....................................................... 19
9.3. Termination of Restrictions................................... 19
10. SUPPLYING INFORMATION.................................................. 20
11. LOSS OR MUTILATION..................................................... 20
12. OFFICE OF THE COMPANY.................................................. 20
13. FINANCIAL AND BUSINESS INFORMATION..................................... 21
13.1. Quarterly Information....................................... 21
13.2. Annual Information.......................................... 21
13.3. Filings..................................................... 21
14. REPURCHASE BY THE COMPANY OF WARRANT................................... 22
14.1. Obligation to Repurchase Warrant............................ 22
14.2. Determination and Payment of Repurchase Price............... 23
15. APPRAISAL.......................................................... 24
16. LIMITATION OF LIABILITY................................................ 24
17. MISCELLANEOUS...................................................... 24
17.1. Nonwaiver and Expenses...................................... 24
17.2. Notice Generally............................................ 24
17.3. Remedies.................................................... 25
17.4. Successors and Assigns...................................... 25
17.5. Amendment................................................... 25
17.6. Severability................................................ 25
17.7. Headings.................................................... 26
17.8. Governing Law............................................... 26
- ii -
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 68,762 Warrant No. C-3
SERIES C WARRANT
To Purchase Common Stock of
ELXSI CORPORATION
THIS WARRANT CERTIFIES THAT ELIOT KIRKLAND L.L.C., or its
registered assigns, is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from ELXSI CORPORATION, a Delaware corporation
(the "Company"), 68,762 shares of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a Current Warrant Price of $4.36 per share, all on the
terms and conditions and pursuant to the provisions hereinafter set forth. The
number of shares of Common Stock purchasable under this Warrant and the Current
Warrant Price are subject to adjustment as provided in Section 4.
This Warrant is one of a the warrants originally issued by the
Company on the Closing Date (as hereinafter defined) to Cadmus Corporation,
entitling the holder or holders thereof to purchase, initially and in the
aggregate, up to 68,762 shares of Common Stock (collectively, the "Series C
Warrants").
1. DEFINITIONS
As used in this Warrant, the following terms shall have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Appraised Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the fair saleable value of such share
of Common Stock (determined without giving effect to the discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Company may have no class of equity security registered under the
Exchange Act) as of the last day of the immediately preceding fiscal month
unless such last day of the immediately preceding month is within 15 days of
such date specified, then as of the last day of the next preceding fiscal month,
based on the value of the Company, as determined by an investment banking firm
selected in accordance
<PAGE>
with the terms of Section 15, divided by the number of Fully Diluted Outstanding
shares of Common Stock.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall have the meaning set forth in the
Merger Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.001 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.7) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.7.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property,
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, (a) if there shall not then be a
public market for the Common Stock, the Appraised Value per share of Common
Stock as at such date, or (b) if there shall then be a public market for the
Common Stock, the average of the daily market prices for 30 consecutive Business
Days commencing 45 days before such date. The daily market price for each such
Business Day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange, (iii) if the Common Stock is not then listed or admitted to
trading on any stock exchange, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
National Association of Securities Dealers Automatic Quotation System or the
National Quotation
- 2 -
<PAGE>
Bureau, Inc., (iv) if neither such corporation at the time is engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business, or (v) if there is no such firm, as furnished by any member of
the NASD selected mutually by the Majority Holders and the Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"Deferral Notice" shall have the meaning set forth in
Section 14.1(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean January 31, 1997.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, and all other
options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all Warrants, whether or not then
exercisable.
"Merger Agreement" shall mean the Agreement and Plan of Merger
dated October 16, 1992 among the Company, ELXSI, a California corporation and
wholly-owned subsidiary of the Company, Cadmus Corporation, a Massachusetts
corporation, and Holdingcues,
- 3 -
<PAGE>
Inc., a Delaware corporation and wholly-owned subsidiary of Cadmus Corporation.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in
Section 4.7.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated 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).
"Registration Rights Agreement" shall mean that Registration
Rights Agreement entered into by the Company and Cadmus Corporation, a
Massachusetts corporation, referred to in Section 6.01(h) of the Merger
Agreement.
"Repurchase Price" shall have the meaning set forth in
Section 14.2.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series C Warrants" shall have the meaning set forth in the
second paragraph of this Warrant.
"Series C Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Series A Warrants upon the exercise thereof.
"Transfer" shall mean any disposition of any warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
- 4 -
<PAGE>
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Closing Date and
until 5:00 P.M., New York time, on the Expiration Date, Holder may exercise this
Warrant, on one or more occasions, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 4209 Vineland Road,
Suite J-1, Orlando, Florida 32811 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant.
Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be in such denomination or denominations as such
Holder shall request in the notice and shall be registered in the name of Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date on which the last of the
notice, the payment of the Current Warrant Price and this Warrant
- 5 -
<PAGE>
is received by the Company as described above. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be
required to register shares in the name of any Person who acquired this Warrant
(or part thereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
2.2. Payment of Warrant Price. (a) Payment of the Warrant
Price shall be made at the option of the Holder (i) by certified or official
bank check, (ii) by surrender of indebtedness of the Company with a principal
value equal to the Warrant Price or such portion of the Warrant Price as shall
be comprised of such indebtedness, (iii) by surrender of equity securities of
the Company, including equity securities obtained pursuant to this Warrant (or
any warrant issued in substitution hereof), with a value equal to the Warrant
Price or such portion of the Warrant Price as shall be comprised by such equity
securities, (iv) by surrender of a warrant of the Company, including this
Warrant, or any warrant issued in substitution thereof or hereof), or (v) by any
combination of the foregoing with an aggregate value equal to the Warrant Price.
(b) In the event of an exercise of this Warrant in the manner
set forth in Sections 2.2(a)(iii) or (v) above, the value of such equity
securities shall be an amount equal to the sum of the average of the daily
market price of such securities for the thirty (30) consecutive Business Days
preceding the date on which this warrant shall be exercised and the quantity of
securities tendered.
(c) In the event of an exercise of this Warrant in the manner
set forth in Sections 2.2(a)(iv) or (v) above, the value of the warrant shall be
an amount equal to the difference between (i) an amount equal to the sum of the
average of the daily market price of the securities represented by such warrant
for the thirty (30) consecutive Business Days preceding the date on which this
Warrant shall be exercised and the quantity of securities for which the warrant
may be exchanged and (ii) an amount equal to the sum of the exercise price as
specified in such warrant and the quantity of securities for which the warrant
may be exchanged .
2.3. Payment of Taxes. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms
hereof shall have been duly authorized and, upon issuance, validly
issued and shall be fully paid and nonassessable and without any
preemptive rights. The Company shall pay all expenses in
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connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such tax or
charge is imposed by law upon Holder, in which case such taxes or charges shall
be paid by Holder. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issuance of
any certificate for shares of Common Stock issuable upon exercise of this
Warrant in any name other than that of Holder, and in such case the Company
shall not be required to issue or deliver any stock certificate until such tax
or other charge has been paid.
2.4. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.5. Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold pursuant
to a registration statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as Holder under Sections 9, 10
and 17 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Sections 9 and 14,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of Exhibit B hereto duly executed by Holder or its agent or attorney
and if such transfer is not to be made pursuant to Section 14, funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to Section
9, execute and
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deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and
deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to
maintain, at its aforesaid office or agency, books for the
registration and the registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give each Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1. Stock Dividends, Subdivisions and Combinations. If
at any time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
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(c) combine its outstanding Shares of Common Stock into
a smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Issuance of Additional Shares of Common Stock. If at
any time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock to persons other than Buyers (as such term is
defined in that certain Stock and Note Purchase Agreement dated as of August 31,
1989 by and among the Company, The Airlie Group L.P. and Milley & Company),
Continental Illinois Equity Corporation ("CIEC") and their respective affiliates
and associates (as such terms are defined under the Securities Exchange Act of
1934, as amended) in exchange for consideration in an amount per Additional
Share of Common Stock less than the Current Warrant Price at the time the
Additional Shares of Common Stock are issued, then (i) the Current Warrant Price
as to the number of shares for which this Warrant is exercisable prior to such
adjustment shall be reduced to a price determined by dividing (A) an amount
equal to the sum of (X) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the then existing Current
Warrant Price, plus (Y) the consideration, if any, received by the Company upon
such issue or sale to persons other than Buyers, CIEC or their respective
affiliates or associates, by (B) the total number of shares of Common Stock
Outstanding immediately after such issue or sale (excluding the number of shares
issued in the transaction to Buyers, CIEC or their respective affiliates or
associates) and (ii) the number of shares of Common Stock for which this Warrant
is exercisable shall be adjusted to equal the product obtained by multiplying
the Current Warrant Price in effect immediately prior to such issue or sale by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale and dividing the product thereof by the
Current Warrant Price resulting from the adjustment made pursuant to clause (i)
above.
4.3. Issuance of Warrants or Other Rights. If at any time
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a
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merger in which the Company is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, then the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price shall be adjusted as provided in Section 4.2 on the basis that the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such warrants or other rights or necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of the actual issuance of such warrants or
other rights. No further adjustments of the number of shares for which this
Warrant is exercisable or the Current Warrant Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
4.4. Issuance of Convertible Securities. If at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.2 on the basis
that the maximum number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such Convertible Securities. No adjustment of the number of shares for which
this Warrant is exercisable or the Current Warrant Price shall be made under
this Section 4.4 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 4.3. No
further adjustments of the number of shares of the Common Stock for which this
Warrant is exercisable or the Current Warrant Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase or any warrant or other right to purchase any such Convertible
Securities for which adjustments of the number of shares of Common Stock for
which this Warrant is exercisable or the Current Warrant Price have been or are
to be made pursuant to other provisions of this Section 4, no further
adjustments of the number
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of shares of Common Stock for which this Warrant is exercisable or the Current
Warrant Price shall be made by reason of such issue or sale.
4.5. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable shall have been made pursuant to Section 4.3 or Section 4.4 as the
result of any issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such Convertible Securities, shall expire, and all or a
portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such Convertible
Securities,as the case may be, shall not have been exercised, or
treated as having been exercised or otherwise cancelled or acquired by
the Company in connection with any settlement including, without
limitation, any cash settlement, of such warrants or rights, or the
right of conversion or exchange of such Convertible Securities, or
(b) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the terms of
such other Convertible Securities, shall be increased solely by virtue
of provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or
event,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(c) treating the number of Additional Shares of Common Stock
or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or any
such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually
received and receivable therefor, and
(d) treating any such warrants or rights or any such
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which shares of Common Stock or other
property are issuable under such warrants or rights or other
Convertible Securities; whereupon a new adjustment of the number of
shares of Common Stock for which this Warrant is exercisable shall be
made, which new
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adjustment shall supersede the previous adjustment so rescinded and
annulled.
4.6. Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account
any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to
be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company. In
case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to.subscribe for or purchase
such Additional Shares of Common Stock or Convertible Securities shall
be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be
the fair value, as determined in good faith by the Board of Directors
of the Company, of such portion of the assets and business of the
non-surviving corporation as such Board in good faith shall determine
to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the case may be.
The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Company for issuing
such warrants or other rights plus the additional consideration payable
to the Company upon the exercise of such warrants or other rights. The
consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration received by the Company for issuing warrants or
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other rights to subscribe for or purchase such Convertible Securities,
plus the consideration paid or payable to the Company in respect of the
subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon exercise
of the right of conversion or exchange in such Convertible Securities.
In case of the issuance at any time of any Additional Shares of Common
Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company
shall be deemed to have received for such Additional Shares of Common
Stock or Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied. Whenever the Board of Directors of
the Company shall be required to make a determination in good faith of
the fair value of any consideration, such determination shall, if
requested by the Majority Holders, be supported by an opinion of an
investment banking firm of recognized national standing selected by the
Company and acceptable to such Holders.
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.1) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon
as such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum adjustment
or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
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thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, and Holder exercises this
Warrant, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place, upon
payment of the then Current Warrant Price. Notwithstanding any other
provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares
shall be cancelled by the Company and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination
in good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by Holder, and any
dispute shall be resolved by an investment banking firm of recognized
national standing selected by the Company and acceptable to such
Holder.
4.7. Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its Common Stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
receivable upon or as a corporation, and reorganization,Property
reclassification, merger, result of such consolidation or disposition of assets
by a holder of the number of
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shares of Common Stock for which this Warrant is exercisable immediately
reclassification, event. In case of any merger, consolidation such
reorganization, assets, or disposition of the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.7 "common Stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.7 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.8. Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than any other action described in this Section 4, then, unless
such action will not have an adverse effect upon the rights of the Holders, the
number of shares of Common Stock or other stock for which this Warrant is
exercisable and the purchase price thereof shall be adjusted in such manner as
may be equitable in the circumstances in order to preserve and maintain the
economic interest and ownership interest of the Holders in and to the Common
Stock represented by this Warrant.
4.9. Certain Limitations. Notwithstanding anything herein to
the contrary, the Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price to be
less than the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to
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be executed by the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board of Directors of the Company determined the fair value of any evidences
of indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in Section 4.6(a)), specifying
the number of shares of Common Stock for which this Warrant is exercisable and
(if such adjustment was made pursuant to Section 4.7 or 4.8) describing the
number and kind of any other shares of stock or Other Property for which this
Warrant is exercisable, and any change in the purchase price or prices thereof,
after giving effect to such adjustment or change. The Company shall promptly
cause a signed copy of such certificate to be delivered to each Holder in
accordance with Section 17.2. The Company shall keep at its office or agency
designated pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
5.2. Accountants' Opinion. Upon each adjustment of the Current
Warrant Price or the number of shares for which this Warrant is exercisable, and
in the event of any change in the rights of the holder of this Warrant by reason
of other events herein set forth, then and in each such case, upon the written
request of the Majority Holders, the Company will promptly obtain an opinion of
a firm of independent certified public accountants selected by the Company's
Board of Directors and reasonably acceptable to such Majority Holders, stating
the adjusted Current Warrant Price and the new number of shares so issuable, or
specifying the other shares of stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company will promptly mail a copy of such accountants'
opinion to the registered holders this Warrant.
5.3. Notice of Certain Corporate Actions. The Holder shall
be entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of
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all such actions as may be necessary or appropriate to protect the rights of
Holder against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall have been duly and validly issued and shall be fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of any Warrant, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of any Warrant require registration or qualification with
any governmental authority under any federal or state law (otherwise than as
provided in the Registration Rights
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Agreement) before such shares may be so issued, the Company will in good faith
and as expeditiously as possible and at its expense endeavor to cause such
shares to be duly registered or qualified.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and are
subject to the conditions specified in a certain Warrant dated
_____________ originally issued by ELXSI Corporation. No transfer of
the shares. represented by this certificate shall be valid or effective
until such conditions have been fulfilled. A copy of the form of said
Warrant is on file with the Secretary of ELXSI Corporation. The holder
of this certificate, by acceptance or this certificate, agrees to be
bound by the provisions of such Warrant."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and the securities represented hereby have
not been registered under the Securities Act of 1933, as
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<PAGE>
amended, and may not be transferred in violation of such Act,
the rules and regulations thereunder or the provisions of this
Warrant."
9.2. Notice of Proposed Transfers; Requests for Registration.
Prior to any Transfer or attempted Transfer of any Warrants or any shares of
Restricted Common Stock, the holder of such Warrants or Restricted Common Stock
shall give ten days' prior written notice (a "Transfer Notice") to the Company
of such holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof, so
notify the holder of such Warrants or such Restricted Common Stock and such
holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(a), and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
The holder of the Warrants or the Restricted Common Stock, as the case may be,
giving the Transfer Notice shall not be entitled to transfer such Warrants or
such Restricted Common Stock until receipt of notice from the Company under this
Section 9.2.
The holders of Series A Warrants and Series A Warrant Stock
shall have the right to request registration of such Series A Warrant Stock
pursuant to the Registration Rights Agreement.
9.3. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions imposed
by Section 9 shall terminate as to this Warrant, as hereinabove provided, the
Holder hereof shall be entitled to receive from the Company, at the expense of
the
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<PAGE>
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON
___________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, and Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove proved, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Stock in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
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<PAGE>
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. If requested, the Company will
deliver to each Holder, as soon as practicable after the end of each of the
first three quarters of the Company's fiscal year, and in any event within 60
days thereafter, one copy of an unaudited consolidated balance sheet of the
Company and its subsidiaries as at the close of such quarter, and the related
unaudited consolidated statements of income and changes in financial position of
the Company for such quarter and, in the case of the second and third quarters,
for the portion of the fiscal year ending with such quarter, setting forth in
each case in comparative form the figures for the corresponding periods in the
previous fiscal year. Such financial statements shall be prepared by the Company
in accordance with GAAP and accompanied by the certification of the Company's
chief executive officer or chief financial officer that such financial
statements are complete and correct and present fairly the consolidated
financial position, results of operations and changes in financial position of
the Company and its subsidiaries as at the end of such quarter and for such
year-to-date period, as the case may be.
13.2. Annual Information. If requested, the Company
will deliver to each Holder as soon as practicable after the end of
each fiscal year of the Company, and in any event within 90 days
thereafter, one copy of:
(i) an audited consolidated balance sheet of the Company
and its subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income, retained
earnings and changes in financial position of the Company and its
subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and reasonably acceptable
to the Majority Holders, and (ii) a report of such independent certified public
accountants confirming any adjustment made pursuant to Section 4 during such
year.
13.3. Filings. The Company will file on or before the required
date all regular or periodic reports (pursuant to the Exchange Act) with the
Commission and will deliver to each Holder promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the Company
to its stockholders generally, and of each regular or periodic report (pursuant
to the Exchange Act) and any registration statement, prospectus or written
- 21 -
<PAGE>
communication filed by the Company with (i) the Commission or (ii) any
securities exchange on which shares of Common Stock are listed.
14. REPURCHASE BY THE COMPANY OF WARRANT
14.1. Obligation to Repurchase Warrant. (a) If at any time
prior to the Expiration Date any Holder shall be unable to exercise all or any
portion of the Warrants without significant delay in accordance with the terms
hereof, as a consequence of any restriction imposed by any governmental
authority under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 or any
other United States antitrust law, or the rights incident to the shares of
Common Stock issuable on exercise of this Warrant would be on exercise of this
Warrant, in whole or in part, in any way impaired, modified or otherwise
limited, including, without limitation, any limitation on the voting rights of
such shares, as a result of any such restriction imposed by any governmental
authority, or under any applicable United States antitrust law and the Holder is
unable to sell this Warrant on terms reasonably acceptable to such Holder to any
third party who would not be subject to such restriction or law, then upon
written notice from any such Holder, the Company shall repurchase from such
Holder all or the portion of this Warrant designated in such notice, all in
accordance with the provisions of this Section 14.1, for an amount determined by
multiplying (i) the number of shares of Common Stock subject to this Warrant or
portion thereof being repurchased by (ii) the difference between the Current
Market Price per share of Common Stock as of the date of such notice and the
Current Warrant Price per share of Common Stock as of the date of such notice;
provided, however, that the Company shall have the right, upon delivery of a
written notice (the "Deferral Notice") to the Holder within 15 days following
its receipt of the repurchase notice, to satisfy its obligations under this
Section 14.1 to repurchase this Warrant or a portion thereof by effecting, at
the Company's expense, within 90 days after the date of the Deferral Notice, an
underwritten public offering on a firm commitment basis of the shares of Common
Stock subject to the Warrant requested to be repurchased, the net proceeds
(after underwriting discounts and commissions) of which shall not be less than
the amount required for such repurchase, in which event such repurchase of the
Warrant shall be deferred and such underlying Common Stock shall be sold
pursuant to such public offering. Nothing herein shall preclude the exercise by
Holder of any portion of this Warrant exercisable at any time prior to such
repurchase.
(b) Notwithstanding the provisions of Section 14.1(a), if, at
any time during the period between the date on which any Holder shall have
exercised its rights under Section 14.1 to cause the Company to repurchase all
or a portion of such Holder's Warrant and, on or prior to the date of such
repurchase, the Company shall consolidate or merge with, or sell all or
substantially all of its
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<PAGE>
property and assets to, any Person and the consideration received by
stockholders in connection with such merger, consolidation or sale shall consist
solely of cash, then, such Holder shall (whether or not such Holder shall have
previously surrendered such Holder's Warrant for repurchase by the Company
pursuant to this Section 14) be entitled to receive, on the date of such
repurchase, the higher of (i) the amount payable to such Holder as determined
pursuant to Section 14.1(a) and (ii) an amount equal to the amount of cash such
Holder would have received upon such consolidation, merger or sale had such
Holder's Warrant (or the portion thereof being repurchased) been fully exercised
immediately prior thereto less the purchase price payable at such time for the
purchase of the shares of Common Stock then subject to such Holder's Warrant (or
the portion thereof being repurchased) and, if such consideration does not
consist solely of cash, then this Warrant shall become exercisable immediately.
14.2. Determination and Payment of Repurchase Price. (a) The
purchase price for any repurchase pursuant to this Section 14 (the "Repurchase
Price") shall be determined within 90 days of the date of the repurchase notice
received or given by the Company pursuant to Section 14.1, and shall be payable
in cash within 20 days following the date of such determination of the
Repurchase Price. On the date of any repurchase of Warrants pursuant to this
Section 14, each Holder shall assign to the Company such Holder's Warrant or
portion thereof being repurchased, as the case may be, without any
representation or warranty, by the surrender of such Holder's Warrant at the
principal office of the Company referred to in Section 2.1 against payment
therefor of the Repurchase Price by, at the option of such Holder (i) wire
transfer to an account in a bank located in the United States designated by such
Holder for such purpose or (ii) a certified or official bank check drawn on a
member of the New York Clearing House payable to the order of such Holder. If
less than all of any Holder's Warrant is being repurchased, the Company shall,
pursuant to Section 3, cancel such Warrant and issue in the name of, and deliver
to, such Holder a new Warrant for the portion not being repurchased.
(b) Any repurchase by the Company of all or any portion of the
Warrant pursuant to Section 14.1 which is delayed by the failure of the Company
to determine the Repurchase Price within the time periods required in Section
14.2(a) shall be commenced within 10 days after the determination of the
Repurchase Price.
(c) In the event that the determination of the Repurchase
Price requires an opinion from an investment banking firm or accounting firm,
all costs and fees associated therewith shall be paid by the Company.
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<PAGE>
15. APPRAISAL
The determination of the Appraised Value per share of Common
Stock shall be made by an investment banking firm of nationally recognized
standing selected by the Company and acceptable to the Majority Holders. If the
investment banking firm selected by the Company is not acceptable to the
Majority Holders and the Company and the Majority Holders cannot agree on a
mutually acceptable investment banking firm, then the Majority Holders and the
Company shall each choose one such investment banking firm and the respective
chosen firms shall agree on another investment banking firm which shall make the
determination. The Company shall retain, at its sole cost, such investment
banking firm as may be necessary for the determination of Appraised Value
required by the terms of this Warrant.
16. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
17. MISCELLANEOUS
17.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to make, when due, any payments provided for
hereunder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
17.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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<PAGE>
(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the books of the Company maintained for such
purpose.
(b) If to the Company at
ELXSI Corporation
4209 Vineland Road, Suite J-1,
Orlando, Florida 32811
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, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail.
17.3. Remedies. Each holder of this Warrant and Warrant Stock,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
17.4. Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant, and shall
be enforceable by any such Holder.
17.5. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Majority Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the prior written consent of the Holder thereof.
17.6. Severability. Wherever possible, each provision
of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Warrant shall be prohibited by or invalid under applicable
- 25 -
<PAGE>
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 Warrant.
17.7. Headings. The headings used in this Warrant are
for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
17.8. Governing Law. This Warrant shall be governed by
the laws of the State of New York, without regard to the provisions
thereof relating to conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: August 1, 1995
ELXSI CORPORATION
By:_______________________________
Name:
Title:
Attest:
By:______________________________
Name:
Title:
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<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of __________ Shares of Common Stock of
ELXSI Corporation, a Delaware corporation (the "Company"), and herewith makes
payment therefor by tender of [cash] [indebtedness of the Company] [equity
securities of the Company] [one or more warrants of the Company], all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to whose address is and, if such shares of Common Stock shall
not include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.
_______________________________________________
(Name of Registered Owner)
_______________________________________________
(Signature of Registered Owner)
_______________________________________________
(Street Address)
_______________________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares
Name and Address of Assignee of Common Stock
- ---------------------------- ---------------
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of ELXSI Corporation
maintained for the purpose, with full power of substitution in the premises.
Dated:________________________ Print Name:_________________________
Signature:__________________________
Witness:____________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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<PAGE>
EXHIBIT 4.7
ALLONGE AND AMENDMENT
to
SERIES C WARRANTS OF ELXSI CORPORATION
--------------------------------------
THIS ALLONGE AND AMENDMENT (this "instrument") to the Series C Warrant
to Purchase Common Stock of ELXSI Corporation, a Delaware corporation (the
"Company"), described hereinbelow (the "Subject Warrants Agreement"; and the
warrants evidenced thereby, the "Subject Warrants") is being executed by the
Company and the current holder (the "Holder") of the Subject Warrants, with the
intention and understanding that: (1) the amendments set forth herein shall be
binding upon the Company, the Holder and their respective successors and assigns
(including, without limitation, subsequent holders of the Subject Warrants); and
(2) this instrument shall be attached to, and form a part of, the Subject
Warrants Agreement or, in lieu thereof, that the amendments of the Subject
Warrants provided for herein shall be incorporated in any new Subject Warrants
Agreement that may be issued at a future date (including upon any transfer of
the Subject Warrants).
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, and intending to be legally
bound, it is hereby agreed as follows:
1. Increase in of Exercise Price. With the intention of increasing the
current exercise price of the Subject Warrants from $4.36 per share to $5.23 per
share, the Subject Warrant Agreement is hereby amended by: (A) deleting the
"$4.36" where it appears in the initial paragraph thereof; and (B) inserting, in
lieu thereof, "$5.23".
2. Extension of Expiration Date. With the intention of extending the
expiration date of the Subject Warrants by two years, the Subject Warrant
Agreement is hereby amended by: (A) deleting the "January 31, 1997" where it
appears in the definition of "Expiration Date" therein and; and (B) inserting,
in lieu thereof, the "January 31, 1999".
3. Miscellaneous. Except as expressly amended hereby, the Subject
Warrants Agreement shall remain in full force and effect in accordance with the
terms thereof. This instrument shall be governed by the laws of the State of New
York, without regard to the provisions thereof relating to conflict of laws.
Dated: , 1997 Subject Warrants:
---------------------- ----------------
Cert. No.: C-3
Dated: 8/1/95
No. Warrants: 68,762
Agreed and Accepted:
The Company: The Holder:
- ----------- ----------
ELXSI Corporation Eliot Kirkland L.L.C.
By: By:
----------------------------- ----------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT 4.12
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of December 30, 1996
between
ELXSI
and
BANK OF AMERICA ILLINOIS
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND OTHER TERMS........................................2
1.1 Definitions...................................................2
1.2 Other Definitional Provisions................................19
1.3 Interpretation of Agreement..................................20
1.4 Compliance with Financial Restrictions.......................20
1.5 Effect of Restatement........................................20
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS................................20
2.1 Loans.........................................................20
2.1.1 Revolving Loans.....................................20
2.1.2 Maximum Outstanding Revolving Loans.................21
2.1.3 Mandatory Reductions................................21
2.1.4 Voluntary Reductions................................21
2.1.5 Effect of Reductions................................22
2.1.6 Supplemental Revolving Loans........................22
2.1.7 Additional Revolving Loans..........................22
2.1.8 Mandatory Repayments................................23
2.2 Letters of Credit.............................................23
2.3 Loan Account; Demand Deposit Account..........................26
2.4 Interest and Fees.............................................26
2.4.1 Interest.............................................26
2.4.2 Nonuse Fee...........................................28
2.4.3 Method of Calculating Interest and Fees..............28
2.4.4 Payment of Interest and Fees.........................28
2.5 Requests for Loans and Other Information......................28
2.6 Notes.......................................................29
2.7 [Intentionally Omitted].....................................30
2.8 [Intentionally Omitted].....................................30
2.9 All Loans One Obligation....................................30
2.10 Closing Fee.................................................30
2.11 Making of Payments; Application of
Collections; Charging of Accounts.........................30
2.12 Lender's Election Not to Enforce............................31
2.13 Reaffirmation...............................................31
2.14 Setoff......................................................32
2.15 Increased Costs.............................................32
2.16 Borrowing Elections.........................................32
2.17 Continuation and Conversion Elections.......................33
2.18 Funding.....................................................34
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<PAGE>
2.19 Eurodollar Rate Lending Unlawful............................34
2.20 Eurodollar Deposits Unavailable.............................34
2.21 Increased Eurodollar Rate Loan Costs, etc...................35
2.22 Funding Losses..............................................35
3. COLLATERAL..........................................................36
3.1 Grant of Security Interest..................................36
3.2 Accounts Receivable and Cash................................37
3.3 Inventory...................................................40
3.4 Equipment...................................................41
3.5 Supplemental Documentation..................................42
3.6 Releases of Certain Collateral..............................42
4. REPRESENTATIONS AND WARRANTIES......................................42
4.1 Organization................................................42
4.2 Authorization...............................................43
4.3 No Conflicts................................................43
4.4 Validity and Binding Effect.................................43
4.5 No Default..................................................43
4.6 Financial Statements........................................43
4.7 Insurance...................................................44
4.8 Litigation; Contingent Liabilities..........................44
4.9 Liens.......................................................44
4.10 Subsidiaries................................................45
4.11 Partnership; Joint Ventures.................................45
4.12 Business and Collateral Locations...........................45
4.13 Real Property...............................................45
4.14 Related Agreements..........................................46
4.15 Control of Collateral; Lease of Property....................46
4.16 Intellectual Property; Licenses.............................46
4.17 Solvency....................................................47
4.18 Contracts; Labor Matters....................................47
4.19 Pension and Welfare Plans...................................47
4.20 Regulation U................................................48
4.21 Compliance..................................................48
4.22 Taxes.......................................................48
4.23 Investment Company Act Representation.......................48
4.24 Public Utility Holding Company Act Representation...........48
4.25 Environmental, Safety and Health Matters....................48
5. BORROWER COVENANTS..................................................49
5.1 Financial Statements and Other Reports......................49
5.1.1 Financial Reports....................................49
(a) Annual Audit Report............................49
-ii-
<PAGE>
(b) Monthly Financial Statement....................50
(c) Officer's Certificate..........................50
(d) Management Letters.............................50
5.1.2 Same Store Sales Reports............................50
5.1.3 Azimuth Group Deliveries............................50
5.1.4 Borrowing Base Certificates.........................50
5.1.5 Other Reports.......................................51
(a) SEC and Other Reports..........................51
(b) Report of Change Relating to Borrower,
Subsidiaries or Partnership.................51
(c) Other Reports..................................51
5.2 Notices.....................................................51
(a) Default..............................................51
(b) Litigation...........................................51
(c) Judgment.............................................51
(d) Pension Plans and Welfare Plans......................51
(e) Business and Collateral Information..................52
(f) Change of Name or Status.............................52
(g) Insurance Information................................52
(h) Environmental and Safety and Health Matters..........52
(i) Material Adverse Change..............................53
(j) Default by Others....................................53
(k) Moveable Collateral..................................53
(l) Change in Management or Line(s) of Business..........53
(m) Other Notices........................................53
5.3 Existence...................................................53
5.4 Nature of Business..........................................53
5.5 Books, Records and Access...................................53
5.6 Insurance...................................................54
5.7 Insurance Survey............................................55
5.8 Repair......................................................55
5.9 Taxes.......................................................55
5.10 Compliance..................................................55
5.11 Pension Plans...............................................55
5.12 Merger, Purchase and Sale...................................56
5.13 Restricted Payments.........................................56
5.14 Borrower's and Subsidiaries' Stock..........................57
5.15 Indebtedness................................................57
5.16 Liens.......................................................57
5.17 Guaranties..................................................58
5.18 Investments.................................................58
5.19 Subsidiaries................................................59
5.20 Leases......................................................59
5.21 Change in Accounts Receivable...............................59
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<PAGE>
5.22 Future Environmental Assessments............................59
5.23 Related Agreements..........................................59
5.24 Unconditional Purchase Options..............................60
5.25 Use of Proceeds.............................................60
5.26 Transactions with Related Parties...........................60
5.27 Mortgagee...................................................61
5.28 No Amendment to Certain Documents; Actions
Regarding Azimuth Group...................................61
5.29 Intellectual Property Collateral............................61
6. DEFAULT.............................................................63
6.1 Event of Default............................................63
(a) Non-Payment..........................................63
(b) Non-Payment of or Default under Other
Indebtedness.......................................63
(c) Validity.............................................63
(d) Other Obligations....................................63
(e) Insolvency...........................................64
(f) Pension Plans........................................64
(g) Non-Compliance With This Agreement...................64
(h) Non-Compliance With Related Agreements...............64
(i) Warranty.............................................65
(j) Litigation...........................................65
(k) Conduct of Business..................................65
(l) Ownership............................................65
(m) Material Adverse Change..............................65
6.2 Effect of Event of Default; Remedies........................66
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND
LENDER'S RIGHTS.....................................................67
7.1 Notice of Disposition of Collateral.........................67
7.2 Application of Proceeds of Collateral.......................67
7.3 Care of Collateral..........................................67
7.4 Performance of Borrower's Obligations.......................67
7.5 Lender's Rights.............................................68
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS.............................................................68
8.1 Conditions Precedent to Effectiveness of Agreement..........68
8.1.1 Agreement...........................................68
8.1.2 Additional Revolving Note...........................68
8.1.3 Related Agreements..................................69
8.1.4 No Defaults.........................................69
8.1.5 Exhibits; Schedules.................................69
8.1.6 Closing Fee.........................................69
8.1.7 Documents...........................................69
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(a) Resolutions............................................69
(b) Incumbency Certificates................................69
(c) Borrower's Certificate.................................69
(d) Bylaws.................................................70
(e) Articles...............................................70
(f) Registration; Good Standing............................70
(g) Legal Opinions.........................................70
(h) Disbursement Letter....................................70
(i) Azimuth Documents......................................70
(j) Assignments of Group Security Interests................70
(k) Pledged Securities and Instruments.....................71
(l) Other Documents........................................71
8.2 Continuing Conditions Precedent to all Loans and
Letters of Credit; Certification............................71
(a) No Change in Condition.................................71
(b) Default................................................71
(c) Insurance..............................................71
(d) Warranties.............................................72
(e) No Material Transaction................................72
(f) Accounting Methods.....................................72
8.3 Conditions Precedent to all Additional
Revolving Loans.............................................72
(a) Default................................................72
(b) Receipt of Current Borrowing Base Certificates.........72
(c) Borrowing Requests.....................................72
9. INDEMNITY............................................................73
9.1 Environmental, Safety and Health Indemnity...................73
9.2 General Indemnity............................................73
9.3 Capital Adequacy.............................................74
10. ADDITIONAL PROVISIONS................................................74
11. GENERAL..............................................................74
11.1 Borrower Waiver.............................................74
11.2 Power of Attorney...........................................74
11.3 Expenses; Attorneys' Fees...................................75
11.4 Lender Fees and Charges.....................................76
11.5 Lawful Interest.............................................76
11.6 No Waiver by Lender; Amendments.............................76
11.7 Termination of Credit.......................................76
11.8 Notices.....................................................77
11.9 Assignments and Participations; Information.................77
11.10 Severability..................................................77
11.11 Successors....................................................78
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11.12 Construction; Governing Law..................................78
11.13 CONSENT TO JURISDICTION......................................78
11.14 Subsidiary Reference.........................................78
11.15 WAIVER OF JURY TRIAL.........................................78
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LIST OF EXHIBITS AND SCHEDULES
Exhibits:
Exhibit A Form of Insurance Endorsement (ss.5.6)
Exhibit B Form of Landlord's Consent (ss.1.1)
Exhibit C Form of Mortgage (ss.1.1)
Exhibit D Copy of Parent Pledge Agreement (ss.1.1)
Exhibit E Copy of Parent Subordination Agreement (ss.1.1)
Exhibit F Form of Amended and Restated Trademark
Security Agreement (ss.1.1)
Exhibit H Form of Accountant's Letter (ss.5.1.1(a)(i))
Exhibit I Form of Borrowing Request
Exhibit J Form of Warehousemen's Consent
Exhibit K Form of Bailee's/Processor's Consent
Exhibit L Form of Assignment of Business Interruption
Insurance Proceeds
Exhibit M Form of Copyright Security Agreement
Exhibit N Form of Patent Security Agreement
Exhibit O Form of Mortgage Supplement
Exhibit P Form of Continuation/Conversion Notice
Schedules:
Schedule 3.2 Depositary Accounts
Schedule 4.1 Borrower Trade Names, State of Incorporation
& Qualification
Schedule 4.5 Existing Defaults
Schedule 4.7 Insurance Summary
Schedule 4.8 Schedule of Litigation & Contingent Liabilities
Schedule 4.11 Schedule of Partnerships & Joint Ventures
Schedule 4.12 Schedule of Business & Collateral Locations
Schedule 4.13 Schedule of Real Property Descriptions and
Owners
Schedule 4.15 Schedule of Leases
Schedule 4.16 Schedule of Intellectual Property
Schedule 4.18 Schedule of Labor Matters
Schedule 4.19 Schedule of Contingent Employee Benefit Plan
Liabilities
Schedule 4.21 Schedule of Noncompliance
Schedule 4.25 Schedule of Environmental Matters
Schedule 5.15 Schedule of Indebtedness
Schedule 5.16 Schedule of Liens
Schedule 5.18 Schedule of Investments
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of
December 30, 1996 by and between BANK OF AMERICA ILLINOIS, an Illinois banking
corporation having its principal office at 231 South LaSalle Street, Chicago,
Illinois 60697 ("Lender"), and ELXSI, a California corporation having its
principal office at 4209 Vineland Road, Orlando, Florida 32811 ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower and Lender (formerly Continental Bank N.A.) previously
entered into that certain Loan and Security Agreement dated as of July 1, 1991
(as previously amended, the "Original Loan Agreement") whereunder Lender agreed
to extend loans and other financial accommodations from time to time to
Borrower;
WHEREAS, Borrower and Lender also previously entered into that certain
Amended and Restated Loan and Security Agreement dated as of October 30, 1992,
as amended by the First Amendment to Amended and Restated Loan and Security
Agreement dated as of February 4, 1993, the Second Amendment to Amended and
Restated Loan and Security Agreement dated as of December 6, 1994, the Third
Amendment to Amended and Restated Loan and Security Agreement dated as of
January 25, 1995, the Fourth Amendment to Amended and Restated Loan and Security
Agreement dated as of May 5, 1995 and the Fifth Amendment to Amended and
Restated Loan and Security Agreement dated as of July 3, 1995 (as so amended,
the "First Restated Loan Agreement") whereunder Borrower and Lender amended and
restated the Original Loan Agreement;
WHEREAS, Borrower and Lender also previously entered into that certain
Amended and Restated Loan and Security Agreement dated as of June 27, 1996 (the
"Existing Loan Agreement") whereunder Borrower and Lender amended and restated
the First Restated Loan Agreement;
WHEREAS, Borrower has requested Lender to make available Additional
Revolving Loans to Borrower under an additional revolving credit facility,
subject to certain restrictions set forth herein, in an aggregate principal
amount not to exceed $8,850,000 at any time outstanding, the proceeds of which
Additional Revolving Loans will be used by Borrower solely to fund the purchase
of the Subsidiary Loans by Borrower on the Restatement Date pursuant to the
terms and conditions of the Recapitalization Agreement and, from and after the
Restatement Date, solely to fund advances to Contempo, Compo West Loan Agreement
and the DEI Loan Agreement, respectively, to be used by each of Contempo,
Contempo West and DEI for its respective working capital and general corporate
purposes;
WHEREAS, Lender is willing to continue to extend its commitment to make
Revolving Loans and Supplemental Revolving Loans, and to continue to issue
Letters of Credit to Borrower,
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in each case for the purposes stated herein and on the terms and subject to the
conditions hereinafter set forth;
WHEREAS, Lender is willing to extend its commitment to make Additional
Revolving Loans to Borrower for the sole purpose stated above and subject to
the conditions hereinafter set forth;
WHEREAS, Borrower and Lender now desire to amend and restate the
Existing Loan Agreement to, among other things, set forth the terms and
conditions under which Lender hereafter will continue to make Revolving Loans
and Supplemental Revolving Loans, and continue to issue Letters of Credit to or
for the account of Borrower, and make Additional Revolving Loans to Borrower,
and to restate the Existing Loan Agreement to reflect the amendments thereto;
and
WHEREAS, this Agreement shall become effective upon the date (the
"Restatement Date") on which, after it has been executed by Borrower and Lender,
Borrower has satisfied all of the conditions precedent more particularly set
forth in Section 8.1 but in the event such conditions have not been satisfied
or waived on or before December 31, 1996, this Agreement (other than Section
2.10) shall be of no force or effect and the Existing Credit Agreement shall
continue in full force and effect;
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit (including any loan or advance or grant of credit by renewal or
extension) hereafter made to Borrower by Lender, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Existing Loan Agreement is hereby amended and resta
I. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" means any Person who is or who may become
obligated to Borrower under, with respect to, or on account of, an Account
Receivable, Contract Right, General Intangible or other Collateral or Third
Party Collateral.
"Account Receivable" means any account of Borrower and any other
right of Borrower to payment for goods sold or leased or for services rendered,
whether or not evidenced by an instrument or chattel paper and whether or not
yet earned by performance.
"Additional Revolving Credit Amount" means $8,850,000, as
adjusted pursuant to this Agreement, including pursuant to Sections 2.1.3 and
2.1.4.
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"Additional Revolving Loan" is defined in Section 2.1.7.
"Agreement" means this Amended and Restated Loan and Security
Agreement, as it may be amended, restated, supplemented or otherwise modified
from time to time.
"Applicable Margins" shall mean, for any date, the Eurodollar
Rate Margin and the Reference Rate Margin, as applicable, as in effect for such
date.
"Application" means an application by Borrower, in a form and
containing terms and provisions acceptable to Lender, for the issuance by Lender
of a Letter of Credit.
"Assignee Deposit Account" has the meaning ascribed to such term
in Section 3.2(d).
"Attorneys' Fees" means the reasonable fees and charges of the
attorneys (and all paralegals, secretaries, accountants and other staff
employed by such attorneys) employed by Lender (including but not limited to
attorneys and paralegals who are employees of Lender) from time to time (i) in
connection with the negotiation, preparation, execution, delivery,
administration and enforcement of this Agreement, any Related Agreement, any
Supplemental Documentation and all other documents or instruments provided for
herein or in any thereof or delivered or to be delivered hereunder or under any
thereof or in connection herewith or with any thereof, (ii) to prepare
documentation related to the Loans made and other Liabilities incurred
hereunder, (iii) to prepare any amendment to or waiver under this Agreement or
any Related Agreement, (iv) to represent Lender in any litigation, contest,
dispute, suit or proceeding or to commence, defend or intervene in any
litigation, contest, dispute, suit or proceeding or to file a petition,
complaint, answer, motion or other pleading, or to take any other action in or
with respect to, any litigation, contest, dispute, suit or proceeding (whether
instituted by Lender, Borrower or any other Person and whether inted Agreement,
or Borrower's or any other Obligor's or any Subsidiary's affairs in connection
therewith, (v) to protect, collect, lease, sell, take possession of, or
liquidate any of the Collateral or any Third Party Collateral in accordance
with the terms hereof or any Related Agreement or Supplemental Documentation,
(vi) to attempt to enforce any security interest in any of the Collateral or
any Third Party Collateral or to give any advice with respect to such
enforcement and (vii) to enforce any of Lender's rights to collect any of the
Liabilities.
"Azimuth" means Azimuth Corporation, a Delaware corporation.
"Azimuth Documents" means, collectively, the Recapitalization
Agreement, the Azimuth Group Loan Agreements, the Related Agreements (as such
term is defined in the Azimuth Loan Agreement) and the Other Loan Documents (as
such term is defined in the Azimuth Loan Agreement).
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"Azimuth Group Loan Agreements" means, collectively, the Azimuth
Loan Agreement, the Contempo Loan Agreement, the Contempo West Loan Agreement
and the DEI Loan Agreement.
"Azimuth Loan Agreement" means that certain Second Amended and
Restated Loan and Security Agreement dated as of October 9, 1995 between Lender
and Azimuth, as amended, restated, supplemented or otherwise modified from time
to time (including pursuant to the Recapitalization Agreement).
"Bailee's/Processor's Consent" means a document in the form of
Exhibit K, with appropriate insertions, or such other form as shall be
acceptable to Lender.
"Bickford's Business" means the portion of Borrower's business
conducted by Borrower prior to the Merger.
"Borrower" is defined in the introduction of this Agreement.
"Borrowing Base Certificate" shall have the respective meaning
provided (i) in the Contempo Loan Agreement when used with reference to
Contempo, (ii) the Contempo West Loan Agreement when used with reference to
Contempo West and (iii) the DEI Loan Agreement when used with reference to DEI.
"Borrowing Request" means a Borrowing Request in the form of
Exhibit I hereto.
"Business Day" means:
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed
in Chicago, Illinois; and
(b) (i) relative to the date of making or continuing any
Loans as, or converting any Loans from or into, Eurodollar Rate
Loans,
(ii) making any payment or prepayment of principal of or
payment of interest on any portion of the principal amount of
any Loans being maintained as Eurodollar Rate Loans, or
(iii) Borrower's giving any notice (or the number of
Business Days to elapse prior to the effectiveness thereof) in
connection with any matter referred to in clause(b)(i) or
(b)(ii) above,
any day on which dealings in Dollars are carried on in the interbank
eurodollar market of Lender's Eurodollar Office.
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"Capitalized Lease" means any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" means July 1, 1991.
"Code" means the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed to also refer to any successor sections.
"Collateral" has the meaning ascribed to such term in
Section 3.1.
"Commercial Letter of Credit" means any Letter of Credit which
is drawable upon presentation of a sight draft and other documents evidencing
the sale or shipment of goods purchased by Borrower in the ordinary course of
Borrower's business.
"Compensatory Amount" shall have the meaning ascribed thereto in
Section 2.15 hereof.
"Computer Hardware and Software Collateral" means:
(a) all of Borrower's: computer and other electronic data
processing hardware, integrated computer systems, central processing
units, memory units, display terminals, printers, features, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories
and all peripheral devices and other related computer hardware;
(b) all of Borrower's: software programs (including both source
code, object code and all related applications and data files), whether
now owned, licensed or leased or hereafter acquired by Borrower,
designed for use on the computers and electronic data processing
hardware described in clause (a) above;
(c) all firmware of Borrower associated with the property
described in clauses (a) and (b) of this definition;
(d) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to the hardware,
software and firmware described in the preceding clauses (a) through
(c) of this definition; and
(e) all rights with respect to all of the foregoing, including
without limitation, any and all copyrights, licenses, options,
warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights
and indemnifications and any substitutions, replacements, additions or
model conversions of any of the foregoing.
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"Contempo" means Contempo Design, Inc., an Illinois corporation.
"Contempo Loan Agreement" means that certain Loan and Security
Agreement dated as of October 9, 1995 by and between Lender and Contempo, as
amended, restated, supplemented or otherwise modified from time to time
(including pursuant to the Recapitalization Agreement).
"Contempo West" means Contempo Design West, Inc., a Delaware
corporation.
"Contempo West Loan Agreement" means that certain Loan and
Security Agreement dated as of October 9, 1995 by and between Lender and
Contempo West, as amended, restated, supplemented or otherwise modified from
time to time (including pursuant to the Recapitalization Agreement).
"Continuation/Conversion Notice" means a notice of continuation
or conversion and a certificate duly executed by the chief executive,
accounting, or other authorized officer of Borrower on behalf of Borrower, each
such notice and certificate to be substantially in the form of Exhibit P
hereto.
"Contract Right" means any right of Borrower to payment under a
contract, which right is not yet earned by performance and not evidenced by an
instrument or chattel paper.
"Copyright Collateral" means:
(a) all copyrights and all semi-conductor chip product mask
works of the Borrower, whether statutory or common law, registered or
unregistered, now or hereafter in force throughout the world including
all of Borrower's right, title and interest in and to all copyrights
and mask works registered in the United States Copyright Office or
anywhere else in the world and also including the copyrights and mask
works referred to in Item A of Schedule 4.16 hereto, and all
applications for registration thereof, whether pending or in
preparation, all copyright and mask work licenses, including each
copyright and mask work license referred to in Item B of Schedule 4.16
hereto, the right to sue for past, present and future infringements of
any thereof, all rights corresponding thereto throughout the world and
all extensions and renewals of any thereof; and
(b) all proceeds of the foregoing, including licenses, royalties,
income, payments, claims, damages and proceeds of suit.
"Copyright Security Agreement" means the Copyright Security
Agreement between Borrower and Lender in the form of Exhibit M, with
appropriate insertions, as it may be amended, restated, supplemented or
otherwise modified from time to time.
"Credit" means the facilities established under this Agreement
pursuant to which Lender will make Revolving Loans, Supplemental Revolving
Loans and Additional Revolving Loans to, and issue Letters of Credit for the
account of, Borrower.
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"Credit Reduction Amount" means, for each Credit Reduction Date,
commencing with the first Credit Reduction Date to occur on December 31, 1996,
an amount equal to $250,000, in each case subject to adjustment as provided in
Section 2.1.
"Credit Reduction Date" means the last Business Day of each
calendar month other than January, February, and March of each calendar year.
"Cues Business" means the portion of Borrower's business which
was conducted by Cues and Holdingcues prior to the Merger.
"Default Rate" means, with respect to any Loan after any portion
thereof is not paid when due, whether by acceleration or otherwise, a rate of
interest per annum equal to two percent (2.0%) in excess of the rate then borne
by Reference Rate Loans.
"DEI" means Delaware Electro Industries, Inc., a Delaware
corporation.
"DEI Loan Agreement" means that certain Loan and Security
Agreement dated as of October 9, 1995 by and between Lender and DEI, as amended,
restated, supplemented or otherwise modified from time to time (including
pursuant to the Recapitalization Agreement).
"Demand Deposit Account" has the meaning ascribed to such term
in Section 2.3.
"Depositary Accounts" has the meaning ascribed to such term in
Section 3.2(d).
"Dollar" and the sign "$" mean lawful money of the United States
of America.
"EBITDA" means Borrower's consolidated net earnings before
interest expense, depreciation, amortization and provision for Taxes for the
fiscal quarter of Borrower ending on the date of det quarter to the extent that
the aggregate of all such gains and extraordinary or nonrecurring items of
income exceeds the aggregate of losses on such sales or other dispositions and
extraordinary or nonrecurring charges during such quarter, and (ii) interest
expense shall include, without limitation, implicit interest expense on
Capitalized Leases.
"Environmental Laws" means the federal Clean Air Act, the
federal Clean Water Act, the federal Resource Conservation and Recovery Act,
the federal Comprehensive Environmental Response, Compensation and Liability
Act, any so-called "Superfund" or "Superlien" law, the federal Toxic Substances
Control Act, and any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree or other legal, judicial or regulatory
requirement regulating, relating to, or imposing liability or standards of
conduct (including, but not limited to, permit requirements and emission or
effluent restrictions) concerning any Hazardous Materials or any
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hazardous, toxic or dangerous waste, substance or constituent, or any pollutant
or contaminant, whether solid, liquid or gas, in each case as from time to time
in effect.
"Environmental Lien" means a Lien in favor of any governmental
entity for (1) any liability under any Environmental Law or (2) damages arising
from or costs incurred by such governmental entity in response to a spillage,
disposal or release into the environment of any Hazardous Material or any
hazardous, toxic or dangerous waste, substance or constituent, or any pollutant
or contaminant or other substance.
"Equipment" means all equipment of Borrower of every description,
including, without limitation, fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefor and replacements
thereof.
"ERISA" meansmport, together with the regulations thereunder, in
each case as in effect from time to time. References to sections of ERISA shall
be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, partnership, or other
trade or business (whether or not incorporated) that is, along with Borrower
treated as a single employer under Sections 414(b), (c), (m) or (o) of the Code.
"Eurodollar Office" means, relative to Lender, the office of
Lender designated as such below its signature hereto (or, in the case of an
assignee, in the assignment executed by it) or such other office of Lender as
designated from time to time by notice from Lender to Borrower, whether or not
outside the United States of America, which shall be making or maintaining
Eurodollar Rate Loans of Lender hereunder.
"Eurodollar Rate" means, relative to the Interest Period for
each Eurodollar Rate Loan comprising all or any part of the same advance, the
rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 0.0625%) of the rates per annum at which Dollar deposits in immediately
available funds are offered to Lender's Eurodollar Office in the interbank
eurodollar market as at or about 10:00 a.m., Chicago time, two Business Days
prior to the beginning of such Interest Period, for delivery on the first day
of such Interest Period, in an amount approximately equal or comparable to the
amount of such advance and for a period equal to such Interest Period.
"Eurodollar Rate (Adjusted)" means, relative to any portion of a
Loan to be made, continued, or maintained as, or converted into, a Eurodollar
Rate Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 0.0625%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
----------------------
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(Adjusted) 1 - the Eurodollar
Reserve Percentage.
"Eurodollar Rate Loan" means a Loan bearing interest, at all
times during the Interest Period applicable to such Loan, at a rate of interest
determined by reference to the Eurodollar Rate (Adjusted).
"Eurodollar Rate Margin" shall mean the per annum marginal
interest rate set forth below as determined by the corresponding Funded
Debt/EBITDA Ratio determined as of the last day of each Fiscal Quarter in each
fiscal year (and to become effective as provided in Section 2.4.1(b)).
Eurodollar Rate Margin Funded Debt/EBITDA Ratio
---------------------- ---------------------------------------
2.75% greater than 2.00
2.00% less than or equal to 2.00 but
greater than 1.25
1.75% less than or equal to 1.25
"Eurodollar Reserve Percentage" means, relative to each Interest
Period, a percentage (expressed as a decimal) equal to the daily average during
such Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the Federal Reserve Board, for determining the maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other applicable regulation of the Federal Reserve Board
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as currently defined in Regulation D.
"Event of Default" is defined in Section 6.1.
"Excess Cash Flow" means, for any period, an amount equal to (a)
the consolidated net income of Borrower for such period after deduction of
income tax expenses (excluding deferred income taxes) for such period, plus
depreciation and amortization expenses (inc to the extent such payments are
permitted hereunder).
"Excluded Taxes" means taxes imposed on the net income of Lender
or imposed on Lender by reason of Lender being engaged in a trade or business
in the United States of America or having a fixed place of business therein.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
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"Fiscal Year" means any period of 12 consecutive calendar months
ending on the 31st day of December. References to a Fiscal Year with a number
corresponding to any calendar year (e.g., "Fiscal Year 1996) refer to the Fiscal
Year ending on the 31st day of December occurring during such calendar year.
"Fixtures" means all fixtures of Borrower of every description
and all substitutions and replacements of any thereof.
"Funded Debt" means, as of any date of determination, the
principal amount of Borrower's Indebtedness outstanding which would be
reflected as liabilities on a balance prepared in accordance with GAAP (but
excluding from the determination thereof all Indebtedness owing with respect to
Additional Revolving Loans).
"Funded Debt/EBITDA Ratio" means the ratio of Borrower's Funded
Debt determined as of the last day of any specified fiscal quarter of Borrower
divided by Borrower's EBITDA for the four (4) fiscal quarters then ended.
"GAAP" means generally accepted accounting principles as in
effect from time to time; provided that the financial tests set forth in
Sections 4.1 through 4.4 of Supplement A shall at all times be calculated in
accordance with generally accepted accounting principles as in effect on the
Closing Date unless Borrower and Lender shall have agreed to modifications to
such covenants to account for any changes in such principles after the date
hereof.
"General Intangibles" means all of Borrower's intangible
personal property, including things in action, causes of action and all other
personal property of Borrower of every kind and nature (other than accounts,
inventory, equipment, chattel paper, documents, instruments and money),
including, without limitation, corper lists, tax refund claims, claims against
carriers and shippers, guarantee claims, security interests, security deposits
or other security held by or granted to Borrower to secure any payment from an
Account Debtor, and any rights to indemnification.
"Hazardous Materials" means any toxic substance, hazardous
substance, hazardous material, hazardous chemical or hazardous waste defined or
qualifying as such in (or for the purposes of) any Environmental Law, or any
pollutant or contaminant, and shall include, but not be limited to, petroleum,
including crude oil or any fraction thereof which is liquid at standard
conditions of temperature or pressure (60 degrees Fahrenheit and 14.7 pounds
per square inch absolute), any radioactive material, including, but not
limited to, any source, special nuclear or by-product material as defined at
42 U.S.C. section 2011 et seq., as amended or hereafter amended,
polychlorinated biphenyls and asbestos in any form or condition.
"Indebtedness" of any Person means, without duplication, (i) any
obligation of such Person for borrowed money, including, without limitation,
(a) any obligation of such Person evidenced by bonds, debentures, notes or
other similar debt instruments and (b) any obligation for
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borrowed money which is non-recourse to the credit of such Person but which is
secured by a Lien on any asset of such Person, (ii) any obligation of such
Person on account of deposits or advances, (iii) any obligation of such Person
for the deferred purchase price of any property or services, except Trade
Accounts Payable, (iv) any obligation of such Person as lessee under a
Capitalized Lease and (v) any Indebtedness of another Person secured by a Lien
on any asset of such first Person, whether or not such Indebtedness is assumed
by such first Person. For all purposes of this Agreement, the Indebtedness of
any Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or joint venturer. Notwithstanding the
foregoing, for purposes of computing Borrower's compliance with Section 2.2, 2.4
and 2.5 of Supplement A hereto, and for purposes of computing Funded Debt, there
shall be excluded from the determination of "Indebtedness" the Subordinated Note
and all Indebtedness of Borrower to Parent.
"Intellectual Property Collateral" means, collectively, the
Computer Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Interest Period" means, relative to any Eurodollar Rate Loan,
the period from the date on which such Eurodollar Rate Loan is made or continued
as, or converted into, a Eurodollar Rate Loan pursuant to Section 2.16 or 2.17,
and, unless the maturity of such Eurodollar Rate Loan is accelerated, the day
which numerically corresponds to such date one, two or three months thereafter,
as Borrower may select in its relevant notice pursuant to Section 2.16 or 2.17;
provided that:
(a) Borrower shall not be permitted to select Interest Periods to
be in effect at any one time which have expiration dates occurring on
more than four different dates;
(b) if there exists no numerically corresponding day in such
month, such Interest Period shall end on the last Business Day of such
month;
(c) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is a
Business Day falling in a new calendar month, in which case such
Interest Period
shall end on the Business Day next preceding such numerically
corresponding day); and
(d) Borrower shall not be permitted to select, and there shall
not be applicable, any Interest Period that would end later than the
Termination Date.
"Inventory" means any and all of the goods of Borrower
(including, without limitation, goods in transit) wheresoever located which are
or may at any time be leased by Borrower to a lessee, held for sale or lease,
furnished under any contract of service by, or held as raw materials, work in
process, or supplies or materials used or consumed in the business of, Borrower
or which are held for use in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, and all goods the
sale or other disposition of which
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has given rise to an Account Receivable, Contract Right or General Intangible
and which are returned to and/or repossessed and/or stopped in transit by
Borrower or Lender or any agent or bailee of any of them, and all documents of
title or other documents representing the same.
"Investment" of any Person means any investment, made in cash or
by delivery of any kind of property or asset, in any other Person, whether by
acquisition of shares of stock or similar interest, Indebtedness or other
obligation or security, or by loan, advance or capital contribution, or
otherwise.
"Investment Property" shall have the meaning ascribed thereto in
Section 9-115 of the UCC in those jurisdictions in which such definition has
been adopted and shall include, without limitation (i) all securities, whether
certificated or uncertificated, including, without limitation, stocks, bonds,
interests in limited liability companies, partnership interests, treasury
securities, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of Borrower, including without limitation, the rights
of Borrower to any securities account and the financial assets held by a
securities intermediary in such securities account and any free credit balance
or other money owing by any securities intermediary with respect to that
account; (iii)
all securities accounts held by Borrower; (iv) all commodity contracts held by
Borrower; and (v) all commodity accounts held by Borrower.
"Landlord's Consent" means a Landlord's Consent substantially in
the form of Exhibit B, with appropriate insertions, or such other form as shall
be acceptable to Lender, as it may be amended or modified from time to time.
"L/C Draft" means a draft drawn on Lender pursuant to a Letter
of Credit.
"Lender" is defined in the introduction to this Agreement.
"Letter of Credit" means a letter of credit issued by Lender
under this Agreement on the Application of Borrower.
"Letter of Credit Obligations" means at any time an amount equal
to the sum of (i) the aggregate amount available to be drawn under outstanding
Letters of Credit, plus (ii) all amounts drawn, but not yet reimbursed, under
Letters of Credit, plus (iii) the aggregate outstanding face amount of all
accepted but unpaid L/C Drafts.
"Liabilities" means all of the liabilities, obligations,
reimbursement obligations in connection with any letter of credit and
indebtedness of Borrower, any Subsidiary or any other Obligor to Lender of any
kind or nature, however created, arising or evi to (i) Borrower's obligations
under any Note, (ii) Borrower's obligations under this Agreement, (iii)
interest, charges, expenses, Attorneys' Fees and other sums chargeable to
Borrower by Lender under this Agreement or any Related Agreement, (iv) the
obligations of Borrower, any Subsidiary or any other obligor under any Related
Agreement, including obligations of performance,
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and (v) Borrower's obligations with respect to any Letter of Credit or
Application therefor. "Liabilities" shall also include any and all amendments
(including any amendment and restatement), extensions or renewals of any of the
foregoing.
"Lien" means any mortgage, pledge, hypothecation, judgment lien
or similar legal process, title retention lien, or other lien, encumbrance or
security interest, including, without limitation, the interest of a vendor
under any conditional sale or other title retention agreement and the interest
of a lessor under any Capitalized Lease.
"Loan" means (i) the Revolving Loans made pursuant to
Section 2.1.1, (ii) the Supplemental Revolving Loans made pursuant to
Section 2.1.6, (iii) the Additional Revolving Loans made pursuant to
Section 2.1.7 and (iv) any other loan or advance made to Borrower by Lender
under or pursuant to this Agreement.
"Loan Account" has the meaning ascribed to such term in
Section 2.3.
"Management Agreement" means the Management Agreement dated as
of September 25, 1989, as amended, between Borrower, as assignee of Parent, and
Cadmus Corporation, a Massachusetts corporation ("Cadmus"), as assignee of
Milley Management Incorporated (assignee of Winchester National, Inc. d/b/a
Milley & Company).
"Margin Stock" has the meaning ascribed to such term in
Regulation U of the Federal Reserve Board or any regulation substituted
therefor, as in effect from time to time.
"Merger" means the merger of Han of Merger, dated October 16,
1992, among Borrower, Cadmus and Holdingcues.
"Mortgage" means any mortgage, deed of trust, leasehold mortgage,
and/or assignment of leases and rents between Borrower and Lender, each
substantially in the form of Exhibit C, with appropriate insertions, in each
case as amended or otherwise modified from time to time.
"Mortgage Supplement" means a supplement to a Mortgage which was
executed in connection with the Existing Loan Agreement, in the form of Exhibit
O.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any
other Obligor or any ERISA Affiliate, or to which Borrower, any other Obligor
or any ERISA Affiliate has contributed or is contributing.
"Net Worth" means at any time, the sum of (a) the consolidated
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury
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stock) of Borrower calculated in accordance with GAAP and (b) the outstanding
principal amount of all Subordinated Debt.
"Note" means any promissory note of Borrower evidencing any loan
or advance (including but not limited to any Revolving Loans, any Supplemental
Revolving Loans and any Additional Revolving Loans) made by Lender to Borrower
pursuant to this Agreement.
"Obligor" means Borrower and each other Person who is or shall
become primarily or secondarily liable on any of the Liabilities, or who grants
to Lender a Lien on any property of such Person as security for any of the
Liabilities.
"Occupational Safety and Health Law" means the federal
Occupational Safety and Health Act of 1970 and any other federal, state or
local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to or imposing liability or standards of conduct
concerning employee health and/or safety.
"Original Loan Agreement" is defined in the Recitals to this
Agreement.
"Parent" means ELXSI Corporation, a Delaware corporation and the
owner of 100% of the issued and outstanding capital stock of Borrower, and any
successor thereto.
"Parent Pledge Agreement" means the Pledge Agreement between
Parent and Lender, a copy of which is attached as Exhibit D, as it may be
amended, restated, supplemented or otherwise modified from time to
timeSubordination Agreement between Parent, Lender and Borrower, a copy of
which is attached as Exhibit E, as it may be amended, restated, supplemented or
otherwise modified from time to time.
"Participant" means any Person, now or at any time hereafter,
participating with Lender in the Loans made to Borrower pursuant to this
Agreement or any Related Agreement.
"Patent Collateral" means all of the following property of
Borrower, whether presently existing or hereafter arising or acquired:
(a) all letters patent and applications for letters patent,
including each letter patent and letter patent application referred to
in Item A of Schedule 4.16 hereto;
(b) all patent licenses, including each patent license
referred to in Item B of Schedule 4.16 hereto;
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(c) all reissues, divisions, continuations, extensions,
renewals and continuations-in-part of any of the items described in the
foregoing clauses (a) and (b); and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the
right to sue third parties for past, present or future infringements of
any letter patent or letter patent application, including any letter
patent or letter patent application referred to in Item A of Schedule
4.16 hereto, and for any patent license, including any patent license
referred to in Item B of Schedule 4.16 hereto, and all corresponding
rights throughout the world.
"Patent Security Agreement" means the Patent Security Agreement
between Borrower and Lender in the form of Exhibit N, with appropriate
insertions, as amended, restated, supplemented or otherwise modified from time
to time.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined
in Section 3(2) of ERISA, which is subject to the provisions of Title IV of
ERISA (other than a Multiemployer Plan) and which is maintained by Borrower,
any other Obligor or any ERISA Affiliate or for which any of the foregoing may
have any liability, including any liability by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA or having been a substantial
employer within the meaning of Section 4063 of ERISA at any time during the
five years preceding the time of determination.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, or government (whether national, federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Real Property" means each parcel of real property owned or
leased by Borrower iden "Recapitalization Agreement" means that
certain Recapitalization Agreement dated
as of December 30, 1996 by and among Azimuth, DEI, Contempo, Contempo West,
Borrower and Lender, and all documents, instruments and agreements delivered
pursuant thereto, all as amended, restated, supplemented or otherwise modified
from time to time.
"Reference Rate" means, at any time and from time to time, the
rate per annum then most recently announced by Lender at its head office as its
reference rate. The Reference Rate is not necessarily intended to be the lowest
rate of interest determined by Lender in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as
Reference Rate Loans shall take effect simultaneously with each change in the
Reference Rate. Lender shall give notice promptly to Borrower of changes in the
Reference Rate.
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"Reference Rate Loan" means a Loan bearing interest at a
fluctuating rate determined by reference to the Reference Rate.
"Reference Rate Margin" shall mean the per annum marginal
interest rate set forth below as determined by the corresponding Funded
Debt/EBITDA Ratio determined as of the last day of each Fiscal Quarter of each
fiscal year.
Reference Rate Margin Funded Debt/EBITDA Ratio
--------------------- --------------------------
.25% greater than 2.00
0% less than or equal to 2.00
"Regulatory Change" means, relative to Lender:
(a) any change after the Second Restatement Date in (or the
adoption, implementation, phase-in or commencement of effectiveness of)
any applicable law, guideline or request (whether or not having the
force of law); or
(b) any change after the Second Restatement Date in the
application to Lender of any applicable law, guideline or request
(whether or not having the force of law), including a determination by
Lender to apply the requirements of changes to Regulations H and Y of
the Federal Reserve. Board issued on January 19, 1989 and the
regulations of the Comptroller of the Currency, 12 C.F.R. Part 3,
Appendix A, issued on January 27, 1989 to its Loans hereunder.
"Related Agreement" means any agreement, instrument or document
(including, without limitation, notes, guarantees, mortgages, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements and trust account agreements) heretofore, now, or
hereafter delivered to Lender with respect to or in connection with or pursuant
to this Agreement or any of the Liabilities (including, without limitation, any
Azimuth Document), and executed by or on behalf of Borrower or any other
Obligor.
"Related Party" means any Person (other than a Subsidiary) (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, Borrower, (ii) which
beneficially owns or holds ten percent (10%) or more of the equity interest of
Borrower or (iii) ten percent (10%) or more of the equity interest of which is
beneficially owned or held by Borrower or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
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"Reportable Event" means a "reportable event" as defined in
ERISA, other than a reportable event not subject to the provision for 30-day
notice to the PBGC under applicable regulations.
"Revolving is Agreement, including pursuant to Sections 2.1.3
and 2.1.4.
"Revolving Loan" is defined in Section 2.1.1.
"Revolving Loan Availability" means the Revolving Credit Amount
minus the Letter of Credit Obligations.
"Second Restatement Date" means June 27, 1996.
"Standby Letter of Credit" means any Letter of Credit which is
not a Commercial Letter of Credit.
"Subordinated Debt" means (a) the Subordinated Note and (b) that
portion of any other Indebtedness of Borrower which contains terms satisfactory
to Lender and is subordinated, in a manner satisfactory to Lender, as to right
and time of payment of principal and interest thereon, to all of the
Liabilities.
"Subordinated Note" means that certain 15% subordinated
Promissory Note dated June 27, 1991 issued by Borrower to Parent in the
original principal amount of $4,500,000.
"Subsidiary" means any Person of which or in which Borrower and
its other Subsidiaries own directly or indirectly 50% or more of (i) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
Person, if it is a corporation, (ii) the capital interest or profits interest
of such Person, if it is a partnership, joint venture or similar entity or
(iii) the beneficial interest of such Person, if it is a trust, association or
other unincorporated organization. Unless otherwise indicated, the term
"Subsidiary", refers to a Subsidiary of Borrower.
"Subsidiary Loans" shall have the meaning provided in the
Recapitalization Agreement.
"Supplemental Documentation" has the meaning ascribed to such
term in Section 3.5.
"Supplemental Revolving Credit Amount" means $5,100,000, as
adjusted pursuant to this Agreement; including pursuant to Section 2.1.3 and
2.1.4.
"Supplemental Revolving Loan" is defined in Section 2.1.6.
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"Taxes" with respect to any Person means taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or
any of its properties, franchises or assets.
"Termination Date" means June 30, 1998 or such later date as may
be fixed pursuant to Section 11.7.
"Third Party Collateral" means any property of any Person other
than Borrower which secures payment or performance of any Liabilities.
"Trade Accounts Payable" of any Person means trade accounts
payable of such Person with a maturity of not greater than 90 days incurred in
the ordinary course of such Person's business.
"Trade Secret" has the meaning ascribed to that term in the
definition of Trade Secrets Collateral.
"Trade Secrets Collateral" means common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how used in or contemplated at any time for use in the business of
Borrower (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other
tangible form, including all documents and things embodying or incorporating
such Trade Secret, all Trade Secret licenses, and including the right to sue
for and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license.
"Trademark" has the meaning ascribed to that term in the
definition of Trademark Collateral.
"Trademark Collateral" means:
(a) all of Borrower's trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, other
source of business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of a
like nature (all of the foregoing items in this clause (a) being
collectively called a "Trademark"), now existing anywhere in the world
or hereafter adopted or acquired, whether currently in use or not, all
registrations and recordings thereof and all applications in connection
therewith, whether pending or in preparation for filing, including
registrations, recordings and applications in the United States Patent
and Trademark Office or in any office or agency of the United States of
America or any State thereof or any foreign country, including each
Trademark, Trademark registration, recording and application therefor
referred to in Item A of Schedule 4.16 hereto;
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(b) all Trademark licenses, including each Trademark license
referred to in Item B of Schedule 4.16 hereto;
(c) all reissues, extensions or renewals of any of the items
described in clauses (a) and (b);
(d) all of the goodwill of the business connected with the
use of, and symbolized by, the items described in clauses (a) and (b);
and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by Borrower against third parties for past, present
or future infringement or dilution of any Trademark or Trademark
registration, including any Trademark or Trademark registration
referred to in Item A of Schedule 4.16 hereto, or Trademark license,
including each Trademark license referred to in Item B of Schedule 4.16
hereto, or for any injury to the goodwill associated with the use of
any such Trademark or for breach or enforcement of any Trademark
license.
"Trademark Security Agreement" means the Amended and Restated
Trademark Security Agreement between Borrower and Lender substantially in the
form of Exhibit F, with appropriate insertions, as it may be amended, restated,
supplemented or otherwise modified or supplemented from time to time.
"UCC" means the Uniform Commercial Code as in effect in the
State of Illinois, and any successor statute, as in effect from time to time.
References to sections of the UCC shall be construed to also refer to any
successor sections.
"Unmatured Event of Default" means any event or condition which,
with the lapse of time or giving of notice to Borrower or both, would
constitute an Event of Default.
"Warehouseman's Consent" means a document in the form of Exhibit
J, with appropriate insertions, or such other form as shall be acceptable to
the Lender.
1.2 Other Definitional Provisions. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or
in any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any Note
or in any certificate or other document made or delivered pursuant hereto.
Terms used and not defined in this Agreement which are defined in any
Supplement or Exhibit hereto shall, unless the context otherwise indicates,
have the meanings given them in such Supplement or Exhibit. Terms used and not
defined in this Agreement in reference to the Lien granted hereunder, the
Collateral or Third Party Collateral shall, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same
are used or defined therein.
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1.3 Interpretation of Agreement. A reference to a Section, an Exhibit,
a Supplement or a Schedule is, unless otherwise stated, a reference to a
section hereof, an exhibit hereto or a schedule hereto, as the case may be.
Section captions used in this Agreement are for convenience only and shall not
affect the construction of this Agreement. Reference to "this Agreement" shall
include the provisions of Supplement A.
1.4 Compliance with Financial Restrictions. Compliance with each of the
financial ratios and restrictions contained in Section 5 or Supplement A shall,
except to the extent otherwise provided herein, be determined in accordance
with GAAP consistently followed.
1.5 Effect of Restatement. This Agreement shall, except as otherwise
expressly set forth herein, supersede the Existing Loan Agreement from and
after the Restatement Date with respect to the transactions hereunder and with
respect to the Loans and Letters of Credit outstanding under the Existing Loan
Agreement as of Restatement Date. The parties hereto acknowledge and agree,
however, that (i) this Agreement and all other Related Agreements executed and
delivered herewith do not constitute a novation, payment and reborrowing or
termination of the Liabilities under the Existing Loan Agreement and the other
Related Agreements as in effect prior to the Restatement Date, (ii) such
Liabilities are in all respects continuing with only the terms being modified
as provided in this Agreement and the other Related Agreements, (iii) the liens
and security interests in favor of Lender securing payment of such Liabilities
are in all respects continuing and in full force and effect with respect to all
Liabilities and (iv) all references in the other Related Agreements to this
Agreement shall be deemed to refer without further amendment to this Agreement.
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.
2.1 Loans.
2.1.1 Revolving Loans.
(a) Subject to the terms and conditions of this
Agreement and the Related Agreements, and in reliance upon the
warranties of Borrower set forth herein and in the Related
Agreements, Lender agrees to continue to make such loans or
advances (individually each a "Revolving Loan" and collectively
the "Revolving Loans") from time to time before the Termination
Date to Borrower as Borrower may from time to time request;
provided, however, that, except as provided in the proviso to
Section 2.1.2, the aggregate principal amount of all Revolving
Loans at any time outstanding shall not exceed the Revolving
Loan Availability. Revolving Loans may be repaid and, subject to
the the Credit is otherwise terminated as
provided in this Agreement. Borrower and Lender acknowledge the
making of the Revolving Loans which are outstanding on the
Restatement Date in accordance with the terms of the Existing
Loan Agreement and agree that, from and after the Restatement
Date, such Revolving Loans shall continue to be outstanding
pursuant to the terms and conditions of this Agreement.
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(b) All Revolving Loans hereunder shall be paid by
Borrower on the Termination Date, unless payable sooner pursuant
to the provisions of this Agreement, but may, at Borrower's
election, be repaid in whole or in part at any time prior to
such date without premium or penalty.
2.1.2 Maximum Outstanding Revolving Loans. Notwithstanding any
other provision of this Agreement, the aggregate outstanding principal
balance of the Revolving Loans shall not at any time exceed the
Revolving Credit Amount as in effect at such time; provided, however,
that the foregoing shall not limit the right of Lender to advance
Revolving Loans to Borrower pursuant to the provisions of Section 2.2,
3.2, 5.5, 5.6, 5.22, 7.4, 11.3 or 11.4 or any other provision of this
Agreement or any Related Agreement that permits Lender to advance
Revolving Loans to Borrower. If at any time the amount of Revolving
Loans exceeds the Revolving Loan Availability, Borrower shall
immediately upon demand repay such excess.
2.1.3 Mandatory Reductions. (a) On each Credit Reduction Date,
the Revolving Credit Amount shall be reduced by the Credit Reduction
Amount for such date. (b) On the date of Borrower's receipt of proceeds
from any loan permitted pursuant to Section 5.15(e), the Revolving
Credit Amount shall first be reduced, until reduced to zero, and
thereafter the Supplemental Revolving Credit Amount and the Additional
Revolving Credit Amount; on a pro rata basis (or on such other basis as
Borrower may reasonably request), shall be reduced, by an amount equal
to 75% of the net proceeds of such loan. (c) On the date of Borrower's
sale of any business location on the first page of Schedule 4.12
pursuant to the proviso in Section 5.12(b), the Revolving Credit Amount
shall first be reduced, until reduced to zero, and thereafter the
Supplemental Revolving Credit Amount and the Additional Revolving
Credit Amount, on a pro rata basis (or on such other basis as Borrower
may reasonably request), shall be reduced, by an amount equal to 75%
of the gross sales price for such business location (it being
understood that if Borrower receives non-cash proceeds in connection
with any such sale, the gross sales price for such sale shall be
determined by Lender in good faith after consultation with Borrower).
2.1.4 Voluntary Reductions. In addition to the mandatory
reductions of the Revolving Credit Amount, Supplemental Revolving
Credit Amount and Additional Revolving Credit Amount under Section
2.1.3 above, Borrower may voluntarily, at any time, on at least three
(3) Business Days' prior written notice received by Lender, permanently
reduce the Revolving Credit Amount, the Supplemental Revolving Credit
Amount and/or the Additional Revolving Credit Amount; provided that
Borrower may not at any time reduce (i) the Revolving Credit Amount to
an amount which is less than the then-outstanding principal balance of
all Revolving Loans, (ii) the Supplemental Revolving Credit Amount to
an amount which is less than the then-outstanding principal balance of
all Supplemental Revolving Loans, and (iii) the Additional Revolving
Credit Amount to an amount which is less than the then-outstanding
principal balance of all Additional Revolving Loans.
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2.1.5 Effect of Reductions. Any unscheduled reduction of the
Revolving Credit Amount pursuant to clause (b) of Section 2.1.3 or
pursuant to Section 2.1.4 shall reduce the Credit Reduction Amounts for
subsequent Credit Reduction Dates as follows: 25% of such reduction
shall reduce the Credit Reduction Amounts for subsequent Credit
Reduction Dates in the order of their occurrence; and 75% of such
reduction shall reduce the Credit Reduction Amounts for subsequent
Credit Reduction Dates in the inverse order of their occurrence. Any
unscheduled reduction of the Revolving Credit Amount pursuant to clause
(c) of Section 2.1.3 shall reduce the Credit Reduction Amount for each
subsequent Credit Reduction Date by $5,000 for each business location
sold pursuant to the proviso in Section 5.12(b).
2.1.6 Supplemental Revolving Loans.
(a) Subject to the terms and conditions of this
Agreement and the Related Agreements, and in reliance upon the
warranties of Borrower set forth herein and in the Related
Agreements, Lender agrees to continue to make such loans or
advances (individually each a "Supplemental Revolving Loan" and
collectively the "Supplemental Revolving Loans") from time to
time before the Termination Date to Borrower as Borrower may
from time to time request; provided, however, that the aggregate
principal amount of all Supplemental Revolving Loans at any time
outstanding shall not exceed the Supplemental Revolving Credit
Amount. Supplemental Revolving Loans may be repaid and, subject
to the terms and conditions hereof, reborrowed to but not
including the Termination Date unless the Credit is otherwise
terminated as provided in this Agreement. Borrower and Lender
acknowledge the making of the Supplemental Revolving Loans which
are outstanding on the Restatement Date in accordance with the
terms of the Existing Loan Agreement and agree that, from and
after the Restatement Date, such Supplemental Revolving Loans
shall continue to be outstanding pursuant to the terms and
conditions of this Agreement.
(b) All Supplemental Revolving Loans hereunder
shall be paid by Borrower on the Termination Date, unless
payable sooner pursuant to the provisions of this Agreement, but
may, at Borrower's election, be repaid in whole or in part at
any time prior to such date without premium or penalty.
2.1.7 Additional Revolving Loans.
(a) Subject to the terms and conditions of this
Agreement and the Related Agreements, and in reliance upon the
warranties of Borrower set forth herein and in the Related
Agreements, Lender agrees to make such loans or advances
(individually each an "Additional Revolving Loan" and
collectively the "Additional Revolving Loans") from time to time
before the Termination Date to Borrower as Borrower may from
time to time request; provided, however, that the aggregate
principal amount of all Additional Revolving Loans at any time
outstanding shall not
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exceed the Additional Revolving Credit Amount. Additional
Revolving Loans may be repaid and, subject to the terms and
conditions hereof, reborrowed to but not including the
Termination Date unless the Credit is otherwise terminated as
provided in this Agreement.
(b) All Additional Revolving Loans hereunder shall
be paid by Borrower on the Termination Date, unless payable
sooner pursuant to the provisions of this Agreement, but may, at
Borrower's election, be repaid in whole or in part at any time
prior to such date without premium or penalty.
2.1.8 Mandatory Repayments. Promptly upon receipt by Borrower of
any repayments of principal under the Azimuth Group Loan Agreements,
Borrower shall within one Business Day repay outstanding Additional
Revolving Loans in a principal amount equal to all such repayments of
principal received by Borrower.
2.2 Letters of Credit.
(a) In addition to Loans made pursuant to Section 2.1, but
subject to satisfaction of the conditions precedent set forth in
Section 8, Lender will, upon receipt of duly executed Applications and
such other documents, instruments and/or agreements as Lender may
reasonably require, issue Letters of Credit on such terms as are
satisfactory to Lender; provided, however, that Lender shall not be
required to issue any Letter of Credit at any time:
(i) if, before or after giving effect to such Letter of
Credit, the Letter of Credit Obligations would exceed the lesser
of (A) the Revolving Credit Amount minus the outstanding
principal balance of the Revolving Loans or (B) $2,500,000; and
(ii) which has an expiration date which is (A) more
than one (1) year after the date of issuance (provided that a
Standby Letter of Credit may provide for an annual renewal if
such renewal is consented to by Lender and all conditions
precedent to the issuance of Letters of Credit are met at the
time of such renewal), or (B) after sixty (60) Business Days
immediately preceding the scheduled Termination Date.
Borrower and Lender acknowledge the issuance of the
Letters of Credit which are outstanding on the Restatement Date in
accordance with the terms of the Existing Loan Agreement and agree that,
from and after the Restatement Date, such Letters of Credit shall
continue to be outstanding pursuant to the terms and conditions of this
Agreement.
(b) Borrower agrees to pay Lender, on demand, Lender's standard
administrative operating fees and charges in effect from time to time
for issuing and administering any Letters of Credit. Borrower further
agrees to pay Lender a commission (i) on each Standby
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Letter of Credit and related L/C Draft accepted by Lender but not yet
paid equal to two and one-half percent (2.5%) per annum (calculated on
the basis of a year consisting of 360 days and paid for actual days
elapsed) on the aggregate daily average amount available to be drawn
under such Standby Letter of Credit and aggregate unpaid amount under
such L/C Drafts, payable quarterly in arrears, and (ii) on each
Commercial Letter of Credit, and related L/C Draft accepted by Lender
but not yet paid equal to two and one-half percent (2.5%) per annum
(calculated on the basis of a year consisting of 360 days and paid for
actual days elapsed) for the period from the date of issuance to the
date of expiry, of the original face amount of such Commercial Letter
of Credit payable upon the initial draw under, or acceptance of any L/C
Draft with respect to, such Letter of Credit. Lender may provide for
the payment of any fees, charges or commission due by advancing the
amount thereof to borrower as a Revolving Loan.
(c) Borrower agrees to reimburse Lender, on demand, for each
payment made by Lender under or pursuant to any Letter of Credit or L/C
Draft. Borrower further agrees to pay to Lender, on demand, interest at
the Default Rate applicable to Revolving Loans on any amount paid by
Lender under or pursuant to any Letter of Credit or L/C Draft from the
date of payment until the date of reimbursement to Lender. Lender may
provide for the payment of any reimbursement obligations and any
interest accrued thereon by advancing the amount thereof to Borrower as
a Revolving Loan; provided, however, that, subject to the conditions
precedent set forth in Section 8.2, if at the time Lender makes a
payment under or pursuant to a Letter of Credit or L/C Draft the
Revolving Loan Availability is at least equal to Borrower's
reimbursement obligation with respect to such payment, Borrower hereby
authorizes Lender, and Lender will, immediately and without any request
by or notice to Borrower, provide for the payment of any reimbursement
obligations due to Lender and any interest accrued thereon by making a
Revolving Loan to Borrower in the amount thereof, which reimbursement
obligation shall be thereupon satisfied to the extent of the Revolving
Loan so made.
(d) Borrower's obligation to reimburse Lender for payments and
disbursements made by Lender under any Letter of Credit shall be
absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which
Borrower may have or have had against Lender or any other Person.
Borrower assumes all risks of the acts or omissions of the users of the
Letters of Credit and all risks of the misuse of the Letters of Credit.
Neither Lender nor any of its correspondents shall be responsible: (i)
for the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document specified in the Applications even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged; (ii) for the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer
or assign any Letter of Credit or any of the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) for failure of any L/C
Draft to bear any reference or adequate reference to any Letter of
Credit, or failure of anyone to note the amount of any draft on the
reverse of any Letter of Credit or to surrender or to take up any
Letter of Credit or to send forward any such document apart from drafts
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as required by the terms of any Letter of Credit, each of which
provisions, if contained in the Letter of Credit itself, it is agreed,
may be waived by Lender; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher;
(v) for any error, neglect, default, suspension or insolvency of any
correspondents of Lender; (vi) for errors in translation or for errors
in interpretation of technical terms; (vii) for any loss or delay, in
the transmission or otherwise, of any such document or draft or of
proceeds thereof; or (viii) for any other in making or failing to make
payment under any Letter of Credit, except only that Borrower shall
have a claim against Lender, and Lender shall be liable to Borrower, to
the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by Borrower which Borrower proves were
caused by Lender's willful misconduct or gross negligence in
determining whether documents presented under any Letter of Credit
comply with the terms of such Letter of Credit. None of the above shall
affect, impair or prevent the vesting of any of the rights or powers of
Lender. Lender shall have the right to transmit the terms of any Letter
of Credit without translating them.
(e) Notwithstanding anything to the contrary herein or in any
Application, upon the occurrence and during the continuance of an Event
of Default, an amount equal to the aggregate amount of the outstanding
Letter of Credit Obligations shall, at Lender's option and without
demand upon or further notice to Borrower, be deemed (as between Lender
and Borrower) to have been paid or disbursed by Lender under the Letters
of Credit and L/C Drafts accepted by Lender (notwithstanding that
such amounts may not in fact have been so paid or disbursed), and a
Revolving Loan to Borrower in the amount of such Letter of Credit
Obligations to have been made and accepted, which Loan shall be
immediately due and payable. In lieu of the foregoing, at the election
of Lender at any time after an Event of Default has occurred and is
continuing, Borrower shall, upon Lender's demand, deliver to Lender
cash collateral equal to the aggregate Letter of Credit Obligations.
Any such cash collateral and/or any amounts received by Lender in
payment of the Loan made pursuant to this paragraph (e) shall be held
by Lender in the Assignee Deposit Account or a separate account
appropriately designated as a cash collateral account in relation to
this Agreement and the Letters of Credit and shall be retained
by Lender as collateral security in respect of, first, Borrower's
Liabilities under or in connection with the Letters of Credit and L/C
Drafts and, then, all other Liabilities. Such amounts shall not be
used by Lender to pay any amounts drawn or paid under or pursuant to
any Letter of Credit or L/C Draft, but may be applied to reimburse
Lender for drawings or payments under or pursuant to Letters of Credit
or L/C Drafts which Lender has paid, or if no such reimbursement is
required, to payment of such other Liabilities as Lender shall
determine. Any amounts remaining in any cash collateral account
established pursuant to this paragraph (e) following payment in
full of all Liabilities shall be returned to Borrower.
(f) In determining whether to make any payment under or pursuant
to any Letter of Credit or any related L/C Draft, Lender shall have no
obligation to Borrower or any other Person other than to confirm that
any documents required to be delivered have been delivered and that
such documents comply on their face with the requirements of such
Letter
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of Credit. No action taken or omitted by Lender under or in connection
with any Letter of Credit or L/C Draft, if taken or omitted in the
absence of gross negligence or willful misconduct, shall put Lender
under any resulting liability to Borrower.
2.3 Loan Account; Demand Deposit Account. Lender shall establish or
cause to be established on its books in Borrower's name one or more accounts
(each a "Loan Account") to evidence Loans made to Borrower. Lender will credit
or cause to be credited to a commercial account (a "Demand Deposit Account")
maintained by Borrower at Lender's 231 South LaSalle Street, Chicago, Illinois
office the amount of any sums advanced as Loans hereunder. Any amounts advanced
as Loans hereunder which are credited to Borrower's Demand Deposit Account,
together with any other amounts advanced to Borrower as a Loan pursuant to this
Agreement, will be debited to the applicable Loan Account and result in an
increase in the principal balance outstanding in such Loan Account in the
amount thereof.
