SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
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[ ] 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 0-13284
V BAND CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-2990015
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
565 Taxter Road, Elmsford, New York 10523
----------------------------------------------------
(Address and zip code of principal executive office)
(914) 789-5000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares of Common Stock outstanding, as of July 31, 1997, was
5,412,591 shares.
<PAGE>
V BAND CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1997
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets at July 31, 1997 (unaudited) and
October 31, 1996
Consolidated statements of operations for the three and nine
months ended July 31, 1997 and 1996 (unaudited)
Consolidated statements of cash flows for the nine months
ended July 31, 1997 and 1996(unaudited)
Notes to consolidated financial statements(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1997 AND OCTOBER 31, 1996
(in 000's, except share data)
July 31, October 31,
1997 1996
----------- -----------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 374 $ 2,258
Accounts receivable, less allowance for
doubtful accounts of $383 in 1997 and $381 in 1996 7,517 6,737
Inventories, net 7,202 7,798
Deferred tax asset 700 700
Prepaid expenses and other current assets 536 680
----------- -----------
Total current assets 16,329 18,173
----------- -----------
Fixed Assets:
Furniture, fixtures, equipment and leasehold improvements 9,474 9,701
Less: Accumulated depreciation and amortization (8,661) (8,591)
----------- -----------
Total fixed assets 813 1,110
----------- -----------
Other Assets 2,580 2,759
----------- -----------
TOTAL ASSETS $ 19,722 $ 22,042
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 2,314 $ --
Accounts payable 889 3,196
Accrued wages 778 973
Customer deposits 1,171 1,773
Other accrued expenses 760 1,612
----------- -----------
Total current liabilities 5,912 7,554
----------- -----------
</TABLE>
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<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1997 AND OCTOBER 31, 1996
(in 000's, except share data)
(continued)
July 31, October 31,
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
Shareholders' Equity:
Common stock, $.01 par value; authorized 20,000,000 shares;
issued and outstanding 7,131,913 in 1997 and 7,042,492 in 1996 71 70
Capital in excess of par value 19,872 19,776
Retained earnings 5,461 6,242
Cumulative translation adjustment 174 168
---------- -----------
25,578 26,256
Less - Treasury stock, at cost; 1,719,322 shares (11,768) (11,768)
----------- -----------
Total shareholders' equity 13,810 14,488
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,722 $ 22,042
=========== ===========
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 1997 AND 1996 (unaudited)
(in 000's, except per share data)
Three Months Ended Nine Months Ended
July 31, July 31,
-------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales
Equipment ............................ $5,407 $ 6,725 $19,617 $19,872
Service .............................. 1,448 1,228 4,196 3,836
-------- -------- -------- --------
Total sales ....................... 6,855 7,953 23,813 23,708
-------- -------- -------- --------
Cost of Sales
Equipment ............................ 3,406 3,846 12,228 11,768
Service .............................. 990 758 2,874 2,454
-------- -------- -------- --------
Total cost of sales ............... 4,396 4,604 15,102 14,222
-------- -------- -------- --------
Gross profit ...................... 2,459 3,349 8,711 9,486
-------- -------- -------- --------
Operating Expenses
Selling, general and administrative .. 2,470 2,542 6,990 7,380
Research and development ............. 787 800 2,478 2,335
-------- -------- -------- --------
Total operating expenses .......... 3,257 3,342 9,468 9,715
-------- -------- -------- --------
Operating income (loss) ........... (798) 7 (757) (229)
Interest Income (Expense) ................. (19) 9 (15) 41
Other Income (Expense) .................... 3 25 (9) (47)
-------- -------- -------- --------
Net income (loss) ................. $ (814) $ 41 $ (781) $ (235)
======== ======== ======== ========
Per share data
Net income (loss) .................... $ (.15) $ .01 $ (.15) $ (.04)
======== ======== ======== ========
Weighted average number of shares of common
stock and common stock equivalents .... 5,413 5,328 5,385 5,327
======== ======== ======== ========
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996 (unaudited)
(in 000's)
1997 1996
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss ................................................. $ (781) $ (235)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation ......................................... 432 570
Amortization of other assets ......................... 309 337
Provision (benefit) for doubtful accounts ............ 2 (34)
Provision for inventory reserves ..................... -- 75
Changes in assets and liabilities
Accounts receivable ............................. (782) (2,094)
Inventories ..................................... 596 (442)
Prepaid expenses and other current assets........ 144 26
Other assets .................................... (26) 72
Accounts payable and other current liabilities .. (3,957) (349)
Foreign currency translation adjustment ......... 6 (36)
------- -------
Net cash used in operating activities ...... (4,057) (2,110)
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Cash Flows from Investing Activities
Sales of marketable securities ........................... -- 187
Capital expenditures .................................... (133) (112)
------- -------
Net cash (used in) provided by investing
activities ................................. (133) 75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996 (unaudited)
(in 000's)
(continued)
1997 1996
------- -------
<S> <C> <C>
Cash Flows from Financing Activities
Proceeds from short-term debt............................. 3,032 --
Payments of short-term debt............................... (718) --
Proceeds from issuance of common stock.................... 97 --
Debt issuance cost........................................ (105) --
------- -------
Net cash provided by financing activities... 2,306 --
------- -------
Net decrease in cash and cash equivalents ..................... (1,844) (2,035)
Cash and Cash Equivalents, at beginning of period ............. 2,258 2,740
------- -------
Cash and Cash Equivalents, at end of period ................... $ 374 $ 705
======= =======
Supplementary Disclosures
Income taxes paid ........................................ $ 230 $ 65
======= =======
Interst paid.............................................. $ 204 $ --
======= =======
See notes to consolidated financial statements
</TABLE>
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in 000's)
Note A -- Basis of Presentation
The accompanying consolidated financial statements include the accounts of V
Band Corporation and its wholly-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the Company's audited financial statements for the fiscal year
ended October 31, 1996 as set forth in the Company's annual report on Form 10-K.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at July 31, 1997 and all periods presented
have been made.
Note B -- Significant accounting policies
Revenue recognition - Equipment revenue, which includes equipment and labor for
new system installations and modifications to existing systems at customer
locations, is recognized as the product is shipped. For long-term contracts,
equipment revenue is recognized under the percentage of completion method.
Service revenue, which includes maintenance contract revenue and repairs, is
recognized when the service has been completed.
Reclassifications - Certain prior year amounts have been reclassified to conform
with the current period presentation.
Adoption of SFAS 128 - The Company will adopt the Statement of Financial
Accounting Standard No. 128, "Earnings Per Share" ("SFAS 128") in the fourth
quarter of 1997, as required. The Company will continue to apply APB No. 15,
"Earnings Per Share" until the adoption of SFAS 128. The new standard specifies
the computation, presentation and disclosure requirements for earnings per
share. The pro forma earnings per common share computed under the provisions of
SFAS 128 for the three and nine month periods ended July 31, 1997 and 1996 would
not be materially different than the reported amounts.
Adoption of SFAS 123 - The Company will adopt the Statemenet of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") in the fourth quarter of 1997, as required. The Company has elected to
continue to measure such compensation expense using the method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", as permitted by SFAS 123. When adopted, SFAS 123 will not have any
effect on the Company's financial position or results of operations, but will
required the Company to provide expanded disclosure regarding its stock-based
employee compensation plans.