2.4 Interest and Fees.
2.4.1 Interest. (a) From the date any Revolving Loan,
Supplemental Revolving Loan or Additional Revolving Loan is made,
converted or continued on or after the Second Restatement Date to the
date the principal amount of such loan is repaid in full, interest
shall accrue on the outstanding principal amount of such Loan at a
rate per annum determined as follows:
(i) in the case of a Revolving Loan that is a Reference
Rate Loan, at a per annum rate equal to the Reference Rate from
time to time in effect, plus the Reference Rate Margin from time
to time in effect;
(ii) in the case of a Revolving Loan that is a
Eurodollar Rate Loan, during each Interest Period applicable
thereto, at a per annum rate equal to the Eurodollar Rate
(Adjusted) for such Interest Period, plus the Eurodollar Rate
Margin from time to time during such Interest Period in effect;
(iii) in the case of a Supplemental Revolving Loan that
is a Reference Rate Loan, at a per annum rate equal to the
Reference Rate from time to time in effect, plus the Reference
Rate Margin from time to time in effect; and
(iv) in the case of a Supplemental Revolving Loan that
is a Eurodollar Rate Loan, during each Interest Period
applicable thereto, at a per annum rate equal to the Eurodollar
Rate (Adjusted) for such Interest Period, plus the Eurodollar
Rate Margin from time to time during such Interest Period in
effect.
(v) in the case of an Additional Revolving Loan that is a
Reference Rate Loan, at a per annum rate equal to the Reference
Rate from time to time in effect, plus the Reference Rate Margin
from time to time in effect; and
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(vi) in the case of an Additional Revolving Loan that is
a Eurodollar Rate Loan, during each Interest Period applicable
thereto, at a per annum rate equal to the Eurodollar Rate
(Adjusted) for such Interest Period, plus the Eurodollar Rate
Margin from time to time during such Interest Period in effect.
(b) The Applicable Margins in effect for any date shall be
determined based upon the Funded Debt/EBITDA Ratio measured as of the
last day of the most recently completed fiscal quarter of Borrower of
each Fiscal Year, commencing on five (5) Business Days following the
date of delivery to Lender of an officer's certificate with financial
statements for the month ending March 31, 1996; provided that if any
change in the Funded Debt/EBITDA Ratio results in an adjustment in the
Applicable Margins, such adjustment shall become effective on the fifth
(5th) Business Day following the delivery to Lender of quarterly
financial statements demonstrating the need for such adjustment and, as
to each Eurodollar Rate Loan outstanding at the time of such delivery,
only upon expiration of the then current Interest Period applicable
thereto; provided further, that notwithstanding the foregoing Borrower
may only borrow Reference Rate Loans at a Reference Rate Margin equal
to 0% until five (5) Business Days after Lender receives an officer's
certificate with the monthly financial statements for the month ending
March 31, 1996.
(c) If any Loan or portion thereof is not paid when due, whether
by acceleration or otherwise, the entire unpaid principal amount of
such Loan shall bear interest thereafter at the Default Rate until such
amount is paid in full.
(d) Interest accrued on each Loan shall be payable, without
duplication:
(i) on the Termination Date;
(ii) On that portion of the outstanding
principal amount thereof maintained as a Reference Rate Loan,
on the first day of each month;
(iii) On that portion of the outstanding principal
amount thereof maintained as a Eurodollar Rate Loan, on the last
day of each applicable Interest Period, and if, such Interest
Period shall exceed three months, on that day of the third month
of such Interest Period numerically corresponding to the first
day of such Interest Period (or, if there is no such numerically
corresponding day in such third month, on the last day of such
third month); and
(iv) upon acceleration of the Loans pursuant to
Section 6.2, immediately upon such acceleration.
(e) Whenever any payment shall otherwise be due on a day that is
not a Business Day, such payment shall (except as otherwise required by
clause (d) of the definition of the term "Interest Period" with respect
to payments on Loans maintained as Eurodollar Rate
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Loans) be made on the next succeeding Business Day, and such extension
of time shall be included in computing interest and fees, if any, in
connection with such payment.
(f) All determinations by Lender of any rate of interest
applicable to any Loan or other Liability shall be conclusive absent
manifest error.
2.4.2 Nonuse Fee. Borrower agrees to pay to Lender (a) a fee
equal to three- tenths of one percent (.30%) per annum on the daily
average amount by which the Revolving Credit Amount exceeds the sum of
the outstanding principal balance of the Revolving Loans plus the
Letter of Credit Obligations, (b) a fee equal to three-tenths of one
percent (.30%) per annum on the daily average amount by which the
Supplemental Revolving Credit Amount exceeds the outstanding principal
balance of the Supplemental Revolving Loans, and (c) a fee equal to
three-tenths of one percent (.30%) per annum on the daily average
amount by which the Additional Revolving Credit Amount exceeds the
outstanding principal balance of the Additional Revolving Loans. The
fees provided for in this Section 2.4.2 shall be payable monthly in
arrears on the first day of each month and on the date the Credit
terminates, in each case for the period then ended.
2.4.3 Method of Calculating Interest and Fees. Interest on the
unpaid principal amount of each Loan shall accrue from and including
the date such Loan is made to, but not including, the date such Loan is
paid. Interest and fees shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed.
2.4.4 Payment of Interest and Fees. Lender may provide for the
payment of any unpaid accrued interest and any fees by charging the
Demand Deposit Account or any other bank account maintained by Borrower
with Lender.
2.5 Requests for Loans and Other Information.
(a) Borrower may make a request for a Loan hereunder by either
(i) delivering or telecopying to Lender a Borrowing Request or (ii) giving
telephonic notice thereof to Lender, promptly confirmed in writing by
transmittal of a Borrowing Request to Lender (1) with respect to a Eurodollar
Rate Loan at or before 10:00 a.m. Chicago time on not less than 3 nor more than
5 Business Days' prior notice and (ii) with respect to Reference Rate Loans, at
or before 12:00 noon, Chicago time on the Business Day that such Reference Rate
Loan is to be made. In the case of Reference Rate Loans, each Loan advance
shall be in a minimum principal amount of $25,000 and an integral multiple of
$5,000 in excess of that amount, except for Revolving Loans made pursuant to
the provisions of Section 2.2, 2.10, 3.2, 5.5, 5.6, 5.22, 7.4, 11.3 or 11.4 or
any other provision of this Agreement or any Related Agreement that permits
Lender to advance Revolving Loans to Borrower. In the case of Eurodollar Rate
Loans, each Loan advance shall be in a minimum principal amount of $1,000,000
and an integral multiple of $500,000 in excess of such amount. Each request for
a Loan advance shall constitute Borrower's representation and warranty to
Lender that all of the applicable conditions contained in Section 8.2 have been
met and will continue to be met after giving affect to that Revolving Loan
advance.
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(b) In the event that Borrower shall at any time make a request
for a Loan hereunder, Borrower agrees to forthwith provide Lender with
such information, at such frequency and in such format, as is
reasonably required by Lender, such information to be as current as
practicable as of the time of such request.
(c) Borrower shall provide Lender with documentation
satisfactory to Lender indicating the names of those employees of
Borrower authorized by Borrower to sign Borrowing Requests and
Continuation/Conversion Notices on behalf of Borrower and Borrower
shall provide Lender with documentation satisfactory to Lender
indicating the names of the employees of Borrower authorized by
Borrower to make telephonic requests for Loans and conversions/
continuations, and/or to authorize disbursement of the proceeds of
Loans by wire transfer or otherwise, and Lender shall be entitled to
rely upon such documentation until notified in writing by Borrower of
any change(s) in the names of the employees so authorized. Lender shall
be entitled to act on the instructions of anyone reasonably believed by
Lender to be one of the persons authorized to request Loans or
disbursements of Loan proceeds by telephone and Borrower shall (in the
absence of Lender's gross negligence or willful misconduct) be bound
thereby in the same manner as if the person were actually so
authorized. Borrower agrees to indemnify and hold Lender harmless
from any and all claims, damages, liabilities, losses, costs
and expenses (including Attorneys' Fees) which may arise or be created
by the acceptance of instructions for making or paying Loans by wire
transfer or telephone (in the absence of Lender's gross negligence or
willful misconduct).
2.6 Notes. Except to the extent a Loan may, in Lender's sole and
absolute discretion, be evidenced by a Note, all Loans and payments hereunder
shall be recorded on Lender's books, which shall be rebuttable presumptive
evidence of the amount of such Loans outstanding at any time hereunder. Lender
will account monthly as to all Loans and payments hereunder and, absent
demonstrable error, each monthly accounting will be fully binding on Borrower
unless, within thirty (30) days of Borrower's receipt thereof, Borrower shall
provide Lender with a specific listing of exceptions. Notwithstanding any term
or condition of this Agreement to the contrary, however, the failure of Lender
to record the date and amount of any Loan hereunder shall not limit or
otherwise affect the obligation of Borrower to repay any such Loan.
2.7 [Intentionally Omitted]
2.8 [Intentionally Omitted]
2.9 All Loans One Obligation. The Revolving Loans, Supplemental
Revolving Loans, Additional Revolving Loans and all other Loans under this
Agreement shall constitute one Loan, and all Indebtedness and other Liabilities
of Borrower to Lender under this Agreement and any of the Related Agreements
shall constitute one general obligation secured by Lender's Lien on all of the
Collateral and Third Party Collateral and by all other Liens heretofore, now,
or at any time hereafter granted by Borrower or any other Obligor to Lender.
Borrower agrees that all of the rights of Lender set forth in this Agreement
shall apply to any modification of or supplement to this
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Agreement, any Supplement or Exhibit hereto, and the Related Agreements, unless
otherwise agreed in writing.
2.10 Closing Fee. Borrower agrees to pay to Lender a closing fee of
$50,000 on the Restatement Date. With Lender's consent, the amount of any
closing fee due on the Restatement Date may be advanced to Borrower as a
Revolving Loan.
2.11 Making of Payments; Application of Collections; Charging of
Accounts.
(a) All payments hereunder shall be made without set-off or
counterclaim and shall be made to Lender in immediately available funds
(except as Lender may otherwise consent) prior to 12:30 p.m., Chicago
time, on the date due at its office at 231 South LaSalle Street,
Chicago, Illinois 60697, or at such other place as may be designated by
Lender to Borrower in writing. Any payments received after such time
shall be deemed received on the next Business Day. Whenever any payment
to be made hereunder or under any Note or Related Agreement shall be
stated to be due on a date other than a Business Day, such payment may
be made on the next succeeding Business Day, and such extension of time
shall be included in the calculation of interest and any fees.
(b) Borrower authorizes Lender, and on each Business Day Lender
will, subject to the provisions of this paragraph (b), apply any
amounts received by Lender (whether deposited in the Assignee Deposit
Account of Borrower or otherwise received by Lender) from the
collection of items of payment and from proceeds of any Collateral or
Third Party Collateral (whether received upon any sale or other
distribution of Collateral or Third Party Collateral by Lender or
otherwise), against the principal and/or interest of any Loans made
hereunder and/or any other Liabilities, whether or not then due, in
such order of application as Lender may determine, unless such
payments or proceeds are, in Lender's sole and absolute discretion,
released to Borrower; provided, however, that so long as no Event of
Default exists, any such amounts received by Lender shall be applied
as follows: first, to payment of amounts then due with respect to fees
(including Attorneys' Fees), charges and expenses for which Borrower
is liable pursuant to this Agreement and the Related Agreements;
second, to payment of amounts then due with respect to interest on the
Loans; third, to payment of amounts then due with respect to principal
of the Loans; fourth, to prepayment of the Revolving Loans; fifth, to
prepayment of the Supplemental Revolving Loans; and sixth, to
prepayment of the Additional Revolving Loans; provided, further, that
no checks, drafts or other instruments received by Lender shall
constitute final payment to Lender unless and until such item of
payment has actually been collected. All items or amounts which are
delivered to Lender by or on behalf of Borrower or any Obligor or any
Account Debtor on account of partial or full payment or otherwise as
proceeds of any of the Collateral or Third Party Collateral (including
any items or amounts which may have been deposited to the Assignee
Deposit Account) may from time to time in Lender's sole and absolute
discretpayment of the Liabilities, whether or not then due as provided
in the preceding sentence. Notwithstanding anything to the contrary
herein, (i) all cash, checks, instruments and other
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items of payment, for purposes of determining (x) the occurrence of an
Event of Default and (y) whether, under Sections 2.1 and 2.2, there is
availability for Loans or Letters of Credit, shall be deemed received
upon actual receipt by Lender, unless the same is subsequently
dishonored for any reason whatsoever, and (ii) solely for purposes of
interest calculation hereunder, all cash, checks, instruments and other
items of payment shall be deemed to have been applied against the
Liabilities on the first Business Day after receipt by Lender of
available funds with respect thereto.
(c) Borrower hereby authorizes Lender to, and Lender may, in its
sole and absolute discretion, charge to Borrower at any time when due
all or any portion of any of the Liabilities (and interest, if any,
thereon), including but not limited to any Attorneys' Fees and other
costs and expenses of Lender for which Borrower or any other Obligor is
liable pursuant to the terms of this Agreement or any Related Agreement,
by charging Borrower's Demand Deposit Account or any other bank account
of Borrower with Lender; provided, however, that the provisions of this
Section 2.11(c) shall not affect Borrower's obligation to pay when due
all amounts payable by Borrower or any other obligor under this
Agreement, any Note or any Related Agreement, whether or not there are
sufficient funds therefor in the Demand Deposit Account or any such
other bank account of Borrower.
2.12 Lender's Election Not to Enforce. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including, without limitation, any right of Lender to refrain
from making a Loan or issuing a Letter of Credit if all conditions precedent to
Lender's obligation to making such Loan or issuing such Letter of Credit have
not been satisfied.
2.13 Reaffirmation. Each request for a Loan or a Letter of Credit by
Borrower pursuant to this Agreement shall constitute an automatic certification
by Borrower to Lender that (i) all of the representations and warranties of
Borrower and each other Obligor in this Agreement and each of the Related
Agreements are true and correct on the date of such request to the same extent
as if made on such date, except (x) to the extent any such representation or
warranty relates solely to an earlier date (including the date hereof) and was
true and correct on such earlier date and (y) for such changes as are the result
of any act or omission specifically permitted hereunder (or under such Related
Agreement) or otherwise expressly agreed to by Lender and (ii) immediately
before and after making the requested Loan or issuing the requested Letter of
Credit, no Event of Default, or Unmatured Event of Default, then exists or
would result therefrom.
2.14 Setoff. In addition to and not in limitation of all other rights
and remedies (including other rights of offset or banker's lien) that
Lender or any other holder of any Note may have under applicable law, Lender
or such other holder shall, at any time any Event of Default, or any Unmatured
Event of Default under clause (e) of Section 6.1, exists, have the right to
appropriate and apply to the payment of the Liabilities (whether or not then
due), in such order of application as Lender or such other holder may elect,
any and all balances, credits, deposits (general or special,
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time or demand, provisional or final), accounts or monies of Borrower then or
thereafter with Lender or such other holder. Lender shall use reasonable
efforts to give Borrower prompt notice of any appropriation and application
pursuant to the preceding sentence (but failure to give such notice shall not
impose any liability on Lender or relieve Borrower of any of its obligations).
2.15 Increased Costs. If any Regulatory Change imposes, modifies or
deems applicable any capital adequacy, capital maintenance or similar
requirement (including a request or requirement which affects the manner in
which Lender allocates capital resources to its commitments, including its
commitments hereunder) and as a result thereof, in the reasonable opinion of
Lender, the rate of return on Lender's capital as a consequence of its
commitments or Loans, or the issuance any Letter of Credit hereunder, is
reduced to a level below that which Lender could have achieved but for such
circumstances, then and in each such case upon notice from time to time by
Lender to Borrower, Borrower shall pay to Lender such additional amount or
amounts as shall compensate Lender for such reduction in its rate of return
(herein such additional amounts being collectively called a "Compensatory
Amount") ; provided that (a) each Compensatory Amount shall be reduced to the
extent, if any, that Lender increases the Reference Rate, or the Eurodollar
Rate (Adjusted) is increased, in order to recover all or part of the increased
costs which are imposed by such Regulatory Change and (b) in determining any
increased expense, reduction in rate of return on capital or reduction in an
amount received, Lender shall act reasonably and in good faith and will, to the
extent the increased costs or reductions in amounts received or receivable
relate to Lender's loans and commitments in general and are not specifically
attributable to the Loans and the commitments hereunder, use averaging and
attribution methods which are reasonable and which cover all loans similar to
the Loans made, and all Letters of Credit similar to Letters of Credit issued,
by Lender whether or not the loan documentation for such other loans permits
the Lender to receive increased costs of the type described in this Section
2.15. Such notice shall contain a statement of Lender as to any such additional
amount or amounts (including calculations thereof in reasonable absence of
manifest error, be conclusive evidence of the matters stated therein and be
binding upon Borrower.
2.16 Borrowing Elections. At the election of Borrower pursuant to a
Borrowing Request delivered pursuant to Section 2.6, Loans comprising any
borrowing may be made as Reference Rate Loans or Eurodollar Rate Loans. Each
Borrowing Request shall be irrevocable and binding upon Borrower.
2.17 Continuation and Conversion Elections. At the election of Borrower
pursuant to a Continuation/Conversion Notice delivered by either (1) delivering
or telecopying to Lender a Continuation/Conversion Notice or (2) giving
telephonic notice thereof to Lender, in each case at or before 10:00 a.m.,
Chicago time (and, in the case of any such telephonic notice, promptly
confirming such notice by delivering or telecopying a Continuation/Conversion
Notice therefor, signed by an authorized officer of Borrower, to Lender), on
any Business Day, Borrower may elect, from time to time on not less than 3 nor
more than 5 prior Business Days' notice:
(a) that all, or any portion in an aggregate minimum amount of
$1,000,000 and an integral multiple of $500,000 in excess of such
amount, of the Revolving Loan,
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Supplemental Revolving Loan or Additional Revolving Loan be converted
from Reference Rate Loans into Eurodollar Rate Loans or from Eurodollar
Rate Loans into Reference Rate Loans (subject to the minimum borrowing
requirements set forth in Section 2.5(a)); and
(b) on the expiration of the Interest Period applicable to the
Eurodollar Rate Loans comprising all or part of the Revolving Loan, the
Supplemental Revolving Loan or the Additional Revolving Loan, that all,
or any portion in an aggregate minimum amount of $1,000,000 and an
integral multiple of $500,000 in excess of such amount, of such Loans
be continued as Eurodollar Rate Loans (in the absence of delivery of
such notice under either this clause (b) or clause (a) above, Borrower
will be deemed to have elected that such Eurodollar Rate Loans be
converted into Reference Rate Loans);
provided that:
(i) no portion of the outstanding principal amount of any
Loans may be continued as, or be converted into, Eurodollar Rate
Loans when any Event of Default has occurred and is continuing;
(ii) no portion of the outstanding principal amount of
any Loans may be continued as, or be converted into, Eurodollar
Rate Loans if, after giving effect to such action, the Interest
Period applicable thereto shall extend beyond the date of any
mandatory repayment of Loans unless a sufficient principal
amount of such Loans is being maintained as Reference Rate Loans
or Eurodollar Rate Loans having an Interest Period ending on or
prior to the date of any such mandatory repayment to permit such
repayment to be applied in full to Reference Rate Loans; and
(iii) no portion of the outstanding principal amount of
any Loans may be continued as, or converted into, Eurodollar
Rate Loans or Reference Rate Loans if, after giving effect to
such action, the aggregate principal amount of any Eurodollar
Rate Loans having a particular Interest Period is less than
$1,000,000 or not an integral multiple of $500,000.
2.18 Funding. In the event Borrower elects to obtain any Loans as
Eurodollar Rate Loans pursuant to Section 2.16, or elects to continue or convert
any portion of the principal amount of any Reference Rate Loans to Eurodollar
Rate Loans pursuant to Section 2.17, Lender may, if it so elects, fulfill its
obligation to make or continue any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a
Eurodollar Rate Loan in accordance with any election made by Borrower by causing
a foreign branch or affiliate of Lender or an international banking facility
created by Lender to make such Eurodollar Rate Loan; provided that in such event
such Eurodollar Rate Loan shall be deemed to have been made by Lender, and the
obligation of Borrower to repay such Eurodollar Rate Loan shall nevertheless be
to Lender and shall be deemed to be held by it, to the extent of such Eurodollar
Rate Loan, for the account of such foreign branch, affiliate or international
banking facility. In addition, Borrower hereby consents and agrees that, for
purposes of any determination to be made for purposes of this Agreement
(including
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Sections 2.19, 2.20, 2.21 and 2.22)), it shall be conclusively assumed that
Lender elected to fund all Eurodollar Rate Loans by purchasing Dollar deposits
in its Eurodollar Office's interbank eurodollar market.
2.19 Eurodollar Rate Lending Unlawful. If, as the result of any
Regulatory Change, Lender shall determine (which determination shall be
conclusive and binding on Borrower) that it is unlawful for Lender to make,
continue, or maintain any Loan as, or to convert any Loan into, a Eurodollar
Rate Loan, the obligations of Lender to make, continue, or maintain, as the
case may be, any portion of the principal amount of any Loans as, or to convert
any Loans into, Eurodollar Rate Loans shall, upon such determination (and
telephonic notice thereof confirmed in writing to Borrower), forthwith be
suspended (but only to the extent unlawful) until Lender shall notify Borrower
that the circumstances causing such suspension no longer exist, and all
Eurodollar Rate Loans shall automatically convert into Reference Rate Loans.
2.20 Eurodollar Deposits Unavailable. If prior to the date on which all
or any portion of the principal amount of any Loan is to be made or continued
as, or be converted into, Eurodollar Rate Loans, Lender shall have determined
(and telephonic notice thereof, confirmed in writing, shall have been given to
Borrower) that:
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to Lender in the interbank
eurodollar market; or
(b) by reason of circumstances affecting the interbank
eurodollar market, adequate means do not exist, for ascertaining the
interest rate applicable hereunder to such Eurodollar Rate Loan,
then, the obligations of Lender under Sections 2.16 and 2.17 to make or
continue any portion of the principal amount of any Loans as, or to
convert any Loans into, Eurodollar Rate Loans shall forthwith be
suspended until Lender shall notify Borrower that the circumstances
causing such suspension no longer exist.
2.21 Increased Eurodollar Rate Loan Costs, etc. Borrower agrees to
reimburse Lender for any increase in the cost to Lender of making, continuing
or maintaining (or of its obligation to make, continue or maintain) any
portion of the principal amount of any of its Loans as, or of converting (or of
its obligation to convert) any portion of the principal amount of any of its
Loans into, Eurodollar Rate Loans and for any reduction in the amount of any
sum receivable by Lender hereunder in respect of making, continuing or
maintaining any portion of the principal amount of any of its Loans as, or
converting any portion of the principal amount of any Loans into, Eurodollar
Rate Loans, which increased cost or reduced amount (a) results from a
Regulatory Change and (b) is not attributable to Excluded Taxes applicable to
Lender, in each case imposed by the jurisdiction under the laws of which it is
constituted or in which it is doing business or, a Tax of any jurisdiction
imposed by withholding with respect to a payment hereunder. In any such event,
Lender shall promptly notify Borrower thereof, stating the reasons therefor and
the additional amount required fully to compensate Lender for such increased
cost or reduced amount. Such additional amounts
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shall be payable in full on the earlier of each interest payment date occurring
after they have accrued and on demand. A statement as to any such increased
cost or reduced amount or any change therein (including calculations thereof in
reasonable detail) shall be submitted by Lender to Borrower and shall, in the
absence of manifest error, be conclusive and binding on Borrower; provided that
Borrower shall not be liable in respect of any such increased cost or reduced
amount as to which Lender became aware and failed to notify Borrower promptly
if and to the extent that prompt notice could have avoided or materially
lessened payment by Borrower hereunder.
2.22 Funding Losses. In the event Lender shall incur any loss or
expense (including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Lender to make, continue,
or maintain any portion of the principal amount of any Loan as, or to convert
any portion of the principal amount of any Loan into, a Eurodollar Rate Loan)
as a result of:
(a) repayment or prepayment of the principal amount of any
Eurodollar Rate Loans on a date other than the scheduled last day of
the Interest Period applicable thereto;
(b) any conversion of all or any portion of the outstanding
principal amount of any Eurodollar Rate Loans to Reference Rate Loans
pursuant to Section 2.16 or 2.19 prior to the expiration of the
Interest Period then applicable thereto;
(c) any Loans not being made as Eurodollar Rate Loans in
accordance with the Borrowing Request therefor, unless pursuant to
Section 2.19 or 2.20; or
(d) any Loans not being continued as, or converted into,
Eurodollar Rate Loans in accordance with the Continuation/Conversion
Notice given therefor, unless pursuant to Section 2.19 or 2.20,
then, upon the request of Lender to Borrower, Borrower shall pay to
Lender such amount as will (in the reasonable determination of Lender)
reimburse Lender for such loss or expense. A statement as to any such
loss or expense (including calculations thereof in reasonable detail)
shall be submitted by Lender to Borrower and shall, in the absence of
manifest error, be conclusive and binding on Borrower. Any payment
required under this Section 2.22 shall not constitute a premium or
penalty under any circumstances.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of all Loans
now or hereafter made by Lender to Borrower hereunder or under any Note, and as
security for the payment or other satisfaction of all other Liabilities
(including, without limitation, all reimbursement obligations under any Letters
of Credit), Borrower hereby reaffirms its grant of a security interest under
the Original Loan Agreement and in connection with the Existing Loan Agreement
and further grants to Lender a security interest in and to the following
property of Borrower, whether now owned or existing, or
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hereafter acquired or coming into existence, wherever now or hereafter located
(all such property is hereinafter referred to collectively as the
"Collateral"):
(a) Accounts Receivable;
(b) Equipment and Fixtures;
(c) Inventory;
(d) General Intangibles;
(e) Contract Rights and documents of title;
(f) All chattel paper and instruments evidencing, arising out of
or relating to any obligation to Borrower for goods sold or leased or
services rendered, or otherwise arising out of or relating to any
property described in clauses (a) through (e) above;
(g) Any and all balances, credits, deposits (general or special,
time or demand, provisional or final), accounts or monies of or in the
name of Borrower now or hereafter with Lender and any and all property
of every kind or description of or in the name of Borrower now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, or standing to Borrower's credit on the
books of, Lender, any agent or bailee for Lender, or any Participant;
(h) All interest of Borrower in any goods, the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any
Accounts Receivable, Contract Rights, General Intangibles or any
chattel paper or instruments referred to in clause (f) above;
(i) Any and all other property of Borrower, of any kind or
description (including but not limited to real estate of Borrower),
including, without limitation, any property of Borrower subject to a
separate mortgage, pledge or security interest in favor of Lender or in
which Lender now or hereafter has or acquires a security interest
securing any Liabilities pursuant to an agreement or instrument other
than this Agreement;
(j) All Intellectual Property Collateral;
(k) All Investment Property;
(l) All of Borrower's right, title and interest in and to all
replacements, substitutions, additions or accessions to or for any of
the foregoing;
(m) All of Borrower's right, title and interest in and to all
books, correspondence, credit files, records, invoices and other papers
and documents, including, without limitation
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all tapes, cards, computer runs, computer programs and other papers and
documents in the possession or control of Borrower or any provider of
computer services from time to time acting for Borrower, and all rights
in, to and under all policies of insurance, including claims of rights
to payments thereunder and proceeds therefrom, including any credit
insurance; and
(n) All products and proceeds (including but not limited to any
Accounts Receivable or other proceeds arising from the sale or other
disposition of any Collateral, any returns of any Equipment or
Inventory sold by Borrower, and the proceeds of any insurance covering
any of the Collateral) of any of the foregoing.
Notwithstanding the foregoing, Lender agrees that the term
"Collateral" shall not include any property released by Lender pursuant
to Section 3.6 so long as Lender is prohibited from having a Lien on
such property pursuant to the terms of any document relating to
Indebtedness that is secured by a Lien on such property which is
permitted by Section 5.16.
3.2 Accounts Receivable and Cash.
(a) If requested by Lender, Borrower shall advise Lender
promptly of any Inventory returned by or repossessed from any Account
Debtor, or otherwise recovered, shall receive such Inventory in trust
and, unless otherwise instructed to deliver such Inventory to Lender,
shall resell it for Lender. If requested by Lender, Borrower shall
notify Lender immediately of all disputes and claims by any Account
Debtor and settle or adjust them at no expense to Lender. If Lender
directs, no discount or credit allowance shall be granted thereafter by
Borrower to any Account Debtor. Any and all Account Debtor payments and
all net amounts received by Lender in settlement, adjustment or
liquidation of any Account Receivable may be applied by Lender to the
Liabilities or credited to the Demand Deposit Account (subject to
collection) with Lender, as Lender may deem appropriate, as more fully
described in Section 2.11. If requested by Lender, Borrower will make
proper entries in its books and records disclosing the assignment of
Accounts Receivable to Lender.
(b) Borrower warrants that: (i) to the best of Borrower's
knowledge all of the Accounts Receivable are and will continue to be
bona fide existing obligations created by the sale of goods, the
rendering of services, or the furnishing of other good and sufficient
consideration to Account Debtors in the regular course of business and
(ii) to the best of Borrower's knowledge, all shipping or delivery
receipts and other documents furnished or to be furnished to Lender in
connection therewith are and will be genuine.
(c) Lender is authorized and empowered (which authorization and
power, being coupled with an interest, is irrevocable until the last to
occur of termination of this Agreement and payment and performance in
full of all of the Liabilities under this Agreement) at any time in its
sole and absolute discretion:
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(1) To request, in Lender's name, Borrower's name or the
name of a third party, confirmation from any Account Debtor or
party obligated under or with respect to any Collateral of the
amount shown by the Accounts Receivable or other Collateral to
be payable, or any other matter stated therein;
(2) To endorse in Borrower's name and to collect any
chattel paper, checks, notes, drafts, instruments or other items
of payment tendered to or received by Lender in payment of any
Account Receivable or other obligation owing to Borrower;
(3) To notify, either in Lender's name or Borrower's
name, and/or to require Borrower to notify, any Account Debtor
or other Person obligated under or in respect of any Collateral,
of the fact of Lender's Lien thereon and of the collateral
assignment thereof to Lender;
(4) To direct, either in Lender's name or Borrower's
name, and/or to require Borrower to direct, any Account Debtor
or other Person obligated under or in respect of any Collateral
to make payment directly to Lender of any amounts due or to
become due thereunder or with respect thereto; and
(5) After the occurrence and during the continuance of an
Event of Default, to demand, collect, surrender, release or
exchange all or any part of any Collateral or any amounts due
thereunder or with respect thereto, or compromise or extend or
renew for any period (whether or not longer than the initial
period) any and all sums which are now or may hereafter become
due or owing upon or with respect to any of the Collateral, or
enforce, by suit or otherwise, payment or performance of any of
the Collateral either in Lender's own name or in the name of
Borrower.
Under no circumstances shall Lender be under any duty to act in regard
to any of the foregoing matters. The costs relating to any of the
foregoing matters, including Attorneys' Fees and out-of-pocket
expenses, and the cost of any Assignee Deposit Account or other bank
account or accounts which may be required hereunder, shall be borne
solely by Borrower whether the same are incurred by Lender or Borrower,
and Lender may advance same to Borrower as a Revolving Loan.
(d) Borrower may maintain at the institutions described in
Schedule 3.2 (and such other institutions which Borrower shall have
notified Lender of in writing from time to time for this purpose)
accounts ("Depositary Accounts") for the deposits of revenues from the
operation of the Bickford's Business; provided that Borrower shall on a
daily basis cause funds to be transferred from such Depositary Accounts
to a special bank account (the "Assignee Deposit Account") with Lender
(or such other financial institution as Lender shall consent) over
which Lender alone has the power of withdrawal, to the extent
necessary to cause the aggregate funds on deposit for any restaurant of
Borrower not to exceed $3,000.
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(e) Borrower shall, forthwith upon receipt by Borrower of all
checks, drafts, cash and other remittances in payment of or as proceeds
of, or on account of, any of the Accounts Receivable or other
Collateral derived from the Cues Business, to deposit the same in the
Assignee Deposit Account. Borrower shall, to the extent required by
Lender, designate with each such deposit the particular Account
Receivable or other item of Collateral upon which such remittance was
made.
(f) Borrower acknowledges that the maintenance of the Assignee
Deposit Account is solely for the convenience of Lender in facilitating
its own operations and Borrower does not and shall not have any right,
title or interest in the Assignee Deposit Account or in the amounts at
any time appearing to the credit thereof (it being understood that so
long as no Event of Default exists Lender shall be required to apply
such amounts as provided in the first proviso to Section 2.11(b)). Upon
the full and final liquidation of all Liabilities, Lender will pay over
to Borrower any excess amounts received by Lender as payment or
proceeds of Collateral, whether received by Lender as a deposit in the
Assignee Deposit Account or received by Lender as a direct payment on
any of the sums due hereunder.
(g) Borrower appoints Lender, or any Person whom Lender may from
time to time designate, as Borrower's attorney and agent-in-fact with
power: (i) to open an escrow account or Assignee Deposit Account under
Lender's sole control for the collection of Accounts Receivable or
other Collateral, if not required contemporaneously with the execution
hereof, and (ii) to do all other things which Lender is permitted to do
under this Agreement or any Related Agreement. Neither Lender nor any
of its directors, officers, employees or agents will be liable for any
acts of commission or omission nor for any error in judgment or mistake
of fact or law, unless the same shall have resulted from gross
negligence or willful misconduct. The foregoing appointment and power,
being coupled with an interest, is irrevocable until all Liabilities
under this Agreement are paid and performed in full and this Agreement
is terminated. Except as otherwise expressly provided herein, Borrower
expressly waives presentment, demand, notice of dishonor and protest of
all instruments and any other notice to which it might otherwise be
entitled.
(h) If any Account Receivable, Contract Right or General
Intangible arises out of a contract with the United States of America
or any department, agency, or instrumentality thereof, Borrower will
immediately notify Lender in writing and, if Lender so requests,
Borrower will promptly execute any instruments and take any steps
reasonably required by Lender in order that all monies due and to
become due under such contract shall be assigned to Lender and notice
thereof given to the government under the Federal Assignment of Claims
Act of 1940, as amended, or other applicable laws or regulations.
(i) If any Account Receivable or Contract Right is evidenced by
chattel paper or promissory notes, trade acceptances, or other
instruments for the payment of money, Borrower will, unless (i)
deposited in a Depositary Account, the Assignee Deposit Account or any
other bank account of Borrower with Lender or (ii) Lender shall
otherwise agree,
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deliver the originals of same to Lender, appropriately endorsed to
Lender's order and, regardless of the form of such endorsement,
Borrower hereby expressly waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with
respect thereto.
3.3 Inventory. (a) Unless Lender shall otherwise agree, if Borrower
sells Inventory related to the Cues Business for cash, all full and partial
payments therefor shall be immediately (and, in any event, not later than the
end of the day received) delivered by Borrower to Lender in their original form
for deposit in the Assignee Deposit Account or for other application to
reduction of the Liabilities, in either case in accordance with Section 2.11.
Pending such delivery, all such cash shall be held by Borrower in trust for
Lender.
(b) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances. Lender shall not be
responsible for collection of any proceeds or for losses in collected proceeds
held by Borrower in trust for Lender. Any and all risk of loss for any or all
of the foregoing shall be upon Borrower, except (notwithstanding any other
provision of this Section 3.3 to the contrary) for such loss as shall result
from Lender's gross negligence or willful misconduct.
(c) If requested by Lender, Borrower shall, upon acquiring an interest
in any Inventory related to the Cues Business, deliver to Lender a description
of such Inventory, together with such supplier's invoices, warranties,
production, cost and other records as Lender may request. If requested by
Lender, Borrower shall deliver to Lender schedules of the sale of any Inventory
related to the Cues Business immediately upon its sale. Any material change in
the value or condition of any Inventory related to the Cues Business, and any
errors discovered in any schedule or description delivered to Lender, shall be
reported to Lender immediately. Borrower confirms that the warranties and
representations in this Agreement shall apply to each schedule. Borrower
represents and warrants that, as to each schedule and description of Inventory
delivered to Lender:
(1) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all material respects;
(2) None of the goods are defective, of second quality, used, or
goods returned after shipment, except where described as such; and
(3) All Inventory not included on such schedule or description
has been previously scheduled or described.
(d) If requested by Lender, Borrower will notify Lender immediately if
Borrower obtains possession (by return, repossession or otherwise) of any
Inventory related to the Cues Business which has been sold, and will inform
Lender of the identity of the returned or repossessed Inventory, the applicable
Amount Debtor and the amount of the applicable Account Receivable.
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3.4 Equipment.
(a) Borrower shall at all times keep, and cause each Subsidiary
to keep, its Equipment in good operating condition and repair, ordinary
wear and tear excepted, and neither Borrower nor any Subsidiary shall,
without the prior written consent of Lender, sell, lease, or otherwise
dispose of any Equipment, or any part thereof or interest therein;
provided, however, that without Lender's consent Borrower may dispose
of obsolete or unuseful Equipment provided all Equipment disposed of in
any Fiscal Year has an aggregate market value of $50,000 or less.
(b) In the event any Equipment (other than pursuant to Section
2.1.3(c) with respect to sales of Equipment in connection with the sale
of a business location) is sold, transferred or otherwise disposed of
by Borrower or any Subsidiary, unless Lender shall agree otherwise,
Borrower or the applicable Subsidiary shall deliver all of the proceeds
of such sale, transfer or disposition to Lender, which proceeds shall
be deposited in the Assignee Deposit Account or otherwise applied to
the repayment of the Liabilities, in either case in accordance with
Section 2.11.
(c) Borrower will, upon request of Lender, submit to Lender a
current listing of all Equipment of Borrower and its Subsidiaries,
which listing shall indicate the type, model, serial number and
location of such Equipment.
3.5 Supplemental Documentation. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above hereinafter referred to as "Supplemental
Documentation"), in form and substance reasonably acceptable to Lender, and pay
all taxes, fees and other costs and expenses associated with any recording or
filing of the Supplemental Documentation. Borrower hereby irrevocably makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney (and agent-in-fact) (which
appointment and power, being coupled with an interest, is irrevocable until the
last to occur of termination of this Agreement and payment and performance in
full of all of the Liabilities under this Agreement) to sign the name of
Borrower on any of the Supplemental Documentation and to deliver any of the
Supplemental Documentation to such Persons as Lender, in its sole and absolute
discretion, may elect. Borrower agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.
3.6 Releases of Certain Collateral. Lender agrees that, so long as no
Event of Default or Unmatured Event of Default has occurred and is continuing,
Lender will, concurrently with any reduction in the Revolving Credit Amount
pursuant to clause (c) of Section 2.1.3, subordinate (or, if requested by
Borrower after Borrower has made reasonable efforts to obtain consent to a
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subordination, release) its interest in the Real Estate (and any related
fixtures) and proceeds thereof that constitute the security for the making of
the loan giving rise to such reduction.
4. REPRESENTATIONS AND WARRANTIES.
To induce Lender to make Loans to, and issue Letters of Credit for the
account of, Borrower under this Agreement, Borrower makes the following
representations and warranties, all of which shall be true and correct as of
the Restatement Date and shall survive the execution of this Agreement and the
Restatement Date, provided that any representation or warranty made by Borrower
under the Original Loan Agreement or the Existing Loan Agreement shall survive
the execution and delivery of this Agreement:
4.1 Organization. Borrower and all of its corporate Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions of their respective incorporation. All of Borrower's
other Subsidiaries, if any, are entities duly organized, validly existing and
in good standing under the laws of the jurisdictions of their respective
organization. Borrower and all of its Subsidiaries are in good standing and are
duly qualified to do business in each jurisdiction where (x) because of the
nature of their respective activities or properties, such qualification is
required and (y) the failure to be so qualified would have a material adverse
effect on the financial condition or operations of Borrower or of Borrower and
the Subsidiaries taken as a whole. Except as set forth in Schedule 4.1, on the
Restatement Date, Borrower and each Subsidiary conducts business in its own
name exclusively. Schedule 4.1 sets forth a complete and accurate list, as of
the Restatement Date, of (a) the state or other jurisdiction of formation of
Borrower, (b) each state in which Borrower is qualified to do business and (c)
all of Borrower's trade names, trade styles and doing business forms.
4.2 Authorization. Each of Borrower and any other Obligor a party
thereto is duly authorized to execute and deliver this Agreement, any Notes,
and any Related Agreements or Supplemental Documentation contemplated by this
Agreement. Borrower is and will continue to be duly authorized to borrow monies
hereunder. Each of Borrower and each other Obligor a party thereto is duly
authorized to perform its obligations under this Agreement, any Notes and any
such Related Agreements and Supplemental Documentation. The execution, delivery
and performance by each of Borrower and any other Obligor a party thereto of
this Agreement, any Notes, and any Related Agreements or Supplemental
Documentation contemplated by this Agreement, and the borrowings hereunder, do
not and will not require any consent or approval of any governmental agency or
authority.
4.3 No Conflicts. The execution, delivery and performance by Borrower
and any other Obligor a party thereto of this Agreement, any Notes, and any
Related Agreements or Supplemental Documentation contemplated by this Agreement
do not and will not conflict with (i) any provision of law, (ii) the charter or
by-laws of Borrower or any such Obligor, (iii) any agreement binding upon
Borrower or any such Obligor or (iv) any court or administrative order or
decree applicable to Borrower or any such Obligor, and do not and will not
require, or result in, the creation or
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imposition of any Lien on any asset of Borrower or any of its Subsidiaries or
any such Obligor except as provided herein.
4.4 Validity and Binding Effect. This Agreement, any Notes, and any
Related Agreements or Supplemental Documentation contemplated by this Agreement
are or, when duly executed and delivered, will be legal, valid and binding
obligations of Borrower and any other Obligor a party thereto, enforceable
against Borrower and any such other Obligor in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
4.5 No Default. Except as set forth in Schedule 4.5, neither Borrower
nor any of its Subsidiaries is in default under any agreement or instrument to
which Borrower or any Subsidiary is a party or by which any of their respective
properties or assets is bound or affected, which default might materially and
adversely affect (i) Lender's Lien on or rights with respect to any material
Collateral or Third Party Collateral or (ii) the financial condition or
operations of Borrower or Borrower and its Subsidiaries taken as a whole. No
Event of Default or Unmatured Event of Default has occurred and is continuing.
4.6 Financial Statements. The audited consolidated balance sheets of
Parent and Borrower, as at December 31, 1995, and the related statements of
income, stockholder's equity and cash flows, and the unaudited consolidated
balance sheets of Parent and Borrower, as at September 30, 1996, and the
related statements of income, stockholder's equity and cash flows, copies of
which have been or will be furnished to Lender, have been prepared in
conformity with GAAP applied on a basis consistent with that of the preceding
fiscal year and period and present fairly the financial condition of Parent or
Borrower, as applicable, and their respective Subsidiaries as at such dates and
he results of their operations for the periods then ended, subject (in the case
of the interim financial statement) to year-end audit adjustments, and (in the
case of the audited financial statements) have been prepared without a
qualification which is of a "going concern" or similar nature, or which relates
to the limited scope of examination of matters relevant to such financial
statement. Since December 31, 1995, there has been no material adverse change
in the financial condition of Parent, Borrower, any Subsidiary or Parent,
Borrower and their respective Subsidiaries taken as a whole. The pro forma
consolidated balance sheet of Borrower and its Subsidiaries as at March 31,
1996, a copy of which has been furnished to Lender, has been prepared in
accordance with GAAP and fairly presents the financial condition of Borrower
and its Subsidiaries as at such date.
4.7 Insurance. Schedule 4.7 hereto is a complete and accurate summary
of the property and casualty insurance program carried by Borrower and its
Subsidiaries on the Restatement Date. Schedule 4.7 includes the insurer's(s')
name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s)
of coverage, the annual premium(s), Best's policyholder's and financial size
ratings of the insurer(s), exclusions, deductibles and self-insured retention
and describes in detail any retrospective rating plan, fronting arrangement or
any other self-insurance or risk assumption agreed to by Borrower or any
Subsidiary or imposed upon Borrower or any Subsidiary by any such insurer,
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all as of the Restatement Date. This summary also includes any self-insurance
program that is in effect.
4.8 Litigation; Contingent Liabilities.
(a) Except for those referred to in Schedule 4.8 (or otherwise
disclosed to Lender pursuant to Section 5.2), no claims, litigation,
arbitration proceedings or governmental proceedings are pending or
threatened against or are affecting Borrower or any Subsidiary, the
results of which might materially and adversely affect (i) the
financial condition or operations of Borrower or Borrower and its
Subsidiaries taken as a whole or (ii) Lender's interest in or Lien on
any material Collateral or Third Party Collateral.
(b) Other than any liability incident to the claims, litigation
or proceedings disclosed in Schedule 4.8, Schedule 4.19 or Schedule
4.25 (or otherwise disclosed to Lender pursuant to Section 5.2), or
provided for or disclosed in the financial statements referred to in
Section 4.6, neither Borrower nor any of its Subsidiaries has any
contingent liabilities which are material to Borrower or Borrower and
its Subsidiaries taken as a whole.
4.9 Liens. None of the Collateral or other property, revenues or assets
of Borrower or any Subsidiary is subject to any Lien (including but not limited
to Liens pursuant to Capitalized Leases under which Borrower or any Subsidiary
is a lessee) except Liens permitted by Section 5.16.
4.10 Subsidiaries. Borrower has no Subsidiaries except for Cues B.V.
and Knopafex Ltd., of which it owns 100% of the issued and outstanding capital
stock.
4.11 Partnership; Joint Ventures. Neither Borrower nor any of its
Subsidiaries is a partner or joint venturer in any partnership or joint venture
other than the partnerships and joint ventures listed on Schedule 4.11.
Schedule 4.11 sets forth, for each such partnership or joint venture, a
complete and accurate statement of (a) Borrower's and each Subsidiary's
percentage ownership of each such partnership or joint venture, (b) the state
or other jurisdiction of formation or incorporation, as appropriate, of each
such partnership or joint venture, (c) each state in which each such
partnership or joint venture is qualified to do business on the Restatement
Date and (d) all of each such partnership's or joint venture's trade names,
trade styles or doing business forms on the Restatement Date.
4.12 Business and Collateral Locations.
(a) On the Restatement Date, (x) the office where Borrower keeps
Borrower's books and records concerning Borrower's Accounts Receivable
and other Collateral is located at 1330 Soldier's Field Road, Boston,
Massachusetts 02135 and 3501 Vineland Road, Orlando, Florida 32811-6484
and (y) Borrower's chief place of business and chief executive office
is located at the address of Borrower set forth on the signature pages
of this Agreement. Schedule 4.12 contains a complete and accurate list,
as of the Restatement Date, of (i) all of Borrower's places of business
other than those referred to in the first sentence of
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this paragraph (a) and (ii) all locations and places of business of
eacj Subsidiary. On the Restatement Date, the names of any landlords,
over landlords and/or mortgagees of any such locations (including the
locations referred to in the first sentence of this paragraph (a)), are
identified in Schedule 4.12.
(b) Schedule 4.12 contains a complete and accurate list, as of
the Restatement Date, of (i) the locations of all of Borrower's
Inventory, Equipment and Fixtures, (ii) if applicable, the locations
of all tangible Third Party Collateral (except any part thereof which
prior to the execution of this Agreement Borrower shall have advised
Lender in writing consists of Collateral or Third Party Collateral, as
applicable, normally used in more than one state) and (iii) if any
Inventory, Equipment or other Collateral or any Third Party Collateral
is not in the possession or control of Borrower or the owner of such
Third Party Collateral, the name and mailing address of each bailee,
processor, warehouseman or other Person in possession or control
thereof.
4.13 Real Property. Schedule 4.13 contains a complete and accurate
list, as of the Restatement Date, of (a) the address and legal descriptions of
any real property owned by Borrower or any Subsidiary or on which any Fixtures
are located and (b) in the case of Fixtures located on property not owned by
Borrower or any Subsidiary, the name(s) and mailing addresses of the record
owners of such property.
4.14 Related Agreements. All representations and warranties of Borrower
contained in any Related Agreements are true and correct as if made on the
Restatement Date (except (x) to the extent any such representation or warranty
relates solely to an earlier date and was true and correct on such earlier date
(including the date thereof) and (y) for such changes as are the result of any
act or omission specifically permitted hereunder or under such Related
Agreement or otherwise expressly permitted by Lender) and Borrower hereby
adopts and affirms all such representations and warranties which Borrower
agrees shall be incorporated by reference herein and made a part hereof.
4.15 Control of Collateral; Lease of Property. Borrower is not now
conducting, or permitting or suffering to be conducted, any activities pursuant
to or in conjunction with which any of the Collateral is now, or will be (while
any Liabilities exist or this Agreement is in effect), in the possession of any
Subsidiary or Obligor (other than Borrower). Except for Capitalized Leases
included on Schedule 5.15, Schedule 4.15 contains a complete and accurate list
as of the Restatement Date of (a) all leases under which Borrower or a
Subsidiary is the lessee covering any machinery, equipment or real property
used by Borrower or any Subsidiary and (b) the name and mailing address of each
lessor or owner of such machinery, equipment or real property.
4.16 Intellectual Property; Licenses. Borrower and each of its
Subsidiaries possesses adequate Intellectual Property Collateral to continue to
conduct its respective business as heretofore conducted by it, and all such
Intellectual Property Collateral existing on the Restatement Date (together
with, in the case of patents, Trademarks and copyrights, the date of issuance
thereof) are listed on Schedule 4.16. With respect to all Intellectual Property
Collateral which is not of negligible economic value and is necessary to the
continued operation of Borrower's business:
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(i) it is valid and enforceable, is subsisting, and has not been
adjudged invalid or unenforceable, in whole or in part;
(ii) Borrower has made all necessary filings and recordations to
protect its interest therein, including, without limitation,
recordations of all of its interest in the Patent Collateral and
Trademark Collateral in the United States Patent and Trademark Office
and in corresponding offices throughout the world and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world;
(iii) Borrower is the exclusive owner of the entire and
unencumbered right, title and interest therein and thereto and no claim
has been made that the use of any Intellectual Property Collateral does
or may violate the asserted rights of any third party; and
(iv) Borrower has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
Borrower owns directly or is entitled to use, by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of Borrower's business.
4.17 Solvency. As of the Restatement Date, and at all times thereafter,
Borrower and each of its Subsidiaries has capital sufficient to carry on its
respective business and transactions and all business and transactions in which
it is about to engage, and is now solvent and able to pay its respective debts
as they mature, and Borrower and each of its Subsidiaries now owns property
having a value, both at fair valuation and at present fair salable value,
greater than the amount required to pay Borrower's or such Subsidiary's debts.
4.18 Contracts; Labor Matters. Except as disclosed on Schedule 4.18: (a)
neither Borrower nor any Subsidiary is a party to any contract or agreement, or
is subject to any charge, corporate restriction, judgment, decree or order,
which materially and adversely affects its business, property, assets,
operations or condition, financial or otherwise; (b) no labor contract to which
Borrower or any Subsidiary is a party or is otherwise subject is scheduled to
expire prior to the initial Termination Date; (c) neither Borrower nor any
Subsidiary has, within the two-year period preceding the Restatement Date, taken
any action which would have constituted or resulted in a "plant closing" or
"mass layoff", within the meaning of the Federal Worker Adjustment and
Retraining Notification Act of 1988 or any similar applicable federal, state or
local law; and (d) on the Restatement Date (i) neither Borrower nor any
Subsidiary is a party to any labor dispute and (ii) there are no strikes or
walkouts relating to any labor contracts to which Borrower or any Subsidiary is
a party or is otherwise subject.
4.19 Pension and Welfare Plans. Each Pension Plan complies in all
material respects with all applicable statutes and governmental rules and
regulations; no Reportable Event has occurred
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with respect to any Pension Plan; neither Borrower nor any ERISA Affiliate has
withdrawn from any Multiemployer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 or 4205 of ERISA, respectively, which
resulted in a withdrawal liability that has not been satisfied or which could
result in a withdrawal liability for the Borrower or any ERISA Affiliate in
excess of, for all such withdrawals, $25,000; no steps have been instituted to
terminate any Pension Plan (other than in connection with a termination that
qualifies under Section 4041(b) of ERISA); no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA; no condition exists or event or transaction has occurred in
connection with any Pension Plan or Multiemployer Plan which could result in the
incurrence by Borrower, any other Obligor or any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor any other Obligor nor any
ERISA Affiliate is a "contributing sponsor" as defined in Section 4001(a)(13) of
ERISA of a "single-employer plan" as defined in Section 4001(a)(15) of ERISA
which has two or more contributing sponsors, at least two of whom are not under
common control. Except as listed in Schedule 4.19, neither Borrower nor any
Subsidiary nor any other Obligor has any contingent liability with respect to
any "employee welfare benefit plans," as such term is defined in Section 3(1) of
ERISA, which covers retired or terminated employees and their beneficiaries,
other than liability for continuation coverage described in Part 6 of Subtitle B
of Title I of ERISA.
4.20 Regulation U. Borrower is not engaged in the business of
purchasing or selling Margin Stock or extending credit to others for the purpose
of purchasing or carrying Margin Stock, and no part of the proceeds of any
borrowing hereunder will be used to purchase or carry any Margin Stock or for
any other purpose which would violate any of the margin regulations of the
Federal Reserve Board.
4.21 Compliance. Except as described on Schedule 4.21 or Schedule 4.25,
Borrower and its Subsidiaries are in material compliance with all statutes and
governmental rules and regulations applicable to them.
4.22 Taxes. Each of Borrower and its Subsidiaries has filed all tax
returns which are required to have been filed and has paid, or made adequate
provisions for the payment of, all of its Taxes which are due and payable,
except such Taxes, if any, as are being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP have been maintained.
Borrower is not aware of any proposed assessment against Borrower or any of its
Subsidiaries for additional Taxes (or any basis for any such assessment) which
might be material to Borrower and its Subsidiaries taken as a whole.
4.23 Investment Company Act Representation. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
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4.24 Public Utility Holding Company Act Representation. Borrower is not
a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.25 Environmental, Safety and Health Matters. Except as disclosed on
Schedule 4.25, as of the Restatement Date Borrower and each of its Subsidiaries
and each property, operation and facility that Borrower or any Subsidiary may
own, operate or control (i) complies in all respects with (A) all applicable
Environmental Laws and (B) all applicable Occupational Safety and Health Laws;
(ii) is not subject to any judicial or administrative proceeding alleging the
violation of any Environmental Law or Occupational Safety and Health Law; (iii)
has not received any notice or inquiry (A) that it may be in violation of any
Environmental Law or Occupational Safety and Health Law, (B) threatening the
commencement of any proceeding relating to allegedly unlawful, unsafe or
unhealthy conditions or (C) alleging that it is or may be responsible for any
response, cleanup or corrective action, including but not limited to any
remedial investigation/feasibility studies, under any Environmental Law or
Occupational Safety and Health Law; (iv) is not the subject of federal or state
investigation evaluating whether any investigation, remedial action or other
response is needed to respond to (A) a spillage, disposal or release or
threatened release into the environment of any Hazardous Material or other
hazardous, toxic or dangerous waste, substance or constituent, or other
substance or (B) any allegedly unsafe or unhealthful condition; (v) has not
filed any notice under or relating to any Environmental Law or Occupational
Safety and Health Law indicating or reporting (A) any past or present spillage,
disposal or release into the environment of, or treatment, storage or disposal
of, any Hazardous Material or other hazardous, toxic or dangerous waste,
substance or constituent, or other substance or (B) any potentially unsafe or
unhealthful condition, and there exists no basis for such notice irrespective of
whether such notice was actually filed; and (vi) has no contingent liability in
connection with (A) any actual or potential spillage, disposal or release iof,
or otherwise with respect to, any Hazardous Material or other hazardous, toxic
or dangerous waste, substance or constituent, or other substance, whether on any
premises owned or occupied by Borrower or any Subsidiary or on any other
premises, or (B) any unsafe or unhealthful condition. Except as disclosed on
Schedule 4.25, there are no underground storage tanks, whether or not in use, in
or under any property or facilities owned, operated or controlled by Borrower or
any Subsidiary, and there are no Hazardous Materials on, in or under any
property or facilities owned, operated or controlled by Borrower or any
Subsidiary, including but not limited to such Hazardous Materials that may be
contained in underground storage tanks, but excepting such Hazardous Materials
used in accordance with all applicable laws and in the same manner as an
ordinary consumer (e.g., gasoline in tanks of motor vehicles, small amounts of
cosmetic cleaners, heating oil in tanks, etc.).
5. BORROWER COVENANTS.
From the Restatement Date and thereafter until the Credit is terminated
and all Liabilities of Borrower hereunder are paid in full, Borrower agrees
that, unless Lender shall otherwise consent in writing, it will:
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5.1 Financial Statements and Other Reports. Furnish to Lender in form
reasonably satisfactory to Lender:
5.1.1 Financial Reports:
(a) Annual Audit Report. Within ninety (90) days
after each Fiscal Year of Borrower, a copy of the annual audit
report of Borrower and its consolidated Subsidiaries prepared on
a consolidated (and, if requested by Lender, consolidating) basis
in conformity with GAAP and certified by an independent certified
public accountant who shall be of recognized national standing or
otherwise reasonably satisfactory to Lender, together with (i) a
letter from such accountant substantially in the form of Exhibit
H, (ii) a certificate from such accountant containing a
computation of, and showing compliance with, each of the
covenants contained in Section 5.13, 5.15(d), 5.15(e) and 5.20
and Sections 2.1 through 2.5 of Supplement A, and (iii) a
certificate from such accountant to the effect that, in making
the examination necessary for the signing of such annual audit
report, such accountant has not become aware of any Event of
Default or Unmatured Event of Default that has occurred and is
continuing, or, if such accountant has become aware of any such
event, describing it;
(b) Monthly Financial Statement. Within thirty (30)
days after the end of each month (other than the last month) of
each Fiscal Year, a copy of the unaudited financial statement of
(x) Parent and its consolidated Subsidiaries, (y) the Bickford
Business and (z) the Cues Business prepared on a consolidated
basis in conformity with GAAP (subject to normal year-end
adjustments and except that such statements need not include
notes), signed by Borrower's chief financial officer and
consisting of at least a balance sheet as at the close of such
month and statements of earnings and cash flows for such month
and for the period from the beginning of such Fiscal Year to the
close of such month;
(c) Officer's Certificate. Together with the
financial statements furnished by Borrower under the preceding
clauses (a) and (b) (but only for the months of March, June and
September), a certificate of Borrower's chief financial officer
or treasurer, dated the date of such annual audit report or such
monthly financial statement, as the case may be, containing a
statement that no Event of Default or Unmatured Event of Default
has occurred and is continuing, or, if there is any such event,
describing it and the steps, if any, being taken to cure it, and
containing a computation of, and showing compliance with, each of
the covenants contained in Section 5.13, 5.15(d), 5.15(e) and
5.20 and Sections 2.1 through 2.5 of Supplement A; and
(d) Management Letters. Promptly upon receipt
thereof, a copy of any "management letter" or other material
communication from Borrower's
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auditors (including a copy of any such letter which accompanies
the audit report referred to in clause (a)).
5.1.2 Same Store Sales Reports. Not later than July 31st and
January 31st of each year, a report for each of Borrower's restaurants
and stores of sales for the preceding six months and year-to-date, with
a comparison of such sales figures to the corresponding periods in the
prior Fiscal Year, all in form reasonably satisfactory to Lender.
5.1.3 Azimuth Group Deliveries. Promptly upon receipt by
Borrower, all financial statements, reports, officer's certificates,
notices and all other information received by Borrower from Azimuth,
Contempo, Contempo West and DEI pursuant to the Azimuth Loan Agreement,
the Contempo Loan Agreement, the Contempo West Loan Agreement and the
DEI Loan Agreement, respectively.
5.1.4 Borrowing Base Certificates. A current Borrowing Base
Certificate of Contempo, Contempo West and DEI at the end of each month
and together with each Borrowing Request for an Additional Revolving
Loan, with each Borrowing Base Certificate being in compliance with
applicable requirements for Contempo, Contempo West and DEI set forth in
the Contempo Loan Agreement, the Contempo West Loan Agreement and the
DEI Loan Agreement, respectively.
5.1.5 Other Reports:
(a) SEC and Other Reports. Copies of each filing
and report made by Parent with or to any securities exchange or
the Securities and Exchange Commission and of each communication
from Parent to shareholders generally, promptly upon the filing
or making thereof;
(b) Report of Change Relating to Borrower,
Subsidiaries or Partnership. Promptly from time to time, a
written report of any change in the information set forth in
Schedule 4.1 or Schedule 4.11 concerning Borrower, any
Subsidiary, or any partnership or joint venture; and
(c) Other Reports. Promptly from time to time,
such other reports and information as Lender may reasonably
request.
5.2 Notices. Notify Lender in writing of any of the following
immediately upon learning of the occurrence thereof (or, (i) in the case of
clause (d) of this Section 5.21, promptly upon learning of the occurrence
thereof followed within 30 days after such occurrence by a description of the
steps being taken with respect thereto, and (ii) in the case of the matters
specified in items (i), (ii), (iv) (v) and (vi) of clause (e) and in clause (f)
of this Section 5.2, at least 30 days prior to the occurrence thereof to the
extent applicable to the Borrower, any Subsidiary or any other Obligor),
describing the same and, if applicable, the steps being taken by the Person(s)
affected with respect thereto:
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(a) Default. The occurrence of (i) an Event of Default or
Unmatured Event of Default and (ii) to the extent not included in the
foregoing clause (i), the default by Borrower, any other Obligor, any
Subsidiary or any Related Party under any material note, indenture, loan
agreement, mortgage, lease, deed or other material similar agreement to
which Borrower, any other Obligor, any Subsidiary or any Related Party,
as appropriate, is a party or by which it is bound;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting Borrower, any other
Obligor, any Subsidiary, any Related Party, any Collateral or any Third
Party Collateral, whether or not considered to be covered by insurance;
(c) Judgment. The entry of any judgment or decree
against Borrower, any other Obligor, any Subsidiary or any Related
Party, if the amount of such judgment exceeds $25,000;
(d) Pension Plans and Welfare Plans. The occurrence of a
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by Borrower, any ERISA
Affiliate, or any other Obligor; the institution of proceedings to
terminate a Pension Plan by the PBGC or any other Person; the withdrawal
in a "complete withdrawal" or a "partial withdrawal as defined in
Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA
Affiliate or any other Obligor from any Multiemployer Plan; the failure
of Borrower, any other Obligor or any ERISA Affiliate to make a required
contribution to any Pension Plan, including but not limited to any
failure to pay an amount sufficient to give rise to a Lien under Section
302(f) of ERISA; the taking of any action with respect to a Pension Plan
which could result in the requirement that Borrower, any other Obligor
or any ERISA Affiliate furnish a bond or other security to the PBGC or
such Pension Plan; the occurrence of any other event (other than an
amendment to any Pension Plan which is required by a change in a
provision of ERISA or the Code applicable to such plan) with respect to
any Pension Plan which could result in the incurrence by Borrower, any
other Obligor or any ERISA Affiliate of any material liability, fine or
penalty; or the incurrence of any material increase in the contingent
liability of Borrower, any other Obligor or any Subsidiary with respect
to any "employee welfare benefit plan" as defined in Section 3(1) of
ERISA which covers retired or terminated employees and their
beneficiaries, other than liability for continuation coverage described
in Part 6 of Subtitle B of Title I of ERISA;
(e) Business and Collateral Information. Any change or proposed
change in any of the information set forth on Schedule 4.12, Schedule
4.13 or Schedule 4.15, including but not limited to (i) any change in
the location of any Inventory or Equipment or any Third Party
Collateral, (ii) the identity of any new bailee, processor, warehouseman
or other Person in possession or control of any Inventory, Equipment or
other Collateral or any Third Party Collateral, (iii) any change in the
name or address of the lessor or owner of any real property or equipment
leased to Borrower, any Subsidiary or any other Obligor, (iv) any
proposed change in the location of Borrower's or any Subsidiary's chief
executive office or chief place
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of business, (v) any proposed opening, closing or other change in the
list of offices and other places of business of Borrower and each
Subsidiary and (vi) any opening, closing or other change in the offices
and other places of business of each other Obligor;
(f) Change of Name or Status. Any change in the name or
address of Borrower, any other Obligor or any Subsidiary, or any
change in the list of trade names and tradestyles set forth in Schedule
4.1;
(g) Insurance Information. Any material change in the
information set forth in Schedule 4.7;
(h) Environmental and Safety and Health Matters. The occurrence
of any event or the acquisition of any information which, if it had
occurred or was true on or before the Restatement Date, would have been
required to have been disclosed and included on Schedule 4.25, including
but not limited to the existence of any Environmental Lien and receipt
of any notice from any federal, state or local government or agency with
respect to any actual or alleged violation of any Environmental Law or
any Occupational Safety and Health Law;
(i) Material Adverse Change. The occurrence of a material
adverse change in the business, operations or financial condition of
Borrower, any other Obligor or any Subsidiary;
(j) Default by Others. Any material default by any Account Debtor
or other Person obligated to Borrower, any other Obligor, or any
Subsidiary under any contract, chattel paper, note or other evidence of
amounts payable or due or to become due to Borrower, such Obligor or
such Subsidiary if the amount payable under such contract, chattel
paper, note or other evidence of amounts payable or due of to become due
is material;
(k) Moveable Collateral. If any of the Collateral or Third Party
Collateral consists of goods of a type normally used in more than one
state, whether or not actually so used, any use of any such goods in any
state other than a state in which Borrower shall have previously advised
Lender such goods will be used. Borrower agrees that such goods will
not, unless Lender shall otherwise consent in writing, be used outside
the continental United States;
(l) Change in Management or Line(s) of Business. Any substantial
change in the senior management of Borrower or any Subsidiary, or any
change in Borrower's or any Subsidiary's line(s) of business; and
(m) Other Notices. Any notices required to be provided pursuant
to any Related Agreement or the other provisions of this Agreement, and
notice of the occurrence of such other events as Lender may reasonably
from time to time specify.
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5.3 Existence. Maintain and preserve, and cause each Subsidiary to
maintain and preserve, its respective existence as a corporation or other form
of business organization (except as permitted by Section 5.12), as the case may
be, and all rights, privileges, licenses, patents, patent rights, copyrights,
trademarks, trade names, trade styles, franchises and other authority to the
extent material and necessary for the conduct of its respective business in the
ordinary course as conducted from time to time.
5.4 Nature of Business. Engage, and cause each Subsidiary to engage, in
substantially the same fields of business as it is engaged in on the Restatement
Date (and no other business).
5.5 Books, Records and Access. Maintain, and cause each Subsidiary to
maintain, complete and accurate books and records (including but not limited to
records relating to Accounts Receivable, Inventory, Equipment and other
Collateral), in which full and correct entries shall be made of all dealings and
transactions in relation to its respective business and activities such that
financial statements in conformity with GAAP can be prepared. Cause its books
and records as at the end of any calendar month to be posted and closed not more
than twenty-five (25) days after the last business day of such month. Permit,
and cause each Subsidiary to permit, access by Lender and its agents or
employees to the books and records of Borrower and such Subsidiary at Borrower's
or such Subsidiary's place or places of business at intervals to be determined
by Lender and without hindrance or delay, and permit and cause each Subsidiary
to permit Lender or its agents and employees to inspect Borrower's Inventory and
Equipment and such Subsidiary's inventory and equipment, to perform appraisals
of Borrower's Equipment and such Subsidiary's equipment, and to inspect, audit,
check and make copies and/or extracts from the books, records, computer data and
records, computer programs, journals, orders, receipts, correspondence and other
data relating to Inventory, Accounts Receivable, Contract Rights, General
Intangibles, Equipment and any other Collateral or Third Party Collateral, or
relating to any other transactions between the parties hereto. Any and all such
inspections and/or audits shall be at Borrower's expense, and Lender may advance
same to Borrower as a Revolving Loan. Notwithstanding the foregoing or any other
provision of this Agreement or any Related Agreement, (a) as long as no Event of
Default or Unmatured Event of Default has occurred or is continuing, Borrower
shall not be required to reimburse Lender for appraisals of Borrower's Equipment
or the equipment of its Subsidiaries more frequently than once each Fiscal Year
and (b) Lender shall exercise its rights under this Section 5.5 (and under the
other provisions of this Agreement and each Related Agreement) in a manner which
will not unduly interfere with the ordinary business operations of Borrower and
its Subsidiaries.
5.6 Insurance. Maintain, and cause each Subsidiary to maintain,
insurance to such extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated or as Lender may reasonably request
from time to time. Keep the Collateral properly housed and insured for its full
insurable value against loss or damage by fire, theft, explosion, sprinklers,
collision (in the case of motor vehicles) and such other risks as are
customarily insured against by persons engaged in business similar to that of
Borrower, with such companies, in such amounts and under policies in such form
as shall be reasonably satisfactory to Lender. Certificates of such policies of
insurance have been delivered to Lender prior to the Restatement Date together
with evidence of payment of all premiums therefor. Borrower shall cause each
issuer of an insurance
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policy to provide Lender, prior to the Restatement Date, with an endorsement or
an independent instrument (i) substantially in the form of Exhibit A or such
other form and containing such other terms as shall be reasonably acceptable to
Lender and (ii) showing loss payable to Lender and, if required by Lender,
naming Lender as an additional insured. Borrower hereby directs all insurers
under such policies of insurance to pay all proceeds payable thereunder directly
to Lender. Borrower appoints Lender and any Person whom Lender may from time to
time designate (and all officers, employees or agents designated by Lender or
such Person) as Borrower's true and lawful attorney and agent-intact with power
to make, settle and adjust claims under such policies of insurance, endorse the
name of Borrower on any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance and, at any time an Event of Default
exists, make all determinations and decisions with respect to such policies of
insurance. The foregoing appointment and power, being coupled with an interest,
is irrevocable until all Liabilities are paid and performedreement is
terminated. In the event Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required herein or to pay
any premium in whole or in part relating thereto, then Lender, without waiving
or releasing any obligation of or default by Borrower hereunder, may at any time
thereafter (but shall be under no obligation to do so) obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed by Lender,
including reasonable Attorneys' Fees, court costs, expenses and other charges
relating thereto, shall be payable on demand by Borrower to Lender, and Lender
may, in its sole and absolute discretion, advance such sums to Borrower as a
Revolving Loan.
5.7 Insurance Survey. Provide to Lender at least annually within 90 days
of the end of Borrower's Fiscal Year, a certificate signed by its chief
financial officer that attests to and summarizes the property and casualty
insurance program carried by Borrower and its Subsidiaries. This summary shall
include the insurer's(s') name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, the annual premium(s), Best's
policyholder's and financial size ratings of the insurer(s), exclusions,
deductibles and self-insured retention and shall describe in detail any
retrospective rating plan, fronting arrangement or any other self-insurance or
risk assumption agreed to by Borrower or any Subsidiary or imposed upon Borrower
or any Subsidiary by any such insurer, as well as any self-insurance program
that is in effect. Borrower shall notify Lender in writing (1) at least 20 days
prior to any cancellation or material change of any such insurance by Borrower
or any Subsidiary and (2) within 5 business days after receipt of any notice
(whether formal or informal) of any cancellation or change in any of its
insurance by any of its insurers or any material change in the cost thereof or
which reduces the policyholder's or financial size ratings of the insurance
carriers of Borrower or any of its Subsidiaries, as established by Best's
Insurance Reports. Annually, Lender shall have the right to request Borrower to
have a risk management survey completed by a recognized independent risk
management consultant acceptable to it and Lender which will identify, quantify
and assess any catastrophic uninsured, underinsured or self-insured exposures
faced by Borrower and its Subsidiaries. The cost of such survey shall be borne
solely by Borrower. A copy of the results of such survey shall be promptly
delivered by Borrower to Lender.
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5.8 Repair. Maintain, preserve and keep, and cause each Subsidiary to
maintain, preserve and keep, its properties in operating condition and repair,
ordinary wear and tear excepted, and from time to time make, and cause each
Subsidiary to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be reasonably preserved and maintained.
5.9 Taxes. Pay, and cause each Subsidiary to pay, when due, all of its
Taxes, unless and only to the extent that Borrower or such Subsidiary is
contesting such Taxes in good faith and by appropriate proceedings and Borrower
or such Subsidiary has set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP.
5.10 Compliance. Comply, and cause each Subsidiary to comply, in all
material respects with all statutes and governmental rules and regulations
applicable to it.
5.11 Pension Plans. Not permit, and not permit any Subsidiary to permit,
any condition to exist in connection with any Pension Plan which might
reasonably constitute grounds for the PBGC to institute proceedings to have such
Pension Plan terminated or a trustee appointed to administer such Pension Plan;
not fail, and not permit any Subsidiary to fail, to make a required contribution
to any Pension Plan if such failure would be sufficient to give rise to a Lien
under Section 302(f) of ERISA; and not engage in, or permit to exist or occur,
or permit any of its Subsidiaries to engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower or any of its Subsidiaries of any
material liability, fine or penalty.
5.12 Merger, Purchase and Sale. Not, and not permit any Subsidiary to:
(a) be a party to any merger, liquidation or consolidation (other than the
Merger), provided that any Subsidiary may merge with and into, or liquidate
into, Borrower or another Subsidiary; (b) except in the normal course of its
business or as otherwise permitted herein (including Sections 3.4(a) and
5.16(e)) or in any Related Agreement, sell, transfer, convey, lease or otherwise
dispose of any of its assets (provided, however, that Borrower may sell the real
and personal property and other assets at or comprising the operations of any
business location listed on Schedule 4.12 if the following two conditions are
met: (i) Borrower receives Lender's prior written consent to such sale, and (ii)
such sale is made at fair market value to a Person other than a Related Party);
(c) sell or assign, with or without recourse, any Accounts Receivable, Contract
Rights, notes receivable or chattel paper, except as otherwise expressly
permitted in this Agreement or any Related Agreement; or (d) purchase or
otherwise acquire all or substantially all the assets of any Person (unless and
to the extent that such assets constitute no more than two (2) restaurant
locations in any Fiscal Year; it being understood and agreed that the addition
of new restaurant locations solely through the assumption or incurrence of lease
obligations shall not be deemed to be a purchase for purposes of this clause
(d)).
5.13 Restricted Payments. Not purchase or redeem any shares of its stock
(other than for stock of Borrower), declare or pay any dividends thereon (other
than stock dividends), make any distribution to stockholders as such (other than
distributions of stock of Borrower) or set aside any
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funds for any such purpose, not prepay, purchase or redeem, and not permit any
Subsidiary to purchase, any Subordinated Debt, not make any advances to Parent
and, if an Event of Default or Unmatured Event of Default exists or would result
therefrom, not, and not permit any Subsidiary to, pay any management or similar
fees to Parent or any of its affiliates pursuant to the terms of the Management
Agreement (except that any such fees may be paid whether or not an Event of
Default or Unmatured Event of Default exists or would result therefrom, solely
to extent such fees are to pay regular salaries (and not bonuses) of any
employees or officers of Parent); provided, however, that: (a) Borrower may pay
dividends and advances to Parent in an aggregate amount not exceeding 50% of
Borrower's Excess Cash Flow for the immediately preceding Fiscal Year so long as
(i) Lender shall have received Borrower's annual audit report pursuant to
Section 5.1.1(a) for such preceding Fiscal Year, (ii) after giving effect to any
such proposed dividend or advance the amount of the Revolving Loan Availability
will exceed the outstanding principal amount of the Revolving Loans by at least
$500,000, (iii) no Event of Default or Unmatured Event of Default shall then
exist or will result from any such dividend payment or advance and (iv) Borrower
shall have given Lender prior written notice of any such proposed dividend or
advance and certified its compliance with this Section 5.13; (b) Borrower may,
within 60 days after obtaining the proceeds of any loan permitted pursuant to
Section 5.15(e), pay a dividend or advance to Parent in an amount not exceeding
25% of the proceeds of such loan so long as the conditions specified in
sub-clauses (ove have been met; (c) Borrower may make scheduled payments of
principal of and interest on the Subordinated Note, so long as the conditions
specified in sub-clauses (ii), (iii) and (iv) of clause (a) above have been met
(it being understood that each reference to a "dividend" in such sub-clauses
shall be deemed, for purposes of this clause (c), to be a reference to the
relevant payment on the Subordinated Note); and (d) Borrower may, within ten
(10) days after obtaining the proceeds of any Supplemental Revolving Loan
permitted hereunder, pay a dividend or advance in the amount of such proceeds of
such Loan to Parent to be used by Parent as specified by Section 5.25 so long as
the conditions specified in subclauses (iii) and (iv) of clause (a) above have
been met. Dividends and advances permitted and paid under clause (a), (b) or (d)
of the foregoing sentence shall not reduce the amount of dividends or advances
payable under any other such sub-clause.
5.14 Borrower's and Subsidiaries' Stock. Not permit any Subsidiary to
purchase or otherwise acquire any shares of the stock of Borrower, and not take
any action, or permit any Subsidiary to take any action, which will result in a
decrease in Borrower's ultimate ownership interest in any Subsidiary.
5.15 Indebtedness. Not, and not permit any Subsidiary to, incur or
permit to exist any Indebtedness (including but not limited to Indebtedness as
lessee under Capitalized Leases), except: (a) Indebtedness under the terms of
this Agreement; (b) Subordinated Debt; (c) other Indebtedness outstanding on the
date hereof and listed on Schedule 5.15; (d) Indebtedness hereafter incurred in
connection with Liens permitted under Section 5.16(d); (e) Indebtedness
hereafter incurred in connection with Liens permitted under Section 5.16(e); and
(f) other Indebtedness approved in writing by Lender.
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5.16 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien with respect to any of its property, revenue or assets now owned
or hereafter acquired, except: (a) Liens for Taxes which are not delinquent or
which are being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
are being maintained; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, and other like statutory Liens arising in the ordinary course of
business securing obligations which are not overdue or which are being contested
in good faith and by appropriate proceedings and as to which such reserves or
other appropriate provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers' compensation, unemployment
insurance and other similar legislation or regulations; (d) Liens in connection
with the acquisition of property after the Second Restatement Date by way of
purchase money mortgage, conditional sale or other title retention agreement,
Capitalized Lease or other deferred payment contract, and attaching only to the
property being acquired (and proceeds thereof and accessions thereto), if (i)
except in the case of a Capitalized Lease, the Indebtedness secured thereby does
not exceed 75% of the fair market value of such property at the time of the
acquisition thereof and (ii) the aggregate principal and interest payments of
the Indebtedness of Borrower and its Subsidiaries secured by such Liens does not
exceed (x) $450,000 in Fiscal Year 1996, (y) $900,000 in Fiscal Year 1997 and
(z) $1,350,000 in Fiscal Year 1998; (e) liens on Real Property and any related
fixtures (and proceeds thereof and accessions thereto) securing loans to
Borrower obtained after the Second Restatement Date, provided the initial amount
of the loan secured by any such Lien is not less than 75% of the appraised value
of the Real Property securing such loan; (f) Liens in favor of Lendn Schedule
5.16 (and in the case of Capitalized Leases listed or referred to thereon,
Capitalized Leases entered into after the Second Restatement Date for the same
property or assets, provided that any increase in the Indebtedness payable under
such new Capitalized Leases shall be permitted, and count against the
limitations set forth, under clause (d)(ii) above); (h) lessor's Liens and
reasonable deposits pursuant to operating leases permitted hereunder under which
Borrower or a Subsidiary is the lessee; (i) Liens disclosed in the ALTA Title
Loan Insurance Policies and ALTA Class A Surveys delivered pursuant to Section
8.1.10(c) of the Original Loan Agreement, or otherwise under the Original Loan
Agreement or the Existing Loan Agreement, and not objected to by Lender on or
prior to the Second Restatement Date; (j) zoning or building restrictions and
other minor encumbrances on and defects in title to real property which do not
materially impair the use or value thereof; (k) Liens incurred or deposits made
to secure the performance of surety or appeal bonds and attaching to property
not exceeding $200,000; (l) attachment or judgment Liens not exceeding $200,000;
(m) bankers' liens arising by operation of law in connection with the Depositary
Accounts; and (n) Liens consented to in writing by Lender.
5.17 Guaranties. Not, and not permit any Subsidiary to, become or be a
guarantor or surety of, or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person, except for the
endorsement, in the ordinary course of collection, of instruments payable to it
or its order.
5.18 Investments. Not, and not permit any Subsidiary to, make or
permit to exist any Investment in any Person, except for: (a) advances to
employees of Borrower or any of its
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Subsidiaries for travel or other ordinary business expenses provided that the
aggregate amount outstanding at any one time shall not exceed $10,000 for any
single employee and $25,000 in the aggregate for all employees; (b) advances to
subcontractors and suppliers not at any time exceeding an aggregate outstanding
amount of $10,000; (c) extensions of credit in the nature of Accounts Receivable
or notes receivable arising from the sale of goods and services in the ordinary
course of business; (d) shares of stock, obligations or other securities
received in settlement of claims arising in the ordinary course of business; (e)
Investments (other than Investments in the nature of loans or advances)
outstanding on the date hereof in Subsidiaries by Borrower and other
Subsidiaries; (f) Investments in the nature of loans and advances constituting
Indebtedness of Subsidiaries to Borrower and to other Subsidiaries outstanding
on the Second Restatement Date and listed on Schedule 5.18; (g) other
Investments outstanding on the Second Restatement Date and listed on Schedule
5.18; (h) Investments in Depositary Accounts; (i) deposits permitted by Section
5.16; (j) a loan to ELX Limited Partnership made in December 1994 in an original
principal amount of $1,155,625 and any accrued interest thereon; (k) Investments
in the nature of loans and advances made to Parent as permitted under Section
5.13; (l) Subsidiary Loans made pursuant to the Contempo Loan Agreement, the
Contempo West Loan Agreement or the DEI Loan Agreement, as the case may be; and
(m) other Investments consented to by Lender in writing.
5.19 Subsidiaries. Not, and not permit any Subsidiary to, acquire any
stock or similar interest in any Person, and not create, establish or acquire
any Subsidiaries other than those existing on the Second Restatement Date.
5.20 Leases. Not enter into or permit to exist, or permit any Subsidiary
to enter into or permit to exist, any arrangements for the leasing by Borrower
or such Subsidiary, as lessee under a lease which is not a Capitalized Lease, of
any real or personal property (or any interest therein) other than under (a)
leases in existence on the Second Restatement Date and listed on Schedule 4.15
and extensions and renewals thereof (provided that any increase in the rental
payments thereunder will count against the permitted lease rentals in clause (b)
below) and (b) leases entered into after the Second Restatement Date having base
rentals not exceeding (in the aggregate for all such leases) (i) $400,000 in
Fiscal Year 1996, (ii) $800,000 in Fiscal Year 1997 and (iii) $1,200,000 in
Fiscal Year 1998
5.21 Change in Accounts Receivable. After the occurrence of an Event of
Default or Unmatured Event of Default, permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account Receivable, including any of the terms
relating thereto.
5.22 Future Environmental Assessments. Borrower shall provide such
information and certifications which Lender may reasonably request from time to
time pertaining to the environmental aspects of Borrower and its Subsidiaries
and any property owned, operated or controlled by Borrower or any Subsidiary. To
investigate environmental aspects of Borrower and its Subsidiaries and their
properties, facilities and operations, Lender or its agents shall have the right
at any time to enter upon the property of Borrower or any Subsidiary, take
samples, review the books, records or other documents of Borrower and its
Subsidiaries, interview officers and
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employees of Borrower or its Subsidiaries, and conduct such other activities as
Lender, in its sole discretion, deems appropriate. Borrower shall, and shall
cause its Subsidiaries to, cooperate fully in the conduct of any such
assessment. If Lender decides to cause such an assessment to be conducted
because of (a) Lender's considering taking possession of or title to the
property after the occurrence of an Event of Default or (b) a material change in
the use of the property which, in Lender's reasonable opinion, increases the
risk of non-compliance with Environmental Laws or increases the risk of cost or
liabilities thereunder, then Borrower shall pay upon demand all costs and
expenses (including Attorney's Fees) connected with such assessment. Lender may,
in its discretion, provide for the payment of any amount due from Borrower under
this Section 5.22 by making Borrower a Revolving Loan. Nothing in this Section
5.22, and no actions taken by Lender pursuant thereto, shall give, or be
construed as controlling or giving, to Lender the right or obligation to direct
or control the conduct or action or inaction of Borrower or any Subsidiary with
respect to any environmental matters, including but not limited to those
pertaining to compliance with any Environmental Laws.
5.23 Related Agreements. Not enter into, or permit any Subsidiary to
enter into, any agreement containing any provision which would be violated or
breached by the performance by Borrower or such Subsidiary of its obligations
hereunder or under any Related Agreement or any instrument or document delivered
or to be delivered by Borrower or such Subsidiary in connection herewith.
5.24 Unconditional Purchase Options. Not enter into or be a party to, or
permit any Subsidiary to enter into or be a party to, any contract for the
purchase of materials, supplies or other property or services, if such contract
requires that payment be made by it regardless of whether or not delivery is
ever made of such materials, supplies or other property or services.
5.25 Use of Proceeds. Not use or permit any proceeds (a) of the Loans to
be used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of (i) "purchasing or carrying" any Margin Stock (except
as provided in clause (b) below), and furnish to Lender, upon request, a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U of the Federal Reserve Board or (ii) funding all or
any part of any hostile take-over or tender offer, or (b) of the Supplemental
Revolving Loans to be used other than as a dividend or advance paid by Borrower
to Parent to be used by Parent (i) on the Restatement Date (A) to fund the
repurchase by Parent from Bank of America Capital Corporation (as successor to
Continental Illinois Corporation) ("BACC") of that certain Series B Warrant
dated January 23, 1990 to purchase 604,656 shares of Parent's Series A
Non-Voting Convertible Preferred Stock, $.001 par value, previously issued and
sold to BACC, for a repurchase price of $477,678.24, (B) to fund the repayment
in full by Parent to BACC of that certain Senior Subordinated Note dated
September 25, 1989 in the original principal amount of $401,765 and issued by
Parent in favor of BACC, together with all interest and other amounts owing to
BACC thereunder, in an aggregate amount of $245,679.30 (C) to fund the repayment
in full by Parent to BACC that certain Senior Subordinated Note dated June 27,
1991 in the original principal amount of $502,206.25 and issued by Parent in
favor of BACC, together with all interest and other amounts owing to BACC
thereunder, in an aggregate amount of $511,511.53, and (D) to fund a loan by
Parent to ELX Limited Partnership in
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the amount of $909,150.00 to be used by ELX Limited Partnership solely to
purchase from BACC 220,400 shares of Parent's Common Stock, par value $.001 per
share, in an aggregate amount of $909,150.00, and (ii) prior to and after the
Restatement Date solely to purchase Parent Securities and to pay and fees, costs
and expenses incurred in connection with such purchase, or (c) of the Additional
Revolving Loans to be used (i) on the Restatement Date other than to fund the
purchase by Borrower of the Subsidiary Loans outstanding on the Restatement Date
pursuant to the terms and conditions of the Recapitalization Agreement and (ii)
from and after the Restatement Date other than to fund future Subsidiary Loans
to Contempo, Contempo West and DEI under the Contempo Loan Agreement, the
Contempo West Loan Agreement and the DEI Loan Agreement, respectively, to be
used by Contempo, Contempo West and DEI for its respective working capital and
permitted corporate purposes.
5.26 Transactions with Related Parties. Not, and not permit any
Subsidiary to, enter into or be a party to any transaction or arrangement,
including, without limitation, the purchase, sale, lease or exchange of property
or the rendering of any service, with any Related Party, 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 no less favorable to
Borrower or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not a Related Party; provided, however, that the
foregoing shall not prohibit (a) the existence or performance of the Management
Agreement; (b) the transactions contemplated under the Recapitalization
Agreement; or (c) any other transaction or arrangement permitted by any other
provision of this Agreement (including, without limitation, Sections 5.12(a),
5.13, 5.15(c) and 5.18).
5.27 Mortgagee. Cause all real property owned or leased by Borrower, or
in which Borrower has an interest, to be subject to a Mortgage in favor of
Lender which is satisfactory in form and substance to Lender (except to the
extent otherwise expressly consented to in writing by Lender).
5.28 No Amendment to Certain Documents; Actions Regarding Azimuth
Group.
(a) Not enter into or permit to exist any amendment or
modification of the Management Agreement.
(b) Not enter into or permit to exist any amendment or
modification of any of the Azimuth Documents or any waiver of any
provision set forth in any of the Azimuth Documents.
(c) Not commence or join with any creditor of Azimuth, Contempo,
Contempo West or DEI other than Lender in commencing any proceedings to
collect or enforce any obligations under the Azimuth Documents, or
exercise any rights or remedies under the Azimuth Documents, in each
case without the prior written consent of Lender to be given in Lender's
sole and absolute discretion.
5.29 Intellectual Property Collateral.
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(a) Not, and not permit any Subsidiary to, do any act, or omit to
do any act, whereby any of the Patent Collateral may lapse or become
abandoned or dedicated to the public or unenforceable;
(b) Not, and not permit any Subsidiary or any licensee of it
or of any Subsidiary to:
(i) fail to continue to use any of the Trademark
Collateral to the extent necessary in order to maintain all of
the Trademark Collateral in full force free from any claim of
abandonment for non-use;
(ii) fail in any material respect to maintain as in the
past the quality of products and services offered under all of
the Trademark Collateral;
(iii) fail to employ all of the Trademark Collateral
registered with any Federal or state or foreign authority with an
appropriate notice of such registration;
(iv) adopt or use any other Trademark which is
confusingly similar or a colorable imitation of any of the
Trademark Collateral;
(v) use any of the Trademark Collateral registered with
any Federal or state or foreign authority except for the uses for
which registration or application for registration of all of the
Trademark Collateral has been made; or
(vi) do or permit any act or knowingly omit to do any
act whereby any of the Trademark Collateral may lapse or become
invalid or unenforceable;
(c) Not, and not permit any Subsidiary to, do or permit any act
or knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
unenforceable or placed in the public domain except upon expiration of
the end of an unrenewable term of a registration thereof;
(d) Notify Lender immediately if it knows that any application or
registration relating to any of the Intellectual Property Collateral may
become abandoned or dedicated to the public or placed in the public
domain or invalid or unenforceable, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark
Office, the United States Copyright Office or any foreign counterpart
thereof or any court) regarding Borrower's or any Subsidiary's ownership
of any of the Intellectual Property Collateral, its right to register
the same or to keep and maintain and enforce the same;
(e) Not, and not permit any Subsidiary or any of its or any
Subsidiary's agents, employees, designees or licensees to, file an
application for the registration of any Intellectual Property Collateral
with the United States Patent and Trademark Office, the
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United States Copyright Office or any similar office or agency in any
other country or any political subdivision thereof, unless it promptly
informs Lender, and upon request of Lender, executes and delivers any
and all agreements, instruments, documents and papers as Lender may
reasonably request to evidence Lender's security interest in such
Intellectual Property Collateral and the goodwill and general
intangibles of Borrower relating thereto or represented thereby;
(f) Take, and cause each Subsidiary to take, all necessary steps,
including in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any similar
office or agency in any other country or any political subdivision
thereof, to maintain and pursue any application (and to obtain the
relevant registration) filed with respect to, and to maintain any
registration of, the Intellectual Property Collateral, including the
filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation
proceedings and the payment of fees and taxes (except to the extent that
dedication, abandonment or invalidation is permitted under the foregoing
clauses (a), (b) and (c)); and
(g) Promptly upon request of Lender, execute and deliver to
Lender, and cause its Subsidiaries to execute and deliver to Lender, any
document reasonably required to acknowledge or register or perfect
Lender's interest in any part of the Intellectual Property Collateral.
6. DEFAULT.
6.1 Event of Default. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Non-Payment. Default in the payment, when due or declared
due, of any of the Liabilities.
(b) Non-Payment of or Default under Other Indebtedness. Default
in the payment when due, whether by acceleration or otherwise (subject
to any applicable grace period), of any Indebtedness of, or guaranteed
by, Borrower, any other Obligor or any Subsidiary (other than (i) any
Indebtedness under this Agreement and any Note or (ii) any Indebtedness
of any Subsidiary to Borrower or to any other Subsidiary), or any event
or condition shall occur which results in the acceleration of the
maturity of any such Indebtedness or enables the holder or holders of
any such Indebtedness or any trustee or agent for such holders (any
required notice of default having been given and any applicable grace
period having expired) to accelerate the maturity of such other
Indebtedness; provided that the aggregate amount of all such
Indebtedness which is so affected shall equal or exceed $200,000.
(c) Validity. If the validity or enforceability of this
Agreement, any Mortgage, the Parent Pledge Agreement, the Parent
Subordination Agreement or any other Related
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Agreement shall be challenged by or on behalf of Borrower, any other
Obligor or any Related Party, or shall fail to remain in full force and
effect (other than as expressly permitted hereunder or thereunder).
(d) Other Obligations. Default in the payment when due, whether
by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period or waiver of such default) of,
(i) any obligation or agreement of Borrower, any other Obligor or any
Subsidiary to or with Lender (other than any obligation or agreement of
Borrower hereunder or under any Related Agreement) or (ii) any material
obligation or agreement of Borrower, any other Obligor or any Subsidiary
to or with any other Person (other than (x) any such material obligation
or agreement constituting or related to Indebtedness, (y) Trade Accounts
Payable and (z) any material obligation or agreement of any Subsidiary
to Borrower or to any other Subsidiary), except only to the extent that
the existence of any such default is being contested by Borrower, such
other Obligor or such Subsidiary, as the case may be, in good faith and
by appropriate proceedings and Borrower, such other Obligor or such
Subsidiary, as applicable, shall have set aside on its books such
reserves or other appropriate provisions therefor as may be required by
GAAP.
(e) Insolvency. Borrower, any other Obligor or any Subsidiary
becomes insolvent, or generally fails to pay, or admits in writing its
inability to pay, its debts as they mature, or applies for, consents to,
or acquiesces in the appointment of a trustee, receiver or other
custodian for Borrower, such other Obligor or such Subsidiary, or for a
substantial part of the property of Borrower, such other Obligor or such
Subsidiary, or makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower, any
other Obligor or any Subsidiary, or for a substantial part of the
property of Borrower, any other Obligor or any Subsidiary and is not
discharged or dismissed within 60 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Borrower, any other Obligor or
any Subsidiary and, if such proceeding is instituted against Borrower,
such Obligor or such Subsidiary, Borrower, such Obligor or such
Subsidiary consents thereto or acquiesces therein or such proceeding is
not dismissed within 60 days or an order for relief is entered; or any
warrant of attachment or similar legal process is issued against any
substantial part of the property of Borrower, any other Obligor or any
Subsidiary.
(f) Pension Plans. The institution by Borrower, any ERISA
Affiliate or any other Person of steps to terminate any Pension Plan if,
in connection with such termination, Borrower or any ERISA Affiliate
would be required to make a contribution to such Pension Plan or to the
PBGC, or would incur a liability or obligation to such Pension Plan, in
excess of $100,000 or a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA.
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(g) Non-Compliance With This Agreement. Default in the
performance of any of Borrower's agreements set forth in Section 2, 5.3,
5.5, 5.6 or 5.12 through 5.28 (and not constituting an Event of Default
under any of the other subsections of this Section 6.1); or default in
the performance of any of Borrower's agreements set forth in Section
3.2, 3.3, 3.4, 5.1.2 or 5.2 (and not constituting an Event of Default
under any of the other subsections of this Section 6.1), and continuance
of such default for three (3) Business Days after notice thereof to
Borrower from Lender; or default in the performance of any of Borrower's
other agreements herein set forth (and not constituting an Event of
Default under any of the other subsections of this Section 6.1), and
continuance of such default for thirty (30) days after notice thereof to
Borrower from Lender.
(h) Non-Compliance With Related Agreements. Default in the
performance by Borrower, any other Obligor or any Subsidiary of any of
its agreements set forth in any Mortgage, the Parent Pledge Agreement,
the Parent Subordination Agreement or any other Related Agreement (and
not constituting an Event of Default under any of the other subsections
of this Section 6.1), and continuance of such default after any required
notice from Lender and/or the expiration of the grace period (if any)
set forth therein.
(i) Warranty. Any warranty made by Borrower, any other Obligor or
any Subsidiary herein or in any Mortgage, the Parent Pledge Agreement,
the Parent Subordination Agreement or any other Related Agreement is
untrue or misleading in any material respect when made or deemed made;
or any schedule, statement, report, notice, certificate or other writing
furnished by Borrower, any other Obligor or any Subsidiary to Lender
hereunder, under any Related Agreement or in connection herewith or
therewith is untrue or misleading in any material respect on the date as
of which the facts set forth therein are stated or certified; or any
certification made or deemed made by Borrower, any other Obligor or any
Subsidiary to Lender is untrue or misleading in any material respect on
or as of the date made or deemed made.
(j) Litigation. There shall be entered against any one of
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $100,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which Borrower, such Subsidiary or such
Obligor, as applicable, is insured and with respect to which the insurer
has assumed responsibility in writing (or Borrower has provided other
evidence reasonably satisfactory to Lender of such insurer's liability
and ability to pay) or for and to the extent which Borrower, such
Subsidiary or such Obligor, as applicable, is otherwise indemnified if
the terms of such indemnification are reasonably satisfactory to Lender.
(k) Conduct of Business. If Borrower, any other Obligor or any
Subsidiary is enjoined, restrained or in any way prevented by court
order, which has not been dissolved or stayed within five (5) Business
Days, from conducting all or any material part of its business affairs.
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(l) Ownership. If (i) Parent shall fail to own all of the voting
stock of Borrower or shall fail to have control over the management and
operations of Borrower or (ii) a majority of Board of Directors of
Parent shall consist of directors whose election has not been approved
in advance by Milley & Company, provided that if the existence of such
majority is the result of the death or resignation of a director whose
election was approved by Milley & Company, there shall be no Event of
Default under this clause if the resulting vacancy is filled within 60
days by a director whose election was approved in advance in writing by
Milley Management Incorporated.
(m) Material Adverse Change. Lender shall have determined in good
faith that (i) a material adverse change has occurred since the Second
Restatement Date in the business, operations or financial condition of
Borrower, any other Obligor, or Borrower and its Subsidiaries taken as a
whole, (ii) Lender's interest in any material Collateral or Third Party
Collateral has been adversely affected or impaired (other than as a
result of releases or subordinations expressly provided for herein or in
any Related Document or otherwise agreed to by Lender), or the value
thereof to Lender has been diminished to a material extent, (iii) an
event has occurred or information has become available which, if it had
occurred or was true on the Restatement Date, would have been required
to have been disclosed on Schedule 4.25 and which, in Lender's judgment,
imposes or is reasonably likely to impose a material liability on
Borrower or any other Obligor or to result in an event described in
clause (ii) above, or (iv) the prospect of payment of any of the
Liabilities or performance of any other material obligation or agreement
of Borrower or any other Obligor hereunder or under any Related
Agreement is materially impaired, and the condition giving rise to such
determination does not constitute an Event of Default under any of the
other subsections of this Section 6.1 and continues to exist after
notice of such determination by Lender to Borrower.
(n) Azimuth Group Defaults. The occurrence of any Event of
Default (as such terms are defined in each of the Azimuth Group Loan
Agreements) under Section 6.1(a) of any Azimuth Group Loan Agreement and
such Event of Default shall continue unremedied for a period of thirty
(30) days.
6.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default described in
Section 6.1(e) shall occur, then Lender's commitment and the Credit
shall terminate and all Liabilities shall be immediately due and payable
without demand, notice or declaration of any kind whatsoever.
(b) In the event an Event of Default other than the one described
in Section 6.1(e) shall occur, then Lender may declare its commitment
and the Credit to be terminated and/or declare all Liabilities to be
immediately due and payable without demand or notice of any kind
whatsoever, whereupon the Credit extended under this Agreement shall
terminate and/or all Liabilities shall be immediately due and payable.
Lender shall promptly advise
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Borrower of any such declaration, but failure to do so shall not impair
the effect of such declaration.
(c) In the event of the occurrence of any Event of Default,
Lender may exercise any one or more or all of the following remedies,
all of which are cumulative and non-exclusive:
(i) Any remedy contained in this Agreement or in any of
the Related Agreements or any Supplemental Documentation;
(ii) Any rights and remedies available to Lender under
the UCC and any other applicable law;
(iii) To the extent permitted by applicable law, Lender
may, without notice, demand or legal process of any kind, take
possession of any or all of the Collateral and Third Party
Collateral (in addition to Collateral and Third Party Collateral
which it may already have in its possession), wherever it may be
found, and for that purpose may pursue the same wherever it may
be found, and may enter into any premises where any of the
Collateral or Third Party Collateral may be or is supposed to be,
and search for, take possession of, remove, keep and store any of
the Collateral or Third Party Collateral until the same shall be
sold or otherwise disposed of, and Lender shall have the right to
store the same in any of Borrower's premises without cost to
Lender;
(iv) At Lender's request, Borrower will, at Borrower's
expense, assemble the tangible Collateral and Third Party
Collateral and make it available to Lender at a place or places
to be designated by Lender which is reasonably convenient to
Lender and Borrower; and
(v) Lender at its option, and pursuant to notification
given to Borrower as provided for below, may sell any Collateral
actually or constructively in its possession at public or private
sale and apply the proceeds thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition.
7.2 Application of Proceeds of Collateral. Any proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including
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Attorneys' Fees, and any balance of such proceeds may be applied by Lender
toward the payment of such of the Liabilities, and in such order of application,
as Lender may from time to time elect.
7.3 Care of Collateral. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Lender to comply with such request shall not, of itself,
be deemed a failure to exercise reasonable care, and no failure of Lender to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall, in and of itself, be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
7.4 Performance of Borrower's Obligations. Lender shall have the right,
but shall not be obligated, to discharge any claims against or Liens, and any
Taxes at any time levied or placed upon any or all Collateral, including,
without limitation, those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. Lender may also pay for
maintenance and preservation of Collateral. Lender may, but is not obligated to,
perform or fulfill any of Borrower's responsibilities under this Agreement which
Borrower has failed to perform or fulfill. Lender may advance to Borrower as a
Revolving Loan any payment made or expense incurred by Lender under this Section
7.4.
7.5 Lender's Rights. None of the following shall affect the obligations
of Borrower to Lender under this Agreement or Lender's right with respect to the
remaining Collateral or any Third Party Collateral (any or all of which actions
may be taken by Lender at any time, whether before or after an Event of Default,
at its sole and absolute discretion and without notice to Borrower):
(a) acceptance or retention by Lender of other property or
interests in property as security for the Liabilities, or acceptance or
retention of any Obligor(s), in addition to Borrower, with respect to
any of the Liabilities;
(b) release of its security interest in, or surrender or release
of, or the substitution or exchange of or for, all or any part of the
Collateral or any Third Party Collateral or any other property securing
any of the Liabilities, or any extension or renewal for one or more
periods (whether or not longer than the original period), or release,
compromise, alteration or exchange, of any obligations of any guarantor
or other Obligor with respect to any Collateral, any Third Party
Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange, of any of the Liabilities, or release or compromise of any
obligation of any Obligor with respect to any of the Liabilities; or
(d) failure by Lender to resort to other security or pursue any
Person liable for any of the Liabilities before resorting to the
Collateral or any Third Party Collateral.
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS.
8.1 Conditions Precedent to Effectiveness of Agreement. The amendments
to the Existing Loan Agreement embodied in this Agreement shall not be effective
(in which case the Existing Loan Agreement shall remain in full force and
effect) and the initial Additional Revolving Loans shall not be funded unless
and until the following conditions precedent have been satisfied, in each case
on or prior to the Restatement Date:
8.1.1 Agreement. Borrower and Lender shall have duly
executed and delivered this Agreement.
8.1.2 Additional Revolving Note. Borrower shall have duly
executed and delivered to Lender an Additional Revolving Loan Note.
8.1.3 Related Agreements. All of the Related Agreements shall
be in full force and effect.
8.1.4 No Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing or will occur after giving
effect to the making of the initial Additional Revolving Loan and the
consummation of the transactions contemplated herein.
8.1.5 Exhibits; Schedules. All Exhibits and Schedules to this
Agreement shall have been updated and completed, and submitted to
Lender, in form and substance satisfactory to Lender, and shall contain
no facts or information which Lender, in its sole judgment, determines
to be unacceptable.
8.1.6 Closing Fee. If not funded with the proceeds of the initial
Revolving Loan under this Agreement, Lender shall have received the
closing fee referred to in Section 2.10 and any other fees due and
payable by Borrower or any other Person to Lender on the funding of the
initial Loan under this Agreement.
8.1.7 Documents. Lender shall have received all of the following,
each duly executed where appropriate and dated as of the Restatement
Date (or such other date as shall be satisfactory to Lender), in form
and substance satisfactory to Lender:
(a) Resolutions. A copy, duly certified by the secretary
or an assistant secretary of Borrower and Parent, of (1)
resolutions of the Board of Directors of such corporation
authorizing, as applicable, (A) the borrowings by Borrower
hereunder and (B) the execution, delivery and performance of this
Agreement and each Related Agreement to which such corporation is
a party, (2) all documents evidencing any other necessary
corporate action on the part of such corporation with respect to
this Agreement and the Related Agreements, and (3) all approvals
or consents, if any, with respect to this Agreement and the
Related Agreements;
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(b) Incumbency Certificates. A certificate of the
secretary or an assistant secretary of Borrower and Parent
certifying the names of the officers of such corporation
authorized to sign this Agreement and each Related Agreement to
which such corporation is a party, and all other documents and
certificates to be delivered by such corporation hereunder,
together with samples of the true signatures of such officers;
(c) Borrower's Certificate. The certificate of the
President or Chairman of the Board of Borrower certifying to the
fulfillment of all conditions precedent (other than any waived by
Lender) to closing the transaction contemplated by this Agreement
and to the truth and accuracy, as of such date, of the
representations and warranties of Borrower and each Obligor
contained in this Agreement, each Mortgage, the Trademark
Security Agreement and each other Related Agreement to which
Borrower is a party;
(d) Bylaws. A copy of Borrower's and Parent's
respective Bylaws duly certified by the secretary or an assistant
secretary of each of them;
(e) Articles. A copy of Borrower's and Parent's
respective Articles of Incorporation, duly certified by the
Secretary of State of the state of its incorporation
or by the secretary or an assistant secretary of each of them;
(f) Registration; Good Standing. A copy, duly certified by
the applicable Secretary of State (or other appropriate officer),
of (i) certificates of good standing for Borrower and Parent
issued by the Secretary of State (or other appropriate officer)
of the jurisdiction of incorporation of such entity and of each
other state where such entity is qualified to do business or
where, because of the nature of its business or properties,
qualification to do business is required, and (ii) in any state
or locality in which Borrower is doing business under an assumed
name, a certificate or other document (if available) issued by
the Secretary of State of each such state or by such locality
evidencing Borrower's authority to use such name;
(g) Legal Opinions. Legal opinions from Dechert Price
& Rhoads, special counsel to Borrower and Parent;
(h) Disbursement Letter. Written authorization and
instructions from Borrower, in form satisfactory to Lender, for
disbursement of the proceeds of the initial Loans under this
Agreement, including a wire transfer authorization form;
(i) Azimuth Documents. Executed copies of all Azimuth
Documents which shall be in form and substance satisfactory to
Lender, together with a certificate of the President, Chief
Financial Officer or Treasurer of Borrower certifying as of the
Restatement Date that (i) the Azimuth Documents are in full force
and effect on the Restatement Date, (ii) all parties to the
Azimuth Documents
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have performed and complied with all agreements and conditions
contained in the Azimuth Documents referred to therein required
to be performed or complied with on or before the Restatement
Date, and no party to any of the Azimuth Documents is in default
in the performance or compliance with any of the terms or
provisions thereof;
(j) Assignments of Group Security Interests. Duly executed
(i) assignments on form UCC-3 (or such other appropriate form) of
all Group Security Evidences (as such term is defined in the
Recapitalization Agreement) in the appropriate recordable or
fileable form, naming Borrower as the assignee and Lender as the
assignor of the Group Security (as such term is defined in the
Recapitalization Agreement) and (ii) assignments on form UCC-3
(or such other appropriate form) of all Group Security Evidences
in the appropriate recordable or fileable form, naming Lender as
the assignee and Borrower as the assignor of the Group Security.
(k) Pledged Securities and Instruments. All original stock
certificates, promissory notes and other instruments pledged
under the Azimuth Documents, and all original New Revolving Notes
issued under the Azimuth Group Loan Agreements pursuant to
Section 3.2(h) of the Recapitalization Agreement.
(l) Other Documents. Lender shall have received such other
documents or legal opinions as Lender may reasonably request, all
in form and substance satisfactory to Lender. Borrower shall have
furnished to Lender such additional copies or executed
counterparts of the documents referred to above as Lender may
request.
In the event that all of the foregoing conditions precedent have
not been satisfied or waived on or before December 31, 1996, this Agreement
(other than the required payment of certain Closing Fee pursuant to Section
2.10) shall be of no further force and effect and the Existing Loan Agreement
shall continue in full force and effect.
8.2 Continuing Conditions Precedent to all Loans and Letters of Credit;
Certification. The obligation of Lender to make any Loan or issue any Letter of
Credit is subject to satisfaction of the following conditions precedent in
addition to those provided in Section 8.1:
(a) No Change in Condition. No change in the condition or
operations, financial or otherwise, of Borrower, any other Obligor or
Borrower and its Subsidiaries taken as whole shall have occurred since
the Second Restatement Date which change, in the reasonable credit
judgment of Lender, may have a material adverse effect on Borrower, any
other Obligor or Borrower and its Subsidiaries taken as a whole, or on
any material Collateral or Third Party Collateral;
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(b) Default. Before and after giving effect to the making of
such Loan or the issuance of such Letter of Credit, no Event of Default
or Unmatured Event of Default shall have occurred and be continuing;
(c) Insurance. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent, scope or cost of the insurance
policies of the Borrower or any Subsidiary listed on Schedule 4.7 which
change would have a material adverse effect on the financial condition
of Borrower, any Subsidiary or Borrower and its Subsidiaries taken as a
whole, or would significantly adversely affect Borrower's ability to
perform its obligations under this Agreement, any Note, or any Related
Agreement to which it is a party;
(d) Warranties. Before and after giving effect to the making of
such Loan or the issuance of such Letter of Credit, the warranties in
Section 4 shall be true and correct as though made on the date of such
Loan or Letter of Credit, except (x) to the extent any such
representation or warranty relates solely to an earlier date (including
the Restatement Date) and was true and correct on such earlier date and
(y) for such changes as are the result of any act or omission
specifically permitted hereunder (or under any Related Agreement) or
otherwise expressly permitted by Lender;
(e) No Material Transaction. None of Borrower, any Subsidiary or
any other Obligor shall have entered into any material (as determined by
Lender) commitment or transaction, including, without limitation,
transactions for borrowings and capital expenditures, which are not in
the ordinary course of their respective businesses (excluding
transactions expressly permitted hereunder (or under any Related
Agreement) or consented to by Lender in writing); and
(f) Accounting Methods. Borrower shall not have made any
material (as determined by Lender) change in its accounting methods or
principles except as required by GAAP.
Each request for a Loan or Letter of Credit hereunder made or deemed to
have been made by Borrower shall be deemed to be a certificate of Borrower as to
the matters set out in the foregoing provisions of this Section 8.2.
8.3 Conditions Precedent to all Additional Revolving Loans. The
obligation of the Lender to make any Additional Revolving Loan (including the
Additional Revolving Loan made on the Restatement Date) is subject to
satisfaction of the following conditions precedent in addition to those provided
in Sections 8.1 and 8.2:
(a) Default. Before and after giving effect to the making of such
Additional Revolving Loans, no Default or Event of Default (as such
terms are defined in each of the Azimuth Group Loan Agreements) shall
have occurred and be continuing;
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(b) Receipt of Current Borrowing Base Certificates. Lender
shall have received a duly executed current Borrowing Base Certificate
of Contempo, Contempo West and DEI as provided in Section 5.1.4; and
(c) Borrowing Requests. Lender shall have received copies of all
borrowing requests received by Borrower under any Azimuth Group Loan
Agreement with respect to any loans requested thereunder, or, if any
such request is made by telephone, written confirmation by Borrower of
the amount of such loan requested and whether such loan is requested by
Contempo, Contempo West or DEI.
Each request for an Additional Revolving Loan hereunder made or deemed
to have been made by Borrower shall be deemed to be a certificate of Borrower as
to the matters set out in the foregoing provisions of this Section 8.3.
9. INDEMNITY.
9.1 Environmental, Safety and Health Indemnity. Borrower hereby
indemnifies Lender and agrees to hold Lender harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of any
and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Borrower or any of its Subsidiaries of any
Environmental Law or Occupational Safety and Health Law, or with respect to, or
as a direct or indirect result of, (i) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
properties utilized by Borrower and/or any Subsidiary into or upon any land, the
atmosphere, or any watercourse, body of water, groundwater or wetland, of any
Hazardous Material or other hazardous, toxic or dangerous waste, substance or
constituent, or other substance (including, without limitation, any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or arising
under any Environmental Law) or (ii) the existence of any unsafe or unhealthful
condition on or at any premises utilized by Borrower and/or any Subsidiary it
the conduct of its business (excluding, in each case, any of the foregoing
resulting from Lender's gross negligence or willful misconduct). The provisions
of and undertakings and indemnification set out in this Section 9.1 shall
survive satisfaction and payment of the Liabilities and termination of this
Agreement.
9.2 General Indemnity. In addition to the payment of expenses pursuant
to Section 11.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
any Note, and the officers, directors, employees, agents, and affiliates of
Lender and such holders (collectively, the "Indemnitees"), harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on,
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incurred by, or asserted against any Indemnitee, in any manner relating to or
arising out of this Agreement, any Related Agreement or any other agreements
executed and delivered by Borrower or any other Obligor in connection herewith,
the statements contained in any commitment letter delivered by Lender, Lender's
agreement to make the Loans or to issue Letters of Credit hereunder, or the use
or intended use of the proceeds of any of the Loans or any proceeds of Letters
of Credit hereunder (the "indemnified liabilities"); provided that Borrower
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, Borrower shall contribute the maximum portion
that it is permitted to pay under applicable law to the payment and satisfaction
of all indemnified liabilities incurred by the Indemnitees or any of them. The
provisions of the undertakings and indemnification set out ive satisfaction and
payment of the Liabilities and termination of this Agreement.
9.3 Capital Adequacy. If Lender shall reasonably determine that the
application or adoption of any law, rule, regulation, directive, interpretation,
treaty or guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the force of law
(including, without limitation, application of changes to Regulation H and
Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on
January 19, 1989 and regulations of the Comptroller of the Currency, Department
of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the
Currency on January 27, 1989) increases the amount of capital required or
expected to be maintained by Lender or any Person controlling Lender, and such
increase is based upon the existence of Lender's obligations hereunder and other
commitments of this type, then from time to time, within 10 days after demand
from Lender, Borrower shall pay to Lender such amount or amounts as will
compensate Lender or such controlling Person, as the case may be, for such
increased capital requirement. The determination of any amount to be paid by
Borrower under this Section 9.3 shall take into consideration the policies of
Lender or any Person controlling Lender with respect to capital adequacy and
shall be based upon any reasonable averaging, attribution and allocation
methods. A certificate of Lender setting forth the amount or amounts as shall be
necessary to compensate Lender as specified in this Section 9.3 shall be
delivered to Borrower and shall be conclusive in the absence of manifest error.
10. ADDITIONAL PROVISIONS.
Additional provisions are set forth in Supplement A.
11. GENERAL.
11.1 Borrower Waiver. Except as otherwise provided in this Agreement or
any Related Agreement, Borrower waives (i) presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, one or more extensions or renewals 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
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<PAGE>
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 Lender's relevy, attachment or levy on or of, the Collateral or
any bond or security which might be required by any court prior to allowing
Lender to exercise any of Lender's remedies; and (iii) the benefit of all
valuation, appraisement and exemption laws. Borrower acknowledges that it has
been advised by counsel of its choice with respect to this Agreement and the
transactions evidenced by this Agreement.
11.2 Power of Attorney. Borrower appoints Lender, or any Person whom
Lender may from time to time designate, as Borrower's attorney and agent-in-fact
with power (which appointment and power, being coupled with an interest, is
irrevocable until all Liabilities are paid and performed in full and this
Agreement is terminated), without notice to Borrower, to:
(a) At such time or times hereafter as Lender or said agent, in
its sole and absolute discretion, may determine, in Borrower's or
Lender's name (i) endorse Borrower's name on any checks, notes, drafts
or any other items of payment relating to and/or proceeds of the
Collateral which come into the possession of Lender or under Lender's
control and apply such payment or proceeds to the Liabilities (subject
to the provisions of Section 2.11); (ii) endorse Borrower's name on any
chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement in Lender's possession relating
to Accounts Receivable, Inventory or any other Collateral; (iii) use the
information recorded on or contained in any data processing equipment
and computer hardware and software to which Borrower has access relating
to Accounts Receivable, Inventory and/or other Collateral; (iv) after
the occurrence and during the continuance of an Event of Default, use
Borrower's stationery and sign the name of Borrower to verifications of
Accounts Receivable and notices thereof to Account Debtors; and (v) if
not done by Borrower, do all acts and things determined in good faith by
Lender to be necessary to fulfill Borrower's obligations under this
Agreement; and
(b) At such time or times after the occurrence and during the
continuance of an Event of Default as Lender or said agent, in its sole
and absolute discretion, may determine, in Borrower's or Lender's name:
(i) demand payment of the Accounts Receivable; (ii) enforce payment of
the Accounts Receivable, by legal proceedings or otherwise; (iii)
exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts Receivable and other Collateral; (iv) settle,
adjust, compromise, extend or renew the Accounts Receivable; (v) settle,
adjust or compromise any legal proceedings brought to collect the
Accounts Receivable; (vi) if permitted by applicable law, sell or assign
the Accounts Receivable and/or other Collateral upon such terms for such
amounts and at such time or times as Lender may deem advisable; (vii)
discharge and release the Accounts Receivable and/or other Collateral;
(viii) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or similar document against any Account Debtor; (ix) prepare,
file and sign Borrower's name on any notice of lien, assignment or
satisfaction of lien or similar document in connection with the Accounts
Receivable and/or other Collateral; and (x) do all acts and things
necessary, in Lender's sole and absolute discretion, to obtain repayment
of the Liabilities and to fulfill Borrower's other obligations under
this Agreement.
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<PAGE>
If Lender at any time designates any Person to act as Borrower's
attorney and agent-in-fact pursuant to this Section 11.2 or any other
provision of this Agreement or any Related Agreement that permits such
designation, Lender shall use reasonable efforts to give Borrower prompt
notice of such designation (but failure to give such notice shall not
impair the validity or effect of such designation or impose any
liability on Lender).
11.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any Loan
is made hereunder, to pay upon demand all Attorneys' Fees and all other
reasonable expenses incurred by Lender in connection with (i) the preparation,
negotiation and execution of this Agreement, any Related Agreement and any
document required to be furnished in connection herewith or therewith, (ii) the
preparation of any and all amendments to this Agreement or any of the Related
Agreements and all other instruments or documents provided for therein or
delivered or to be delivered thereunder or in connection therewith, (iii) the
collection or enforcement of Borrower's or any other Obligor's obligations
hereunder or under any Related Agreement and (iv) the collection or enforcement
of any of Lender's rights in or to any Collateral or Third Party Collateral.
Lender may advance all such amounts to Borrower as a Revolving Loan. Borrower
also agrees to pay, and save Lender harmless from all liability for, any stamp
or other taxes which may be payable with respect to the execution or delivery of
this Agreement, or any Related Agreement or Supplemental Documentation, or the
issuance of any Note or of any other instruments or documents provided for
herein or to be delivered hereunder or in connection herewith. Borrower's
obligations in this Section 11.3 shall survive any termination of this
Agreement.
11.4 Lender Fees and Charges. Borrower agrees to pay Lender on demand
the customary fees and charges of Lender for maintenance of accounts with Lender
or for providing other services to Borrower not provided for herein. Lender may,
in its sole and absolute discretion, provide for such payment by advancing the
amount thereof to Borrower as a Revolving Loan.
11.5 Lawful Interest. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to Borrower.
11.6 No Waiver by Lender; Amendments. No failure or delay on the part of
Lender in the exercise of any power or right, and no course of dealing between
Borrower and Lender, shall operate as a waiver of such power or right, nor shall
any single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. The remedies
provided for herein are cumulative and not exclusive of any remedies which may
be available to Lender at law or in equity. No notice to or demand on Borrower
not required hereunder shall in any event entitle Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of Lender to any other or further action in any
circumstances without notice or demand. No amendment, modification or waiver of,
or consent with respect to, any provision of this Agreement or any Related
Agreement shall in any event be effective unless the same shall be in writing
and signed and delivered by Lender. Any waiver of any provision of this
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<PAGE>
Agreement, and any consent to any departure by Borrower from the terms of any
provision of this Agreement, shall be effective only in the specific instance
and for the specific purpose for which given.
11.7 Termination of Credit. (a) Unless the Termination Date is extended
pursuant to clause (b) of this Section 11.7, the Credit shall terminate on the
then scheduled Termination Date. Borrower may terminate the Credit at any time
upon notice to Lender and payment in full of the outstanding principal balance
of the Loans and all other Liabilities. The termination or cancellation of the
Credit shall not affect or impair the liabilities and obligations of Borrower or
any one or more of the Obligors to Lender or Lender's rights with respect to any
Loans and advances made and other Liabilities incurred prior to such termination
or with respect to the Collateral or any Third Party Collateral. All of Lender's
rights and remedies, the liens and security interests of Lender in the
Collateral and all of Borrower's duties and obligations under this Agreement
shall survive termination of the Credit until all of the Liabilities have been
finally paid and performed in full, at which time this Agreement and the Related
Agreements shall terminate (except any provisions hereof or thereof which by
their terms survive such termination).
(b) Borrower may, not more than 90 days nor less than 30 days prior to
any scheduled Termination Date, request that Lender extend the Credit for an
additional one-year period to the next anniversary of such date. Unless Lender,
in the exercise of its sole and absolute discretion, notifies Borrower of its
willingness to extend the Credit for such additional one-year period, the Credit
shall terminate on the then scheduled Termination Date and all loans and other
Liabilities shall thereupon be due and payable.
11.8 Notices. Except as otherwise expressly provided herein, any notice
hereunder to Borrower or Lender shall be in writing (including telegraphic,
telex, or facsimile communication) and shall be given to Borrower or Lender at
its address, telex number or facsimile number set forth on the signature pages
hereof or at such other address, telex number or facsimile number as Borrower or
Lender may, by written notice, designate as its address, telex number or
facsimile number for purposes of notices hereunder. All such notices shall be
deemed to be given when transmitted by telex and the appropriate answerback is
received, transmitted by facsimile, delivered to the telegraph office, delivered
by courier, personally delivered or, in the case of notice by mail, three (3)
Business Days following deposit in the United States mails, properly addressed
as herein provided, with proper postage prepaid; provided, however, that notice
to Lender of Borrower's intent to terminate the Credit shall not be effective
until actually received by Lender.
11.9 Assignments and Participations; Information. Borrower hereby
consents to Lender's grant of participations in or sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or any Related Agreement, or of any portion of any thereof, including,
without limitation, Lender's rights, titles, interests, remedies, powers and/or
duties. Lender may furnish any information concerning Borrower in the possession
of Lender from time to time to assignees of the rights and/or obligations of
Lender hereunder and to participants in any Loan (including prospective
assignees and participants) and may furnish information in response to credit
inquiries consistent with general banking practice. Lender shall promptly notify
Borrower
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<PAGE>
of Lender's grant of any participation in or sale, assignment, transfer or other
disposition of this Agreement or any Related Agreement, or of any portion of any
thereof. Borrower shall use its best efforts to assist Lender in its efforts to
sell assignments and participations.
11.10 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 Successors. This Agreement shall be binding upon Borrower and
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower and Lender and the successors and assigns of Lender.
Borrower shall not assign its rights or duties hereunder without the consent of
Lender.
11.12 Construction; Governing Law. Borrower acknowledges that this
Agreement shall not be binding upon Lender or become effective until and unless
accepted by Lender in writing. If so accepted by Lender, this Agreement and the
Related Agreements and Supplemental Documentation shall, unless otherwise
expressly provided therein, be deemed to have been negotiated and entered into
in, and shall be governed and controlled by the laws of, the State of Illinois
as to interpretation, enforcement, validity, construction, effect, choice of
law, and in all other respects, including, but not limited to, the legality of
the interest rate and other charges, but excluding perfection of security
interests and liens which shall be governed and controlled by the laws of the
relevant jurisdiction.
11.13 CONSENT TO JURISDICTION. TO INDUCE LENDER TO ACCEPT THIS
AGREEMENT, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND
ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, THE
SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE
HEREOF, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT
THEREOF.
11.14 Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to "Borrower
and its Subsidiaries" or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries
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<PAGE>
and, where applicable, to the extent any such Subsidiaries are consolidated with
Borrower for financial reporting purposes.
11.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i)
UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
ELXSI
By:__________________________________
Name:________________________________
Title:_______________________________
Address: 4209 Vineland Road
Suite J-1
Orlando, Florida 32811
Attention: President
Facsimile number: 203/661-1119
BANK OF AMERICA ILLINOIS
By:__________________________________
Name:________________________________
Title:_______________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Middle Market I
Facsimile number: 312/828-1974
SIGNATURE PAGE S-1
<PAGE>
SUPPLEMENT A
to
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of December 30, 1996 Between
ELXSI and
BANK OF AMERICA ILLINOIS
1. Loan Agreement Reference. This Supplement A, as it may be amended or modified
from time to time, is a part of the Amended and Restated Loan and Security
Agreement, dated as of December ___, 1996, between Borrower and Lender (together
with all amendments, restatements, supplements and other modifications thereto,
the "Loan Agreement"). Terms used and not defined herein which are defined in
the Loan Agreement shall have the meaning ascribed to them therein unless the
context requires otherwise.
2. Additional Covenants. Until all of Borrower's Liabilities are paid in full,
Borrower agrees that, unless Lender otherwise consents in writing, it will:
2.1 Net Worth. Not permit at any time during any fiscal quarter,
measured as of the last day of the most recently completed fiscal quarter set
forth below, Net Worth to be less than the amount set forth below across from
such fiscal quarter:
Fiscal Quarter Ending Net Worth
--------------------- ---------
06/30/96 $22,000,000
09/30/96 $22,000,000
12/31/96 and thereafter $22,000,000
2.2 Liabilities to Net Worth Ratio. Not permit, on the last day of any
fiscal quarter, the ratio of the Borrower's consolidated total liabilities (but
excluding from the calculation thereof all principal and interest owing with
respect to Additional Revolving Loans) to the Borrower's Net Worth to exceed
1.50:1.
2.3 Capital Expenditures. Not, and not permit any Subsidiary to,
purchase or otherwise acquire (including, without limitation, acquisition by way
of Capitalized Lease), or commit to purchase or otherwise acquire, any fixed
asset if, after giving effect to such purchase or other acquisition, (A) the
aggregate capitalized cost of all fixed assets purchased or otherwise acquired
(other than by means of a Capitalized Lease) by Borrower and its Subsidiaries on
a consolidated basis plus (B) the aggregate annual payments under Capitalized
Leases (excluding the portion thereof representing imputed interest) of Borrower
and its Subsidiaries on a consolidated basis (excluding, in each of (A) and (B),
(a) any fixed asset which constitutes a replacement for an asset
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<PAGE>
which was the subject of a casualty or governmental taking to the extent the
purchase or other acquisition thereof is funded by insurance proceeds or other
payments received as a result of such casualty or taking and (b) the first
$675,000 of capital expenditures related solely to removal of underground
storage tanks or other environmental problems at Borrower's restaurant
locations) would exceed (i) $3,250,000 in Fiscal Year 1996 and (ii) $3,000,000
in any Fiscal Year thereafter.
2.4 Interest Coverage Ratio. Not permit, on the last day of any fiscal
quarter, the ratio of (a) Borrower's EBITDA for the four (4) fiscal quarters
then ended to (b) Borrower's consolidated interest expense (but excluding from
the calculation thereof all interest expense with respect to Additional
Revolving Loans) the four (4) fiscal quarters then ended to be less than 3.00:1.
2.5 Funded Debt/EBITDA Ratio. Not permit, on the last day of any fiscal
quarter set forth below, the Funded Debt/EBITDA Ratio to be more than the ratio
set forth below opposite such fiscal quarter:
Fiscal Quarter Ending Ratio
--------------------- -----
3/31/96 and each fiscal quarter thereafter 2.00:1
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<PAGE>
EXHIBIT 4.13
WARRANT PURCHASE AND SENIOR
SUBORDINATED NOTE TERMINATION AGREEMENT
This Warrant Purchase and Senior Subordinated Note Termination
Agreement (this "Agreement") is dated as of December 30, 1996 and is made by and
between BankAmerica Capital Corporation, a Delaware corporation and successor to
Continental Illinois Equity Corporation ("BACC"), and ELXSI Corporation, a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of that certain Stock and Note
Purchase Agreement dated as of August 31, 1989 (the "1989 Stock and Note
Purchase Agreement") by and among The Airlie Group L.P., a Delaware limited
partnership ("Airlie"), Milley & Company, a Delaware corporation ("Milley"), and
the Company and pursuant to that certain Stock and Note Purchase Agreement dated
as of January 23, 1990 (the "1990 Stock and Note Purchase Agreement") by and
among BACC, the Company, Airlie and Milley, the Company has (i) issued to BACC
that certain Series B Warrant No. B-1 to Purchase 604,656 shares of Series A
NonVoting Convertible Preferred Stock of the Company (the "Warrant"), (ii)
issued to BACC that certain Senior Subordinated Note dated September 25, 1989 in
the original principal amount of $401,765 (the "1989 Subordinated Note") and
(iii) issued to BACC that certain Senior Subordinated Note dated June 27, 1991
in the original principal amount of $502,206.25 (the "1991 Subordinated Note"
and, together with the 1989 Subordinated Note, the "Subordinated Notes"); and
WHEREAS, the Company desires to purchase the Warrant from BACC
and BACC desires to sell the Warrant to the Company, and the Company desires to
pay in full all indebtedness and other obligations owing to BACC under the
Subordinated Notes and to terminate the Subordinated Notes, all on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and for other good and valuable
consideration the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. Capitalized terms used but not defined
herein shall have the respective meanings given to such terms in the Warrant
or, as applicable, in the Subordinated Notes.
2. Extension of Warrant Expiration Date. The Company and
BACC hereby agree that the definition of "Expiration Date" as set forth in the
Warrant is hereby amended to be "December 31, 1996".
3. Warrant Purchase. The Company agrees to pay to BACC on
the date of this Agreement in immediately available funds by wire transfer to
an account specified in writing by BACC the amount of Four Hundred Seventy-Seven
Thousand Six Hundred Seventy-Eight Dollars and Twenty-Four Cents ($477,678.24)
(the "Warrant Purchase Payment"). BACC agrees
<PAGE>
to surrender and deliver for cancellation the Warrant to the Company within 5
Business Days from the date hereof. Upon receipt of the Warrant Purchase
Payment, BACC agrees that BACC shall have no further rights under the Warrant.
4. Prepayment and Termination of Subordinated Notes. The
Company agrees to pay BACC on the date of this Agreement in immediately
available funds by wire transfer to an account specified in writing by BACC the
amount of Seven Hundred Fifty-Seven Thousand One Hundred Ninety Dollars and
Eighty-Three Cents ($757,190.83) (the "Subordinated Notes Payoff Amount"), which
amount includes all principal and accrued and unpaid interest through but not
including the date of this Agreement and which payment shall constitute payment
in full of the Subordinated Notes. BACC agrees to surrender and deliver for
cancellation the Subordinated Notes to the Company within 5 Business Days from
the date hereof. Upon receipt of the Subordinated Notes Payoff Amount, BACC
agrees that the Subordinated Notes will be paid in full and that the
Subordinated Notes shall be terminated. In consideration of the prepayment of
the Subordinated Notes by the Company hereunder, BACC hereby waives the
prepayment charge specified in Section 1.3 of the Subordinated Notes.
5. (a) Representations and Warranties of the Company. As a
material inducement to the execution by BACC of this Agreement, the Company
hereby represents and warrants to BACC as follows:
(i) The Company has all requisite power and authority
(corporate and otherwise) to execute, deliver and perform its
obligations under this Agreement.
(ii) The execution, delivery and performance by the
Company of this Agreement does not and will not (i) violate any
provisions of any law, rule, regulation, order, writ, judgment, decree,
determination or award having applicability to the Company or (ii)
conflict with or result in a breach of or constitute a default under the
articles of incorporation or by-laws of the Company or any indenture,
loan agreement or any other agreement or instrument to which the Company
is a party or by which the Company or any of its properties may be bound
or affected.
(iii) The execution and delivery of this Agreement have
been duly authorized by the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement.
This Agreement constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other similar laws affecting the enforcement of
creditors' rights generally and to general equitable principles.
(iv) The Company has sufficient knowledge, experience
and sophistication to enable it to properly and fully evaluate and
understand the merits and risks associated with its purchase of the
Warrant. The Company is acquiring the Warrant for investment only and
with no present intention of distributing or reselling such Warrant
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<PAGE>
or any part thereof in any transaction that would constitute a
"distribution" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). The Company understands that the Warrant
has not been registered under the Securities Act or any state securities
laws and may not be sold or transferred except in compliance therewith
or pursuant to an exemption thereunder and is being transferred to the
Company, in part, in reliance on the foregoing representations and
warranties.
(b) Representations and Warranties of BACC. As an
inducement to the execution by the Company of the Agreement, BACC
hereby represents and warrants to the Company as follows:
(i) BACC has all requisite power and authority
(corporate and otherwise) to execute, deliver and perform its
obligations under this Agreement.
(ii) The execution and delivery of this Agreement have
been duly authorized by BACC. This Agreement constitutes the legal,
valid and binding obligation of BACC, enforceable against BACC in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws effecting the
enforcement of creditors' rights generally and to general equitable
principles.
(iii) BACC: (A) has sufficient knowledge, experience
and sophistication to enable it to properly and fully evaluate and
understand the merits and risks associated with its sale of the Warrant
hereunder, (B) is an "accredited investor" (as such term is defined in
Rule 5.01(a) of Regulation D of the Securities Act), and (c) has, prior
to the date hereof, received all information concerning the Company
requested by it, and had the opportunity to ask questions and receive
answers concerning the same.
6. Transfer of Warrant. In consideration of the sale by BACC of
the Warrant to the Company hereunder, the Company hereby waives the requirements
of Sections 3 and 9 of the Warrant, including, without limitation, notice to the
Company of the proposed transfer of the Warrant and the delivery to the Company
by BACC of an opinion of counsel.
7. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement.
8. Notices. All notices and other communications shall be in
writing and shall be delivered by reputable overnight courier or first-class
mail, postage prepaid, to the Company or BACC at the respective addresses set
forth on the signature page hereto or to such other address as one party may
have furnished to the others in writing.
9. Assignment. This Agreement may not be assigned without the
prior written consent of the parties hereto.
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<PAGE>
10. Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws (excluding choice or
conflicts of laws rules) of the State of Illinois.
11. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which taken
together constitute one instrument.
[signature page follows]
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<PAGE>
ELXSI CORPORATION
By: ______________________________________
Name:_____________________________________
Title:____________________________________
Address:
4209 Vineland Road
Suite J-1
Orlando, Florida 32811
Attention: President
BANKAMERICA CAPITAL CORPORATION
By: ______________________________________
Name:_____________________________________
Title:____________________________________
Address:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Middle Market I
SIGNATURE PAGE S-1
<PAGE>
EXHIBIT 10.24
===============================================================================
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 9, 1995
BETWEEN
AZIMUTH CORPORATION
and
BANK OF AMERICA ILLINOIS
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND OTHER TERMS.............................................. 2
1.1 Definitions......................................................... 2
1.2 Other Definitional Provisions....................................... 12
1.3 Interpretation of Agreement......................................... 13
1.4 Compliance with Financial Restrictions.............................. 13
2. LOANS; OTHER MATTERS..................................................... 13
2.1 Term Loan........................................................... 13
2.2 Loan Account; Demand Deposit Account................................ 13
2.3 Interest and Fees................................................... 14
2.3.1 Interest................................................... 14
2.3.2 Additional Fee............................................. 14
2.3.3 Method of Calculating Interest and Fees.................... 14
2.3.4 Payment of Interest and Fees................................14
2.4 Note ............................................................ 14
2.5 One Obligation...................................................... 14
2.6 Making of Payments; Application of Collections;
Charging of Accounts........................................ 15
2.7 Lender's Election Not to Enforce.................................... 16
2.8 Setoff ............................................................ 16
2.9 Refinancing Fee..................................................... 17
3. COLLATERAL............................................................... 17
3.1 Grant of Security Interest.......................................... 17
3.2 Accounts Receivable................................................. 18
3.3 Inventory........................................................... 22
3.4 Equipment........................................................... 23
3.5 Supplemental Documentation.......................................... 23
3.6 Other Security...................................................... 24
4. REPRESENTATIONS AND WARRANTIES........................................... 24
4.1 Organization........................................................ 24
4.2 Authorization....................................................... 25
4.3 No Conflicts........................................................ 25
4.4 Validity and Binding Effect......................................... 25
4.5 No Default.......................................................... 25
4.6 Financial Statements................................................ 26
4.7 Insurance........................................................... 26
4.8 Litigation; Contingent Liabilities.................................. 26
4.9 Liens ............................................................ 26
4.10 Subsidiaries....................................................... 27
4.11 Partnerships; Joint Ventures....................................... 27
4.12 Business and Collateral Locations.................................. 27
4.13 Real Property...................................................... 28
4.14 [Intentionally Left Blank.]........................................ 28
i
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PAGE
4.15 Control of Collateral; Lease of Property.......................... 28
4.16 Patents, Trademarks, etc.......................................... 28
4.17 Solvency.......................................................... 28
4.18 Contracts; Labor Matters.......................................... 28
4.19 Pension and Welfare Plans......................................... 29
4.20 Regulation U...................................................... 30
4.21 Compliance........................................................ 30
4.22 Taxes ........................................................... 30
4.23 Investment Company Act Representation............................. 30
4.24 Public Utility Holding Company Act
Representation.................................................. 30
4.25 Environmental and Safety and Health Matters....................... 30
4.26 Related Agreements................................................ 31
5. BORROWER COVENANTS....................................................... 32
5.1 Financial Statements and Other Reports............................. 32
5.1.1 Financial Reports......................................... 32
(a) Annual Audit Report................................. 32
(b) Quarterly Financial Statement....................... 32
(c) Monthly Financial Statement......................... 32
(d) Officer's Certificate............................... 33
5.1.2 Other Reports............................................. 33
(a) SEC and Other Reports............................... 33
(b) Report of Change Relating to
Borrower, Subsidiaries, Partnerships
or Joint Ventures................................... 33
(c) Patents, etc........................................ 33
(d) Other Reports....................................... 33
5.2 Notices ........................................................... 33
(a) Default...................................................34
(b) Litigation................................................34
(c) Judgment..................................................34
(d) Pension Plans and Welfare Plans...........................34
(e) Business and Collateral Information.......................34
(f) Change of Name or Status..................................35
(g) Insurance Information.....................................35
(h) Environmental and Safety and Health
Matters...................................................35
(i) Material Adverse Change...................................35
(j) Default by Others.........................................35
(k) Moveable Collateral.......................................35
(l) Change in Management or Line(s) of
Business..................................................36
(m) Other Notices.............................................36
5.3 Existence...........................................................36
5.4 Nature of Business..................................................36
ii
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PAGE
5.5 Books, Records and Access..........................................36
5.6 Insurance..........................................................37
5.7 Insurance Survey...................................................38
5.8 Repair ...........................................................38
5.9 Taxes ...........................................................38
5.10 Compliance........................................................39
5.11 Pension Plans.....................................................39
5.12 Merger, Purchase and Sale.........................................39
5.13 Restricted Payments...............................................40
5.14 Borrower's and Subsidiaries' Stock................................41
5.15 Indebtedness......................................................41
5.16 Liens ...........................................................42
5.17 Guaranties........................................................42
5.18 Investments.......................................................42
5.19 Subsidiaries......................................................43
5.20 Leases ...........................................................43
5.21 Change in Accounts Receivable.....................................43
5.22 Future Environmental Assessments..................................43
5.23 [Intenionally Left Blank].........................................44
5.24 Unconditional Purchase Options....................................44
5.25 Use of Proceeds...................................................44
5.26 Transactions with Related Parties................................ 44
5.27 Modification of Subordinated Debt, etc............................45
5.28 Restrictive Agreements............................................45
5.29 Inconsistent Agreements...........................................45
5.30 Stock Appreciation Plan...........................................45
6. DEFAULT.................................................................. 46
6.1 Event of Default...................................................46
(a) Non-Payment.................................................46
(b) Non-Payment of Other Indebtedness...........................46
(c) Acceleration of Other Indebtedness..........................46
(d) Other Obligations...........................................46
(e) Insolvency..................................................47
(f) Pension Plans...............................................47
(g) Non-Compliance With This Agreement..........................48
(h) Non-Compliance With Related Agreements......................48
(i) Warranty....................................................48
(j) Litigation..................................................48
(k) Validity....................................................48
(l) Conduct of Business.........................................49
(m) Board Membership............................................49
(n) Material Adverse Change.....................................49
(o) Other Loan Agreements.......................................49
6.2 Effect of Event of Default; Remedies...............................49
iii
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PAGE
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S
RIGHTS............................................................. 50
7.1 Notice of Disposition of Collateral.......................... 50
7.2 Application of Proceeds of Collateral........................ 50
7.3 Care of Collateral........................................... 51
7.4 Performance of Borrower's Obligations........................ 51
7.5 Lender's Rights.............................................. 51
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS............................................................ 52
8.1 Conditions Precedent.................................. 52
8.1.1 Security Interest.............................. 52
8.1.2 Financial Statements........................... 52
8.1.3 Other Loan Agreements.......................... 52
8.1.4 Blocked Account; Lock Box...................... 52
8.1.5 Effect of Law.................................. 52
8.1.6 Exhibits; Schedules............................ 52
8.1.7 Fees........................................... 53
8.1.8 Documents...................................... 53
(a) Resolutions...................................... 53
(b) Incumbency Certificates.......................... 53
(c) Borrower's Certificate........................ 53
(d) Accountant's Letter........................... 53
(e) Bylaws........................................ 54
(f) Charter....................................... 54
(g) Registration; Good Standing................... 54
(h) Legal Opinion................................. 54
(i) Insurance..................................... 54
(j) Landlord's Consents........................... 54
(k) Note............................................. 54
(l) Guaranty......................................... 54
(m) Pledge Agreement................................. 54
(n) Other Documents............................... 55
8.2 Further Conditions Precedent; Certification........... 55
(a) No Change in Condition........................ 55
(b) Default....................................... 55
(c) Insurance..................................... 55
(d) Warranties.................................... 55
(e) Accounting Methods............................ 55
9. INDEMNITY............................................................... 56
9.1 Environmental and Safety and Health Indemnity......... 56
9.2 General Indemnity..................................... 56
9.3 Capital Adequacy...................................... 57
9.4 Other Indemnities..................................... 57
iv
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PAGE
10. ADDITIONAL PROVISIONS................................................... 57
11. GENERAL..................................................................58
11.1 Borrower Waiver................................................58
11.2 Power of Attorney..............................................58
11.3 Expenses; Attorneys' Fees......................................59
11.4 Lender Fees and Charges........................................60
11.5 Lawful Interest................................................60
11.6 No Waiver by Lender; Amendments................................60
11.7 Termination of Credit..........................................60
11.8 Notices........................................................61
11.9 Assignments and Participations; Information....................61
11.10 Severability..................................................62
11.11 Successors....................................................62
11.12 Construction..................................................62
11.13 Consent to Jurisdiction.......................................62
11.14 Subsidiary Reference..........................................62
11.15 WAIVER OF JURY TRIAL..........................................63
11.16 Prior Actions.................................................63
12. BORROWER GUARANTY....................................................63
12.1 Guaranty of Payment............................................63
12.2 Obligations Absolute, Unconditional, etc.......................63
12.3 Waiver of All Defenses.........................................65
12.4 Payment, etc., by Borrower.....................................67
12.5 Subrogation....................................................68
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LIST OF EXHIBITS AND SCHEDULES
Exhibits:
Exhibit A [Reserved]
Exhibit B [Reserved]
Exhibit C Form of Term Note
Exhibit D Form of Insurance Endorsement (ss.5.6)
Exhibit E Form of Pledge Agreement
Exhibit F [Reserved]
Exhibit G Form of Guaranty
Exhibit H Form of Landlord's Consent
Exhibit I Form of Borrower's Counsel Opinion (ss.8.1.8(h))
Schedules:
Schedule 4.1 Borrower Trade Names, State of Incorporation
& Qualification
Schedule 4.3 Schedule of Conflicts
Schedule 4.5 Schedule of Defaults
Schedule 4.7 Insurance Summary
Schedule 4.8 Schedule of Litigation & Contingent Liabilities
Schedule 4.9 Schedule of Liens
Schedule 4.10 Schedule of Subsidiaries
Schedule 4.11 Schedule of Partnerships & Joint Ventures
Schedule 4.12 Schedule of Business & Collateral Locations
Schedule 4.13 Schedule of Real Property Descriptions and
Owners
Schedule 4.15 Schedule of Leases
Schedule 4.16 Schedule of Patents, Trademarks & Copyrights
Schedule 4.18 Schedule of Labor Matters
Schedule 4.19 Schedule of Contingent Employee Benefit Plan
Liabilities
Schedule 4.21 Schedule of Noncompliance
Schedule 4.25 Schedule of Environmental Matters
Schedule 5.13 Schedule of Restricted Payments
Schedule 5.15 Schedule of Indebtedness
Schedule 5.18 Schedule of Investments
Schedule 5.28 Schedule of Restrictive Agreements
vi
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as from
time to time amended, modified or supplemented, this "Agreement") is made as of
the 9th day of October, 1995 by and between BANK OF AMERICA ILLINOIS (formerly
Continental Bank N.A.), an Illinois banking corporation, having its principal
office at 231 South LaSalle Street, Chicago, Illinois 60697 ("Lender"), and
AZIMUTH CORPORATION, a Delaware corporation ("Borrower").
RECITALS
1. On January 16, 1991, Borrower and Lender entered into a Loan
Agreement (such Loan Agreement, as amended to the date hereof, being herein
referred to as the "Original Loan Agreement"; and the other capitalized terms
used herein shall have the meanings set forth in Section 1.1) pursuant to which
Lender has made revolving loans and a term loan to Borrower.
2. Borrower and Lender desire that the Original Loan Agreement be
amended and restated on the terms and conditions set forth herein to, among
other things, set forth the terms and conditions under which Lender hereafter
will extend Loans to Borrower; it being the intention of Borrower and Lender
that this Agreement and the execution and delivery of any substituted promissory
notes not effect a novation of the obligations of Borrower to Lender under the
Original Loan Agreement but merely a restatement and, where applicable, a
substitution of the terms governing and evidencing such obligations hereafter.
3. As security for the loans made or to be made by Lender to, or for
the account of, Borrower, (a) Borrower has caused Borrower's Subsidiaries,
Delaware Electro Industries, Inc., a Delaware corporation ("Delaware"), Contempo
Design, Inc., an Illinois corporation ("Contempo"), and Contempo Design West,
Inc., a Delaware corporation ("Contempo West"), to grant Lender a lien on, and a
security interest in, all of their respective assets, (b) Borrower has executed
and delivered a pledge of all or a majority of the issued and outstanding
capital stock of Delaware, Contempo and Contempo West, and (c) Delaware,
Contempo and Contempo West have executed a guaranty whereby such companies
jointly and severally guaranty the full and prompt payment and performance of
all obligations of Borrower to Lender in connection with the Original Loan
Agreement.
4. Concurrently with the consummation of the transactions
contemplated hereby, each of Delaware, Contempo and Contempo West will enter
into a Loan and Security Agreement and related
<PAGE>
documentation with Lender whereby Delaware, Contempo and Contempo West shall
each assume a portion of the "Liabilities" under and as defined in the Original
Loan Agreement that are represented by "Revolving Loans" under and as defined in
the Original Loan Agreement. Borrower shall guarantee the payment and
performance of such assumed liabilities and all other obligations of Delaware,
Contempo and Contempo West to Lender (and each such entity shall guarantee the
payment and performance of all obligations of the other such entities to
Lender).
Accordingly, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the Original Loan
Agreement is hereby amended and restated in its entirety, and the parties hereto
agree, as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" shall mean any Person who is or who may
become obligated to Borrower or any other Obligor, as applicable, under, with
respect to, or on account of an Account Receivable, Contract Right, General
Intangible or other Collateral or Third
Party Collateral.
"Account Receivable" shall mean any account of Borrower and
any other right of Borrower or any other Obligor, as applicable, to payment,
whether or not evidenced by an instrument or chattel paper and whether or not
yet earned by performance (excluding any Contract Right).
"Assignee Deposit Account" shall have the meaning ascribed to
such term in Section 3.2(d).
"Attorneys' Fees" shall mean the reasonable value of the
services (and reasonable costs, charges and expenses related thereto) of the
attorneys (and all paralegals, secretaries, accountants and other staff employed
by such attorneys) employed by Lender (including, but not limited to, attorneys
and paralegals who are employees of Lender) from time to time (i) in connection
with the negotiation, preparation, execution, delivery, administration and
enforcement of this Agreement, any Related Agreement, any Supplemental
Documentation and all other documents or instruments provided for herein or in
any thereof or delivered or to be delivered hereunder or under any thereof or in
connection herewith or with any thereof, (ii) to prepare documentation related
to the Loans made and other Liabilities incurred hereunder, (iii) to
2
<PAGE>
prepare any amendment to or waiver under this Agreement or any Related Agreement
and any documents or instruments related thereto, (iv) to represent Lender in
any litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene in any litigation, contest, dispute, suit or proceeding or to file a
petition, complaint, answer, motion or other pleading, or to take any other
action in or with respect to, any litigation, contest, dispute, suit or
proceeding (whether instituted by Lender, Borrower or any other Person and
whether in bankruptcy or otherwise) in any way or respect relating to the
Collateral, any Third Party Collateral, this Agreement or any Related Agreement,
or Borrower's or any other Obligor's or any Subsidiary's affairs, (v) to
protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral or any Third Party Collateral, (vi) to attempt to enforce any
security interest in any of the Collateral or any Third Party Collateral or to
give any advice with respect to such enforcement and (vii) to enforce any of
Lender's rights to collect any of the Liabilities.
"Banking Day" shall mean any day other than a Saturday, Sunday
or legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois.
"Borrower" -- see Preamble.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed to also refer to any successor
sections.
"Collateral" shall have the meaning ascribed to such term in
Section 3.1, and, where the context requires, shall include "Collateral" as such
term is defined in each Other Loan Agreement.
"Consolidated Net Worth" at any date shall mean the excess of
(a) the sum of capital stock, additional paid-in capital, retained earnings (or
minus accumulated deficit) of Borrower and its Subsidiaries, all as would be
shown on a consolidated balance sheet of Borrower and its Subsidiaries,
determined in accordance with GAAP, prepared at such date (including minority
interests reflected in such balance sheet) over (b) any item which shall not
have been classified in such consolidated balance sheet as a liability but which
is included within "Indebtedness" as defined herein.
3
<PAGE>
"Consolidated Senior Debt-Equity Ratio" at any time shall mean
the ratio, expressed as a percentage, of (a) all Indebtedness of Borrower and
its Subsidiaries representing any borrowing or financing (excluding Subordinated
Debt and intercompany Indebtedness) to (b) the sum of (i) Consolidated Net Worth
plus (ii) Subordinated Debt.
"Consolidated Senior Interest Coverage Ratio" for any period
shall mean the ratio, expressed as a percentage, of (a) the sum of (i) the
consolidated pre-tax net income of Borrower and its Subsidiaries for such period
plus (ii) consolidated interest expense (including imputed interest expense) of
Borrower and its Subsidiaries during such period with respect to all
Indebtedness of Borrower and its Subsidiaries representing any borrowing or
financing (excluding intercompany Indebtedness) plus (iii) consolidated goodwill
amortization of Borrower and its Subsidiaries during such period plus (iv)
consolidated depreciation expense of Borrower and its Subsidiaries during such
period to (b) the amount calculated pursuant to clause (a)(ii) of this
definition (excluding interest expense with respect to Subordinated Debt).
"Consolidated Total Debt-Equity Ratio" at any time shall mean
the ratio, expressed as a percentage, of (a) all Indebtedness of Borrower and
its Subsidiaries representing any borrowing or financing (excluding intercompany
Indebtedness) to (b) Consolidated Net Worth.
"Consolidated Total Interest Coverage Ratio" for any period
shall mean the ratio, expressed as a percentage, of (a) the sum of (i)
consolidated pre-tax net income of Borrower and its Subsidiaries for such period
plus (ii) consolidated interest expense (including imputed interest expense) of
Borrower and its Subsidiaries during such period with respect to all
Indebtedness of Borrower and its Subsidiaries representing any borrowing or
financing (excluding intercompany Indebtedness) plus (iii) consolidated goodwill
amortization of Borrower and its Subsidiaries during such period plus (iv)
consolidated depreciation expense of Borrower and its Subsidiaries during such
period to (b) the amount calculated pursuant to clause (a)(ii) of this
definition.
"Contempo" -- see Recitals.
"Contempo Amsterdam" shall mean Contempo Design Europe B.V., a
Dutch corporation 90% owned by Contempo and 10% owned by an employee thereof.
"Contempo West" -- see Recitals.
"Contract Right" shall mean any right of Borrower to payment
under a contract, which right is not yet earned by performance and not evidenced
by an instrument or chattel paper.
4
<PAGE>
"Credit" shall mean the facility established under this
Agreement pursuant to which Lender will make Loans to Borrower.
"Default" shall mean any event or condition which, with the
lapse of time or giving of notice to Borrower or both, would constitute an Event
of Default.
"Default Rate" shall mean, with respect to a Loan, the rate of
interest which is applicable to such Loan after any amount thereof is not paid
when due, whether by acceleration or otherwise, as determined pursuant to
Supplement A.
"Delaware" -- see Recitals.
"Demand Deposit Account" shall have the meaning ascribed to
such term in Section 2.2.
"Environmental Laws" shall mean the Clean Air Act of 1970, as
amended, 42 U.S.C. ss.7401 et seq., the Clean Water Act, as amended, 33 U.S.C.
ss.1251 et seq., the Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. ss.6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.,
any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act,
15 U.S.C. ss.2601 et seq., and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree or other written legal
requirement regulating, relating to, or imposing liability or standards of
conduct (including, but not limited to, permit requirements, emission or
effluent restrictions and other requirements relating to manufacturing,
processing, generation, distribution, use, treatment, storage, disposal,
clean-up, transport or handling) concerning any Hazardous Materials or any
hazardous, toxic or dangerous waste, substance or constituent, or any noise,
odor, waste, radiation, pollutant or contaminant or other substance, whether
solid, liquid or gas, as now or at any time hereafter in effect.
"Environmental Lien" shall mean a Lien in favor of any entity
for (1) any liability under any Environmental Law or (2) damages arising from or
costs incurred by such governmental entity in response to a spillage, disposal
or release into the environment of any Hazardous Material or any hazardous,
toxic or dangerous waste, substance or constituent, or any pollutant or
contaminant or other substance.
"Equipment" shall mean all equipment of every description,
including, without limitation, fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefor and replacements
thereof.
5
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any corporation, partnership, or
other trade or business (whether or not incorporated) that is, along with
Borrower, a member of a controlled group of corporations or a controlled group
of trades or businesses, as described in sections 414(b) and 414(c),
respectively, of the Code or section 4001 of ERISA, or a member of the same
affiliated service group within the meaning of section 414(m) of the Code.
"Event of Default" shall have the meaning ascribed to such
term in Section 6.1.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System or any successor thereto.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year.
"Fiscal Year" shall mean any period of 12 consecutive calendar
months ending on the last day of December.
"Fixtures" shall mean all fixtures of Borrower or any other
Obligor, as applicable, of every description and all substitutions and
replacements of any thereof.
"Fuse World" shall mean Fuse World, Inc., an Ohio
corporation.
"Fuse World Acquisition" shall mean (i) the acquisition by
Delaware of the outstanding capital stock of Fuse World substantially on the
terms set forth in the Fuse World Letter of Intent and (ii) the subsequent
dissolution or merger of Fuse World into Delaware; provided, however, that if an
acquisition merger is agreed to by Fuse World, then "Fuse World Acquisition"
shall mean the acquisition by merger of Fuse World by Delaware substantially on
the terms set forth in the Fuse World Letter of Intent.
"Fuse World Letter of Intent" shall mean that certain letter
dated August 15, 1995 from Steven D. Hollopeter, President of Delaware, to
Curtis Marling, President of Fuse World, a copy of which has been presented to
Lender.
"GAAP" shall mean generally accepted accounting principles as
applied in the preparation of the audited financial statements of Borrower
referred to in Section 4.6.
6
<PAGE>
"General Intangibles" shall mean all of Borrower's intangible
personal property, including things in action, causes of action and all other
personal property of Borrower of every kind and nature (other than accounts,
inventory, equipment, chattel paper, documents, instruments and money),
including, without limitation, corporate or other business records, inventions,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, security interests, security deposits or other security held
by or granted to Borrower to secure any payment from an Account Debtor, and any
rights to indemnification.
"Guaranteed Obligations" shall have the meaning ascribed to
such term in Section 12.1.
"Guaranty" shall have the meaning ascribed to such term in
Section 3.6.
"Hazardous Materials" shall mean any toxic substance,
hazardous substance, hazardous material, hazardous chemical or hazardous waste
defined or qualifying as such in (or for the purposes of) any Environmental Law,
or any pollutant or contaminant, and shall include, but not be limited to,
petroleum, including crude oil or any fraction thereof which is liquid at
standard conditions of temperature or pressure (60 degrees fahrenheit and 14.7
pounds per square inch absolute), any radioactive material, including, but not
limited to, any source, special nuclear or by-product material as defined at 42
U.S.C. ss.2011 et seq., as amended or hereafter amended, polychlorinated
biphenyls and asbestos in any form or condition.
"Impermissible Qualification" shall mean, relative to the
opinion or certification of any public accounting firm as to any financial
statement of any Obligor, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to
its removal, would require an adjustment to such item the
effect of which would be to cause such Obligor to be in
default of any of its obligations under Section 3.1 of
Supplement A.
7
<PAGE>
"Indebtedness" of any Person shall mean, without duplication,
(i) any obligation of such Person for borrowed money, including, without
limitation, (a) any obligation of such Person evidenced by bonds, debentures,
notes or other similar debt instruments and (b) any obligation for borrowed
money which is non-recourse to the credit of such Person but which is secured by
a Lien on any asset of such Person, (ii) any obligation of such Person on
account of deposits or advances, (iii) any obligation of such Person for the
deferred purchase price of any property or services, except Trade Accounts
Payable, (iv) any obligation of such Person as lessee under a Capitalized Lease
and (v) any Indebtedness of another Person secured by a Lien on any asset of
such first Person, whether or not such Indebtedness is assumed by such first
Person. For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or joint venturer.
"Inventory" shall mean any and all goods (including, without
limitation, goods in transit) of Borrower or any other Obligor, as applicable,
wheresoever located, which are or may at any time be leased to a lessee, held
for sale or lease or furnished under any contract of service by, or held as raw
materials, work in process, or supplies or materials used or consumed in the
business of, Borrower, or which are held for use in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
and all goods the sale or other disposition of which has given rise to an
Account Receivable, Contract Right or General Intangible and which are returned
to and/or repossessed and/or stopped in transit by Borrower or Lender or any
agent or bailee of any of them, and all documents of title or other documents
representing the same.
"Investment" of any Person shall mean any investment, made in
cash or by delivery of any kind of property or asset, in any other Person,
whether by acquisition of shares of stock or similar interest, Indebtedness or
other obligation or security, or by loan, advance or capital contribution, or
otherwise.
"Landlord's Consent" shall mean a Landlord's Consent
substantially in the form of Exhibit H, with appropriate insertions, or such
other form as shall be acceptable to Lender, as it may be amended or modified
from time to time.
"Lender" -- see Preamble.
"Liabilities" shall mean all of the liabilities, obligations,
reimbursement obligations in connection with any letter of credit, and
indebtedness of Borrower, Delaware, Contempo, Contempo West, any other
Subsidiary or any other Obligor to Lender of any kind or nature, however
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter
8
<PAGE>
existing or due or to become due, and including but not limited to (i)
Borrower's obligations under any Note, (ii) Borrower's obligations under this
Agreement, (iii) interest, charges, expenses, Attorneys' Fees and other sums
chargeable to Borrower by Lender under this Agreement or any Related Agreement,
(iv) the obligations of Borrower, Delaware, Contempo, Contempo West, any other
Subsidiary or any other Obligor under any Related Agreement, including
obligations of performance and (v) the Guaranteed Obligations. "Liabilities"
shall also include any and all amendments, extensions, renewals, refundings or
refinancings of any of the foregoing.
"Lien" shall mean any mortgage, pledge, hypothecation,
judgment lien or similar legal process, title retention lien, or other lien,
encumbrance or security interest, including, without limitation, the interest of
a vendor under any conditional sale or other title retention agreement and the
interest of a lessor under any Capitalized Lease.
"Loan" shall mean the Term Loan made pursuant to Section 2.1
and any other loan or advance made to Borrower by Lender under or pursuant to
this Agreement.
"Loan Account" shall have the meaning ascribed to such term in
Section 2.2.
"Margin Stock" shall have the meaning ascribed to such term in
Regulation U of the Federal Reserve Board or any regulation substituted
therefor, as in effect from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is maintained for employees of
Borrower, any other Obligor or any ERISA Affiliate.
"Note" shall mean the Term Note and any other promissory note
of Borrower evidencing any loan or advance made by Lender to Borrower pursuant
to this Agreement.
"Obligor" shall mean Borrower and each other Person who is or
shall become primarily or secondarily liable on any of the Liabilities, or who
grants to Lender a Lien on any property of such Person as security for any of
the Liabilities.
"Occupational Safety and Health Law" shall mean the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et
seq., and any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning employee health and/or safety.
"Original Loan Agreement" - see Recitals.
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"Other Loan Agreements" shall mean the Loan and Security
Agreement dated as of the date hereof between Lender and Contempo, the Loan and
Security Agreement dated as of the date hereof between Lender and Contempo West
and the Loan and Security Agreement dated as of the date hereof between Lender
and Delaware, in each case as the same may be amended, supplemented or otherwise
modified from time to time.
"Other Loan Documents" shall mean the "Related Agreements"
and the "Supplemental Documentation" as defined in each Other Loan
Agreement.
"Participant" shall mean any Person, now or at any time or
times hereafter, participating with Lender in the Loans made to Borrower
pursuant to this Agreement or any Related Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean a "pension plan," as such term is
defined in Section 3(2) of ERISA, which is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which Borrower, any other
Obligor or any ERISA Affiliate may have any liability, including any liability
by reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, or government (whether national, federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Pledge Agreement" shall have the meaning ascribed to such
term in Section 3.6.
"Post-Retirement Welfare Plans" shall have the meaning
ascribed to such term in Section 4.19.
"Reference Rate" shall mean, at any time, the rate of interest
then most recently announced by Lender at Chicago, Illinois as its reference
rate (of which announcements Lender shall give notice promptly to Borrower).
Each change in the interest rate on any Loan shall take effect on the effective
date of the change in the Reference Rate.
"Refinancing Fee" shall have the meaning ascribed to such term
in Section 2.9.
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"Related Agreement" shall mean any agreement, instrument or
document (including, without limitation, notes, guarantees, mortgages, deeds of
trust, chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter delivered to Lender with respect to or in
connection with or pursuant to this Agreement or any of the Liabilities, and
executed by or on behalf of Borrower, Delaware, Contempo, Contempo West or any
other Obligor.
"Related Party" shall mean any Person (other than a
Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, Borrower, (ii)
which beneficially owns or holds ten percent (10%) or more of the equity
interest of Borrower or (iii) ten percent (10%) or more of the equity interest
of which is beneficially owned or held by Borrower or a Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Reportable Event" shall mean a "reportable event" as defined
in Section 4043(b) of ERISA and the regulations thereunder.
"Restatement Date" shall mean the date this Agreement becomes
effective pursuant to Section 8.
"Stock Appreciation Plan" shall have the meaning ascribed to
such term in Section 5.15.
"Subordinated Debt" shall mean (i) those certain 10%
Subordinated Promissory Notes due October 30, 1994 of Borrower in the aggregate
original principal amount of $1,525,000; (ii) that certain $300,000 subordinated
note of Borrower payable to the order of Milley Management Incorporated, a
Delaware corporation; and (iii) that portion of any other liabilities,
obligations or Indebtedness of Borrower which contains terms reasonably
satisfactory to Lender and is subordinated, in a manner reasonably satisfactory
to Lender, as to right and time of payment of principal and interest thereon, to
all of the Liabilities.
"Subsidiary" shall mean any Person of which or in which
Borrower and its other Subsidiaries own directly or indirectly 50% or more of
(i) the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of directors
of such Person, if it is a corporation, (ii) the capital interest or profits
interest of such Person, if it is a partnership, joint venture or similar entity
or
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(iii) the beneficial interest of such Person, if it is a trust, association or
other unincorporated organization.
"Supplemental Documentation" shall have the meaning ascribed
to such term in Section 3.5.
"Taxes" with respect to any Person shall mean taxes,
assessments or other governmental charges or levies imposed upon such Person,
its income or any of its properties, franchises or assets.
"Term Loan" shall have the meaning ascribed to such term in
Section 2.1.
"Term Note" shall have the meaning ascribed to such term in
Section 2.4.
"Termination Date" shall mean August 31, 1996 or such later
date to which the Termination Date may be extended pursuant to Section 11.7.
"Third Party Collateral" shall mean any property of any Person
other than Borrower which secures payment or performance of any Liabilities and,
where the context requires, shall include "Third Party Collateral" under each
Other Loan Agreement.
"Trade Accounts Payable" of any Person shall mean trade
accounts payable of such Person with a scheduled maturity of not greater than 90
days incurred in the ordinary course of such Person's business.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Illinois, and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time. References to sections
of the UCC shall be construed to also refer to any successor sections.
1.2 Other Definitional Provisions. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or in
any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any Note
or in any certificate or other document made or delivered pursuant hereto. Terms
used in this Agreement which are defined in any Supplement or Exhibit hereto
shall, unless the context otherwise indicates, have the meanings given them in
such Supplement or Exhibit. Other terms used in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
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1.3 Interpretation of Agreement. A Section, an Exhibit or a Schedule
is, unless otherwise stated, a reference to a section hereof, an exhibit hereto
or a schedule hereto, as the case may be. Section captions used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement. The words "hereof," "herein," "hereto" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Reference to "this
Agreement" shall include the provisions of Supplement A.
1.4 Compliance with Financial Restrictions. Compliance with each of the
financial ratios and restrictions contained in Section 5 or Supplement A shall,
except as otherwise provided herein, be determined in accordance with GAAP
consistently followed.
2. LOANS; OTHER MATTERS.
2.1 Term Loan.
(a) On the Restatement Date, Borrower owed Lender the
principal amount of $5,468,200.02 under the "Term Loan" under
and as defined in the Original Loan Agreement. Borrower and
Lender agree that such outstanding principal balance
constitutes the "Term Loan" hereunder as of the date hereof.
(b) Unless otherwise required to be sooner paid
pursuant to any other provision of this Agreement, the
principal of the Term Loan shall be repaid on the Termination
Date.
(c) Borrower may, upon at least three (3) Banking
Days' prior notice to Lender, prepay the principal of the Term
Loan in whole or in part without any premium or penalty. Any
partial prepayment of principal shall be in a minimum amount
of the lesser of (i) the outstanding principal balance of the
Term Loan and (ii) $50,000 or an integral multiple thereof.
Any principal of the Term Loan which is repaid may not be
reborrowed.
2.2 Loan Account; Demand Deposit Account. Lender shall
establish or cause to be established on its books in Borrower's name one or more
accounts (each a "Loan Account") to evidence Loans made to Borrower. Lender will
credit or cause to be credited to a commercial account ("Demand Deposit
Account") maintained by Borrower at Lender's 231 South LaSalle Street, Chicago,
Illinois office the amount of any sums advanced as Loans hereunder. Any amounts
advanced as Loans hereunder which are credited to Borrower's Demand Deposit
Account, together with any other amounts advanced to Borrower as a Loan pursuant
to this Agreement, will be debited to
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the applicable Loan Account and result in an increase in the principal balance
outstanding in such Loan Account in the amount thereof.
2.3 Interest and Fees.
2.3.1 Interest. The unpaid principal amount of the Loans
hereunder shall bear interest until maturity at the rates indicated in
Supplement A. Until maturity, interest on the Loans shall be paid by
Borrower on the date(s) indicated in Supplement A, and at such
maturity. After maturity, whether by acceleration or otherwise, accrued
interest shall be payable on demand.
2.3.2 Additional Fee. Borrower agrees to pay to Lender the
fee of $300,000 specified in Section 2.3.3 of the Original Loan
Agreement on the Termination Date.
2.3.3 Method of Calculating Interest and Fees. Interest on the
unpaid principal amount of each Loan shall accrue from and including
the date such Loan is made to, but not including, the date such Loan is
paid. Interest and any fees shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. All
determinations by Lender of the rate of interest applicable to any Loan
shall be rebuttable presumptive evidence of the applicable interest
rate for such Loan.
2.3.4 Payment of Interest and Fees. Lender may provide for the
payment of any unpaid non-capitalized accrued interest and any fees by
charging the Demand Deposit Account or any other bank account
maintained by Borrower with Lender.
2.4 Note. The Term Loan shall be evidenced by a promissory note
(herein, as it may from time to time be supplemented, amended or replaced,
called the "Term Note") substantially in the form set forth on Exhibit C, with
appropriate insertions, payable to the order of Lender on the Termination Date.
2.5 One Obligation. All Indebtedness and other Liabilities of Borrower
to Lender under this Agreement and any of the Related Agreements shall
constitute one general obligation secured by Lender's Lien on all of the
Collateral and Third Party Collateral and by all other Liens heretofore, now, or
at any time or times hereafter granted by Borrower or any other Obligor to
Lender. Borrower agrees that all of the rights of Lender set forth in this
Agreement shall apply to any modification of or supplement to this Agreement,
any Supplements or Exhibits hereto, and the Related Agreements, unless otherwise
agreed in writing.
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2.6 Making of Payments; Application of Collections; Charging
of Accounts.
(a) All payments hereunder shall be made without set-off or
counterclaim and shall be made to Lender in immediately available funds
(except as Lender may otherwise consent) prior to 12:30 p.m., Chicago
time, on the date due at its office at 231 South LaSalle Street,
Chicago, Illinois 60697, or at such other place as may be designated by
Lender to Borrower in writing. Any payments received after such time
shall be deemed received on the next Banking Day. Whenever any payment
to be made hereunder or under any Note shall be stated to be due on a
date other than a Banking Day, such payment shall be due on the next
succeeding Banking Day, and such extension of time shall be included in
the calculation of interest and any fees.
(b) Borrower authorizes Lender to, and Lender will, subject to
the provisions of this paragraph (b), apply the whole or any part of
any amounts received by Lender (whether deposited in the Assignee
Deposit Account of Borrower or otherwise received by Lender) from the
collection of items of payment and proceeds of any Collateral or Third
Party Collateral (whether received upon any sale or other distribution
of Collateral or Third Party Collateral by Lender or otherwise),
against the principal of and/or interest on any Loans made hereunder
and/or any other Liabilities, whether or not then due, in such order of
application as Lender may determine, unless such payments or proceeds
are, in Lender's sole and absolute discretion, released to Borrower;
provided, however, so long as no Event of Default exists and is
continuing, any such amounts received by Lender shall be applied as
follows: first, to payment of amounts then due with respect to fees
(including Attorneys' Fees), charges and expenses for which Borrower or
any other Obligor is liable pursuant to this Agreement and the Related
Agreements; second, to payment of amounts then due with respect to
interest on the Loans; third, to payment of amounts then due with
respect to principal of the Loans; fourth, to prepayment of the Term
Loan; and fifth, to the payment of the Guaranteed Obligations then due
and owing; and provided, further, that no checks, drafts or other
instruments received by Lender shall constitute final payment to Lender
unless and until such item of payment has actually been collected. All
items or amounts which are delivered to Lender by or on behalf of
Borrower or any Obligor or any Account Debtor on account of partial or
full payment or otherwise as proceeds of any of the Collateral or Third
Party Collateral (including any items or amounts which may have been
deposited to the Assignee Deposit Account) may from time to time in
Lender's sole and absolute discretion be released to Borrower or be
applied by Lender towards payment of the Liabilities, whether or not
then due, in accordance with the
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preceding sentence. Notwithstanding anything to the contrary herein,
(i) solely for purposes of determining the occurrence of an Event of
Default, all cash, checks, instruments and other items of payment shall
be deemed received upon actual receipt by Lender, unless the same is
subsequently dishonored for any reason whatsoever and (ii) solely for
purposes of interest calculation hereunder, all cash, checks,
instruments and other items of payment shall be deemed to have been
applied against the Liabilities on the second Banking Day after receipt
by Lender of available funds with respect thereto.
(c) Borrower hereby authorizes Lender to, and Lender may, in
its sole and absolute discretion, charge to Borrower at any time when
due all or any portion of any of the Liabilities including but not
limited to any Attorneys' Fees and other costs and expenses of Lender
for which Borrower or any other Obligor is liable pursuant to the terms
of this Agreement or any Related Agreement, by charging Borrower's
Demand Deposit Account or any other bank account of Borrower with
Lender; provided, however, that the provisions of this Section 2.6(c)
shall not affect the obligation of Borrower or any other Obligor to pay
when due all amounts payable by such Person under this Agreement, any
Note or any Related Agreement, whether or not there are sufficient
funds therefor in the Demand Deposit Account or any such other bank
account of Borrower. So long as no Event of Default or Default exists,
Lender shall use reasonable efforts to give Borrower prompt notice of
Liabilities paid by charging such Demand Deposit Account or other
account (but failure to give such notice shall not impose any liability
on Lender or relieve Borrower of any of its obligations).
2.7 Lender's Election Not to Enforce. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including, without limitation, any right of Lender to refrain
from making a Loan if all conditions precedent to Lender's obligation to making
such Loan have not been satisfied.
2.8 Setoff. In addition to and not in limitation of all other rights
and remedies (including other rights of offset or banker's lien) that Lender or
any other holder of any Note may have under applicable law, Lender or such other
holder shall, upon the occurrence of any Event of Default described in Section
6.1 and during the continuance thereof, or upon the occurrence of any Default
described in Section 6.1(e) and during the continuance thereof, have the right
to appropriate and apply to the payment of the Liabilities (whether or not then
due), in such order of
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application as Lender or such other holder may elect, any and all balances,
credits, deposits (general or special, time or demand, provisional or final),
accounts or moneys of Borrower then or thereafter with Lender or such other
holder. Lender shall use reasonable efforts to give Borrower prompt notice of
any appropriation and application pursuant to the preceding sentence (but
failure to give such notice shall not impose any liability on Lender or relieve
Borrower of any of its obligations).
2.9 Refinancing Fee. Borrower shall pay Lender a Refinancing Fee (as
hereinafter defined) from time to time if Borrower shall obtain any Indebtedness
or equity contributions (other than from another Obligor or Contempo Amsterdam
except if such Indebtedness or equity contribution is funded with funds obtained
by such other Obligor or Contempo Amsterdam from a non-Obligor (other than
Lender)) after the date hereof and Borrower shall at any time repay all or any
portion of the Term Loan with the proceeds of such Indebtedness or equity
contributions. As used in this Section, "Refinancing Fee" shall mean an amount
equal to the product of the amount of the repayment of the Term Loan with such
proceeds multiplied by .0125.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of all
Loans now or hereafter made by Lender to Borrower hereunder or under any Note,
and as security for the payment or other satisfaction of all other Liabilities,
Borrower hereby grants to Lender a security interest in and to the following
property of Borrower, whether now owned or existing, or hereafter acquired or
coming into existence, wherever now or hereafter located (all such property is
hereinafter referred to collectively as the "Collateral"):
(a) Accounts Receivable;
(b) Equipment and Fixtures;
(c) Inventory;
(d) General Intangibles (including all rights of Borrower
with respect to all amounts now or hereafter from time to time
loaned or advanced by Borrower to any Subsidiary);
(e) Contract Rights and documents of title;
(f) All chattel paper and instruments evidencing, arising out
of or relating to any obligation to Borrower for goods sold or leased
or services rendered, or otherwise arising out of or relating to any
property described in clauses (a) through (e) above;
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(g) Any and all balances, credits, deposits (general or
special, time or demand, provisional or final), accounts or monies of
or in the name of Borrower now or hereafter with Lender, any agent or
bailee for Lender, or any Participant, and any and all property of
every kind or description of or in the name of Borrower now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, or standing to Borrower's credit on the
books of, Lender, any agent or bailee for Lender, or any Participant;
(h) All interest of Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any
Accounts Receivable, General Intangibles, Contract Rights, or any
chattel paper or instru-
ments referred to in clause (f) above;
(i) Any and all other property of Borrower, of any kind or
description (including but not limited to real estate of Borrower),
including, without limitation, any property of Borrower subject to a
separate mortgage, pledge or security interest in favor of Lender or in
which Lender now or hereafter has or acquires a security interest
securing any Liabilities pursuant to an agreement or instrument other
than this Agreement;
(j) All replacements, substitutions, additions or
accessions to or for any of the foregoing;
(k) To the extent related to the property described in clauses
(a) through (j) above, all books, correspondence, credit files,
records, invoices and other papers and documents, including, without
limitation, to the extent so related, all tapes, cards, computer runs,
computer programs and other papers and documents in the possession or
control of Borrower or any computer bureau from time to time acting for
Borrower, and, to the extent so related, all rights in, to and under
all policies of insurance, including claims of rights to payments
thereunder and proceeds therefrom, including any credit insurance; and
(l) All products and proceeds (including but not limited to
any Accounts Receivable or other proceeds arising from the sale or
other disposition of any Collateral, any returns of any Equipment or
Inventory sold by Borrower, and the proceeds of any insurance covering
any of the Collateral) of any of the foregoing.