<PAGE>
Note C -- Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
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<S> <C> <C>
Finished goods ........................... $ 5,059 $ 4,757
Parts and components ..................... 4,255 5,144
------- -------
9,314 9,901
Less: Inventory reserves................. (2,112) (2,103)
------- -------
$ 7,202 $ 7,798
======= =======
</TABLE>
Note D -- Short-Term Debt
On May 28, 1997, the Company entered into a Credit Agreement by and between the
Company and National Bank of Canada, New York Branch, and associated loan
documentation (collectively, the "Credit Agreement"). The Credit Agreement
provides a revolving loan and letter of credit facility of up to $4 million with
interest rates (at the Company's option) of prime plus 1/4 percent or libor plus
2 1/4 percent. The Company's obligations under the Credit Agreement are secured
by security interests in all of the assets of V Band Corporation and its
domestic subsidiaries. Additionally, on May 29, 1997, the Company repaid the
amount borrowed from its Chairman and Chief Executive Officer in full, including
interest.
Note E -- Income Taxes
The Company's deferred tax asset of $700 is net of a valuation allowance of
$4,818 and the Company has available net operating loss carryforwards for tax
return purposes of approximately $8,900 which begin to expire in 2009.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (in 000's except per share data)
Results of Operations
Sales for the third quarter of 1997, ended July 31, 1997, of $6,855 were $1,098,
or 14%, lower than the $7,953 reported for the third quarter of 1996. Sales for
the nine months ended July 31, 1997 of $23,813 were $105, or 1%, higher than the
$23,708 reported in the same period of 1996. Equipment sales of $5,407 in the
third quarter of 1997 decreased by $1,318, or 20%, from the equipment sales of
$6,725 in third quarter of 1996. This decrease in the third quarter equipment
sales was due primarily to delays of scheduled shipments which were due to
shortages of certain long lead time components for the Company's products. These
shipments are expected to be completed in the fourth quarter. For the nine
months ended July 31, 1997, equipment sales of $19,617 were $255, or 1%, lower
than the $19,872 reported in the same period for 1996. This decrease in the
equipment sales was due in part to the aforementioned shipment delays due to
component shortages and a decrease in the sales of the Company's wholly-owned
subsidiary, Licom, Incorporated. Equipment sales for Licom for the nine months
ended July 31, 1997 were $536 compared to $1,786 reported in the same period for
1996, a decrease of $1,250, or 70%. The decrease in Licom sales was attributable
to reduced demand and increased competition in the markets served by Locom's
products. Equipment sales, excluding Licom sales, were $19,081 and $18,086 for
the nine months ended July 31, 1997 and 1996, respectively, for an increase of
$995, or 6%. This increase, excluding Licom sales was due to an increase in the
Company's eXchange Phone, Power Deck and DXi products. Sales from the Company's
service business of $1,448 for the third quarter of 1997 were $220 or 18% higher
than the $1,228 of sales for the third quarter of 1996. Service sales for the
nine months ended July 31, 1997, of $4,196 were $360, or 9%, higher than the
$3,836 reported in 1996 due to an increase in the Company's maintenance sales.
Gross profit margins for the third quarter ended July 31, 1997 were 35.9% as
compared to 42.1% for the same period in 1996. Gross profit margins for the nine
months ended July 31, 1997 were 36.6% as compared to 40.0% for the same period
in 1996. Gross profit margins for equipment sales for the third quarter ended
July 31, 1997 were 37.0% as compared to 42.8% for the same period in 1996. Gross
profit margins for equipment sales for the nine months ended July 31, 1997 were
37.7% as compared to 40.8% for the same period in 1996. The decrease in the
gross profit margin for equipment sales was attributable to a number of factors
- - the impact of fixed cost in the production facility which were absorbed over
lower third quarter sales due to the aforementioned shipment delays due to
component shortages; the decline of Licom sales and sales to non-financial
customers which typically generated higher gross margins; and lower gross
margins attained for international sales due to increased competitive pricing
pressures in the international market for the Company's products. The gross
profit margin for service sales for the third quarter ended July 31, 1997 was
31.6% as compared to 38.1% for the same periods in 1996. The gross profit margin
for service sales for the nine months ended July 31, 1997 was 31.5% as compared
to 36.1% for the same periods in 1996. The decrease in the gross profit margin
for service sales was primarily due to higher costs to support international
service sales.
Operating expenses for the third quarter of 1997 were $3,257, or $85 lower than
the $3,342 reported for the third quarter of 1996. The decrease was primarily
attributable to the reduction in Licom's operating expenses as achieved by
<PAGE>
downsizing and relocating Licom's operations to the Company's corporate
headquarter. For the nine months ended July 31, 1997, operating expenses were
$9,468, or $247 lower than $9,715 for the same period in 1996. The decrease was
primarily attributable to the reduction in Licom's operating expenses as
achieved by downsizing and relocating Licom's operations to the Company's
corporate headquarters. This decrease was partially offset by the increase in
costs to develop customized products for specific customer contracts.
The net loss reported in the third quarter ended July 31, 1997 was $814, or $.15
per share compared to a net income of $41, or $.01 per share, for the third
quarter of 1996. The net loss reported for the nine months ended July 31, 1997
was $781, or $.15 per share, as compared to a net loss of $235, or $.04 per
share, for the same period in 1996.
The average shares outstanding for the quarter ended July 31, 1997 increased to
5,413 versus 5,328 for the same period in 1996, due to the issuance of stock
under the Company's Employee Stock Purchase Plan.
Financial Condition
The Company's aggregate of cash and cash equivalents was $374 at July 31, 1997,
a decrease of $1,884 from the October 31, 1996 balance of $2,258. The decline
was attributable primarily to the net loss and decreases in accounts payable and
other current liabilities, which were partially offset by an increase in
short-term debt and a decrease in inventory.
On May 28, 1997, the Company obtained a $4 million secured credit facility from
the National Bank of Canada, New York Branch. As of July 31, 1997, the amount
due National Bank of Canada was $2.3 million.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.15 Agreement dated May 28, 1997 between the Company and
National Bank of Canada, New York Branch.
(b) Reports on Form 8-K
On June 11, 1997, the Company filed a Current Report, on Form 8-K,
reporting, under Item 5, that the Company entered into a $4 million secured
credit facility with the National Bank of Canada, New York Branch.
<PAGE>
V BAND CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
V BAND CORPORATION
(Registrant)
Date: September 12, 1997
/s/ Thomas E. Feil
------------------
Thomas E. Feil
Chairman & Chief Executive Officer
(Duly Authorized Officer)
Date: September 12, 1997
/s/ Mark R. Hahn
----------------
Mark R. Hahn
Chief Financial Officer
(Principal Accounting Officer)
-----------------------------------------------------------------
$4,000,000
CREDIT AGREEMENT
dated as of May 28, 1997
between
V BAND CORPORATION
and
NATIONAL BANK OF CANADA, NEW YORK BRANCH
----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This table of contents has been provided for the convenience of the parties and
does not constitute part of the Agreement to which it is attached.
ARTICLE 1 DEFINITIONS...........................................
1.1 Defined Terms.........................................
1.2 Other Definitional Provisions.........................
ARTICLE 2 THE CREDIT FACILITY...................................
2.1 The Loans.............................................
2.2 Maintenance of Account; Procedure for Borrowing
2.3 Procedure for Conversion and Continuation.............
2.4 Minimum Amount of Eurodollar Loans and Maximum
Number of Interest Periods............................
2.5 Termination or Reduction of Commitments...............
2.6 Repayment of Loans....................................
2.7 Evidence of Indebtedness..............................
2.8 Optional and Mandatory Prepayments....................
2.9 Interest Rates and Payment Dates......................
2.10 The Letters of Credit.................................
2.11 Fees..................................................
2.12 Computation of Interest and Fees......................
2.13 Place and Manner of Payment...........................
2.14 Use of Letters of Credit and Loan Proceeds............
ARTICLE 3 YIELD PROTECTION AND ILLEGALITY; TAXES
3.1 Inability to Determine Interest Rate..................
3.2 Illegality............................................
3.3 Additional Costs; Capital Adequacy....................
3.4 Taxes.................................................
3.5 Indemnity.............................................
ARTICLE 4 REPRESENTATIONS AND WARRANTIES........................
4.1 Organization, Powers, Compliance......................
4.2 Capital Stock, Subsidiaries, Fiscal Year..............
4.3 Authorization, Absence of Conflicts...................
4.4 Binding Obligations...................................
4.5 Financial Condition and Statements....................
4.6 Taxes.................................................
4.7 Title to Properties...................................
4.8 Proceedings...........................................
4.9 Labor Disputes; Collective Bargaining Agreements......
4.10 Material Agreements and Licenses......................
4.11 Intangible Assets.....................................
4.12 Condition of Assets...................................
4.13 No Defaults, Compliance With Laws.....................
4.14 Indebtedness..........................................
4.15 Not an Investment Company or Regulated Company........
4.16 Use of Proceeds.......................................
4.17 Ranking of Loans......................................
4.18 Burdensome Provisions.................................
4.19 ERISA.................................................
4.20 Environmental Matters.................................
4.21 Correct Information...................................
ARTICLE 5 CONDITIONS PRECEDENT..................................
5.1 Conditions Precedent to Initial Credit Event..........
5.2 Conditions Precedent to Each Credit Event.............
ARTICLE 6 COVENANTS.............................................
6.1 Corporate Existence, Properties.......................
6.2 Payment of Indebtedness, Taxes........................
6.3 Financial Statements, Reports, etc....................
6.4 Notice of Adverse Events and Significant Changes......
6.5 Books and Records; Inspection.........................
6.6 Insurance.............................................
6.7 Compliance with Laws..................................
6.8 Environmental Laws....................................
6.9 Use of Proceeds.......................................
6.10 Indebtedness..........................................
6.11 Liens.................................................
6.12 Contingent Liabilities................................
6.13 Merger and Consolidation; Acquisition and..........
Disposition Of Assets.................................
6.14 Investments...........................................
6.15 Change in Nature of Business..........................
6.16 Transactions with Affiliates..........................
6.17 Restricted Payments...................................
6.18 Management Fees.......................................
6.19 Leases................................................
6.20 Capital Expenditures..................................
6.21 Cash Dominion ........................................
6.22 Formation or Acquisition of Subsidiaries..............
6.23 Location of Inventory.................................
6.24 Change in Fiscal Date or Accounting Practices.........
ARTICLE 7 FINANCIAL COVENANTS...................................
7.1 Financial Covenants...................................
7.2 Definitions Relating to Financial Covenants...........
ARTICLE 8 EVENTS OF DEFAULT.....................................
8.1 Events of Default.....................................
8.2 Waivers...............................................
ARTICLE 9 MISCELLANEOUS.........................................
9.1 Notice................................................
9.2 Expenses, Indemnity...................................
9.3 Amendments and Waivers................................
9.4 Waivers...............................................
9.5 Cumulative Remedies...................................
9.6 Survival..............................................
9.7 Successors and Assigns................................
9.8 Set-off...............................................
9.9 Governing Law.........................................
9.10 Judicial Proceedings..................................
9.11 Waiver of Jury Trial..................................
9.12 Further Assurances....................................
9.13 Integration Clause....................................
9.14 Severability..........................................
9.15 Counterparts..........................................
9.16 Acknowledgments.......................................
SCHEDULES
Schedule I - Disclosure Schedule
EXHIBITS
Exhibit A - Form of Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Conversion or Continuation
Exhibit C - Form of Compliance Certificate
<PAGE>
CREDIT AGREEMENT, dated as of May 28, 1997, by and between V BAND
CORPORATION, a New York corporation (the "Borrower") and NATIONAL BANK OF
CANADA, NEW YORK BRANCH (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Bank extend credit to
it in the form of revolving loans and letters of credit as provided below, and
the Bank is willing to extend such credit on the terms and subject to the
conditions specified below.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Account": any right, now existing or hereafter arising, of the
Borrower to payment for goods sold or for services rendered which constitutes an
account receivable of the Borrower under generally accepted accounting
principles.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 5% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Applicable Percentage": as defined in Section 2.11(f).
"Audit Fee": as defined in Section 2.11(e).
"Available Commitment": at any time, the amount, if any, by which at
such time (a) the lesser of (x) the Commitment or (y) the Borrowing Base,
exceeds (b) the Exposure.
"Bank": as defined in the preamble hereto.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16%) equal to the greater of (a) the NBC Base Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2%. For purposes hereof: "NBC Base Rate" shall mean the rate of
interest per annum established by the Bank from time to time as a reference rate
for short-term commercial loans in Dollars to U.S. corporate borrowers, as such
rate is in effect on such day (which the Borrower acknowledges is not
necessarily the Bank's lowest rate); and "Federal Funds Effective Rate" shall
mean the overnight cost of funds of the Bank, as determined solely by the Bank.
Any change in the Base Rate due to a change in the NBC Base Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on the
effective day of such change in the NBC Base Rate or the Federal Funds Effective
Rate.
"Base Rate Loan": at any time, any Loan which bears interest at such
time at a rate that is based upon the Base Rate.
"Borrower": as defined in the preamble hereto.
"Borrowing Base": an amount equal to the sum of:
(i) up to 85% of the aggregate amount of the Eligible
Accounts at such time; plus
(ii) up to the lesser of (x) 40% of the aggregate value
(at the lower cost or market value at such time) of
Eligible Inventory or (y) $750,000.
"Borrowing Base Certificate": as defined in Section 6.3(f).
"Borrowing Date": any Business Day on which the Bank makes a Loan to
the Borrower or issues a Letter of Credit for account of the Borrower.
"Business": as defined in Section 4.20(a).
"Business Day": a day (i) other than a Saturday, Sunday, legal
holiday or any other day on which commercial banks in New York, New York, are
authorized or required by law or by government decree to close and (ii) if such
day relates to a Eurodollar Loan, which is also a day on which dealings in
eurodollar deposits are carried out between banks in the relevant interbank
eurodollar market.
"Capital Expenditures": for any period, without duplication, the
aggregate amount of all expenditures, whether paid in cash or other assets or
accrued as a liability (including the aggregate amount of all obligations under
Capital Leases incurred during such period) made or to be made by the Borrower
during such period to acquire or construct fixed or capital assets, plant and
equipment (including any renewals, improvements and replacements thereof and all
tooling costs, but excluding repairs), computed in accordance with GAAP.
"Capital Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation),
and any and all warrants or options to purchase any of the foregoing.
"Cash Collateralize": with respect to any outstanding Letter of
Credit, to deposit cash with the Bank in an amount equal to the undrawn amount
of such Letter of Credit, as collateral security for the Borrower's obligation
to reimburse the Bank for any payment made or to be made by the Bank under or
pursuant to such Letter of Credit.
"Closing Date": the date on which this Agreement shall have been
executed by all the parties hereto.
"Closing Fee": as defined in Section 2.11(a).
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": (i) all assets of the Borrower and its Domestic
Subsidiaries and (ii) all of the issued and outstanding shares of Capital Stock
of the Borrower's Subsidiaries pledged to the Bank, which secure the Obligations
from time to time, including all assets which constitute "Collateral", as such
term is defined in any Security Document.
"Commercial Letter of Credit": any Letter of Credit issued for the
purpose of providing the primary payment mechanism in connection with the
purchase of any materials, goods or services by the Borrower or any of its
Subsidiaries in the ordinary course of business of the Borrower or such
Subsidiary.
"Commitment": the commitment of the Bank to make Loans pursuant to
Section 2.1, and to issue Letters of Credit pursuant to Section 2.10, in the
maximum aggregate principal amount of Four Million Dollars ($4,000,000), as the
Commitment may be terminated or reduced from time to time in accordance with the
provisions of this Agreement.