3.2 Accounts Receivable.
(a) If requested by Lender, Borrower shall advise Lender
promptly of any Inventory returned by or repossessed from any
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Account Debtor, or otherwise recovered, shall receive such Inventory in trust
and, unless instructed to deliver such Inventory to Lender, shall resell it for
Lender. If requested by Lender, Borrower shall notify Lender immediately of all
disputes and claims by any Account Debtor and settle or adjust them at no
expense to Lender. If Lender directs after the occurrence and during the
continuance of an Event of Default or a Default, no discount or credit allowance
shall be granted thereafter by Borrower to any Account Debtor. All Account
Debtor payments and all net amounts received by Lender in settlement, adjustment
or liquidation of any Account Receivable may be applied by Lender to the
Liabilities or credited to Borrower's Demand Deposit Account (subject to
collection) with Lender, as Lender may deem appropriate, in either case in
accordance with Section 2.6. If requested by Lender, Borrower will make proper
entries in its books and records disclosing the assignment of Accounts
Receivable to Lender.
(b) Borrower warrants that: (i) to the best of Borrower's knowledge all
of the Accounts Receivable are and will continue to be bona fide existing
obligations created by the sale of goods, the rendering of services, or the
furnishing of other good and sufficient consideration to Account Debtors in the
regular course of business and (ii) to the best of Borrower's knowledge all
shipping or delivery receipts and other documents furnished or to be furnished
to Lender in connection therewith are and will be genuine.
(c) Lender is hereby authorized and empowered (which authorization and
power, being coupled with an interest, shall be irrevocable until the later to
occur of termination of this Agreement and the final payment and performance in
full of all of the Liabilities) at any time in its sole and absolute discretion:
(1) To request, in Borrower's name or, after the occurrence
and during the continuance of an Event of Default or a Default, in
Lender's name or the name of a third party, confirmation from any
Account Debtor or party obligated under or with respect to any
Collateral of the amount shown by the Accounts Receivable or other
Collateral to be payable, or any other matter stated therein;
(2) To endorse in Borrower's name and to collect any chattel
paper, checks, notes, drafts, instruments or other items of payment
tendered to or received by Lender in payment of any Account Receivable
or other obligation owing to Borrower;
(3) To notify, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to notify, any Account Debtor or other
Person obligated under or
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in respect of any Collateral, of the fact of Lender's Lien
thereon and of the collateral assignment thereof to Lender;
(4) To direct, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to direct, any Account Debtor or other
Person obligated under or in respect of any Collateral to make payment
directly to Lender of any amounts due or to become due thereunder or
with respect thereto; and
(5) After the occurrence and during the continuance of an
Event of Default, to demand, collect, surrender, release or exchange
all or any part of any Collateral or any amounts due thereunder or with
respect thereto, or compromise or extend or renew for any period
(whether or not longer than the initial period) any and all sums which
are now or may hereafter become due or owing upon or with respect to
any of the Collateral, or enforce, by suit or otherwise, payment or
performance of any of the Collateral either in Lender's own name or in
the name of Borrower.
Under no circumstances shall Lender be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and reasonable out-of-pocket expenses, and the cost of
any Assignee Deposit Account or other bank account or accounts which may be
required hereunder, shall be borne solely by Borrower whether the same are
incurred by Lender or Borrower, and Lender may advance same to Borrower as a
Loan.
(d) Unless otherwise consented to by Lender, Borrower will, forthwith
upon receipt by Borrower of all checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, any of the Accounts Receivable or
other Collateral, deposit the same in a special bank account (the "Assignee
Deposit Account") with Lender or such other bank or financial institution as
Lender shall consent, over which Lender alone has power of withdrawal, and will,
to the extent required by Lender, designate with each such deposit the
particular Account Receivable or other item of Collateral upon which the
remittance was made. Borrower acknowledges that the maintenance of the Assignee
Deposit Account is solely for the convenience of Lender in facilitating its own
operations and Borrower does not and shall not have any right, title or interest
in the Assignee Deposit Account or in the amounts at any time appearing to the
credit thereof. Said proceeds shall be deposited in precisely the form received
except for Borrower's endorsement where necessary to permit collection of items,
which endorsement Borrower agrees to make. Pending such deposit, Borrower agrees
not to commingle any such checks, drafts, cash and other remittances with any of
its funds or property, but will hold them separate and apart
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therefrom and upon an express trust for Lender until deposit thereof is made in
the Assignee Deposit Account. Upon the full and final liquidation of all
Liabilities, Lender will pay over to Borrower any excess amounts received by
Lender as payment or proceeds of Collateral, whether received by Lender as a
deposit in the Assignee Deposit Account or received by Lender as a direct
payment on any of the sums due hereunder.
(e) Borrower appoints Lender, or any Person whom Lender may from time
to time designate, as Borrower's attorney and agent-in- fact with power: (i)
after the occurrence and during the continuance of an Event of Default, to
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender; (ii) after the event
described in the foregoing clause (i), to receive, open and dispose of all mail
addressed to Borrower; (iii) to send, in Borrower's name or, after the
occurrence and during the continuance of an Event of Default or a Default, in
Lender's name or the name of a third party, requests for verification of
Accounts Receivable or other Collateral to Account Debtors; (iv) to open an
escrow account or Assignee Deposit Account under Lender's sole control for the
collection of Accounts Receivable or other Collateral, if not required
contemporaneously with the execution hereof; and (v) to do all other things
which Lender is permitted to do under this Agreement or any Related Agreement or
which are reasonably necessary to carry out this Agreement and the Related
Agreements. Neither Lender nor any of its directors, officers, employees or
agents will be liable for any acts of commission or omission nor for any error
in judgment or mistake of fact or law, unless the same shall have resulted from
gross negligence or willful misconduct. The foregoing appointment and power,
being coupled with an interest, shall be irrevocable until all Liabilities under
this Agreement are finally paid and performed in full and this Agreement is
terminated. Borrower expressly waives presentment, demand, notice of dishonor
and protest of all instruments and any other notice to which it might otherwise
be entitled.
(f) If any Account Receivable, Contract Right or General Intangible
arises out of a contract with the United States or any department, agency, or
instrumentality thereof, Borrower will, unless Lender shall otherwise agree,
immediately notify Lender in writing and execute any instruments and take any
steps required by Lender in order that all monies due and to become due under
such contract shall be assigned to Lender and notice thereof given to the
government under the Federal Assignment of Claims Act of 1940, as amended, or
other applicable laws or regulations; provided, however, that unless Lender
otherwise requests, until an Event of Default or a Default shall have occurred
and be continuing, Borrower need not take any of the steps contemplated in this
paragraph with respect to any contract with a value of less than $10,000.
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(g) If any Account Receivable or Contract Right is evidenced by chattel
paper or promissory notes, trade acceptances, or other instruments for the
payment of money, Borrower will, unless Lender shall otherwise agree, deliver
the originals of same to Lender, appropriately endorsed to Lender's order and,
regardless of the form of such endorsement, Borrower hereby expressly waives
presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto.
3.3 Inventory.
(a) Unless Lender shall otherwise agree, if Borrower sells Inventory
for cash, all full and partial payments therefor shall be immediately (and, in
any event, not later than the end of the day received) delivered by Borrower to
Lender in their original form for deposit in the Assignee Deposit Account or for
other application to reduction of the Liabilities, in either case in accordance
with Section 2.6. Pending such delivery, all such cash shall be held by Borrower
in trust for Lender.
(b) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances, except for Lender's
gross negligence or willful misconduct. Lender shall not be responsible for
collection of any proceeds or for losses in collected proceeds held by Borrower
in trust for Lender. Any and all risk of loss for any or all of the foregoing
shall be upon Borrower, except for such loss as shall result from Lender's gross
negligence or willful misconduct.
(c) If requested by Lender, Borrower shall, upon acquiring an interest
in any Inventory, deliver to Lender a description of such Inventory, together
with supplier's invoices, warranties, production, cost and other records as
Lender may request. If requested by Lender, Borrower shall deliver to Lender
schedules of the sale of any Inventory immediately upon its sale. Any material
change in the value or condition of any Inventory, and any errors discovered in
any schedule or description delivered to Lender, shall be reported to Lender
immediately. Borrower confirms that the warranties and representations in this
Agreement shall apply to each schedule. Borrower represents and warrants that,
as to each schedule and description of Inventory delivered to Lender:
(1) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all material respects;
(2) None of the goods are defective, of second quality,
used, or goods returned after shipment, except where described
as such; and
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(3) All Inventory not included on such schedule or
description has been previously scheduled or described.
(d) If requested by Lender, Borrower will notify Lender immediately if
Borrower obtains possession (by return, repossession or otherwise) of any
Inventory which has been sold, and will inform Lender of the identity of the
returned or repossessed Inventory, the applicable Account Debtor and the amount
of the applicable Account Receivable.
3.4 Equipment.
(a) Borrower shall at all times keep, and cause each Subsidiary to
keep, its Equipment in good operating condition and repair, ordinary wear and
tear excepted, and neither Borrower nor any Subsidiary shall, without the prior
written consent of Lender, sell, lease, or otherwise dispose of any of its
Equipment, or any part thereof or interest therein; provided, however, that
without Lender's consent (but with notice to Lender) Borrower or any Subsidiary
may dispose of obsolete or unuseful Equipment in the ordinary course provided
all Equipment so disposed of by Borrower and its Subsidiaries in any Fiscal Year
has an aggregate market value of $50,000 or less.
(b) In the event any Equipment is sold, transferred or otherwise
disposed of by Borrower or any Subsidiary, unless Lender shall agree otherwise,
Borrower or the applicable Subsidiary shall deliver all of the proceeds of any
such sale, transfer or disposition to Lender, which proceeds shall be deposited
in the Assignee Deposit Account or otherwise applied to the repayment of the
Liabilities, in either case in accordance with Section 2.6.
(c) Borrower will, upon request of Lender, submit to Lender a current
listing of all Equipment of Borrower and its Subsidiaries, which listing shall
indicate the type, model, serial number and location of such Equipment.
3.5 Supplemental Documentation. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above is hereinafter referred to as the "Supplemental
Documentation"), in form and substance acceptable to Lender, and pay all taxes,
fees and other reasonable costs and expenses associated with any recording or
filing of the Supplemental Documentation. Borrower hereby irrevocably makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney (and agent-in-fact)
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(which appointment and power, being coupled with an interest, shall be
irrevocable until the later to occur of termination of this Agreement and final
payment and performance in full of all of the Liabilities) to sign the name of
Borrower on any of the Supplemental Documentation and to deliver any of the
Supplemental Documentation to such Persons as Lender, in its sole and absolute
discretion, may elect. Borrower agrees that a carbon, photographic, photostatic,
or other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
3.6 Other Security. Borrower shall cause Delaware, Contempo and
Contempo West to execute and deliver to Lender an amended and restated Guaranty
Agreement (the "Guaranty") in the form attached hereto as Exhibit G. Borrower
has caused Delaware, Contempo and Contempo West to execute and deliver to Lender
UCC-1 financing statements, suitable for filing centrally (and locally) in
certain jurisdictions, showing Lender as secured party and duly executed on
behalf of such Obligor, as debtor. Borrower shall execute and deliver to Lender
an amended and restated Pledge Agreement (the "Pledge Agreement") in the form
attached hereto as Exhibit E, and has delivered to Lender stock certificates
representing the number of outstanding shares of capital stock of each of
Delaware, Contempo and Contempo West set forth in Attachment 1 to the Pledge
Agreement, as collateral in pledge thereunder, along with undated stock powers
relating to the shares pledged under the Pledge Agreement executed by Borrower
in blank. Borrower shall deliver to Lender the intercompany notes pledged under
the Pledge Agreement on or prior to the Restatement Date. Borrower shall cause
all intercompany Indebtedness owing to Borrower or any Subsidiary by Borrower or
any other Subsidiary to be reflected by intercompany notes in form and substance
satisfactory to Lender, which notes shall be pledged to Lender under the Pledge
Agreement.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to make Loans
to Borrower under this Agreement, Borrower makes the following
representations and warranties, all of which shall survive the
execution of this Agreement:
4.1 Organization. Borrower and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Borrower and each of its Subsidiaries
is in good standing and is duly qualified to do business in each jurisdiction
where, because of the nature of its business, such qualification is required and
where the failure to so qualify would have a material adverse effect on such
Person. Schedule 4.1 sets forth a complete and accurate list, as of the date of
this Agreement, of (a) the state or other jurisdiction of formation of Borrower,
(b) each state in which Borrower is qualified to do business and (c) all of
Borrower's trade names or doing business forms.
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4.2 Authorization. Each of Borrower and any other Obligor a party
thereto is duly authorized to execute and deliver this Agreement, the Other Loan
Agreements, the Other Loan Documents, the Notes, and any Related Agreements or
Supplemental Documentation contemplated by this Agreement, and to perform its
obligations under this Agreement, the Other Loan Agreements, the Other Loan
Documents, the Notes and any such Related Agreements and Supplemental
Documentation. Borrower is and will continue to be duly authorized to borrow
monies hereunder. The execution, delivery and performance by each of Borrower
and any other Obligor a party thereto of this Agreement, the Other Loan
Agreements, the Other Loan Documents, the Notes, and any Related Agreements or
Supplemental Documentation contemplated by this Agreement, and the borrowings
hereunder and thereunder, do not and will not require any consent or approval of
any governmental agency or authority.
4.3 No Conflicts. Except as set forth on Schedule 4.3, the execution,
delivery and performance by Borrower and each other Obligor a party thereto of
this Agreement, the Other Loan Agreements, the Other Loan Documents, the Notes,
and any Related Agreements or Supplemental Documentation contemplated by this
Agreement do not and will not conflict with (i) any provision of law, (ii) the
charter or by-laws of Borrower or such Obligor, (iii) any agreement binding upon
Borrower or such Obligor or (iv) any court or administrative order or decree
applicable to Borrower or such Obligor, and do not and will not require, or
result in, the creation or imposition of any Lien on any asset of Borrower or
any of its Subsidiaries or such Obligor except as provided herein.
4.4 Validity and Binding Effect. This Agreement, the Other Loan
Agreements, the Other Loan Documents, the Notes, and any Related Agreements or
Supplemental Documentation contemplated by this Agreement, when duly executed
and delivered, will be legal, valid and binding obligations of Borrower and each
other Obligor a party thereto, enforceable against Borrower or such Obligor, as
applicable, in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
4.5 No Default. Except as set forth on Schedule 4.5, neither Borrower
nor any of its Subsidiaries is in default under any agreement or instrument to
which Borrower or such Subsidiary is a party or by which any of their respective
properties or assets is bound or affected, which default would reasonably be
expected to materially and adversely affect (i) Lender's Lien on or rights with
respect to any Collateral or Third Party Collateral or (ii) the financial
condition or operations of Borrower, any Subsidiary or Borrower and its
Subsidiaries taken as a whole. No Event of Default or Default has occurred and
is continuing.
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4.6 Financial Statements. Borrower's consolidated and consolidating
financial statements as at December 31, 1994 and Borrower's unaudited
consolidated and consolidating financial statements as at March 31, 1995, copies
of which have been or concurrently with the effectiveness hereof will be
furnished to Lender, have been prepared in conformity with GAAP applied on a
basis consistent with that of the preceding fiscal year and period and present
fairly the financial condition of Borrower and its Subsidiaries as at such dates
and the results of their operations for the periods then ended, subject (in the
case of the interim financial statements) to year-end audit adjustments. Since
December 31, 1994, there has been no material adverse change in the financial
condition of Borrower, any Subsidiary or Borrower and its Subsidiaries taken as
a whole.
4.7 Insurance. Schedule 4.7 hereto is a complete and accurate summary
of the property and casualty insurance program carried by Borrower and its
Subsidiaries on the date hereof. Schedule 4.7 includes the insurer's(s')
name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, the annual premium(s), Best's policyholder's and financial size
ratings of the insurer(s), exclusions, deductibles and self-insured retention
and describes in detail any retrospective rating plan, fronting arrangement or
any other self-insurance or risk assumption agreed to by Borrower or any
Subsidiary or imposed upon Borrower or any Subsidiary by any such insurer. This
summary also includes any self-insurance program that is in effect.
4.8 Litigation; Contingent Liabilities.
(a) Except for those referred to in Schedule 4.8, no claims,
litigation, arbitration proceedings or governmental proceedings are
pending or, to the best of Borrower's knowledge, threatened against or
are affecting Borrower or any Subsidiary, the results of which would
reasonably be expected to materially and adversely affect (i) the
financial condition or operations of Borrower, any Subsidiary or
Borrower and its Subsidiaries taken as a whole or (ii) Lender's
interest in or Lien on any material Collateral or Third Party
Collateral.
(b) Other than any liability incident to the claims,
litigation or proceedings disclosed in Schedule 4.8 or Schedule 4.19,
or provided for or disclosed in the financial statements referred to in
Section 4.6, neither Borrower nor any of its Subsidiaries has any
contingent liabilities which are material to Borrower, any Subsidiary
or Borrower and its Subsidiaries taken as a whole.
4.9 Liens. None of the Collateral, the Third Party Collateral
or any other property, revenues or assets of Borrower or any
Subsidiary is subject to any Lien (including but not limited to
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Liens pursuant to Capitalized Leases under which Borrower or any Subsidiary is a
lessee) except: (a) Liens permitted by Section 5.16; (b) Liens disclosed in the
financial statements referred to in Section 4.6; and (c) Liens listed on
Schedule 4.9.
4.10 Subsidiaries. Borrower has no Subsidiaries except for Delaware,
Contempo, Contempo Amsterdam and Contempo West. Schedule 4.10 sets forth, for
each Subsidiary, a complete and accurate statement of (a) Borrower's and each
Subsidiary's percentage ownership of each of their respective Subsidiaries, (b)
the state or other jurisdiction of formation or incorporation of each
Subsidiary, (c) each state in which each Subsidiary is qualified to do business
on the date of this Agreement and (d) all of each Subsidiary's trade names or
doing business forms on the date of this Agreement.
4.11 Partnerships; Joint Ventures. Neither Borrower nor any of its
Subsidiaries is a partner or joint venturer in any partnership or joint venture
other than the partnerships and joint ventures listed on Schedule 4.11. Schedule
4.11 sets forth, for each such partnership or joint venture, a complete and
accurate statement of (a) Borrower's and each Subsidiary's percentage ownership
of each such partnership or joint venture, (b) the state or other jurisdiction
of formation or incorporation, as appropriate, of each such partnership or joint
venture, (c) each state in which each such partnership or joint venture is
qualified to do business on the date of this Agreement and (d) all of each such
partnership's or joint venture's trade names or doing business forms on the date
of this Agreement.
4.12 Business and Collateral Locations.
(a) On the date hereof the offices where Borrower and each
Subsidiary keeps its books and records concerning its accounts
receivable and other Collateral, and Borrower's chief place of business
and chief executive office, are located at the addresses set forth on
Schedule 4.12. Schedule 4.12 contains a complete and accurate list, as
of the date of this Agreement, of (i) all of Borrower's places of
business other than that referred to in the first sentence of this
paragraph (a) and (ii) all locations and places of business of each
Subsidiary other than those referred to in the first sentence of this
paragraph (a). On the date hereof, the names of any landlords of any
such locations (including Borrower's place of business referred to in
the first sentence of this paragraph (a)) are identified in Schedule
4.12.
(b) Schedule 4.12 contains a complete and accurate list, as
of the date of this Agreement, of (i) the locations of all of
Borrower's Inventory, Equipment and Fixtures and the locations of all
Inventory, Equipment and Fixtures of any Subsidiary under each Other
Loan Agreement, (ii) the locations
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of all Third Party Collateral (except any part thereof which prior to
the execution of this Agreement Borrower shall have advised Lender in
writing consists of Collateral or Third Party Collateral, as
applicable, normally used in more than one state) and (iii) if any of
Borrower's or any Subsidiary's Inventory or Equipment or other
Collateral or any Third Party Collateral, is not in the possession or
control of Borrower or such Subsidiary or the owner of such Third Party
Collateral, the name and mailing address of each bailee, processor,
ware- houseman or other Person in possession or control thereof.
4.13 Real Property. Schedule 4.13 contains a complete and accurate
list, as of the date of this Agreement, of (a) the address and legal
descriptions of any real property owned by Borrower or any Subsidiary or on
which any Fixtures are located and (b) in the case of Fixtures located on
property not owned by Borrower or any Subsidiary, the name(s) and mailing
addresses of the record owners of such property.
4.14 [Intentionally Left Blank.]
4.15 Control of Collateral; Lease of Property. Except for Capitalized
Leases included on Schedule 5.15, Schedule 4.15 contains a complete and accurate
list of (a) all leases under which Borrower or a Subsidiary is the lessee
covering any machinery, equipment or real property used by Borrower or any
Subsidiary and (b) the name and mailing address of each lessor or owner of such
machinery, equipment or real property.
4.16 Patents, Trademarks, etc. Borrower and each of its Subsidiaries
possesses, or has sufficient rights in, adequate assets, licenses, patents,
patent applications, copyrights, trademarks, trademark applications, and
tradenames to continue to conduct its respective business as heretofore
conducted by it, and all such licenses, patents, patent applications, registered
copyrights, trademarks, trademark applications, and tradenames existing on the
date hereof and, in the case of patents, trademarks and registered copyrights,
the date of issuance thereof, are listed on Schedule 4.16.
4.17 Solvency. Borrower and each of its Subsidiaries now has capital
sufficient to carry on its respective business and transactions and all business
and transactions in which it is about to engage, and is now solvent and able to
pay its respective debts as they mature, and Borrower and each of its
Subsidiaries now owns property having a value, both at fair valuation and at
present fair salable value, greater than the amount required to pay Borrower's
or such Subsidiary's debts.
4.18 Contracts; Labor Matters. Except as disclosed on
Schedule 4.18: (a) neither Borrower nor any Subsidiary is a party
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to any contract or agreement, or is subject to any charge, corporate
restriction, judgment, decree or order, which materially and adversely affects
its business, property, assets, operations or condition, financial or otherwise;
(b) no labor contract to which Borrower or any Subsidiary is a party or is
otherwise subject is scheduled to expire prior to the current Termination Date
or the "Termination Date" under any Other Loan Agreement; (c) neither Borrower
nor any Subsidiary has, within the two-year period preceding the date of this
Agreement, taken any action which would have constituted or resulted in a "plant
closing" or "mass layoff" within the meaning of the Federal Worker Adjustment
and Retraining Notification Act of 1988 or any similar applicable federal, state
or local law, and Borrower has no reasonable expectation that any such action is
or will be required at any time prior to the current Termination Date or the
"Termination Date" under any Other Loan Agreement; and (d) on the date of this
Agreement (i) neither Borrower nor any Subsidiary is a party to any material
labor dispute and (ii) there are no strikes or walkouts pending or, to the best
knowledge of Borrower, threatened relating to any labor contracts to which
Borrower or any Subsidiary is a party or is otherwise subject.
4.19 Pension and Welfare Plans. Each Pension Plan complies in all
material respects with all applicable statutes and governmental rules and
regulations; no Reportable Event has occurred and is continuing with respect to
any Pension Plan; neither Borrower nor any ERISA Affiliate has withdrawn from
any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in sections 4203 or 4205 of ERISA, respectively; no steps have been
instituted to terminate any Pension Plan; no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA; no condition exists or event or transaction has occurred in
connection with any Pension Plan or Multiemployer Plan which could result in the
incurrence by Borrower, any other Obligor or any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor any other Obligor nor any
ERISA Affiliate is a "contributing sponsor" as defined in section 4001(a) (13)
of ERISA of a "single-employer plan" as defined in section 4001 (a) (15) of
ERISA which has two or more contributing sponsors at least two of whom are not
under common control. Except as listed in Schedule 4.19, neither Borrower nor
any Subsidiary has any contingent liability with respect to any post-retirement
benefit under any "employee welfare benefit plans," as such term is defined in
section 3(1) of ERISA, other than liability for benefit coverage required by
applicable law, continuation coverage described in Part 6 of Title I of ERISA or
in section 4980B of the Code, severance pay, benefits the full cost of which is
borne by the former employee (or the former employee's beneficiary), or
disability, medical or life benefits provided due to injuries, sickness or
disease commencing prior to the termination of employment ("Post-Retirement
Welfare Plans").
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4.20 Regulation U. Borrower is not engaged in the business of
purchasing or selling Margin Stock or extending credit to others for the purpose
of purchasing or carrying Margin Stock, and no part of the proceeds of any
borrowing hereunder will be used to purchase or carry any Margin Stock or for
any other purpose which would violate any of the margin regulations of the
Federal Reserve Board.
4.21 Compliance. Except as described on Schedule 4.21 or Schedule 4.25,
Borrower and its Subsidiaries are in material compliance with all statutes and
governmental rules and regulations applicable to them.
4.22 Taxes. Borrower and each of its Subsidiaries has filed all tax
returns which are required to have been filed and has paid, or made adequate
provisions for the payment of, all of its Taxes which are due and payable,
except such Taxes, if any, as are being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP have been maintained. The federal income
tax liability of Borrower and its domestic Subsidiaries has been audited by the
Internal Revenue Service and has been finally determined and satisfied (or the
statute of limitations as provided in Code section 6501 has expired) for all tax
years up to and including the tax year ended December 31, 1986. To the best of
Borrower's knowledge, there is no proposed assessment against Borrower or any of
its Subsidiaries for additional Taxes (or any basis for any such assessment)
which would reasonably be expected to be material to Borrower and its
Subsidiaries taken as a whole.
4.23 Investment Company Act Representation. None of Borrower or any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. For purposes of this Section 4.23, the term "investment company"
does not include so-called "private investment companies" that are exempted from
the definition of "investment company" under section 3(c)(1) of such Act.
4.24 Public Utility Holding Company Act Representation. None of
Borrower or any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
4.25 Environmental and Safety and Health Matters. Except as disclosed
on Schedule 4.25, Borrower and each of its Subsidiaries and/or each property,
operation and facility that Borrower or any Subsidiary may own, lease, operate
or control: (i) complies in all respects with (A) all applicable Environmental
Laws and (B) all applicable Occupational Safety and Health Laws; (ii) is not
subject to any judicial or administrative proceeding alleging the violation
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of any Environmental Law or Occupational Safety and Health Law; (iii) has not
received any notice or inquiry (A) that it may be in violation of any
Environmental Law or Occupational Safety and Health Law, (B) threatening the
commencement of any proceeding relating to allegedly unlawful, unsafe or
unhealthy conditions or (C) alleging that it is or may be responsible for any
response, cleanup, or corrective action, including but not limited to any
remedial investigation/feasibility studies, under any Environmental Law or
Occupational Safety and Health Law; (iv) to the best of Borrower's knowledge, is
not the subject of federal or state investigation evaluating whether any
investigation, remedial action or other response is needed to respond to (A) a
spillage, disposal or release or threatened release into the environment of any
Hazardous Material or other hazardous, toxic or dangerous waste, substance or
constituent, or other substance or (B) any allegedly unsafe or unhealthful
condition; (v) has not filed any notice under or relating to any Environmental
Law or Occupational Safety and Health Law (excluding, solely as to treatment,
storage and disposal, any routine periodic filings required under law,
including, without limitation the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. ss.11001 et seq.) indicating or reporting (A) any past or present
spillage, disposal or release into the environment of, or treatment, storage or
disposal of, any Hazardous Material or other hazardous, toxic or dangerous
waste, substance or constituent, or other substance or (B) any potentially
unsafe or unhealthful condition, and there exists no basis for such notice
irrespective of whether such notice was actually filed; and (vi) has no
contingent liability in connection with (A) any actual or potential spillage,
disposal or release into the environment of, or otherwise with respect to, any
Hazardous Material or other hazardous, toxic or dangerous waste, substance or
constituent, or other substance, whether on any premises owned or occupied by
Borrower or any Subsidiary or on any other premises or (B) any unsafe or
unhealthful condition. Except as disclosed on Schedule 4.25, there are no
underground storage tanks, whether or not in use, in or under any property or
facilities owned, operated or controlled by Borrower or any Subsidiary and there
are no Hazardous Materials on, in or under any property or facilities owned,
operated or controlled by Borrower or any Subsidiary, including but not limited
to such Hazardous Materials that may be contained in underground storage tanks,
but excepting such Hazardous Materials used in accordance with all applicable
laws and in the same manner as an ordinary consumer (e.g., gasoline in tanks of
motor vehicles, small amounts of cleaners, etc.).
4.26 Related Agreements. All representations and warranties of Borrower
and its Subsidiaries contained in any Related Agreements are true and correct as
if made on the date hereof and Borrower hereby adopts and affirms all such
representations and warranties which Borrower agrees shall be incorporated by
reference herein and made a part hereof.
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5. BORROWER COVENANTS. From the date of this Agreement and thereafter until the
Credit is terminated and all Liabilities of Borrower hereunder and all
"Liabilities" of each Subsidiary under and as defined in each Other Loan
Agreement are finally paid in full, Borrower agrees that, unless Lender shall
otherwise consent in writing, it will:
5.1 Financial Statements and Other Reports. Furnish, or cause
to be furnished, to Lender in form reasonably satisfactory to
Lender:
5.1.1 Financial Reports:
(a) Annual Audit Report. Within one hundred twenty
(120) days after each Fiscal Year of Borrower, a copy of the
annual audit report of Borrower and its Subsidiaries prepared
on a consolidating and consolidated basis and in conformity
with GAAP and certified by KPMG Peat Marwick or such other
independent certified public accountant who shall be
reasonably satisfactory to Lender, together with a certificate
from such accountant (i) acknowledging to Lender such
accountant's understanding that Lender and any Participant is
relying on such annual audit report, (ii) containing a
computation of, and showing compliance with, each of the
financial ratios and restrictions contained in this Section 5
or in Supplement A, and (iii) to the effect that, in making
the examination necessary for the signing of such annual audit
report, such accountant has not become aware of any Event of
Default or Default that has occurred and is continuing, or, if
such accountant has become aware of any such event, describing
it and the steps, if any, being taken to cure it;
(b) Quarterly Financial Statement. Within forty-five
(45) days after each Fiscal Quarter of Borrower, a copy of the
unaudited financial statement of Borrower and its Subsidiaries
prepared in the same manner as the audit report referred to in
the preceding clause (a), signed by Borrower's chief financial
officer and consisting of at least a balance sheet as at the
close of such Fiscal Quarter and statements of earnings and
cash flows for such Fiscal Quarter and for the period from the
beginning of such Fiscal Year to the close of such Fiscal
Quarter;
(c) Monthly Financial Statement. Within forty-five
(45) days after the end of each month of each Fiscal Year of
Borrower, a copy of the unaudited financial statement of
Borrower and its Subsidiaries prepared in the same manner as
the audit report referred to in the preceding clause (a),
signed by Borrower's chief financial officer and consisting of
at least a balance sheet as at the close
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of such month and statements of earnings and cash flows for
such month and for the period from the beginning of such
Fiscal Year to the close of such month; and
(d) Officer's Certificate. Together with the
financial statements furnished by Borrower under the preceding
clauses (a), (b) and (c), a certificate of Borrower signed by
Borrower's chief financial officer, dated the date of such
annual audit report or such quarterly or monthly financial
statement, as the case may be, containing a statement that no
Event of Default or Default has occurred and is continuing,
or, if there is any such event, describing it and the steps,
if any, being taken to cure it, and containing a computation
of, and showing compliance with, each of the financial ratios
and restrictions contained in this Section 5 or in Supplement
A.
5.1.2 Other Reports:
(a) SEC and Other Reports. Copies of each filing and
report made by Borrower or any Subsidiary with or to any
securities exchange or the Securities and Exchange Commission
and of each communication from Borrower or any Subsidiary to
shareholders generally, promptly upon the filing or making
thereof;
(b) Report of Change Relating to Borrower,
Subsidiaries, Partnerships or Joint Ventures. Promptly
from time to time, a written report of any change in the
information set forth in Schedule 4.1, Schedule 4.10 or
Schedule 4.11 concerning Borrower, any Subsidiary, or any
partnership or joint venture;
(c) Patents, etc. Promptly from time to time, a
written report of any change to the list of patents,
trademarks, copyrights and other information set forth in
Schedule 4.16; and
(d) Other Reports. As soon as practicable from time
to time, such other reports or information reasonably
requested by Lender.
5.2 Notices. Notify Lender in writing of any of the following
immediately upon learning of the occurrence thereof (or, in the case of clauses
(e) and (f) of this Section 5.2, at least 30 days prior to the occurrence
thereof to the extent applicable to Borrower, any Subsidiary or any other
Obligor), describing the same and, if applicable, the steps being taken by the
Person(s) affected with respect thereto:
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(a) Default. The occurrence of (i) an Event of Default or a
Default and (ii) to the extent not included in clause (i) of this
Section 5.2(a), the default by Borrower, Delaware, Contempo, Contempo
West, any other Obligor or any Subsidiary under any Other Loan
Agreement or any material note, indenture, loan agreement, mortgage,
lease, deed or other material similar agreement to which Borrower,
Delaware, Contempo, Contempo West, any other Obligor or any Subsidiary,
as appropriate, is a party or by which it is bound;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting Borrower, Delaware,
Contempo, Contempo West, any other Obligor, any Subsidiary, any
Collateral or any Third Party Collateral, whether or not considered to
be covered by insurance, if the amount in controversy exceeds $10,000;
(c) Judgment. The entry of any judgment or decree
against Borrower, Delaware, Contempo, Contempo West, any other
Obligor or any Subsidiary, if the amount of such judgment
exceeds $25,000;
(d) Pension Plans and Welfare Plans. The occurrence of a
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by Borrower, any ERISA
Affiliate, or any other Obligor; the institution of proceedings to
terminate a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial withdrawal" as
defined in sections 4203 and 4205, respectively, of ERISA by Borrower,
any ERISA Affiliate or any other Obligor from any Multiemployer Plan;
the failure of Borrower, any other Obligor or any ERISA Affiliate to
make a required contribution to any Pension Plan, including but not
limited to any failure to pay an amount sufficient to give rise to a
Lien under section 302(f) of ERISA; the taking of any action with
respect to a Pension Plan which could result in the requirement that
Borrower, any other Obligor or any ERISA Affiliate furnish a bond or
other security to the PBGC or such Pension Plan other than the bond
required by section 412 of ERISA; the occurrence of any other event
with respect to any Pension Plan which could result in the incurrence
by Borrower, any other Obligor or any ERISA Affiliate of any material
liability, fine or penalty; or the incurrence of any material increase
in the contingent liability of Borrower, any other Obligor or any
Subsidiary with respect to any Post-Retirement Welfare Plans;
(e) Business and Collateral Information. Any change or
proposed change in any of the information set forth on Schedule
4.12, 4.13 or 4.15, including but not limited to (i) any change
in the location of any of Borrower's Inventory or Equipment or
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any other Collateral or Third Party Collateral, (ii) the identity of
any new bailee, processor, warehouseman or other Person in possession
or control of any of Borrower's Inventory or Equipment or any other
Collateral or Third Party Collateral, (iii) any change in the name or
address of the lessor or owner of any real property or equipment leased
to Borrower, any Subsidiary or any other Obligor, (iv) any proposed
change in the location of Borrower's or any Subsidiary's chief
executive office or chief place of business, (v) any proposed opening,
closing or other change in the list of offices and other places of
business of Borrower or any Subsidiary and (vi) any opening, closing or
other change in the offices and other places of business of any other
Obligor;
(f) Change of Name or Status. Any change in the name or
address of Borrower, any Subsidiary or any other Obligor, as
well as any change in the list of tradenames set forth in
Schedule 4.1;
(g) Insurance Information. Any material change in the
information set forth in Schedule 4.7;
(h) Environmental and Safety and Health Matters. The
occurrence of any event, or the acquisition of any information
which, if it had occurred or was true on or before the
Restatement Date, would have been required to have been
disclosed and included on Schedule 4.25, including but not
limited to (i) existence of any Environmental Lien and (ii)
receipt of any notice from any federal, state or local
government or agency with respect to any actual or alleged
violation of any Environmental Law or any Occupational Safety
and Health Law;
(i) Material Adverse Change. The occurrence of a
material adverse change in the business, operations or
financial condition of Borrower, any other Obligor or any
Subsidiary;
(j) Default by Others. Any material default by any Account
Debtor or other Person obligated to Borrower, any other Obligor, or any
Subsidiary under any contract, chattel paper, note or other evidence of
amounts payable or due or to become due to Borrower, such Obligor or
such Subsidiary if the amount payable under such contract, chattel
paper, note or other evidence of amounts payable or due or to become
due is material;
(k) Moveable Collateral. If any of the Collateral or
Third Party Collateral shall consist of goods of a type
normally used in more than one state, whether or not actually
so used, any use of any such goods in any state other than a
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state in which Borrower shall have previously advised Lender such goods
will be used. Borrower agrees that such goods will not, unless Lender
shall otherwise consent in writing, be used outside the continental
United States or in Louisiana;
(l) Change in Management or Line(s) of Business. Any
substantial change in the senior management of Borrower or any
Subsidiary, or any change in Borrower's or any Subsidiary's
line(s) of business; and
(m) Other Notices. Any notices required to be provided
pursuant to any Related Agreement or the other provisions of this
Agreement, and notice of the occurrence of such other events as Lender
may reasonably specify from time to time.
5.3 Existence. Maintain and preserve, and cause each Subsidiary to
maintain and preserve, its respective existence as a corporation or other form
of business organization, as the case may be, and all rights, privileges,
licenses, patents, patent rights, copyrights, trademarks, trade names,
franchises and other authority to the extent material and necessary for the
conduct of its respective business in the ordinary course as conducted from time
to time.
5.4 Nature of Business. Engage, and cause each Subsidiary to engage
engage, in substantially the same fields of business as it is engaged in on the
date hereof.
5.5 Books, Records and Access. Maintain, and cause each Subsidiary to
maintain, complete and accurate books and records (including but not limited to
records relating to Accounts Receivable, Inventory, Equipment and other
Collateral), in which full and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its respective business and
activities; cause its books and records as at the end of any calendar month to
be posted and closed not more than fifteen (15) days after the last business day
of such month; and permit, and cause each Subsidiary to permit, access by Lender
and its agents or employees upon not less than one day's prior telephonic
notice, such access to be given during normal business hours (except after an
Event of Default or a Default shall have occurred and be continuing, in which
case no notice shall be required and no limitation on the business hours of the
investigation shall apply) to the books and records of Borrower and such
Subsidiary at Borrower's or such Subsidiary's place or places of business at
intervals to be determined by Lender and without hindrance or delay, and on like
notice permit and cause each Subsidiary to permit Lender or its agents and
employees to inspect Borrower's and/or such Subsidiary's inventory and
Equipment, to perform appraisals of Borrower's and/or such Subsidiary's
equipment, and to inspect, audit, check and make copies and/or extracts from the
books, records, computer data and
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records, computer programs, journals, orders, receipts, correspondence and other
data relating to Inventory, Accounts Receivable, Contract Rights, General
Intangibles, Equipment and any other Collateral or Third Party Collateral, or
relating to any other transactions between the parties hereto. Any and all such
inspections and/or audits shall be at Borrower's expense, and Lender may advance
the same to Borrower as a Loan. Notwithstanding the foregoing, as long as no
Event of Default or Default has occurred and is continuing, Borrower shall not
be required to reimburse Lender for appraisals of Equipment of Borrower and its
Subsidiaries more frequently than once each Fiscal Year.
5.6 Insurance. Maintain, and cause each Subsidiary to maintain,
insurance to such extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated or as Lender may reasonably request
from time to time. Keep the Collateral properly housed and insured for its full
insurable value against loss or damage by fire, theft, explosion, sprinklers,
collision (in the case of motor vehicles) and such other risks as are
customarily insured against by persons engaged in business similar to that of
Borrower, with such companies, in such amounts and under policies in such form
as shall be reasonably satisfactory to Lender. Certificates of such policies of
insurance have been delivered to Lender prior to the date hereof together with
evidence of payment of all premiums therefor. Borrower shall cause each issuer
of an insurance policy to provide Lender, prior to the Restatement Date, with an
endorsement or an independent instrument (i) substantially in the form of
Exhibit D or such other form and containing such other terms as shall be
acceptable to Lender and (ii) showing loss payable to Lender and, if required by
Lender, naming Lender as an additional insured. Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable thereunder
directly to Lender. Borrower appoints Lender and any Person whom Lender may from
time to time designate (and all officers, employees or agents designated by
Lender or such Person) as Borrower's true and lawful attorney and agent-in-fact
with power to make, settle and adjust claims under such policies of insurance,
endorse the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and make all
determinations and decisions with respect to such policies of insurance. The
foregoing appointment and power, being coupled with an interest, shall be
irrevocable until all Liabilities are paid and performed in full and this
Agreement is terminated. In the event Borrower or any Subsidiary at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required herein or to pay any premium in whole or in part relating
thereto, then Lender, without waiving or releasing any obligation or default
hereunder, may at any time or times thereafter (but shall be under no obligation
to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which Lender reasonably deems
advisable. All sums
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so disbursed by Lender, including Attorneys' Fees, court costs, expenses and
other charges relating thereto, shall be payable on demand by Borrower to
Lender, and Lender may, in its sole and absolute discretion, advance such sums
to Borrower as a Loan.
5.7 Insurance Survey. Provide to Lender at least annually within 120
days of the end of Borrower's Fiscal Year, a certificate of Borrower signed by
its president or a vice president of Borrower that attests to and summarizes the
property and casualty insurance program carried by Borrower and its
Subsidiaries. This summary shall include the insurer's(s') name(s), policy
number(s), expiration date(s), amount(s) of coverage, type(s) of coverage, the
annual premium(s), Best's policyholder's and financial size ratings of the
insurer(s), exclusions, deductibles and self-insured retention and shall
describe in detail any retrospective rating plan, fronting arrangement or any
other self-insurance or risk assumption agreed to by Borrower or any Subsidiary
or imposed upon Borrower or any Subsidiary by any such insurer, as well as any
self-insurance program that is in effect. Borrower shall notify Lender in
writing (1) at least 20 days prior to any cancellation or material change of any
such insurance by Borrower or any Subsidiary, and (2) within 5 business days
after receipt of any notice (whether formal or informal) of any cancellation or
change in any of its insurance by any of its insurers or any material change in
the cost thereof or which reduces the policyholder's or financial size ratings
of the insurance carriers of Borrower or any of its Subsidiaries, as established
by Best's Insurance Reports. Annually, Lender shall have the right to request
Borrower to have a risk management survey completed by a recognized independent
risk management consultant acceptable to it and Lender which will identify,
quantify and assess any catastrophic uninsured, underinsured or self-insured
exposures faced by Borrower and its Subsidiaries. The cost of such survey shall
be borne solely by Borrower. A copy of the results of each such survey shall be
promptly delivered by Borrower to Lender.
5.8 Repair. Maintain, preserve and keep, and cause each Subsidiary to
maintain, preserve and keep, its respective properties in operating condition
and repair, ordinary wear and tear excepted, and from time to time make, and
cause each Subsidiary to make, all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained.
5.9 Taxes. Pay, and cause each Subsidiary to pay, when due, all of its
Taxes, unless and only to the extent that Borrower or such Subsidiary is
contesting such Taxes in good faith and by appropriate proceedings and Borrower
or such Subsidiary has set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP.
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5.10 Compliance. Comply in all material respects, and cause each
Subsidiary to comply in all material respects, with all statutes and
governmental rules and regulations applicable to it.
5.11 Pension Plans. Not permit, and not permit any Subsidiary to
permit, any condition to exist in connection with any Pension Plan which would
reasonably constitute grounds for the PBGC to institute proceedings to have such
Pension Plan terminated or a trustee appointed to administer such Pension Plan;
not fail, and not permit any Subsidiary to fail, to make a required contribution
to any Pension Plan if such failure is sufficient to give rise to a Lien under
section 302(f) of ERISA; and not engage in, or permit to exist or occur, or
permit any of its Subsidiaries to engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower or any of its Subsidiaries of any
material liability, fine or penalty.
5.12 Merger, Purchase and Sale. Not, and not permit any Subsidiary to:
(a) be a party to any merger, liquidation or consolidation; (b) except in the
normal course of its business and except as permitted by the proviso to Section
3.4(a), sell, transfer, convey, lease or otherwise dispose of any of its assets;
(c) sell or assign, with or without recourse, any Accounts Receivable, Contract
Rights, notes receivable or chattel paper, except as provided in this Agreement;
or (d) purchase or otherwise acquire all or substantially all the assets of any
Person; provided, however, that the Fuse World Acquisition shall be permitted if
the Lender has received five Business Days' prior written notice of such
acquisition and if, prior to such acquisition or contemporaneously with such
acquisition, the following conditions precedent shall have been satisfied
(i) if, after the Fuse World Acquisition, Fuse World shall
continue to exist as a separate legal entity, (x) Delaware shall pledge
to the Lender all of the outstanding shares of capital stock of Fuse
World pursuant to an amendment to the Pledge Agreement in form and
substance satisfactory to the Lender and shall deliver to Lender share
certificates representing all of the outstanding shares of capital
stock of Fuse World along with undated stock powers duly executed in
blank, (y) Fuse World shall become a party to the Guaranty pursuant to
an amendment to the Guaranty in form and substance satisfactory to the
Lender and (z) Fuse World shall grant to the Lender a security interest
in all of its personal property pursuant to a security agreement in
substantially the form of the Original Security Agreement,
(ii) Delaware shall have delivered to the Lender
acknowledgment copies of properly filed Uniform Commercial Code
financing statements (Form UCC-1) or such other evidence of
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filing as may be acceptable to the Lender, naming Delaware (and, if
after the Fuse World Acquisition Fuse World continues to exist, Fuse
World) as the debtor and the Lender as the secured party, filed in all
jurisdictions as may be necessary or desirable to perfect the security
interest of the Lender in the collateral of Delaware (and, if after the
Fuse World Acquisition Fuse World continues to exist, Fuse World),
(iii) Delaware shall have delivered to the Lender executed
copies of proper Uniform Commercial Code Form UCC-3 termination
statements, if any, necessary to release all Liens and other rights of
any Person other than the Lender in any collateral being granted to the
Lender pursuant to the Delaware Loan Agreement or, if applicable,
clause (i)(z) above, and
(iv) Delaware shall have delivered to the Lender certified
copies of Uniform Commercial Code Requests for Information or Copies
(Form UCC-11), or a similar search report certified by a party
acceptable to the Lender, dated a date satisfactory to the Lender,
listing all effective financing statements which name either Delaware
or Fuse World, under their present names and any previous names, as the
debtor and which are filed in the jurisdictions in which filings were
made pursuant to clause (ii) above, together with copies of such
financing statements.
5.13 Restricted Payments.
(a) Borrower will not declare, pay, or make any dividend or
distribution (in cash, property, or obligations) on any shares of any
class of capital stock (now or hereafter outstanding) of Borrower or on
any warrants, options, or other rights with respect to any shares of
any class of capital stock (now or hereafter outstanding) of Borrower
(other than dividends or distributions payable in its stock, or
warrants to purchase its stock, or splitups or reclassifications of its
stock into additional or other shares of its stock) or apply, or permit
any Subsidiary to apply, any of its funds, property, or assets to the
purchase, redemption, sinking fund, or other retirement of any shares
of any class of capital stock (now or hereafter outstanding) of
Borrower;
(b) Borrower will not permit any Subsidiary to declare, pay,
or make any dividend or distribution (in cash, property, or
obligations) on any shares of any class of capital stock (now or
hereafter outstanding) of such Subsidiary or on any warrants, options,
or other rights with respect to any shares of any class of capital
stock (now or hereafter outstanding) of such Subsidiary or apply any of
its funds, property, or assets to the purchase, redemption, sinking
fund, or other retirement of any shares of any class of capital stock
(now or hereafter
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outstanding) of such Subsidiary other than (x) dividends paid to
Borrower to reimburse Borrower for Borrower's overhead and
administrative expenses and (y) dividends of Contempo Amsterdam paid to
Contempo;
(c) Borrower will not, and will not permit any Subsidiary to,
pay or prepay any principal of, or make any payment of interest on, or
redeem, purchase, or defease, any Subordinated Debt (except (x) solely
to the extent of and with the net cash proceeds of an offering of
equity securities by Borrower and (y) intercompany Indebtedness held by
Borrower or another Obligor); and
(d) Borrower will not, and will not permit any Subsidiary
to, make any deposit for any of the foregoing purposes;
provided, however, that
(e) Borrower may, subject to the subordination provisions
applicable to any of its Subordinated Debt and provided that no Event
of Default or Default has occurred and is continuing or would exist
after giving effect to any such payment, make payments of interest
accrued thereon when due; and
(f) Borrower may make the payments described in Schedule
5.13.
5.14 Borrower's and Subsidiaries' Stock. Not permit any Subsidiary to
purchase or otherwise acquire any shares of the stock of Borrower, and not take
any action, or permit any Subsidiary to take any action, which will result in a
decrease in Borrower's or any Subsidiary's ownership interest in any Subsidiary.
5.15 Indebtedness. Not, and not permit any Subsidiary to, incur or
permit to exist any Indebtedness (including but not limited to Indebtedness as
lessee under Capitalized Leases), except: (a) Indebtedness under this Agreement;
(b) Subordinated Debt; (c) Indebtedness owing by Borrower or another Obligor to
Borrower or another Obligor which is evidenced by a note pledged to Lender under
the Pledge Agreement; (d) other Indebtedness outstanding on the date hereof and
listed on Schedule 5.15; (e) Indebtedness hereafter incurred in connection with
Liens permitted under Section 5.16(d); (f) Indebtedness issued in connection
with that certain Stock Appreciation Plan adopted by Borrower's Board of
Directors on October 30, 1988 (the "Stock Appreciation Plan") which is not due
and payable until Borrower shall offer to redeem its Series A Preferred Stock
(which offer shall not violate Section 5.13); (g) Indebtedness of Contempo
Amsterdam to Contempo or another Obligor which is evidenced by a note pledged to
Lender in an amount not to exceed $350,000 at any one time outstanding; (h) from
and after the time of the Fuse World Acquisition (or the stock acquisition
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described in clause (i) of the definition thereof), Indebtedness of Delaware
described in the "Shareholder Note" section of the Fuse World Letter of Intent,
provided that such Indebtedness is subordinated, in a manner satisfactory to
Lender, as to right of payment of principal and interest thereon, to all
Liabilities of Delaware; and (i) other Indebtedness approved in writing by
Lender.
5.16 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien with respect to any property, revenue or assets, whether now
owned or hereafter acquired, except: (a) Liens for current Taxes not delinquent
or Taxes being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
are being maintained; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, and other like statutory Liens arising in the ordinary course of
business securing obligations which are not overdue or which are being contested
in good faith and by appropriate proceedings and as to which such reserves or
other appropriate provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security legislation; (d) Liens in connection with
the acquisition of property after the date hereof by way of purchase money
mortgage, conditional sale or other title retention agreement, Capitalized Lease
or other deferred payment contract, and attaching only to the property being
acquired, if (i) the Indebtedness secured thereby does not exceed 80% of the
fair market value of such property at the time of the acquisition thereof and
(ii) the aggregate outstanding amount of such Indebtedness of Borrower and its
Subsidiaries does not exceed $100,000; (e) Liens in favor of Lender; (f) Liens
referred to in clauses (b) and (c) of Section 4.9; (g) Liens granted prior to
December 31, 1987 to secure Indebtedness which is permitted by clause (c) of
Section 5.15; and (h) Liens consented to in writing by Lender.
5.17 Guaranties. Not, and not permit any Subsidiary to, become or be a
guarantor or surety of, or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person, except for (i)
the endorsement, in the ordinary course of collection, of instruments payable to
it or its order, (ii) the guaranty of Borrower contained in Section 12, (iii)
the Related Agreements and (iv) guaranties by Borrower of the obligations of
Delaware, Contempo and Contempo West under real estate leases.
5.18 Investments. Not, and not permit any Subsidiary to, make
or permit to exist any Investment in any Person, except for: (a)
advances to employees of Borrower or any of its Subsidiaries for
travel or other ordinary business expenses provided that the
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aggregate amount outstanding at any one time shall not exceed $15,000 for any
single employee and $50,000 in the aggregate for all employees; (b) advances to
subcontractors and suppliers in maximum aggregate amounts reasonably acceptable
to Lender but in any event not exceeding an aggregate outstanding amount of
$35,000; (c) extensions of credit in the nature of Accounts Receivable or notes
receivable arising from the sale of goods and services in the ordinary course of
business; (d) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business; (e) Investments
(other than Investments in the nature of loans or advances) outstanding on the
date hereof in Subsidiaries by Borrower and other Subsidiaries; (f) Investments
in the nature of loans and advances constituting Indebtedness of Subsidiaries to
Borrower and to other Subsidiaries outstanding on the date hereof and listed on
Schedule 5.18 and Investments representing Indebtedness permitted under Section
5.15(c) and (g); (g) other Investments outstanding on the date hereof and listed
on Schedule 5.18; (h) the Investment by Delaware in Fuse World represented by
the Fuse World Acquisition; and (i) other Investments consented to by Lender in
writing.
5.19 Subsidiaries. Not, and not permit any Subsidiary to, acquire any
stock or similar interest in any Person, and not create, establish or acquire
any Subsidiaries other than those existing on the date of this Agreement and
except that Delaware may purchase the outstanding capital stock of Fuse World in
the Fuse World Acquisition provided that within 10 days' thereof Fuse World
shall be dissolved or merged into Delaware.
5.20 Leases. Not enter into or permit to exist, or permit any
Subsidiary to enter into or permit to exist, any arrangements for the leasing by
Borrower or such Subsidiary, as lessee under a lease which is not a Capitalized
Lease, of any real or personal property (or any interest therein) other than
under leases in existence on the date hereof and listed on Schedule 4.15 (and
renewals, replacements and extensions thereof entered into on commercially
reasonable terms); provided, however, that Borrower and its Subsidiaries may
enter into additional leases of personal or real property after the date hereof
which, in the aggregate for all such leases, do not require rental payments for
any Fiscal Year in excess of $50,000.
5.21 Change in Accounts Receivable. After the occurrence of an Event of
Default or a Default, permit or agree to any extension, compromise or settlement
or make any change or modification of any kind or nature with respect to any
Account Receivable, including any of the terms relating thereto.
5.22 Future Environmental Assessments. Borrower shall provide
such information and certifications which Lender may reasonably
request from time to time pertaining to the environmental aspects of
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Borrower and its Subsidiaries and any property owned, operated or controlled by
Borrower or any Subsidiary. To investigate environmental aspects of Borrower and
its Subsidiaries and their properties, facilities and operations, Lender or its
agents shall have the right upon prior notice to Borrower and at any reasonable
time to enter upon the property of Borrower or any Subsidiary, take samples,
review the books, records or other documents of Borrower and its Subsidiaries,
interview officers and employees of Borrower or its Subsidiaries, and conduct
such other activities as Lender, in its sole discretion, deems appropriate;
provided, however, that (i) Lender's activities shall not unreasonably interfere
with Borrower's operations, and (ii) Lender shall provide Borrower with a copy
of any written findings or results of such assessment. Borrower shall, and shall
cause its Subsidiaries to, cooperate fully in the conduct of any such
assessment. If Lender decides to cause such an assessment to be conducted
because of (a) Lender's considering taking possession of or title to the
property after the occurrence of an Event of Default or (b) a material change in
the use of the property which, in Lender's opinion, increases the risk of
non-compliance with Environmental Laws or increases the risk of cost or
liabilities thereunder, then Borrower shall pay upon demand all costs and
expenses (including Attorneys' Fees) connected with such assessment. Lender may,
in its discretion, provide for the payment of any amount due from Borrower under
this Section 5.22 by making Borrower a Loan. Nothing in this Section 5.22, and
no actions taken by Lender pursuant thereto, shall give, or be construed as
controlling or giving, to Lender the right or obligation to direct or control
the conduct or action or inaction of Borrower or any Subsidiary with respect to
any environmental matters, including but not limited to those pertaining to
compliance with any Environmental Laws.
5.23 [Intentionally Left Blank.]
5.24 Unconditional Purchase Options. Not enter into or be a party to,
or permit any Subsidiary to enter into or be a party to any contract for the
purchase of materials, supplies or other property or services, if such contract
requires that payment be made by it regardless of whether or not delivery is
ever made of such materials, supplies or other property or services.
5.25 Use of Proceeds. Not use or permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying" any Margin Stock, and
furnish to Lender upon request, a statement in conformity with the requirements
of Federal Reserve Form U-1 referred to in Regulation U of the Federal Reserve
Board.
5.26 Transactions with Related Parties. Not, and not permit
any Subsidiary to, enter into or be a party to any transaction or
arrangement, including, without limitation, the purchase, sale,
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lease or exchange of property or the rendering of any service, with any Related
Party, except (x) 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 no less favorable to Borrower or such Subsidiary than would
obtain in a comparable arm's- length transaction with a Person not a Related
Party and (y) transactions permitted by Section 5.15(c) and (g) and 5.18(e) and
(f).
5.27 Modification of Subordinated Debt, etc. From and after the date of
issuance of any Indebtedness qualifying as Subordinated Debt (including, without
limitation, the Subordinated Debt referenced in clauses (i) and (ii) of the
definition of Subordinated Debt), not, and not permit any Subsidiary to, consent
to any amendment, supplement, or other modification of any of the terms
(including acceleration, covenant, default, subordination, sinking fund,
repayment, interest rate, or redemption provisions contained in, or applicable
to, any instrument evidencing or applicable to any Subordinated Debt) contained
in or applicable to any instrument evidencing or applicable to any Subordinated
Debt held by a non- Obligor, other than any amendment, supplement, or other
modification which extends the date or reduces the amount of any required
repayment or redemption.
5.28 Restrictive Agreements. Not, and not permit any Subsidiary to,
enter into any agreement or arrangement which contains a restriction on the
ability of such Subsidiary to make any payment to Borrower by way of dividends,
advances, repayments of advances, reimbursements of management and other
intercompany charges, expenses, and accruals, or other returns on investments or
any other agreement or arrangement which restricts the ability of such
Subsidiary to make any payment to Borrower, except as disclosed in Schedule
5.28.
5.29 Inconsistent Agreements. Not, and not permit any Subsidiary to,
enter into any agreement containing any provision which would be violated or
breached by the making of any Loan or by the performance by Borrower of its
obligations hereunder or under any Related Agreement or the performance by any
other Obligor of its obligations under any Related Agreement.
5.30 Stock Appreciation Plan. Borrower shall not (i) amend any
currently existing award notices issued pursuant to the Stock Appreciation Plan
or (ii) issue any award notices after the date hereof pursuant to the Stock
Appreciation Plan or any similar plan or arrangement providing for cash payments
to be made to any Person prior to the scheduled date for payment in full of all
Liabilities.
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6. DEFAULT.
6.1 Event of Default. Each of the following shall constitute
an Event of Default under this Agreement:
(a) Non-Payment. Default in the payment, when due or
declared due, of any of the Liabilities.
(b) Non-Payment of Other Indebtedness. Default in the payment
when due, whether by acceleration or otherwise (subject to any
applicable grace period), of any Indebtedness of, or guaranteed by,
Borrower, any other Obligor or any Subsidiary (other than (i) any
Indebtedness under this Agreement and any Notes, (ii) any Indebtedness
of Borrower or any Subsidiary to Borrower or to any other Subsidiary or
(iii) Indebtedness under the Other Loan Agreements); provided that (x)
the aggregate amount of Indebtedness so affected shall equal or exceed
$25,000 and (y) failure to make any payment on any Subordinated Debt
described in clause (i) of the definition of Subordinated Debt shall
not be an Event of Default, so long as the holders of such Subordinated
Debt are prohibited under the terms of such Subordinated Debt from
taking any action, and refrain from instituting any litigation, to
collect.
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, Borrower, any other Obligor or any
Subsidiary (other than (i) any Indebtedness of Borrower or any
Subsidiary to Borrower or to any other Subsidiary, (ii) the
Indebtedness under this Agreement and any Notes or (iii) Indebtedness
under the Other Loan Agreements) or enables the holder or holders of
such other Indebtedness or any trustee or agent for such holders (any
required notice of default having been given and any applicable grace
period having expired) to accelerate the maturity of such other
Indebtedness; provided that (x) the aggregate amount of Indebtedness
with respect to which such event or condition shall have occurred shall
equal or exceed $25,000 and (y) any event or condition which shall have
occurred which shall result in the acceleration of any Subordinated
Debt described in clause (i) of the definition of Subordinated Debt
shall not be an Event of Default, so long as the holders of such
Subordinated Debt are prohibited under the terms of such Subordinated
Debt from taking any action, and refrain from instituting any
litigation, to collect.
(d) Other Obligations. Default in the payment when due,
whether by acceleration or otherwise, or in the performance or
observance (subject to any applicable grace period or waiver of
such default) of (i) any obligation or agreement of Borrower,
any other Obligor or any Subsidiary to or with Lender (other
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than any obligation or agreement of Borrower hereunder and under any
Related Agreement); or (ii) any material obligation or agreement of
Borrower, any other Obligor or any Subsidiary to or with any other
Person (other than (x) any such material obligation or agreement
constituting or related to Indebtedness, (y) Trade Accounts Payable and
(z) any material obligation or agreement of any Subsidiary to Borrower
or to any other Subsidiary), except only to the extent that the
existence of any such default is being contested by Borrower, such
other Obligor or such Subsidiary, as the case may be, in good faith and
by appropriate proceedings and Borrower, such other Obligor or such
Subsidiary, as applicable, shall have set aside on its books such
reserves or other appropriate provisions therefor as may be required by
GAAP.
(e) Insolvency. Borrower, any other Obligor or any Subsidiary
becomes insolvent, or generally fails to pay, or admits in writing its
inability to pay, its debts as they mature, or applies for, consents
to, or acquiesces in the appointment of a trustee, receiver or other
custodian for Borrower, such other Obligor or such Subsidiary, or for a
substantial part of the property of Borrower, such other Obligor or
such Subsidiary, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for
Borrower, any other Obligor or any Subsidiary, or for a substantial
part of the property of Borrower, any other Obligor or any Subsidiary
and is not discharged or dismissed within 60 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Borrower, any other Obligor or
any Subsidiary and, solely in the case where such proceeding shall have
been instituted against Borrower, such Obligor or such Subsidiary, such
proceeding shall not have been dismissed within 60 days or an order for
relief shall have been entered; or any warrant of attachment or similar
legal process is issued against any substantial part of the property of
Borrower, any other Obligor or any Subsidiary.
(f) Pension Plans. The institution by Borrower or any ERISA
Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, Borrower or any ERISA Affiliate would be
required to make a contribution to such Pension Plan, or would incur a
liability or obligation to such Pension Plan, in excess of $50,000; the
institution by the PBGC of steps to terminate any Pension Plan and the
continuation of either such condition after notice thereof from Lender;
or a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
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(g) Non-Compliance With This Agreement. Default in the
performance of any of Borrower's agreements set forth in Section 2,
3.2, 3.3, 3.4, 5.3, 5.5, 5.6 or 5.12 through 5.30 (and not constituting
an Event of Default under any of the other subsections of this Section
6.1), and continuance of such default after written notice thereof to
Borrower from Lender; or default in the performance of any of
Borrower's agreements set forth in Section 5.2 (and not constituting an
Event of Default under any of the other subsections of this Section
6.1), and continuance of such default for three (3) Banking Days after
notice thereof to Borrower from Lender; or default in the performance
of any of Borrower's other agreements herein set forth (and not
constituting an Event of Default under any of the other subsections of
this Section 6.1), and continuance of such default for thirty (30) days
after written notice thereof to Borrower from Lender.
(h) Non-Compliance With Related Agreements. Default in the
performance by Borrower, any other Obligor or any Subsidiary of any of
its agreements set forth in any Related Agreement (and not constituting
an Event of Default under any of the other subsections of this Section
6.1), and continuance of such default after notice from Lender and the
expiration of the grace period (if any) set forth therein.
(i) Warranty. Any warranty made by Borrower or any other
Obligor herein or in any Related Agreement is untrue or misleading in
any material respect when made or deemed made; any schedule, statement,
report, notice, certificate or other writing furnished by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on the date as of which the facts set forth therein are stated
or certified; or any certification made or deemed made by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on or as of the date made or deemed made.
(j) Litigation. There shall be entered against any one of
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $50,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which Borrower, such Subsidiary or such
Obligor, as applicable, is insured and with respect to which the
insurer has assumed responsibility in writing or for and to the extent
which Borrower, such Subsidiary or such Obligor, as applicable, is
otherwise indemnified if the terms of such indemnification are
satisfactory to Lender.
(k) Validity. If the validity or enforceability of this
Agreement or any Related Agreement shall be challenged by
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Borrower, any other Obligor or any other Person acting through, or on
behalf of, Borrower or any other Obligor, or shall fail to remain in
full force and effect.
(l) Conduct of Business. If Borrower, any other Obligor or any
Subsidiary is enjoined, restrained or in any way prevented by court
order, which has not been dissolved or stayed within five (5) business
days, from conducting all or any material part of its business affairs.
(m) Board Membership. If (x) Alexander M. Milley or (y)
Robert C. Shaw and Steven Hollopeter shall for any reason other
than the death, disability or permanent incapacity of any such
individual cease to be members of the board of directors of
Borrower.
(n) Material Adverse Change. Lender shall have determined in
good faith that (i) a material adverse change has occurred in the
business, operations or financial condition of Borrower, any other
Obligor or any Subsidiary, (ii) Lender's interest in any material
Collateral or Third Party Collateral has been adversely affected or
impaired, or the value thereof to Lender has been diminished to a
material extent or (iii) the prospect of payment or performance of any
obligation or agreement of Borrower or any other Obligor hereunder or
under any Related Agreement is materially impaired, and the condition
giving rise to such determination does not constitute an Event of
Default under any of the other subsections of this Section 6.1 and
continues to exist unremedied for a period of thirty (30) days after
written notice of such determination by Lender to Borrower.
(o) Other Loan Agreements. The existence of any other
"Event of Default" under and as defined in the Other Loan
Agreements.
6.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default described in
Section 6.1(e) shall occur, then Lender's commitment and the Credit extended
under this Agreement shall terminate and all Liabilities hereunder and under any
Notes shall be immediately due and payable without demand, notice or declaration
of any kind whatsoever.
(b) In the event an Event of Default other than one described in
Section 6.1(e) shall occur, then Lender may declare its commitment terminated
and/or all Liabilities hereunder and under any Notes immediately due and payable
without demand or notice of any kind whatsoever, whereupon the Credit extended
under this Agreement shall terminate and all Liabilities hereunder and under any
Notes
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shall be immediately due and payable. Lender shall promptly advise Borrower of
any such declaration, but failure to do so shall not impair the effect of such
declaration.
(c) If any Event of Default exists and is continuing, Lender
may exercise any one or more or all of the following remedies, all
of which are cumulative and non-exclusive:
(1) Any remedy contained in this Agreement or in any of
the Related Agreements or any Supplemental Documentation;
(2) Any rights and remedies available to Lender under the
UCC and any other applicable law;
(3) To the extent permitted by applicable law, Lender may,
without notice, demand or legal process of any kind, take possession of
any or all of the Collateral and Third Party Collateral (in addition to
Collateral and Third Party Collateral which it may already have in its
possession), wherever it may be found, and for that purpose may pursue
the same wherever it may be found, and may enter into any premises
where any of the Collateral or Third Party Collateral may be or is
supposed to be, and search for, take possession of, remove, keep and
store any of the Collateral or Third Party Collateral until the same
shall be sold or otherwise disposed of, and Lender shall have the right
to store the same in any of Borrower's premises without cost to Lender;
(4) At Lender's request, Borrower will (and will cause its
Subsidiaries to), at Borrower's (or such Subsidiaries') expense,
assemble the Collateral and Third Party Collateral and make it
available to Lender at a place or places to be designated by Lender
which is reasonably convenient to Lender and Borrower; and
(5) Lender at its option, and pursuant to notification given
to Borrower (or any other applicable Obligor) as provided for below,
may sell any Collateral or Third Party Collateral actually or
constructively in its possession at public or private sale and apply
the proceeds thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition.
7.2 Application of Proceeds of Collateral. Any proceeds of
any disposition by Lender of any of the Collateral may be applied by
Lender to the payment of expenses in connection with the taking
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possession of, storing, preparing for sale, and disposition of Collateral,
including Attorneys' Fees and legal expenses, and any balance of such proceeds
may be applied by Lender toward the payment of such of the Liabilities, and in
such order of application, as Lender may from time to time elect.
7.3 Care of Collateral. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Lender to comply with such request shall not, of itself,
be deemed a failure to exercise reasonable care, and no failure of Lender to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
7.4 Performance of Borrower's Obligations. Lender shall have the right,
but shall not be obligated, to discharge any claims against or Liens, and any
Taxes at any time levied or placed upon any or all Collateral, including,
without limitation, those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. Lender may also pay for
maintenance and preservation of Collateral. Lender may, but is not obligated to,
perform or fulfill any of Borrower's responsibilities under this Agreement which
Borrower has failed to perform or fulfill. Lender may advance to Borrower as a
Loan any payment made or expense incurred by Lender under this Section 7.4.
7.5 Lender's Rights. None of the following shall affect the obligations
of Borrower to Lender under this Agreement or Lender's right with respect to the
remaining Collateral or any Third Party Collateral (any or all of which actions
may be taken by Lender at any time, whether before or after an Event of Default,
at its sole and absolute discretion and without notice to Borrower):
(a) acceptance or retention by Lender of other property or
interests in property as security for the Liabilities, or acceptance or
retention of any Obligor(s), in addition to Borrower, with respect to
any of the Liabilities;
(b) release of its security interest in, or the surrender or
release of, or the substitution or exchange of or for, all or any part
of the Collateral or any Third Party Collateral or any other property
securing any of the Liabilities (including but not limited to any
property of any Obligor other than Borrower), or any extension or
renewal for one or more periods (whether or not longer than the
original period), or release,
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compromise, alteration or exchange, of any obligations of any guarantor
or other Obligor with respect to any Collateral, any Third Party
Collateral or any such property;
(c) extension or renewal for one or more periods (whether or
not longer than the original period), or release, compromise,
alteration or exchange of any of the Liabilities, or release or
compromise of any obligation of any Obligor with respect to any of the
Liabilities; or
(d) failure by Lender to resort to other security or pursue
any Person liable for any of the Liabilities before resorting to the
Collateral or Third Party Collateral.
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 Conditions Precedent. The effectiveness of this Agreement
is subject to satisfaction of the following conditions precedent (in
addition to those provided in Section 8.2):
8.1.1 Security Interest. The security interest in the
Collateral granted under this Agreement and the Related Agreements, and
in any Third Party Collateral and all other Liens granted to Lender to
secure the Liabilities, shall be a senior, perfected Lien except as
otherwise agreed by Lender, and all financing statements and other
documents relating to Collateral and Third Party Collateral shall have
been filed or recorded, as appropriate.
8.1.2 Financial Statements. Borrower shall deliver to Lender
Borrower's audited consolidated and consolidating financial statements
as at December 31, 1994, prepared in conformity with GAAP applied on a
basis consistent with that of the preceding Fiscal Year.
8.1.3 Other Loan Agreements. The Other Loan Agreements
shall have become effective in accordance with their terms.
8.1.4 Blocked Account; Lock Box. Borrower and its Subsidiaries
shall have entered into blocked account and/or lock box agreements with
Lender for the collection and remittance to Lender of cash proceeds of
Collateral and Third Party Collateral.
8.1.5 Effect of Law. No law or regulation affecting Lender's
entering into this Agreement shall impose upon Lender any material
obligation, fee, liability, loss, cost, expense or damage.
8.1.6 Exhibits; Schedules. All Exhibits and Schedules to
this Agreement shall have been completed and submitted to
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Lender, shall be in form and substance reasonably satisfactory to
Lender and shall contain no facts or information which Lender, in its
reasonable judgment, determines to be unacceptable.
8.1.7 Fees. Lender shall have received all fees then due and
payable by Borrower or any other Person hereunder or in connection
herewith.
8.1.8 Documents. Lender shall have received all of the
following, each duly executed where appropriate and dated as of the
Restatement Date (or such other date as shall be satisfactory to
Lender), in form and substance satisfactory to Lender:
(a) Resolutions. A copy, duly certified by the secretary or an
assistant secretary of Borrower and each Subsidiary party to a Related
Agreement, of: (1) resolutions of the Board of Directors of Borrower
and each such Subsidiary authorizing (A) the borrowings by Borrower
hereunder and (B) the execution, delivery and performance by Borrower
and each such Subsidiary of this Agreement and each other Related
Agreement to which Borrower and each such Subsidiary is a party or by
which it is bound; (2) all documents evidencing any other necessary
corporate action with respect to this Agreement and the Related
Agreements; and (3) all approvals or consents, if any, with respect to
this Agreement and the Related Agreements;
(b) Incumbency Certificates. A certificate of the secretary of
Borrower and each Subsidiary party to a Related Agreement certifying
the names of the officers of Borrower and each such Subsidiary
authorized to sign this Agreement and each other Related Agreement to
which Borrower and each such Subsidiary is a party or by which any of
them is bound, and all other documents and certificates to be delivered
by any of them hereunder, together with samples of the true signatures
of such officers;
(c) Borrower's Certificate. The certificate of the President
or Chief Executive Officer of Borrower certifying to the fulfillment of
all conditions precedent to closing and funding the secured financing
transaction contemplated by this Agreement and to the truth and
accuracy, as of such date, of the representations and warranties of
Borrower and each Subsidiary party to a Related Agreement contained in
this Agreement and each other Related Agreement to which Borrower or
such Subsidiary is a party or by which it is bound;
(d) Accountant's Letter. With respect to the financial
statements referred to in Section 4.6, a "reliance letter" from
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the accountants who prepared such statements in form and
content acceptable to Lender;
(e) Bylaws. A copy, duly certified by the secretary or
an assistant secretary of Borrower and each Subsidiary party to
a Related Agreement, of the Bylaws of Borrower and each such
Subsidiary;
(f) Charter. A copy, duly certified by the Secretary of
State of the state of organization of each such Person, of the
Certificate of Incorporation of Borrower and each Subsidiary
party to a Related Agreement;
(g) Registration; Good Standing. A copy, duly certified by the
applicable Secretary of State, of a certificate of good standing issued
by the Secretary of the State of the state of organization of Borrower
and each Subsidiary party to a Related Agreement and each other state
where Borrower and each such Subsidiary is qualified to do business or
where, because of the nature of its business or properties,
qualification to do business is required;
(h) Legal Opinion. A legal opinion from counsel for
Borrower and each Subsidiary party to a Related Agreement
substantially in the form of Exhibit I;
(i) Insurance. Evidence satisfactory to Lender of the
existence of insurance on the Collateral, Third Party Collateral and
business of Borrower and each Subsidiary in amounts and with insurers
acceptable to Lender, together with evidence establishing that Lender
is named as a loss payee and/or additional insured, as applicable, on
all related insurance policies;
(j) Landlord's Consents. A Landlord's Consent, duly
executed by the owner of each leased premises identified on
Schedule 4.12, 4.13 or 4.15 where Collateral or Third Party
Collateral is located other than 4209 Vineland Road, Orlando,
Florida;
(k) Note. The Term Note in the form of Exhibit C;
(l) Guaranty. A Guaranty, duly executed by Delaware,
Contempo and Contempo West;
(m) Pledge Agreement. A Pledge Agreement, duly executed
by Borrower, together with all intercompany notes pledged
thereunder, duly endorsed in blank or accompanied by duly
endorsed blank bond powers or allonges; and
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(n) Other Documents. Such other documents as Lender shall
determine to be necessary or desirable, including but not limited to
documents described in paragraphs (a), (b), (e), (f), (g), (h) and (i)
of this Section 8.1.8 with respect to any Obligor other than Borrower
and its Subsidiaries.
8.2 Further Conditions Precedent; Certification. The
effectiveness of this Agreement is subject to satisfaction of the
following conditions precedent in addition to those provided in
Section 8.1:
(a) No Change in Condition. No change in the condition or
operations, financial or otherwise, of Borrower, any Subsidiary or any
other Obligor shall have occurred which change, in the reasonable
credit judgment of Lender, would reasonably be expected to have a
material adverse effect on Borrower, such Subsidiary or such other
Obligor, or on any Collateral or Third Party Collateral (which
Collateral or Third Party Collateral Lender deems in its sole
discretion to be material);
(b) Default. Before and after the effectiveness hereof,
no Event of Default or Default shall have occurred and be
continuing;
(c) Insurance. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent, scope or cost of the insurance
policies of Borrower or any Subsidiary listed on Schedule 4.7 which
change would have a material adverse effect on the financial condition
of Borrower, any Subsidiary or Borrower and its Subsidiaries taken as a
whole, or would significantly adversely affect Borrower's ability to
perform its obligations under this Agreement, the Notes, or any Related
Agreement to which it is a party or by which it is bound;
(d) Warranties. Before and after the effectiveness
hereof, the warranties in Section 4 shall be true and correct
as though made on the Restatement Date, except for such changes
as are specifically permitted hereunder; and
(e) Accounting Methods. Borrower shall not have made any
material (as reasonably determined by Lender) change in its
accounting methods or principles except as required by GAAP.
Each request for a Loan hereunder made or deemed to have been made by
Borrower shall be deemed to be a certificate of Borrower as to the matters set
out in the foregoing provisions of this Section 8.2.
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9. INDEMNITY.
9.1 Environmental and Safety and Health Indemnity. Borrower hereby
indemnifies Lender and agrees to hold Lender harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of any
and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Borrower or any of its Subsidiaries of any
Environmental Law or Occupational Safety and Health Law, or with respect to, or
as a direct or indirect result of, (i) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
properties utilized by Borrower and/or any Subsidiary into or upon any land, the
atmosphere, or any watercourse, body of water, groundwater or wetland, of any
Hazardous Material or other hazardous, toxic or dangerous waste, substance or
constituent, or other substance (including, without limitation, any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or arising
under any Environmental Law) or (ii) the existence of any unsafe or unhealthful
condition on or at any premises utilized by Borrower and/or any Subsidiary in
the conduct of its business. The provisions and undertakings of indemnification
set out in this Section 9.1 shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
9.2 General Indemnity. In addition to the payment of expenses pursuant
to Section 11.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
any Note, and the officers, directors, employees, agents, and affiliates of
Lender and such holders (collectively, the "Indemnitees"), harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any Related Agreement or
any other agreements executed and delivered by Borrower or any other Obligor in
connection herewith, the statements contained in any commitment letter delivered
by Lender, Lender's agreement to make the Loans hereunder, or the use or
intended use of the proceeds of any of the Loans hereunder (the "indemnified
liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of such Indemnitee. To the extent that the
undertaking
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to indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrower shall
contribute the maximum portion that it is permitted to pay under applicable law
to the payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them. The provisions and undertakings of indemnification
set out in this Section 9.2 shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
9.3 Capital Adequacy. If Lender shall reasonably determine that the
application or adoption of any law, rule, regulation, directive, interpretation,
treaty or guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the force or law
(including, without limitation, application of changes to Regulation H and
Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on
January 19, 1989 and regulations of the Comptroller of the Currency, Department
of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the
Currency on January 27, 1989) increases the amount of capital required or
expected to be maintained by Lender or any Person controlling Lender, and such
increase is based upon the existence of Lender's obligations hereunder and other
commitments of this type, then from time to time, within ten (10) days after
demand from Lender, Borrower shall pay to Lender such amount or amounts as will
compensate Lender or such controlling Person, as the case may be, for such
increased capital requirement. The determination of any amount to be paid by
Borrower under this Section 9.3 shall take into consideration the policies of
Lender or any Person controlling Lender with respect to capital adequacy and
shall be based upon any reasonable averaging, attribution and allocation
methods. A certificate of Lender setting forth the amount or amounts as shall be
necessary to compensate Lender as specified in this Section 9.3 shall be
delivered to Borrower and shall be conclusive in the absence of manifest error.
The provisions and undertakings of indemnification set out in this Section 9.3
shall survive satisfaction and payment of the Liabilities and termination of
this Agreement.
9.4 Other Indemnities. Notwithstanding anything to the contrary
elsewhere in this Agreement, all other indemnities of Borrower in favor of
Lender contained in this Agreement shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
10. ADDITIONAL PROVISIONS. Additional provisions are set forth in
Supplement A.
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11. GENERAL.
11.1 Borrower Waiver. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals 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,
assuming Lender has acted in a commercially reasonable manner, 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 Lender's
relevy, attachment or levy on or of, the Collateral or any bond or security
which might be required by any court prior to allowing Lender to exercise any of
Lender's remedies; and (iii) the benefit of all valuation, appraisement and
exemption laws. Borrower acknowledges that it has been advised by counsel of its
choice with respect to this Agreement and the transactions evidenced by this
Agreement.
11.2 Power of Attorney. Borrower appoints Lender, or any Person whom
Lender may from time to time designate, as Borrower's attorney and agent-in-fact
with power (which appointment and power, being coupled with an interest, shall
be irrevocable until all Liabilities are finally paid and performed in full and
this Agreement is terminated), without notice to Borrower, to:
(a) At such time or times hereafter as Lender or said agent,
in its sole and absolute discretion, may determine in Borrower's or
Lender's name (i) endorse Borrower's name on any checks, notes, drafts
or any other items of payment relating to and/or proceeds of the
Collateral which come into the possession of Lender or under Lender's
control and apply such payment or proceeds to the Liabilities in
accordance with the terms hereof; (ii) endorse Borrower's name on any
chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement in Lender's possession relating
to Accounts Receivable, Inventory or any other Collateral; (iii) use
the information recorded on or contained in any data processing
equipment and computer hardware and software to which Borrower has
access relating to Accounts Receivable, Inventory and/or other
Collateral; (iv) use Borrower's stationery and sign the name of
Borrower to verification of Accounts Receivable and notices thereof to
Account Debtors; and (v) if not done by Borrower, do all acts and
things determined by Lender to be necessary, to fulfill Borrower's
obligations under this Agreement; and
(b) At such time or times after the occurrence and during the
continuance of an Event of Default, as Lender or said agent, in its
sole and absolute discretion, may determine, in
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Borrower's or Lender's name: (i) demand payment of the Accounts
Receivable; (ii) enforce payment of the Accounts Receivable, by legal
proceedings or otherwise; (iii) exercise all of Borrower's rights and
remedies with respect to the collection of the Accounts Receivable and
other Collateral; (iv) settle, adjust, compromise, extend or renew the
Accounts Receivable; (v) settle, adjust or compromise any legal
proceedings brought to collect the Accounts Receivable; (vi) if
permitted by applicable law, sell or assign the Accounts Receivable
and/or other Collateral upon such terms for such amounts and at such
time or times as Lender may deem advisable; (vii) discharge and release
the Accounts Receivable and/or other Collateral; (viii) prepare, file
and sign Borrower's name on any proof of claim in bankruptcy or similar
document against any Account Debtor; (ix) prepare, file and sign
Borrower's name on any notice of lien, assignment or satisfaction of
lien or similar document in connection with the Accounts Receivable
and/or other Collateral; and (x) do all acts and things necessary, in
Lender's sole and absolute discretion, to obtain repayment of the
Liabilities and to fulfill Borrower's other obligations under this
Agreement.
11.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any
Loan is made hereunder, to pay upon demand all Attorneys' Fees and all other
reasonable expenses incurred by Lender in connection with (i) the preparation,
negotiation and execution of this Agreement, any Related Agreement, the Other
Loan Agreements, the Other Loan Documents and any document required to be
furnished in connection herewith or therewith, (ii) the preparation of any and
all amendments to this Agreement or any of the Related Agreements and all other
instruments or documents provided for therein or delivered or to be delivered
thereunder or in connection therewith, (iii) the collection or enforcement of
Borrower's or any other Obligor's obligations hereunder or under any Related
Agreement, and (iv) the collection or enforcement of any of Lender's rights in
or to any Collateral or Third Party Collateral; provided, however, that Borrower
shall have no obligation to pay the Attorney's Fees in clause (i) of this
sentence to the extent that the same exceed $30,000. Lender may advance all such
amounts to Borrower as a Loan. Borrower also agrees, (v) to indemnify and hold
Lender harmless from any loss or expense which may arise or be created by the
acceptance of telephonic or other instructions for making Loans except for
losses and expenses arising from Lender's gross negligence or willful
misconduct, and (vi) to pay, and save Lender harmless from all liability for,
any stamp or other taxes which may be payable with respect to the execution or
delivery of this Agreement, or any Related Agreement or Supplemental
Documentation, or the issuance of any Note or of any other instruments or
documents provided for herein or to be delivered hereunder or in connection
herewith. Borrower's foregoing obligations shall survive any termination of this
Agreement.
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11.4 Lender Fees and Charges. Borrower agrees to pay Lender on demand
the customary fees and charges of Lender for maintenance of accounts with Lender
or for providing other services to Borrower. Lender may, in its sole and
absolute discretion, provide for such payment by advancing the amount thereof to
Borrower as a Loan.
11.5 Lawful Interest. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to Borrower.
11.6 No Waiver by Lender; Amendments. No failure or delay on the part
of Lender in the exercise of any power or right, and no course of dealing
between Borrower and Lender shall operate as a waiver of such power or right,
nor shall any single or partial exercise of any power or right preclude other or
further exercise thereof or the exercise of any other power or right. The
remedies provided for herein are cumulative and not exclusive of any remedies
which may be available to Lender at law or in equity. No notice to or demand on
Borrower not required hereunder shall in any event entitle Borrower to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the right of Lender to any other or further action in any
circumstances without notice or demand. No amendment, modification or waiver of,
or consent with respect to, any provision of this Agreement or any Related
Agreement shall in any event be effective unless the same shall be in writing
and signed and delivered by Lender and Borrower. Any waiver of any provision of
this Agreement, and any consent to any departure by Borrower from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which given.
11.7 Termination of Credit.
(a) Unless the Termination Date is extended pursuant to clause
(b) of this Section 11.7, the Credit shall terminate on the
then-scheduled Termination Date. Borrower may terminate the Credit at
any time prior to the Termination Date upon notice to Lender and
payment in full of the outstanding principal balance of the Loans and
all other Liabilities. All of Lender's rights and remedies, the liens
and security interests of Lender in the Collateral and the Third Party
Collateral and all of Borrower's duties and obligations under this
Agreement shall survive termination of the Credit extended to Borrower
hereunder until all of the Liabilities have been finally paid and
performed in full. The termination or cancellation of the Credit shall
not affect or impair the
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liabilities and obligations of Borrower or any one or more of the
Obligors to Lender or Lender's rights with respect to any Loans and
advances made and other Liabilities incurred prior to such termination
or with respect to the Collateral or any Third Party Collateral.
(b) Borrower may, not more than 90 days nor less than 75 days
prior to any scheduled Termination Date, request that Lender extend the
Credit for an additional one-year period to the next anniversary of
such date. Unless Lender, in the exercise of its sole and complete
discretion, notifies Borrower of its willingness to extend the Credit
for such additional one-year period, the Credit shall terminate on the
then scheduled Termination Date (and all Loans and other Liabilities
shall be thereupon due and payable).
11.8 Notices. Except as otherwise expressly provided herein, any notice
hereunder to Borrower or Lender shall be in writing (including telegraphic,
telex, or facsimile communication) and shall be given to Borrower or Lender at
its address, telex number or facsimile number set forth on the signature pages
hereof or at such other address, telex number or facsimile number as Borrower or
Lender may, by written notice, designate as its address, telex number or
facsimile number for purposes of notices hereunder. All such notices shall be
deemed to be given when transmitted by telex and the appropriate answerback is
received, transmitted by facsimile, delivered to the telegraph office, delivered
by courier, personally delivered or, in the case of notice by mail, three (3)
Banking Days following deposit in the United States mails, properly addressed as
herein provided, with proper postage prepaid; provided, however, that notice to
Lender of Borrower's intent to terminate the Credit shall not be effective until
actually received by Lender.
11.9 Assignments and Participations; Information. Borrower hereby
consents to Lender's grant of participations in or sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or any Related Agreement, or of any portion of any thereof, including
without limitation Lender's rights, titles, interests, remedies, powers and/or
duties. Lender may furnish any information concerning Borrower in the possession
of Lender from time to time to assignees of the rights and/or obligations of
Lender hereunder and to Participants in any Loan (including prospective
assignees and Participants) and may furnish information in response to credit
inquiries consistent with general banking practice. Lender shall promptly notify
Borrower of Lender's grant of any participation in or sale, assignment, transfer
or other disposition of this Agreement or any Related Agreement, or of any
portion of any thereof. Borrower shall use its reasonable efforts to assist
Lender in its efforts to sell assignments and participations.
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11.10 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 Successors. This Agreement shall be binding upon Borrower and
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower and Lender and the successors and assigns of Lender.
Borrower shall not assign its rights or duties hereunder without the consent of
Lender.
11.12 Construction. Borrower acknowledges that this Agreement shall not
be binding upon Lender until and unless accepted by Lender in writing. If so
accepted by Lender, this Agreement and the Related Agreements and Supplemental
Documentation shall, unless otherwise expressly provided therein, be deemed to
have been negotiated and entered into in, and shall be governed and controlled
by the laws of, the State of Illinois as to interpretation, enforcement,
validity, construction, effect, choice of law, and in all other respects,
including, but not limited to, the legality of the interest rate and other
charges, but excluding perfection of security interests and liens which shall be
governed and controlled by the laws of the relevant jurisdiction.
11.13 Consent to Jurisdiction. To induce Lender to accept this
Agreement, Borrower irrevocably agrees that, subject to Lender's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, THE
SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE
HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT
THEREOF.
11.14 Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to "Borrower
and its Subsidiaries" or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes.
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11.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(i) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Initials of Alexander M. Milley, President of Borrower:
.
11.16 Prior Actions. Borrower hereby waives, releases and forever
discharges Lender, its officers, employees and agents, from any and all rights,
claims, demands or causes of action against Lender, in law or in equity, arising
out of Lender's past actions or omissions with respect to the Original Loan
Agreement, any other agreements or documents, or any lien or collateral securing
any Liabilities under and as defined in the Original Loan Agreement.
12. BORROWER GUARANTY.
12.1 Guaranty of Payment. Borrower hereby absolutely,
unconditionally and irrevocably
(i) guarantees the full and prompt payment and performance
when due, whether by required payment, declaration, acceleration, or
otherwise, and at all times thereafter, of all of the monetary
obligations of each of Delaware, Contempo and Contempo West under, or
in respect of, the Indebtedness of such Subsidiaries under the Other
Loan Agreements and the Other Loan Documents (the "Guaranteed
Obligations"); and
(ii) agrees to reimburse Lender for all costs and expenses,
including, without limitation, Attorneys' Fees, which Lender expends or
incurs in collecting or compromising any Guaranteed Obligation and in
enforcing this Section 12, whether or not suit is filed, including all
costs, expenses, reasonable Attorneys' Fees, and other charges incurred
by Lender in connection with any insolvency, bankruptcy,
reorganization, liquidation, dissolution, arrangement, or other similar
proceeding involving Borrower which in any way affects the exercise by
Lender of its rights, powers, remedies, and privileges with respect to
this Section 12 or the outstanding principal amount of the Guaranteed
Obligations.
12.2 Obligations Absolute, Unconditional, etc. Borrower agrees that its
obligations under this Section 12 shall be absolute, unconditional, and
irrevocable, irrespective of the genuineness, validity, legality, or
enforceability of the Guaranteed Obligations, the Other Loan Agreements, or any
Other Loan Document, or any other
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instrument or collateral relating to or securing the payment, performance, or
observance thereof or any other circumstance which could otherwise constitute a
legal or equitable discharge of a surety or guarantor, and Lender may proceed to
enforce this Section 12 without pursuing or collecting a judgment against any
other Person, without resorting to or enforcing any other collateral or security
and without any other action whatsoever. Lender shall have no obligation to
protect, secure, perfect, or insure any collateral security document or property
at any time held as security for the Guaranteed Obligations or this Section 12.
Borrower hereby absolutely, unconditionally and irrevocably waives and agrees
not to assert or take advantage of:
(a) any right to require Lender to proceed against Delaware,
Contempo, Contempo West or any other Obligor or any other Person, or to
proceed against or exhaust any other security or collateral for the
payment, performance, or observance of the Guaranteed Obligations, or
to pursue any other remedy whatsoever before proceeding against
Borrower hereunder;
(b) any defense that may arise by reason of the incapacity,
lack of authority, death, or disability of any Person, or the failure
of Lender to file or enforce a claim against any estate (in
administration, bankruptcy or any other proceedings) of any Person;
(c) any defense based upon an election of remedies by
Lender, including an election to proceed by non-judicial rather
than judicial foreclosure;
(d) any other defense of Delaware, Contempo or Contempo West,
or the cessation of the liability of Delaware, Contempo or Contempo
West, for any cause whatsoever, with respect to any Guaranteed
Obligation;
(e) any other defense of any kind, whether now existing or
arising hereafter, of Borrower to any action, suit, or judicial or
legal proceeding that may be instituted with respect to this Section
12;
(f) presentment, demand, protest and notice of any kind,
including, without limitation, notice of the creation or non-payment or
non-performance of all or any of the Guaranteed Obligations, notice of
dishonor or protest, notice of acceptance by Lender of this Section 12,
notice of the existence, creation or incurrence of any new or
additional indebtedness, obligation, or other liability, and notice of
action or non-action on the part of Lender, Delaware, Contempo,
Contempo West or any other Obligor or other Person in connection with
the Guaranteed Obligations or otherwise; and
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(g) any duty on the part of Lender or any other Person to
disclose to Borrower any facts or information any such Person may now
or hereafter know or possess regarding Delaware, Contempo, Contempo
West, the Guaranteed Obligations or any other matter whatsoever,
regardless of whether such Person has reason to believe that such facts
or other information may materially increase the risk which Borrower
intends to assume or has reason to believe that such facts or other
information are unknown to Borrower or has a reasonable opportunity to
communicate such facts or other information, it being understood and
agreed that Borrower is fully and solely responsible for being and
keeping informed of the financial condition of Delaware, Contempo and
Contempo West and of all other circumstances bearing on the risk of
non-payment, non-performance, or non-observance of any Guaranteed
Obligation.
This Section 12 shall in all respects be a continuing, absolute, unconditional,
and irrevocable guaranty of payment, and shall remain in full force and effect
until all Guaranteed Obligations have been fully paid. This Section 12 shall
continue to be effective, or be reinstated, as the case may be, if at any time
any payment, in whole or in part, of any Guaranteed Obligation is rescinded or
must otherwise be restored or returned by Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Borrower or any of
Delaware, Contempo or Contempo West, or upon or as a result of the appointment
of a custodian, receiver, trustee, or other officer with similar powers with
respect to Borrower or any of Delaware, Contempo or Contempo West or any part of
the property of any thereof, or otherwise, all as though such payments had never
been made. If any Event of Default shall at any time have occurred and be
continuing and acceleration of the Indebtedness represented by any Other Loan
Agreement shall at any time be prevented by reason of the pendency against the
Subsidiary obligated thereunder of a case or proceeding under a bankruptcy or
insolvency law, Borrower agrees that, for purposes of this Section 12 and its
obligations hereunder, the maturity of such principal amount shall be deemed to
have been accelerated with the same effect as if the holder of such Indebtedness
had accelerated the same in accordance with the terms of such Other Loan
Agreement, and Borrower shall forthwith pay such principal amount and interest
(if any) thereon and other Guaranteed Obligations without further notice or
demand.
12.3 Waiver of All Defenses. Lender may, from time to time, in its sole
discretion and without notice to the Borrower, take any or all of the following
actions, all without in any way diminishing, impairing, releasing, or affecting
the liability or obligations of Borrower under or with respect to this Section
12, and Borrower hereby irrevocably consents to any or all of the following
actions by Lender or any holder of any Guaranteed Obligation:
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(a) retain or obtain a Lien in any property to secure any
of the Guaranteed Obligations or any obligation hereunder;
(b) retain or obtain the primary or secondary obligation
of any obligor or obligors with respect to any of the
Guaranteed Obligations;
(c) extend or renew for one or more periods (whether or not
longer than the original period), or alter or exchange, any of the
Guaranteed Obligations, or release or compromise any obligation of any
nature of any other Obligor or any other Person with respect to any of
the Guaranteed Obligations or amend or modify in any respect any Other
Loan Agreement or any Other Loan Document;
(d) waive, modify, subordinate, compromise or release its Lien
in, or surrender, release, or permit any substitution or exchange for,
all or any part of any property securing any of the Guaranteed
Obligations or any obligation hereunder, or extend or renew for one or
more periods (whether or not longer than the original period) or waive,
release, subordinate, compromise, modify, alter or exchange any
guaranty or other obligations of any nature of any obligor with respect
to any such property; and
(e) resort to Borrower for payment of any of the Guaranteed
Obligations, whether or not Lender shall have resorted to or exhausted
any other remedy or any other security or collateral for any obligation
hereunder or shall have proceeded against Delaware, Contempo, Contempo
West or any other Obligor or any other Person primarily or secondarily
obligated with respect to any of the Guaranteed Obligations.
Borrower absolutely, unconditionally, and irrevocably agrees that its liability
hereunder, and the remedies for the enforcement of such liability, shall in no
way be diminished or affected by:
(i) the release or discharge of Delaware, Contempo or Contempo
West or any other Obligor or any other Person responsible for the
payment, performance, or observance of any Guaranteed Obligation in any
creditors', receivership, bankruptcy, reorganization, insolvency, or
other case or proceeding;
(ii) the rejection or disaffirmance in any such proceeding
of any instrument evidencing, securing, or executed in
connection with the Guaranteed Obligations; or
(iii) the impairment, limitation, or modification of the
Guaranteed Obligations resulting from the operation of any present or
future provision of the federal Bankruptcy Code or
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any other statute or law of any kind or from the decision or
order of any court.
Borrower absolutely, unconditionally, and irrevocably further agrees that:
(x) the creation from time to time of Guaranteed Obligations,
and the application or allocation of amounts received by the Lender or
any other Person to the payment of such Guaranteed Obligations, and the
creation, existence, or enforcement from time to time of any security
for the Guaranteed Obligations, and the application and allocation of
the proceeds of such security, shall in no way affect or impair the
rights, remedies, powers and privileges of Lender or any other holder
of a Guaranteed Obligation or the obligations of Borrower under this
Section 12; and
(y) any amounts received by Lender from whatsoever source on
account of the Guaranteed Obligations may be applied by it toward the
payment of such of the Guaranteed Obligations and in such order of
application as Lender may in its sole discretion determine.
Borrower hereby expressly waives notice of the creation of the Guaranteed
Obligations and all diligence in collection or protection of or realization upon
the Guaranteed Obligations or any thereof, any obligation hereunder, or any
security for or guaranty of any of the foregoing.
12.4 Payment, etc., by Borrower. Borrower hereby unconditionally covenants
and agrees that, in the event any of Delaware, Contempo or Contempo West shall
fail duly and punctually to pay any Guaranteed Obligation on the date on which
such payment is due (whether at scheduled maturity, by acceleration, or
otherwise), Borrower will, within five Business Days after the receipt of
written notice from Lender demanding payment of the amount of the Guaranteed
Obligation which the Subsidiary primarily obligated thereon has failed to pay,
pay the entire amount of Guaranteed Obligations demanded to Lender at its office
at 231 South LaSalle Street, Chicago, Illinois 60697, in same day funds. If
Borrower fails to pay any such amount, Lender may institute any action or
proceeding, and make, obtain and enforce a judgment or final decree, against
Borrower and collect in the manner provided by law or in equity out of
Borrower's property, wherever situated, all amounts adjudged or decreed to be
payable. Borrower further agrees that Lender may from time to time, upon receipt
by Lender of any proceeds of any collateral granted by Borrower to Lender in
connection herewith, apply such proceeds to the payment of the Guaranteed
Obligations.
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12.5 Subrogation. Borrower hereby irrevocably agrees not to assert any
claim or other right which it may now or hereafter acquire against each of
Delaware, Contempo and Contempo West or any other Obligor that arises from the
existence, payment, performance or enforcement of Borrower's obligations under
this Section 12 or any other Related Agreement, including any right of
subrogation, reimbursement, exoneration, or indemnification, any right to
participate in any claim or remedy of Lender against the Borrower or any other
Obligor or any collateral which Lender now has or hereafter acquires, whether or
not such claim, remedy or right arises in equity, or under contract, statute or
common law, including the right to take or receive from Borrower or any other
Obligor, directly or indirectly, in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other right, until
all Guaranteed Obligations have been finally paid in full in cash and all
obligations of Lender to make advances to Borrower, Delaware, Contempo and
Contempo West have been terminated.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
AZIMUTH CORPORATION
By:____________________________________
Title:_________________________________
Address: 4209 Vineland Road
Suite J-1
Orlando, Florida 32811
Attention: Alexander M. Milley
Facsimile number: (407) 849-0625
BANK OF AMERICA ILLINOIS
By:____________________________________
Title:_________________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Andrew J. Sutherland
Facsimile number: 312/828-3889
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SUPPLEMENT A
to
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of October 9, 1995 between BANK OF AMERICA
ILLINOIS ("Lender") and AZIMUTH CORPORATION ("Borrower")
1. Loan Agreement Reference. This Supplement A, as it may be amended or modified
from time to time, is a part of the Second Amended and Restated Loan and
Security Agreement dated as of October 9, 1995 between Borrower and Lender
(together with all amendments, modifications and supplements thereto, the "Loan
Agreement"). Terms used herein which are defined in the Loan Agreement shall
have the meaning ascribed to them therein unless the context requires otherwise.
2. Interest.
2.1 Loans. (a) Interest to Maturity. The unpaid principal
balance of the Loans shall bear interest to maturity at 11% per
annum.
(b) Default Rate. If any amount of the Loans is not paid when due,
whether by acceleration or otherwise, the entire unpaid principal balance of the
Loans shall bear interest until paid at a rate per annum equal to 13%.
2.2 Computation. Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. Changes in any interest
rate provided for herein which are due to changes in the Reference Rate shall
take effect on the date of the change in the Reference Rate.
2.3 Payment. Until maturity, interest on the Loans shall be payable
monthly in arrears on the last day of each calendar month at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand. Notwithstanding the foregoing, if no Event of Default or
Unmatured Event of Default shall have occurred and be continuing (excluding any
Unmatured Event or Default relating to the non-payment of interest which is
capitalized pursuant to this Section 2.3), until the Termination Date, at
Borrower's option, all interest payable on the Loans shall be capitalized and
added at the end of each March, June, September and December to the unpaid
principal amount of the Loans on which such interest was payable.
3. Additional Covenants. From the date of the Loan Agreement and
thereafter until all of Borrower's Liabilities under the Loan
<PAGE>
Agreement are paid in full, Borrower agrees that, unless Lender otherwise
consents in writing, it will:
3.1 Consolidated Net Worth. Not permit Borrower's
Consolidated Net Worth to be less than $2,750,000.
3.2 Current Ratio. Not permit the ratio of Borrower's
consolidated current assets to Borrower's consolidated current
liabilities to be less than 1.35:1.
3.3 Liabilities to Net Worth Ratio. Not permit the ratio of
Borrower's consolidated total liabilities to Borrower's Consolidated
Net Worth to exceed 6.2:1.
3.4 Working Capital. Not permit the excess of Borrower's consolidated
current assets over Borrower's consolidated current liabilities (excluding
interest bearing Indebtedness with a maturity of less than one year from the
date of calculation) to be less than $3,500,000.
3.5 Capital Expenditures. Not, and not permit any Subsidiary to,
purchase or otherwise acquire (including, without limitation, acquisition by way
of Capitalized Lease), or commit to purchase or otherwise acquire, any fixed
asset if, after giving effect to such purchase or other acquisition, the
aggregate cost of all fixed assets purchased or otherwise acquired by Borrower
and its Subsidiaries on a consolidated basis in any one Fiscal Year would exceed
$425,000 in any Fiscal Year.
3.6 Consolidated Senior Debt-Equity Ratio. Not permit the
Consolidated Senior Debt-Equity Ratio to exceed 250%.
3.7 Consolidated Senior Interest Coverage Ratio. From and
after October 31, 1995, not permit the Consolidated Senior Interest
Coverage Ratio to be less than 100%.
Borrower's Initials:___________________
Lender's Initials:_____________________
Date: October 9, 1995
2
<PAGE>
EXHIBIT 10.25
LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 9, 1995
BETWEEN
DELAWARE ELECTRO INDUSTRIES, INC.
and
BANK OF AMERICA ILLINOIS
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND OTHER TERMS..........................................2
1.1 Definitions................................................2
1.2 Other Definitional Provisions.............................15
1.3 Interpretation of Agreement...............................15
1.4 Compliance with Financial Restrictions....................15
2. LOANS; OTHER MATTERS................................................16
2.1 Loans.....................................................16
2.1.1 Revolving Loans....................................16
2.1.2 Reduction of Revolving Credit Amount...............16
2.1.3 Maximum Outstanding Loans..........................16
2.1.4 Assumption.........................................17
2.2 Loan Account; Demand Deposit Account......................17
2.3 Interest and Fees.........................................17
2.3.1 Interest on Revolving Loans........................17
2.3.2 Nonuse Fee.........................................18
2.3.3 Method of Calculating Interest and Fees............18
2.3.4 Payment of Interest and Fees.......................18
2.4 Requests for Loans; Borrowing Base Certificates;
Other Information.........................................18
2.5 Notes.....................................................19
2.6 Overdraft Loans...........................................20
2.7 Over Advances.............................................20
2.8 All Loans One Obligation..................................21
2.9 Making of Payments; Application of Collections;
Charging of Accounts......................................21
2.10 Lender's Election Not to Enforce..........................23
2.11 Reaffirmation.............................................23
2.12 Setoff....................................................23
2.13 Refinancing Fee...........................................23
2.14 Closing Fee...............................................24
3. COLLATERAL..........................................................24
3.1 Grant of Security Interest................................24
3.2 Accounts Receivable.......................................25
3.3 Inventory.................................................29
3.4 Equipment.................................................30
3.5 Supplemental Documentation................................30
4. REPRESENTATIONS AND WARRANTIES......................................31
5. BORROWER COVENANTS......................................................31
6. DEFAULT.................................................................31
6.1 Event of Default...............................................31
<PAGE>
PAGE
(a) Non-Payment................................................31
(b) Non-Payment of Other Indebtedness..........................31
(c) Acceleration of Other Indebtedness.........................32
(d) Other Obligations..........................................32
(e) Insolvency.................................................32
(f) Pension Plans..............................................33
(g) Non-Compliance With This Agreement.........................33
(h) Non-Compliance With Related
Agreements.................................................34
(i) Warranty...................................................34
(j) Litigation.................................................34
(k) Validity...................................................34
(l) Conduct of Business........................................34
(m) Material Adverse Change....................................34
(n) Other Loan Agreements......................................35
6.2 Effect of Event of Default; Remedies......................35
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S
RIGHTS..............................................................36
7.1 Notice of Disposition of Collateral.......................36
7.2 Application of Proceeds of Collateral.....................36
7.3 Care of Collateral........................................36
7.4 Performance of Borrower's Obligations.....................36
7.5 Lender's Rights...........................................37
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS.............................................................38
8.1 Conditions Precedent......................................38
8.1.1 Security Interest..................................38
8.1.2 Blocked Account; Lock Box..........................38
8.1.3 Effect of Law......................................38
8.1.4 Other Loan Agreements..............................38
8.1.5 Fees...............................................38
8.1.6 Documents..........................................38
(a) Resolutions..................................38
(b) Incumbency Certificates.................39
(c) Borrower's Certificate..................39
(d) Landlord's Consents.....................39
(e) Note....................................39
(f) Other Documents.........................39
8.2 Continuing Conditions Precedent to all Loans;
Certification.............................................39
(a) No Change in Condition..................39
(b) Default.................................40
(c) Insurance...............................40
(d) Warranties..............................40
(e) Accounting Methods......................40
<PAGE>
PAGE
9. INDEMNITY................................................................40
9.1 Environmental and Safety and Health Indemnity..............40
9.2 General Indemnity..........................................41
9.3 Capital Adequacy...........................................41
9.4 Other Indemnities..........................................42
10. ADDITIONAL PROVISIONS................................................42
11. GENERAL.................................................................42
11.1 Borrower Waiver............................................42
11.2 Power of Attorney..........................................43
11.3 Expenses; Attorneys' Fees..................................44
11.4 Lender Fees and Charges....................................44
11.5 Lawful Interest............................................44
11.6 No Waiver by Lender; Amendments............................44
11.7 Termination of Credit......................................45
11.8 Notices....................................................45
11.9 Assignments and Participations; Information................46
11.10 Severability..................................................46
11.11 Successors....................................................46
11.12 Construction..................................................46
11.13 Consent to Jurisdiction.......................................47
11.14 Subsidiary Reference..........................................47
11.15 WAIVER OF JURY TRIAL..........................................47
11.16 Prior Actions.................................................47
<PAGE>
LIST OF EXHIBITS
Exhibits:
Exhibit A Form of Borrowing Base Certificate (ss.2.5(c))
Exhibit B [Reserved]
Exhibit C Form of Revolving Note
Exhibit D [Reserved]
Exhibit E Form of Landlord's Consent
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as from time to time amended, modified
or supplemented, this "Agreement") is made as of this 9th day of October, 1995
by and between BANK OF AMERICA ILLINOIS (formerly Continental Bank N.A.), an
Illinois banking corporation having its principal office at 231 South LaSalle
Street, Chicago, Illinois 60697 ("Lender"), and DELAWARE ELECTRO INDUSTRIES,
INC., a Delaware corporation ("Borrower").
RECITALS
1. On January 16, 1991, Azimuth Corporation, a Delaware corporation
("Parent"), and Lender entered into an Amended and Restated Loan and Security
Agreement (such Amended and Restated Loan and Security Agreement, as amended to
the date hereof, being herein referred to as the "Original Loan Agreement"; and
the other capitalized terms used herein shall have the meanings set forth in
Section 1.1) pursuant to which Lender made loans to Parent.
2. Parent and Lender are, on the date hereof, amending and
restating the Original Loan Agreement.
3. As security for the loans made by Lender to Parent, (a) Borrower and
other Subsidiaries of Parent, Contempo Design West, Inc., a Delaware corporation
("Contempo West"), and Contempo Design, Inc., an Illinois corporation
("Contempo"), have granted Lender a lien on, and a security interest in, all of
their respective assets and (b) Borrower, Contempo and Contempo West have
executed a guaranty whereby such companies jointly and severally guaranteed the
full and prompt payment and performance of all obligations of Parent to Lender
in connection with the Original Loan Agreement and all related documents.
4. In connection with the amendment and restatement of the Original Loan
Agreement, Borrower and other Subsidiaries of Parent are assuming a portion of
the "Liabilities" under and as defined in the Original Loan Agreement
representing "Revolving Loans" under and as defined in the Original Loan
Agreement, with the portion of such Liabilities assumed by Borrower to be
governed by the terms of this Agreement.
5. Lender has agreed to provide financial accommodations to Borrower in
addition to those assumed by Borrower as described in the immediately preceding
recital on the terms hereinafter set forth.
<PAGE>
Accordingly, in consideration of the mutual agreements
contained herein, and subject to the terms and conditions hereof,
the parties hereto agree, as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" shall mean any Person who is or who may become
obligated to Borrower under, with respect to, or on account of an Account
Receivable, Contract Right, General Intangible or
other Collateral or Third Party Collateral.
"Account Receivable" shall mean any account of Borrower and any
other right of Borrower to payment, whether or not evidenced by an instrument or
chattel paper and whether or not yet earned by performance (excluding any
Contract Right).
"Accounts Receivable Availability" shall have the meaning
ascribed to such term in Supplement A.
"Assignee Deposit Account" shall have the meaning ascribed to
such term in Section 3.2(d).
"Assumed Liabilities" shall have the meaning ascribed to such
term in Section 2.1.4.
"Attorneys' Fees" shall mean the reasonable value of the services
(and reasonable costs, charges and expenses related thereto) of the attorneys
(and all paralegals, secretaries, accountants and other staff employed by such
attorneys) employed by Lender (including, but not limited to, attorneys and
paralegals who are employees of Lender) from time to time (i) in connection with
the negotiation, preparation, execution, delivery, administration and
enforcement of this Agreement, any Related Agreement, any Supplemental
Documentation and all other documents or instruments provided for herein or in
any thereof or delivered or to be delivered hereunder or under any thereof or in
connection herewith or with any thereof, (ii) to prepare documentation related
to the Loans made and other Liabilities incurred hereunder, (iii) to prepare any
amendment to or waiver under this Agreement or any Related Agreement and any
documents or instruments related thereto, (iv) to represent Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene in any litigation, contest, dispute, suit or proceeding or to file a
petition, complaint, answer, motion or other pleading, or to take any other
action in or with respect to, any litigation, contest,
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<PAGE>
dispute, suit or proceeding (whether instituted by Lender, Borrower or any other
Person and whether in bankruptcy or otherwise) in any way or respect relating to
the Collateral, any Third Party Collateral, this Agreement or any Related
Agreement, or Borrower's or any other Obligor's or any Subsidiary's affairs, (v)
to protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral or any Third Party Collateral, (vi) to attempt to enforce any
security interest in any of the Collateral or any Third Party Collateral or to
give any advice with respect to such enforcement and (vii) to enforce any of
Lender's rights to collect any of the Liabilities.
"Banking Day" shall mean any day other than a Saturday, Sunday or
legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois.
"Borrower" -- see Preamble.
"Borrowing Base" shall have the meaning ascribed to such term in
Supplement A.
"Borrowing Base Certificate" shall mean a certificate in
substantially the form of Exhibit A.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" shall mean the date this Agreement becomes
effective pursuant to Section 8.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed to also refer to any successor sections.
"Collateral" shall have the meaning ascribed to such term
in Section 3.1.
"Contempo" -- see Recitals.
"Contempo Amsterdam" shall mean Contempo Design Europe B.V., a
Dutch corporation 90% owned by Contempo and 10% owned by an employee thereof.
"Contempo West" -- see Recitals.
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<PAGE>
"Contract Right" shall mean any right of Borrower to payment
under a contract, which right is not yet earned by performance and not evidenced
by an instrument or chattel paper.
"Credit" shall mean the facility established under this Agreement
pursuant to which Lender will make Revolving Loans to Borrower.
"Default" shall mean any event or condition which, with the lapse
of time or giving of notice to Borrower or both, would constitute an Event of
Default.
"Default Rate" shall mean, with respect to a Loan, the rate of
interest which is applicable to such Loan after any amount thereof is not paid
when due, whether by acceleration or otherwise, as determined pursuant to
Supplement A.
"Demand Deposit Account" shall have the meaning ascribed to such
term in Section 2.2.
"Eligible Account Receivable" shall mean an Account Receivable
owing to Borrower which meets the following requirements:
(1) it is genuine and in all respects what it purports
to be;
(2) it arises from either (a) the performance of services by
Borrower, which services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto
or (b) the sale or lease of goods by Borrower; and if it arises from the
sale or lease of goods, (i) such goods comply with such Account Debtor's
specifications (if any) and have been shipped to, or delivered to and
accepted by, such Account Debtor and (ii) Borrower has possession of, or
if requested by Lender has delivered to Lender, shipping and delivery
receipts evidencing such shipment, delivery and acceptance;
(3) it (a) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (i) is dated not earlier than the date
of shipment or performance and (ii) has payment terms not unacceptable
to Lender (in good faith and in the exercise of its reasonable judgment)
and (b) meets the Eligible Account Receivable requirements set forth in
Supplement A;
(4) it is not subject to any assignment, claim or Lien, other
than (a) a Lien in favor of Lender, (b) Liens consented to by Lender in
writing and (c) Liens described in Section 5.16(a) of the Parent Loan
Agreement;
-4-
<PAGE>
(5) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor with respect thereto, and is not
subject to a claim for setoff, counterclaim, credit or allowance (except
any credit or allowance which has been deducted in computing the net
amount of the applicable invoice as shown in the original schedule or
Borrowing Base Certificate furnished to Lender identifying or including
such Account Receivable) or adjustment by the Account Debtor with
respect thereto, or to any claim by such Account Debtor denying
liability thereunder in whole or in part, and such Account Debtor has
not refused to accept any of the goods or services which are the subject
of such Account Receivable or offered or attempted to return any of such
goods;
(6) there are no proceedings or actions which are then threatened
or pending against the Account Debtor with respect thereto or to which
such Account Debtor is a party which proceedings or actions would
reasonably be expected to result in any material adverse change in such
Account Debtor's financial condition or in its ability to pay any
Account Receivable in full when due;
(7) it does not arise out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the assignment
by Borrower to Lender of the Account Receivable arising with respect
thereto;
(8) the Account Debtor with respect thereto is not a Subsidiary
or Obligor, or a director, officer, employee or agent of Borrower,
Parent, Contempo, Contempo West, a
Subsidiary or Obligor;
(9) the Account Debtor with respect thereto is a resident or
citizen of, and is located within, the United States of America, unless
the sale of goods giving rise to the Account Receivable is on letter of
credit, banker's acceptance or other credit support terms reasonably
satisfactory to Lender;
(10) it is not an Account Receivable arising from a "sale on
approval," "sale or return" or "consignment," or subject to any other
repurchase or return agreement;
(11) it is not an Account Receivable with respect to which
possession and/or control of the goods sold giving rise thereto is held,
maintained or retained by Borrower or any Subsidiary, or other Obligor
(or by any agent or custodian of Borrower, any Subsidiary, or other
Obligor) for the account of or subject to further and/or future
direction from the Account Debtor thereof;
-5-
<PAGE>
(12) it is not an Account Receivable which in any way fails to
meet or violates any warranty, representation or covenant contained in
this Agreement or any Related Agreement relating directly or indirectly
to Borrower's Accounts Receivable;
(13) the Account Debtor thereunder is not located in the States
of Indiana, New Jersey or Minnesota; provided, however, that such
restriction shall not apply to an Account Receivable if at the time the
Account Receivable was created and at all times thereafter (a) Borrower
had filed and has maintained effective a current Notice of Business
Activities Report with the appropriate office or agency of the State of
Indiana, New Jersey or Minnesota, as applicable or (b) Borrower was and
has continued to be exempt from the filing of such Report and has
provided Lender with satisfactory evidence thereof;
(14) it arises in the ordinary course of business of
Borrower;
(15) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, Borrower has assigned its
right to payment of such Account Receivable to Lender pursuant to the
Assignment of Claims Act of 1940, as amended;
(16) if Lender in good faith and in its reasonable judgment has
established a credit limit for an Account Debtor, the aggregate dollar
amount of Accounts Receivable due from such Account Debtor, including
such Account Receivable, does not exceed such credit limit (it being
understood that in establishing any such credit limit Lender may rely on
factors which, due to confidentiality restrictions or otherwise, are not
disclosed to Borrower); and
(17) if the Account Receivable is evidenced by chattel paper or
an instrument, (a) Lender shall have specifically agreed in writing to
include such Account Receivable as an Eligible Account Receivable, (b)
only payments then due and payable under such chattel paper or
instrument shall be included as an Eligible Account Receivable and (c)
the originals of such chattel paper or instruments have been endorsed
and/or assigned and delivered to Lender in a manner satisfactory to
Lender.
An Account Receivable which is at any time an Eligible Account
Receivable, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible Account
Receivable. Further, with respect to any Account Receivable, if Lender
at any time or times hereafter determines in good faith and in its
reasonable judgment that
-6-
<PAGE>
the prospect of payment or performance by the Account Debtor with
respect thereto is or will be impaired for any reason whatsoever,
notwithstanding anything to the contrary contained above, such Account
Receivable shall forthwith cease to be an Eligible Account Receivable.
Notwithstanding the foregoing, commencing with the opening of business
on the date that the Fuse World Acquisition (or the stock acquisition
described in clause (i) of the definition thereof) is consummated, and
thereafter until the earlier of 10 days after such acquisition or the
merger into Borrower of Fuse World or the dissolution of Fuse World, any
Account Receivable owing to Fuse World which meets the requirements of
clauses (1) through (17) above shall be an "Eligible Account Receivable"
hereunder (provided that for this purpose the term "Borrower" appearing
in such clauses shall be read "Fuse World").
"Eligible Inventory" shall mean Inventory which meets the
following requirements:
(1) it is owned by Borrower and is not subject to any prior
assignment, claim or Lien, other than (a) a Lien in favor of Lender, (b)
Liens consented to by Lender in writing and (c) Liens described in
Section 5.16(a) of the Parent Loan Agreement;
(2) if it is held for sale or lease or furnishing under contracts
of service, it is (except as Lender may otherwise consent in writing)
new and unused;
(3) except as Lender may otherwise consent, it is in the possession
and control of Borrower; provided, however, that if it is stored on
premises leased by Borrower (i) Lender is in possession of a Landlord's
Consent duly executed by the owner (or its duly authorized agent) of
such premises and (ii) Borrower is not in default under the lease with
respect to such premises pursuant to which the landlord can exercise any
remedies under such lease;
(4) it is not Inventory which is dedicated to, identifiable with,
or is otherwise specifically to be used in the manufacture of, goods
which are to be sold or leased to the United States of America or any
department, agency or instrumentality thereof, and in respect of which
Inventory Borrower shall have received any progress or other advance
payment which is or may be against any Account Receivable generated upon
the sale or lease of any such goods;
(5) it is not Inventory produced in violation of the
Fair Labor Standards Act and subject to the "hot goods"
provisions contained in Title 29 U.S.C. ss.215 or any successor
statute or section;
-7-
<PAGE>
(6) it is not "private label" Inventory, or Inventory bearing a
servicemark, trademark or name of any Person other than Borrower or with
respect to which the use by Borrower or the manufacture or sale thereof
by Borrower is subject to any licensing, patent, royalty, trademark,
tradename or copyright agreement with any other Person; provided,
however, that none of the foregoing shall apply to any Inventory
consisting of fuses and aircraft and other fasteners;
(7) it is not (i) packaging or shipping materials, (ii) goods used
in connection with maintenance or repair of the business, properties or
assets of Borrower or (iii) general supplies;
(8) it is not Inventory which in any way fails to meet or violates
any warranty, representation or covenant contained in this Agreement or
any Related Agreement relating directly or indirectly to the Inventory
of Borrower;
(9) Lender has determined in good faith and in its reasonable
judgment that it is not unacceptable due to age, type, category, quality
and/or quantity; and
(10) it satisfies the Eligible Inventory Requirements,
if any, set forth in Supplement A.
Inventory of Borrower which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be Eligible Inventory. Notwithstanding the foregoing,
commencing with the opening of business on the date that the Fuse World
Acquisition (or the stock acquisition described in clause (i) of the
definition thereof) is consummated, and thereafter until the earlier of
10 days after such acquisition or the merger into Borrower of Fuse World
or the dissolution of Fuse World, any Inventory of Fuse World which
meets the requirements of clauses (1) through (10) above shall be
"Eligible Inventory" hereunder (provided that for this purpose the term
"Borrower" appearing in such clauses shall be read "Fuse World").
"Environmental Laws" shall mean the Clean Air Act of 1970, as
amended, 42 U.S.C. ss.7401 et seq., the Clean Water Act, as amended, 33 U.S.C.
ss.1251 et seq., the Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. ss.6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.,
any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act,
15 U.S.C. ss.2601 et seq., and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree or other written legal
requirement regulating, relating to, or imposing liability or standards of
conduct (including, but not
-8-
<PAGE>
limited to, permit requirements, emission or effluent restrictions and other
requirements relating to manufacturing, processing, generation, distribution,
use, treatment, storage, disposal, clean-up, transport or handling) concerning
any Hazardous Materials or any hazardous, toxic or dangerous waste, substance or
constituent, or any noise, odor, waste, radiation, pollutant or contaminant or
other substance, whether solid, liquid or gas, as now or at any time hereafter
in effect.
"Equipment" shall mean all equipment of every description,
including, without limitation, fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefor and replacements
thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, partnership, or
other trade or business (whether or not incorporated) that is, along with
Borrower, a member of a controlled group of corporations or a controlled group
of trades or businesses, as described in sections 414(b) and 414(c),
respectively, of the Code or section 4001 of ERISA, or a member of the same
affiliated service group within the meaning of section 414(m) of the Code.
"Event of Default" shall have the meaning ascribed to such term
in Section 6.1.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year.
"Fiscal Year" shall mean any period of 12 consecutive calendar
months ending on the last day of December.
"Fixtures" shall mean all fixtures of Borrower of every
description and all substitutions and replacements of any thereof.
"Fuse World" shall mean Fuse World, Inc., an Ohio
corporation.
"Fuse World Acquisition" shall mean (i) the acquisition by
Borrower of the outstanding capital stock of Fuse World substantially on the
terms set forth in the Fuse World Letter of Intent, and (ii) the subsequent
dissolution or merger of Fuse World
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<PAGE>
with and into Borrower; provided, however, that if an acquisition merger is
agreed to by Fuse World, then "Fuse World Acquisition" shall mean the
acquisition by merger of Fuse World by Borrower substantially on the terms set
forth in the Fuse World Letter of Intent.
"Fuse World Letter of Intent" shall mean that certain letter
dated August 15, 1995 from Steven D. Hollopeter, President of Borrower,
addressed to Curtis Marling, President of Fuse World, a copy of which has been
presented to the Lender.
"GAAP" shall mean generally accepted accounting principles as
applied in the preparation of the audited financial statements of Parent
referred to in Section 4.6 of the Parent Loan Agreement.
"General Intangibles" shall mean all of Borrower's intangible
personal property, including things in action, causes of action and all other
personal property of Borrower of every kind and nature (other than accounts,
inventory, equipment, chattel paper, documents, instruments and money),
including, without limitation, corporate or other business records, inventions,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, security interests, security deposits or other security held
by or granted to Borrower to secure any payment from an Account Debtor, and any
rights to indemnification.
"Guaranteed Obligations" means all obligations of Borrower under
the Amended and Restated Guaranty Agreement of Borrower, Contempo and Contempo
West dated as of the Closing Date.
"Hazardous Materials" shall mean any toxic substance, hazardous
substance, hazardous material, hazardous chemical or hazardous waste defined or
qualifying as such in (or for the purposes of) any Environmental Law, or any
pollutant or contaminant, and shall include, but not be limited to, petroleum,
including crude oil or any fraction thereof which is liquid at standard
conditions of temperature or pressure (60 degrees fahrenheit and 14.7 pounds per
square inch absolute), any radioactive material, including, but not limited to,
any source, special nuclear or by-product material as defined at 42 U.S.C.
ss.2011 et seq., as amended or hereafter amended, polychlorinated biphenyls and
asbestos in any form or condition.
"Indebtedness" of any Person shall mean, without duplication, (i)
any obligation of such Person for borrowed money, including, without limitation,
(a) any obligation of such Person evidenced by bonds, debentures, notes or other
similar debt
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instruments and (b) any obligation for borrowed money which is non-recourse to
the credit of such Person but which is secured by a Lien on any asset of such
Person, (ii) any obligation of such Person on account of deposits or advances,
(iii) any obligation of such Person for the deferred purchase price of any
property or services, except Trade Accounts Payable, (iv) any obligation of such
Person as lessee under a Capitalized Lease and (v) any Indebtedness of another
Person secured by a Lien on any asset of such first Person, whether or not such
Indebtedness is assumed by such first Person. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or joint
venturer.
"Inventory" shall mean any and all goods of Borrower (including,
without limitation, goods in transit) wheresoever located, which are or may at
any time be leased to a lessee, held for sale or lease or furnished under any
contract of service by, or held as raw materials, work in process, or supplies
or materials used or consumed in the business of, Borrower or which are held for
use in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, and all goods the sale or other disposition of which
has given rise to an Account Receivable, Contract Right or General Intangible
and which are returned to and/or repossessed and/or stopped in transit by
Borrower or Lender or any agent or bailee of any of them, and all documents of
title or other documents representing the same.
"Inventory Availability" shall have the meaning ascribed to such
term in Supplement A.
"Landlord's Consent" shall mean a Landlord's Consent
substantially in the form of Exhibit E, with appropriate insertions, or such
other form as shall be acceptable to Lender, as it may be amended or modified
from time to time.
"Lender" -- see Preamble.
"Liabilities" shall mean all of the liabilities, obligations,
reimbursement obligations in connection with any letter of credit, and
indebtedness of Borrower, any Subsidiary or any other Obligor to Lender of any
kind or nature, however created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing or due or to become
due, and including but not limited to (i) Borrower's obligations under any Note,
(ii) Borrower's obligations under this Agreement, (iii) interest, charges,
expenses, Attorneys' Fees and other sums chargeable to Borrower by Lender under
this Agreement or any Related Agreement, (iv) the obligations of Borrower, any
Subsidiary and any other Obligor under any Related Agreement, including
obligations of performance and (v) the Guaranteed Obligations.
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"Liabilities" shall also include any and all amendments, extensions, renewals,
refundings or refinancings of any of the foregoing.
"Lien" shall mean any mortgage, pledge, hypothecation, judgment
lien or similar legal process, title retention lien, or other lien, encumbrance
or security interest, including, without limitation, the interest of a vendor
under any conditional sale or other title retention agreement and the interest
of a lessor under any Capitalized Lease.
"Loan" shall mean (i) the Revolving Loans made pursuant to
Section 2.1.1 and (ii) any other loan or advance made to Borrower by Lender
under or pursuant to this Agreement.
"Loan Account" shall have the meaning ascribed to such term in
Section 2.2.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in Section 4001(a) (3) of ERISA which is maintained for employees of Borrower,
any other Obligor or any ERISA Affiliate.
"Note" shall mean the Revolving Note and any other promissory
note of Borrower evidencing any loan or advance (including but not limited to
any Revolving Loans) made by Lender to Borrower pursuant to this Agreement.
"Obligor" shall mean Borrower and each other Person who is or
shall become primarily or secondarily liable on any of the Liabilities, or who
grants to Lender a Lien on any property of such Person as security for any of
the Liabilities.
"Occupational Safety and Health Law" shall mean the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et seq., and any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to or imposing liability or standards of
conduct concerning employee health and/or safety.
"Original Loan Agreement" - see Recitals.
"Original Security Agreement" means the Amended and Restated
Security Agreement dated as of January 16, 1991 among Borrower, Contempo,
Contempo West and Lender.
"Other Loan Agreements" means the Loan and Security Agreement
dated as of the date hereof between Lender and Contempo and the Loan and
Security Agreement dated as of the date hereof between Lender and Contempo West,
as the same may be amended, supplemented or otherwise modified from time to
time, and the Parent Loan Agreement.
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"Over Advance" shall have the meaning ascribed to such term in
Section 2.7.
"Overdraft Loan" shall have the meaning ascribed to such term in
Section 2.6.
"Parent" -- see Recitals.
"Parent Loan Agreement" means the Second Amended and Restated
Loan and Security Agreement between Lender and Parent dated as of the date
hereof, as the same may be amended, supplemented or otherwise modified from time
to time.
"Participant" shall mean any Person, now or at any time or times
hereafter, participating with Lender in the Loans made to Borrower pursuant to
this Agreement or any Related Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean a "pension plan," as such term is
defined in Section 3(2) of ERISA, which is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which Borrower, any other
Obligor or any ERISA Affiliate may have any liability, including any liability
by reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, or government (whether national, federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Reference Rate" shall mean, at any time, the rate of interest
then most recently announced by Lender at Chicago, Illinois as its reference
rate (of which announcements Lender shall give notice promptly to Borrower).
Each change in the interest rate on any Loan shall take effect on the effective
date of the change in the Reference Rate.
"Refinancing Fee" shall have the meaning ascribed to such term in
Section 2.13.
"Related Agreement" shall mean any agreement, instrument or
document (including, without limitation, notes, guarantees, mortgages, deeds of
trust, chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore,
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now, or hereafter delivered to Lender with respect to or in connection with or
pursuant to this Agreement or any of the Liabilities, and executed by or on
behalf of Borrower, Parent, Contempo, Contempo West or any other Obligor.
"Related Party" shall mean any Person (other than a Subsidiary)
(i) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, Borrower, (ii) which
beneficially owns or holds ten percent (10%) or more of the equity interest of
Borrower or (iii) ten percent (10%) or more of the equity interest of which is
beneficially owned or held by Borrower or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Revolving Credit Amount" shall have the meaning ascribed to such
term in Supplement A.
"Revolving Loan" shall have the meaning ascribed to such term in
Section 2.1.1.
"Revolving Loan Availability" shall mean the lesser of (a) the
Revolving Credit Amount and (b) the Borrowing Base.
"Revolving Note" shall have the meaning ascribed to such term in
Section 2.5.
"Subsidiary" shall mean any Person of which or in which Borrower
and its other Subsidiaries own directly or indirectly 50% or more of (i) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
Person, if it is a corporation, (ii) the capital interest or profits interest of
such Person, if it is a partnership, joint venture or similar entity or (iii)
the beneficial interest of such Person, if it is a trust, association or other
unincorporated organization.
"Supplemental Documentation" shall have the meaning ascribed to
such term in Section 3.5.
"Taxes" with respect to any Person shall mean taxes, assessments
or other governmental charges or levies imposed upon such Person, its income or
any of its properties, franchises or assets.
"Termination Date" shall mean August 31, 1996 or such later date
to which the Termination Date may be extended pursuant to Section 11.7.
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"Third Party Collateral" shall mean any property of any Person
other than Borrower which secures payment or performance of any Liabilities.
"Trade Accounts Payable" of any Person shall mean trade accounts
payable of such Person with a scheduled maturity of not greater than 90 days
incurred in the ordinary course of such Person's business.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of Illinois, and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time. References to sections
of the UCC shall be construed to also refer to any successor sections.
1.2 Other Definitional Provisions. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or in
any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any Note
or in any certificate or other document made or delivered pursuant hereto. Terms
used in this Agreement which are defined in any Supplement or Exhibit hereto
shall, unless the context otherwise indicates, have the meanings given them in
such Supplement or Exhibit. Other terms used in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
1.3 Interpretation of Agreement. A Section, an Exhibit or a Schedule is,
unless otherwise stated, a reference to a section hereof, an exhibit hereto or a
schedule hereto, as the case may be. Section captions used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
The words "hereof," "herein," "hereto" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Reference to "this Agreement" shall
include the provisions of Supplement A.
1.4 Compliance with Financial Restrictions. Compliance with each of the
financial ratios and restrictions contained herein shall, except as otherwise
provided herein, be determined in accordance with GAAP consistently followed.
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2. LOANS; OTHER MATTERS.
2.1 Loans.
2.1.1 Revolving Loans.
(a) Subject to the terms and conditions of this Agreement
and the Related Agreements, and in reliance upon the warranties
of Borrower set forth herein and in the Related Agreements,
Lender agrees to make such loans or advances (individually each a
"Revolving Loan" and collectively the "Revolving Loans") from
time to time before the Termination Date to Borrower as Borrower
may from time to time request, up to but not in excess (at any
one time outstanding) of the Revolving Loan Availability.
Revolving Loans made by Lender may be repaid and, subject to the
terms and conditions hereof, reborrowed to but not including the
Termination Date unless the Credit extended under this Agreement
is otherwise terminated as provided in this Agreement.
(b) In the event the aggregate outstanding principal
balance of the Revolving Loans exceeds the Revolving Loan
Availability, Borrower shall, unless Lender shall otherwise
consent, without notice or demand of any kind, immediately make
such repayments of the Revolving Loans or take such other actions
as shall be necessary to eliminate such excess.
(c) All Revolving Loans hereunder shall be paid by
Borrower on the Termination Date, unless payable sooner pursuant
to the provisions of this Agreement, but may, at Borrower's
election, be repaid in whole or in part at any time prior to such
date without premium or penalty.
2.1.2 Reduction of Revolving Credit Amount. Borrower may, at any
time, on at least three (3) Banking Days' prior written notice received
by Lender, permanently reduce the Revolving Credit Amount; provided,
however, that concurrently with any such reduction, Borrower shall pay
to Lender the amount, if any, as is necessary to reduce the outstanding
principal balance of all Revolving Loans to such reduced Revolving
Credit Amount.
2.1.3 Maximum Outstanding Loans. Notwithstanding any other
provision of this Agreement, the aggregate outstanding principal balance
of all Loans shall not exceed the Revolving Credit Amount; provided,
however, that the foregoing shall not limit the right of Lender to
advance Revolving Loans to Borrower pursuant to the provisions of
Section 5.5, 5.6 or 5.22 of the Parent Loan Agreement (as incorporated
herein by
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reference) or Section 3.2(c), 7.4, 11.3, 11.4 or any other provision of
this Agreement or any Related Agreement that permits Lender to advance
Loans to Borrower.
2.1.4 Assumption. Borrower and Lender agree that $2,145,942.00 of
the principal balance of the "Revolving Loans" under and as defined in
the Original Loan Agreement outstanding as of the date hereof shall
constitute Revolving Loans hereunder as of the Closing Date. To the
extent of such loans, Borrower hereby absolutely and unconditionally
assumes and affirms all of the "Liabilities" of Parent under and as
defined in the Original Loan Agreement (the "Assumed Liabilities").
Borrower hereby agrees to pay and perform the Assumed Liabilities with
the same effect and to the same extent (as modified hereby) as if
Borrower had been the original primary obligor thereof. To the extent of
the Assumed Liabilities, this Agreement shall be deemed to be a partial
amendment and restatement of the terms and provisions of the Original
Loan Agreement. Nothing contained in this Agreement shall be construed
to release, cancel, terminate, impair the priority of or otherwise
affect adversely all or any part of the Indebtedness of Parent assumed
by Borrower hereunder or the Lien of Lender granted in respect thereof.
Nothing herein shall deem the Indebtedness of Parent to have been paid,
extinguished or novated and the Assumed Liabilities shall remain
outstanding and unpaid on the Closing Date.
2.2 Loan Account; Demand Deposit Account. Lender shall establish or
cause to be established on its books in Borrower's name one or more accounts
(each a "Loan Account") to evidence Loans made to Borrower. Lender will credit
or cause to be credited to a commercial account ("Demand Deposit Account")
maintained by Borrower at Lender's 231 South LaSalle Street, Chicago, Illinois
office the amount of any sums advanced as Loans hereunder. Any amounts advanced
as Loans hereunder which are credited to Borrower's Demand Deposit Account,
together with any other amounts advanced to Borrower as a Loan pursuant to this
Agreement, will be debited to the applicable Loan Account and result in an
increase in the principal balance outstanding in such Loan Account in the amount
thereof.
2.3 Interest and Fees.
2.3.1 Interest on Revolving Loans. The unpaid principal amount of
each Revolving Loan shall bear interest until maturity at the rates
applicable to Revolving Loans indicated in Supplement A. If any
Revolving Loan or portion thereof is not paid when due, whether by
acceleration or otherwise, the entire unpaid principal amount of the
Revolving Loans shall bear interest thereafter until such overdue amount
is paid in full at the Default Rate applicable to Revolving Loans
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indicated in Supplement A. Until maturity, interest on the Revolving
Loans shall be paid by Borrower on the date(s) indicated in Supplement
A, and at such maturity. After maturity, whether by acceleration or
otherwise, accrued interest shall be payable on demand.
2.3.2 Nonuse Fee. Borrower agrees to pay to Lender a fee equal to
one-half of one percent (0.5%) per annum on the product of (x) the daily
average amount by which $5,400,000 exceeds the sum of the outstanding
principal balance of the Revolving Loans hereunder plus the outstanding
principal amount of the "Revolving Loans" under the Other Loan
Agreements times (y) .40. Such fee shall be payable in arrears on the
last day of each Fiscal Quarter, and on the date the Credit terminates,
in each case for the period then ended.
2.3.3 Method of Calculating Interest and Fees. Interest on the
unpaid principal amount of each Loan shall accrue from and including the
date such Loan is made to, but not including, the date such Loan is
paid. Interest and any fees shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. All
determinations by Lender of the rate of interest applicable to any Loan
shall be rebuttable presumptive evidence of the applicable interest rate
for such Loan.
2.3.4 Payment of Interest and Fees. Lender may provide for the
payment of any unpaid accrued interest and any fees by charging the
Demand Deposit Account or any other bank account maintained by Borrower
with Lender.
2.4 Requests for Loans; Borrowing Base Certificates; Other
Information.
(a) Loans shall be requested in writing or by telephone, except
for Overdraft Loans and Revolving Loans made pursuant to the provisions
of Section 5.5, 5.6 or 5.22 of the Parent Loan Agreement (as
incorporated herein by reference) or Section 3.2(c), 7.4, 11.3 or 11.4
or any other provision of this Agreement (other than Section 2.1.1) or
any Related Agreement that permits Lender to advance Revolving Loans to
Borrower.
(b) In the event that Borrower shall at any time, or from time to
time, (i) make a request for a Loan hereunder or (ii) be deemed to have
requested an Overdraft Loan, Borrower agrees to provide Lender with such
information, as soon as practicable after a request therefor, at such
frequency and in such format, as is reasonably required by Lender, such
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information to be current as of the time such information is
provided.
(c) Borrower further agrees to provide to Lender a current
Borrowing Base Certificate at the end of each week and at such other
times as Lender may reasonably request. On each Borrowing Base
Certificate, determinations as to eligibility and ineligibility of
collateral shall be made as of the same time. Such Borrowing Base
Certificate shall be executed and certified as accurate by such officers
or employees of Borrower as Borrower shall designate in writing to
Lender pursuant to duly adopted resolutions of the respective Board of
Directors of each such company authorizing such action. Prior to the
borrowing of any Loan used to fund the Fuse World Acquisition (or the
stock acquisition described in clause (i) of the definition thereof),
Borrower agrees to provide Lender a Borrowing Base Certificate with
respect to the Accounts Receivable and Inventory of Fuse World as of the
latest practicable date, executed by an officer or employee of Borrower
designated as aforesaid.
(d) Borrower shall provide Lender with documentation satisfactory
to Lender indicating the names of those employees of Borrower authorized
by Borrower to sign Borrowing Base Certificates on behalf of such
companies and Borrower shall provide Lender with documentation
satisfactory to Lender indicating the names of the employees of Borrower
authorized by Borrower to make telephonic requests for Loans, and/or to
authorize disbursement of the proceeds of Loans by wire transfer or
otherwise, and Lender shall be entitled to rely upon such documentation
until notified in writing by Borrower of any change(s) in the names of
the employees so authorized. Lender shall be entitled to act on the
instructions of anyone identifying himself as one of the persons
authorized to request Loans or disbursements of Loan proceeds by
telephone and Borrower shall be bound thereby in the same manner as if
the person were actually so authorized. Borrower agrees to indemnify and
hold Lender harmless from and against any and all claims, damages,
liabilities, losses, costs and expenses (including Attorneys' Fees)
which may arise or be created by the acceptance of instructions for
making or paying Loans by wire transfer or telephone, except for those
claims, damages, liabilities, losses, costs and expenses arising from
Lender's gross negligence or willful misconduct.
2.5 Notes. The Revolving Loans shall be evidenced by a promissory note
(herein, as it may from time to time be supplemented, extended or replaced,
called the "Revolving Note") substantially in the form set forth in Exhibit C,
with appropriate insertions, dated the date hereof, payable to the order of
Lender on the Termination Date. Borrower hereby irrevocably authorizes
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Lender to make (or cause to be made) appropriate notations on the grid attached
to the Revolving Note (or on a continuation of such grid attached to the
Revolving Note and made a part thereof), which notations, if made, shall
evidence, inter alia, the date and outstanding principal amount of all Revolving
Loans evidenced thereby. Any such notations on such grid (and on any
continuation thereof) indicating the outstanding principal amount of Revolving
Loans shall be rebuttable presumptive evidence of the principal amount thereof
owing and unpaid, but the failure to record any such amount on such grid (or on
such continuation) shall not limit or otherwise affect the obligations of
Borrower hereunder or under the Revolving Note to make payments of principal of
or interest on such Revolving Loans when due. Upon request by Borrower to Lender
(but not more than once in any 90-day period), Lender will furnish Borrower with
a photocopy of the grid attached to the Revolving Note.
2.6 Overdraft Loans. Lender, in its sole and absolute discretion, and
subject to the terms hereof, may make a Revolving Loan to Borrower in an amount
equal to the amount of any overdraft which may from time to time exist with
respect to the Demand Deposit Account or any other bank account which Borrower
may now or hereafter have with Lender. The existence of any such overdraft shall
be deemed to be a request by Borrower for such Loan. Borrower acknowledges that
Lender is under no duty or obligation to make any Loan to Borrower to cover any
overdraft. Borrower further agrees that an overdraft shall constitute a separate
Loan under this Agreement (an "Overdraft Loan"), which shall bear, from the date
on which the overdraft occurred until paid, interest in an amount equal to the
greater of (x) 130% of the highest rate of interest then charged for Loans
(other than Overdraft Loans) made hereunder and (y) $50.00 per day. If Lender,
in its sole and absolute discretion, decides not to make a Loan to cover part or
all of any overdraft, Lender may return any check(s) which created such
overdraft.
2.7 Over Advances. Lender, in its sole and absolute discretion, may make
Revolving Loans to Borrower in amounts which cause the outstanding principal
balance of the Revolving Loans to exceed the Revolving Loan Availability or
otherwise permit the outstanding principal balance of the Revolving Loans to at
any time exceed the Revolving Loan Availability, and no such event or occurrence
shall cause or constitute a waiver by Lender of its right to refuse to make any
further Revolving Loans at any time that an Over Advance exists or would result
therefrom. During any period in which the aggregate outstanding Revolving Loans
exceeds the Revolving Loan Availability (such excess Liabilities are herein
referred to as "Over Advances"), the amount of Over Advances shall bear interest
at a rate equal to 130% of the highest rate of interest then charged for
Revolving Loans made hereunder.
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2.8 All Loans One Obligation. The Revolving Loans and all other Loans
under this Agreement shall constitute one Loan, and all Indebtedness and other
Liabilities of Borrower to Lender under this Agreement and any of the Related
Agreements shall constitute one general obligation secured by Lender's Lien on
all of the Collateral and Third Party Collateral and by all other Liens
heretofore, now, or at any time or times hereafter granted by Borrower or any
other Obligor to Lender. Borrower agrees that all of the rights of Lender set
forth in this Agreement shall apply to any modification of or supplement to this
Agreement, any Supplements or Exhibits hereto, and the Related Agreements,
unless otherwise agreed in writing.
2.9 Making of Payments; Application of Collections; Charging
of Accounts.
(a) All payments hereunder shall be made without set-off or
counterclaim and shall be made to Lender in immediately available funds
(except as Lender may otherwise consent) prior to 12:30 p.m., Chicago
time, on the date due at its office at 231 South LaSalle Street,
Chicago, Illinois 60697, or at such other place as may be designated by
Lender to Borrower in writing. Any payments received after such time
shall be deemed received on the next Banking Day. Whenever any payment
to be made hereunder or under any Note shall be stated to be due on a
date other than a Banking Day, such payment shall be due on the next
succeeding Banking Day, and such extension of time shall be included in
the calculation of interest and any fees.
(b) Borrower authorizes Lender to, and Lender will, subject to
the provisions of this paragraph (b), apply the whole or any part of any
amounts received by Lender (whether deposited in the Assignee Deposit
Account of Borrower or otherwise received by Lender) from the collection
of items of payment and proceeds of any Collateral or Third Party
Collateral (whether received upon any sale or other distribution of
Collateral or Third Party Collateral by Lender or otherwise), against
the principal of and/or interest on any Loans made hereunder and/or any
other Liabilities, whether or not then due, in such order of application
as Lender may determine, unless such payments or proceeds are, in
Lender's sole and absolute discretion, released to Borrower; provided,
however, so long as no Event of Default exists and is continuing, any
such amounts received by Lender shall be applied as follows: first, to
payment of amounts then due with respect to fees (including Attorneys'
Fees), charges and expenses for which Borrower or any other Obligor is
liable pursuant to this Agreement and the Related Agreements; second, to
payment of amounts then due with respect to interest on the Loans;
third, to payment of amounts then due with respect to
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principal of the Loans; fourth, to repayment of the Revolving Loans; and
fifth, to payment of the Guaranteed Obligations then due and owing; and
provided, further, that no checks, drafts or other instruments received
by Lender shall constitute final payment to Lender unless and until such
item of payment has actually been collected. All items or amounts which
are delivered to Lender by or on behalf of Borrower or any Obligor or
any Account Debtor on account of partial or full payment or otherwise as
proceeds of any of the Collateral or Third Party Collateral (including
any items or amounts which may have been deposited to the Assignee
Deposit Account) may from time to time in Lender's sole and absolute
discretion be released to Borrower or be applied by Lender towards
payment of the Liabilities, whether or not then due, in accordance with
the preceding sentence. Notwithstanding anything to the contrary herein,
(i) solely for purposes of determining the occurrence of an Event of
Default, all cash, checks, instruments and other items of payment shall
be deemed received upon actual receipt by Lender, unless the same is
subsequently dishonored for any reason whatsoever, (ii) for purposes of
determining whether, under Section 2.1, there is availability for Loans,
all cash, checks, instruments and other items of payment shall be
applied against the Liabilities on the first Banking Day after receipt
thereof by Lender and (iii) solely for purposes of interest calculation
hereunder, all cash, checks, instruments and other items of payment
shall be deemed to have been applied against the Liabilities on the
second Banking Day after receipt by Lender of available funds with
respect thereto.
(c) Borrower hereby authorizes Lender to, and Lender may, in its
sole and absolute discretion, charge to Borrower at any time when due
all or any portion of any of the Liabilities including but not limited
to any Attorneys' Fees and other costs and expenses of Lender for which
Borrower or any other Obligor is liable pursuant to the terms of this
Agreement or any Related Agreement, by charging Borrower's Demand
Deposit Account or any other bank account of Borrower with Lender;
provided, however, that the provisions of this Section 2.9(c) shall not
affect the obligation of Borrower or any other Obligor to pay when due
all amounts payable by such Person under this Agreement, any Note or any
Related Agreement, whether or not there are sufficient funds therefor in
the Demand Deposit Account or any such other bank account of Borrower.
So long as no Event of Default or Default exists, Lender shall use
reasonable efforts to give Borrower prompt notice of Liabilities paid by
charging such Demand Deposit Account or other account (but failure to
give such notice shall not impose any liability on Lender or relieve
Borrower of any of its obligations).
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2.10 Lender's Election Not to Enforce. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including, without limitation, any right of Lender to refrain
from making a Loan if all conditions precedent to Lender's obligation to making
such Loan have not been satisfied.
2.11 Reaffirmation. Each Loan requested by Borrower pursuant to this
Agreement shall constitute an automatic certification by Borrower to Lender that
(i) all of the representations and warranties of Borrower, Parent and each other
Obligor in this Agreement and each of the Related Agreements are true and
correct on the date of such request to the same extent as if made on such date,
except for such changes as are specifically permitted hereunder (or under such
Related Agreement) and (ii) immediately before and after making the requested
Loan, no Event of Default or Default then exists or would result therefrom.
2.12 Setoff. In addition to and not in limitation of all other rights
and remedies (including other rights of offset or banker's lien) that Lender or
any other holder of any Note may have under applicable law, Lender or such other
holder shall, upon the occurrence of any Event of Default described in Section
6.1 and during the continuance thereof, or upon the occurrence of any Default
described in Section 6.1(e) and during the continuance thereof, have the right
to appropriate and apply to the payment of the Liabilities (whether or not then
due), in such order of application as Lender or such other holder may elect, any
and all balances, credits, deposits (general or special, time or demand,
provisional or final), accounts or moneys of Borrower then or thereafter with
Lender or such other holder. Lender shall use reasonable efforts to give
Borrower prompt notice of any appropriation and application pursuant to the
preceding sentence (but failure to give such notice shall not impose any
liability on Lender or relieve Borrower of any of its obligations).
2.13 Refinancing Fee. Borrower shall pay Lender a Refinancing Fee (as
hereinafter defined) from time to time if Borrower shall obtain any Indebtedness
or equity contributions (other than from any other Obligor or Contempo Amsterdam
except if such Indebtedness or equity contribution is funded with funds obtained
by such other Obligor or Contempo Amsterdam from a non- Obligor (other than
Lender)) after the date hereof and Borrower shall at any time cause the
Revolving Credit Amount to be permanently reduced with the proceeds of such
Indebtedness or equity contributions. As used in this Section, "Refinancing Fee"
shall mean an amount equal to the amount of the reduction in the
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Revolving Credit Amount caused with such proceeds, multiplied by .0125.
2.14 Closing Fee. Borrower agrees to pay Lender a closing
fee of $20,000 on the Closing Date. With Lender's consent, the
amount of such closing fee may be advanced to Borrower as a
Revolving Loan.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of all Loans
now or hereafter made by Lender to Borrower hereunder or under any Note, as
security for the payment or other satisfaction of all other Liabilities,
Borrower hereby confirms the continued effectiveness of the grant of a security
interest contained in the Original Security Agreement and hereby further grants
to Lender a security interest in and to the following property of Borrower,
whether now owned or existing, or hereafter acquired or coming into existence,
wherever now or hereafter located (all such property is hereinafter referred to
collectively as the "Collateral"):
(a) Accounts Receivable;
(b) Equipment and Fixtures;
(c) Inventory;
(d) General Intangibles (including all rights of Borrower with
respect to all amounts now or hereafter from time to time loaned or
advanced by Borrower to any Subsidiary);
(e) Contract Rights and documents of title;
(f) All chattel paper and instruments evidencing, arising out of
or relating to any obligation to Borrower for goods sold or leased or
services rendered, or otherwise arising out of or relating to any
property described in clauses (a) through (e) above;
(g) Any and all balances, credits, deposits (general or special,
time or demand, provisional or final), accounts or monies of or in the
name of Borrower now or hereafter with Lender, any agent or bailee for
Lender, or any Participant, and any and all property of every kind or
description of or in the name of Borrower now or hereafter, for any
reason or purpose whatsoever, in the possession or control of, or in
transit to, or standing to Borrower's credit on the books of, Lender,
any agent or bailee for Lender, or any Participant;
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(h) All interest of Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any
Accounts Receivable, General Intangibles, Contract Rights, or any
chattel paper or instru-
ments referred to in clause (f) above;
(i) Any and all other property of Borrower, of any kind or
description (including but not limited to real estate of Borrower),
including, without limitation, any property of Borrower subject to a
separate mortgage, pledge or security interest in favor of Lender or in
which Lender now or hereafter has or acquires a security interest
securing any Liabilities pursuant to an agreement or instrument other
than this Agreement;
(j) All replacements, substitutions, additions or
accessions to or for any of the foregoing;
(k) To the extent related to the property described in clauses
(a) through (j) above, all books, correspondence, credit files, records,
invoices and other papers and documents, including, without limitation,
to the extent so related, all tapes, cards, computer runs, computer
programs and other papers and documents in the possession or control of
Borrower or any computer bureau from time to time acting for Borrower,
and, to the extent so related, all rights in, to and under all policies
of insurance, including claims of rights to payments thereunder and
proceeds therefrom, including any credit insurance; and
(l) All products and proceeds (including but not limited to any
Accounts Receivable or other proceeds arising from the sale or other
disposition of any Collateral, any returns of any Equipment or Inventory
sold by Borrower, and the proceeds of any insurance covering any of the
Collateral) of any of the foregoing.
3.2 Accounts Receivable.
(a) If requested by Lender, Borrower shall advise Lender promptly of any
Inventory returned by or repossessed from any Account Debtor, or otherwise
recovered, shall receive such Inventory in trust and, unless instructed to
deliver such Inventory to Lender, shall resell it for Lender. If requested by
Lender, Borrower shall notify Lender immediately of all disputes and claims by
any Account Debtor and settle or adjust them at no expense to Lender. If Lender
directs after the occurrence and during the continuance of an Event of Default
or a Default, no discount or credit allowance shall be granted thereafter by
Borrower to any Account Debtor. All Account Debtor payments and all net amounts
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received by Lender in settlement, adjustment or liquidation of any Account
Receivable may be applied by Lender to the Liabilities or credited to Borrower's
Demand Deposit Account (subject to collection) with Lender, as Lender may deem
appropriate, in either case in accordance with Section 2.9. If requested by
Lender, Borrower will make proper entries in its books and records disclosing
the assignment of Accounts Receivable to Lender.
(b) Borrower warrants that: (i) to the best of Borrower's knowledge all
of the Accounts Receivable are and will continue to be bona fide existing
obligations created by the sale of goods, the rendering of services, or the
furnishing of other good and sufficient consideration to Account Debtors in the
regular course of business and (ii) to the best of Borrower's knowledge all
shipping or delivery receipts and other documents furnished or to be furnished
to Lender in connection therewith are and will be genuine.
(c) Lender is hereby authorized and empowered (which authorization and
power, being coupled with an interest, shall be irrevocable until the later to
occur of termination of this Agreement and the final payment and performance in
full of all of the Liabilities) at any time in its sole and absolute discretion:
(1) To request, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name or the name of a third party, confirmation from any Account Debtor
or party obligated under or with respect to any Collateral of the amount
shown by the Accounts Receivable or other Collateral to be payable, or
any other matter stated therein;
(2) To endorse in Borrower's name and to collect any chattel
paper, checks, notes, drafts, instruments or other items of payment
tendered to or received by Lender in payment of any Account Receivable
or other obligation owing to Borrower;
(3) To notify, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to notify, any Account Debtor or other
Person obligated under or in respect of any Collateral, of the fact of
Lender's Lien thereon and of the collateral assignment thereof to
Lender;
(4) To direct, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to direct, any Account Debtor or other
Person obligated under or in respect of any Collateral to make payment
directly to
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Lender of any amounts due or to become due thereunder or with
respect thereto; and
(5) After the occurrence and during the continuance of an Event
of Default, to demand, collect, surrender, release or exchange all or
any part of any Collateral or any amounts due thereunder or with respect
thereto, or compromise or extend or renew for any period (whether or not
longer than the initial period) any and all sums which are now or may
hereafter become due or owing upon or with respect to any of the
Collateral, or enforce, by suit or otherwise, payment or performance of
any of the Collateral either in Lender's own name or in the name of
Borrower.
Under no circumstances shall Lender be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and reasonable out-of-pocket expenses, and the cost of
any Assignee Deposit Account or other bank account or accounts which may be
required hereunder, shall be borne solely by Borrower whether the same are
incurred by Lender or Borrower, and Lender may advance same to Borrower as a
Revolving Loan.
(d) Unless otherwise consented to by Lender, Borrower will, forthwith
upon receipt by Borrower of all checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, any of the Accounts Receivable or
other Collateral, deposit the same in a special bank account (the "Assignee
Deposit Account") with Lender or such other bank or financial institution as
Lender shall consent, over which Lender alone has power of withdrawal, and will,
to the extent required by Lender, designate with each such deposit the
particular Account Receivable or other item of Collateral upon which the
remittance was made. Borrower acknowledges that the maintenance of the Assignee
Deposit Account is solely for the convenience of Lender in facilitating its own
operations and Borrower does not and shall not have any right, title or interest
in the Assignee Deposit Account or in the amounts at any time appearing to the
credit thereof. Said proceeds shall be deposited in precisely the form received
except for Borrower's endorsement where necessary to permit collection of items,
which endorsement Borrower agrees to make. Pending such deposit, Borrower agrees
not to commingle any such checks, drafts, cash and other remittances with any of
its funds or property, but will hold them separate and apart therefrom and upon
an express trust for Lender until deposit thereof is made in the Assignee
Deposit Account. Upon the full and final liquidation of all Liabilities, Lender
will pay over to Borrower any excess amounts received by Lender as payment or
proceeds of Collateral, whether received by Lender as a deposit in the Assignee
Deposit Account or received by Lender as a direct payment on any of the sums due
hereunder.
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(e) Borrower appoints Lender, or any Person whom Lender may from time to
time designate, as Borrower's attorney and agent-in- fact with power: (i) after
the occurrence and during the continuance of an Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by Lender; (ii) after the event described in the foregoing
clause (i), to receive, open and dispose of all mail addressed to Borrower;
(iii) to send, in Borrower's name or, after the occurrence and during the
continuance of an Event of Default or a Default, in Lender's name or the name of
a third party, requests for verification of Accounts Receivable or other
Collateral to Account Debtors; (iv) to open an escrow account or Assignee
Deposit Account under Lender's sole control for the collection of Accounts
Receivable or other Collateral, if not required contemporaneously with the
execution hereof; and (v) to do all other things which Lender is permitted to do
under this Agreement or any Related Agreement or which are reasonably necessary
to carry out this Agreement and the Related Agreements. Neither Lender nor any
of its directors, officers, employees or agents will be liable for any acts of
commission or omission nor for any error in judgment or mistake of fact or law,
unless the same shall have resulted from gross negligence or willful misconduct.
The foregoing appointment and power, being coupled with an interest, shall be
irrevocable until all Liabilities under this Agreement are finally paid and
performed in full and this Agreement is terminated. Borrower expressly waives
presentment, demand, notice of dishonor and protest of all instruments and any
other notice to which it might otherwise be entitled.
(f) If any Account Receivable, Contract Right or General Intangible
arises out of a contract with the United States or any department, agency, or
instrumentality thereof, Borrower will, unless Lender shall otherwise agree,
immediately notify Lender in writing and execute any instruments and take any
steps required by Lender in order that all monies due and to become due under
such contract shall be assigned to Lender and notice thereof given to the
government under the Federal Assignment of Claims Act of 1940, as amended, or
other applicable laws or regulations; provided, however, that unless Lender
otherwise requests, until an Event of Default or a Default shall have occurred
and be continuing, Borrower need not take any of the steps contemplated in this
paragraph with respect to any contract with a value of less than $10,000.
(g) If any Account Receivable or Contract Right is evidenced by chattel
paper or promissory notes, trade acceptances, or other instruments for the
payment of money, Borrower will, unless Lender shall otherwise agree, deliver
the originals of same to Lender, appropriately endorsed to Lender's order and,
regardless of the form of such endorsement, Borrower hereby expressly waives
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presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto.
3.3 Inventory.
(a) Unless Lender shall otherwise agree, if Borrower sells Inventory for
cash, all full and partial payments therefor shall be immediately (and, in any
event, not later than the end of the day received) delivered by Borrower to
Lender in their original form for deposit in the Assignee Deposit Account or for
other application to reduction of the Liabilities, in either case in accordance
with Section 2.9. Pending such delivery, all such cash shall be held by Borrower
in trust for Lender.
(b) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances, except for Lender's
gross negligence or willful misconduct. Lender shall not be responsible for
collection of any proceeds or for losses in collected proceeds held by Borrower
in trust for Lender. Any and all risk of loss for any or all of the foregoing
shall be upon Borrower, except for such loss as shall result from Lender's gross
negligence or willful misconduct.
(c) If requested by Lender, Borrower shall, upon acquiring an interest
in any Inventory, deliver to Lender a description of such Inventory, together
with supplier's invoices, warranties, production, cost and other records as
Lender may request. If requested by Lender, Borrower shall deliver to Lender
schedules of the sale of any Inventory immediately upon its sale. Any material
change in the value or condition of any Inventory, and any errors discovered in
any schedule or description delivered to Lender, shall be reported to Lender
immediately. Borrower confirms that the warranties and representations in this
Agreement shall apply to each schedule. Borrower represents and warrants that,
as to each schedule and description of Inventory delivered to Lender:
(1) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all material respects;
(2) None of the goods are defective, of second quality, used, or
goods returned after shipment, except where described as such; and
(3) All Inventory not included on such schedule or description
has been previously scheduled or described.
(d) If requested by Lender, Borrower will notify Lender
immediately if Borrower obtains possession (by return, repossession
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or otherwise) of any Inventory which has been sold, and will inform Lender of
the identity of the returned or repossessed Inventory, the applicable Account
Debtor and the amount of the applicable Account Receivable.
3.4 Equipment.
(a) Borrower shall at all times keep, and cause each Subsidiary to keep,
its Equipment in good operating condition and repair, ordinary wear and tear
excepted, and neither Borrower nor any Subsidiary shall, without the prior
written consent of Lender, sell, lease, or otherwise dispose of any of its
Equipment, or any part thereof or interest therein; provided, however, that
without Lender's consent (but with notice to Lender) Borrower or any Subsidiary
may dispose of obsolete or unuseful Equipment in the ordinary course provided
all Equipment so disposed of by Parent and its Subsidiaries in any Fiscal Year
has an aggregate market value of $50,000 or less.
(b) In the event any Equipment is sold, transferred or otherwise
disposed of by Borrower or any Subsidiary, unless Lender shall agree otherwise,
Borrower or the applicable Subsidiary shall deliver all of the proceeds of any
such sale, transfer or disposition to Lender, which proceeds shall be deposited
in the Assignee Deposit Account or otherwise applied to the repayment of the
Liabilities, in either case in accordance with Section 2.9.
(c) Borrower will, upon request of Lender, submit to Lender a current
listing of all Equipment of Borrower and its Subsidiaries, which listing shall
indicate the type, model, serial number and location of such Equipment.
3.5 Supplemental Documentation. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above is hereinafter referred to as the "Supplemental
Documentation"), in form and substance acceptable to Lender, and pay all taxes,
fees and other reasonable costs and expenses associated with any recording or
filing of the Supplemental Documentation. Borrower hereby irrevocably makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney (and agent-in-fact) (which
appointment and power, being coupled with an interest, shall be irrevocable
until the later to occur of termination of this Agreement and final payment and
performance in full of all of the Liabilities) to sign the name of Borrower on
any of the Supplemental Documentation and to deliver any of the
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Supplemental Documentation to such Persons as Lender, in its sole and absolute
discretion, may elect. Borrower agrees that a carbon, photographic, photostatic,
or other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to make Loans to Borrower
under this Agreement, Borrower hereby represents and warrants to Lender the
truth and accuracy of all matters contained in Section 4 of the Parent Loan
Agreement as from time to time in effect (or, if the Parent Loan Agreement has
been terminated, as in effect immediately prior to such termination), insofar as
the representations and warranties contained therein are applicable to Borrower,
each such representation and warranty (insofar as applicable as aforesaid) and
all other terms of the Parent Loan Agreement to which reference is made therein,
being incorporated herein by reference as though specifically set forth herein.
5. BORROWER COVENANTS. From the date of this Agreement and thereafter until the
Credit is terminated and all Liabilities are finally paid in full, Borrower
agrees that, unless Lender shall otherwise consent in writing, it will perform,
comply with and be bound by all of the agreements, covenants and obligations set
forth in Section 5 of the Parent Loan Agreement as from time to time in effect
(or, if the Parent Loan Agreement has been terminated, as in effect immediately
prior to such termination) which are applicable to Borrower, each such
agreement, covenant and obligation and all other terms of the Parent Loan
Agreement to which reference is made therein being incorporated herein by
reference as though specifically set forth herein. Without limiting the
foregoing, to the extent that Sections 5.5, 5.6 and 5.22 of the Parent Loan
Agreement provide that Lender may advance loans to Parent in certain
circumstances, it is agreed that Lender may make advances to Borrower in such
circumstances if such circumstances exist with respect to Borrower, with such
advances to be Revolving Loans hereunder.
6. DEFAULT.
6.1 Event of Default. Each of the following shall constitute
an Event of Default under this Agreement:
(a) Non-Payment. Default in the payment, when due or
declared due, of any of the Liabilities.
(b) Non-Payment of Other Indebtedness. Default in the payment
when due, whether by acceleration or otherwise (subject to any
applicable grace period), of any Indebtedness of, or guaranteed by,
Borrower, any other Obligor or any Subsidiary (other than (i) any
Indebtedness under this Agreement and any Notes, (ii) any Indebtedness
of Parent or
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any Subsidiary of Parent to Borrower or to any other Subsidiary of
Parent, (iii) any Indebtedness of Borrower to Parent or any other
Subsidiary of Parent or (iv) Indebtedness under the Other Loan
Agreements); provided that the aggregate amount of Indebtedness so
affected shall equal or exceed $25,000.
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, Borrower, any other Obligor or any
Subsidiary (other than (i) any Indebtedness of Parent or any Subsidiary
of Parent to Borrower or to any other Subsidiary of Parent, (ii) the
Indebtedness under this Agreement and any Notes, (iii) any Indebtedness
of Borrower to Parent or any other Subsidiary of Parent or (iv)
Indebtedness under the Other Loan Agreements) or enables the holder or
holders of such other Indebtedness or any trustee or agent for such
holders (any required notice of default having been given and any
applicable grace period having expired) to accelerate the maturity of
such other Indebtedness; provided that the aggregate amount of
Indebtedness with respect to which such event or condition shall have
occurred shall equal or exceed $25,000.
(d) Other Obligations. Default in the payment when due, whether
by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period or waiver of such default) of
(i) any obligation or agreement of Borrower, any other Obligor or any
Subsidiary to or with Lender (other than any obligation or agreement of
Borrower hereunder and under any Related Agreement); or (ii) any
material obligation or agreement of Borrower, any other Obligor or any
Subsidiary to or with any other Person (other than (x) any such material
obligation or agreement constituting or related to Indebtedness, (y)
Trade Accounts Payable and (z) any material obligation or agreement of
any Subsidiary to Borrower or to any other Subsidiary), except only to
the extent that the existence of any such default is being contested by
Borrower, such other Obligor or such Subsidiary, as the case may be, in
good faith and by appropriate proceedings and Borrower, such other
Obligor or such Subsidiary, as applicable, shall have set aside on its
books such reserves or other appropriate provisions therefor as may be
required by GAAP.
(e) Insolvency. Borrower, any other Obligor or any Subsidiary
becomes insolvent, or generally fails to pay, or admits in writing its
inability to pay, its debts as they mature, or applies for, consents to,
or acquiesces in the appointment of a trustee, receiver or other
custodian for Borrower, such other Obligor or such Subsidiary, or for a
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substantial part of the property of Borrower, such other Obligor or such
Subsidiary, or makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower, any
other Obligor or any Subsidiary, or for a substantial part of the
property of Borrower, any other Obligor or any Subsidiary and is not
discharged or dismissed within 60 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Borrower, any other Obligor or
any Subsidiary and, solely in the case where such proceeding shall have
been instituted against Borrower, such Obligor or such Subsidiary, such
proceeding shall not have been dismissed within 60 days or an order for
relief shall have been entered; or any warrant of attachment or similar
legal process is issued against any substantial part of the property of
Borrower, any other Obligor or any Subsidiary.
(f) Pension Plans. The institution by Borrower or any ERISA
Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, Borrower or any ERISA Affiliate would be
required to make a contribution to such Pension Plan, or would incur a
liability or obligation to such Pension Plan, in excess of $50,000; the
institution by the PBGC of steps to terminate any Pension Plan and the
continuation of either such condition after notice thereof from Lender;
or a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
(g) Non-Compliance With This Agreement. Default in the
performance of any of Borrower's agreements set forth in Section 2, 3.2,
3.3 or 3.4 hereof or Section 5.3, 5.5, 5.6 or 5.12 through 5.30 of the
Parent Loan Agreement (and not, in each case, constituting an Event of
Default under any of the other subsections of this Section 6.1), and
continuance of such default after written notice thereof to Borrower
from Lender; or default in the performance of any of Borrower's
agreements set forth in Section 6 of Supplement A or Section 5.2 of the
Parent Loan Agreement (and not, in each case, constituting an Event of
Default under any of the other subsections of this Section 6.1), and
continuance of such default for three (3) Banking Days after notice
thereof to Borrower from Lender; or default in the performance of any of
Borrower's other agreements herein set forth (and not constituting an
Event of Default under any of the other subsections of this Section
6.1), and continuance of such default for thirty (30) days after written
notice thereof to Borrower from Lender.
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(h) Non-Compliance With Related Agreements. Default in the
performance by Borrower, any other Obligor or any Subsidiary of any of
its agreements set forth in any Related Agreement (and not constituting
an Event of Default under any of the other subsections of this Section
6.1), and continuance of such default after notice from Lender and the
expiration of the grace period (if any) set forth therein.
(i) Warranty. Any warranty made by Borrower or any other Obligor
herein or in any Related Agreement is untrue or misleading in any
material respect when made or deemed made; any schedule, statement,
report, notice, certificate or other writing furnished by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on the date as of which the facts set forth therein are stated
or certified; or any certification made or deemed made by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on or as of the date made or deemed made.
(j) Litigation. There shall be entered against any one of
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $50,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which Borrower, such Subsidiary or such
Obligor, as applicable, is insured and with respect to which the insurer
has assumed responsibility in writing or for and to the extent which
Borrower, such Subsidiary or such Obligor, as applicable, is otherwise
indemnified if the terms of such indemnification are satisfactory to
Lender.
(k) Validity. If the validity or enforceability of this Agreement
or any Related Agreement shall be challenged by Borrower, any other
Obligor or any other Person acting through, or on behalf of, Borrower or
any other Obligor, or shall fail to remain in full force and effect.
(l) Conduct of Business. If Borrower, any other Obligor or any
Subsidiary is enjoined, restrained or in any way prevented by court
order, which has not been dissolved or stayed within five (5) business
days, from conducting all or any material part of its business affairs.
(m) Material Adverse Change. Lender shall have determined in good
faith that (i) a material adverse change has occurred in the business,
operations or financial condition of Borrower, any other Obligor or any
Subsidiary, (ii) Lender's interest in any material Collateral or Third
Party Collateral has been adversely affected or impaired, or the value
thereof to Lender has been diminished to a material
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extent or (iii) the prospect of payment or performance of any obligation
or agreement of Borrower or any other Obligor hereunder or under any
Related Agreement is materially impaired, and the condition giving rise
to such determination does not constitute an Event of Default under any
of the other subsections of this Section 6.1 and continues to exist
unremedied for a period of thirty (30) days after written notice of such
determination by Lender to Borrower.
(n) Other Loan Agreements. The existence of any other
"Event of Default" under and as defined in the Other Loan
Agreements.
6.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default described in Section
6.1(e) shall occur, then Lender's commitment and the Credit extended under this
Agreement shall terminate and all Liabilities hereunder and under any Notes
shall be immediately due and payable without demand, notice or declaration of
any kind whatsoever.
(b) In the event an Event of Default other than one described in Section
6.1(e) shall occur, then Lender may declare its commitment terminated and/or all
Liabilities hereunder and under any Notes immediately due and payable without
demand or notice of any kind whatsoever, whereupon the Credit extended under
this Agreement shall terminate and all Liabilities hereunder and under any Notes
shall be immediately due and payable. Lender shall promptly advise Borrower of
any such declaration, but failure to do so shall not impair the effect of such
declaration.
(c) If any Event of Default exists and is continuing, Lender may
exercise any one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
(1) Any remedy contained in this Agreement or in any of
the Related Agreements or any Supplemental Documentation;
(2) Any rights and remedies available to Lender under
the UCC and any other applicable law;
(3) To the extent permitted by applicable law, Lender may,
without notice, demand or legal process of any kind, take possession of
any or all of the Collateral and Third Party Collateral (in addition to
Collateral and Third Party Collateral which it may already have in its
possession), wherever it may be found, and for that purpose may pursue
the same wherever it may be found, and may enter into any premises where
any of the Collateral or Third Party Collateral may be or is supposed to
be, and search for, take possession of,
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remove, keep and store any of the Collateral or Third Party Collateral
until the same shall be sold or otherwise disposed of, and Lender shall
have the right to store the same in any of Borrower's premises without
cost to Lender;
(4) At Lender's request, Borrower will (and will cause its
Subsidiaries to), at Borrower's (or such Subsidiaries') expense,
assemble the Collateral and Third Party Collateral and make it available
to Lender at a place or places to be designated by Lender which is
reasonably convenient to Lender and Borrower; and
(5) Lender at its option, and pursuant to notification given to
Borrower (or any other applicable Obligor) as provided for below, may
sell any Collateral or Third Party Collateral actually or constructively
in its possession at public or private sale and apply the proceeds
thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S
RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition.
7.2 Application of Proceeds of Collateral. Any proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by Lender toward
the payment of such of the Liabilities, and in such order of application, as
Lender may from time to time elect.
7.3 Care of Collateral. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Lender to comply with such request shall not, of itself,
be deemed a failure to exercise reasonable care, and no failure of Lender to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
7.4 Performance of Borrower's Obligations. Lender shall have
the right, but shall not be obligated, to discharge any claims
against or Liens, and any Taxes at any time levied or placed upon
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any or all Collateral, including, without limitation, those arising under
statute or in favor of landlords, taxing authorities, government, public and/or
private warehousemen, common and/or private carriers, processors, finishers,
draymen, coopers, dryers, mechanics, artisans, laborers, attorneys, courts, or
others. Lender may also pay for maintenance and preservation of Collateral.
Lender may, but is not obligated to, perform or fulfill any of Borrower's
responsibilities under this Agreement which Borrower has failed to perform or
fulfill. Lender may advance to Borrower as a Revolving Loan any payment made or
expense incurred by Lender under this Section 7.4.
7.5 Lender's Rights. None of the following shall affect the obligations
of Borrower to Lender under this Agreement or Lender's right with respect to the
remaining Collateral or any Third Party Collateral (any or all of which actions
may be taken by Lender at any time, whether before or after an Event of Default,
at its sole and absolute discretion and without notice to Borrower):
(a) acceptance or retention by Lender of other property or
interests in property as security for the Liabilities, or acceptance or
retention of any Obligor(s), in addition to Borrower, with respect to
any of the Liabilities;
(b) release of its security interest in, or the surrender or
release of, or the substitution or exchange of or for, all or any part
of the Collateral or any Third Party Collateral or any other property
securing any of the Liabilities (including but not limited to any
property of any Obligor other than Borrower), or any extension or
renewal for one or more periods (whether or not longer than the original
period), or release, compromise, alteration or exchange, of any
obligations of any guarantor or other Obligor with respect to any
Collateral, any Third Party Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange of any of the Liabilities, or release or compromise of any
obligation of any Obligor with respect to any of the Liabilities; or
(d) failure by Lender to resort to other security or pursue any
Person liable for any of the Liabilities before resorting to the
Collateral or Third Party Collateral.
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 Conditions Precedent. The effectiveness of this Agreement (and the
obligation of Lender to make any Loan hereunder on the date of this Agreement)
is subject to satisfaction of the following conditions precedent (in addition to
those provided in Section 8.2):
8.1.1 Security Interest. The security interest in the Collateral
granted under this Agreement and the Related Agreements, and in any
Third Party Collateral and all other Liens granted to Lender to secure
the Liabilities, shall be a senior, perfected Lien except as otherwise
agreed by Lender, and all financing statements and other documents
relating to Collateral and Third Party Collateral shall have been filed
or recorded, as appropriate.
8.1.2 Blocked Account; Lock Box. Borrower and its Subsidiaries
shall have entered into blocked account and/or lock box agreements with
Lender for the collection and remittance to Lender of cash proceeds of
Collateral and Third Party Collateral.
8.1.3 Effect of Law. No law or regulation affecting Lender's
entering into this Agreement shall impose upon Lender any material
obligation, fee, liability, loss, cost, expense or damage.
8.1.4 Other Loan Agreements. The Other Loan Agreements
shall have become effective in accordance with their terms.
8.1.5 Fees. Lender shall have received the closing fee referred
to in Section 2.14 and any other fees then due and payable by Borrower
or any other Person hereunder or in connection herewith.