"Commitment Fee": as defined in Section 2.11(b).
"Commitment Period": the period from and including the date hereof
to but excluding the Commitment Termination Date.
"Commitment Termination Date": May 28, 2000, or such earlier date on
which the Commitment shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414(b) or 414(c) of the
Code.
"Consolidated EBITDA": as defined in Section 7.2.
"Consolidated Interest Expense": as defined in Section 7.2.
"Consolidated Tangible Net Worth": as defined in Section 7.2.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contribution Agreement": a Contribution Agreement in form and
substance satisfactory to the Bank, pursuant to which the Borrower and its
Domestic Subsidiaries shall set forth their respective indemnification and
contribution obligations relating to payments made by any of them to the Bank
under any Loan Document.
"Current Ratio": as defined in Section 7.2.
"Customary Charges": as defined in Section 2.11(d).
"Default": an Event of Default or an event which, with the giving of
notice or lapse of time or both, or upon the occurrence of any other
contingency, would be an Event of Default.
"Disclosure Schedule": the Disclosure Schedule attached to this
Agreement as Schedule I.
"Dollars: and "$": dollars in lawful currency of the United States
of America.
"Domestic Subsidiary": any Subsidiary of the Borrower that is
organized under the laws of the United States or any state thereof.
"Effective Date": the date on which all the conditions precedent set
forth in Section 5.1 shall have been satisfied or waived.
"Eligible Account": means an Account of the Borrower in which the
Bank has a first and perfected security interest and which meets each of the
following requirements:
(a) such Account arose from a bona fide outright sale of
goods (and not consignments or "sale or return"
transactions) or rendering of services by the Borrower and
such goods have been shipped or such services rendered to
the respective account debtors or their designees;
(b) such Account is based on an enforceable order or
contract for goods or services and such goods have been
delivered or such services rendered in accordance with such
order or contract;
(c) the amount shown as an Account on the Borrower's books
and any invoice or statement delivered to the Bank is owing
to the Borrower and no partial payment has been made thereon
by anyone;
(d) such Account, or any portion thereof which is included
in the Borrowing Base, is not subject to any discount,
credit, rebate, allowance, set-off, reservation, contra
account, claim of reduction, counterclaim, recoupment, or
any claim for credit, allowance or adjustment by the account
debtor on such Account known to the Borrower because of
returned, inferior and damaged goods or unsatisfactory
services, or for any other reason, except for customary
discounts allowed for prompt payment;
(e) such Account is not one as to which Bank has determined,
with notice to Borrower, to be ineligible in whole or in
part for the following or similar reasons:
(1) payment terms not customary,
(2) credit weakness of the account debtor,
(3) history of slow payments or disputes, or
(4) any questions as to the bona fide nature of
the account debtor thereon or its undertaking
to pay;
(f) the Borrower has good, marketable and undisputed title
to such Account, free and clear of any Liens, other than
Liens in favor of the Bank and Permitted Liens;
(g) such Account is unconditionally payable in Dollars and
the obligations of the account debtor under such Account (i)
are not evidenced by a promissory note or other negotiable
instrument (except for any such note or instrument on which
the Bank holds a perfected first lien), (ii) are not in
dispute and are not subject to any set-off or counter-claim,
and (iii) have not been extended or modified in any respect;
(h) the account debtor on such Account (i) is not an
Affiliate of the Borrower and (ii) is not bankrupt or
insolvent or the subject of receivership proceedings, and
has not made an assignment for benefit of creditors or a
composition with creditors;
(i) to the extent such Account is reflected in any Borrowing
Base Certificate, the account debtor thereon has not as of
the date of such Borrowing Base Certificate returned, or
refused to retain, or asserted a right to return or refuse,
any of the goods from the sale of which such Account or
portion thereof arose;
(j) such Account is evidenced by an invoice dated the date
that shipment, delivery or performance was made or rendered
to the account debtor and (i) such Account is not more than
sixty (60) days past due from the original due date thereof
and (ii) not more than ninety (90) days have elapsed from
the invoice date of such invoice;
(k) the amount of such Account, together with the amount of
the other Accounts owed by the same account debtor with
respect to which not more than 90 days have elapsed from
invoice date, constitutes at least fifty percent (50%) of
the aggregate amount owing on all Accounts from such account
debtor
(l) the amount of such Account reported on a Borrowing Base
Certificate or a Period-End Recapitulation Report as an
Eligible Account excludes as of the date of such
Recapitulation (i) all partial or total payments received
therefor, (ii) all chargeback billings, all freight items
and claims, (iv) all finance charges, late charges or other
service charges, (v) any retainages agreed to by the
Borrower or asserted by the account debtor thereon, or (vi)
reversals of credits previously given to the account debtor
thereon;
(m) if (i) such Account represents progress or contract
billings, then the services or goods to which such billings
relate have been rendered or shipped, as the case may be,
and (ii) if such Account represents billings under a
maintenance contract, then the time period to which such
billings relate has ended;
(n) such Account does not arise out of a contract with or
order from an account debtor which by its terms forbids or
makes void or unenforceable the assignment of the Account
arising with respect thereto;
(o) such Account, and the account debtor thereon, are deemed
acceptable to the Bank in good faith and in its sole
discretion;
(p) if the United States of America, any state, county or
municipality, or any agency, department or instrumentality
thereof, is the account debtor with respect to such Account,
the Borrower shall have duly assigned its rights to payment
thereon to the Bank pursuant to the Assignment of Claims Act
of 1940, as amended, or any similar state or local statute
or regulation; and
(q) either (x) the account debtor on such account is a
resident of the United States of America or Canada, an
entity organized under the law of the United States of
America or Canada or any political subdivision thereof, or
any office or branch located in the United States of America
or Canada of any entity organized under the laws of another
country or (y) such Account is backed by a letter of credit
in form and issued by a bank satisfactory to the Bank or is
credit-insured pursuant to a policy in form and issued by an
insurer satisfactory to the Bank.
"Eligible Inventory": as of any date of determination, all Inventory
of the Borrower:
(a) that is then located at the Elmsford Facilities;
(b) which consists of raw materials or finished goods;
(c) which is of merchantable quality and fit for sale;
(d) to which the Borrower has good, marketable and
undisputed title, free and clear of any Liens, other than
Liens in favor of the Bank and Permitted Liens;
(e) in which the Bank holds a perfected security interest
or, in the case of items in transit, which are evidenced by
a bill of lading in form satisfactory to the Bank, which
bill of lading is in the possession of the Bank; and
(f) which the Bank in good faith deems to be Eligible
Inventory for purposes of this Agreement;
provided, however, that there shall in any event be excluded from Eligible
Inventory:
(1) any goods which are consigned or leased to the Borrower
or are, for any reason, not owned by the Borrower;
(2) any items which are not then located at the Elmsford
Facilities;
(3) any items which constitute work in progress;
(4) packaging supplies;
(5) items which are determined by the Bank, in good faith,
to be obsolete or not to be marketable in the ordinary
course of business of the Borrower; and
(6) items which are determined by the Bank, in good faith,
to be so highly customized for a specific Person as not to
be readily saleable to anyone else;
(7) items which are determined by the Bank, in its sole
discretion, to be ineligible for any other reason.
"Elmsford Facilities": the facilities of the Borrower located at 565
Taxter Road, Elmsford, New York 10523, and 3 Westchester Plaza, Elmsford, New
York 10523, respectively.
"Environmental Costs": any and all costs or expenses (including,
without limitation, attorneys' and consultants' fees, investigation and
laboratory fees, response costs, court costs and litigation expenses) of
whatever kind or nature, known or unknown, contingent or otherwise, arising out
of, or in any way relating to any violation of, noncompliance with or liability
under any Environmental Laws or any orders, requirements, demands, or
investigations of any Person related to any Environmental Laws. Environmental
Costs include any and all of the foregoing, without regard to whether they arise
out of or are related to any past, pending or threatened proceeding of any kind.
"Environmental Laws": any and all applicable foreign, Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or the
environment, as now or at any time hereafter in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
from time to time thereunder.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves) under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum equal to the
rate quoted by the Bank to banks in the New York interbank eurodollar market two
Business Days prior to the beginning of such Interest Period for deposits in
eurodollars in immediately available funds to be delivered on the first day of
such Interest Period in amounts and for durations comparable to the relevant
Eurodollar Loan and Interest Period.
"Eurodollar Loan": at any time, any Loan, which bears interest at
such time at a rate which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward, if necessary, to the
nearest 1/16%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 8.1.
"Exposure": at any time, the sum of (a) the aggregate principal
amount of all Loans outstanding at such time, plus (b) the LC Exposure at such
time.
"Federal Funds Effective Rate": as set forth in the definition of
the term "Base Rate".
"Fee": each of the Closing Fee, the Commitment Fee, the Letter of
Credit Fees, the Customary Charges, the Audit Fee, and the Prepayment Fee; and
"Fees" means all of the foregoing fees, collectively.
"Former Plan": any employee benefit plan in respect of which the
Borrower or a Commonly Controlled Entity could incur liability because of
Section 4069 or Section 4212(c) of ERISA.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, consistently applied.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Obligation": of or by any Person shall mean any
obligation, contingent or otherwise, of such Person, guaranteeing or entered
into with the purpose of guaranteeing any Indebtedness of any other Person (the
"Primary Obligor") in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the holder of such Indebtedness of the
payment of such Indebtedness, or (c) to maintain working capital, equity or
other financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness, and any other contract
which, in economic effect, is substantially equivalent to a guarantee; provided,
however, that the term "Guarantee Obligation" shall not include endorsements for
collection or deposit of instruments in the ordinary course of business.
"Hazardous Substances": any and all wastes, materials and
substances, whether solid, liquid or gaseous, (i) defined as "hazardous
substances" or "toxic substances" in any Environmental Law, (ii) otherwise
protected against by any Environmental Law, or (iii) the discharge, spillage,
uncontrolled loss, seepage or filtration of which constitutes a violation of any
Environmental Law, including, without limitation, radioactive waste, asbestos,
asbestos-containing materials, radon gas, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum products and by-products and oil.
"Indebtedness": of any Person at any date (a) all indebtedness,
liabilities and obligations of such Person for borrowed money (including, in the
case of the Borrower, indebtedness hereunder), (b) all indebtedness evidenced by
notes, bonds, debentures or similar instruments, (c) all obligations of such
Person under Capital Leases, (d) all obligations of such Person in respect of
acceptances (as defined in Section 3-410 of the UCC) issued or created for the
account of such Person, (e) the undrawn amount of all letters of credit issued
for the account of such Person (including, in the case of the Borrower, the
Letters of Credit) and (without duplication) all drafts drawn thereunder, (f)
all indebtedness of such Person for the deferred purchase price of property or
services (other than trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (g) all
obligations of such Person, contingent or otherwise, under or in respect of any
interest rate swap, cap or collar agreement, any currency exchange rate swap
agreement, or similar arrangement between such Person and a bank or other
financial institution providing for the transfer or mitigation of interest or
exchange risks either generally or under specific contingencies, (h) all
indebtedness or obligations of the types referred to in the preceding clauses
(a) through (g) above secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof and (i) all Guarantee Obligations of such Person, in each case
determined as at such date, without duplication and in accordance with GAAP. The
Indebtedness of any Person shall include the Indebtedness of any Partnership in
which such Person is a general partner, unless such partnership Indebtedness is
without recourse to such general partner. The term "Indebtedness", when used
with respect to any Person, shall include all liabilities and obligations of
such Person in respect of any of the items specified above, irrespective of
whether GAAP requires that such liabilities and obligations be reported as
indebtedness on such Person's financial statements or whether such Person
actually reports such liabilities and obligations as indebtedness on its
financial statements.
"Indemnitee": as defined in Section 9.2(b).
"Ineligible Financial Institutions": any banks or other financial
institutions, other than (a) the Bank and (b) banks or other financial
institutions which have executed and delivered to the Bank letter agreements in
form and substance reasonably satisfactory to the Bank, acknowledging the
security interest of the Bank in any funds or credit balances maintained by them
for the account of the Borrower or any of its Subsidiaries, agreeing to block
such accounts and wire all cash balances to the Bank upon demand by the Bank
following the occurrence of an Event of Default hereunder, and limiting their
set-off rights in a manner satisfactory to the Bank.
"Intellectual Property Security Agreement": a Security
Agreement-Patents, Trademarks and Copyrights, in form and substance satisfactory
to the Bank, pursuant to which the Borrower and its Domestic Subsidiaries shall
grant to the Bank, as security for the Obligations, a lien on their respective
patents, trademarks and copyrights and the related applications and licenses.
"Interest Coverage Ratio": as defined in Section 7.2.
"Interest Period": with respect to any Eurodollar Loan, the period
commencing on the borrowing or conversion date of such Eurodollar Loan, or on
the last day of the immediately preceding Interest Period applicable to such
Eurodollar Loan, as the case may be, and ending one, two or three months
thereafter, as selected by the Borrower in its notice of borrowing, conversion
or continuation, as the case may be, given with respect thereto; provided,
however, that:
(a) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately
preceding Business Day;
(b) no Interest Period may extend beyond the Commitment
Termination Date; and
(c) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the relevant subsequent calendar month) shall
end on the last Business Day of the relevant subsequent calendar
month.
"Inventory": with respect to any Person, all goods and other
personal property owned by such Person which are held for sale or lease or are
furnished or are to be furnished under a contract of service or which constitute
raw materials, work in process or materials used or consumed or to be used or
consumed in such Person's business, or in the processing, packaging or shipping
of the same, and all finished goods, including all inventory as defined in
Section 9-109(4) of the UCC.
"Investments": in any Person means:
(i) the purchase or acquisition (whether for cash, property,
services or securities or otherwise, and whether structured as an
acquisition or as a merger or consolidation or otherwise) of any
share of Capital Stock, any bond, note, debenture or other evidence
of indebtedness, or any other security, issued by such Person, or of
any partnership or other ownership interest in such Person, or any
binding obligation or option to make such purchase or acquisition,
(ii) any loan, advance, or extension of credit to, any
deposit with, and any contribution to the capital of, such Person,
and any commitment to make such loan, advance, extension of credit,
deposit or contribution to capital,
(iii) any Guarantee Obligation, or other contingent
obligation, with respect to Indebtedness or other liability of such
Person, and
(iv) any purchase of all or any integral part of the
business of such Person or assets comprising such business or part
thereof, and any binding obligation or option to make such purchase;
provided, however, that the term "Investment" shall not include (a) current
trade and customer accounts receivable for services rendered in the ordinary
course of business and payable in accordance with customary trade terms and
other investments in accounts, contract rights and chattel paper arising or
acquired in the ordinary course of business or (b) stock or other securities
acquired in connection with the satisfaction or enforcement of debts or claims
due or owing or as security for any such debts or claims, provided that such
debts or claims were not created for the purpose of or with a view to acquiring
such stock or other securities.
"LC Application": as defined in Section 2.10(c).
"LC Disbursement": any payment or disbursement made by the Bank
under or pursuant to a Letter of Credit.
"LC Exposure": at any time, the sum of (a) the aggregate undrawn
amount of all Letters of Credit then outstanding, plus (b) the aggregate amount
drawn under Letters of Credit for which the Bank has not been reimbursed by the
Borrower.