8.1.6 Documents. Lender shall have received all of the following,
each duly executed where appropriate and dated as of the Closing Date
(or such other date as shall be satisfactory to Lender), in form and
substance satisfactory to Lender:
(a) Resolutions. A copy, duly certified by the secretary or an
assistant secretary of Borrower and each Subsidiary party to a Related
Agreement, of: (1) resolutions of the Board of Directors of Borrower and
each such Subsidiary authorizing (A) the borrowings by Borrower
hereunder, (B) the execution, delivery and performance by Borrower and
each such Subsidiary of this Agreement and each other Related Agreement
to which Borrower and each such Subsidiary is a party or by which it is
bound and (C) certain officers or employees (i) of
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Borrower to request borrowings by telephone and (ii) of Borrower to
execute Borrowing Base Certificates; (2) all documents evidencing any
other necessary corporate action with respect to this Agreement and the
Related Agreements; and (3) all approvals or consents, if any, with
respect to this Agreement and the Related Agreements;
(b) Incumbency Certificates. A certificate of the secretary of
Borrower and each Subsidiary party to a Related Agreement certifying the
names of the officers of Borrower and each such Subsidiary authorized to
sign this Agreement and each other Related Agreement to which Borrower
and each such Subsidiary is a party or by which any of them is bound,
and all other documents and certificates to be delivered by any of them
hereunder, together with samples of the true signatures of such
officers;
(c) Borrower's Certificate. The certificate of the President or
Chief Executive Officer of Borrower certifying to the fulfillment of all
conditions precedent to closing and funding the secured financing
transaction contemplated by this Agreement and to the truth and
accuracy, as of such date, of the representations and warranties of
Borrower and each Subsidiary party to a Related Agreement contained in
this Agreement and each other Related Agreement to which Borrower or
such Subsidiary is a party or by which it is bound;
(d) Landlord's Consents. A Landlord's Consent, duly executed by
the owner of each leased premises identified on Schedule 4.12, 4.13 or
4.15 to the Parent Loan Agreement where Collateral or Third Party
Collateral is located other than 4209 Vineland Road, Orlando, Florida;
(e) Note. The Revolving Note in the form of Exhibit C;
and
(f) Other Documents. Such other documents as Lender shall
determine to be necessary or desirable, including but not limited to
documents described in paragraphs (a) and (b) of this Section 8.1.6 with
respect to any Obligor other than Borrower and its Subsidiaries.
8.2 Continuing Conditions Precedent to all Loans; Certification. The
obligation of Lender to make any Loan hereunder is subject to satisfaction of
the following conditions precedent in addition to those provided in Section 8.1:
(a) No Change in Condition. No change in the condition
or operations, financial or otherwise, of Borrower, any
Subsidiary or any other Obligor shall have occurred which
change, in the reasonable credit judgment of Lender, would
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reasonably be expected to have a material adverse effect on Borrower,
such Subsidiary or such other Obligor, or on any Collateral or Third
Party Collateral (which Collateral or Third Party Collateral Lender
deems in its sole discretion to be material);
(b) Default. Before and after giving effect to such
Loan, no Event of Default or Default shall have occurred and
be continuing;
(c) Insurance. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent, scope or cost of the insurance
policies of Borrower or any Subsidiary listed on Schedule 4.7 to the
Parent Loan Agreement which change would have a material adverse effect
on the financial condition of Borrower, any Subsidiary or Borrower and
its Subsidiaries taken as a whole, or would significantly adversely
affect Borrower's ability to perform its obligations under this
Agreement, the Notes or any Related Agreement to which it is a party or
by which it is bound;
(d) Warranties. Before and after giving effect to such Loan, the
warranties in Section 4 shall be true and correct as though made on the
date of such Loan, except for such changes as are specifically permitted
hereunder; and
(e) Accounting Methods. Borrower shall not have made
any material (as reasonably determined by Lender) change in
its accounting methods or principles except as required by
GAAP.
Each request for a Loan hereunder made or deemed to have been made by
Borrower shall be deemed to be a certificate of Borrower as to the matters set
out in the foregoing provisions of this Section 8.2.
9. INDEMNITY.
9.1 Environmental and Safety and Health Indemnity. Borrower hereby
indemnifies Lender and agrees to hold Lender harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of any
and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Parent or any of its Subsidiaries of any
Environmental Law or Occupational Safety and Health Law, or with respect to, or
as a direct or indirect result of, (i) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
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properties utilized by Parent and/or any Subsidiary of Parent into or upon any
land, the atmosphere, or any watercourse, body of water, groundwater or wetland,
of any Hazardous Material or other hazardous, toxic or dangerous waste,
substance or constituent, or other substance (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law) or (ii) the existence of any unsafe or
unhealthful condition on or at any premises utilized by Parent and/or any
Subsidiary of Parent in the conduct of its business. The provisions and
undertakings of indemnification set out in this Section 9.1 shall survive
satisfaction and payment of the Liabilities and termination of this Agreement.
9.2 General Indemnity. In addition to the payment of expenses pursuant
to Section 11.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
any Note, and the officers, directors, employees, agents, and affiliates of
Lender and such holders (collectively, the "Indemnitees"), harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any Related Agreement or
any other agreements executed and delivered by Borrower or any other Obligor in
connection herewith, the statements contained in any commitment letter delivered
by Lender, Lender's agreement to make the Loans hereunder, or the use or
intended use of the proceeds of any of the Loans hereunder (the "indemnified
liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of such Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Borrower shall contribute the maximum portion that it is permitted to pay under
applicable law to the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them. The provisions and undertakings of
indemnification set out in this Section 9.2 shall survive satisfaction and
payment of the Liabilities and termination of this Agreement.
9.3 Capital Adequacy. If Lender shall reasonably determine
that the application or adoption of any law, rule, regulation,
directive, interpretation, treaty or guideline regarding capital
adequacy, or any change therein or in the interpretation or
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administration thereof, whether or not having the force or law (including,
without limitation, application of changes to Regulation H and Regulation Y of
the Federal Reserve Board issued by the Federal Reserve Board on January 19,
1989 and regulations of the Comptroller of the Currency, Department of the
Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the Currency
on January 27, 1989) increases the amount of capital required or expected to be
maintained by Lender or any Person controlling Lender, and such increase is
based upon the existence of Lender's obligations hereunder and other commitments
of this type, then from time to time, within ten (10) days after demand from
Lender, Borrower shall pay to Lender such amount or amounts as will compensate
Lender or such controlling Person, as the case may be, for such increased
capital requirement. The determination of any amount to be paid by Borrower
under this Section 9.3 shall take into consideration the policies of Lender or
any Person controlling Lender with respect to capital adequacy and shall be
based upon any reasonable averaging, attribution and allocation methods. A
certificate of Lender setting forth the amount or amounts as shall be necessary
to compensate Lender as specified in this Section 9.3 shall be delivered to
Borrower and shall be conclusive in the absence of manifest error. The
provisions and undertakings of indemnification set out in this Section 9.3 shall
survive satisfaction and payment of the Liabilities and termination of this
Agreement.
9.4 Other Indemnities. Notwithstanding anything to the contrary
elsewhere in this Agreement, all other indemnities of Borrower in favor of
Lender contained in this Agreement shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
10. ADDITIONAL PROVISIONS. Additional provisions are set forth in
Supplement A.
11. GENERAL.
11.1 Borrower Waiver. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals 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,
assuming Lender has acted in a commercially reasonable manner, 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 Lender's
relevy, attachment or levy on or of, the Collateral or any bond or security
which might be required by any court prior to allowing Lender to exercise any of
Lender's remedies; and (iii) the benefit of all valuation,
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appraisement and exemption laws. Borrower acknowledges that it has been advised
by counsel of its choice with respect to this Agreement and the transactions
evidenced by this Agreement.
11.2 Power of Attorney. Borrower appoints Lender, or any Person whom
Lender may from time to time designate, as Borrower's attorney and agent-in-fact
with power (which appointment and power, being coupled with an interest, shall
be irrevocable until all Liabilities are finally paid and performed in full and
this Agreement is terminated), without notice to Borrower, to:
(a) At such time or times hereafter as Lender or said agent, in
its sole and absolute discretion, may determine in Borrower's or
Lender's name (i) endorse Borrower's name on any checks, notes, drafts
or any other items of payment relating to and/or proceeds of the
Collateral which come into the possession of Lender or under Lender's
control and apply such payment or proceeds to the Liabilities in
accordance with the terms hereof; (ii) endorse Borrower's name on any
chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement in Lender's possession relating
to Accounts Receivable, Inventory or any other Collateral; (iii) use the
information recorded on or contained in any data processing equipment
and computer hardware and software to which Borrower has access relating
to Accounts Receivable, Inventory and/or other Collateral; (iv) use
Borrower's stationery and sign the name of Borrower to verification of
Accounts Receivable and notices thereof to Account Debtors; and (v) if
not done by Borrower, do all acts and things determined by Lender to be
necessary, to fulfill Borrower's obligations under this Agreement; and
(b) At such time or times after the occurrence and during the
continuance of an Event of Default, as Lender or said agent, in its sole
and absolute discretion, may determine, in Borrower's or Lender's name:
(i) demand payment of the Accounts Receivable; (ii) enforce payment of
the Accounts Receivable, by legal proceedings or otherwise; (iii)
exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts Receivable and other Collateral; (iv) settle,
adjust, compromise, extend or renew the Accounts Receivable; (v) settle,
adjust or compromise any legal proceedings brought to collect the
Accounts Receivable; (vi) if permitted by applicable law, sell or assign
the Accounts Receivable and/or other Collateral upon such terms for such
amounts and at such time or times as Lender may deem advisable; (vii)
discharge and release the Accounts Receivable and/or other Collateral;
(viii) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or similar document against any Account Debtor; (ix) prepare,
file and sign Borrower's name on any notice of lien, assignment or
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satisfaction of lien or similar document in connection with the Accounts
Receivable and/or other Collateral; and (x) do all acts and things
necessary, in Lender's sole and absolute discretion, to obtain repayment
of the Liabilities and to fulfill Borrower's other obligations under
this Agreement.
11.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any Loan
is made hereunder, to pay upon demand all Attorneys' Fees and all other
reasonable expenses incurred by Lender in connection with (i) [intentionally
left blank], (ii) the preparation of any and all amendments to this Agreement or
any of the Related Agreements and all other instruments or documents provided
for therein or delivered or to be delivered thereunder or in connection
therewith, (iii) the collection or enforcement of Borrower's or any other
Obligor's obligations hereunder or under any Related Agreement, and (iv) the
collection or enforcement of any of Lender's rights in or to any Collateral or
Third Party Collateral. Lender may advance all such amounts to Borrower as a
Revolving Loan. Borrower also agrees, (v) to indemnify and hold Lender harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans except for losses and expenses
arising from Lender's gross negligence or willful misconduct, and (vi) to pay,
and save Lender harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Agreement, or
any Related Agreement or Supplemental Documentation, or the issuance of any Note
or of any other instruments or documents provided for herein or to be delivered
hereunder or in connection herewith. Borrower's foregoing obligations shall
survive any termination of this Agreement.
11.4 Lender Fees and Charges. Borrower agrees to pay Lender on demand
the customary fees and charges of Lender for maintenance of accounts with Lender
or for providing other services to Borrower. Lender may, in its sole and
absolute discretion, provide for such payment by advancing the amount thereof to
Borrower as a Revolving Loan.
11.5 Lawful Interest. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to Borrower.
11.6 No Waiver by Lender; Amendments. No failure or delay on
the part of Lender in the exercise of any power or right, and no
course of dealing between Borrower and Lender shall operate as a
waiver of such power or right, nor shall any single or partial
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exercise of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. The remedies provided for herein are
cumulative and not exclusive of any remedies which may be available to Lender at
law or in equity. No notice to or demand on Borrower not required hereunder
shall in any event entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Lender to
any other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or any Related Agreement shall in any event be effective
unless the same shall be in writing and signed and delivered by Lender and
Borrower. Any waiver of any provision of this Agreement, and any consent to any
departure by Borrower from the terms of any provision of this Agreement, shall
be effective only in the specific instance and for the specific purpose for
which given.
11.7 Termination of Credit.
(a) Unless the Termination Date is extended pursuant to clause
(b) of this Section 11.7, the Credit shall terminate on the
then-scheduled Termination Date. Borrower may terminate the Credit at
any time prior to the Termination Date upon notice to Lender and payment
in full of the outstanding principal balance of the Loans and all other
Liabilities. All of Lender's rights and remedies, the liens and security
interests of Lender in the Collateral and the Third Party Collateral and
all of Borrower's duties and obligations under this Agreement shall
survive termination of the Credit extended to Borrower hereunder until
all of the Liabilities have been finally paid and performed in full. The
termination or cancellation of the Credit shall not affect or impair the
liabilities and obligations of Borrower or any one or more of the
Obligors to Lender or Lender's rights with respect to any Loans and
advances made and other Liabilities incurred prior to such termination
or with respect to the Collateral or any Third Party Collateral.
(b) Borrower may, not more than 90 days nor less than 75 days
prior to any scheduled Termination Date, request that Lender extend the
Credit for an additional one-year period to the next anniversary of such
date. Unless Lender, in the exercise of its sole and complete
discretion, notifies Borrower of its willingness to extend the Credit
for such additional one-year period, the Credit shall terminate on the
then scheduled Termination Date (and all Loans and other Liabilities
shall be thereupon due and payable).
11.8 Notices. Except as otherwise expressly provided herein,
any notice hereunder to Borrower or Lender shall be in writing
(including telegraphic, telex, or facsimile communication) and
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shall be given to Borrower or Lender at its address, telex number or facsimile
number set forth on the signature pages hereof or at such other address, telex
number or facsimile number as Borrower or Lender may, by written notice,
designate as its address, telex number or facsimile number for purposes of
notices hereunder. All such notices shall be deemed to be given when transmitted
by telex and the appropriate answerback is received, transmitted by facsimile,
delivered to the telegraph office, delivered by courier, personally delivered
or, in the case of notice by mail, three (3) Banking Days following deposit in
the United States mails, properly addressed as herein provided, with proper
postage prepaid; provided, however, that notice to Lender of Borrower's intent
to terminate the Credit shall not be effective until actually received by
Lender.
11.9 Assignments and Participations; Information. Borrower hereby
consents to Lender's grant of participations in or sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or any Related Agreement, or of any portion of any thereof, including
without limitation Lender's rights, titles, interests, remedies, powers and/or
duties. Lender may furnish any information concerning Borrower in the possession
of Lender from time to time to assignees of the rights and/or obligations of
Lender hereunder and to Participants in any Loan (including prospective
assignees and Participants) and may furnish information in response to credit
inquiries consistent with general banking practice. Lender shall promptly notify
Borrower of Lender's grant of any participation in or sale, assignment, transfer
or other disposition of this Agreement or any Related Agreement, or of any
portion of any thereof. Borrower shall use its reasonable efforts to assist
Lender in its efforts to sell assignments and participations.
11.10 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 Successors. This Agreement shall be binding upon Borrower and
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower and Lender and the successors and assigns of Lender.
Borrower shall not assign its rights or duties hereunder without the consent of
Lender.
11.12 Construction. Borrower acknowledges that this Agreement shall not
be binding upon Lender until and unless accepted by Lender in writing. If so
accepted by Lender, this Agreement and the Related Agreements and Supplemental
Documentation shall, unless otherwise expressly provided therein, be deemed to
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have been negotiated and entered into in, and shall be governed and controlled
by the laws of, the State of Illinois as to interpretation, enforcement,
validity, construction, effect, choice of law, and in all other respects,
including, but not limited to, the legality of the interest rate and other
charges, but excluding perfection of security interests and liens which shall be
governed and controlled by the laws of the relevant jurisdiction.
11.13 Consent to Jurisdiction. To induce Lender to accept this
Agreement, Borrower irrevocably agrees that, subject to Lender's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, THE
SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE
HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT
THEREOF.
11.14 Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to "Borrower
and its Subsidiaries" or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes.
11.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i)
UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Initials of Steven D. Hollopeter, President of Borrower:
_______________.
11.16 Prior Actions. Borrower hereby waives, releases and forever
discharges Lender, its officers, employees and agents, from any and all rights,
claims, demands or causes or action against Lender, in law or in equity, arising
out of Lender's past actions or omissions with respect to the Original Loan
Agreement, any other agreements or documents, or any lien or collateral securing
any Liabilities under and as defined in the Original Loan Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
DELAWARE ELECTRO INDUSTRIES, INC.
By:__________________________________
Title: ______________________________
Address: c/o Azimuth Corporation
4209 Vineland Road
Orlando, Florida 32811
Attention: Alexander M. Milley
Facsimile number: (407) 849-0625
BANK OF AMERICA ILLINOIS
By: _________________________________
Title: ______________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Andrew J. Sutherland
Facsimile number: 312/828-3889
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<PAGE>
SUPPLEMENT A
to
LOAN AND SECURITY AGREEMENT
Dated as of October 9, 1995 between BANK OF AMERICA
ILLINOIS ("Lender") and DELAWARE ELECTRO INDUSTRIES,
INC. ("Borrower")
1. Loan Agreement Reference. This Supplement A, as it may be amended or modified
from time to time, is a part of the Loan and Security Agreement dated as of
October 9, 1995 between Borrower and Lender (together with all amendments,
modifications and supplements thereto, the "Loan Agreement"). Terms used herein
which are defined in the Loan Agreement shall have the meaning ascribed to them
therein unless the context requires otherwise.
2. Revolving Credit Amount; Borrowing Base.
2.1 Revolving Credit Amount. The maximum amount of Revolving Loans which
Lender will make available to Borrower (such amount is herein called the
"Revolving Credit Amount") is (i) FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS
($5,400,000) (unless such amount is increased by Lender in its sole discretion)
less (ii) the principal amount of "Revolving Loans" (under and as defined in
each Other Loan Agreement) outstanding under each Other Loan Agreement.
2.2 Borrowing Base. The term "Borrowing Base", as used
herein, shall mean:
(i) an amount (the "Accounts Receivable Availability") equal to
85% of the net amount (after deduction of such reserves and
allowances as Lender deems proper and necessary in good faith and
in the exercise of its reasonable judgment) of the Eligible
Accounts Receivable of Borrower; plus
(ii) an amount (the "Inventory Availability") equal to the lesser
of (A) the sum of (x) 40% of the net value (as determined by
Lender and after deduction of such reserves and allowances as
Lender deems proper and necessary in good faith and in the
exercise of its reasonable judgment) of the Eligible Inventory of
Borrower consisting of fuses plus (y) 25% of the net value (as
determined by Lender and after deduction of such reserves and
allowances as Lender deems proper and necessary in good faith and
in the exercise of its reasonable judgment) of the Eligible
Inventory of Borrower consisting of fasteners or (B) $2,500,000
(such dollar amount, as adjusted from time to time, is
hereinafter called the "Inventory Availability Sublimit"); plus
<PAGE>
(iii) an amount (the "Additional Availability") equal to (A)(1)
from the Closing Date to the one year anniversary thereof,
$300,000 and (2) thereafter, zero less (B) the principal amount
of "Revolving Loans" under and as defined in the Other Loan
Agreements then outstanding under the Other Loan Agreements in
excess of the "Accounts Receivable Availability" under and as
defined in each Other Loan Agreement.
2.3 Availability Adjustments.
None.
2.4 Lender's Rights. Borrower agrees that nothing contained in this
Supplement A (i) shall be construed as Lender's agreement to resort or look to a
particular type or item of Collateral as security for any specific Loan or
advance or in any way limit Lender's right to resort to any or all of the
Collateral as security for any of the Liabilities, (ii) shall be deemed to limit
or reduce any lien on or any security interest in or upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.8 of the Loan Agreement.
3. Interest.
3.1
(a) Interest to Maturity. The outstanding principal balance of
the Revolving Loans (other than Overdraft Loans and Over
Advances) shall bear interest to maturity at the Reference Rate
in effect from time to time plus one and one-half percent (1.5%)
per annum.
(b) Default Rate. If any amount of the Revolving Loans is
not paid when due, whether by acceleration or otherwise, the
outstanding principal balance of the Revolving Loans (other than
Overdraft Loans and Over Advances) shall bear interest until paid
at a rate per annum equal to the greater of the (a) the Reference
Rate from time to time in effect plus two and one-half percent
(2.5%) or (b) two and one-half percent (2.5%) above the Reference
Rate in effect at the time such amount became due.
3.2 Overdraft Loans; Over Advances. Overdraft Loans and Over Advances
shall bear interest at the rate(s) determined pursuant to Section 2.6 or Section
2.7 of the Loan Agreement, as applicable.
3.3 Computation. Interest shall be calculated on the basis
of a year consisting of 360 days and paid for actual days elapsed.
Changes in any interest rate provided for herein which are due to
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<PAGE>
changes in the Reference Rate shall take effect on the date of the change in the
Reference Rate.
3.4 Payment. Until maturity, interest on the Loans shall be payable
monthly in arrears on the last day of each calendar month at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand.
4. Eligible Account Receivable Data. Each Account Receivable of Borrower must be
due and payable within 90 days of the date of the invoice evidencing such
Account Receivable and must not be unpaid on the date that is 91 days after the
date of such invoice. If invoices representing 25% or more of the unpaid net
amount of all Accounts Receivable of Borrower from any one Account Debtor are
unpaid more than 90 days after the date of such invoices, then all Accounts
Receivable relating to such Account Debtor shall cease to be Eligible Accounts
Receivable.
5. Eligible Inventory Requirements.
None.
6. Information. Borrower agrees that, until the Credit is
terminated, it shall furnish to Lender in form reasonably
satisfactory to Lender the following:
(a) Within fifteen (15) days after the end of each month, an aging of
all Accounts Receivable of Borrower and an aging of all accounts payable
of Borrower; and
(b) Within fifteen (15) days after the end of each month, an Inventory
certification report as of the end of the month for all Inventory
locations.
Borrower's Initials: ______________
Lender's Initials: ______________
Date: October 9, 1995
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<PAGE>
EXHIBIT 10.26
===============================================================================
LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 9, 1995
BETWEEN
CONTEMPO DESIGN, INC.
and
BANK OF AMERICA ILLINOIS
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND OTHER TERMS...............................................2
1.1 Definitions..........................................................2
1.2 Other Definitional Provisions.......................................13
1.3 Interpretation of Agreement.........................................13
1.4 Compliance with Financial Restrictions..............................14
2. LOANS; OTHER MATTERS.....................................................14
2.1 Loans..........................................................14
2.1.1 Revolving Loans.........................................14
2.1.2 Reduction of Revolving Credit Amount....................14
2.1.3 Maximum Outstanding Loans...............................15
2.1.4 Assumption..............................................15
2.2 Loan Account; Demand Deposit Account...........................15
2.3 Interest and Fees..............................................16
2.3.1 Interest on Revolving Loans.............................16
2.3.2 Nonuse Fee..............................................16
2.3.3 Method of Calculating Interest and Fees.................16
2.3.4 Payment of Interest and Fees............................16
2.4 Requests for Loans; Borrowing Base Certificates;
Other Information..............................................16
2.5 Notes...............................................................17
2.6 Overdraft Loans.....................................................18
2.7 Over Advances.......................................................18
2.8 All Loans One Obligation............................................19
2.9 Making of Payments; Application of Collections;
Charging of Accounts...........................................19
2.10 Lender's Election Not to Enforce...................................21
2.11 Reaffirmation......................................................21
2.12 Setoff.............................................................21
2.13 Refinancing Fee....................................................21
2.14 Closing Fee........................................................22
3. COLLATERAL...............................................................22
3.1 Grant of Security Interest..........................................22
3.2 Accounts Receivable.................................................23
3.3 Inventory...........................................................27
3.4 Equipment...........................................................28
3.5 Supplemental Documentation..........................................28
4. REPRESENTATIONS AND WARRANTIES...........................................29
5. BORROWER COVENANTS.......................................................29
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PAGE
6. DEFAULT..................................................................29
6.1 Event of Default....................................................29
(a) Non-Payment.............................................29
(b) Non-Payment of Other Indebtedness.......................29
(c) Acceleration of Other Indebtedness......................30
(d) Other Obligations.......................................30
(e) Insolvency..............................................30
(f) Pension Plans...........................................31
(g) Non-Compliance With This Agreement......................31
(h) Non-Compliance With Related Agreements..................32
(i) Warranty..................................................32
(j) Litigation..............................................32
(k) Validity................................................32
(l) Conduct of Business.....................................32
(m) Material Adverse Change.................................32
(n) Other Loan Agreements.....................................33
6.2 Effect of Event of Default; Remedies...........................33
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S
RIGHTS...................................................................34
7.1 Notice of Disposition of Collateral............................34
7.2 Application of Proceeds of Collateral..........................34
7.3 Care of Collateral.............................................34
7.4 Performance of Borrower's Obligations..........................35
7.5 Lender's Rights................................................35
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS..................................................................36
8.1 Conditions Precedent...........................................36
8.1.1 Security Interest.......................................36
8.1.2 Blocked Account; Lock Box...............................36
8.1.3 Effect of Law...........................................36
8.1.4 Other Loan Agreements...................................36
8.1.5 Fees....................................................36
8.1.6 Documents...............................................36
(a) Resolutions...............................................36
(b) Incumbency Certificates...................................37
(c) Borrower's Certificate..................................37
(d) Landlord's Consents.....................................37
(e) Note......................................................37
(f) Other Documents.........................................37
8.2 Continuing Conditions Precedent to all Loans;
Certification..................................................37
(a) No Change in Condition..................................37
(b) Default.................................................38
(c) Insurance...............................................38
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<PAGE>
PAGE
(d) Warranties...............................................38
(e) Accounting Methods.......................................38
9. INDEMNITY...............................................................38
9.1 Environmental and Safety and Health Indemnity......................38
9.2 General Indemnity..................................................39
9.3 Capital Adequacy...................................................39
9.4 Other Indemnities..................................................40
10. ADDITIONAL PROVISIONS...................................................40
11. GENERAL.................................................................40
11.1 Borrower Waiver...................................................40
11.2 Power of Attorney.................................................41
11.3 Expenses; Attorneys' Fees.........................................42
11.4 Lender Fees and Charges...........................................42
11.5 Lawful Interest...................................................42
11.6 No Waiver by Lender; Amendments...................................42
11.7 Termination of Credit.............................................43
11.8 Notices...........................................................43
11.9 Assignments and Participations; Information.......................44
11.10 Severability.....................................................44
11.11 Successors.......................................................44
11.12 Construction.....................................................44
11.13 Consent to Jurisdiction..........................................45
11.14 Subsidiary Reference.............................................45
11.15 Waiver of Jury Trial ............................................45
11.16 Prior Actions ...................................................45
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<PAGE>
LIST OF EXHIBITS
Exhibits:
Exhibit A Form of Borrowing Base Certificate (ss.2.5(c))
Exhibit B [Reserved]
Exhibit C Form of Revolving Note
Exhibit D [Reserved]
Exhibit E Form of Landlord's Consent
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<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as from time to time amended, modified
or supplemented, this "Agreement") is made as of this 9th day of October, 1995
by and between BANK OF AMERICA ILLINOIS (formerly Continental Bank N.A.), an
Illinois banking corporation having its principal office at 231 South LaSalle
Street, Chicago, Illinois 60697 ("Lender"), and CONTEMPO DESIGN, INC., an
Illinois corporation ("Borrower").
RECITALS
1. On January 16, 1991, Azimuth Corporation, a Delaware corporation
("Parent"), and Lender entered into an Amended and Restated Loan and Security
Agreement (such Amended and Restated Loan and Security Agreement, as amended to
the date hereof, being herein referred to as the "Original Loan Agreement"; and
the other capitalized terms used herein shall have the meanings set forth in
Section 1.1) pursuant to which Lender made loans to Parent.
2. Parent and Lender are, on the date hereof, amending and
restating the Original Loan Agreement.
3. As security for the loans made by Lender to Parent, (a) Borrower and
other Subsidiaries of Parent, Contempo Design West, Inc., a Delaware corporation
("Contempo West"), and Delaware Electro Industries, Inc., a Delaware corporation
("Delaware"), have granted Lender a lien on, and a security interest in, all of
their respective assets and (b) Borrower, Delaware and Contempo West have
executed a guaranty whereby such companies jointly and severally guaranteed the
full and prompt payment and performance of all obligations of Parent to Lender
in connection with the Original Loan Agreement and all related documents.
4. In connection with the amendment and restatement of the Original Loan
Agreement, Borrower and other Subsidiaries of Parent are assuming a portion of
the "Liabilities" under and as defined in the Original Loan Agreement
representing "Revolving Loans" under and as defined in the Original Loan
Agreement, with the portion of such Liabilities assumed by Borrower to be
governed by the terms of this Agreement.
5. Lender has agreed to provide financial accommodations to Borrower in
addition to those assumed by Borrower as described in the immediately preceding
recital on the terms hereinafter set forth.
<PAGE>
Accordingly, in consideration of the mutual agreements contained herein,
and subject to the terms and conditions hereof, the parties hereto agree, as
follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" shall mean any Person who is or who may become
obligated to Borrower under, with respect to, or on account of an Account
Receivable, Contract Right, General Intangible or
other Collateral or Third Party Collateral.
"Account Receivable" shall mean any account of Borrower and any
other right of Borrower to payment, whether or not evidenced by an instrument or
chattel paper and whether or not yet earned by performance (excluding any
Contract Right).
"Accounts Receivable Availability" shall have the meaning
ascribed to such term in Supplement A.
"Assignee Deposit Account" shall have the meaning ascribed to
such term in Section 3.2(d).
"Assumed Liabilities" shall have the meaning ascribed to such
term in Section 2.1.4.
"Attorneys' Fees" shall mean the reasonable value of the services
(and reasonable costs, charges and expenses related thereto) of the attorneys
(and all paralegals, secretaries, accountants and other staff employed by such
attorneys) employed by Lender (including, but not limited to, attorneys and
paralegals who are employees of Lender) from time to time (i) in connection with
the negotiation, preparation, execution, delivery, administration and
enforcement of this Agreement, any Related Agreement, any Supplemental
Documentation and all other documents or instruments provided for herein or in
any thereof or delivered or to be delivered hereunder or under any thereof or in
connection herewith or with any thereof, (ii) to prepare documentation related
to the Loans made and other Liabilities incurred hereunder, (iii) to prepare any
amendment to or waiver under this Agreement or any Related Agreement and any
documents or instruments related thereto, (iv) to represent Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene in any litigation, contest, dispute, suit or proceeding or to file a
petition, complaint, answer, motion or other pleading, or to take any other
action in or with respect to, any litigation, contest,
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<PAGE>
dispute, suit or proceeding (whether instituted by Lender, Borrower or any other
Person and whether in bankruptcy or otherwise) in any way or respect relating to
the Collateral, any Third Party Collateral, this Agreement or any Related
Agreement, or Borrower's or any other Obligor's or any Subsidiary's affairs, (v)
to protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral or any Third Party Collateral, (vi) to attempt to enforce any
security interest in any of the Collateral or any Third Party Collateral or to
give any advice with respect to such enforcement and (vii) to enforce any of
Lender's rights to collect any of the Liabilities.
"Banking Day" shall mean any day other than a Saturday, Sunday or
legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois.
"Borrower" -- see Preamble.
"Borrowing Base" shall have the meaning ascribed to such term in
Supplement A.
"Borrowing Base Certificate" shall mean a certificate in
substantially the form of Exhibit A.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" shall mean the date this Agreement becomes
effective pursuant to Section 8.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed to also refer to any successor sections.
"Collateral" shall have the meaning ascribed to such term
in Section 3.1.
"Contempo Amsterdam" shall mean Contempo Design Europe B.V., a
Dutch corporation 90% owned by Borrower and 10% owned by an employee thereof.
"Contempo West" -- see Recitals.
"Contract Right" shall mean any right of Borrower to payment
under a contract, which right is not yet earned by performance and not evidenced
by an instrument or chattel paper.
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<PAGE>
"Credit" shall mean the facility established under this Agreement
pursuant to which Lender will make Revolving Loans to Borrower.
"Default" shall mean any event or condition which, with the lapse
of time or giving of notice to Borrower or both, would constitute an Event of
Default.
"Default Rate" shall mean, with respect to a Loan, the rate of
interest which is applicable to such Loan after any amount thereof is not paid
when due, whether by acceleration or otherwise, as determined pursuant to
Supplement A.
"Delaware" -- see Recitals.
"Demand Deposit Account" shall have the meaning ascribed to such
term in Section 2.2.
"Eligible Account Receivable" shall mean an Account Receivable
owing to Borrower which meets the following requirements:
(1) it is genuine and in all respects what it purports
to be;
(2) it arises from either (a) the performance of services by
Borrower, which services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto
or (b) the sale or lease of goods by Borrower; and if it arises from the
sale or lease of goods, (i) such goods comply with such Account Debtor's
specifications (if any) and (except in the case of exhibits manufactured
by Borrower which are stored at the premises of Borrower for a period of
not more than 60 days after completion as an accommodation to the
applicable Account Debtor ("Temporarily Stored Exhibits")) have been
shipped to, or delivered to and accepted by, such Account Debtor and
(ii) Borrower has possession of, or if requested by Lender has delivered
to Lender, shipping and delivery receipts evidencing such shipment,
delivery and acceptance (except that no such receipts shall be required
in the case of an Account Receivable relating to a Temporarily Stored
Exhibit);
(3) it (a) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (i) is dated not earlier than the date
of shipment or performance (or, in the case of an Account Receivable
relating to a Temporarily Stored Exhibit, the date of completion of such
exhibit) and (ii) has payment terms not unacceptable to Lender (in good
faith and in the exercise of its reasonable judgment) and (b) meets the
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Eligible Account Receivable requirements set forth in
Supplement A;
(4) it is not subject to any assignment, claim or Lien, other
than (a) a Lien in favor of Lender, (b) Liens consented to by Lender in
writing and (c) Liens described in Section 5.16(a) of the Parent Loan
Agreement;
(5) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor with respect thereto, and is not
subject to a claim for setoff, counterclaim, credit or allowance (except
(x) any credit or allowance which has been deducted in computing the net
amount of the applicable invoice as shown in the original schedule or
Borrowing Base Certificate furnished to Lender identifying or including
such Account Receivable or (y) as Lender in its sole discretion may
otherwise agree) or adjustment by the Account Debtor with respect
thereto, or to any claim by such Account Debtor denying liability
thereunder in whole or in part, and such Account Debtor has not refused
to accept any of the goods or services which are the subject of such
Account Receivable or offered or attempted to return any of such goods;
(6) there are no proceedings or actions which are then threatened
or pending against the Account Debtor with respect thereto or to which
such Account Debtor is a party which proceedings or actions would
reasonably be expected to result in any material adverse change in such
Account Debtor's financial condition or in its ability to pay any
Account Receivable in full when due;
(7) it does not arise out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the assignment
by Borrower to Lender of the Account Receivable arising with respect
thereto;
(8) the Account Debtor with respect thereto is not a Subsidiary
or Obligor, or a director, officer, employee or agent of Borrower,
Parent, Delaware, Contempo West, a
Subsidiary or Obligor;
(9) the Account Debtor with respect thereto is a resident or
citizen of, and is located within, the United States of America, unless
the sale of goods giving rise to the Account Receivable is on letter of
credit, banker's acceptance or other credit support terms reasonably
satisfactory to Lender;
(10) it is not an Account Receivable arising from a "sale on
approval," "sale or return" or "consignment," or subject to any other
repurchase or return agreement;
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<PAGE>
(11) except in the case of an Account Receivable relating to a
Temporarily Stored Exhibit, it is not an Account Receivable with respect
to which possession and/or control of the goods sold giving rise thereto
is held, maintained or retained by Borrower or any Subsidiary, or other
Obligor (or by any agent or custodian of Borrower, any Subsidiary, or
other Obligor) for the account of or subject to further and/or future
direction from the Account Debtor thereof;
(12) it is not an Account Receivable which in any way fails to
meet or violates any warranty, representation or covenant contained in
this Agreement or any Related Agreement relating directly or indirectly
to Borrower's Accounts Receivable;
(13) the Account Debtor thereunder is not located in the States
of Indiana, New Jersey or Minnesota; provided, however, that such
restriction shall not apply to an Account Receivable if at the time the
Account Receivable was created and at all times thereafter (a) Borrower
had filed and has maintained effective a current Notice of Business
Activities Report with the appropriate office or agency of the State of
Indiana, New Jersey or Minnesota, as applicable or (b) Borrower was and
has continued to be exempt from the filing of such Report and has
provided Lender with satisfactory evidence thereof;
(14) it arises in the ordinary course of business of
Borrower;
(15) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, Borrower has assigned its
right to payment of such Account Receivable to Lender pursuant to the
Assignment of Claims Act of 1940, as amended;
(16) if Lender in good faith and in its reasonable judgment has
established a credit limit for an Account Debtor, the aggregate dollar
amount of Accounts Receivable due from such Account Debtor, including
such Account Receivable, does not exceed such credit limit (it being
understood that in establishing any such credit limit Lender may rely on
factors which, due to confidentiality restrictions or otherwise, are not
disclosed to Borrower); and
(17) if the Account Receivable is evidenced by chattel paper or
an instrument, (a) Lender shall have specifically agreed in writing to
include such Account Receivable as an Eligible Account Receivable, (b)
only payments then due and payable under such chattel paper or
instrument shall be included as an Eligible Account Receivable and (c)
the originals of such chattel paper or instruments have been
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<PAGE>
endorsed and/or assigned and delivered to Lender in a manner
satisfactory to Lender.
An Account Receivable which is at any time an Eligible Account
Receivable, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible Account
Receivable. Further, with respect to any Account Receivable, if Lender
at any time or times hereafter determines in good faith and in its
reasonable judgment that the prospect of payment or performance by the
Account Debtor with respect thereto is or will be impaired for any
reason whatsoever, notwithstanding anything to the contrary contained
above, such Account Receivable shall forthwith cease to be an Eligible
Account Receivable.
"Environmental Laws" shall mean the Clean Air Act of 1970, as
amended, 42 U.S.C. ss.7401 et seq., the Clean Water Act, as amended, 33 U.S.C.
ss.1251 et seq., the Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. ss.6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.,
any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act,
15 U.S.C. ss.2601 et seq., and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree or other written legal
requirement regulating, relating to, or imposing liability or standards of
conduct (including, but not limited to, permit requirements, emission or
effluent restrictions and other requirements relating to manufacturing,
processing, generation, distribution, use, treatment, storage, disposal,
clean-up, transport or handling) concerning any Hazardous Materials or any
hazardous, toxic or dangerous waste, substance or constituent, or any noise,
odor, waste, radiation, pollutant or contaminant or other substance, whether
solid, liquid or gas, as now or at any time hereafter in effect.
"Equipment" shall mean all equipment of every description,
including, without limitation, fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefor and replacements
thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, partnership, or
other trade or business (whether or not incorporated) that is, along with
Borrower, a member of a controlled group of corporations or a controlled group
of trades or
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businesses, as described in sections 414(b) and 414(c), respectively, of the
Code or section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of section 414(m) of the Code.
"Event of Default" shall have the meaning ascribed to such term
in Section 6.1.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year.
"Fiscal Year" shall mean any period of 12 consecutive calendar
months ending on the last day of December.
"Fixtures" shall mean all fixtures of Borrower of every
description and all substitutions and replacements of any thereof.
"GAAP" shall mean generally accepted accounting principles as
applied in the preparation of the audited financial statements of Parent
referred to in Section 4.6 of the Parent Loan Agreement.
"General Intangibles" shall mean all of Borrower's intangible
personal property, including things in action, causes of action and all other
personal property of Borrower of every kind and nature (other than accounts,
inventory, equipment, chattel paper, documents, instruments and money),
including, without limitation, corporate or other business records, inventions,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, security interests, security deposits or other security held
by or granted to Borrower to secure any payment from an Account Debtor, and any
rights to indemnification.
"Guaranteed Obligations" means all obligations of Borrower under
the Amended and Restated Guaranty Agreement of Borrower, Delaware and Contempo
West dated as of the Closing Date.
"Hazardous Materials" shall mean any toxic substance, hazardous
substance, hazardous material, hazardous chemical or hazardous waste defined or
qualifying as such in (or for the purposes of) any Environmental Law, or any
pollutant or contaminant, and shall include, but not be limited to, petroleum,
including crude oil or any fraction thereof which is liquid at standard
conditions of temperature or pressure (60 degrees fahrenheit and 14.7 pounds per
square inch absolute), any radioactive material, including, but not limited to,
any source,
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special nuclear or by-product material as defined at 42 U.S.C.
ss.2011 et seq., as amended or hereafter amended, polychlorinated
biphenyls and asbestos in any form or condition.
"Indebtedness" of any Person shall mean, without duplication, (i)
any obligation of such Person for borrowed money, including, without limitation,
(a) any obligation of such Person evidenced by bonds, debentures, notes or other
similar debt instruments and (b) any obligation for borrowed money which is
non-recourse to the credit of such Person but which is secured by a Lien on any
asset of such Person, (ii) any obligation of such Person on account of deposits
or advances, (iii) any obligation of such Person for the deferred purchase price
of any property or services, except Trade Accounts Payable, (iv) any obligation
of such Person as lessee under a Capitalized Lease and (v) any Indebtedness of
another Person secured by a Lien on any asset of such first Person, whether or
not such Indebtedness is assumed by such first Person. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or joint
venturer.
"Inventory" shall mean any and all goods of Borrower (including,
without limitation, goods in transit) wheresoever located, which are or may at
any time be leased to a lessee, held for sale or lease or furnished under any
contract of service by, or held as raw materials, work in process, or supplies
or materials used or consumed in the business of, Borrower or which are held for
use in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, and all goods the sale or other disposition of which
has given rise to an Account Receivable, Contract Right or General Intangible
and which are returned to and/or repossessed and/or stopped in transit by
Borrower or Lender or any agent or bailee of any of them, and all documents of
title or other documents representing the same.
"Landlord's Consent" shall mean a Landlord's Consent
substantially in the form of Exhibit E, with appropriate insertions, or such
other form as shall be acceptable to Lender, as it may be amended or modified
from time to time.
"Lender" -- see Preamble.
"Liabilities" shall mean all of the liabilities, obligations,
reimbursement obligations in connection with any letter of credit, and
indebtedness of Borrower, any Subsidiary or any other Obligor to Lender of any
kind or nature, however created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing or due or to become
due, and including but not limited to (i) Borrower's obligations under any Note,
(ii) Borrower's obligations under this Agreement, (iii)
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interest, charges, expenses, Attorneys' Fees and other sums chargeable to
Borrower by Lender under this Agreement or any Related Agreement, (iv) the
obligations of Borrower, any Subsidiary and any other Obligor under any Related
Agreement, including obligations of performance and (v) the Guaranteed
Obligations. "Liabilities" shall also include any and all amendments,
extensions, renewals, refundings or refinancings of any of the foregoing.
"Lien" shall mean any mortgage, pledge, hypothecation, judgment
lien or similar legal process, title retention lien, or other lien, encumbrance
or security interest, including, without limitation, the interest of a vendor
under any conditional sale or other title retention agreement and the interest
of a lessor under any Capitalized Lease.
"Loan" shall mean (i) the Revolving Loans made pursuant to
Section 2.1.1 and (ii) any other loan or advance made to Borrower by Lender
under or pursuant to this Agreement.
"Loan Account" shall have the meaning ascribed to such term in
Section 2.2.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is maintained for employees of Borrower,
any other Obligor or any ERISA Affiliate.
"Note" shall mean the Revolving Note and any other promissory
note of Borrower evidencing any loan or advance (including but not limited to
any Revolving Loans) made by Lender to Borrower pursuant to this Agreement.
"Obligor" shall mean Borrower and each other Person who is or
shall become primarily or secondarily liable on any of the Liabilities, or who
grants to Lender a Lien on any property of such Person as security for any of
the Liabilities.
"Occupational Safety and Health Law" shall mean the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et seq., and any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to or imposing liability or standards of
conduct concerning employee health and/or safety.
"Original Loan Agreement" - see Recitals.
"Original Security Agreement" means the Amended and Restated
Security Agreement dated as of January 16, 1991 among Borrower, Delaware,
Contempo West and Lender.
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"Other Loan Agreements" means the Loan and Security Agreement
dated as of the date hereof between Lender and Delaware and the Loan and
Security Agreement dated as of the date hereof between Lender and Contempo West,
as the same may be amended, supplemented or otherwise modified from time to
time, and the Parent Loan Agreement.
"Over Advance" shall have the meaning ascribed to such term in
Section 2.7.
"Overdraft Loan" shall have the meaning ascribed to such term in
Section 2.6.
"Parent" -- see Recitals.
"Parent Loan Agreement" means the Second Amended and Restated
Loan and Security Agreement between Lender and Parent dated as of the date
hereof, as the same may be amended, supplemented or otherwise modified from time
to time.
"Participant" shall mean any Person, now or at any time or times
hereafter, participating with Lender in the Loans made to Borrower pursuant to
this Agreement or any Related Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean a "pension plan," as such term is
defined in Section 3(2) of ERISA, which is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which Borrower, any other
Obligor or any ERISA Affiliate may have any liability, including any liability
by reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, or government (whether national, federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Reference Rate" shall mean, at any time, the rate of interest
then most recently announced by Lender at Chicago, Illinois as its reference
rate (of which announcements Lender shall give notice promptly to Borrower).
Each change in the interest rate on any Loan shall take effect on the effective
date of the change in the Reference Rate.
"Refinancing Fee" shall have the meaning ascribed to such term in
Section 2.13.
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"Related Agreement" shall mean any agreement, instrument or
document (including, without limitation, notes, guarantees, mortgages, deeds of
trust, chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter delivered to Lender with respect to or in
connection with or pursuant to this Agreement or any of the Liabilities, and
executed by or on behalf of Borrower, Parent, Delaware, Contempo West or any
other Obligor.
"Related Party" shall mean any Person (other than a Subsidiary)
(i) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, Borrower, (ii) which
beneficially owns or holds ten percent (10%) or more of the equity interest of
Borrower or (iii) ten percent (10%) or more of the equity interest of which is
beneficially owned or held by Borrower or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Revolving Credit Amount" shall have the meaning ascribed to such
term in Supplement A.
"Revolving Loan" shall have the meaning ascribed to such term in
Section 2.1.1.
"Revolving Loan Availability" shall mean the lesser of (a) the
Revolving Credit Amount and (b) the Borrowing Base.
"Revolving Note" shall have the meaning ascribed to such term in
Section 2.5.
"Siemens" means an Account Debtor of the Borrower with one of the
following names (as derived from the books and records of the Borrower):
"Siemens Medical Systems, Electromedical", "Siemens Physiological Recording",
"Siemens Burdick", "Siemens Electric Ltd.", "Siemens Hearing Instruments",
"Siemens Infusion Systems", "Siemens Medical Labs", "Siemens Medical Systems",
"Siemens Medical Systems - EM", "Siemens Medical Systems, Inc.", "Siemens
Medical Systems\Ultrasound", "Siemens Nuclear Group", "Siemens Oncology
Systems", "Siemens Pelton & Crane", "Siemens Quantum, Inc." or "Siemens Solar
Instruments".
"Subsidiary" shall mean any Person of which or in which Borrower
and its other Subsidiaries own directly or indirectly 50% or more of (i) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
Person, if it is a
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corporation, (ii) the capital interest or profits interest of such Person, if it
is a partnership, joint venture or similar entity or (iii) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.
"Supplemental Documentation" shall have the meaning ascribed to
such term in Section 3.5.
"Taxes" with respect to any Person shall mean taxes, assessments
or other governmental charges or levies imposed upon such Person, its income or
any of its properties, franchises or assets.
"Termination Date" shall mean August 31, 1996 or such later date
to which the Termination Date may be extended pursuant to Section 11.7.
"Third Party Collateral" shall mean any property of any Person
other than Borrower which secures payment or performance of any Liabilities.
"Trade Accounts Payable" of any Person shall mean trade accounts
payable of such Person with a scheduled maturity of not greater than 90 days
incurred in the ordinary course of such Person's business.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of Illinois, and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time. References to sections
of the UCC shall be construed to also refer to any successor sections.
1.2 Other Definitional Provisions. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or in
any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any Note
or in any certificate or other document made or delivered pursuant hereto. Terms
used in this Agreement which are defined in any Supplement or Exhibit hereto
shall, unless the context otherwise indicates, have the meanings given them in
such Supplement or Exhibit. Other terms used in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
1.3 Interpretation of Agreement. A Section, an Exhibit or a Schedule is,
unless otherwise stated, a reference to a section hereof, an exhibit hereto or a
schedule hereto, as the case may be. Section captions used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
The words
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"hereof," "herein," "hereto" and "hereunder" and words of similar import when
used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Reference to "this Agreement" shall
include the provisions of Supplement A.
1.4 Compliance with Financial Restrictions. Compliance with each of the
financial ratios and restrictions contained herein shall, except as otherwise
provided herein, be determined in accordance with GAAP consistently followed.
2. LOANS; OTHER MATTERS.
2.1 Loans.
2.1.1 Revolving Loans.
(a) Subject to the terms and conditions of this Agreement
and the Related Agreements, and in reliance upon the warranties
of Borrower set forth herein and in the Related Agreements,
Lender agrees to make such loans or advances (individually each a
"Revolving Loan" and collectively the "Revolving Loans") from
time to time before the Termination Date to Borrower as Borrower
may from time to time request, up to but not in excess (at any
one time outstanding) of the Revolving Loan Availability.
Revolving Loans made by Lender may be repaid and, subject to the
terms and conditions hereof, reborrowed to but not including the
Termination Date unless the Credit extended under this Agreement
is otherwise terminated as provided in this Agreement.
(b) In the event the aggregate outstanding principal
balance of the Revolving Loans exceeds the Revolving Loan
Availability, Borrower shall, unless Lender shall otherwise
consent, without notice or demand of any kind, immediately make
such repayments of the Revolving Loans or take such other actions
as shall be necessary to eliminate such excess.
(c) All Revolving Loans hereunder shall be paid by
Borrower on the Termination Date, unless payable sooner pursuant
to the provisions of this Agreement, but may, at Borrower's
election, be repaid in whole or in part at any time prior to such
date without premium or penalty.
2.1.2 Reduction of Revolving Credit Amount. Borrower may, at any
time, on at least three (3) Banking Days' prior written notice received
by Lender, permanently reduce the Revolving Credit Amount; provided,
however, that concurrently with any such reduction, Borrower shall pay
to Lender the
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amount, if any, as is necessary to reduce the outstanding principal
balance of all Revolving Loans to such reduced Revolving Credit Amount.
2.1.3 Maximum Outstanding Loans. Notwithstanding any other
provision of this Agreement, the aggregate outstanding principal balance
of all Loans shall not exceed the Revolving Credit Amount; provided,
however, that the foregoing shall not limit the right of Lender to
advance Revolving Loans to Borrower pursuant to the provisions of
Section 5.5, 5.6 or 5.22 of the Parent Loan Agreement (as incorporated
herein by reference) or Section 3.2(c), 7.4, 11.3, 11.4 or any other
provision of this Agreement or any Related Agreement that permits Lender
to advance Loans to Borrower.
2.1.4 Assumption. Borrower and Lender agree that $1,160,768.45 of
the principal balance of the "Revolving Loans" under and as defined in
the Original Loan Agreement outstanding as of the date hereof shall
constitute Revolving Loans hereunder as of the Closing Date. To the
extent of such loans, Borrower hereby absolutely and unconditionally
assumes and affirms all of the "Liabilities" of Parent under and as
defined in the Original Loan Agreement (the "Assumed Liabilities").
Borrower hereby agrees to pay and perform the Assumed Liabilities with
the same effect and to the same extent (as modified hereby) as if
Borrower had been the original primary obligor thereof. To the extent of
the Assumed Liabilities, this Agreement shall be deemed to be a partial
amendment and restatement of the terms and provisions of the Original
Loan Agreement. Nothing contained in this Agreement shall be construed
to release, cancel, terminate, impair the priority of or otherwise
affect adversely all or any part of the Indebtedness of Parent assumed
by Borrower hereunder or the Lien of Lender granted in respect thereof.
Nothing herein shall deem the Indebtedness of Parent to have been paid,
extinguished or novated and the Assumed Liabilities shall remain
outstanding and unpaid on the Closing Date.
2.2 Loan Account; Demand Deposit Account. Lender shall establish or
cause to be established on its books in Borrower's name one or more accounts
(each a "Loan Account") to evidence Loans made to Borrower. Lender will credit
or cause to be credited to a commercial account ("Demand Deposit Account")
maintained by Borrower at Lender's 231 South LaSalle Street, Chicago, Illinois
office the amount of any sums advanced as Loans hereunder. Any amounts advanced
as Loans hereunder which are credited to Borrower's Demand Deposit Account,
together with any other amounts advanced to Borrower as a Loan pursuant to this
Agreement, will be debited to the applicable Loan Account and result in an
increase in the principal balance outstanding in such Loan Account in the amount
thereof.
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2.3 Interest and Fees.
2.3.1 Interest on Revolving Loans. The unpaid principal amount of
each Revolving Loan shall bear interest until maturity at the rates
applicable to Revolving Loans indicated in Supplement A. If any
Revolving Loan or portion thereof is not paid when due, whether by
acceleration or otherwise, the entire unpaid principal amount of the
Revolving Loans shall bear interest thereafter until such overdue amount
is paid in full at the Default Rate applicable to Revolving Loans
indicated in Supplement A. Until maturity, interest on the Revolving
Loans shall be paid by Borrower on the date(s) indicated in Supplement
A, and at such maturity. After maturity, whether by acceleration or
otherwise, accrued interest shall be payable on demand.
2.3.2 Nonuse Fee. Borrower agrees to pay to Lender a fee equal to
one-half of one percent (0.5%) per annum on the product of (x) the daily
average amount by which $5,400,000 exceeds the outstanding principal
balance of the Revolving Loans hereunder plus the outstanding principal
amount of the "Revolving Loans" under the Other Loan Agreements times
(y) .40. Such fee shall be payable in arrears on the last day of each
Fiscal Quarter, and on the date the Credit terminates, in each case for
the period then ended.
2.3.3 Method of Calculating Interest and Fees. Interest on the
unpaid principal amount of each Loan shall accrue from and including the
date such Loan is made to, but not including, the date such Loan is
paid. Interest and any fees shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. All
determinations by Lender of the rate of interest applicable to any Loan
shall be rebuttable presumptive evidence of the applicable interest rate
for such Loan.
2.3.4 Payment of Interest and Fees. Lender may provide for the
payment of any unpaid accrued interest and any fees by charging the
Demand Deposit Account or any other bank account maintained by Borrower
with Lender.
2.4 Requests for Loans; Borrowing Base Certificates; Other
Information.
(a) Loans shall be requested in writing or by telephone, except
for Overdraft Loans and Revolving Loans made pursuant to the provisions
of Section 5.5, 5.6 or 5.22 of the Parent Loan Agreement (as
incorporated herein by reference) or Section 3.2(c), 7.4, 11.3 or 11.4
or any other provision of this Agreement (other than Section 2.1.1) or
any Related
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Agreement that permits Lender to advance Revolving Loans to Borrower.
(b) In the event that Borrower shall at any time, or from time to
time, (i) make a request for a Loan hereunder or (ii) be deemed to have
requested an Overdraft Loan, Borrower agrees to provide Lender with such
information, as soon as practicable after a request therefor, at such
frequency and in such format, as is reasonably required by Lender, such
information to be current as of the time such information is provided.
(c) Borrower further agrees to provide to Lender a current
Borrowing Base Certificate at the end of each week and at such other
times as Lender may reasonably request. On each Borrowing Base
Certificate, determinations as to eligibility and ineligibility of
collateral shall be made as of the same time. Such Borrowing Base
Certificate shall be executed and certified as accurate by such officers
or employees of Borrower as Borrower shall designate in writing to
Lender pursuant to duly adopted resolutions of the respective Board of
Directors of each such company authorizing such action.
(d) Borrower shall provide Lender with documentation satisfactory
to Lender indicating the names of those employees of Borrower authorized
by Borrower to sign Borrowing Base Certificates on behalf of such
companies and Borrower shall provide Lender with documentation
satisfactory to Lender indicating the names of the employees of Borrower
authorized by Borrower to make telephonic requests for Loans, and/or to
authorize disbursement of the proceeds of Loans by wire transfer or
otherwise, and Lender shall be entitled to rely upon such documentation
until notified in writing by Borrower of any change(s) in the names of
the employees so authorized. Lender shall be entitled to act on the
instructions of anyone identifying himself as one of the persons
authorized to request Loans or disbursements of Loan proceeds by
telephone and Borrower shall be bound thereby in the same manner as if
the person were actually so authorized. Borrower agrees to indemnify and
hold Lender harmless from and against any and all claims, damages,
liabilities, losses, costs and expenses (including Attorneys' Fees)
which may arise or be created by the acceptance of instructions for
making or paying Loans by wire transfer or telephone, except for those
claims, damages, liabilities, losses, costs and expenses arising from
Lender's gross negligence or willful misconduct.
2.5 Notes. The Revolving Loans shall be evidenced by a promissory note
(herein, as it may from time to time be supplemented, extended or replaced,
called the "Revolving Note") substantially in the form set forth in Exhibit C,
with appropriate
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insertions, dated the date hereof, payable to the order of Lender on the
Termination Date. Borrower hereby irrevocably authorizes Lender to make (or
cause to be made) appropriate notations on the grid attached to the Revolving
Note (or on a continuation of such grid attached to the Revolving Note and made
a part thereof), which notations, if made, shall evidence, inter alia, the date
and outstanding principal amount of all Revolving Loans evidenced thereby. Any
such notations on such grid (and on any continuation thereof) indicating the
outstanding principal amount of Revolving Loans shall be rebuttable presumptive
evidence of the principal amount thereof owing and unpaid, but the failure to
record any such amount on such grid (or on such continuation) shall not limit or
otherwise affect the obligations of Borrower hereunder or under the Revolving
Note to make payments of principal of or interest on such Revolving Loans when
due. Upon request by Borrower to Lender (but not more than once in any 90-day
period), Lender will furnish Borrower with a photocopy of the grid attached to
the Revolving Note.
2.6 Overdraft Loans. Lender, in its sole and absolute discretion, and
subject to the terms hereof, may make a Revolving Loan to Borrower in an amount
equal to the amount of any overdraft which may from time to time exist with
respect to the Demand Deposit Account or any other bank account which Borrower
may now or hereafter have with Lender. The existence of any such overdraft shall
be deemed to be a request by Borrower for such Loan. Borrower acknowledges that
Lender is under no duty or obligation to make any Loan to Borrower to cover any
overdraft. Borrower further agrees that an overdraft shall constitute a separate
Loan under this Agreement (an "Overdraft Loan"), which shall bear, from the date
on which the overdraft occurred until paid, interest in an amount equal to the
greater of (x) 130% of the highest rate of interest then charged for Loans
(other than Overdraft Loans) made hereunder and (y) $50.00 per day. If Lender,
in its sole and absolute discretion, decides not to make a Loan to cover part or
all of any overdraft, Lender may return any check(s) which created such
overdraft.
2.7 Over Advances. Lender, in its sole and absolute discretion, may make
Revolving Loans to Borrower in amounts which cause the outstanding principal
balance of the Revolving Loans to exceed the Revolving Loan Availability or
otherwise permit the outstanding principal balance of the Revolving Loans to at
any time exceed the Revolving Loan Availability, and no such event or occurrence
shall cause or constitute a waiver by Lender of its right to refuse to make any
further Revolving Loans at any time that an Over Advance exists or would result
therefrom. During any period in which the aggregate outstanding Revolving Loans
exceeds the Revolving Loan Availability (such excess Liabilities are herein
referred to as "Over Advances"), the amount of Over Advances shall
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bear interest at a rate equal to 130% of the highest rate of interest then
charged for Revolving Loans made hereunder.
2.8 All Loans One Obligation. The Revolving Loans and all other Loans
under this Agreement shall constitute one Loan, and all Indebtedness and other
Liabilities of Borrower to Lender under this Agreement and any of the Related
Agreements shall constitute one general obligation secured by Lender's Lien on
all of the Collateral and Third Party Collateral and by all other Liens
heretofore, now, or at any time or times hereafter granted by Borrower or any
other Obligor to Lender. Borrower agrees that all of the rights of Lender set
forth in this Agreement shall apply to any modification of or supplement to this
Agreement, any Supplements or Exhibits hereto, and the Related Agreements,
unless otherwise agreed in writing.
2.9 Making of Payments; Application of Collections; Charging
of Accounts.
(a) All payments hereunder shall be made without set-off or
counterclaim and shall be made to Lender in immediately available funds
(except as Lender may otherwise consent) prior to 12:30 p.m., Chicago
time, on the date due at its office at 231 South LaSalle Street,
Chicago, Illinois 60697, or at such other place as may be designated by
Lender to Borrower in writing. Any payments received after such time
shall be deemed received on the next Banking Day. Whenever any payment
to be made hereunder or under any Note shall be stated to be due on a
date other than a Banking Day, such payment shall be due on the next
succeeding Banking Day, and such extension of time shall be included in
the calculation of interest and any fees.
(b) Borrower authorizes Lender to, and Lender will, subject to
the provisions of this paragraph (b), apply the whole or any part of any
amounts received by Lender (whether deposited in the Assignee Deposit
Account of Borrower or otherwise received by Lender) from the collection
of items of payment and proceeds of any Collateral or Third Party
Collateral (whether received upon any sale or other distribution of
Collateral or Third Party Collateral by Lender or otherwise), against
the principal of and/or interest on any Loans made hereunder and/or any
other Liabilities, whether or not then due, in such order of application
as Lender may determine, unless such payments or proceeds are, in
Lender's sole and absolute discretion, released to Borrower; provided,
however, so long as no Event of Default exists and is continuing, any
such amounts received by Lender shall be applied as follows: first, to
payment of amounts then due with respect to fees (including Attorneys'
Fees), charges and expenses for which Borrower or any other Obligor is
liable
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pursuant to this Agreement and the Related Agreements; second, to
payment of amounts then due with respect to interest on the Loans;
third, to payment of amounts then due with respect to principal of the
Loans; fourth, to repayment of the Revolving Loans; and fifth, to
payment of the Guaranteed Obligations then due and owing; and provided,
further, that no checks, drafts or other instruments received by Lender
shall constitute final payment to Lender unless and until such item of
payment has actually been collected. All items or amounts which are
delivered to Lender by or on behalf of Borrower or any Obligor or any
Account Debtor on account of partial or full payment or otherwise as
proceeds of any of the Collateral or Third Party Collateral (including
any items or amounts which may have been deposited to the Assignee
Deposit Account) may from time to time in Lender's sole and absolute
discretion be released to Borrower or be applied by Lender towards
payment of the Liabilities, whether or not then due, in accordance with
the preceding sentence. Notwithstanding anything to the contrary herein,
(i) solely for purposes of determining the occurrence of an Event of
Default, all cash, checks, instruments and other items of payment shall
be deemed received upon actual receipt by Lender, unless the same is
subsequently dishonored for any reason whatsoever, (ii) for purposes of
determining whether, under Section 2.1, there is availability for Loans,
all cash, checks, instruments and other items of payment shall be
applied against the Liabilities on the first Banking Day after receipt
thereof by Lender and (iii) solely for purposes of interest calculation
hereunder, all cash, checks, instruments and other items of payment
shall be deemed to have been applied against the Liabilities on the
second Banking Day after receipt by Lender of available funds with
respect thereto.
(c) Borrower hereby authorizes Lender to, and Lender may, in its
sole and absolute discretion, charge to Borrower at any time when due
all or any portion of any of the Liabilities including but not limited
to any Attorneys' Fees and other costs and expenses of Lender for which
Borrower or any other Obligor is liable pursuant to the terms of this
Agreement or any Related Agreement, by charging Borrower's Demand
Deposit Account or any other bank account of Borrower with Lender;
provided, however, that the provisions of this Section 2.9(c) shall not
affect the obligation of Borrower or any other Obligor to pay when due
all amounts payable by such Person under this Agreement, any Note or any
Related Agreement, whether or not there are sufficient funds therefor in
the Demand Deposit Account or any such other bank account of Borrower.
So long as no Event of Default or Default exists, Lender shall use
reasonable efforts to give Borrower prompt notice of Liabilities paid by
charging such Demand Deposit Account or other account (but failure to
give such
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notice shall not impose any liability on Lender or relieve
Borrower of any of its obligations).
2.10 Lender's Election Not to Enforce. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including, without limitation, any right of Lender to refrain
from making a Loan if all conditions precedent to Lender's obligation to making
such Loan have not been satisfied.
2.11 Reaffirmation. Each Loan requested by Borrower pursuant to this
Agreement shall constitute an automatic certification by Borrower to Lender that
(i) all of the representations and warranties of Borrower, Parent and each other
Obligor in this Agreement and each of the Related Agreements are true and
correct on the date of such request to the same extent as if made on such date,
except for such changes as are specifically permitted hereunder (or under such
Related Agreement) and (ii) immediately before and after making the requested
Loan, no Event of Default or Default then exists or would result therefrom.
2.12 Setoff. In addition to and not in limitation of all other rights
and remedies (including other rights of offset or banker's lien) that Lender or
any other holder of any Note may have under applicable law, Lender or such other
holder shall, upon the occurrence of any Event of Default described in Section
6.1 and during the continuance thereof, or upon the occurrence of any Default
described in Section 6.1(e) and during the continuance thereof, have the right
to appropriate and apply to the payment of the Liabilities (whether or not then
due), in such order of application as Lender or such other holder may elect, any
and all balances, credits, deposits (general or special, time or demand,
provisional or final), accounts or moneys of Borrower then or thereafter with
Lender or such other holder. Lender shall use reasonable efforts to give
Borrower prompt notice of any appropriation and application pursuant to the
preceding sentence (but failure to give such notice shall not impose any
liability on Lender or relieve Borrower of any of its obligations).
2.13 Refinancing Fee. Borrower shall pay Lender a Refinancing Fee (as
hereinafter defined) from time to time if Borrower shall obtain any Indebtedness
or equity contributions (other than from any other Obligor or Contempo Amsterdam
except if such Indebtedness or equity contribution is funded with funds obtained
by such other Obligor or Contempo Amsterdam from a non- Obligor (other than
Lender)) after the date hereof and Borrower shall at any time cause the
Revolving Credit Amount to be permanently reduced with the proceeds of such
Indebtedness or
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equity contributions. As used in this Section, "Refinancing Fee" shall mean an
amount equal to the amount of the reduction in the Revolving Credit Amount
caused with such proceeds, multiplied by .0125.
2.14 Closing Fee. Borrower agrees to pay to Lender a closing
fee of $15,000 on the Closing Date. With Lender's consent, the
amount of such closing fee due may be advanced to Borrower as a
Revolving Loan.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of all Loans
now or hereafter made by Lender to Borrower hereunder or under any Note, as
security for the payment or other satisfaction of all other Liabilities,
Borrower hereby confirms the continued effectiveness of the grant of a security
interest contained in the Original Security Agreement and hereby further grants
to Lender a security interest in and to the following property of Borrower,
whether now owned or existing, or hereafter acquired or coming into existence,
wherever now or hereafter located (all such property is hereinafter referred to
collectively as the "Collateral"):
(a) Accounts Receivable;
(b) Equipment and Fixtures;
(c) Inventory;
(d) General Intangibles (including all rights of Borrower with
respect to all amounts now or hereafter from time to time loaned or
advanced by Borrower to any Subsidiary);
(e) Contract Rights and documents of title;
(f) All chattel paper and instruments evidencing, arising out of
or relating to any obligation to Borrower for goods sold or leased or
services rendered, or otherwise arising out of or relating to any
property described in clauses (a) through (e) above;
(g) Any and all balances, credits, deposits (general or special,
time or demand, provisional or final), accounts or monies of or in the
name of Borrower now or hereafter with Lender, any agent or bailee for
Lender, or any Participant, and any and all property of every kind or
description of or in the name of Borrower now or hereafter, for any
reason or purpose whatsoever, in the possession or control of, or in
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transit to, or standing to Borrower's credit on the books of,
Lender, any agent or bailee for Lender, or any Participant;
(h) All interest of Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any
Accounts Receivable, General Intangibles, Contract Rights, or any
chattel paper or instru-
ments referred to in clause (f) above;
(i) Any and all other property of Borrower, of any kind or
description (including but not limited to real estate of Borrower),
including, without limitation, any property of Borrower subject to a
separate mortgage, pledge or security interest in favor of Lender or in
which Lender now or hereafter has or acquires a security interest
securing any Liabilities pursuant to an agreement or instrument other
than this Agreement;
(j) All replacements, substitutions, additions or
accessions to or for any of the foregoing;
(k) To the extent related to the property described in clauses
(a) through (j) above, all books, correspondence, credit files, records,
invoices and other papers and documents, including, without limitation,
to the extent so related, all tapes, cards, computer runs, computer
programs and other papers and documents in the possession or control of
Borrower or any computer bureau from time to time acting for Borrower,
and, to the extent so related, all rights in, to and under all policies
of insurance, including claims of rights to payments thereunder and
proceeds therefrom, including any credit insurance; and
(l) All products and proceeds (including but not limited to any
Accounts Receivable or other proceeds arising from the sale or other
disposition of any Collateral, any returns of any Equipment or Inventory
sold by Borrower, and the proceeds of any insurance covering any of the
Collateral) of any of the foregoing.
3.2 Accounts Receivable.
(a) If requested by Lender, Borrower shall advise Lender promptly of any
Inventory returned by or repossessed from any Account Debtor, or otherwise
recovered, shall receive such Inventory in trust and, unless instructed to
deliver such Inventory to Lender, shall resell it for Lender. If requested by
Lender, Borrower shall notify Lender immediately of all disputes and claims by
any Account Debtor and settle or adjust them at no expense to Lender. If Lender
directs after the occurrence and during the
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continuance of an Event of Default or a Default, no discount or credit allowance
shall be granted thereafter by Borrower to any Account Debtor. All Account
Debtor payments and all net amounts received by Lender in settlement, adjustment
or liquidation of any Account Receivable may be applied by Lender to the
Liabilities or credited to Borrower's Demand Deposit Account (subject to
collection) with Lender, as Lender may deem appropriate, in either case in
accordance with Section 2.9. If requested by Lender, Borrower will make proper
entries in its books and records disclosing the assignment of Accounts
Receivable to Lender.
(b) Borrower warrants that: (i) to the best of Borrower's knowledge all
of the Accounts Receivable are and will continue to be bona fide existing
obligations created by the sale of goods, the rendering of services, or the
furnishing of other good and sufficient consideration to Account Debtors in the
regular course of business and (ii) to the best of Borrower's knowledge all
shipping or delivery receipts and other documents furnished or to be furnished
to Lender in connection therewith are and will be genuine.
(c) Lender is hereby authorized and empowered (which authorization and
power, being coupled with an interest, shall be irrevocable until the later to
occur of termination of this Agreement and the final payment and performance in
full of all of the Liabilities) at any time in its sole and absolute discretion:
(1) To request, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name or the name of a third party, confirmation from any Account Debtor
or party obligated under or with respect to any Collateral of the amount
shown by the Accounts Receivable or other Collateral to be payable, or
any other matter stated therein;
(2) To endorse in Borrower's name and to collect any chattel
paper, checks, notes, drafts, instruments or other items of payment
tendered to or received by Lender in payment of any Account Receivable
or other obligation owing to Borrower;
(3) To notify, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to notify, any Account Debtor or other
Person obligated under or in respect of any Collateral, of the fact of
Lender's Lien thereon and of the collateral assignment thereof to
Lender;
(4) To direct, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to
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direct, any Account Debtor or other Person obligated under or in respect
of any Collateral to make payment directly to Lender of any amounts due
or to become due thereunder or with respect thereto; and
(5) After the occurrence and during the continuance of an Event
of Default, to demand, collect, surrender, release or exchange all or
any part of any Collateral or any amounts due thereunder or with respect
thereto, or compromise or extend or renew for any period (whether or not
longer than the initial period) any and all sums which are now or may
hereafter become due or owing upon or with respect to any of the
Collateral, or enforce, by suit or otherwise, payment or performance of
any of the Collateral either in Lender's own name or in the name of
Borrower.
Under no circumstances shall Lender be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and reasonable out-of-pocket expenses, and the cost of
any Assignee Deposit Account or other bank account or accounts which may be
required hereunder, shall be borne solely by Borrower whether the same are
incurred by Lender or Borrower, and Lender may advance same to Borrower as a
Revolving Loan.
(d) Unless otherwise consented to by Lender, Borrower will, forthwith
upon receipt by Borrower of all checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, any of the Accounts Receivable or
other Collateral, deposit the same in a special bank account (the "Assignee
Deposit Account") with Lender or such other bank or financial institution as
Lender shall consent, over which Lender alone has power of withdrawal, and will,
to the extent required by Lender, designate with each such deposit the
particular Account Receivable or other item of Collateral upon which the
remittance was made. Borrower acknowledges that the maintenance of the Assignee
Deposit Account is solely for the convenience of Lender in facilitating its own
operations and Borrower does not and shall not have any right, title or interest
in the Assignee Deposit Account or in the amounts at any time appearing to the
credit thereof. Said proceeds shall be deposited in precisely the form received
except for Borrower's endorsement where necessary to permit collection of items,
which endorsement Borrower agrees to make. Pending such deposit, Borrower agrees
not to commingle any such checks, drafts, cash and other remittances with any of
its funds or property, but will hold them separate and apart therefrom and upon
an express trust for Lender until deposit thereof is made in the Assignee
Deposit Account. Upon the full and final liquidation of all Liabilities, Lender
will pay over to Borrower any excess amounts received by Lender as payment or
proceeds of Collateral, whether received by
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Lender as a deposit in the Assignee Deposit Account or received by Lender as a
direct payment on any of the sums due hereunder.
(e) Borrower appoints Lender, or any Person whom Lender may from time to
time designate, as Borrower's attorney and agent-in- fact with power: (i) after
the occurrence and during the continuance of an Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by Lender; (ii) after the event described in the foregoing
clause (i), to receive, open and dispose of all mail addressed to Borrower;
(iii) to send, in Borrower's name or, after the occurrence and during the
continuance of an Event of Default or a Default, in Lender's name or the name of
a third party, requests for verification of Accounts Receivable or other
Collateral to Account Debtors; (iv) to open an escrow account or Assignee
Deposit Account under Lender's sole control for the collection of Accounts
Receivable or other Collateral, if not required contemporaneously with the
execution hereof; and (v) to do all other things which Lender is permitted to do
under this Agreement or any Related Agreement or which are reasonably necessary
to carry out this Agreement and the Related Agreements. Neither Lender nor any
of its directors, officers, employees or agents will be liable for any acts of
commission or omission nor for any error in judgment or mistake of fact or law,
unless the same shall have resulted from gross negligence or willful misconduct.
The foregoing appointment and power, being coupled with an interest, shall be
irrevocable until all Liabilities under this Agreement are finally paid and
performed in full and this Agreement is terminated. Borrower expressly waives
presentment, demand, notice of dishonor and protest of all instruments and any
other notice to which it might otherwise be entitled.
(f) If any Account Receivable, Contract Right or General Intangible
arises out of a contract with the United States or any department, agency, or
instrumentality thereof, Borrower will, unless Lender shall otherwise agree,
immediately notify Lender in writing and execute any instruments and take any
steps required by Lender in order that all monies due and to become due under
such contract shall be assigned to Lender and notice thereof given to the
government under the Federal Assignment of Claims Act of 1940, as amended, or
other applicable laws or regulations; provided, however, that unless Lender
otherwise requests, until an Event of Default or a Default shall have occurred
and be continuing, Borrower need not take any of the steps contemplated in this
paragraph with respect to any contract with a value of less than $10,000.
(g) If any Account Receivable or Contract Right is evidenced by chattel
paper or promissory notes, trade acceptances, or other instruments for the
payment of money, Borrower will, unless Lender shall otherwise agree, deliver
the originals of same to Lender,
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appropriately endorsed to Lender's order and, regardless of the form of such
endorsement, Borrower hereby expressly waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with respect
thereto.
3.3 Inventory.
(a) Unless Lender shall otherwise agree, if Borrower sells Inventory for
cash, all full and partial payments therefor shall be immediately (and, in any
event, not later than the end of the day received) delivered by Borrower to
Lender in their original form for deposit in the Assignee Deposit Account or for
other application to reduction of the Liabilities, in either case in accordance
with Section 2.9. Pending such delivery, all such cash shall be held by Borrower
in trust for Lender.
(b) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances, except for Lender's
gross negligence or willful misconduct. Lender shall not be responsible for
collection of any proceeds or for losses in collected proceeds held by Borrower
in trust for Lender. Any and all risk of loss for any or all of the foregoing
shall be upon Borrower, except for such loss as shall result from Lender's gross
negligence or willful misconduct.
(c) If requested by Lender, Borrower shall, upon acquiring an interest
in any Inventory, deliver to Lender a description of such Inventory, together
with supplier's invoices, warranties, production, cost and other records as
Lender may request. If requested by Lender, Borrower shall deliver to Lender
schedules of the sale of any Inventory immediately upon its sale. Any material
change in the value or condition of any Inventory, and any errors discovered in
any schedule or description delivered to Lender, shall be reported to Lender
immediately. Borrower confirms that the warranties and representations in this
Agreement shall apply to each schedule. Borrower represents and warrants that,
as to each schedule and description of Inventory delivered to Lender:
(1) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all material respects;
(2) None of the goods are defective, of second quality, used, or
goods returned after shipment, except where described as such; and
(3) All Inventory not included on such schedule or description
has been previously scheduled or described.
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(d) If requested by Lender, Borrower will notify Lender immediately if
Borrower obtains possession (by return, repossession or otherwise) of any
Inventory which has been sold, and will inform Lender of the identity of the
returned or repossessed Inventory, the applicable Account Debtor and the amount
of the applicable Account Receivable.
3.4 Equipment.
(a) Borrower shall at all times keep, and cause each Subsidiary to keep,
its Equipment in good operating condition and repair, ordinary wear and tear
excepted, and neither Borrower nor any Subsidiary shall, without the prior
written consent of Lender, sell, lease, or otherwise dispose of any of its
Equipment, or any part thereof or interest therein; provided, however, that
without Lender's consent (but with notice to Lender) Borrower or any Subsidiary
may dispose of obsolete or unuseful Equipment in the ordinary course provided
all Equipment so disposed of by Parent and its Subsidiaries in any Fiscal Year
has an aggregate market value of $50,000 or less.
(b) In the event any Equipment is sold, transferred or otherwise
disposed of by Borrower or any Subsidiary, unless Lender shall agree otherwise,
Borrower or the applicable Subsidiary shall deliver all of the proceeds of any
such sale, transfer or disposition to Lender, which proceeds shall be deposited
in the Assignee Deposit Account or otherwise applied to the repayment of the
Liabilities, in either case in accordance with Section 2.9.
(c) Borrower will, upon request of Lender, submit to Lender a current
listing of all Equipment of Borrower and its Subsidiaries, which listing shall
indicate the type, model, serial number and location of such Equipment.
3.5 Supplemental Documentation. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above is hereinafter referred to as the "Supplemental
Documentation"), in form and substance acceptable to Lender, and pay all taxes,
fees and other reasonable costs and expenses associated with any recording or
filing of the Supplemental Documentation. Borrower hereby irrevocably makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney (and agent-in-fact) (which
appointment and power, being coupled with an interest, shall be irrevocable
until the later to occur of termination of this Agreement and final payment and
performance in
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full of all of the Liabilities) to sign the name of Borrower on any of the
Supplemental Documentation and to deliver any of the Supplemental Documentation
to such Persons as Lender, in its sole and absolute discretion, may elect.
Borrower agrees that a carbon, photographic, photostatic, or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to make Loans to Borrower
under this Agreement, Borrower hereby represents and warrants to Lender the
truth and accuracy of all matters contained in Section 4 of the Parent Loan
Agreement as from time to time in effect (or, if the Parent Loan Agreement has
been terminated, as in effect immediately prior to such termination), insofar as
the representations and warranties contained therein are applicable to Borrower,
each such representation and warranty (insofar as applicable as aforesaid) and
all other terms of the Parent Loan Agreement to which reference is made therein,
being incorporated herein by reference as though specifically set forth herein.
5. BORROWER COVENANTS. From the date of this Agreement and thereafter until the
Credit is terminated and all Liabilities are finally paid in full, Borrower
agrees that, unless Lender shall otherwise consent in writing, it will perform,
comply with and be bound by all of the agreements, covenants and obligations set
forth in Section 5 of the Parent Loan Agreement as from time to time in effect
(or, if the Parent Loan Agreement has been terminated, as in effect immediately
prior to such termination) which are applicable to Borrower, each such
agreement, covenant and obligation and all other terms of the Parent Loan
Agreement to which reference is made therein being incorporated herein by
reference as though specifically set forth herein. Without limiting the
foregoing, to the extent that Sections 5.5, 5.6 and 5.22 of the Parent Loan
Agreement provide that Lender may advance loans to Parent in certain
circumstances, it is agreed that Lender may make advances to Borrower in such
circumstances if such circumstances exist with respect to Borrower, with such
advances to be Revolving Loans hereunder.
6. DEFAULT.
6.1 Event of Default. Each of the following shall constitute
an Event of Default under this Agreement:
(a) Non-Payment. Default in the payment, when due or
declared due, of any of the Liabilities.
(b) Non-Payment of Other Indebtedness. Default in the
payment when due, whether by acceleration or otherwise
(subject to any applicable grace period), of any Indebtedness
of, or guaranteed by, Borrower, any other Obligor or any
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Subsidiary (other than (i) any Indebtedness under this Agreement and any
Notes, (ii) any Indebtedness of Parent or any Subsidiary of Parent to
Borrower or to any other Subsidiary of Parent, (iii) any Indebtedness of
Borrower to Parent or any other Subsidiary of Parent or (iv)
Indebtedness under the Other Loan Agreements); provided that the
aggregate amount of Indebtedness so affected shall equal or exceed
$25,000.
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, Borrower, any other Obligor or any
Subsidiary (other than (i) any Indebtedness of Parent or any Subsidiary
of Parent to Borrower or to any other Subsidiary of Parent, (ii) the
Indebtedness under this Agreement and any Notes, (iii) any Indebtedness
of Borrower to Parent or any other Subsidiary of Parent or (iv)
Indebtedness under the Other Loan Agreements) or enables the holder or
holders of such other Indebtedness or any trustee or agent for such
holders (any required notice of default having been given and any
applicable grace period having expired) to accelerate the maturity of
such other Indebtedness; provided that the aggregate amount of
Indebtedness with respect to which such event or condition shall have
occurred shall equal or exceed $25,000.
(d) Other Obligations. Default in the payment when due, whether
by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period or waiver of such default) of
(i) any obligation or agreement of Borrower, any other Obligor or any
Subsidiary to or with Lender (other than any obligation or agreement of
Borrower hereunder and under any Related Agreement); or (ii) any
material obligation or agreement of Borrower, any other Obligor or any
Subsidiary to or with any other Person (other than (x) any such material
obligation or agreement constituting or related to Indebtedness, (y)
Trade Accounts Payable and (z) any material obligation or agreement of
any Subsidiary to Borrower or to any other Subsidiary), except only to
the extent that the existence of any such default is being contested by
Borrower, such other Obligor or such Subsidiary, as the case may be, in
good faith and by appropriate proceedings and Borrower, such other
Obligor or such Subsidiary, as applicable, shall have set aside on its
books such reserves or other appropriate provisions therefor as may be
required by GAAP.
(e) Insolvency. Borrower, any other Obligor or any
Subsidiary becomes insolvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they
mature, or applies for, consents to, or acquiesces in the
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appointment of a trustee, receiver or other custodian for Borrower, such
other Obligor or such Subsidiary, or for a substantial part of the
property of Borrower, such other Obligor or such Subsidiary, or makes a
general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Borrower, any other Obligor or any
Subsidiary, or for a substantial part of the property of Borrower, any
other Obligor or any Subsidiary and is not discharged or dismissed
within 60 days; or any bankruptcy, reorganization, debt arrangement or
other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against
Borrower, any other Obligor or any Subsidiary and, solely in the case
where such proceeding shall have been instituted against Borrower, such
Obligor or such Subsidiary, such proceeding shall not have been
dismissed within 60 days or an order for relief shall have been entered;
or any warrant of attachment or similar legal process is issued against
any substantial part of the property of Borrower, any other Obligor or
any Subsidiary.
(f) Pension Plans. The institution by Borrower or any ERISA
Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, Borrower or any ERISA Affiliate would be
required to make a contribution to such Pension Plan, or would incur a
liability or obligation to such Pension Plan, in excess of $50,000; the
institution by the PBGC of steps to terminate any Pension Plan and the
continuation of either such condition after notice thereof from Lender;
or a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
(g) Non-Compliance With This Agreement. Default in the
performance of any of Borrower's agreements set forth in Section 2, 3.2,
3.3 or 3.4 hereof or Section 5.3, 5.5, 5.6 or 5.12 through 5.30 of the
Parent Loan Agreement (and not, in each case, constituting an Event of
Default under any of the other subsections of this Section 6.1), and
continuance of such default after written notice thereof to Borrower
from Lender; or default in the performance of any of Borrower's
agreements set forth in Section 6 of Supplement A or Section 5.2 of the
Parent Loan Agreement (and not, in each case, constituting an Event of
Default under any of the other subsections of this Section 6.1), and
continuance of such default for three (3) Banking Days after notice
thereof to Borrower from Lender; or default in the performance of any of
Borrower's other agreements herein set forth (and not constituting an
Event of Default under any of the other subsections of this Section
6.1), and continuance of such default
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for thirty (30) days after written notice thereof to Borrower from
Lender.
(h) Non-Compliance With Related Agreements. Default in the
performance by Borrower, any other Obligor or any Subsidiary of any of
its agreements set forth in any Related Agreement (and not constituting
an Event of Default under any of the other subsections of this Section
6.1), and continuance of such default after notice from Lender and the
expiration of the grace period (if any) set forth therein.
(i) Warranty. Any warranty made by Borrower or any other Obligor
herein or in any Related Agreement is untrue or misleading in any
material respect when made or deemed made; any schedule, statement,
report, notice, certificate or other writing furnished by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on the date as of which the facts set forth therein are stated
or certified; or any certification made or deemed made by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on or as of the date made or deemed made.
(j) Litigation. There shall be entered against any one of
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $50,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which Borrower, such Subsidiary or such
Obligor, as applicable, is insured and with respect to which the insurer
has assumed responsibility in writing or for and to the extent which
Borrower, such Subsidiary or such Obligor, as applicable, is otherwise
indemnified if the terms of such indemnification are satisfactory to
Lender.
(k) Validity. If the validity or enforceability of this Agreement
or any Related Agreement shall be challenged by Borrower, any other
Obligor or any other Person acting through, or on behalf of, Borrower or
any other Obligor, or shall fail to remain in full force and effect.
(l) Conduct of Business. If Borrower, any other Obligor or any
Subsidiary is enjoined, restrained or in any way prevented by court
order, which has not been dissolved or stayed within five (5) business
days, from conducting all or any material part of its business affairs.
(m) Material Adverse Change. Lender shall have
determined in good faith that (i) a material adverse change
has occurred in the business, operations or financial
condition of Borrower, any other Obligor or any Subsidiary,
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(ii) Lender's interest in any material Collateral or Third Party
Collateral has been adversely affected or impaired, or the value thereof
to Lender has been diminished to a material extent or (iii) the prospect
of payment or performance of any obligation or agreement of Borrower or
any other Obligor hereunder or under any Related Agreement is materially
impaired, and the condition giving rise to such determination does not
constitute an Event of Default under any of the other subsections of
this Section 6.1 and continues to exist unremedied for a period of
thirty (30) days after written notice of such determination by Lender to
Borrower.
(n) Other Loan Agreements. The existence of any other
"Event of Default" under and as defined in the Other Loan
Agreements.
6.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default described in Section
6.1(e) shall occur, then Lender's commitment and the Credit extended under this
Agreement shall terminate and all Liabilities hereunder and under any Notes
shall be immediately due and payable without demand, notice or declaration of
any kind whatsoever.
(b) In the event an Event of Default other than one described in Section
6.1(e) shall occur, then Lender may declare its commitment terminated and/or all
Liabilities hereunder and under any Notes immediately due and payable without
demand or notice of any kind whatsoever, whereupon the Credit extended under
this Agreement shall terminate and all Liabilities hereunder and under any Notes
shall be immediately due and payable. Lender shall promptly advise Borrower of
any such declaration, but failure to do so shall not impair the effect of such
declaration.
(c) If any Event of Default exists and is continuing, Lender may
exercise any one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
(1) Any remedy contained in this Agreement or in any of
the Related Agreements or any Supplemental Documentation;
(2) Any rights and remedies available to Lender under
the UCC and any other applicable law;
(3) To the extent permitted by applicable law, Lender may,
without notice, demand or legal process of any kind, take possession of
any or all of the Collateral and Third Party Collateral (in addition to
Collateral and Third Party Collateral which it may already have in its
possession), wherever it may be found, and for that purpose may pursue
the
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same wherever it may be found, and may enter into any premises where any
of the Collateral or Third Party Collateral may be or is supposed to be,
and search for, take possession of, remove, keep and store any of the
Collateral or Third Party Collateral until the same shall be sold or
otherwise disposed of, and Lender shall have the right to store the same
in any of Borrower's premises without cost to Lender;
(4) At Lender's request, Borrower will (and will cause its
Subsidiaries to), at Borrower's (or such Subsidiaries') expense,
assemble the Collateral and Third Party Collateral and make it available
to Lender at a place or places to be designated by Lender which is
reasonably convenient to Lender and Borrower; and
(5) Lender at its option, and pursuant to notification given to
Borrower (or any other applicable Obligor) as provided for below, may
sell any Collateral or Third Party Collateral actually or constructively
in its possession at public or private sale and apply the proceeds
thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition.