"Letter of Credit" and "Letters of Credit": as defined in Section
2.10(a).
"Letter of Credit Fee": as defined in Section 2.11(c); and "Letter
of Credit Fees" means the Letter of Credit Fees payable with respect to all the
Letters of Credit issued hereunder from time to time, collectively.
"Leverage Ratio": as defined in Section 7.2.
"Lien": any mortgage, pledge, hypothecation, assignment, security
deposit arrangement, encumbrance, lien (whether statutory, consensual or
otherwise), charge or other security interest (including, without limitation,
any conditional sale or other title retention agreement and any Capital Lease
having substantially the same economic effect as any of the foregoing).
"Loan" and "Loans": as defined in Section 2.1(a).
"Loan Documents": this Agreement, the Note, the Subsidiary
Guarantee, the Security Documents, the Contribution Agreement, the LC
Applications and any other instruments or documents relating hereto or thereto.
"Lockbox": each lockbox established by the Borrower or one of its
Subsidiaries with the Bank pursuant to a Lockbox Agreement.
"Lockbox Agreement": each Lockbox Agreement, in form and substance
satisfactory to the Bank, between the Borrower or any of its Subsidiaries and
the Bank.
"Losses": as defined in Section 9.2(b).
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, or the Borrower's or any of its
Subsidiaries' ability to perform its obligations under this Agreement or any
other Loan Document or (b) the validity or enforceability against the Borrower
or any of its Subsidiaries of this Agreement or any other Loan Document, or any
of the rights or remedies of the Bank hereunder or thereunder.
"Material Environmental Amount": any amount payable by the Borrower
and/or any of its Subsidiaries in respect of or under any Environmental Law for
remedial costs, compliance costs, compensatory damages, punitive damages, fines,
penalties or any combination thereof, that has a Material Adverse Effect.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NBC Base Rate": as set forth in the definition of the term "Base
Rate".
"Note": as defined in Section 2.7(b).
"Notice of Borrowing": as defined in Section 2.2(b).
"Notice of Conversion or Continuation": as defined in Section
2.3(a).
"Obligations": all indebtedness and other liabilities and
obligations of the Borrower hereunder or under any other Loan Document
including, without limitation, (i) the obligation to repay the Loans in full
when due, (ii) the obligation to pay interest on the Loans at the rates and on
the dates specified herein, (iii) the obligation to pay the Fees in full when
due at the rates and on the dates specified herein, (iv) the obligation to
reimburse the Bank in full for any payment made by it under a Letter of Credit
as provided herein or in the relevant LC Application, (v) the obligation to Cash
Collateralize the Letters of Credit as provided herein, (vi) the obligation to
indemnify the Bank as provided herein or in any other Loan Document, (vii) the
obligation to pay costs and expenses as provided herein or in any other Loan
Document, and (viii) the obligation to pay all other amounts specified herein or
in any other Loan Document.
"Operating Account": as defined in Section 2.2(a).
"Optional Reduction Amount": as defined in Section 2.11(f).
"Other Taxes": as defined in Section 9.2(a).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Period End Accounts Receivable and Loan Reconciliation Report" and
"Period End Recapitulation Report": the reports on the Bank's standard form that
are so designated, as they may be modified from time to time, and any substitute
reports, however named.
"Permitted Liens": the Liens described in clauses (a) through (i) of
Section 6.11.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": any employee benefit plan which is covered by ERISA and in
respect of which the Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA.
"Pledge Agreement": a Pledge Agreement in form and substance
satisfactory to the Bank, pursuant to which the Borrower shall pledge to the
Bank all of the shares of capital stock of its Domestic Subsidiaries now or at
any time hereafter owned by it.
"Prepayment Fee": as defined in Section 2.11(f).
"Properly Contested": as defined in Section 6.2.
"Properties" as defined in Section 4.20.
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty-day notice period is
waived under Sections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 4043
or any successor regulation thereto.
"Requirement of Law": as to any Person, the articles or certificate
of incorporation, declaration of trust, partnership agreement and by-laws or
other organizational or governing documents of such Person, and any law, treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its material property or to which such Person or any of its material
property is subject.
"Responsible Officer": the president of the Borrower or, with
respect to financial matters (including the delivery of Compliance Certificates
pursuant to Section 6.3(d) and Borrowing Base Certificates and other
substantiating or supporting documentation regarding the Borrowing Base pursuant
to paragraphs (e) through (j) of Section 6.3), the chief financial officer, the
treasurer or the controller of the Borrower or, with respect to any
certification of incumbency of any officer or any resolutions or other matters
of corporate authorization or governance, the secretary of the Borrower.
"Restricted Payment": with respect to any Person, (i) the
declaration or payment by such Person of any dividend (excluding dividends
payable solely in Capital Stock of such Person) or any other distribution on any
share of the Capital Stock of such Person, (ii) the purchase, redemption or
retirement by such Person of any share of any of such Person's Capital Stock,
(iii) any payment by such Person resulting in the reduction of the capital of
such Person, (iv) the purchase or acquisition by any Subsidiary of such Person
of any share of the Capital Stock of such Person from any other person or
entity, and (v) the payment by such Person or any of its Subsidiaries of any
amount, including principal and interest, of Subordinated Debt.
"SEC": the United States Securities and Exchange Commission or any
successor thereto.
"Security Agreement": a Security Agreement in form and substance
satisfactory to the Bank, pursuant to which the Borrower and its Domestic
Subsidiaries shall grant to the Bank, as security for the Obligations, a blanket
lien on all of their respective assets.
"Security Documents": collectively, the Security Agreement, the
Intellectual Property Security Agreement, the Pledge Agreement, and each
financing statement or other document executed, filed or recorded in connection
therewith; and "Security Document" means each of the foregoing, individually.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent" and "Solvency": with respect to any Person on a particular
date, the condition that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature, and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small amount of capital.
"Solvency Certificate": a certificate in form and substance
satisfactory to the Bank, executed by a Responsible Officer of the Borrower.
"Standby Letter of Credit": any Letter of Credit other than a
Commercial Letter of Credit.
"Subordinated Debt" means all Indebtedness of the Borrower which is
subordinated to the Obligations by an instrument in writing satisfactory in form
and substance to the Bank.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person; and "wholly-owned Subsidiary"
means, as to any Person, a corporation, partnership or other entity all of whose
shares of stock or other ownership interests are owned by such Person and/or by
one or more wholly owned Subsidiaries of such Person. Unless otherwise
indicated, all references to "Subsidiaries" shall be deemed to refer to
Subsidiaries of the Borrower.
"Subsidiary Guarantee": a Subsidiary Guarantee in form and substance
satisfactory to the Bank, pursuant to which each of the Borrower's Domestic
Subsidiaries shall irrevocably and unconditionally guarantee to the Bank the
payment in full of the Obligations when due.
"Taxes": as defined in Section 3.4(a).
"Type": as to any Loan or portion thereof, its nature as a Base Rate
Loan or a Eurodollar Loan.
"UCC": the Uniform Commercial Code as adopted in New York and from
time to time in effect.
"Underfunding": an excess of the present value of all accumulated
benefits under a Plan (based on those assumptions used to fund such Plan), over
the aggregate market value of the assets of such Plan allocable to such
accumulated benefits, determined in each case as of the most recent annual
valuation date.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in any other Loan Document
or any certificate or other document made or delivered pursuant hereto.