7.2 Application of Proceeds of Collateral. Any proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by Lender toward
the payment of such of the Liabilities, and in such order of application, as
Lender may from time to time elect.
7.3 Care of Collateral. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Lender to comply with such request shall not, of itself,
be deemed a failure to exercise reasonable care, and no failure of Lender to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
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7.4 Performance of Borrower's Obligations. Lender shall have the right,
but shall not be obligated, to discharge any claims against or Liens, and any
Taxes at any time levied or placed upon any or all Collateral, including,
without limitation, those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. Lender may also pay for
maintenance and preservation of Collateral. Lender may, but is not obligated to,
perform or fulfill any of Borrower's responsibilities under this Agreement which
Borrower has failed to perform or fulfill. Lender may advance to Borrower as a
Revolving Loan any payment made or expense incurred by Lender under this Section
7.4.
7.5 Lender's Rights. None of the following shall affect the obligations
of Borrower to Lender under this Agreement or Lender's right with respect to the
remaining Collateral or any Third Party Collateral (any or all of which actions
may be taken by Lender at any time, whether before or after an Event of Default,
at its sole and absolute discretion and without notice to Borrower):
(a) acceptance or retention by Lender of other property or
interests in property as security for the Liabilities, or acceptance or
retention of any Obligor(s), in addition to Borrower, with respect to
any of the Liabilities;
(b) release of its security interest in, or the surrender or
release of, or the substitution or exchange of or for, all or any part
of the Collateral or any Third Party Collateral or any other property
securing any of the Liabilities (including but not limited to any
property of any Obligor other than Borrower), or any extension or
renewal for one or more periods (whether or not longer than the original
period), or release, compromise, alteration or exchange, of any
obligations of any guarantor or other Obligor with respect to any
Collateral, any Third Party Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange of any of the Liabilities, or release or compromise of any
obligation of any Obligor with respect to any of the Liabilities; or
(d) failure by Lender to resort to other security or pursue any
Person liable for any of the Liabilities before resorting to the
Collateral or Third Party Collateral.
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 Conditions Precedent. The effectiveness of this Agreement (and the
obligation of Lender to make any Loan hereunder on the date of this Agreement)
is subject to satisfaction of the following conditions precedent (in addition to
those provided in Section 8.2):
8.1.1 Security Interest. The security interest in the Collateral
granted under this Agreement and the Related Agreements, and in any
Third Party Collateral and all other Liens granted to Lender to secure
the Liabilities, shall be a senior, perfected Lien except as otherwise
agreed by Lender, and all financing statements and other documents
relating to Collateral and Third Party Collateral shall have been filed
or recorded, as appropriate.
8.1.2 Blocked Account; Lock Box. Borrower and its Subsidiaries
shall have entered into blocked account and/or lock box agreements with
Lender for the collection and remittance to Lender of cash proceeds of
Collateral and Third Party Collateral.
8.1.3 Effect of Law. No law or regulation affecting Lender's
entering into this Agreement shall impose upon Lender any material
obligation, fee, liability, loss, cost, expense or damage.
8.1.4 Other Loan Agreements. The Other Loan Agreements
shall have become effective in accordance with their terms.
8.1.5 Fees. Lender shall have received the closing fee referred
to in Section 2.14 and any other fees then due and payable by Borrower
or any other Person hereunder or in connection herewith.
8.1.6 Documents. Lender shall have received all of the following,
each duly executed where appropriate and dated as of the Closing Date
(or such other date as shall be satisfactory to Lender), in form and
substance satisfactory to Lender:
(a) Resolutions. A copy, duly certified by the secretary or an
assistant secretary of Borrower and each Subsidiary party to a Related
Agreement, of: (1) resolutions of the Board of Directors of Borrower and
each such Subsidiary authorizing (A) the borrowings by Borrower
hereunder, (B) the execution, delivery and performance by Borrower and
each such Subsidiary of this Agreement and each other Related Agreement
to which Borrower and each such Subsidiary is a party or by which it is
bound and (C) certain officers or employees (i) of
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Borrower to request borrowings by telephone and (ii) of Borrower to
execute Borrowing Base Certificates; (2) all documents evidencing any
other necessary corporate action with respect to this Agreement and the
Related Agreements; and (3) all approvals or consents, if any, with
respect to this Agreement and the Related Agreements;
(b) Incumbency Certificates. A certificate of the secretary of
Borrower and each Subsidiary party to a Related Agreement certifying the
names of the officers of Borrower and each such Subsidiary authorized to
sign this Agreement and each other Related Agreement to which Borrower
and each such Subsidiary is a party or by which any of them is bound,
and all other documents and certificates to be delivered by any of them
hereunder, together with samples of the true signatures of such
officers;
(c) Borrower's Certificate. The certificate of the President or
Chief Executive Officer of Borrower certifying to the fulfillment of all
conditions precedent to closing and funding the secured financing
transaction contemplated by this Agreement and to the truth and
accuracy, as of such date, of the representations and warranties of
Borrower and each Subsidiary party to a Related Agreement contained in
this Agreement and each other Related Agreement to which Borrower or
such Subsidiary is a party or by which it is bound;
(d) Landlord's Consents. A Landlord's Consent, duly executed by
the owner of each leased premises identified on Schedule 4.12, 4.13 or
4.15 to the Parent Loan Agreement where Collateral or Third Party
Collateral is located other than 4209 Vineland Road, Orlando, Florida;
(e) Note. The Revolving Note in the form of Exhibit C;
and
(f) Other Documents. Such other documents as Lender shall
determine to be necessary or desirable, including but not limited to
documents described in paragraphs (a) and (b) of this Section 8.1.6 with
respect to any Obligor other than Borrower and its Subsidiaries.
8.2 Continuing Conditions Precedent to all Loans; Certification. The
obligation of Lender to make any Loan hereunder is subject to satisfaction of
the following conditions precedent in addition to those provided in Section 8.1:
(a) No Change in Condition. No change in the condition
or operations, financial or otherwise, of Borrower, any
Subsidiary or any other Obligor shall have occurred which
change, in the reasonable credit judgment of Lender, would
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reasonably be expected to have a material adverse effect on Borrower,
such Subsidiary or such other Obligor, or on any Collateral or Third
Party Collateral (which Collateral or Third Party Collateral Lender
deems in its sole discretion to be material);
(b) Default. Before and after giving effect to such
Loan, no Event of Default or Default shall have occurred and
be continuing;
(c) Insurance. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent, scope or cost of the insurance
policies of Borrower or any Subsidiary listed on Schedule 4.7 to the
Parent Loan Agreement which change would have a material adverse effect
on the financial condition of Borrower, any Subsidiary or Borrower and
its Subsidiaries taken as a whole, or would significantly adversely
affect Borrower's ability to perform its obligations under this
Agreement, the Notes or any Related Agreement to which it is a party or
by which it is bound;
(d) Warranties. Before and after giving effect to such Loan, the
warranties in Section 4 shall be true and correct as though made on the
date of such Loan, except for such changes as are specifically permitted
hereunder; and
(e) Accounting Methods. Borrower shall not have made
any material (as reasonably determined by Lender) change in
its accounting methods or principles except as required by
GAAP.
Each request for a Loan hereunder made or deemed to have been made by
Borrower shall be deemed to be a certificate of Borrower as to the matters set
out in the foregoing provisions of this Section 8.2.
9. INDEMNITY.
9.1 Environmental and Safety and Health Indemnity. Borrower hereby
indemnifies Lender and agrees to hold Lender harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of any
and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Parent or any of its Subsidiaries of any
Environmental Law or Occupational Safety and Health Law, or with respect to, or
as a direct or indirect result of, (i) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
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properties utilized by Parent and/or any Subsidiary of Parent into or upon any
land, the atmosphere, or any watercourse, body of water, groundwater or wetland,
of any Hazardous Material or other hazardous, toxic or dangerous waste,
substance or constituent, or other substance (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law) or (ii) the existence of any unsafe or
unhealthful condition on or at any premises utilized by Parent and/or any
Subsidiary of Parent in the conduct of its business. The provisions and
undertakings of indemnification set out in this Section 9.1 shall survive
satisfaction and payment of the Liabilities and termination of this Agreement.
9.2 General Indemnity. In addition to the payment of expenses pursuant
to Section 11.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
any Note, and the officers, directors, employees, agents, and affiliates of
Lender and such holders (collectively, the "Indemnitees"), harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any Related Agreement or
any other agreements executed and delivered by Borrower or any other Obligor in
connection herewith, the statements contained in any commitment letter delivered
by Lender, Lender's agreement to make the Loans hereunder, or the use or
intended use of the proceeds of any of the Loans hereunder (the "indemnified
liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of such Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Borrower shall contribute the maximum portion that it is permitted to pay under
applicable law to the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them. The provisions and undertakings of
indemnification set out in this Section 9.2 shall survive satisfaction and
payment of the Liabilities and termination of this Agreement.
9.3 Capital Adequacy. If Lender shall reasonably determine
that the application or adoption of any law, rule, regulation,
directive, interpretation, treaty or guideline regarding capital
adequacy, or any change therein or in the interpretation or
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administration thereof, whether or not having the force or law (including,
without limitation, application of changes to Regulation H and Regulation Y of
the Federal Reserve Board issued by the Federal Reserve Board on January 19,
1989 and regulations of the Comptroller of the Currency, Department of the
Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the Currency
on January 27, 1989) increases the amount of capital required or expected to be
maintained by Lender or any Person controlling Lender, and such increase is
based upon the existence of Lender's obligations hereunder and other commitments
of this type, then from time to time, within ten (10) days after demand from
Lender, Borrower shall pay to Lender such amount or amounts as will compensate
Lender or such controlling Person, as the case may be, for such increased
capital requirement. The determination of any amount to be paid by Borrower
under this Section 9.3 shall take into consideration the policies of Lender or
any Person controlling Lender with respect to capital adequacy and shall be
based upon any reasonable averaging, attribution and allocation methods. A
certificate of Lender setting forth the amount or amounts as shall be necessary
to compensate Lender as specified in this Section 9.3 shall be delivered to
Borrower and shall be conclusive in the absence of manifest error. The
provisions and undertakings of indemnification set out in this Section 9.3 shall
survive satisfaction and payment of the Liabilities and termination of this
Agreement.
9.4 Other Indemnities. Notwithstanding anything to the contrary
elsewhere in this Agreement, all other indemnities of Borrower in favor of
Lender contained in this Agreement shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
10. ADDITIONAL PROVISIONS. Additional provisions are set forth in
Supplement A.
11. GENERAL.
11.1 Borrower Waiver. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals 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,
assuming Lender has acted in a commercially reasonable manner, 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 Lender's
relevy, attachment or levy on or of, the Collateral or any bond or security
which might be required by any court prior to allowing Lender to exercise any of
Lender's remedies; and (iii) the benefit of all valuation,
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appraisement and exemption laws. Borrower acknowledges that it has been advised
by counsel of its choice with respect to this Agreement and the transactions
evidenced by this Agreement.
11.2 Power of Attorney. Borrower appoints Lender, or any Person whom
Lender may from time to time designate, as Borrower's attorney and agent-in-fact
with power (which appointment and power, being coupled with an interest, shall
be irrevocable until all Liabilities are finally paid and performed in full and
this Agreement is terminated), without notice to Borrower, to:
(a) At such time or times hereafter as Lender or said agent, in
its sole and absolute discretion, may determine in Borrower's or
Lender's name (i) endorse Borrower's name on any checks, notes, drafts
or any other items of payment relating to and/or proceeds of the
Collateral which come into the possession of Lender or under Lender's
control and apply such payment or proceeds to the Liabilities in
accordance with the terms hereof; (ii) endorse Borrower's name on any
chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement in Lender's possession relating
to Accounts Receivable, Inventory or any other Collateral; (iii) use the
information recorded on or contained in any data processing equipment
and computer hardware and software to which Borrower has access relating
to Accounts Receivable, Inventory and/or other Collateral; (iv) use
Borrower's stationery and sign the name of Borrower to verification of
Accounts Receivable and notices thereof to Account Debtors; and (v) if
not done by Borrower, do all acts and things determined by Lender to be
necessary, to fulfill Borrower's obligations under this Agreement; and
(b) At such time or times after the occurrence and during the
continuance of an Event of Default, as Lender or said agent, in its sole
and absolute discretion, may determine, in Borrower's or Lender's name:
(i) demand payment of the Accounts Receivable; (ii) enforce payment of
the Accounts Receivable, by legal proceedings or otherwise; (iii)
exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts Receivable and other Collateral; (iv) settle,
adjust, compromise, extend or renew the Accounts Receivable; (v) settle,
adjust or compromise any legal proceedings brought to collect the
Accounts Receivable; (vi) if permitted by applicable law, sell or assign
the Accounts Receivable and/or other Collateral upon such terms for such
amounts and at such time or times as Lender may deem advisable; (vii)
discharge and release the Accounts Receivable and/or other Collateral;
(viii) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or similar document against any Account Debtor; (ix) prepare,
file and sign Borrower's name on any notice of lien, assignment or
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satisfaction of lien or similar document in connection with the Accounts
Receivable and/or other Collateral; and (x) do all acts and things
necessary, in Lender's sole and absolute discretion, to obtain repayment
of the Liabilities and to fulfill Borrower's other obligations under
this Agreement.
11.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any Loan
is made hereunder, to pay upon demand all Attorneys' Fees and all other
reasonable expenses incurred by Lender in connection with (i) [intentionally
left blank], (ii) the preparation of any and all amendments to this Agreement or
any of the Related Agreements and all other instruments or documents provided
for therein or delivered or to be delivered thereunder or in connection
therewith, (iii) the collection or enforcement of Borrower's or any other
Obligor's obligations hereunder or under any Related Agreement, and (iv) the
collection or enforcement of any of Lender's rights in or to any Collateral or
Third Party Collateral. Lender may advance all such amounts to Borrower as a
Revolving Loan. Borrower also agrees, (v) to indemnify and hold Lender harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans except for losses and expenses
arising from Lender's gross negligence or willful misconduct, and (vi) to pay,
and save Lender harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Agreement, or
any Related Agreement or Supplemental Documentation, or the issuance of any Note
or of any other instruments or documents provided for herein or to be delivered
hereunder or in connection herewith. Borrower's foregoing obligations shall
survive any termination of this Agreement.
11.4 Lender Fees and Charges. Borrower agrees to pay Lender on demand
the customary fees and charges of Lender for maintenance of accounts with Lender
or for providing other services to Borrower. Lender may, in its sole and
absolute discretion, provide for such payment by advancing the amount thereof to
Borrower as a Revolving Loan.
11.5 Lawful Interest. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to Borrower.
11.6 No Waiver by Lender; Amendments. No failure or delay on
the part of Lender in the exercise of any power or right, and no
course of dealing between Borrower and Lender shall operate as a
waiver of such power or right, nor shall any single or partial
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exercise of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. The remedies provided for herein are
cumulative and not exclusive of any remedies which may be available to Lender at
law or in equity. No notice to or demand on Borrower not required hereunder
shall in any event entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Lender to
any other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or any Related Agreement shall in any event be effective
unless the same shall be in writing and signed and delivered by Lender and
Borrower. Any waiver of any provision of this Agreement, and any consent to any
departure by Borrower from the terms of any provision of this Agreement, shall
be effective only in the specific instance and for the specific purpose for
which given.
11.7 Termination of Credit.
(a) Unless the Termination Date is extended pursuant to clause
(b) of this Section 11.7, the Credit shall terminate on the
then-scheduled Termination Date. Borrower may terminate the Credit at
any time prior to the Termination Date upon notice to Lender and payment
in full of the outstanding principal balance of the Loans and all other
Liabilities. All of Lender's rights and remedies, the liens and security
interests of Lender in the Collateral and the Third Party Collateral and
all of Borrower's duties and obligations under this Agreement shall
survive termination of the Credit extended to Borrower hereunder until
all of the Liabilities have been finally paid and performed in full. The
termination or cancellation of the Credit shall not affect or impair the
liabilities and obligations of Borrower or any one or more of the
Obligors to Lender or Lender's rights with respect to any Loans and
advances made and other Liabilities incurred prior to such termination
or with respect to the Collateral or any Third Party Collateral.
(b) Borrower may, not more than 90 days nor less than 75 days
prior to any scheduled Termination Date, request that Lender extend the
Credit for an additional one-year period to the next anniversary of such
date. Unless Lender, in the exercise of its sole and complete
discretion, notifies Borrower of its willingness to extend the Credit
for such additional one-year period, the Credit shall terminate on the
then scheduled Termination Date (and all Loans and other Liabilities
shall be thereupon due and payable).
11.8 Notices. Except as otherwise expressly provided herein,
any notice hereunder to Borrower or Lender shall be in writing
(including telegraphic, telex, or facsimile communication) and
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shall be given to Borrower or Lender at its address, telex number or facsimile
number set forth on the signature pages hereof or at such other address, telex
number or facsimile number as Borrower or Lender may, by written notice,
designate as its address, telex number or facsimile number for purposes of
notices hereunder. All such notices shall be deemed to be given when transmitted
by telex and the appropriate answerback is received, transmitted by facsimile,
delivered to the telegraph office, delivered by courier, personally delivered
or, in the case of notice by mail, three (3) Banking Days following deposit in
the United States mails, properly addressed as herein provided, with proper
postage prepaid; provided, however, that notice to Lender of Borrower's intent
to terminate the Credit shall not be effective until actually received by
Lender.
11.9 Assignments and Participations; Information. Borrower hereby
consents to Lender's grant of participations in or sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or any Related Agreement, or of any portion of any thereof, including
without limitation Lender's rights, titles, interests, remedies, powers and/or
duties. Lender may furnish any information concerning Borrower in the possession
of Lender from time to time to assignees of the rights and/or obligations of
Lender hereunder and to Participants in any Loan (including prospective
assignees and Participants) and may furnish information in response to credit
inquiries consistent with general banking practice. Lender shall promptly notify
Borrower of Lender's grant of any participation in or sale, assignment, transfer
or other disposition of this Agreement or any Related Agreement, or of any
portion of any thereof. Borrower shall use its reasonable efforts to assist
Lender in its efforts to sell assignments and participations.
11.10 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 Successors. This Agreement shall be binding upon Borrower and
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower and Lender and the successors and assigns of Lender.
Borrower shall not assign its rights or duties hereunder without the consent of
Lender.
11.12 Construction. Borrower acknowledges that this Agreement shall not
be binding upon Lender until and unless accepted by Lender in writing. If so
accepted by Lender, this Agreement and the Related Agreements and Supplemental
Documentation shall, unless otherwise expressly provided therein, be deemed to
-44-
<PAGE>
have been negotiated and entered into in, and shall be governed and controlled
by the laws of, the State of Illinois as to interpretation, enforcement,
validity, construction, effect, choice of law, and in all other respects,
including, but not limited to, the legality of the interest rate and other
charges, but excluding perfection of security interests and liens which shall be
governed and controlled by the laws of the relevant jurisdiction.
11.13 Consent to Jurisdiction. To induce Lender to accept this
Agreement, Borrower irrevocably agrees that, subject to Lender's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, THE
SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE
HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT
THEREOF.
11.14 Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to "Borrower
and its Subsidiaries" or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes.
11.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i)
UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Initials of Robert C. Shaw, President of Borrower:
.
11.16 Prior Actions. Borrower hereby waives, releases and forever
discharges Lender, its officers, employees and agents, from any and all rights,
claims, demands or causes of action against Lender, in law or in equity, arising
out of Lender's past actions or omissions with respect to the Original Loan
Agreement, any other agreements or documents, or any lien or collateral securing
any Liabilities under and as defined in the Original Loan Agreement.
-45-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CONTEMPO DESIGN, INC.
By:________________________________
Title:_____________________________
Address: c/o Azimuth Corporation
4209 Vineland Road
Orlando, Florida 32811
Attention: Alexander M. Milley
Facsimile number: (407) 849-0625
BANK OF AMERICA ILLINOIS
By:________________________________
Title:_____________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Andrew J. Sutherland
Facsimile number: 312/828-3889
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<PAGE>
SUPPLEMENT A
to
LOAN AND SECURITY AGREEMENT
Dated as of October 9, 1995 between BANK OF AMERICA
ILLINOIS ("Lender") and CONTEMPO DESIGN, INC. ("Borrower")
1. Loan Agreement Reference. This Supplement A, as it may be amended or
modified from time to time, is a part of the Loan and Security Agreement dated
as of October 9, 1995 between Borrower and Lender (together with all amendments,
modifications and supplements thereto, the "Loan Agreement"). Terms used herein
which are defined in the Loan Agreement shall have the meaning ascribed to them
therein unless the context requires otherwise.
2. Revolving Credit Amount; Borrowing Base.
2.1 Revolving Credit Amount. The maximum amount of Revolving Loans which
Lender will make available to Borrower (such amount is herein called the
"Revolving Credit Amount") is (i) FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS
($5,400,000) (unless such amount is increased by Lender in its sole discretion)
less (ii) the principal amount of "Revolving Loans" (under and as defined in
each Other Loan Agreement) outstanding under each Other Loan Agreement.
2.2 Borrowing Base. The term "Borrowing Base", as used
herein, shall mean:
(i) an amount (the "Accounts Receivable Availability") equal to
80% of the net amount (after deduction of such reserves and
allowances as Lender deems proper and necessary in good faith and
in the exercise of its reasonable judgment) of the Eligible
Accounts Receivable of Borrower; plus
(ii) an amount (the "Additional Availability") equal to (A)(1)
from the Closing Date to the one year anniversary thereof,
$300,000 and (2) thereafter, zero less (B) the principal amount
of "Revolving Loans" under and as defined in the Other Loan
Agreements then outstanding under the Other Loan Agreements in
excess of the "Accounts Receivable Availability" and "Inventory
Availability" under and as defined in each Other Loan Agreement.
2.3 Availability Adjustments.
None.
<PAGE>
2.4 Lender's Rights. Borrower agrees that nothing contained in this
Supplement A (i) shall be construed as Lender's agreement to resort or look to a
particular type or item of Collateral as security for any specific Loan or
advance or in any way limit Lender's right to resort to any or all of the
Collateral as security for any of the Liabilities, (ii) shall be deemed to limit
or reduce any lien on or any security interest in or upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.8 of the Loan Agreement.
3. Interest.
3.1
(a) Interest to Maturity. The outstanding principal balance of
the Revolving Loans (other than Overdraft Loans and Over
Advances) shall bear interest to maturity at the Reference Rate
in effect from time to time plus one and one-half percent (1.5%)
per annum.
(b) Default Rate. If any amount of the Revolving Loans is
not paid when due, whether by acceleration or otherwise, the
outstanding principal balance of the Revolving Loans (other than
Overdraft Loans and Over Advances) shall bear interest until paid
at a rate per annum equal to the greater of the (a) the Reference
Rate from time to time in effect plus two and one-half percent
(2.5%) or (b) two and one-half percent (2.5%) above the Reference
Rate in effect at the time such amount became due.
3.2 Overdraft Loans; Over Advances. Overdraft Loans and Over Advances
shall bear interest at the rate(s) determined pursuant to Section 2.6 or Section
2.7 of the Loan Agreement, as applicable.
3.3 Computation. Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. Changes in any interest
rate provided for herein which are due to changes in the Reference Rate shall
take effect on the date of the change in the Reference Rate.
3.4 Payment. Until maturity, interest on the Loans shall be payable
monthly in arrears on the last day of each calendar month at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand.
4. Eligible Account Receivable Data. Each Account Receivable of Borrower must be
due and payable within 90 days of the date of the invoice evidencing such
Account Receivable (180 days in the case of Accounts Receivable owing from
Siemens), and must not be unpaid on the date that is 91 days after the date of
such invoice (181 days in the case of Accounts Receivable owing from Siemens);
provided,
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<PAGE>
however, that Lender, in its sole discretion, may extend the date on which such
invoice must be due and payable to a date which is not more than 120 days from
the date of invoice. If invoices representing 10% or more of the unpaid net
amount of all Accounts Receivable of Borrower and Contempo West from any one
Account Debtor are unpaid more than 90 days after the date of such invoices (180
days in the case of Accounts Receivable owing from Siemens) (or such longer
period as Lender, in its sole discretion, may agree to from time to time), then
all Accounts Receivable relating to such Account Debtor shall cease to be
Eligible Accounts Receivable.
5. Information. Borrower agrees that, until the Credit is terminated, it shall
furnish to Lender in form reasonably satisfactory to Lender, within fifteen (15)
days after the end of each month, an aging of all Accounts Receivable of
Borrower and an aging of all accounts payable of Borrower.
Borrower's Initials: ______________
Lender's Initials: ______________
Date: October 9, 1995
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<PAGE>
EXHIBIT 10.27
================================================================================
LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 9, 1995
BETWEEN
CONTEMPO DESIGN WEST, INC.
and
BANK OF AMERICA ILLINOIS
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND OTHER TERMS...............................................2
1.1 Definitions..................................................2
1.2 Other Definitional Provisions...............................13
1.3 Interpretation of Agreement.................................13
1.4 Compliance with Financial Restrictions......................14
2. LOANS; OTHER MATTERS.....................................................14
2.1 Loans.......................................................14
2.1.1 Revolving Loans......................................14
2.1.2 Reduction of Revolving Credit Amount.................14
2.1.3 Maximum Outstanding Loans............................15
2.1.4 Assumption...........................................15
2.2 Loan Account; Demand Deposit Account........................15
2.3 Interest and Fees...........................................16
2.3.1 Interest on Revolving Loans..........................16
2.3.2 Nonuse Fee...........................................16
2.3.3 Method of Calculating Interest and Fees..............16
2.3.4 Payment of Interest and Fees.........................16
2.4 Requests for Loans; Borrowing Base Certificates;
Other Information...........................................16
2.5 Notes.......................................................17
2.6 Overdraft Loans.............................................18
2.7 Over Advances...............................................18
2.8 All Loans One Obligation....................................19
2.9 Making of Payments; Application of Collections;
Charging of Accounts........................................19
2.10 Lender's Election Not to Enforce............................21
2.11 Reaffirmation...............................................21
2.12 Setoff......................................................21
2.13 Refinancing Fee.............................................21
2.14 Closing Fee.................................................22
3. COLLATERAL...............................................................22
3.1 Grant of Security Interest..................................22
3.2 Accounts Receivable.........................................23
3.3 Inventory...................................................27
3.4 Equipment...................................................28
3.5 Supplemental Documentation..................................28
4. REPRESENTATIONS AND WARRANTIES...........................................29
5. BORROWER COVENANTS.......................................................29
<PAGE>
PAGE
6. DEFAULT..................................................................29
6.1 Event of Default....................................................29
(a) Non-Payment.........................................29
(b) Non-Payment of Other Indebtedness...................29
(c) Acceleration of Other Indebtedness..................30
(d) Other Obligations...................................30
(e) Insolvency..........................................30
(f) Pension Plans.......................................31
(g) Non-Compliance With This Agreement..................31
(h) Non-Compliance With Related
Agreements..........................................32
(i) Warranty...............................................32
(j) Litigation..........................................32
(k) Validity............................................32
(l) Conduct of Business.................................32
(m) Material Adverse Change.............................32
(n) Other Loan Agreements..................................33
6.2 Effect of Event of Default; Remedies........................33
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S
RIGHTS...................................................................34
7.1 Notice of Disposition of Collateral.........................34
7.2 Application of Proceeds of Collateral.......................34
7.3 Care of Collateral..........................................34
7.4 Performance of Borrower's Obligations.......................35
7.5 Lender's Rights.............................................35
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS..................................................................36
8.1 Conditions Precedent........................................36
8.1.1 Security Interest....................................36
8.1.2 Blocked Account; Lock Box............................36
8.1.3 Effect of Law........................................36
8.1.4 Other Loan Agreements................................36
8.1.5 Fees.................................................36
8.1.6 Documents............................................36
(a) Resolutions............................................36
(b) Incumbency Certificates................................37
(c) Borrower's Certificate..............................37
(d) Landlord's Consents.................................37
(e) Note...................................................37
(f) Other Documents.....................................37
8.2 Continuing Conditions Precedent to all Loans;
Certification...............................................37
(a) No Change in Condition..............................37
(b) Default.............................................38
(c) Insurance...........................................38
<PAGE>
PAGE
(d) Warranties..........................................38
(e) Accounting Methods..................................38
9. INDEMNITY................................................................38
9.1 Environmental and Safety and Health Indemnity...............38
9.2 General Indemnity...........................................39
9.3 Capital Adequacy............................................39
9.4 Other Indemnities...........................................40
10. ADDITIONAL PROVISIONS....................................................40
11. GENERAL..................................................................40
11.1 Borrower Waiver.............................................40
11.2 Power of Attorney...........................................41
11.3 Expenses; Attorneys' Fees...................................42
11.4 Lender Fees and Charges.....................................42
11.5 Lawful Interest.............................................42
11.6 No Waiver by Lender; Amendments.............................42
11.7 Termination of Credit.......................................43
11.8 Notices.....................................................43
11.9 Assignments and Participations; Information.................44
11.10 Severability................................................44
11.11 Successors..................................................44
11.12 Construction................................................44
11.13 Consent to Jurisdiction.....................................45
11.14 Subsidiary Reference........................................45
11.15 WAIVER OF JURY TRIAL........................................45
11.16 Prior Actions...............................................45
<PAGE>
LIST OF EXHIBITS
Exhibits:
Exhibit A Form of Borrowing Base Certificate (ss.2.5(c))
Exhibit B [Reserved]
Exhibit C Form of Revolving Note
Exhibit D [Reserved]
Exhibit E Form of Landlord's Consent
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as from time to time amended,
modified or supplemented, this "Agreement") is made as of this 9th day of
October, 1995 by and between BANK OF AMERICA ILLINOIS (formerly Continental Bank
N.A.), an Illinois banking corporation having its principal office at 231 South
LaSalle Street, Chicago, Illinois 60697 ("Lender"), and CONTEMPO DESIGN WEST,
INC., a Delaware corporation ("Borrower").
RECITALS
1. On January 16, 1991, Azimuth Corporation, a Delaware corporation
("Parent"), and Lender entered into an Amended and Restated Loan and Security
Agreement (such Amended and Restated Loan and Security Agreement, as amended to
the date hereof, being herein referred to as the "Original Loan Agreement"; and
the other capitalized terms used herein shall have the meanings set forth in
Section 1.1) pursuant to which Lender made loans to Parent.
2. Parent and Lender are, on the date hereof, amending and
restating the Original Loan Agreement.
3. As security for the loans made by Lender to Parent, (a) Borrower and
other Subsidiaries of Parent, Contempo Design, Inc., an Illinois corporation
("Contempo"), and Delaware Electro Industries, Inc., a Delaware corporation
("Delaware"), have granted Lender a lien on, and a security interest in, all of
their respective assets and (b) Borrower, Delaware and Contempo have executed a
guaranty whereby such companies jointly and severally guaranteed the full and
prompt payment and performance of all obligations of Parent to Lender in
connection with the Original Loan Agreement and all related documents.
4. In connection with the amendment and restatement of the Original
Loan Agreement, Borrower and other Subsidiaries of Parent are assuming a portion
of the "Liabilities" under and as defined in the Original Loan Agreement
representing "Revolving Loans" under and as defined in the Original Loan
Agreement, with the portion of such Liabilities assumed by Borrower to be
governed by the terms of this Agreement.
5. Lender has agreed to provide financial accommodations to Borrower in
addition to those assumed by Borrower as described in the immediately preceding
recital on the terms hereinafter set forth.
<PAGE>
Accordingly, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto
agree, as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" shall mean any Person who is or who may
become obligated to Borrower under, with respect to, or on account of an Account
Receivable, Contract Right, General Intangible or
other Collateral or Third Party Collateral.
"Account Receivable" shall mean any account of Borrower and
any other right of Borrower to payment, whether or not evidenced by an
instrument or chattel paper and whether or not yet earned by performance
(excluding any Contract Right).
"Accounts Receivable Availability" shall have the meaning
ascribed to such term in Supplement A.
"Assignee Deposit Account" shall have the meaning ascribed to
such term in Section 3.2(d).
"Assumed Liabilities" shall have the meaning ascribed to such
term in Section 2.1.4.
"Attorneys' Fees" shall mean the reasonable value of the
services (and reasonable costs, charges and expenses related thereto) of the
attorneys (and all paralegals, secretaries, accountants and other staff employed
by such attorneys) employed by Lender (including, but not limited to, attorneys
and paralegals who are employees of Lender) from time to time (i) in connection
with the negotiation, preparation, execution, delivery, administration and
enforcement of this Agreement, any Related Agreement, any Supplemental
Documentation and all other documents or instruments provided for herein or in
any thereof or delivered or to be delivered hereunder or under any thereof or in
connection herewith or with any thereof, (ii) to prepare documentation related
to the Loans made and other Liabilities incurred hereunder, (iii) to prepare any
amendment to or waiver under this Agreement or any Related Agreement and any
documents or instruments related thereto, (iv) to represent Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene in any litigation, contest, dispute, suit or proceeding or to file a
petition, complaint, answer, motion or other pleading, or to take any other
action in or with respect to, any litigation, contest,
-2-
<PAGE>
dispute, suit or proceeding (whether instituted by Lender, Borrower or any other
Person and whether in bankruptcy or otherwise) in any way or respect relating to
the Collateral, any Third Party Collateral, this Agreement or any Related
Agreement, or Borrower's or any other Obligor's or any Subsidiary's affairs, (v)
to protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral or any Third Party Collateral, (vi) to attempt to enforce any
security interest in any of the Collateral or any Third Party Collateral or to
give any advice with respect to such enforcement and (vii) to enforce any of
Lender's rights to collect any of the Liabilities.
"Banking Day" shall mean any day other than a Saturday, Sunday
or legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois.
"Borrower" -- see Preamble.
"Borrowing Base" shall have the meaning ascribed to such term
in Supplement A.
"Borrowing Base Certificate" shall mean a certificate in
substantially the form of Exhibit A.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" shall mean the date this Agreement becomes
effective pursuant to Section 8.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed to also refer to any successor
sections.
"Collateral" shall have the meaning ascribed to such term
in Section 3.1.
"Contempo" -- see Recitals.
"Contempo Amsterdam" shall mean Contempo Design Europe B.V., a
Dutch corporation 90% owned by Contempo and 10% owned by an employee thereof.
"Contract Right" shall mean any right of Borrower to payment
under a contract, which right is not yet earned by performance and not evidenced
by an instrument or chattel paper.
-3-
<PAGE>
"Credit" shall mean the facility established under this
Agreement pursuant to which Lender will make Revolving Loans to Borrower.
"Default" shall mean any event or condition which, with the
lapse of time or giving of notice to Borrower or both, would constitute an Event
of Default.
"Default Rate" shall mean, with respect to a Loan, the rate of
interest which is applicable to such Loan after any amount thereof is not paid
when due, whether by acceleration or otherwise, as determined pursuant to
Supplement A.
"Delaware" -- see Recitals.
"Demand Deposit Account" shall have the meaning ascribed to
such term in Section 2.2.
"Eligible Account Receivable" shall mean an Account Receivable
owing to Borrower which meets the following requirements:
(1) it is genuine and in all respects what it purports
to be;
(2) it arises from either (a) the performance of services by
Borrower, which services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto
or (b) the sale or lease of goods by Borrower; and if it arises from
the sale or lease of goods, (i) such goods comply with such Account
Debtor's specifications (if any) and (except in the case of exhibits
manufactured by Borrower which are stored at the premises of Borrower
for a period of not more than 60 days after completion as an
accommodation to the applicable Account Debtor ("Temporarily Stored
Exhibits")) have been shipped to, or delivered to and accepted by, such
Account Debtor and (ii) Borrower has possession of, or if requested by
Lender has delivered to Lender, shipping and delivery receipts
evidencing such shipment, delivery and acceptance (except that no such
receipts shall be required in the case of an Account Receivable
relating to a Temporarily Stored Exhibit);
(3) it (a) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (i) is dated not earlier than the
date of shipment or performance (or, in the case of an Account
Receivable relating to a Temporarily Stored Exhibit, the date of
completion of such exhibit) and (ii) has payment terms not unacceptable
to Lender (in good faith and in the exercise of its reasonable
judgment) and (b) meets the
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<PAGE>
Eligible Account Receivable requirements set forth in
Supplement A;
(4) it is not subject to any assignment, claim or Lien, other
than (a) a Lien in favor of Lender, (b) Liens consented to by Lender in
writing and (c) Liens described in Section 5.16(a) of the Parent Loan
Agreement;
(5) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor with respect thereto, and is not
subject to a claim for setoff, counterclaim, credit or allowance
(except (x) any credit or allowance which has been deducted in
computing the net amount of the applicable invoice as shown in the
original schedule or Borrowing Base Certificate furnished to Lender
identifying or including such Account Receivable or (y) as Lender in
its sole discretion may otherwise agree) or adjustment by the Account
Debtor with respect thereto, or to any claim by such Account Debtor
denying liability thereunder in whole or in part, and such Account
Debtor has not refused to accept any of the goods or services which are
the subject of such Account Receivable or offered or attempted to
return any of such goods;
(6) there are no proceedings or actions which are then
threatened or pending against the Account Debtor with respect thereto
or to which such Account Debtor is a party which proceedings or actions
would reasonably be expected to result in any material adverse change
in such Account Debtor's financial condition or in its ability to pay
any Account Receivable in full when due;
(7) it does not arise out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the assignment
by Borrower to Lender of the Account Receivable arising with respect
thereto;
(8) the Account Debtor with respect thereto is not a
Subsidiary or Obligor, or a director, officer, employee or agent of
Borrower, Parent, Delaware, Contempo, a Subsidiary or Obligor;
(9) the Account Debtor with respect thereto is a resident
or citizen of, and is located within, the United States of America,
unless the sale of goods giving rise to the Account Receivable is on
letter of credit, banker's acceptance or other credit support terms
reasonably satisfactory to Lender;
(10) it is not an Account Receivable arising from a "sale
on approval," "sale or return" or "consignment," or subject to
any other repurchase or return agreement;
-5-
<PAGE>
(11) except in the case of an Account Receivable relating to a
Temporarily Stored Exhibit, it is not an Account Receivable with
respect to which possession and/or control of the goods sold giving
rise thereto is held, maintained or retained by Borrower or any
Subsidiary, or other Obligor (or by any agent or custodian of Borrower,
any Subsidiary, or other Obligor) for the account of or subject to
further and/or future direction from the Account Debtor thereof;
(12) it is not an Account Receivable which in any way fails to
meet or violates any warranty, representation or covenant contained in
this Agreement or any Related Agreement relating directly or indirectly
to Borrower's Accounts Receivable;
(13) the Account Debtor thereunder is not located in the
States of Indiana, New Jersey or Minnesota; provided, however, that
such restriction shall not apply to an Account Receivable if at the
time the Account Receivable was created and at all times thereafter (a)
Borrower had filed and has maintained effective a current Notice of
Business Activities Report with the appropriate office or agency of the
State of Indiana, New Jersey or Minnesota, as applicable or (b)
Borrower was and has continued to be exempt from the filing of such
Report and has provided Lender with satisfactory evidence thereof;
(14) it arises in the ordinary course of business of
Borrower;
(15) if the Account Debtor is the United States of America or
any department, agency or instrumentality thereof, Borrower has
assigned its right to payment of such Account Receivable to Lender
pursuant to the Assignment of Claims Act of 1940, as amended;
(16) if Lender in good faith and in its reasonable judgment
has established a credit limit for an Account Debtor, the aggregate
dollar amount of Accounts Receivable due from such Account Debtor,
including such Account Receivable, does not exceed such credit limit
(it being understood that in establishing any such credit limit Lender
may rely on factors which, due to confidentiality restrictions or
otherwise, are not disclosed to Borrower); and
(17) if the Account Receivable is evidenced by chattel paper
or an instrument, (a) Lender shall have specifically agreed in writing
to include such Account Receivable as an Eligible Account Receivable,
(b) only payments then due and payable under such chattel paper or
instrument shall be included as an Eligible Account Receivable and (c)
the originals of such chattel paper or instruments have been
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endorsed and/or assigned and delivered to Lender in a manner
satisfactory to Lender.
An Account Receivable which is at any time an Eligible Account
Receivable, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible Account
Receivable. Further, with respect to any Account Receivable, if Lender
at any time or times hereafter determines in good faith and in its
reasonable judgment that the prospect of payment or performance by the
Account Debtor with respect thereto is or will be impaired for any
reason whatsoever, notwithstanding anything to the contrary contained
above, such Account Receivable shall forthwith cease to be an Eligible
Account Receivable.
"Environmental Laws" shall mean the Clean Air Act of 1970, as
amended, 42 U.S.C. ss.7401 et seq., the Clean Water Act, as amended, 33 U.S.C.
ss.1251 et seq., the Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. ss.6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.,
any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act,
15 U.S.C. ss.2601 et seq., and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree or other written legal
requirement regulating, relating to, or imposing liability or standards of
conduct (including, but not limited to, permit requirements, emission or
effluent restrictions and other requirements relating to manufacturing,
processing, generation, distribution, use, treatment, storage, disposal,
clean-up, transport or handling) concerning any Hazardous Materials or any
hazardous, toxic or dangerous waste, substance or constituent, or any noise,
odor, waste, radiation, pollutant or contaminant or other substance, whether
solid, liquid or gas, as now or at any time hereafter in effect.
"Equipment" shall mean all equipment of every description,
including, without limitation, fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefor and replacements
thereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any corporation, partnership, or
other trade or business (whether or not incorporated) that is, along with
Borrower, a member of a controlled group of corporations or a controlled group
of trades or
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businesses, as described in sections 414(b) and 414(c), respectively, of the
Code or section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of section 414(m) of the Code.
"Event of Default" shall have the meaning ascribed to such
term in Section 6.1.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System or any successor thereto.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year.
"Fiscal Year" shall mean any period of 12 consecutive calendar
months ending on the last day of December.
"Fixtures" shall mean all fixtures of Borrower of every
description and all substitutions and replacements of any thereof.
"GAAP" shall mean generally accepted accounting principles as
applied in the preparation of the audited financial statements of Parent
referred to in Section 4.6 of the Parent Loan Agreement.
"General Intangibles" shall mean all of Borrower's intangible
personal property, including things in action, causes of action and all other
personal property of Borrower of every kind and nature (other than accounts,
inventory, equipment, chattel paper, documents, instruments and money),
including, without limitation, corporate or other business records, inventions,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, security interests, security deposits or other security held
by or granted to Borrower to secure any payment from an Account Debtor, and any
rights to indemnification.
"Guaranteed Obligations" means all obligations of Borrower
under the Amended and Restated Guaranty Agreement of Borrower, Delaware and
Contempo dated as of the Closing Date.
"Hazardous Materials" shall mean any toxic substance,
hazardous substance, hazardous material, hazardous chemical or hazardous waste
defined or qualifying as such in (or for the purposes of) any Environmental Law,
or any pollutant or contaminant, and shall include, but not be limited to,
petroleum, including crude oil or any fraction thereof which is liquid at
standard conditions of temperature or pressure (60 degrees fahrenheit and 14.7
pounds per square inch absolute), any radioactive material, including, but not
limited to, any source,
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special nuclear or by-product material as defined at 42 U.S.C. Section2011 et
seq., as amended or hereafter amended, polychlorinated biphenyls and asbestos in
any form or condition.
"Indebtedness" of any Person shall mean, without duplication,
(i) any obligation of such Person for borrowed money, including, without
limitation, (a) any obligation of such Person evidenced by bonds, debentures,
notes or other similar debt instruments and (b) any obligation for borrowed
money which is non-recourse to the credit of such Person but which is secured by
a Lien on any asset of such Person, (ii) any obligation of such Person on
account of deposits or advances, (iii) any obligation of such Person for the
deferred purchase price of any property or services, except Trade Accounts
Payable, (iv) any obligation of such Person as lessee under a Capitalized Lease
and (v) any Indebtedness of another Person secured by a Lien on any asset of
such first Person, whether or not such Indebtedness is assumed by such first
Person. For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or joint venturer.
"Inventory" shall mean any and all goods of Borrower
(including, without limitation, goods in transit) wheresoever located, which are
or may at any time be leased to a lessee, held for sale or lease or furnished
under any contract of service by, or held as raw materials, work in process, or
supplies or materials used or consumed in the business of, Borrower or which are
held for use in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, and all goods the sale or other disposition
of which has given rise to an Account Receivable, Contract Right or General
Intangible and which are returned to and/or repossessed and/or stopped in
transit by Borrower or Lender or any agent or bailee of any of them, and all
documents of title or other documents representing the same.
"Landlord's Consent" shall mean a Landlord's Consent
substantially in the form of Exhibit E, with appropriate insertions, or such
other form as shall be acceptable to Lender, as it may be amended or modified
from time to time.
"Lender" -- see Preamble.
"Liabilities" shall mean all of the liabilities, obligations,
reimbursement obligations in connection with any letter of credit, and
indebtedness of Borrower, any Subsidiary or any other Obligor to Lender of any
kind or nature, however created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing or due or to become
due, and including but not limited to (i) Borrower's obligations under any Note,
(ii) Borrower's obligations under this Agreement, (iii)
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interest, charges, expenses, Attorneys' Fees and other sums chargeable to
Borrower by Lender under this Agreement or any Related Agreement, (iv) the
obligations of Borrower, any Subsidiary and any other Obligor under any Related
Agreement, including obligations of performance and (v) the Guaranteed
Obligations. "Liabilities" shall also include any and all amendments,
extensions, renewals, refundings or refinancings of any of the foregoing.
"Lien" shall mean any mortgage, pledge, hypothecation,
judgment lien or similar legal process, title retention lien, or other lien,
encumbrance or security interest, including, without limitation, the interest of
a vendor under any conditional sale or other title retention agreement and the
interest of a lessor under any Capitalized Lease.
"Loan" shall mean (i) the Revolving Loans made pursuant to
Section 2.1.1 and (ii) any other loan or advance made to Borrower by Lender
under or pursuant to this Agreement.
"Loan Account" shall have the meaning ascribed to such term in
Section 2.2.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is maintained for employees of
Borrower, any other Obligor or any ERISA Affiliate.
"Note" shall mean the Revolving Note and any other promissory
note of Borrower evidencing any loan or advance (including but not limited to
any Revolving Loans) made by Lender to Borrower pursuant to this Agreement.
"Obligor" shall mean Borrower and each other Person who is or
shall become primarily or secondarily liable on any of the Liabilities, or who
grants to Lender a Lien on any property of such Person as security for any of
the Liabilities.
"Occupational Safety and Health Law" shall mean the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et
seq., and any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning employee health and/or safety.
"Original Loan Agreement" - see Recitals.
"Original Security Agreement" means the Amended and Restated
Security Agreement dated as of January 16, 1991 among Borrower, Delaware,
Contempo and Lender.
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"Other Loan Agreements" means the Loan and Security Agreement
dated as of the date hereof between Lender and Delaware and the Loan and
Security Agreement dated as of the date hereof between Lender and Contempo, as
the same may be amended, supplemented or otherwise modified from time to time,
and the Parent Loan Agreement.
"Over Advance" shall have the meaning ascribed to such term in
Section 2.7.
"Overdraft Loan" shall have the meaning ascribed to such term
in Section 2.6.
"Parent" -- see Recitals.
"Parent Loan Agreement" means the Second Amended and Restated
Loan and Security Agreement between Lender and Parent dated as of the date
hereof, as the same may be amended, supplemented or otherwise modified from time
to time.
"Participant" shall mean any Person, now or at any time or
times hereafter, participating with Lender in the Loans made to Borrower
pursuant to this Agreement or any Related Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean a "pension plan," as such term is
defined in Section 3(2) of ERISA, which is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which Borrower, any other
Obligor or any ERISA Affiliate may have any liability, including any liability
by reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, or government (whether national, federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Reference Rate" shall mean, at any time, the rate of interest
then most recently announced by Lender at Chicago, Illinois as its reference
rate (of which announcements Lender shall give notice promptly to Borrower).
Each change in the interest rate on any Loan shall take effect on the effective
date of the change in the Reference Rate.
"Refinancing Fee" shall have the meaning ascribed to such term
in Section 2.13.
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"Related Agreement" shall mean any agreement, instrument or
document (including, without limitation, notes, guarantees, mortgages, deeds of
trust, chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter delivered to Lender with respect to or in
connection with or pursuant to this Agreement or any of the Liabilities, and
executed by or on behalf of Borrower, Parent, Delaware, Contempo or any other
Obligor.
"Related Party" shall mean any Person (other than a
Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, Borrower, (ii)
which beneficially owns or holds ten percent (10%) or more of the equity
interest of Borrower or (iii) ten percent (10%) or more of the equity interest
of which is beneficially owned or held by Borrower or a Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Revolving Credit Amount" shall have the meaning ascribed to
such term in Supplement A.
"Revolving Loan" shall have the meaning ascribed to such term
in Section 2.1.1.
"Revolving Loan Availability" shall mean the lesser of (a) the
Revolving Credit Amount and (b) the Borrowing Base.
"Revolving Note" shall have the meaning ascribed to such term
in Section 2.5.
"Siemens" means an Account Debtor of the Borrower with one of
the following names (as derived from the books and records of the Borrower):
"Siemens Medical Systems, Electromedical", "Siemens Physiological Recording",
"Siemens Burdick", "Siemens Electric Ltd.", "Siemens Hearing Instruments",
"Siemens Infusion Systems", "Siemens Medical Labs", "Siemens Medical Systems",
"Siemens Medical Systems - EM", "Siemens Medical Systems, Inc.", "Siemens
Medical Systems\Ultrasound", "Siemens Nuclear Group", "Siemens Oncology
Systems", "Siemens Pelton & Crane", "Siemens Quantum, Inc." or "Siemens Solar
Instruments".
"Subsidiary" shall mean any Person of which or in which
Borrower and its other Subsidiaries own directly or indirectly 50% or more of
(i) the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of directors
of such Person, if it is a
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corporation, (ii) the capital interest or profits interest of such Person, if it
is a partnership, joint venture or similar entity or (iii) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.
"Supplemental Documentation" shall have the meaning ascribed
to such term in Section 3.5.
"Taxes" with respect to any Person shall mean taxes,
assessments or other governmental charges or levies imposed upon such Person,
its income or any of its properties, franchises or assets.
"Termination Date" shall mean August 31, 1996 or such later
date to which the Termination Date may be extended pursuant to Section 11.7.
"Third Party Collateral" shall mean any property of any Person
other than Borrower which secures payment or performance of any Liabilities.
"Trade Accounts Payable" of any Person shall mean trade
accounts payable of such Person with a scheduled maturity of not greater than 90
days incurred in the ordinary course of such Person's business.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Illinois, and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time. References to sections
of the UCC shall be construed to also refer to any successor sections.
1.2 Other Definitional Provisions. Unless otherwise defined or
the context otherwise requires, all financial and accounting terms used herein
or in any certificate or other document made or delivered pursuant hereto shall
be defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any Note
or in any certificate or other document made or delivered pursuant hereto. Terms
used in this Agreement which are defined in any Supplement or Exhibit hereto
shall, unless the context otherwise indicates, have the meanings given them in
such Supplement or Exhibit. Other terms used in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
1.3 Interpretation of Agreement. A Section, an Exhibit or a
Schedule is, unless otherwise stated, a reference to a section hereof, an
exhibit hereto or a schedule hereto, as the case may be. Section captions used
in this Agreement are for convenience only and shall not affect the construction
of this Agreement. The words
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"hereof," "herein," "hereto" and "hereunder" and words of similar import when
used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Reference to "this Agreement" shall
include the provisions of Supplement A.
1.4 Compliance with Financial Restrictions. Compliance with
each of the financial ratios and restrictions contained herein shall, except as
otherwise provided herein, be determined in accordance with GAAP consistently
followed.
2. LOANS; OTHER MATTERS.
2.1 Loans.
2.1.1 Revolving Loans.
(a) Subject to the terms and conditions of this
Agreement and the Related Agreements, and in reliance upon the
warranties of Borrower set forth herein and in the Related
Agreements, Lender agrees to make such loans or advances
(individually each a "Revolving Loan" and collectively the
"Revolving Loans") from time to time before the Termination
Date to Borrower as Borrower may from time to time request, up
to but not in excess (at any one time outstanding) of the
Revolving Loan Availability. Revolving Loans made by Lender
may be repaid and, subject to the terms and conditions hereof,
reborrowed to but not including the Termination Date unless
the Credit extended under this Agreement is otherwise
terminated as provided in this Agreement.
(b) In the event the aggregate outstanding principal
balance of the Revolving Loans exceeds the Revolving Loan
Availability, Borrower shall, unless Lender shall otherwise
consent, without notice or demand of any kind, immediately
make such repayments of the Revolving Loans or take such other
actions as shall be necessary to eliminate such excess.
(c) All Revolving Loans hereunder shall be paid by
Borrower on the Termination Date, unless payable sooner
pursuant to the provisions of this Agreement, but may, at
Borrower's election, be repaid in whole or in part at any time
prior to such date without premium or penalty.
2.1.2 Reduction of Revolving Credit Amount. Borrower may, at
any time, on at least three (3) Banking Days' prior written notice
received by Lender, permanently reduce the Revolving Credit Amount;
provided, however, that concurrently with any such reduction, Borrower
shall pay to Lender the
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amount, if any, as is necessary to reduce the outstanding principal
balance of all Revolving Loans to such reduced Revolving Credit Amount.
2.1.3 Maximum Outstanding Loans. Notwithstanding any other
provision of this Agreement, the aggregate outstanding principal
balance of all Loans shall not exceed the Revolving Credit Amount;
provided, however, that the foregoing shall not limit the right of
Lender to advance Revolving Loans to Borrower pursuant to the
provisions of Section 5.5, 5.6 or 5.22 of the Parent Loan Agreement (as
incorporated herein by reference) or Section 3.2(c), 7.4, 11.3, 11.4 or
any other provision of this Agreement or any Related Agreement that
permits Lender to advance Loans to Borrower.
2.1.4 Assumption. Borrower and Lender agree that $340,469.00
of the principal balance of the "Revolving Loans" under and as defined
in the Original Loan Agreement outstanding as of the date hereof shall
constitute Revolving Loans hereunder as of the Closing Date. To the
extent of such loans, Borrower hereby absolutely and unconditionally
assumes and affirms all of the "Liabilities" of Parent under and as
defined in the Original Loan Agreement (the "Assumed Liabilities").
Borrower hereby agrees to pay and perform the Assumed Liabilities with
the same effect and to the same extent (as modified hereby) as if
Borrower had been the original primary obligor thereof. To the extent
of the Assumed Liabilities, this Agreement shall be deemed to be a
partial amendment and restatement of the terms and provisions of the
Original Loan Agreement. Nothing contained in this Agreement shall be
construed to release, cancel, terminate, impair the priority of or
otherwise affect adversely all or any part of the Indebtedness of
Parent assumed by Borrower hereunder or the Lien of Lender granted in
respect thereof. Nothing herein shall deem the Indebtedness of Parent
to have been paid, extinguished or novated and the Assumed Liabilities
shall remain outstanding and unpaid on the Closing Date.
2.2 Loan Account; Demand Deposit Account. Lender shall establish or
cause to be established on its books in Borrower's name one or more accounts
(each a "Loan Account") to evidence Loans made to Borrower. Lender will credit
or cause to be credited to a commercial account ("Demand Deposit Account")
maintained by Borrower at Lender's 231 South LaSalle Street, Chicago, Illinois
office the amount of any sums advanced as Loans hereunder. Any amounts advanced
as Loans hereunder which are credited to Borrower's Demand Deposit Account,
together with any other amounts advanced to Borrower as a Loan pursuant to this
Agreement, will be debited to the applicable Loan Account and result in an
increase in the principal balance outstanding in such Loan Account in the amount
thereof.
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2.3 Interest and Fees.
2.3.1 Interest on Revolving Loans. The unpaid principal amount
of each Revolving Loan shall bear interest until maturity at the rates
applicable to Revolving Loans indicated in Supplement A. If any
Revolving Loan or portion thereof is not paid when due, whether by
acceleration or otherwise, the entire unpaid principal amount of the
Revolving Loans shall bear interest thereafter until such overdue
amount is paid in full at the Default Rate applicable to Revolving
Loans indicated in Supplement A. Until maturity, interest on the
Revolving Loans shall be paid by Borrower on the date(s) indicated in
Supplement A, and at such maturity. After maturity, whether by
acceleration or otherwise, accrued interest shall be payable on demand.
2.3.2 Nonuse Fee. Borrower agrees to pay to Lender a fee equal
to one-half of one percent (0.5%) per annum on the product of (x) the
daily average amount by which $5,400,000 exceeds the outstanding
principal balance of the Revolving Loans hereunder plus the outstanding
principal amount of the "Revolving Loans" under the Other Loan
Agreements times (y) .20. Such fee shall be payable in arrears on the
last day of each Fiscal Quarter, and on the date the Credit terminates,
in each case for the period then ended.
2.3.3 Method of Calculating Interest and Fees. Interest on the
unpaid principal amount of each Loan shall accrue from and including
the date such Loan is made to, but not including, the date such Loan is
paid. Interest and any fees shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. All
determinations by Lender of the rate of interest applicable to any Loan
shall be rebuttable presumptive evidence of the applicable interest
rate for such Loan.
2.3.4 Payment of Interest and Fees. Lender may provide for the
payment of any unpaid accrued interest and any fees by charging the
Demand Deposit Account or any other bank account maintained by Borrower
with Lender.
2.4 Requests for Loans; Borrowing Base Certificates; Other
Information.
(a) Loans shall be requested in writing or by telephone,
except for Overdraft Loans and Revolving Loans made pursuant to the
provisions of Section 5.5, 5.6 or 5.22 of the Parent Loan Agreement (as
incorporated herein by reference) or Section 3.2(c), 7.4, 11.3 or 11.4
or any other provision of this Agreement (other than Section 2.1.1) or
any Related
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Agreement that permits Lender to advance Revolving Loans to Borrower.
(b) In the event that Borrower shall at any time, or from time
to time, (i) make a request for a Loan hereunder or (ii) be deemed to
have requested an Overdraft Loan, Borrower agrees to provide Lender
with such information, as soon as practicable after a request therefor,
at such frequency and in such format, as is reasonably required by
Lender, such information to be current as of the time such information
is provided.
(c) Borrower further agrees to provide to Lender a current
Borrowing Base Certificate at the end of each week and at such other
times as Lender may reasonably request. On each Borrowing Base
Certificate, determinations as to eligibility and ineligibility of
collateral shall be made as of the same time. Such Borrowing Base
Certificate shall be executed and certified as accurate by such
officers or employees of Borrower as Borrower shall designate in
writing to Lender pursuant to duly adopted resolutions of the
respective Board of Directors of each such company authorizing such
action.
(d) Borrower shall provide Lender with documentation
satisfactory to Lender indicating the names of those employees of
Borrower authorized by Borrower to sign Borrowing Base Certificates on
behalf of such companies and Borrower shall provide Lender with
documentation satisfactory to Lender indicating the names of the
employees of Borrower authorized by Borrower to make telephonic
requests for Loans, and/or to authorize disbursement of the proceeds of
Loans by wire transfer or otherwise, and Lender shall be entitled to
rely upon such documentation until notified in writing by Borrower of
any change(s) in the names of the employees so authorized. Lender shall
be entitled to act on the instructions of anyone identifying himself as
one of the persons authorized to request Loans or disbursements of Loan
proceeds by telephone and Borrower shall be bound thereby in the same
manner as if the person were actually so authorized. Borrower agrees to
indemnify and hold Lender harmless from and against any and all claims,
damages, liabilities, losses, costs and expenses (including Attorneys'
Fees) which may arise or be created by the acceptance of instructions
for making or paying Loans by wire transfer or telephone, except for
those claims, damages, liabilities, losses, costs and expenses arising
from Lender's gross negligence or willful misconduct.
2.5 Notes. The Revolving Loans shall be evidenced by a promissory note
(herein, as it may from time to time be supplemented, extended or replaced,
called the "Revolving Note") substantially in the form set forth in Exhibit C,
with appropriate
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insertions, dated the date hereof, payable to the order of Lender on the
Termination Date. Borrower hereby irrevocably authorizes Lender to make (or
cause to be made) appropriate notations on the grid attached to the Revolving
Note (or on a continuation of such grid attached to the Revolving Note and made
a part thereof), which notations, if made, shall evidence, inter alia, the date
and outstanding principal amount of all Revolving Loans evidenced thereby. Any
such notations on such grid (and on any continuation thereof) indicating the
outstanding principal amount of Revolving Loans shall be rebuttable presumptive
evidence of the principal amount thereof owing and unpaid, but the failure to
record any such amount on such grid (or on such continuation) shall not limit or
otherwise affect the obligations of Borrower hereunder or under the Revolving
Note to make payments of principal of or interest on such Revolving Loans when
due. Upon request by Borrower to Lender (but not more than once in any 90-day
period), Lender will furnish Borrower with a photocopy of the grid attached to
the Revolving Note.
2.6 Overdraft Loans. Lender, in its sole and absolute discretion, and
subject to the terms hereof, may make a Revolving Loan to Borrower in an amount
equal to the amount of any overdraft which may from time to time exist with
respect to the Demand Deposit Account or any other bank account which Borrower
may now or hereafter have with Lender. The existence of any such overdraft shall
be deemed to be a request by Borrower for such Loan. Borrower acknowledges that
Lender is under no duty or obligation to make any Loan to Borrower to cover any
overdraft. Borrower further agrees that an overdraft shall constitute a separate
Loan under this Agreement (an "Overdraft Loan"), which shall bear, from the date
on which the overdraft occurred until paid, interest in an amount equal to the
greater of (x) 130% of the highest rate of interest then charged for Loans
(other than Overdraft Loans) made hereunder and (y) $50.00 per day. If Lender,
in its sole and absolute discretion, decides not to make a Loan to cover part or
all of any overdraft, Lender may return any check(s) which created such
overdraft.
2.7 Over Advances. Lender, in its sole and absolute discretion, may
make Revolving Loans to Borrower in amounts which cause the outstanding
principal balance of the Revolving Loans to exceed the Revolving Loan
Availability or otherwise permit the outstanding principal balance of the
Revolving Loans to at any time exceed the Revolving Loan Availability, and no
such event or occurrence shall cause or constitute a waiver by Lender of its
right to refuse to make any further Revolving Loans at any time that an Over
Advance exists or would result therefrom. During any period in which the
aggregate outstanding Revolving Loans exceeds the Revolving Loan Availability
(such excess Liabilities are herein referred to as "Over Advances"), the amount
of Over Advances shall
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bear interest at a rate equal to 130% of the highest rate of interest then
charged for Revolving Loans made hereunder.
2.8 All Loans One Obligation. The Revolving Loans and all other Loans
under this Agreement shall constitute one Loan, and all Indebtedness and other
Liabilities of Borrower to Lender under this Agreement and any of the Related
Agreements shall constitute one general obligation secured by Lender's Lien on
all of the Collateral and Third Party Collateral and by all other Liens
heretofore, now, or at any time or times hereafter granted by Borrower or any
other Obligor to Lender. Borrower agrees that all of the rights of Lender set
forth in this Agreement shall apply to any modification of or supplement to this
Agreement, any Supplements or Exhibits hereto, and the Related Agreements,
unless otherwise agreed in writing.
2.9 Making of Payments; Application of Collections; Charging
of Accounts.
(a) All payments hereunder shall be made without set-off or
counterclaim and shall be made to Lender in immediately available funds
(except as Lender may otherwise consent) prior to 12:30 p.m., Chicago
time, on the date due at its office at 231 South LaSalle Street,
Chicago, Illinois 60697, or at such other place as may be designated by
Lender to Borrower in writing. Any payments received after such time
shall be deemed received on the next Banking Day. Whenever any payment
to be made hereunder or under any Note shall be stated to be due on a
date other than a Banking Day, such payment shall be due on the next
succeeding Banking Day, and such extension of time shall be included in
the calculation of interest and any fees.
(b) Borrower authorizes Lender to, and Lender will, subject to
the provisions of this paragraph (b), apply the whole or any part of
any amounts received by Lender (whether deposited in the Assignee
Deposit Account of Borrower or otherwise received by Lender) from the
collection of items of payment and proceeds of any Collateral or Third
Party Collateral (whether received upon any sale or other distribution
of Collateral or Third Party Collateral by Lender or otherwise),
against the principal of and/or interest on any Loans made hereunder
and/or any other Liabilities, whether or not then due, in such order of
application as Lender may determine, unless such payments or proceeds
are, in Lender's sole and absolute discretion, released to Borrower;
provided, however, so long as no Event of Default exists and is
continuing, any such amounts received by Lender shall be applied as
follows: first, to payment of amounts then due with respect to fees
(including Attorneys' Fees), charges and expenses for which Borrower or
any other Obligor is liable
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pursuant to this Agreement and the Related Agreements; second, to
payment of amounts then due with respect to interest on the Loans;
third, to payment of amounts then due with respect to principal of the
Loans; fourth, to repayment of the Revolving Loans; and fifth, to
payment of the Guaranteed Obligations then due and owing; and provided,
further, that no checks, drafts or other instruments received by Lender
shall constitute final payment to Lender unless and until such item of
payment has actually been collected. All items or amounts which are
delivered to Lender by or on behalf of Borrower or any Obligor or any
Account Debtor on account of partial or full payment or otherwise as
proceeds of any of the Collateral or Third Party Collateral (including
any items or amounts which may have been deposited to the Assignee
Deposit Account) may from time to time in Lender's sole and absolute
discretion be released to Borrower or be applied by Lender towards
payment of the Liabilities, whether or not then due, in accordance with
the preceding sentence. Notwithstanding anything to the contrary
herein, (i) solely for purposes of determining the occurrence of an
Event of Default, all cash, checks, instruments and other items of
payment shall be deemed received upon actual receipt by Lender, unless
the same is subsequently dishonored for any reason whatsoever, (ii) for
purposes of determining whether, under Section 2.1, there is
availability for Loans, all cash, checks, instruments and other items
of payment shall be applied against the Liabilities on the first
Banking Day after receipt thereof by Lender and (iii) solely for
purposes of interest calculation hereunder, all cash, checks,
instruments and other items of payment shall be deemed to have been
applied against the Liabilities on the second Banking Day after receipt
by Lender of available funds with respect thereto.
(c) Borrower hereby authorizes Lender to, and Lender may, in
its sole and absolute discretion, charge to Borrower at any time when
due all or any portion of any of the Liabilities including but not
limited to any Attorneys' Fees and other costs and expenses of Lender
for which Borrower or any other Obligor is liable pursuant to the terms
of this Agreement or any Related Agreement, by charging Borrower's
Demand Deposit Account or any other bank account of Borrower with
Lender; provided, however, that the provisions of this Section 2.9(c)
shall not affect the obligation of Borrower or any other Obligor to pay
when due all amounts payable by such Person under this Agreement, any
Note or any Related Agreement, whether or not there are sufficient
funds therefor in the Demand Deposit Account or any such other bank
account of Borrower. So long as no Event of Default or Default exists,
Lender shall use reasonable efforts to give Borrower prompt notice of
Liabilities paid by charging such Demand Deposit Account or other
account (but failure to give such
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notice shall not impose any liability on Lender or relieve
Borrower of any of its obligations).
2.10 Lender's Election Not to Enforce. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including, without limitation, any right of Lender to refrain
from making a Loan if all conditions precedent to Lender's obligation to making
such Loan have not been satisfied.
2.11 Reaffirmation. Each Loan requested by Borrower pursuant to this
Agreement shall constitute an automatic certification by Borrower to Lender that
(i) all of the representations and warranties of Borrower, Parent and each other
Obligor in this Agreement and each of the Related Agreements are true and
correct on the date of such request to the same extent as if made on such date,
except for such changes as are specifically permitted hereunder (or under such
Related Agreement) and (ii) immediately before and after making the requested
Loan, no Event of Default or Default then exists or would result therefrom.
2.12 Setoff. In addition to and not in limitation of all other rights
and remedies (including other rights of offset or banker's lien) that Lender or
any other holder of any Note may have under applicable law, Lender or such other
holder shall, upon the occurrence of any Event of Default described in Section
6.1 and during the continuance thereof, or upon the occurrence of any Default
described in Section 6.1(e) and during the continuance thereof, have the right
to appropriate and apply to the payment of the Liabilities (whether or not then
due), in such order of application as Lender or such other holder may elect, any
and all balances, credits, deposits (general or special, time or demand,
provisional or final), accounts or moneys of Borrower then or thereafter with
Lender or such other holder. Lender shall use reasonable efforts to give
Borrower prompt notice of any appropriation and application pursuant to the
preceding sentence (but failure to give such notice shall not impose any
liability on Lender or relieve Borrower of any of its obligations).
2.13 Refinancing Fee. Borrower shall pay Lender a Refinancing Fee (as
hereinafter defined) from time to time if Borrower shall obtain any Indebtedness
or equity contributions (other than from any other Obligor or Contempo Amsterdam
except if such Indebtedness or equity contribution is funded with funds obtained
by such other Obligor or Contempo Amsterdam from a non- Obligor (other than
Lender)) after the date hereof and Borrower shall at any time cause the
Revolving Credit Amount to be permanently reduced with the proceeds of such
Indebtedness or
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equity contributions. As used in this Section, "Refinancing Fee" shall mean an
amount equal to the amount of the reduction in the Revolving Credit Amount
caused with such proceeds, multiplied by .0125.
2.14 Closing Fee. Borrower agrees to pay to Lender a closing
fee of $15,000 on the Closing Date. With Lender's consent, the
amount of such closing fee due may be advanced to Borrower as a
Revolving Loan.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of all
Loans now or hereafter made by Lender to Borrower hereunder or under any Note,
as security for the payment or other satisfaction of all other Liabilities,
Borrower hereby confirms the continued effectiveness of the grant of a security
interest contained in the Original Security Agreement and hereby further grants
to Lender a security interest in and to the following property of Borrower,
whether now owned or existing, or hereafter acquired or coming into existence,
wherever now or hereafter located (all such property is hereinafter referred to
collectively as the "Collateral"):
(a) Accounts Receivable;
(b) Equipment and Fixtures;
(c) Inventory;
(d) General Intangibles (including all rights of
Borrower with respect to all amounts now or hereafter from
time to time loaned or advanced by Borrower to any
Subsidiary);
(e) Contract Rights and documents of title;
(f) All chattel paper and instruments evidencing, arising out
of or relating to any obligation to Borrower for goods sold or leased
or services rendered, or otherwise arising out of or relating to any
property described in clauses (a) through (e) above;
(g) Any and all balances, credits, deposits (general or
special, time or demand, provisional or final), accounts or monies of
or in the name of Borrower now or hereafter with Lender, any agent or
bailee for Lender, or any Participant, and any and all property of
every kind or description of or in the name of Borrower now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in
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transit to, or standing to Borrower's credit on the books of,
Lender, any agent or bailee for Lender, or any Participant;
(h) All interest of Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any
Accounts Receivable, General Intangibles, Contract Rights, or any
chattel paper or instru-
ments referred to in clause (f) above;
(i) Any and all other property of Borrower, of any kind or
description (including but not limited to real estate of Borrower),
including, without limitation, any property of Borrower subject to a
separate mortgage, pledge or security interest in favor of Lender or in
which Lender now or hereafter has or acquires a security interest
securing any Liabilities pursuant to an agreement or instrument other
than this Agreement;
(j) All replacements, substitutions, additions or
accessions to or for any of the foregoing;
(k) To the extent related to the property described in clauses
(a) through (j) above, all books, correspondence, credit files,
records, invoices and other papers and documents, including, without
limitation, to the extent so related, all tapes, cards, computer runs,
computer programs and other papers and documents in the possession or
control of Borrower or any computer bureau from time to time acting for
Borrower, and, to the extent so related, all rights in, to and under
all policies of insurance, including claims of rights to payments
thereunder and proceeds therefrom, including any credit insurance; and
(l) All products and proceeds (including but not limited to
any Accounts Receivable or other proceeds arising from the sale or
other disposition of any Collateral, any returns of any Equipment or
Inventory sold by Borrower, and the proceeds of any insurance covering
any of the Collateral) of any of the foregoing.
3.2 Accounts Receivable.
(a) If requested by Lender, Borrower shall advise Lender promptly of
any Inventory returned by or repossessed from any Account Debtor, or otherwise
recovered, shall receive such Inventory in trust and, unless instructed to
deliver such Inventory to Lender, shall resell it for Lender. If requested by
Lender, Borrower shall notify Lender immediately of all disputes and claims by
any Account Debtor and settle or adjust them at no expense to Lender. If Lender
directs after the occurrence and during the
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continuance of an Event of Default or a Default, no discount or credit allowance
shall be granted thereafter by Borrower to any Account Debtor. All Account
Debtor payments and all net amounts received by Lender in settlement, adjustment
or liquidation of any Account Receivable may be applied by Lender to the
Liabilities or credited to Borrower's Demand Deposit Account (subject to
collection) with Lender, as Lender may deem appropriate, in either case in
accordance with Section 2.9. If requested by Lender, Borrower will make proper
entries in its books and records disclosing the assignment of Accounts
Receivable to Lender.
(b) Borrower warrants that: (i) to the best of Borrower's knowledge all
of the Accounts Receivable are and will continue to be bona fide existing
obligations created by the sale of goods, the rendering of services, or the
furnishing of other good and sufficient consideration to Account Debtors in the
regular course of business and (ii) to the best of Borrower's knowledge all
shipping or delivery receipts and other documents furnished or to be furnished
to Lender in connection therewith are and will be genuine.
(c) Lender is hereby authorized and empowered (which authorization and
power, being coupled with an interest, shall be irrevocable until the later to
occur of termination of this Agreement and the final payment and performance in
full of all of the Liabilities) at any time in its sole and absolute discretion:
(1) To request, in Borrower's name or, after the occurrence
and during the continuance of an Event of Default or a Default, in
Lender's name or the name of a third party, confirmation from any
Account Debtor or party obligated under or with respect to any
Collateral of the amount shown by the Accounts Receivable or other
Collateral to be payable, or any other matter stated therein;
(2) To endorse in Borrower's name and to collect any chattel
paper, checks, notes, drafts, instruments or other items of payment
tendered to or received by Lender in payment of any Account Receivable
or other obligation owing to Borrower;
(3) To notify, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to notify, any Account Debtor or other
Person obligated under or in respect of any Collateral, of the fact of
Lender's Lien thereon and of the collateral assignment thereof to
Lender;
(4) To direct, in Borrower's name or, after the occurrence and
during the continuance of an Event of Default or a Default, in Lender's
name, and/or to require Borrower to
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direct, any Account Debtor or other Person obligated under or in
respect of any Collateral to make payment directly to Lender of any
amounts due or to become due thereunder or with respect thereto; and
(5) After the occurrence and during the continuance of an
Event of Default, to demand, collect, surrender, release or exchange
all or any part of any Collateral or any amounts due thereunder or with
respect thereto, or compromise or extend or renew for any period
(whether or not longer than the initial period) any and all sums which
are now or may hereafter become due or owing upon or with respect to
any of the Collateral, or enforce, by suit or otherwise, payment or
performance of any of the Collateral either in Lender's own name or in
the name of Borrower.
Under no circumstances shall Lender be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and reasonable out-of-pocket expenses, and the cost of
any Assignee Deposit Account or other bank account or accounts which may be
required hereunder, shall be borne solely by Borrower whether the same are
incurred by Lender or Borrower, and Lender may advance same to Borrower as a
Revolving Loan.
(d) Unless otherwise consented to by Lender, Borrower will, forthwith
upon receipt by Borrower of all checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, any of the Accounts Receivable or
other Collateral, deposit the same in a special bank account (the "Assignee
Deposit Account") with Lender or such other bank or financial institution as
Lender shall consent, over which Lender alone has power of withdrawal, and will,
to the extent required by Lender, designate with each such deposit the
particular Account Receivable or other item of Collateral upon which the
remittance was made. Borrower acknowledges that the maintenance of the Assignee
Deposit Account is solely for the convenience of Lender in facilitating its own
operations and Borrower does not and shall not have any right, title or interest
in the Assignee Deposit Account or in the amounts at any time appearing to the
credit thereof. Said proceeds shall be deposited in precisely the form received
except for Borrower's endorsement where necessary to permit collection of items,
which endorsement Borrower agrees to make. Pending such deposit, Borrower agrees
not to commingle any such checks, drafts, cash and other remittances with any of
its funds or property, but will hold them separate and apart therefrom and upon
an express trust for Lender until deposit thereof is made in the Assignee
Deposit Account. Upon the full and final liquidation of all Liabilities, Lender
will pay over to Borrower any excess amounts received by Lender as payment or
proceeds of Collateral, whether received by
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Lender as a deposit in the Assignee Deposit Account or received by Lender as a
direct payment on any of the sums due hereunder.
(e) Borrower appoints Lender, or any Person whom Lender may from time
to time designate, as Borrower's attorney and agent-in- fact with power: (i)
after the occurrence and during the continuance of an Event of Default, to
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender; (ii) after the event
described in the foregoing clause (i), to receive, open and dispose of all mail
addressed to Borrower; (iii) to send, in Borrower's name or, after the
occurrence and during the continuance of an Event of Default or a Default, in
Lender's name or the name of a third party, requests for verification of
Accounts Receivable or other Collateral to Account Debtors; (iv) to open an
escrow account or Assignee Deposit Account under Lender's sole control for the
collection of Accounts Receivable or other Collateral, if not required
contemporaneously with the execution hereof; and (v) to do all other things
which Lender is permitted to do under this Agreement or any Related Agreement or
which are reasonably necessary to carry out this Agreement and the Related
Agreements. Neither Lender nor any of its directors, officers, employees or
agents will be liable for any acts of commission or omission nor for any error
in judgment or mistake of fact or law, unless the same shall have resulted from
gross negligence or willful misconduct. The foregoing appointment and power,
being coupled with an interest, shall be irrevocable until all Liabilities under
this Agreement are finally paid and performed in full and this Agreement is
terminated. Borrower expressly waives presentment, demand, notice of dishonor
and protest of all instruments and any other notice to which it might otherwise
be entitled.
(f) If any Account Receivable, Contract Right or General Intangible
arises out of a contract with the United States or any department, agency, or
instrumentality thereof, Borrower will, unless Lender shall otherwise agree,
immediately notify Lender in writing and execute any instruments and take any
steps required by Lender in order that all monies due and to become due under
such contract shall be assigned to Lender and notice thereof given to the
government under the Federal Assignment of Claims Act of 1940, as amended, or
other applicable laws or regulations; provided, however, that unless Lender
otherwise requests, until an Event of Default or a Default shall have occurred
and be continuing, Borrower need not take any of the steps contemplated in this
paragraph with respect to any contract with a value of less than $10,000.
(g) If any Account Receivable or Contract Right is evidenced by chattel
paper or promissory notes, trade acceptances, or other instruments for the
payment of money, Borrower will, unless Lender shall otherwise agree, deliver
the originals of same to Lender,
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appropriately endorsed to Lender's order and, regardless of the form of such
endorsement, Borrower hereby expressly waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with respect
thereto.
3.3 Inventory.
(a) Unless Lender shall otherwise agree, if Borrower sells Inventory
for cash, all full and partial payments therefor shall be immediately (and, in
any event, not later than the end of the day received) delivered by Borrower to
Lender in their original form for deposit in the Assignee Deposit Account or for
other application to reduction of the Liabilities, in either case in accordance
with Section 2.9. Pending such delivery, all such cash shall be held by Borrower
in trust for Lender.
(b) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances, except for Lender's
gross negligence or willful misconduct. Lender shall not be responsible for
collection of any proceeds or for losses in collected proceeds held by Borrower
in trust for Lender. Any and all risk of loss for any or all of the foregoing
shall be upon Borrower, except for such loss as shall result from Lender's gross
negligence or willful misconduct.
(c) If requested by Lender, Borrower shall, upon acquiring an interest
in any Inventory, deliver to Lender a description of such Inventory, together
with supplier's invoices, warranties, production, cost and other records as
Lender may request. If requested by Lender, Borrower shall deliver to Lender
schedules of the sale of any Inventory immediately upon its sale. Any material
change in the value or condition of any Inventory, and any errors discovered in
any schedule or description delivered to Lender, shall be reported to Lender
immediately. Borrower confirms that the warranties and representations in this
Agreement shall apply to each schedule. Borrower represents and warrants that,
as to each schedule and description of Inventory delivered to Lender:
(1) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all material respects;
(2) None of the goods are defective, of second quality,
used, or goods returned after shipment, except where described
as such; and
(3) All Inventory not included on such schedule or
description has been previously scheduled or described.
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(d) If requested by Lender, Borrower will notify Lender immediately if
Borrower obtains possession (by return, repossession or otherwise) of any
Inventory which has been sold, and will inform Lender of the identity of the
returned or repossessed Inventory, the applicable Account Debtor and the amount
of the applicable Account Receivable.
3.4 Equipment.
(a) Borrower shall at all times keep, and cause each Subsidiary to
keep, its Equipment in good operating condition and repair, ordinary wear and
tear excepted, and neither Borrower nor any Subsidiary shall, without the prior
written consent of Lender, sell, lease, or otherwise dispose of any of its
Equipment, or any part thereof or interest therein; provided, however, that
without Lender's consent (but with notice to Lender) Borrower or any Subsidiary
may dispose of obsolete or unuseful Equipment in the ordinary course provided
all Equipment so disposed of by Parent and its Subsidiaries in any Fiscal Year
has an aggregate market value of $50,000 or less.
(b) In the event any Equipment is sold, transferred or otherwise
disposed of by Borrower or any Subsidiary, unless Lender shall agree otherwise,
Borrower or the applicable Subsidiary shall deliver all of the proceeds of any
such sale, transfer or disposition to Lender, which proceeds shall be deposited
in the Assignee Deposit Account or otherwise applied to the repayment of the
Liabilities, in either case in accordance with Section 2.9.
(c) Borrower will, upon request of Lender, submit to Lender a current
listing of all Equipment of Borrower and its Subsidiaries, which listing shall
indicate the type, model, serial number and location of such Equipment.
3.5 Supplemental Documentation. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above is hereinafter referred to as the "Supplemental
Documentation"), in form and substance acceptable to Lender, and pay all taxes,
fees and other reasonable costs and expenses associated with any recording or
filing of the Supplemental Documentation. Borrower hereby irrevocably makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney (and agent-in-fact) (which
appointment and power, being coupled with an interest, shall be irrevocable
until the later to occur of termination of this Agreement and final payment and
performance in
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full of all of the Liabilities) to sign the name of Borrower on any of the
Supplemental Documentation and to deliver any of the Supplemental Documentation
to such Persons as Lender, in its sole and absolute discretion, may elect.
Borrower agrees that a carbon, photographic, photostatic, or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to make Loans to Borrower
under this Agreement, Borrower hereby represents and warrants to Lender the
truth and accuracy of all matters contained in Section 4 of the Parent Loan
Agreement as from time to time in effect (or, if the Parent Loan Agreement has
been terminated, as in effect immediately prior to such termination), insofar as
the representations and warranties contained therein are applicable to Borrower,
each such representation and warranty (insofar as applicable as aforesaid) and
all other terms of the Parent Loan Agreement to which reference is made therein,
being incorporated herein by reference as though specifically set forth herein.
5. BORROWER COVENANTS. From the date of this Agreement and thereafter until the
Credit is terminated and all Liabilities are finally paid in full, Borrower
agrees that, unless Lender shall otherwise consent in writing, it will perform,
comply with and be bound by all of the agreements, covenants and obligations set
forth in Section 5 of the Parent Loan Agreement as from time to time in effect
(or, if the Parent Loan Agreement has been terminated, as in effect immediately
prior to such termination) which are applicable to Borrower, each such
agreement, covenant and obligation and all other terms of the Parent Loan
Agreement to which reference is made therein being incorporated herein by
reference as though specifically set forth herein. Without limiting the
foregoing, to the extent that Sections 5.5, 5.6 and 5.22 of the Parent Loan
Agreement provide that Lender may advance loans to Parent in certain
circumstances, it is agreed that Lender may make advances to Borrower in such
circumstances if such circumstances exist with respect to Borrower, with such
advances to be Revolving Loans hereunder.
6. DEFAULT.
6.1 Event of Default. Each of the following shall constitute
an Event of Default under this Agreement:
(a) Non-Payment. Default in the payment, when due or
declared due, of any of the Liabilities.
(b) Non-Payment of Other Indebtedness. Default in the
payment when due, whether by acceleration or otherwise
(subject to any applicable grace period), of any Indebtedness
of, or guaranteed by, Borrower, any other Obligor or any
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Subsidiary (other than (i) any Indebtedness under this Agreement and
any Notes, (ii) any Indebtedness of Parent or any Subsidiary of Parent
to Borrower or to any other Subsidiary of Parent, (iii) any
Indebtedness of Borrower to Parent or any other Subsidiary of Parent or
(iv) Indebtedness under the Other Loan Agreements); provided that the
aggregate amount of Indebtedness so affected shall equal or exceed
$25,000.
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, Borrower, any other Obligor or any
Subsidiary (other than (i) any Indebtedness of Parent or any Subsidiary
of Parent to Borrower or to any other Subsidiary of Parent, (ii) the
Indebtedness under this Agreement and any Notes, (iii) any Indebtedness
of Borrower to Parent or any other Subsidiary of Parent or (iv)
Indebtedness under the Other Loan Agreements) or enables the holder or
holders of such other Indebtedness or any trustee or agent for such
holders (any required notice of default having been given and any
applicable grace period having expired) to accelerate the maturity of
such other Indebtedness; provided that the aggregate amount of
Indebtedness with respect to which such event or condition shall have
occurred shall equal or exceed $25,000.
(d) Other Obligations. Default in the payment when due,
whether by acceleration or otherwise, or in the performance or
observance (subject to any applicable grace period or waiver of such
default) of (i) any obligation or agreement of Borrower, any other
Obligor or any Subsidiary to or with Lender (other than any obligation
or agreement of Borrower hereunder and under any Related Agreement); or
(ii) any material obligation or agreement of Borrower, any other
Obligor or any Subsidiary to or with any other Person (other than (x)
any such material obligation or agreement constituting or related to
Indebtedness, (y) Trade Accounts Payable and (z) any material
obligation or agreement of any Subsidiary to Borrower or to any other
Subsidiary), except only to the extent that the existence of any such
default is being contested by Borrower, such other Obligor or such
Subsidiary, as the case may be, in good faith and by appropriate
proceedings and Borrower, such other Obligor or such Subsidiary, as
applicable, shall have set aside on its books such reserves or other
appropriate provisions therefor as may be required by GAAP.
(e) Insolvency. Borrower, any other Obligor or any
Subsidiary becomes insolvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they
mature, or applies for, consents to, or acquiesces in the
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appointment of a trustee, receiver or other custodian for Borrower,
such other Obligor or such Subsidiary, or for a substantial part of the
property of Borrower, such other Obligor or such Subsidiary, or makes a
general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Borrower, any other Obligor or any
Subsidiary, or for a substantial part of the property of Borrower, any
other Obligor or any Subsidiary and is not discharged or dismissed
within 60 days; or any bankruptcy, reorganization, debt arrangement or
other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against
Borrower, any other Obligor or any Subsidiary and, solely in the case
where such proceeding shall have been instituted against Borrower, such
Obligor or such Subsidiary, such proceeding shall not have been
dismissed within 60 days or an order for relief shall have been
entered; or any warrant of attachment or similar legal process is
issued against any substantial part of the property of Borrower, any
other Obligor or any Subsidiary.
(f) Pension Plans. The institution by Borrower or any ERISA
Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, Borrower or any ERISA Affiliate would be
required to make a contribution to such Pension Plan, or would incur a
liability or obligation to such Pension Plan, in excess of $50,000; the
institution by the PBGC of steps to terminate any Pension Plan and the
continuation of either such condition after notice thereof from Lender;
or a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
(g) Non-Compliance With This Agreement. Default in the
performance of any of Borrower's agreements set forth in Section 2,
3.2, 3.3 or 3.4 hereof or Section 5.3, 5.5, 5.6 or 5.12 through 5.30 of
the Parent Loan Agreement (and not, in each case, constituting an Event
of Default under any of the other subsections of this Section 6.1), and
continuance of such default after written notice thereof to Borrower
from Lender; or default in the performance of any of Borrower's
agreements set forth in Section 6 of Supplement A or Section 5.2 of the
Parent Loan Agreement (and not, in each case, constituting an Event of
Default under any of the other subsections of this Section 6.1), and
continuance of such default for three (3) Banking Days after notice
thereof to Borrower from Lender; or default in the performance of any
of Borrower's other agreements herein set forth (and not constituting
an Event of Default under any of the other subsections of this Section
6.1), and continuance of such default
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for thirty (30) days after written notice thereof to Borrower from
Lender.
(h) Non-Compliance With Related Agreements. Default in the
performance by Borrower, any other Obligor or any Subsidiary of any of
its agreements set forth in any Related Agreement (and not constituting
an Event of Default under any of the other subsections of this Section
6.1), and continuance of such default after notice from Lender and the
expiration of the grace period (if any) set forth therein.
(i) Warranty. Any warranty made by Borrower or any other
Obligor herein or in any Related Agreement is untrue or misleading in
any material respect when made or deemed made; any schedule, statement,
report, notice, certificate or other writing furnished by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on the date as of which the facts set forth therein are stated
or certified; or any certification made or deemed made by Borrower or
any other Obligor to Lender is untrue or misleading in any material
respect on or as of the date made or deemed made.
(j) Litigation. There shall be entered against any one of
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $50,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which Borrower, such Subsidiary or such
Obligor, as applicable, is insured and with respect to which the
insurer has assumed responsibility in writing or for and to the extent
which Borrower, such Subsidiary or such Obligor, as applicable, is
otherwise indemnified if the terms of such indemnification are
satisfactory to Lender.
(k) Validity. If the validity or enforceability of this
Agreement or any Related Agreement shall be challenged by Borrower, any
other Obligor or any other Person acting through, or on behalf of,
Borrower or any other Obligor, or shall fail to remain in full force
and effect.
(l) Conduct of Business. If Borrower, any other Obligor or any
Subsidiary is enjoined, restrained or in any way prevented by court
order, which has not been dissolved or stayed within five (5) business
days, from conducting all or any material part of its business affairs.
(m) Material Adverse Change. Lender shall have
determined in good faith that (i) a material adverse change
has occurred in the business, operations or financial
condition of Borrower, any other Obligor or any Subsidiary,
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(ii) Lender's interest in any material Collateral or Third Party
Collateral has been adversely affected or impaired, or the value
thereof to Lender has been diminished to a material extent or (iii) the
prospect of payment or performance of any obligation or agreement of
Borrower or any other Obligor hereunder or under any Related Agreement
is materially impaired, and the condition giving rise to such
determination does not constitute an Event of Default under any of the
other subsections of this Section 6.1 and continues to exist unremedied
for a period of thirty (30) days after written notice of such
determination by Lender to Borrower.
(n) Other Loan Agreements. The existence of any other
"Event of Default" under and as defined in the Other Loan
Agreements.
6.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default described in
Section 6.1(e) shall occur, then Lender's commitment and the Credit extended
under this Agreement shall terminate and all Liabilities hereunder and under any
Notes shall be immediately due and payable without demand, notice or declaration
of any kind whatsoever.
(b) In the event an Event of Default other than one described in
Section 6.1(e) shall occur, then Lender may declare its commitment terminated
and/or all Liabilities hereunder and under any Notes immediately due and payable
without demand or notice of any kind whatsoever, whereupon the Credit extended
under this Agreement shall terminate and all Liabilities hereunder and under any
Notes shall be immediately due and payable. Lender shall promptly advise
Borrower of any such declaration, but failure to do so shall not impair the
effect of such declaration.
(c) If any Event of Default exists and is continuing, Lender
may exercise any one or more or all of the following remedies, all
of which are cumulative and non-exclusive:
(1) Any remedy contained in this Agreement or in any of
the Related Agreements or any Supplemental Documentation;
(2) Any rights and remedies available to Lender under
the UCC and any other applicable law;
(3) To the extent permitted by applicable law, Lender may,
without notice, demand or legal process of any kind, take possession of
any or all of the Collateral and Third Party Collateral (in addition to
Collateral and Third Party Collateral which it may already have in its
possession), wherever it may be found, and for that purpose may pursue
the
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same wherever it may be found, and may enter into any premises where
any of the Collateral or Third Party Collateral may be or is supposed
to be, and search for, take possession of, remove, keep and store any
of the Collateral or Third Party Collateral until the same shall be
sold or otherwise disposed of, and Lender shall have the right to store
the same in any of Borrower's premises without cost to Lender;
(4) At Lender's request, Borrower will (and will cause its
Subsidiaries to), at Borrower's (or such Subsidiaries') expense,
assemble the Collateral and Third Party Collateral and make it
available to Lender at a place or places to be designated by Lender
which is reasonably convenient to Lender and Borrower; and
(5) Lender at its option, and pursuant to notification given
to Borrower (or any other applicable Obligor) as provided for below,
may sell any Collateral or Third Party Collateral actually or
constructively in its possession at public or private sale and apply
the proceeds thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition.
7.2 Application of Proceeds of Collateral. Any proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by Lender toward
the payment of such of the Liabilities, and in such order of application, as
Lender may from time to time elect.
7.3 Care of Collateral. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Lender to comply with such request shall not, of itself,
be deemed a failure to exercise reasonable care, and no failure of Lender to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
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7.4 Performance of Borrower's Obligations. Lender shall have the right,
but shall not be obligated, to discharge any claims against or Liens, and any
Taxes at any time levied or placed upon any or all Collateral, including,
without limitation, those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. Lender may also pay for
maintenance and preservation of Collateral. Lender may, but is not obligated to,
perform or fulfill any of Borrower's responsibilities under this Agreement which
Borrower has failed to perform or fulfill. Lender may advance to Borrower as a
Revolving Loan any payment made or expense incurred by Lender under this Section
7.4.
7.5 Lender's Rights. None of the following shall affect the obligations
of Borrower to Lender under this Agreement or Lender's right with respect to the
remaining Collateral or any Third Party Collateral (any or all of which actions
may be taken by Lender at any time, whether before or after an Event of Default,
at its sole and absolute discretion and without notice to Borrower):
(a) acceptance or retention by Lender of other property or
interests in property as security for the Liabilities, or acceptance or
retention of any Obligor(s), in addition to Borrower, with respect to
any of the Liabilities;
(b) release of its security interest in, or the surrender or
release of, or the substitution or exchange of or for, all or any part
of the Collateral or any Third Party Collateral or any other property
securing any of the Liabilities (including but not limited to any
property of any Obligor other than Borrower), or any extension or
renewal for one or more periods (whether or not longer than the
original period), or release, compromise, alteration or exchange, of
any obligations of any guarantor or other Obligor with respect to any
Collateral, any Third Party Collateral or any such property;
(c) extension or renewal for one or more periods (whether or
not longer than the original period), or release, compromise,
alteration or exchange of any of the Liabilities, or release or
compromise of any obligation of any Obligor with respect to any of the
Liabilities; or
(d) failure by Lender to resort to other security or pursue
any Person liable for any of the Liabilities before resorting to the
Collateral or Third Party Collateral.
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 Conditions Precedent. The effectiveness of this Agreement (and the
obligation of Lender to make any Loan hereunder on the date of this Agreement)
is subject to satisfaction of the following conditions precedent (in addition to
those provided in Section 8.2):
8.1.1 Security Interest. The security interest in the
Collateral granted under this Agreement and the Related Agreements, and
in any Third Party Collateral and all other Liens granted to Lender to
secure the Liabilities, shall be a senior, perfected Lien except as
otherwise agreed by Lender, and all financing statements and other
documents relating to Collateral and Third Party Collateral shall have
been filed or recorded, as appropriate.
8.1.2 Blocked Account; Lock Box. Borrower and its Subsidiaries
shall have entered into blocked account and/or lock box agreements with
Lender for the collection and remittance to Lender of cash proceeds of
Collateral and Third Party Collateral.
8.1.3 Effect of Law. No law or regulation affecting Lender's
entering into this Agreement shall impose upon Lender any material
obligation, fee, liability, loss, cost, expense or damage.
8.1.4 Other Loan Agreements. The Other Loan Agreements
shall have become effective in accordance with their terms.
8.1.5 Fees. Lender shall have received the closing fee
referred to in Section 2.14 and any other fees then due and payable by
Borrower or any other Person hereunder or in connection herewith.
8.1.6 Documents. Lender shall have received all of the
following, each duly executed where appropriate and dated as of the
Closing Date (or such other date as shall be satisfactory to Lender),
in form and substance satisfactory to Lender:
(a) Resolutions. A copy, duly certified by the secretary or an
assistant secretary of Borrower and each Subsidiary party to a Related
Agreement, of: (1) resolutions of the Board of Directors of Borrower
and each such Subsidiary authorizing (A) the borrowings by Borrower
hereunder, (B) the execution, delivery and performance by Borrower and
each such Subsidiary of this Agreement and each other Related Agreement
to which Borrower and each such Subsidiary is a party or by which it is
bound and (C) certain officers or employees (i) of
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Borrower to request borrowings by telephone and (ii) of Borrower to
execute Borrowing Base Certificates; (2) all documents evidencing any
other necessary corporate action with respect to this Agreement and the
Related Agreements; and (3) all approvals or consents, if any, with
respect to this Agreement and the Related Agreements;
(b) Incumbency Certificates. A certificate of the secretary of
Borrower and each Subsidiary party to a Related Agreement certifying
the names of the officers of Borrower and each such Subsidiary
authorized to sign this Agreement and each other Related Agreement to
which Borrower and each such Subsidiary is a party or by which any of
them is bound, and all other documents and certificates to be delivered
by any of them hereunder, together with samples of the true signatures
of such officers;
(c) Borrower's Certificate. The certificate of the President
or Chief Executive Officer of Borrower certifying to the fulfillment of
all conditions precedent to closing and funding the secured financing
transaction contemplated by this Agreement and to the truth and
accuracy, as of such date, of the representations and warranties of
Borrower and each Subsidiary party to a Related Agreement contained in
this Agreement and each other Related Agreement to which Borrower or
such Subsidiary is a party or by which it is bound;
(d) Landlord's Consents. A Landlord's Consent, duly executed
by the owner of each leased premises identified on Schedule 4.12, 4.13
or 4.15 to the Parent Loan Agreement where Collateral or Third Party
Collateral is located other than 4209 Vineland Road, Orlando, Florida;
(e) Note. The Revolving Note in the form of Exhibit C;
and
(f) Other Documents. Such other documents as Lender shall
determine to be necessary or desirable, including but not limited to
documents described in paragraphs (a) and (b) of this Section 8.1.6
with respect to any Obligor other than Borrower and its Subsidiaries.
8.2 Continuing Conditions Precedent to all Loans; Certifi-
cation. The obligation of Lender to make any Loan hereunder is
subject to satisfaction of the following conditions precedent in
addition to those provided in Section 8.1:
(a) No Change in Condition. No change in the condition
or operations, financial or otherwise, of Borrower, any
Subsidiary or any other Obligor shall have occurred which
change, in the reasonable credit judgment of Lender, would
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reasonably be expected to have a material adverse effect on Borrower,
such Subsidiary or such other Obligor, or on any Collateral or Third
Party Collateral (which Collateral or Third Party Collateral Lender
deems in its sole discretion to be material);
(b) Default. Before and after giving effect to such
Loan, no Event of Default or Default shall have occurred and
be continuing;
(c) Insurance. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent, scope or cost of the insurance
policies of Borrower or any Subsidiary listed on Schedule 4.7 to the
Parent Loan Agreement which change would have a material adverse effect
on the financial condition of Borrower, any Subsidiary or Borrower and
its Subsidiaries taken as a whole, or would significantly adversely
affect Borrower's ability to perform its obligations under this
Agreement, the Notes or any Related Agreement to which it is a party or
by which it is bound;
(d) Warranties. Before and after giving effect to such
Loan, the warranties in Section 4 shall be true and correct as
though made on the date of such Loan, except for such changes
as are specifically permitted hereunder; and
(e) Accounting Methods. Borrower shall not have made
any material (as reasonably determined by Lender) change in
its accounting methods or principles except as required by
GAAP.
Each request for a Loan hereunder made or deemed to have been made by
Borrower shall be deemed to be a certificate of Borrower as to the matters set
out in the foregoing provisions of this Section 8.2.
9. INDEMNITY.
9.1 Environmental and Safety and Health Indemnity. Borrower hereby
indemnifies Lender and agrees to hold Lender harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of any
and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Parent or any of its Subsidiaries of any
Environmental Law or Occupational Safety and Health Law, or with respect to, or
as a direct or indirect result of, (i) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
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properties utilized by Parent and/or any Subsidiary of Parent into or upon any
land, the atmosphere, or any watercourse, body of water, groundwater or wetland,
of any Hazardous Material or other hazardous, toxic or dangerous waste,
substance or constituent, or other substance (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law) or (ii) the existence of any unsafe or
unhealthful condition on or at any premises utilized by Parent and/or any
Subsidiary of Parent in the conduct of its business. The provisions and
undertakings of indemnification set out in this Section 9.1 shall survive
satisfaction and payment of the Liabilities and termination of this Agreement.
9.2 General Indemnity. In addition to the payment of expenses pursuant
to Section 11.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
any Note, and the officers, directors, employees, agents, and affiliates of
Lender and such holders (collectively, the "Indemnitees"), harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any Related Agreement or
any other agreements executed and delivered by Borrower or any other Obligor in
connection herewith, the statements contained in any commitment letter delivered
by Lender, Lender's agreement to make the Loans hereunder, or the use or
intended use of the proceeds of any of the Loans hereunder (the "indemnified
liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of such Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Borrower shall contribute the maximum portion that it is permitted to pay under
applicable law to the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them. The provisions and undertakings of
indemnification set out in this Section 9.2 shall survive satisfaction and
payment of the Liabilities and termination of this Agreement.
9.3 Capital Adequacy. If Lender shall reasonably determine
that the application or adoption of any law, rule, regulation,
directive, interpretation, treaty or guideline regarding capital
adequacy, or any change therein or in the interpretation or
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administration thereof, whether or not having the force or law (including,
without limitation, application of changes to Regulation H and Regulation Y of
the Federal Reserve Board issued by the Federal Reserve Board on January 19,
1989 and regulations of the Comptroller of the Currency, Department of the
Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the Currency
on January 27, 1989) increases the amount of capital required or expected to be
maintained by Lender or any Person controlling Lender, and such increase is
based upon the existence of Lender's obligations hereunder and other commitments
of this type, then from time to time, within ten (10) days after demand from
Lender, Borrower shall pay to Lender such amount or amounts as will compensate
Lender or such controlling Person, as the case may be, for such increased
capital requirement. The determination of any amount to be paid by Borrower
under this Section 9.3 shall take into consideration the policies of Lender or
any Person controlling Lender with respect to capital adequacy and shall be
based upon any reasonable averaging, attribution and allocation methods. A
certificate of Lender setting forth the amount or amounts as shall be necessary
to compensate Lender as specified in this Section 9.3 shall be delivered to
Borrower and shall be conclusive in the absence of manifest error. The
provisions and undertakings of indemnification set out in this Section 9.3 shall
survive satisfaction and payment of the Liabilities and termination of this
Agreement.
9.4 Other Indemnities. Notwithstanding anything to the contrary
elsewhere in this Agreement, all other indemnities of Borrower in favor of
Lender contained in this Agreement shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
10. ADDITIONAL PROVISIONS. Additional provisions are set forth in
Supplement A.
11. GENERAL.
11.1 Borrower Waiver. Except as otherwise provided for in this
Agreement, Borrower waives (i) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals 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,
assuming Lender has acted in a commercially reasonable manner, 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 Lender's
relevy, attachment or levy on or of, the Collateral or any bond or security
which might be required by any court prior to allowing Lender to exercise any of
Lender's remedies; and (iii) the benefit of all valuation,
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appraisement and exemption laws. Borrower acknowledges that it has been advised
by counsel of its choice with respect to this Agreement and the transactions
evidenced by this Agreement.
11.2 Power of Attorney. Borrower appoints Lender, or any Person whom
Lender may from time to time designate, as Borrower's attorney and agent-in-fact
with power (which appointment and power, being coupled with an interest, shall
be irrevocable until all Liabilities are finally paid and performed in full and
this Agreement is terminated), without notice to Borrower, to:
(a) At such time or times hereafter as Lender or said agent,
in its sole and absolute discretion, may determine in Borrower's or
Lender's name (i) endorse Borrower's name on any checks, notes, drafts
or any other items of payment relating to and/or proceeds of the
Collateral which come into the possession of Lender or under Lender's
control and apply such payment or proceeds to the Liabilities in
accordance with the terms hereof; (ii) endorse Borrower's name on any
chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement in Lender's possession relating
to Accounts Receivable, Inventory or any other Collateral; (iii) use
the information recorded on or contained in any data processing
equipment and computer hardware and software to which Borrower has
access relating to Accounts Receivable, Inventory and/or other
Collateral; (iv) use Borrower's stationery and sign the name of
Borrower to verification of Accounts Receivable and notices thereof to
Account Debtors; and (v) if not done by Borrower, do all acts and
things determined by Lender to be necessary, to fulfill Borrower's
obligations under this Agreement; and
(b) At such time or times after the occurrence and during the
continuance of an Event of Default, as Lender or said agent, in its
sole and absolute discretion, may determine, in Borrower's or Lender's
name: (i) demand payment of the Accounts Receivable; (ii) enforce
payment of the Accounts Receivable, by legal proceedings or otherwise;
(iii) exercise all of Borrower's rights and remedies with respect to
the collection of the Accounts Receivable and other Collateral; (iv)
settle, adjust, compromise, extend or renew the Accounts Receivable;
(v) settle, adjust or compromise any legal proceedings brought to
collect the Accounts Receivable; (vi) if permitted by applicable law,
sell or assign the Accounts Receivable and/or other Collateral upon
such terms for such amounts and at such time or times as Lender may
deem advisable; (vii) discharge and release the Accounts Receivable
and/or other Collateral; (viii) prepare, file and sign Borrower's name
on any proof of claim in bankruptcy or similar document against any
Account Debtor; (ix) prepare, file and sign Borrower's name on any
notice of lien, assignment or
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satisfaction of lien or similar document in connection with the
Accounts Receivable and/or other Collateral; and (x) do all acts and
things necessary, in Lender's sole and absolute discretion, to obtain
repayment of the Liabilities and to fulfill Borrower's other
obligations under this Agreement.
11.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any
Loan is made hereunder, to pay upon demand all Attorneys' Fees and all other
reasonable expenses incurred by Lender in connection with (i) [intentionally
left blank], (ii) the preparation of any and all amendments to this Agreement or
any of the Related Agreements and all other instruments or documents provided
for therein or delivered or to be delivered thereunder or in connection
therewith, (iii) the collection or enforcement of Borrower's or any other
Obligor's obligations hereunder or under any Related Agreement, and (iv) the
collection or enforcement of any of Lender's rights in or to any Collateral or
Third Party Collateral. Lender may advance all such amounts to Borrower as a
Revolving Loan. Borrower also agrees, (v) to indemnify and hold Lender harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans except for losses and expenses
arising from Lender's gross negligence or willful misconduct, and (vi) to pay,
and save Lender harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Agreement, or
any Related Agreement or Supplemental Documentation, or the issuance of any Note
or of any other instruments or documents provided for herein or to be delivered
hereunder or in connection herewith. Borrower's foregoing obligations shall
survive any termination of this Agreement.
11.4 Lender Fees and Charges. Borrower agrees to pay Lender on demand
the customary fees and charges of Lender for maintenance of accounts with Lender
or for providing other services to Borrower. Lender may, in its sole and
absolute discretion, provide for such payment by advancing the amount thereof to
Borrower as a Revolving Loan.
11.5 Lawful Interest. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to Borrower.
11.6 No Waiver by Lender; Amendments. No failure or delay on
the part of Lender in the exercise of any power or right, and no
course of dealing between Borrower and Lender shall operate as a
waiver of such power or right, nor shall any single or partial
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exercise of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. The remedies provided for herein are
cumulative and not exclusive of any remedies which may be available to Lender at
law or in equity. No notice to or demand on Borrower not required hereunder
shall in any event entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Lender to
any other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or any Related Agreement shall in any event be effective
unless the same shall be in writing and signed and delivered by Lender and
Borrower. Any waiver of any provision of this Agreement, and any consent to any
departure by Borrower from the terms of any provision of this Agreement, shall
be effective only in the specific instance and for the specific purpose for
which given.
11.7 Termination of Credit.
(a) Unless the Termination Date is extended pursuant to clause
(b) of this Section 11.7, the Credit shall terminate on the
then-scheduled Termination Date. Borrower may terminate the Credit at
any time prior to the Termination Date upon notice to Lender and
payment in full of the outstanding principal balance of the Loans and
all other Liabilities. All of Lender's rights and remedies, the liens
and security interests of Lender in the Collateral and the Third Party
Collateral and all of Borrower's duties and obligations under this
Agreement shall survive termination of the Credit extended to Borrower
hereunder until all of the Liabilities have been finally paid and
performed in full. The termination or cancellation of the Credit shall
not affect or impair the liabilities and obligations of Borrower or any
one or more of the Obligors to Lender or Lender's rights with respect
to any Loans and advances made and other Liabilities incurred prior to
such termination or with respect to the Collateral or any Third Party
Collateral.
(b) Borrower may, not more than 90 days nor less than 75 days
prior to any scheduled Termination Date, request that Lender extend the
Credit for an additional one-year period to the next anniversary of
such date. Unless Lender, in the exercise of its sole and complete
discretion, notifies Borrower of its willingness to extend the Credit
for such additional one-year period, the Credit shall terminate on the
then scheduled Termination Date (and all Loans and other Liabilities
shall be thereupon due and payable).
11.8 Notices. Except as otherwise expressly provided herein,
any notice hereunder to Borrower or Lender shall be in writing
(including telegraphic, telex, or facsimile communication) and
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shall be given to Borrower or Lender at its address, telex number or facsimile
number set forth on the signature pages hereof or at such other address, telex
number or facsimile number as Borrower or Lender may, by written notice,
designate as its address, telex number or facsimile number for purposes of
notices hereunder. All such notices shall be deemed to be given when transmitted
by telex and the appropriate answerback is received, transmitted by facsimile,
delivered to the telegraph office, delivered by courier, personally delivered
or, in the case of notice by mail, three (3) Banking Days following deposit in
the United States mails, properly addressed as herein provided, with proper
postage prepaid; provided, however, that notice to Lender of Borrower's intent
to terminate the Credit shall not be effective until actually received by
Lender.
11.9 Assignments and Participations; Information. Borrower hereby
consents to Lender's grant of participations in or sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or any Related Agreement, or of any portion of any thereof, including
without limitation Lender's rights, titles, interests, remedies, powers and/or
duties. Lender may furnish any information concerning Borrower in the possession
of Lender from time to time to assignees of the rights and/or obligations of
Lender hereunder and to Participants in any Loan (including prospective
assignees and Participants) and may furnish information in response to credit
inquiries consistent with general banking practice. Lender shall promptly notify
Borrower of Lender's grant of any participation in or sale, assignment, transfer
or other disposition of this Agreement or any Related Agreement, or of any
portion of any thereof. Borrower shall use its reasonable efforts to assist
Lender in its efforts to sell assignments and participations.
11.10 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 Successors. This Agreement shall be binding upon Borrower and
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower and Lender and the successors and assigns of Lender.
Borrower shall not assign its rights or duties hereunder without the consent of
Lender.
11.12 Construction. Borrower acknowledges that this Agreement shall not
be binding upon Lender until and unless accepted by Lender in writing. If so
accepted by Lender, this Agreement and the Related Agreements and Supplemental
Documentation shall, unless otherwise expressly provided therein, be deemed to
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<PAGE>
have been negotiated and entered into in, and shall be governed and controlled
by the laws of, the State of Illinois as to interpretation, enforcement,
validity, construction, effect, choice of law, and in all other respects,
including, but not limited to, the legality of the interest rate and other
charges, but excluding perfection of security interests and liens which shall be
governed and controlled by the laws of the relevant jurisdiction.
11.13 Consent to Jurisdiction. To induce Lender to accept this
Agreement, Borrower irrevocably agrees that, subject to Lender's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, THE
SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE
HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT
THEREOF.
11.14 Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to "Borrower
and its Subsidiaries" or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes.
11.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(i) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Initials of Robert C. Shaw, President of Borrower:
.
11.16 Prior Actions. Borrower hereby waives, releases and forever
discharges Lender, its officers, employees and agents, from any and all rights,
claims, demands or causes of action against Lender, in law or in equity, arising
out of Lender's past actions or omissions with respect to the Original Loan
Agreement, any other agreements or documents, or any lien or collateral securing
any Liabilities under and as defined in the Original Loan Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CONTEMPO DESIGN WEST, INC.
By:_______________________________
Title:____________________________
Address: c/o Azimuth Corporation
4209 Vineland Road
Orlando, Florida 32811
Attention: Alexander M. Milley
Facsimile number: (407) 849-0625
BANK OF AMERICA ILLINOIS
By:_______________________________
Title:____________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Andrew J. Sutherland
Facsimile number: 312/828-3889
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<PAGE>
SUPPLEMENT A
to
LOAN AND SECURITY AGREEMENT
Dated as of October 9, 1995 between BANK OF AMERICA
ILLINOIS ("Lender") and CONTEMPO DESIGN WEST, INC. ("Borrower")
1. Loan Agreement Reference. This Supplement A, as it may be amended or modified
from time to time, is a part of the Loan and Security Agreement dated as of
October 9, 1995 between Borrower and Lender (together with all amendments,
modifications and supplements thereto, the "Loan Agreement"). Terms used herein
which are defined in the Loan Agreement shall have the meaning ascribed to them
therein unless the context requires otherwise.
2. Revolving Credit Amount; Borrowing Base.
2.1 Revolving Credit Amount. The maximum amount of Revolving Loans
which Lender will make available to Borrower (such amount is herein called the
"Revolving Credit Amount") is (i) FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS
($5,400,000) (unless such amount is increased by Lender in its sole discretion)
less (ii) the principal amount of "Revolving Loans" (under and as defined in
each Other Loan Agreement) outstanding under each Other Loan Agreement.
2.2 Borrowing Base. The term "Borrowing Base", as used
herein, shall mean:
(i) an amount (the "Accounts Receivable Availability") equal
to 80% of the net amount (after deduction of such reserves and
allowances as Lender deems proper and necessary in good faith
and in the exercise of its reasonable judgment) of the
Eligible Accounts Receivable of Borrower; plus
(ii) an amount (the "Additional Availability") equal to (A)(1)
from the Closing Date to the one year anniversary thereof,
$300,000 and (2) thereafter, zero less (B) the principal
amount of "Revolving Loans" under and as defined in the Other
Loan Agreements then outstanding under the Other Loan
Agreements in excess of the "Accounts Receivable Availability"
and "Inventory Availability" under and as defined in each
Other Loan Agreement.
2.3 Availability Adjustments.
None.
<PAGE>
2.4 Lender's Rights. Borrower agrees that nothing contained in this
Supplement A (i) shall be construed as Lender's agreement to resort or look to a
particular type or item of Collateral as security for any specific Loan or
advance or in any way limit Lender's right to resort to any or all of the
Collateral as security for any of the Liabilities, (ii) shall be deemed to limit
or reduce any lien on or any security interest in or upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.8 of the Loan Agreement.
3. Interest.
3.1
(a) Interest to Maturity. The outstanding principal balance of
the Revolving Loans (other than Overdraft Loans and Over
Advances) shall bear interest to maturity at the Reference
Rate in effect from time to time plus one and one-half percent
(1.5%) per annum.
(b) Default Rate. If any amount of the Revolving
Loans is not paid when due, whether by acceleration or
otherwise, the outstanding principal balance of the Revolving
Loans (other than Overdraft Loans and Over Advances) shall
bear interest until paid at a rate per annum equal to the
greater of the (a) the Reference Rate from time to time in
effect plus two and one-half percent (2.5%) or (b) two and
one-half percent (2.5%) above the Reference Rate in effect at
the time such amount became due.
3.2 Overdraft Loans; Over Advances. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to Section 2.6
or Section 2.7 of the Loan Agreement, as applicable.
3.3 Computation. Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. Changes in any interest
rate provided for herein which are due to changes in the Reference Rate shall
take effect on the date of the change in the Reference Rate.
3.4 Payment. Until maturity, interest on the Loans shall be payable
monthly in arrears on the last day of each calendar month at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand.
4. Eligible Account Receivable Data. Each Account Receivable of Borrower must be
due and payable within 90 days of the date of the invoice evidencing such
Account Receivable (180 days in the case of Accounts Receivable owing from
Siemens), and must not be unpaid on the date that is 91 days after the date of
such invoice (181 days in the case of Accounts Receivable owing from Siemens);
provided,
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<PAGE>
however, that Lender, in its sole discretion, may extend the date on which such
invoice must be due and payable to a date which is not more than 120 days from
the date of invoice. If invoices representing 10% or more of the unpaid net
amount of all Accounts Receivable of Borrower and Contempo from any one Account
Debtor are unpaid more than 90 days after the date of such invoices (180 days in
the case of Accounts Receivable owing from Siemens) (or such longer period as
Lender, in its sole discretion, may agree to from time to time), then all
Accounts Receivable relating to such Account Debtor shall cease to be Eligible
Accounts Receivable.
5. Information. Borrower agrees that, until the Credit is terminated, it shall
furnish to Lender in form reasonably satisfactory to Lender, within fifteen (15)
days after the end of each month, an aging of all Accounts Receivable of
Borrower and an aging of all accounts payable of Borrower.
Borrower's Initials: ______________
Lender's Initials: ______________
Date: October 9, 1995
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<PAGE>
EXHIBIT 10.28
EXECUTION COPY
FIRST OMNIBUS AMENDMENT
This FIRST OMNIBUS AMENDMENT (this "Amendment"), dated as of August 9,
1996, amends:
(i) the Loan and Security Agreement, dated as of
October 9, 1995 (the "Contempo Loan Agreement"),
between Contempo Design, Inc., an Illinois
corporation ("Contempo"), and Bank of America
Illinois, formerly Continental Bank N.A. (the
"Lender");
(ii) the Loan and Security Agreement, dated as of
October 9, 1995 (the "Contempo West Loan
Agreement"), between Contempo Design West, Inc., a
Delaware corporation ("Contempo West"), and the
Lender;
(iii) the Loan and Security Agreement, dated as of October 9,
1995 (the "DEI Loan Agreement"), between Delaware Electro
Industries, a Delaware corporation ("DEI"), and the
Lender; and
(iv) the Second Amended and Restated Loan and Security
Agreement, dated as of October 9, 1995 (the
"Azimuth Loan Agreement"), between Azimuth
Corporation, a Delaware corporation ("Azimuth"),
and the Lender.
The Lender, Azimuth, Contempo, Contempo West and DEI agree
as follows:
SECTION 1. DEFINITIONS.
"Agreements" means the Azimuth Loan Agreement, the Contempo
Loan Agreement, the Contempo West Loan Agreement and the DEI Loan
Agreement.
"Amendment Effective Date" is defined in Section 3.
"Companies" means Azimuth, Contempo, Contempo West and DEI.
"New Notes" is defined in Section 3.1(iii).
<PAGE>
SECTION 2. AMENDMENTS. Effective on (and subject to the
occurrence of) the Amendment Effective Date:
(a) The definition of "Termination Date" in Section 1.1 of
each Agreement shall be amended by substituting the date
"September 30, 1996" for the date "August 31, 1996" where it
appears in each such definition.
(b) Section 2.1 of Supplement A to each Agreement (other
than the Azimuth Loan Agreement) shall be amended by deleting the
words and figure "FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS
($5,400,000)" where it appears in each such Section and inserting
in lieu thereof the words and figure "SIX MILLION FOUR HUNDRED
THOUSAND DOLLARS ($6,400,000)."
(c) Section 3.5 of Supplement A to the Azimuth Loan
Agreement shall be amended by deleting the figure "$425,000"
where it appears in such Section and inserting in lieu thereof
the figure "$1,000,000."
(d) Section 3.1 of Supplement A to each Agreement (other
than the Azimuth Loan Agreement) shall be amended and restated to
read in its entirety as follows:
3.1
(a) Interest to Maturity. (x) To the extent that the outstanding
principal balance of the Revolving Loans (other than Overdraft
Loans and Over Advances) plus the outstanding principal balance
of all "Revolving Loans" (other than "Overdraft Loans" and "Over
Advances") (as each such term is defined in each Other Loan
Agreement) is less than or equal to $5,400,000, such portion of
the outstanding principal balance of the Revolving Loans shall
bear interest to maturity at the Reference Rate in effect from
time to time plus one and one-half percent (1.5%) per annum, and
(y) To the extent that the outstanding principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances)
plus the outstanding principal balance of all "Revolving Loans"
(other than "Overdraft Loans" and "Over Advances") (as each such
term is defined in each Other Loan Agreement) exceeds $5,400,000,
such portion of the outstanding principal balance of the
Revolving Loans shall bear interest to
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<PAGE>
maturity at the Reference Rate in effect from time to time plus
two and one-half percent (2.5%) per annum.
(b) Default Rate. If any amount of the Revolving
Loans is not paid when due, whether by acceleration or
otherwise, then
(x) To the extent that the outstanding principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances)
plus the outstanding principal balance of all "Revolving Loans"
(other than "Overdraft Loans" and "Over Advances") (as each such
term is defined in each Other Loan Agreement) is less than or
equal to $5,400,000, such portion of the outstanding principal
balance of the Revolving Loans shall bear interest until paid at
a rate per annum equal to the greater of the (a) the Reference
Rate from time to time in effect plus two and one-half percent
(2.5%) or (b) two and one-half percent (2.5%) above the Reference
Rate in effect at the time such amount became due, and
(y) To the extent that the outstanding principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances)
plus the outstanding principal balance of all "Revolving Loans"
(other than "Overdraft Loans" and "Over Advances") (as each such
term is defined in each Other Loan Agreement) exceeds $5,400,000,
such portion of the outstanding principal balance of the
Revolving Loans shall bear interest until paid at a rate per
annum equal to the greater of the (a) the Reference Rate from
time to time in effect plus two and one-half percent (2.5%) or
(b) two and one-half percent (2.5%) above the Reference Rate in
effect at the time such amount became due.
SECTION 3. EFFECTIVENESS. The amendments set forth in
Section 2 above shall become effective on such date (the
"Amendment Effective Date") when
3.1 Documents. The Lender shall have received:
(i) counterparts of this Amendment executed by
each Company;
(ii) an amendment fee of $25,000;
(iii) Revolving Notes (as defined in each of the Contempo
Loan Agreement, the Contempo West Loan Agreement
and the DEI Loan Agreement) executed by Contempo,
Contempo West and DEI
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<PAGE>
in the forms of Exhibits A, B, and C hereto,
respectively (the "New Notes");
(iv) a copy of resolutions of the board of directors of
each Company, duly certified by the Secretary or
Assistant Secretary of each such Company,
authorizing the execution, delivery and performance
by such entity of this Amendment and, as to
Contempo, Contempo West and DEI, the New Note
executed by it;
(v) a certificate as to the incumbency of the officers
of each Company who execute this Amendment or any
New Note on behalf of such Company, with a sample
of such officer's signature, certified by the
Secretary or an Assistant Secretary of such
Company;
(vi) an opinion of Dechert, Price and Rhoads,
counsel to each Company, in form and substance
satisfactory to the Lender; and
(vii) such other documents the Lender may
reasonably request.
3.2 Other Conditions. The following further conditions precedent
shall have been satisfied:
(a) No Default. After giving effect to this Amendment, as
of the date hereof and the Effective Date no Event of Default (as
defined in any Agreement) or event which, with the giving of
notice or the passage of time, or both, would be an Event of
Default, shall have occurred and be continuing.
(b) Representations and Warranties. Except to the extent
changed by circumstances permitted by the Agreements, as amended
hereby, all of the representations and warranties of each Company
contained in each Agreement shall be true and correct on the date
hereof and the Amendment Effective Date.
(c) Certificate. The Lender shall have received a
certificate, dated the date hereof and signed by the President or
a Vice President of each Company as to the matters set forth in
paragraphs (a) and (b) of this Section 3.2.
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<PAGE>
SECTION 4. MISCELLANEOUS.
4.1 Warranties and Absence of Defaults. In order to induce the Lender to
enter into this Amendment, each Company hereby warrants to the Lender that:
(a) Except to the extent changed by circumstances
permitted by the Agreements, as amended hereby, the warranties of
each Company contained in the Agreements are true and correct as
of the date hereof as if made on such date.
(b) No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would constitute an
Event of Default, exists on the date hereof (after giving effect
hereto).
4.2 Expenses. The Companies agree, jointly and severally, to pay on
demand all costs and expenses of the Lender (including the reasonable fees,
charges and expenses of counsel for the Lender) in connection with the
preparation, negotiation, execution, delivery and administration of this
Amendment and all other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. In addition,
the Companies agree, jointly and severally, to pay, and save the Lender harmless
from all liability for, any documentary, stamp or other similar taxes which may
be payable in connection with the execution or delivery of this Amendment, the
borrowings under each of the Contempo Loan Agreement, the Contempo West Loan
Agreement and the DEI Loan Agreement, each as amended hereby, and the execution
and delivery of any instruments or documents provided for herein or delivered or
to be delivered hereunder or in connection herewith. All obligations provided in
this Section 4.2 shall survive any termination of this Amendment or the
Agreements as amended hereby.
4.3 Governing Law. This Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
4.4 Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.5 Reference to Agreements. Except as amended hereby, each Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects. On and after the effectiveness of the amendments to the Agreements
accomplished hereby, each reference in each Agreement to "this Agreement,"
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<PAGE>
"hereunder," "hereof," "herein" or words of like import, and each reference to
such Agreement in any Note (as defined in such Agreement) and in any Related
Agreements (as defined in such Agreement), or other agreements, documents or
instruments executed and delivered pursuant to such Agreement, shall be deemed a
reference to such Agreement, as amended hereby.
4.6 Guaranty Acknowledgements.
(a) Each of Contempo, Contempo West and DEI agrees that
all obligations of such entity under the Second Amended and
Restated Guaranty Agreement dated as of October 9, 1995 among the
undersigned and the Lender shall continue in full force and
effect after giving effect to the consummation of the
transactions contemplated hereby.
(b) Azimuth agrees that all obligations of the undersigned
under Section 12 of the Azimuth Loan Agreement shall continue in
full force and effect after giving effect to the consummation of
the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered at
Chicago, Illinois as of the date and year first above written.
CONTEMPO DESIGN, INC.
By:____________________________
Title:______________________
CONTEMPO DESIGN WEST, INC.
By:____________________________
Title:______________________
DELAWARE ELECTRO INDUSTRIES, INC.
By:_____________________________
Title:________________________
AZIMUTH CORPORATION
By:_____________________________
Title:________________________
BANK OF AMERICA ILLINOIS
By:_____________________________
Title:________________________
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<PAGE>
EXHIBIT 10.29
SECOND OMNIBUS AMENDMENT
This SECOND OMNIBUS AMENDMENT (this "Amendment"), dated as of September
23, 1996, amends:
(i) the Loan and Security Agreement, dated as of October 9,
1995 (as heretofore amended, the "Contempo Loan
Agreement"), between Contempo Design, Inc., an Illinois
corporation ("Contempo"), and Bank of America Illinois,
formerly Continental Bank N.A. (the "Lender");
(ii) the Loan and Security Agreement, dated as of October 9,
1995 (as heretofore amended, the "Contempo West Loan
Agreement"), between Contempo Design West, Inc., a
Delaware corporation ("Contempo West"), and the Lender;
(iii) the Loan and Security Agreement, dated as of October 9,
1995 (as heretofore amended, the "DEI Loan Agreement"),
between Delaware Electro Industries, a Delaware
corporation ("DEI"), and the Lender; and
(iv) the Second Amended and Restated Loan and Security
Agreement, dated as of October 9, 1995 (as heretofore
amended, the "Azimuth Loan Agreement"), between Azimuth
Corporation, a Delaware corporation ("Azimuth"), and the
Lender.
The Lender, Azimuth, Contempo, Contempo West and DEI agree
as follows:
SECTION 1. DEFINITIONS.
"Agreements" means the Azimuth Loan Agreement, the Contempo
Loan Agreement, the Contempo West Loan Agreement and the DEI Loan
Agreement.
"Amendment Effective Date" is defined in Section 3.
"Companies" means Azimuth, Contempo, Contempo West and DEI.
SECTION 2. AMENDMENTS. Effective on (and subject to the occurrence of)
the Amendment Effective Date, the definition of "Termination Date" in Section
1.1 of each Agreement shall be amended by substituting the date "November 30,
1996" for the date "September 30, 1996" where it appears in each such
definition.
<PAGE>
SECTION 3. EFFECTIVENESS. The amendments set forth in Section 2
above shall become effective on such date (the "Amendment Effective Date") when
3.1 Deliveries. The Lender shall have received:
(i) counterparts of this Amendment executed by
each Company; and
(ii) such other documents as the Lender may
reasonably request.
SECTION 4. MISCELLANEOUS.
4.1 Warranties and Absence of Defaults. In order to induce the Lender to
enter into this Amendment, each Company hereby warrants to the Lender that:
(a) Except to the extent changed by circumstances
permitted by the Agreements, as amended hereby, the warranties of
each Company contained in the Agreements are true and correct as
of the date hereof as if made on such date.
(b) No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would constitute an
Event of Default, exists on the date hereof (after giving effect
hereto).
4.2 Expenses. The Companies agree, jointly and severally, to pay on
demand all costs and expenses of the Lender (including the reasonable fees,
charges and expenses of counsel for the Lender) in connection with the
preparation, negotiation, execution, delivery and administration of this
Amendment and all other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. In addition,
the Companies agree, jointly and severally, to pay, and save the Lender harmless
from all liability for, any documentary, stamp or other similar taxes which may
be payable in connection with the execution or delivery of this Amendment, the
borrowings under each of the Contempo Loan Agreement, the Contempo West Loan
Agreement and the DEI Loan Agreement, each as amended hereby, and the execution
and delivery of any instruments or documents provided for herein or delivered or
to be delivered hereunder or in connection herewith. All obligations provided in
this Section 4.2 shall survive any termination of this Amendment or the
Agreements as amended hereby.
4.3 Governing Law. This Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
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<PAGE>
4.4 Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.5 Reference to Agreements. Except as amended hereby, each Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects. On and after the effectiveness of the amendments to the Agreements
accomplished hereby, each reference in each Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
such Agreement in any Note (as defined in such Agreement) and in any Related
Agreements (as defined in such Agreement), or other agreements, documents or
instruments executed and delivered pursuant to such Agreement, shall be deemed a
reference to such Agreement, as amended hereby.
4.6 Guaranty Acknowledgements.
(a) Each of Contempo, Contempo West and DEI agrees that
all obligations of such entity under the Second Amended and
Restated Guaranty Agreement dated as of October 9, 1995 among the
undersigned and the Lender shall continue in full force and
effect after giving effect to the consummation of the
transactions contemplated hereby.
(b) Azimuth agrees that all obligations of the undersigned
under Section 12 of the Azimuth Loan Agreement shall continue in
full force and effect after giving effect to the consummation of
the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered at
Chicago, Illinois as of the date and year first above written.
CONTEMPO DESIGN, INC.
By:____________________________
Title:______________________
CONTEMPO DESIGN WEST, INC.
By:____________________________
Title:______________________
DELAWARE ELECTRO INDUSTRIES, INC.
By:_____________________________
Title:________________________
AZIMUTH CORPORATION
By:_____________________________
Title:________________________
BANK OF AMERICA ILLINOIS
By:_____________________________
Title:________________________
<PAGE>
EXHIBIT 10.30
THIRD OMNIBUS AMENDMENT
This THIRD OMNIBUS AMENDMENT (this "Amendment"), dated as of November
27, 1996, amends:
(i) the Loan and Security Agreement, dated as of October 9,
1995 (as heretofore amended, the "Contempo Loan
Agreement"), between Contempo Design, Inc., an Illinois
corporation ("Contempo"), and Bank of America Illinois,
formerly Continental Bank N.A. (the "Lender");
(ii) the Loan and Security Agreement, dated as of October 9,
1995 (as heretofore amended, the "Contempo West Loan
Agreement"), between Contempo Design West, Inc., a
Delaware corporation ("Contempo West"), and the Lender;
(iii) the Loan and Security Agreement, dated as of October 9,
1995 (as heretofore amended, the "DEI Loan Agreement"),
between Delaware Electro Industries, Inc., a Delaware
corporation ("DEI"), and the Lender; and
(iv) the Second Amended and Restated Loan and Security
Agreement, dated as of October 9, 1995 (as heretofore
amended, the "Azimuth Loan Agreement"), between Azimuth
Corporation, a Delaware corporation ("Azimuth"), and the
Lender.
The Lender, Azimuth, Contempo, Contempo West and DEI agree
as follows:
SECTION 1. DEFINITIONS.
"Agreements" means the Azimuth Loan Agreement, the Contempo
Loan Agreement, the Contempo West Loan Agreement and the DEI Loan
Agreement.
"Amendment Effective Date" is defined in Section 3.
"Companies" means Azimuth, Contempo, Contempo West and DEI.
"New Notes" is defined in Section 3.1(ii).
SECTION 2. AMENDMENTS. Effective on (and subject to the
occurrence of) the Amendment Effective Date:
<PAGE>
(a) The definition of "Termination Date" in Section 1.1 of
each Agreement shall be amended by substituting the date
"December 31, 1996" for the date "November 30, 1996" where it
appears in each such definition.
(b) Section 2.1 of Supplement A to each Agreement (other
than the Azimuth Loan Agreement) shall be amended by deleting the
words and figure "SIX MILLION FOUR HUNDRED THOUSAND DOLLARS
($6,400,000)" where it appears in each such Section and inserting
in lieu thereof the words and figure "SIX MILLION SIX HUNDRED
FIFTY THOUSAND DOLLARS ($6,650,000)."
SECTION 3. EFFECTIVENESS. The amendments set forth in Section 2 above
shall become effective on such date (the "Amendment Effective Date") when
3.1 Deliveries. The Lender shall have received:
(i) counterparts of this Amendment executed by
each Company;
(ii) Revolving Notes (as defined in each of the Contempo
Loan Agreement, the Contempo West Loan Agreement
and the DEI Loan Agreement) executed by Contempo,
Contempo West and DEI in the forms of Exhibits A, B
and C hereto, respectively (the "New Notes"); and
(iii) such other documents as the Lender may
reasonably request.
SECTION 4. MISCELLANEOUS.
4.1 Warranties and Absence of Defaults. In order to induce the Lender
to enter into this Amendment, each Company hereby warrants to the Lender that:
(a) Except to the extent changed by circumstances
permitted by the Agreements, as amended hereby, the warranties of
each Company contained in the Agreements are true and correct as
of the date hereof as if made on such date.
(b) No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would constitute an
Event of Default, exists on the date hereof (after giving effect
hereto).
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<PAGE>
4.2 Expenses. The Companies agree, jointly and severally, to pay on
demand all costs and expenses of the Lender (including the reasonable fees,
charges and expenses of counsel for the Lender) in connection with the
preparation, negotiation, execution, delivery and administration of this
Amendment and all other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. In addition,
the Companies agree, jointly and severally, to pay, and save the Lender harmless
from all liability for, any documentary, stamp or other similar taxes which may
be payable in connection with the execution or delivery of this Amendment, the
borrowings under each of the Contempo Loan Agreement, the Contempo West Loan
Agreement and the DEI Loan Agreement, each as amended hereby, and the execution
and delivery of any instruments or documents provided for herein or delivered or
to be delivered hereunder or in connection herewith. All obligations provided in
this Section 4.2 shall survive any termination of this Amendment or the
Agreements as amended hereby.
4.3 Governing Law. This Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
4.4 Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4.5 Reference to Agreements. Except as amended hereby, each Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects. On and after the effectiveness of the amendments to the Agreements
accomplished hereby, each reference in each Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
such Agreement in any Note (as defined in such Agreement) and in any Related
Agreements (as defined in such Agreement), or other agreements, documents or
instruments executed and delivered pursuant to such Agreement, shall be deemed a
reference to such Agreement, as amended hereby.
4.6 Guaranty Acknowledgements.
(a) Each of Contempo, Contempo West and DEI agrees that
all obligations of such entity under the Second Amended and
Restated Guaranty Agreement dated as of October 9, 1995 among the
undersigned and the Lender shall continue in full force and
effect after giving effect to the consummation of the
transactions contemplated hereby.
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<PAGE>
(b) Azimuth agrees that all obligations of the undersigned
under Section 12 of the Azimuth Loan Agreement shall continue in
full force and effect after giving effect to the consummation of
the transactions contemplated hereby.
4.7 Post-Closing Deliveries. The Companies agree that they
will deliver to the Lender, no later than December 4, 1996,
(i) a copy of resolutions of the board of
directors of each Company, duly certified by
the Secretary or Assistant Secretary of each
such Company, authorizing the execution,
delivery and performance by such entity of
this Amendment and, as to Contempo, Contempo
West and DEI, the New Note executed by it;
and
(ii) a certificate as to the incumbency of the officers
of each Company who execute this Amendment or any
New Note on behalf of such Company, with a sample
of such officer's signature, certified by the
Secretary or an Assistant Secretary of such
Company.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered at
Chicago, Illinois as of the date and year first above written.
CONTEMPO DESIGN, INC.
By:____________________________
Title:______________________
CONTEMPO DESIGN WEST, INC.
By:____________________________
Title:______________________
DELAWARE ELECTRO INDUSTRIES, INC.
By:_____________________________
Title:________________________
AZIMUTH CORPORATION
By:_____________________________
Title:________________________
BANK OF AMERICA ILLINOIS
By:_____________________________
Title:________________________
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<PAGE>
EXHIBIT 10.31
SECOND AMENDED AND RESTATED
GUARANTY AGREEMENT
THIS SECOND AMENDED AND RESTATED GUARANTY AGREEMENT (this "Guaranty"),
dated as of October 9, 1995, by each of the three undersigned corporations
(individually each a "Guarantor" and collectively the "Guarantors") to BANK OF
AMERICA ILLINOIS (formerly Continental Bank N.A.) (the "Bank");
W I T N E S S E T H:
WHEREAS, the Guarantors are Subsidiaries of Azimuth Corporation, a Delaware
corporation (the "Borrower"); and
WHEREAS, pursuant to a Second Amended and Restated Loan and Security
Agreement, dated as of October 9, 1995 (together with all amendments and other
modifications, if any, from time to time hereafter made thereto, the "Loan
Agreement"), between Borrower and the Bank, the Bank has agreed to make Loans
(as defined in the Loan Agreement) to Borrower;
WHEREAS, pursuant to the Other Loan Agreements (as defined in the Loan
Agreement), each Guarantor has agreed to assume a portion of the obligations of
the Borrower under the Original Loan Agreement (as defined in the Loan
Agreement);
WHEREAS, pursuant to the Amended and Restated Guaranty Agreement dated
January 16, 1991, to the Bank, as amended (the "Original Guaranty"), each
Guarantor has guaranteed all obligations of the Borrower to the Bank;
WHEREAS, the Guarantors and the Bank desire to amend the
Original Guaranty in certain respects; and
WHEREAS, each Guarantor has, in consideration of, among other things,
receiving advances and other financial accommodations from the Borrower, duly
authorized the execution, delivery, and performance of this Guaranty;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, each Guarantor hereby agrees that the Original
Guaranty is hereby amended and restated in its entirety as follows:
1
<PAGE>
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty shall, except where the context
otherwise requires, have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Bank" is defined in the preamble.
"Borrower" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Loan Agreement" is defined in the second recital.
"Obligations" means the "Liabilities" under and as defined in the Loan
Agreement and the "Liabilities" under and as defined in each Other Loan
Agreement.
"Original Guaranty" is defined in the fourth recital.
SECTION 1.2. Loan Agreement Definitions. Terms for which meanings are
provided in the Loan Agreement shall, except as otherwise provided herein or as
the context may otherwise require, have the same meanings when used in this
Guaranty, including its preamble and recitals.
SECTION 1.3. UCC Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the UCC are
used in this Agreement, including its preamble and recitals, with such meanings.
ARTICLE II.
GUARANTY
SECTION 2.1. Guaranty of Payment. Each Guarantor, jointly
and severally, hereby absolutely, unconditionally and irrevocably
(a) guarantees the full and prompt payment and performance when
due, whether by required payment, voluntary prepayment, declaration,
acceleration, or otherwise, and at all times thereafter, of all of the
monetary obligations of the Borrower, each other Guarantor or any other
Obligor under, or in respect of, the Obligations; and
2
<PAGE>
(b) agrees to reimburse the Bank for all costs and expenses,
including, without limitation, Attorneys' Fees, which Bank expends or
incurs in collecting or compromising any obligation referred to in clause
(a) and in enforcing this Guaranty, whether or not suit is filed,
including all costs, expenses, reasonable Attorneys' Fees, and other
charges incurred by the Bank in connection with any insolvency,
bankruptcy, reorganization, liquidation, dissolution, arrangement, or
other similar proceedings involving any Guarantor which in any way affect
the exercise by the Bank of its rights, powers, remedies, and privileges
with respect to this Guaranty or the outstanding principal amount of the
Note.
Notwithstanding the foregoing, the maximum aggregate liability of each of the
undersigned under this Guaranty shall not exceed the maximum amount of liability
that such undersigned can incur without rendering this Guaranty voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, plus
the expenses referred to above.
SECTION 2.2. Obligations Absolute, Unconditional, etc. Each Guarantor
agrees that its obligations hereunder shall be absolute, unconditional, and
irrevocable, irrespective of the genuineness, validity, legality or
enforceability of the Obligations, the Notes, the Loan Agreement, any Other Loan
Agreement, or any other Related Agreement or any Other Loan Document, or any
other instrument or collateral relating to or securing the payment, performance,
or observance thereof or any other circumstance which could otherwise constitute
a legal or equitable discharge of a surety or guarantor, and the Bank may
proceed to enforce this Guaranty without pursuing or collecting a judgment
against any other Person (including, without limitation, any other Guarantor),
and without resorting to or enforcing any other collateral or security and
without any other action whatsoever. The Bank shall have no obligation to
protect, secure, perfect or insure any collateral security document or property
subject thereto at any time held as security for the Obligations or this
Guaranty. Each Guarantor hereby absolutely, unconditionally and irrevocably
waives and agrees not to assert or take advantage of:
(a) any right to require the Bank to proceed against the Borrower
or any other Obligor (including, without limitation, any other Guarantor)
or any other Person, to proceed against or exhaust any other security or
collateral for the payment, performance or observance of the Obligations
or to pursue any other remedy whatsoever before proceeding against such
Guarantor hereunder;
(b) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any
Person, or the failure of the Bank to file or enforce a claim
3
<PAGE>
against any estate (in administration, bankruptcy or any other
proceedings) of any Person (including any other Guarantor);
(c) any defense based upon an election of remedies by the
Bank, including an election to proceed by non-judicial rather
than judicial foreclosure;
(d) any other defense of the Borrower or any other
Guarantor or the cessation of the liability of the Borrower or
any other Guarantor for any cause whatsoever, with respect to
any Obligation;
(e) any other defense of any kind, whether now existing or arising
hereafter, of such Guarantor to any action, suit or judicial or legal
proceeding that may be instituted with respect to this Guaranty;
(f) presentment, demand, protest and notice of any kind, including,
without limitation, notice of the creation or non-payment or
non-performance of all or any of the Obligations, notice of dishonor or
protest, notice of acceptance by the Bank of this Guaranty, notice of the
existence, creation or incurrence of any new or additional indebtedness,
obligation or other liability and notice of action or non-action on the
part of the Bank, the Borrower or such Guarantor or any other Obligor
(including any other Guarantor) or other Person in connection with the
Obligations or otherwise; and
(g) any duty on the part of the Bank or any other Person (including
any other Guarantor) to disclose to such Guarantor any facts or
information any such Person may now or hereafter know or possess regarding
the Borrower, each other Guarantor, the Obligations or any other matter
whatsoever, regardless of whether such Person has reason to believe that
such facts or other information may materially increase the risk which
such Guarantor intends to assume or has reason to believe that such facts
or other information are unknown to such Guarantor or has a reasonable
opportunity to communicate such facts or other information, it being
understood and agreed that each Guarantor is fully and solely responsible
for being and keeping informed of the financial condition of the Borrower
and each other Guarantor and of all other circumstances bearing on the
risk of non-payment, non-performance or non-observance of any Obligation.
This Guaranty shall in all respects be a continuing, absolute, unconditional and
irrevocable Guaranty of payment, and shall remain in full force and effect until
all Obligations have been fully paid, and may not be amended, modified, or
supplemented except in accordance with Section 11.6 of each of the Loan
Agreement and each Other Loan Agreement. This Guaranty shall continue to be
4
<PAGE>
effective, or be reinstated, as the case may be, if at any time any payment, in
whole or in part, of any Obligation is rescinded or must otherwise be restored
or returned by the Bank upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Guarantor or the Borrower, or upon or as a
result of the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to any Guarantor or the Borrower or any part of
the property of any thereof, or otherwise, all as though such payments had never
been made. If any "Event of Default" shall at any time have occurred and be
continuing under the Loan Agreement or any Other Loan Agreement and acceleration
of the related Obligations shall at any time be prevented by reason of the
pendency against the Borrower or any other Guarantor of a case or proceeding
under a bankruptcy or insolvency law, each applicable Guarantor agrees that, for
purposes of this Guaranty and its obligations hereunder, the maturity of such
obligations shall be deemed to have been accelerated with the same effect as if
the holder of such Obligations had accelerated the same in accordance with the
terms of the Loan Agreement, and each applicable Guarantor shall forthwith pay
such principal amount and interest (if any) thereon and other Obligations
without further notice or demand.
SECTION 2.3. Waiver of All Defenses. The Bank may, from time to time, in
its sole discretion and without notice to any Guarantor, take any or all of the
following actions, all without in any way diminishing, impairing, releasing or
affecting the liability or obligations of any Guarantor under or with respect to
this Guaranty, and each Guarantor hereby irrevocably consents to any or all of
the following actions by the Bank or any holder of the Note:
(a) retain or obtain a Lien in any property to secure any
of the Obligations or any obligation hereunder;
(b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantor and the other Obligors
(including any other Guarantor), with respect to any of the Obligations;
(c) extend or renew for one or more periods (whether or not longer
than the original period), or alter or exchange, any of the Obligations,
or release or compromise any obligation of any nature of any other Obligor
or any other Person with respect to any of the Obligations or amend or
modify in any respect the Loan Agreement, any Other Loan Agreement, any
other Related Agreement or any Other Loan Document;
(d) waive, modify, subordinate, compromise or release its Lien in,
or surrender, release or permit any substitution or exchange for, all or
any part of any property securing any of the Obligations or any obligation
hereunder, or extend or renew
5
<PAGE>
for one or more periods (whether or not longer than the original period)
or waive, release, subordinate, compromise, modify, alter or exchange any
guaranty or other obligation of any nature of any obligor with respect to
any such property; and
(e) resort to any or all Guarantors for payment of any of the
Obligations, whether or not the Bank shall have resorted to or exhausted
any other remedy or any other security or collateral for any obligation
hereunder or shall have proceeded against the Borrower or any other
Obligor (including any other Guarantor) or any other Person primarily or
secondarily obligated with respect to any of the Obligations.
Each Guarantor absolutely, unconditionally, and irrevocably agrees that the
liability of such Guarantor hereunder, and the remedies for the enforcement of
such liability, shall in no way be diminished or affected by:
(i) the release or discharge of the Borrower or any other Obligor
(including any other Guarantor) or any other Person responsible for the
payment, performance, or observance of any Obligation in any creditors',
receivership, bankruptcy, reorganization, insolvency or other case or
proceeding;
(ii) the rejection or disaffirmance in any such proceeding
of any instrument evidencing, securing or executed in
connection with the Obligations; or
(iii) the impairment, limitation or modification of the Obligations
resulting from the operation of any present or future provision of the
federal Bankruptcy Code or any other statute or law of any kind or from
the decision or order of any court.
Each Guarantor absolutely, unconditionally, and irrevocably further agrees
that:
(x) the creation from time to time of Obligations, including the
making of loans to the Borrower and the other Guarantors, and the
application or allocation of amounts received by the Bank or any other
Person to the payment of such Obligations, and the creation, existence or
enforcement from time to time of any security for the Obligations, and the
application and allocation of the proceeds of such security, shall in no
way affect or impair the rights, remedies, powers and privileges of the
Bank or any other holder of any Obligation or the obligation of each
Guarantor under this Guaranty; and
6
<PAGE>
(y) subject to Section 2.6 of the Loan Agreement and Section 2.9 of
the Other Loan Agreements, any amounts received by the Bank from
whatsoever source on account of the Obligations may be applied by it
toward the payment of such of the Obligations and in such order of
application as the Bank may in its sole discretion determine.
Each Guarantor hereby expressly waives notice of the creation of the
Obligations and all diligence in collection or protection of or realization upon
the Obligations or any thereof, any obligation hereunder or any security for or
guaranty of any of the foregoing.
The creation or existence from time to time of Obligations in excess of the
amount to which the right of recovery against any Guarantor under this Guaranty
is limited is hereby authorized, without notice to any Guarantor, and shall in
no way affect or impair the rights of the Bank and the obligation of each
Guarantor under this Guaranty.
SECTION 2.4. Payment, etc., by Guarantors. Each Guarantor hereby
unconditionally covenants and agrees that:
(a) in the event the Borrower or any other Guarantor shall fail
duly and punctually to pay any Obligation on the date on which such
payment is due (whether at scheduled maturity, by acceleration or
otherwise); or
(b) upon the occurrence of any other Event of Default
under the Loan Agreement or under any Other Loan Agreement;
such Guarantor will, within five Business Days after the receipt of written
notice from the Bank demanding payment of either the amount of the Obligation
which the Borrower or the relevant other Guarantor, as appropriate, has failed
to pay (in the case of a demand arising out of an event described in clause (a))
or up to the entire unpaid amount of the Obligations (in the case of an event
described in clause (b)), pay the entire amount of Obligations demanded to the
Bank at its office at 231 South LaSalle Street, Chicago, Illinois 60697, in same
day funds. If any Guarantor fails to pay any such amount, the Bank may institute
any action or proceeding, and make, obtain and enforce a judgment or final
decree, against such Guarantor and collect in the manner provided by law or in
equity out of such Guarantor's property, wherever situated, all amounts adjudged
or decreed to be payable.
Each Guarantor further agrees that the Bank may from time to time, upon
receipt by the Bank of any proceeds of any collateral granted by such Guarantor
to the Bank in connection herewith, apply such proceeds to the payment of the
Obligations, whether or not then due, as provided in Section 2.6 of the Loan
Agreement or Section 2.9 of the relevant Other Loan Agreement, as applicable.
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<PAGE>
SECTION 2.5. Subrogation. Each Guarantor hereby irrevocably agrees not to
assert any claim or other right which it may now have or hereafter acquire
against the Borrower, any other Guarantor or any other Obligor that arises from
the existence, payment, performance or enforcement of such Guarantor's
obligations under this Guaranty, any Other Loan Agreement, any Other Loan
Document or any other Related Agreement, including any right of subrogation,
reimbursement, exoneration or indemnification, any right to participate in any
claim or remedy of the Bank against the Borrower or any other Obligor or any
collateral which the Bank now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including the right to take or receive from the Borrower or any other
Obligor, directly or indirectly, in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights, until
all Obligations have been finally paid in full in cash and all obligations on
the part of the Bank to make advances to the Borrower and the other Guarantors
have been terminated. If any amount shall be paid to any Guarantor in violation
of the preceding sentence and the Obligations shall not have been paid in cash
in full and the obligations of the Bank to make advances to the Borrower and the
other Guarantors under the Loan Agreement and the Other Loan Agreements have not
been terminated, such amount shall be deemed to have been paid to such Guarantor
for the benefit of, and held in trust for, the Bank, and shall forthwith be paid
to the Bank to be credited and applied upon the Obligations, whether matured or
unmatured.
ARTICLE III.
OFFSET
SECTION 3.1. Right to Offset. In addition to, and without limitation of,
any other rights of the Bank under any applicable law or otherwise, the Bank or
other holder of any Obligation may, without demand or prior notice of any kind,
at any time and from time to time when any amount shall be due and payable by
any Guarantor hereunder, appropriate and apply toward the payment of any
Obligation or any other amount owing to it hereunder any amounts, property,
balances, credits, deposit accounts or moneys of any Guarantor in the possession
or control of the Bank or such holder for any purpose. The Bank shall promptly
advise the applicable Guarantor of any such application, but failure to do so
shall not impair the effect thereof.
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ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. Instrument Pursuant to Loan Agreement. This Guaranty is a
Related Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered, and applied in accordance with the terms and provisions
of the Loan Agreement.
SECTION 4.2. Successors and Assigns; Assignment. This Agreement shall be
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of and be enforceable by the Bank and its successors and assigns,
including any assignee of any Obligation; provided, however, that no Guarantor
may assign any of its obligations hereunder without the prior written consent of
the Bank. The Bank may, subject to the provisions of Section 11.9 of each of the
Loan Agreement and the Other Loan Agreements, from time to time, without notice
to the Guarantors, assign or transfer any Obligation or any interest therein,
and notwithstanding any such transfer or assignment of any subsequent transfer
or assignment thereof, such Obligations shall be and remain Obligations for
purposes of this Agreement, and each and every immediate and successive
transferee or assignee of any Obligation or any interest therein shall, to the
extent of the interest of such transferee or assignee in the Obligations, be
entitled to the benefits of this Guaranty.
SECTION 4.3. Independent Obligations. The obligations of each Guarantor
hereunder are independent of the obligations of the Borrower and each other
Guarantor, and in the event of any default hereunder, a separate action or
actions may be brought, maintained and prosecuted against any Guarantor whether
or not the Borrower or any other Guarantor is a party thereto or joined therein
or a separate action or actions are brought against the Borrower and each
Guarantor. The Bank may maintain successive actions upon any default hereunder.
The rights of the Bank shall not be exhausted by its exercise of any its rights,
powers, remedies and privileges hereunder or by any such action or by any number
of successive actions until all Obligations and all obligations of each
Guarantor hereunder have been fully paid and performed.
SECTION 4.4. Governing Law. This Guaranty shall be deemed to be a contract
made under and governed by the internal laws of the State of Illinois. For
purposes of any action or proceeding involving this Guaranty, each Guarantor
hereby expressly submits to the jurisdiction of all Federal and State courts
located in the State of Illinois and agrees that it may be served with any
process or paper by registered mail or by personal service within or without the
State of Illinois, provided a reasonable time for appearance is allowed.
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SECTION 4.5. Notices. All notices and other communications hereunder to
each Guarantor shall be delivered or transmitted to such Guarantor at the
address set forth below its signature to the Loan Agreement (in the case of the
Borrower) or the Other Loan Agreement to which it is a party (in the case of
each other Guarantor).
SECTION 4.6. Termination. Subject to the last three sentences of Sections
2.2 and to clause (c) of Section 2.3, this Guaranty shall be of no further force
or effect upon the full payment and performance in full of the Obligations and
when the Bank has no further obligation to make advances under the Loan
Agreement or any Other Loan Agreement.
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivery by its authorized officer as of the date first above written.
DELAWARE ELECTRO INDUSTRIES, INC.
By________________________________
Title:__________________________
CONTEMPO DESIGN, INC.
By________________________________
Title:__________________________
CONTEMPO DESIGN WEST, INC.
By________________________________
Title:__________________________
BANK OF AMERICA ILLINOIS
By________________________________
Title:__________________________
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EXHIBIT 10.32
SECOND AMENDED AND RESTATED
PLEDGE AGREEMENT
THIS SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement"),
dated as of October 9, 1995, among the corporations listed on the signature
pages hereof as "Pledgors" (individually each a "Pledgor" and collectively the
"Pledgors"), and BANK OF AMERICA ILLINOIS (formerly Continental Bank N.A.) (the
"Bank");
W I T N E S S E T H:
WHEREAS, Azimuth Corporation, a Delaware corporation ("Parent"), and the
Bank have entered into that certain Second Amended and Restated Loan and
Security Agreement, dated as of October 9, 1995 (together with all amendments
and other modifications, if any, from time to time thereafter made thereto, the
"Parent Loan Agreement");
WHEREAS, the Parent Loan Agreement amends and restates that certain
Amended and Restated Loan and Security Agreement, dated as of January 16, 1991,
between Parent and the Bank (the "Original Loan Agreement");
WHEREAS, the Parent and the Bank entered into that certain Amended and
Restated Pledge Agreement, dated as of January 16, 1991 (the "Original Pledge
Agreement"), in order to provide security for the loans under the Original Loan
Agreement;
WHEREAS, the Parent and the Bank desire that the Original
Pledge Agreement be amended in certain respects;
WHEREAS, the Pledgors, other than Parent, are each party to a Loan and
Security Agreement dated as of the date hereof with the Bank (each, an "Other
Loan Agreement");
WHEREAS, as a condition precedent to the effectiveness of the Parent
Loan Agreement and each Other Loan Agreement, the Pledgors are required to
execute and deliver this Agreement; and
WHEREAS, each Pledgor has duly authorized the execution,
delivery, and performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Bank to enter into the
Parent Loan Agreement and the Other Loan Agreements and to make the loans
contemplated thereby, the Parent hereby acknowledges the continued force and
effect of the security interest granted by the Parent to the Bank under the
Original Pledge Agreement, the Original Pledge Agreement is hereby amended
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<PAGE>
and restated in its entirety, and each Pledgor agrees with the
Bank, as follows:
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Bank" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from stock splits, reclassifications, warrants, options,
non-cash dividends, and other distributions on or with respect to any Pledged
Shares whether similar or dissimilar to the foregoing, but shall not mean
Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares made out of capital surplus.
"Event of Default" means an "Event of Default" under and as defined in
each of the Parent Loan Agreement and each Other Loan Agreement.
"Initial Pledged Shares" is defined in clause (a) of Section
2.1.
"Obligations" is defined in Section 2.2.
"Original Loan Agreement" is defined in the second recital.
"Original Pledge Agreement" is defined in the third recital.
"Other Loan Agreement" is defined in the fifth recital.
"Parent" is defined in the first recital.
"Parent Loan Agreement" is defined in the first recital.
"Pledged Property" means the Initial Pledged Shares, any other Pledged
Shares and all other pledged shares of capital stock, the Pledged Notes and all
other pledged promissory notes, all other securities, all assignments of any
amounts due or to become due, all other instruments, certificates or documents
which are now
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<PAGE>
being delivered by any Pledgor to the Bank or may from time to time hereafter
be delivered by any Pledgor to the Bank for the purpose of pledge under this
Agreement, any other Related Agreement or the Supplemental Documentation, and
all proceeds of any of the foregoing.
"Pledged Notes" is defined in clause (e) of Section 2.1.
"Pledged Share Issuer" means each Person identified on Attachment I
hereto as the issuer of the Initial Pledged Shares identified opposite the name
of such Person.
"Pledged Shares" means the Initial Pledged Shares and all other shares
of capital stock of any Pledged Share Issuer which are delivered by the Parent
to the Bank as Pledged Property hereunder.
"Pledgor" is defined in the preamble.
SECTION 1.2. Parent Loan Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Agreement,
including its preamble and recitals, have the meanings provided in the Parent
Loan Agreement.
SECTION 1.3. UCC Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the UCC are
used in this Agreement, including its preamble and recitals, with such meanings.
ARTICLE II.
PLEDGE
SECTION 2.1. Grant of Security Interest. The Parent hereby acknowledges
and confirms the continuing force and effectiveness of the pledge, assignment,
charge, mortgage, delivery and transfer of, and the security interest granted
in, the "Collateral" under and as defined in the Original Pledge Agreement and
each Pledgor hereby pledges, assigns, charges, mortgages, delivers and transfers
to the Bank, and hereby grants to the Bank a continuing security interest in,
all of such Pledgor's right, title and interest to the following property (the
"Collateral"):
(a) in the case of the Parent only, that number of issued and
outstanding shares of capital stock of each Pledged Share Issuer (the
"Initial Pledged Shares") identified in
Attachment I hereto;
(b) all other Pledged Property, whether now or hereafter
delivered to the Bank in connection with this Agreement;
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<PAGE>
(c) all Dividends, Distributions, interest and other
payments and rights with respect to any Pledged Property;
(d) all accounts, contracts, contract rights, chattel paper,
instruments, general intangibles and other obligations of any kind of
such Pledgor, now or hereafter existing, whether or not arising out of
or in connection with the sale or lease of goods or the rendering of
services, including the following:
(i) all rights of such Pledgor with respect to all amounts
now or hereafter from time to time loaned or advanced by such
Pledgor to Parent or any Subsidiary of the Parent;
(ii) all of such Pledgor's rights now or hereafter
existing in and to all security agreements, leases and other
contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, instruments, general intangibles
or obligations; and
(iii) all leases, security agreements and other contracts
evidencing any of the foregoing accounts, contract rights,
chattel paper, instruments, general intangibles and obligations;
(e) the promissory notes identified in Attachment II
hereto (the "Pledged Notes");
(f) all rights, powers, privileges, options and other benefits
of the Parent under that certain Asset Purchase Agreement (the "Payne
Asset Purchase Agreement") dated on or about July 8, 1988, between SIC
Corporation, a Delaware corporation, and Payne Fabrics, Inc., a Delaware
corporation, and any agreement or other document executed or delivered
in connection therewith, including the right to make all waivers and
agreements, to give notices, consents, and releases and other
instruments, to take such action upon the happening of a default under
the Payne Asset Purchase Agreement or any such agreement or other
document, including the commencement, conduct and consummation of
proceedings at law or in equity, as shall be permitted thereunder or by
law and to do any and all other things as the Parent is or may become
entitled to do thereunder;
(g) all rights, powers, privileges, options and other
benefits of the Parent under that certain Agreement and Plan
of Merger, dated June 30, 1988 (the "Contempo Merger
Agreement"), among Contempo Design, Inc., an Illinois
corporation, Bridget C. Ornatek ("Ornatek") and John K. Sturm
("Sturm"), Contempo Merger Corp., an Illinois corporation, and
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any agreement or other document executed or delivered in connection
therewith (including that certain Escrow Agreement, dated June 30, 1988,
among the Parent, Ornatek, Sturm and Harris Trust and Savings Bank, as
escrow agent), including the right to make all waivers and agreements,
to give notices, consents, and releases and other instruments, to take
such action upon the happening of a default under the Contempo Merger
Agreement or any such agreement or other document, including the
commencement, conduct and consummation of proceedings at law or in
equity, as shall be permitted thereunder or by law and to do any and all
other things as the Parent is or may become entitled to do thereunder;
and
(h) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Agreement secures the
payment in full of all "Liabilities" of each Pledgor under and as defined in the
Parent Loan Agreement (in the case of Parent) or the Other Loan Agreement to
which such Pledgor is a party (in the case of each other Pledgor), whether now
or hereafter existing (all such Liabilities being herein called the
"Obligations").
SECTION 2.3. Delivery of Pledged Property; Registration of Pledge,
Transfer, etc. All certificates or instruments representing or evidencing any
Collateral, including all Pledged Shares and all Pledged Notes, shall be
delivered to and held by or on behalf of (and, in the case of the Pledged Notes
and all other promissory notes pledged hereunder, shall be endorsed to the order
of) the Bank pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank; it being understood that all other necessary
and appropriate action and approvals shall have been taken or received to grant
to the Bank a first priority security interest in such Pledged Shares and
Pledged Notes. The Bank shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Shares, Pledged
Notes or any promissory notes pledged hereunder for certificates or instruments
of smaller or larger denominations.
SECTION 2.4. No Duty on the Bank. The powers conferred on the Bank
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Bank shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.
-5-
<PAGE>
SECTION 2.5. Continuing Security Interest; Transfer of Note. This
Agreement evidences a continuing security interest in the Collateral and shall
remain in full force and effect until payment in full (on or after the
Termination Date) of all Obligations and the termination of all obligations of
the Bank to advance funds to the Pledgors, be binding upon each Pledgor, its
successors and assigns, and inure to the benefit of the Bank and its successors,
transferees and assigns. Upon the payment in full (on or after the Termination
Date) of the Obligations and the termination of all obligations of the Bank to
advance funds to the Pledgors, the security interest granted herein shall
terminate and all rights to the Collateral shall revert to the Pledgors. Upon
any such termination, the Bank will, at the expense of the Pledgors, deliver all
certificates and instruments representing or evidencing the Pledged Shares and
the Pledged Notes, together with all other Collateral held by the Bank
hereunder, and execute and deliver to the Pledgors, at the expense of the
Pledgors, such documents as the Pledgors shall reasonably request to evidence
such termination.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, etc. Each Pledgor represents and warrants unto
the Bank that as at the date hereof and as at the date of any further pledge
hereunder by such Pledgor to the Bank of any Collateral,
(a) such Pledgor is or will be the legal and beneficial owner of,
and has or will have good and marketable title to (and has or will have
full right and authority to pledge and assign) such Collateral, free and
clear of all liens, security interests, options or other charges or
encumbrances, except any lien or security interest granted pursuant
hereto in favor of the Bank and, as to Collateral other than Pledged
Shares and Pledged Notes, liens permitted by Section 5.16 of the Parent
Loan Agreement;
(b) the pledge of all Pledged Shares and Pledged Notes is or,
upon delivery to the Bank, will be effective to create a valid,
perfected first priority security interest in such Collateral and all
proceeds thereof, securing the Obligations;
(c) in the case of any Pledged Shares constituting such
Collateral, all of such Pledged Shares are or will be duly and validly
issued, fully paid and non-assessable;
(d) the Initial Pledged Shares constitute that percentage of the
issued and outstanding shares of capital stock of each Pledged Share
Issuer indicated on Attachment I hereto;
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<PAGE>
(e) each Pledged Note and each promissory note pledged hereunder
has been duly authorized, executed, endorsed, issued and delivered and
is the legal, valid and binding obligation of the issuer thereof, is not
in default, is not overdue and has not been dishonored; and
(f) no authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is or
will be required either
(i) for the pledge by such Pledgor of any Collateral
pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by such Pledgor, or
(ii) for the exercise by the Bank of the voting or other
rights provided for in this Agreement, or as may be required in
connection with a disposition of Collateral by laws affecting the
offering and sale of securities generally, the remedies in
respect of the Collateral pursuant to this Agreement.
No filing or other action will be necessary to perfect or protect the security
interest described in clause (b) above.
ARTICLE IV.
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. No Pledgor
will sell, assign, transfer, pledge or encumber in any other manner the
Collateral (except in favor of the Bank hereunder). Each Pledgor will warrant
and defend the right and title herein granted unto the Bank in and to the
Collateral (and all right, title and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. Each Pledgor agrees
that at any time, and from time to time, at the expense of such Pledgor, such
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that the
Bank may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Bank to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 4.2. Stock Powers, etc. Each Pledgor agrees that all Pledged
Shares delivered by such Pledgor pursuant to this Agreement will be accompanied
by duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Bank. Each Pledgor will, from time to time, upon
request of the Bank, promptly deliver to the Bank such stock powers,
instruments and
-7-
<PAGE>
similar documents, satisfactory in form and substance to the Bank, with respect
to the Collateral as the Bank may reasonably request and will, from time to
time, upon request of the Bank after the occurrence of any Event of Default,
promptly transfer any shares which are part of the Collateral into the name of
any nominee designated by the Bank.
SECTION 4.3. Continuous Pledge. Each Pledgor will, at all times, keep
pledged to the Bank pursuant hereto all shares of capital stock of each Pledged
Share Issuer held by such Pledgor identified in Attachment I hereto, all
additional shares of capital stock of each Pledged Share Issuer which may at any
time hereafter be owned by such Pledgor, all Dividends and Distributions with
respect thereto, all Pledged Notes, all interest, principal and other proceeds
received by the Bank with respect to the Pledged Notes and all other promissory
notes pledged hereunder, all promissory notes and other instruments of any
Subsidiary of Parent or such Pledgor evidencing any Indebtedness or other
obligation of any Subsidiary of Parent or such Pledgor to such Pledgor and all
other securities, instruments, proceeds and rights from time to time received by
or distributable to such Pledgor in respect of any Collateral.
SECTION 4.4. Voting Rights; Dividends, etc. Each Pledgor
agrees to deliver (properly endorsed where required hereby or
requested by the Bank) to the Bank,
(a) after any Default of the nature referred to in Section 6.1(e)
of the Parent Loan Agreement or any Other Loan Agreement or any Event of
Default shall have occurred and be continuing, promptly upon receipt
thereof by any Pledgor and without any request therefor by the Bank, all
Dividends, all Distributions, all interest, all other cash payments and
all proceeds of the Pledged Property and other Collateral, all of which
shall be held by the Bank as additional Collateral for use in accordance
with Section 5.4; and
(b) after any Default of the nature referred to in Section 6.1(e)
of the Parent Loan Agreement or any Other Loan Agreement or any Event of
Default shall have occurred and be continuing, promptly upon request of
the Bank, such proxies and other documents as may be necessary to allow
the Bank to exercise the voting power with respect to any share of
capital stock included in the Collateral;
provided, however, that unless any Default of the nature referred to in Section
6.1(e) of the Parent Loan Agreement or any Other Loan Agreement or any Event of
Default shall have occurred and be continuing, the Parent shall be entitled to
exercise, in its reasonable judgment, but in a manner not inconsistent with the
terms of the Parent Loan Agreement or any Related Agreement, the
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<PAGE>
voting power, and all other incidental rights of ownership with respect to any
Pledged Shares (subject to the Parent's obligation to deliver to the Bank such
Pledged Shares in pledge hereunder). All Dividends, Distributions, interest,
cash payments and proceeds which may at any time and from time to time be held
by any Pledgor but which such Pledgor is then obligated to deliver to the Bank,
shall, until delivery to the Bank, be held by such Pledgor separate and apart
from its other property in trust for the Bank. The Bank agrees that unless a
Default of the nature referred to in Section 6.1(e) of the Parent Loan Agreement
or any Other Loan Agreement or an Event of Default shall have occurred and be
continuing, the Bank shall, upon the written request of the Parent, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by Parent which are necessary to allow Parent to exercise voting power
with respect to any share of capital stock included in the Collateral; provided,
however, that no vote shall be cast, or consent, waiver or ratification given,
or action taken by the Parent that would impair any Collateral or be
inconsistent with or violate any provision of this Agreement, the Parent Loan
Agreement or any Related Agreement.
ARTICLE V.
REMEDIES
SECTION 5.1. Actions upon Event of Default. In addition to its rights
and remedies provided hereunder, whenever an Event of Default shall have
occurred and be continuing, the Bank shall have all rights and remedies of a
secured party upon default under the UCC or other applicable law. Any
notification required by law of any intended disposition by the Bank of any of
the Collateral shall be deemed reasonably and properly given if given at least
10 days before such disposition. Without limitation of the above, the Bank may,
whenever an Event of Default shall have occurred and be continuing, and the
Obligations shall have been declared immediately due and payable, without prior
notice to the Pledgors, take all or any of the following actions:
(a) transfer all or any part of the Collateral into the name of
the Bank or its nominee, with or without disclosing that such Collateral
is subject to the lien and security interest hereunder;
(b) notify the parties obligated on any of the
Collateral to make payment to the Bank of any amount due or to
become due thereunder;
(c) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period
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(whether or not longer than the original period) any
obligations of any nature of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
name of the applicable Pledgor to allow collection of the
Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the applicable
Pledgor) endorsements, assignments, stock powers and other instruments
of conveyance or transfer with respect to all or any of the Collateral.
SECTION 5.2. Attorney-in-Fact. Each Pledgor hereby irrevocably appoints
the Bank its attorney-in-fact, with full authority in the place and stead of
such Pledgor and in the name of such Pledgor, the Bank, or otherwise, from time
to time in the Bank's discretion, to take any action and to execute any
instrument which the Bank may deem necessary or advisable to accomplish the
purposes of this Agreement, including, upon the occurrence and continuance of an
Event of Default, all actions described in Section 5.1.
SECTION 5.3. Securities Laws. Each Pledgor understands that compliance
with the Federal securities laws, applicable blue sky or other state securities
laws or similar laws analogous in purpose or effect may strictly limit the
course of conduct of the Bank if the Bank were to attempt to dispose of all or
any part of the Collateral and may also limit the extent to which or the manner
in which any subsequent transferee of the Collateral may dispose of the same.
Accordingly, each Pledgor agrees that if any Collateral is sold at any public or
private sale, the Bank may elect to sell only to a buyer who will give further
assurances, satisfactory in form and substance to the Bank, respecting
compliance with the requirements of the Securities Act of 1933, as amended; and
that a sale subject to such condition shall be deemed commercially reasonable.
Without limiting the generality of the foregoing, the provisions of this
paragraph would apply if, for example, the Bank were to place all or any part of
the Collateral for private placement by an investment banking firm, or if such
investment banking firm purchased all or any part of the Collateral for its own
account, or if the Bank placed all or any part of the Collateral privately with
a purchaser or purchasers.
SECTION 5.4. Application of Proceeds. All cash proceeds received by the
Bank in respect of any sale of, collection from, or other realization upon, all
or any part of the Collateral may, in the discretion of the Bank be held by the
Bank as additional collateral security for, or then or at any time thereafter be
applied in whole or in part by the Bank against, all or any part of
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<PAGE>
the Obligations in such order of application, not inconsistent with the terms of
the Parent Loan Agreement and the Other Loan Agreements, as the Bank may from
time to time elect in its sole discretion. Any surplus of such cash or cash
proceeds held by the Bank and remaining after payment in full of all the
Obligations, and the occurrence of the Termination Date, shall be paid over to
the Pledgor entitled thereto or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 5.5. Indemnity and Expenses. Each Pledgor hereby indemnifies
and holds harmless the Bank from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including
enforcement of this Agreement), except claims, losses, or liabilities resulting
from the Bank's gross negligence or willful misconduct. Upon demand, the
Pledgors will pay to the Bank the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel and of any
experts and agents, which the Bank may incur in connection with:
(a) the administration of this Agreement, the Parent Loan
Agreement, each Other Loan Agreement, each other Related Agreement and
the Supplemental Documentation;
(b) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any
of the Collateral;
(c) the exercise or enforcement of any of the rights of
the Bank hereunder; or
(d) the failure by any Pledgor to perform or observe any
of the provisions hereof.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1. Related Agreement. This Agreement is a Related Agreement
executed pursuant to the Parent Loan Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered, and applied in
accordance with the terms and provisions of the Parent Loan Agreement.
SECTION 6.2. Amendments, etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by any Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the Bank
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it is given.
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<PAGE>
SECTION 6.3. Obligations Not Affected. The obligations of each Pledgor
under this Agreement shall remain in full force and effect without regard to,
and shall not be impaired or affected by:
(a) any amendment or modification or addition or supplement to
the Parent Loan Agreement, each Other Loan Agreement, any Note, any
other Related Agreement, the Supplemental Documentation, any instrument
delivered in connection therewith or any assignment or transfer thereof;
(b) any exercise, non-exercise or waiver by the Bank of any
right, remedy, power or privilege under or in respect of, or any release
of any guaranty or collateral provided pursuant to, this Agreement, the
Parent Loan Agreement, each Other Loan Agreement, any Related Agreement
or the Supplemental Documentation;
(c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement, the Parent Loan Agreement, each
Other Loan Agreement, any Related Agreement or the Supplemental
Documentation or any assignment or transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, or the like, of any Pledgor or
any other Person, whether or not such Pledgor shall have notice or
knowledge of any of the foregoing.
SECTION 6.4. Protection of Collateral. The Bank may from time to time,
at its option, perform any act which any Pledgor agrees hereunder to perform and
which such Pledgor shall fail to perform after being requested in writing to so
perform (it being understood that no such request need be given after the
occurrence and during the continuance of an Event of Default) and the Bank may
from time to time take any other action which the Bank reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION 6.5. The Bank Not Responsible. The Bank is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Bank shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral if it
takes such action for that purpose as any Pledgor reasonably requests in writing
at times other than upon the occurrence and during the continuance of any Event
of Default, but failure of the Bank to comply with any such request at any time
shall not in itself be deemed a failure to exercise reasonable care.
-12-
<PAGE>
SECTION 6.6. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed or telegraphed or delivered to such party at the address set forth
below its signature hereto (in the case of the Bank), to the Parent Loan
Agreement (in the case of the Parent) or to the Other Loan Agreement to which
such Pledgor is a party (in the case of each Pledgor other than Parent), or as
to either party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such notices and other communications shall, when filed or
telegraphed, respectively, be effective when deposited in the mails or delivered
to the telegraph company, respectively, addressed as aforesaid.
SECTION 6.7. Subrogation. No Pledgor shall be entitled to be subrogated
to any of the rights of the Bank by reason of any amounts received hereunder or
in connection with the Collateral until all Obligations have been paid in full
and the Bank's obligations to make advances pursuant to the Parent Loan
Agreement and the Other Loan Agreements have been fully terminated.
SECTION 6.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Illinois, except
to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of Illinois.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
Pledgors
AZIMUTH CORPORATION
By_____________________________
Title________________________
DELAWARE ELECTRO INDUSTRIES, INC.
By_____________________________
Title________________________
CONTEMPO DESIGN, INC.
By_____________________________
Title________________________
CONTEMPO DESIGN WEST, INC.
By_____________________________
Title________________________
Bank
BANK OF AMERICA ILLINOIS
By_____________________________
Title________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Andrew J. Sutherland
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<PAGE>
ATTACHMENT I
(to the Pledge
Agreement)
INITIAL PLEDGED SHARES
Common Stock
Pledged Authorized Outstanding Shares Owned and
Share Issuer Shares Shares Pledged by the Parent
Number Percentage
1) Delaware 150,000 105,000 105,000 100%
2) Contempo 100,000 1,120 1,120 100%
3) Contempo West 100,000 1,000 900 90%
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<PAGE>
ATTACHMENT II
(to the Pledge
Agreement)
PLEDGED NOTES
Pledgor Issuer
Azimuth Corporation Contempo Design, Inc.
Contempo Design West, Inc.
Delaware Electro Industries, Inc.
Contempo Design Europe B.V.
Contempo Design, Inc. Azimuth Corporation
Contempo Design West, Inc.
Contempo Design Europe B.V.
Delaware Electro Industries, Inc.
Contempo Design West, Inc. Azimuth Corporation
Contempo Design, Inc.
Delaware Electro Industries, Inc.
Contempo Design Europe B.V.
Delaware Electro
Industries, Inc. Azimuth Corporation
Contempo Design, Inc.
Contempo Design West, Inc.
Contempo Design Europe B.V.
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<PAGE>
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-17925, 33-78562, 033-64205, 333-17131) and Form
S-3 (Nos. 33-61712) of ELXSI Corporation of our report dated March 20, 1997
appearing on page F-1 of this form 10-K,
Price Waterhouse LLP
Orlando, Florida
March 28, 1997
<PAGE>
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<DEPRECIATION> 8,653,000
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0
0
<COMMON> 5,000
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<INCOME-TAX> (2,332,000)
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<NET-INCOME> 7,383,000
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
</TABLE>