(b) As used herein, in the other Loan Documents, and in any
certificate or other documents made or delivered pursuant hereto or thereto,
accounting terms which are not defined in Section 1.1 and accounting terms which
are partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; references to
Articles, Sections, Schedules and Exhibits are references to Articles and
Sections of, and Schedules and Exhibits to, this Agreement unless otherwise
specified; and the words "this Agreement" refer to this Credit Agreement,
together with all schedules and exhibits hereto, as amended, restated, modified
or supplemented from time to time.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. Words of the
neuter gender mean and include correlative words of the masculine and feminine
gender.
(e) The Table of Contents and Article, Section, Schedule and Exhibit
headings used in this Agreement are for convenience only and shall not affect
the construction or meaning of any provisions of this Agreement.
(f) Except as otherwise specified herein, all references herein (i)
to any Person shall be deemed to include such Person's successors and assigns,
(ii) to any Requirement of Law defined or referred to herein shall be deemed
references to such Requirement of Law or any successor Requirement of Law as the
same may have been or may be amended or supplemented from time to time, and
(iii) to any Loan Document or other document or agreement defined or referred to
herein shall be deemed to refer to such Loan Document or other document or
agreement (and, in the case of any Note or any other instrument, any instrument
issued in substitution therefor) as the terms thereof may have been or may be
amended, supplemented, waived or otherwise modified from time to time.
(g) Unless otherwise specified, all references to times of day shall
be to New York, New York times.
(h) Unless otherwise specified, the term "including", whenever used
in this Agreement or any other Loan Document, shall be deemed to mean "including
without limitation".
(i) Each authorization in favor of the Bank granted by or pursuant
to this Agreement shall be deemed to be irrevocable and coupled with an
interest.
ARTICLE 2
THE CREDIT FACILITY
2.1 The Loans. Loans
(a) Subject to the terms and conditions of this Agreement, the Bank
agrees to make revolving credit loans (each, a "Loan" and, collectively, the
"Loans") to the Borrower from time to time during the Commitment Period in an
aggregate principal amount at any one time outstanding which, together with the
LC Exposure, will not exceed in the aggregate the lesser of (i) the Commitment
or (ii) the Borrowing Base then in effect.
(b) Subject to the terms and conditions of this Agreement, during
the Commitment Period the Borrower may borrow from the Bank pursuant to this
Article 2, convert pursuant to Section 2.3, repay or prepay pursuant to Section
2.8 (subject to the provisions of Section 3.5) and reborrow pursuant to this
Article 2 up to the amount specified in Section 2.1(a) by means of Base Rate
Loans or Eurodollar Loans; provided that no Loan shall be made hereunder as a
Eurodollar Loan after the day that is one month prior to the Commitment
Termination Date.
2.2 Maintenance of Account; Procedure for Borrowing.
(a) To facilitate the administration of this Agreement, the Borrower
shall establish a non-interest bearing deposit account (the "Operating Account")
with the Bank on or before the Closing Date and shall use and maintain such
account so long as the Commitment is in effect or any Letter of Credit is
outstanding and until the payment in full of the Obligations.
(b) The Borrower may borrow under the Commitment during the
Commitment Period on any Business Day, provided that the Borrower shall give the
Bank irrevocable notice (which notice must be received by the Bank (i) prior to
11:00 a.m. on the requested Borrowing Date with respect to Base Rate Loans, and
(ii) prior to 11.00 a.m. three Business Days prior to the requested Borrowing
Date with respect to Eurodollar Loans), which notice shall be substantially in
the form of Exhibit B-1 and shall be duly completed by the Borrower (each, a
"Notice of Borrowing"). Each Eurodollar Loan shall be in an amount equal to
$500,000 or any greater amount that is a whole multiple of $100,000 and each
Base Rate Loan shall be in an amount equal to $25,000 or any whole multiple
thereof (or, if the Commitment on the requested Borrowing Date is less than
$25,000, such lesser amount). If the Type of the requested Loans is not
specified in a Notice of Borrowing, then such Loans shall be made as Base Rate
Loans. If no Interest Period is specified with respect to any requested
Eurodollar Loans in a Notice of Borrowing, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. The Bank will make the
amount of each Loan available to the Borrower by crediting such amount to the
Borrower's Operating Account.
(c) Notwithstanding the provisions of paragraph (b) above but
subject to all other terms and conditions of this Agreement, the Bank will make
Loans from time to time, to the extent of the then Available Commitment, to
cover checks written on the Borrower's Operating Account. Loans made by the Bank
pursuant to this paragraph (c) shall be made only as Base Rate Loans and may be
made in amounts that are less than $25,000 or a whole multiple thereof, but the
obligation of the Bank to make such Loans shall be subject to all other terms
and conditions of this Agreement, including satisfaction of the conditions
precedent set forth in Sections 5.1 and 5.3 (other than the requirement for
delivery of a Notice of Borrowing). Each presentment to the Bank of a check
written on the Borrower's Operating Account when insufficient collected funds
exist therein to cover such check shall constitute a request by the Borrower for
a Loan hereunder.
2.3 Procedure for Conversion and Continuation.
(a) The Borrower may elect from time to time to convert outstanding
Loans from one Type to another by giving the Bank irrevocable written notice of
such election (i) at least one Business Day prior to the proposed conversion
date, in the case of conversion of Eurodollar Loans into Base Rate Loans and
(ii) at least three Business Days prior to the proposed conversion date, in the
case of conversion of Base Rate Loans into Eurodollar Loans, which notice shall
be substantially in the form of Exhibit B-2 and shall be duly completed by the
Borrower (each, a "Notice of Conversion or Continuation"); provided, however,
that any conversion of Eurodollar Loans into Base Rate Loans may only be made on
the last day of an Interest Period with respect thereto. Any such notice of
conversion to a Eurodollar Loan shall specify the length of the initial Interest
Period therefor. If such notice fails to specify the length of the initial
Interest Period therefor, then the Borrower shall be deemed to have selected an
Interest Period of one month's duration. All or any part of any outstanding
Loans may be converted as provided herein, provided that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the Bank has notified the Borrower that such conversion option is
no longer available and (ii) no Loan may be converted into a Eurodollar Loan
after the date that is one month prior to the Commitment Termination Date.
(b) Any Eurodollar Loan may be continued by the Borrower as such
upon the expiration of the then current Interest Period with respect thereto by
giving a Notice of Conversion or Continuation to the Bank, specifying the length
of the next Interest Period to be applicable to such Loans, determined in
accordance with the applicable provisions of the definition of the term
"Interest Period" set forth in Section 1.1; provided, however, that no
Eurodollar Loan may be continued as such (i) when any Event of Default has
occurred and is continuing and the Bank has notified the Borrower that such
continuation option is no longer available or (ii) after the date that is one
month prior to the Commitment Termination Date; and provided further, that if
the Borrower shall fail to give any required notice as described above in this
paragraph or if such continuation is not permitted pursuant to the preceding
proviso, such Eurodollar Loan shall be automatically converted to a Base Rate
Loan on the last day of the then expiring Interest Period.
2.4 Minimum Amount of Eurodollar Loans and
Maximum Number of Interest Periods.
All borrowings, conversions and continuations of Loans hereunder and
all selections of Interest Periods hereunder shall be in such amounts and shall
be made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of each Eurodollar Loan shall be equal to or greater
than $500,000 and shall be a whole multiple of $100,000 and there shall not be
more than four (4) Interest Periods in effect at any one time.
2.5 Termination or Reduction of Commitments.
(a) The Borrower shall have the right, upon not less than five (5)
Business Days' notice to the Bank, to either terminate the Commitment or, from
time to time, to reduce the amount of the unused Commitment. Any such partial
reduction shall be in an aggregate amount equal to $500,000 or any greater
amount that is a whole multiple of $100,000 and shall reduce permanently the
relevant Commitment then in effect. Any such termination of the Commitment shall
be accompanied by prepayment in full of any Loans then outstanding and an amount
sufficient to Cash Collateralize any Letters of Credit then outstanding. Any
termination or reduction of the Commitment shall also be accompanied by payment
in full of any Prepayment Fee applicable thereto.
(b) Interest accrued on the amount of any prepayment relating to a
termination of the Commitment pursuant hereto and any unpaid Commitment Fees
accrued hereunder with respect to the Commitment or the portion thereof that is
being reduced shall be paid by the Borrower on the date of such termination or
reduction. Prepayments made pursuant to this Section 2.5 shall be accompanied by
amounts payable pursuant to Section 3.5, if any, that are attributable to such
prepayments.
2.6 Repayment of Loans.
The Borrower hereby unconditionally promises to repay to the Bank in
full on the Commitment Termination Date (or such earlier date on which the Loans
become due and payable pursuant to Section 8.1) the aggregate principal amount
of all Loans that are then outstanding.
2.7 Evidence of Indebtedness.
(a) The Bank shall maintain in accordance with its normal practice
an account or accounts evidencing Indebtedness of the Borrower to the Bank
hereunder. The entries made by the Bank in such account or accounts shall be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded, provided, however, that the failure of the Bank to
maintain any such account, or any error therein, shall not in any manner affect
the obligation of the Borrower to repay the Loans, and to pay all interest
accrued thereon, in accordance with the terms of this Agreement.
(b) The Borrower shall execute and deliver to the Bank a promissory
note substantially in the form of Exhibit A (the "Note") to evidence the Loans.
2.8 Optional and Mandatory Prepayments.
(a) The Borrower may prepay the Loans at any time, in whole or in
part, without premium or penalty, upon at least three Business Days' irrevocable
notice to the Bank, specifying the date and amount of prepayment. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with accrued interest on the amount prepaid
and any amounts payable pursuant to Section 3.5. Optional partial prepayments
shall be in an aggregate principal amount equal to $100,000 or any whole
multiple thereof.
(b) All collected funds credited from time to time to any account of
the Borrower with the Bank shall be applied, upon collection, to the payment or
prepayment of the principal amount of and any interest then due on any Loans
then outstanding, and the Borrower hereby authorizes and instructs the Bank to
debit any of its accounts with the Bank for the amount of any such payment or
prepayment. The Bank shall give credit for all collections (x) for purposes of
calculating interest due hereunder, two (2) Business Days after the receipt and
deposit thereof and (y) for all other purposes, in accordance with its internal
policies and procedures.
(c) If the Exposure exceeds the lesser of (i) the Commitment or (ii)
the Borrowing Base at any time, the Borrower shall immediately prepay any
outstanding Loans and, after prepayment in full thereof, Cash Collateralize any
outstanding Letters of Credit, to the extent necessary to eliminate such excess.
Any prepayment hereunder shall be accompanied by accrued interest on the amount
prepaid and any amounts payable pursuant to Section 3.5.
(d) Any prepayment under this Section 2.8 shall be applied, first,
to outstanding Base Rate Loans and Eurodollar Loans with Interest Periods ending
on the day of such prepayment, if any, and thereafter to any other Eurodollar
Loans then outstanding; provided, however, that so long as no Event of Default
shall have occurred and be continuing, the Bank shall not apply collected funds
to the prepayment of outstanding Eurodollar Loans pursuant to Section 2.8(b) if
such prepayment would cause the Borrower to incur liability to the Bank under
Section 3.5. Any such prepayment shall be applied first to interest then due and
then to principal.
2.9 Interest Rates and Payment Dates.
(a) Each Base Rate Loan shall bear interest for each day it is
outstanding at a rate per annum equal to the Base Rate in effect on such day,
plus 1/4%.
(b) Each Eurodollar Loan shall bear interest for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate applicable to such Interest Period, plus 2-1/4%.
(c) After the occurrence of an Event of Default and the expiration
of any applicable grace periods specified in Article 8, interest shall accrue
(after as well as before judgment) (i) with respect to the principal of each
Loan, at a rate per annum equal to two percent (2%) above the rate otherwise
applicable thereto pursuant to Section 2.9(a) or (b), (ii) with respect to any
other Obligations which prior to default bear interest hereunder at a specified
rate, at a rate per annum equal to two percent (2%) above such specified rate,
and (iii) with respect to any other amounts (including overdue payments of
interest and fees) at a rate per annum equal to the Base Rate plus 2 1/4%.
(d) Interest on each Loan (irrespective of Type) shall be payable
monthly in arrears on the first Business Day of each calendar month, commencing
with July 1, 1997, on the date on which such Loan is repaid, prepaid or
converted and, if such Loan is a Eurodollar Loan and the Interest Period
applicable thereto ends on a day that is not the first Business Day of a
calendar month, also on the last day of such Interest Period; provided that
interest accruing pursuant to paragraph (c) of this Section 2.9 shall be payable
from time to time on demand.
(e) It is the intention of the parties hereto to comply strictly
with applicable usury laws; accordingly, it is stipulated and agreed that the
aggregate of all amounts which constitute interest under applicable usury laws,
whether contracted for, charged, taken, reserved, or received, in connection
with the Indebtedness evidenced by this Agreement or any other Loan Document
shall never exceed under any circumstance whatsoever the maximum amount of
interest allowed by applicable usury laws.
2.10 The Letters of Credit.
(a) Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, the Bank agrees, at any time
and from time to time on or after the Effective Date until the earlier of (i)
the tenth Business Day preceding the Commitment Termination Date and (ii) the
termination of the Commitment in accordance with the terms hereof, to issue
letters of credit (each, a "Letter of Credit" and collectively, the "Letters of
Credit") for account of the Borrower; provided, however, that no Letter of
Credit shall be issued if, after giving effect thereto:
(x) the LC Exposure would exceed Seven Hundred Fifty Thousand
Dollars ($750,000); or
(y) the Exposure would exceed the lesser of (1) the Commitment or
(2) the Borrowing Base then in effect.
(b) Each Letter of Credit (i) shall be in form satisfactory to the
Bank, (ii) shall permit drawings upon the presentation of such documents as
shall be specified by the Borrower in the LC Application delivered pursuant to
paragraph (c) of this Section 2.10, and (iii) shall by its terms expire no later
than the earlier to occur of (x) 360 days after the issuance thereof or (y) the
last Business Day prior to the Commitment Termination Date. Any Letter of Credit
may provide for the renewal thereof for additional periods of up to 360 days
(which shall in no event extend beyond the Commitment Termination Date). Each
Letter of Credit shall by its terms provide for payment of drawings in Dollars
at sight.
(c) The Borrower shall request the issuance of a Letter of Credit by
submitting to the Bank a properly completed and duly executed counterpart of the
Bank's standard letter of credit application (an "LC Application") no later than
11:00 a.m., one Business Day (or such shorter period as shall be acceptable to
the Bank) prior to the proposed issuance of the requested Letter of Credit. Each
LC Application shall refer to this Agreement, shall specify (i) the date on
which such Letter of Credit is to be issued (which shall be a Business Day) and
the face amount of such Letter of Credit, (ii) the name and address of the
beneficiary of such Letter of Credit, (iii) whether such Letter of Credit shall
permit a single drawing or multiple drawings, (iv) the form of the documents
required to be presented at the time of any drawing (together with the exact
wording of such documents or copies thereof), and (v) the expiry date of such
Letter of Credit (which shall conform to the provisions of paragraph (b) of this
Section 2.10), and shall be accompanied by such certificates, documents, and
other papers and information as the Bank may reasonably request. The Borrower
hereby agrees to observe and perform all of its covenants, duties and
obligations under each LC Application. In the event of any inconsistency between
the terms of this Agreement and the terms of an LC Application, this Agreement
shall prevail.
(d) The Borrower hereby agrees to reimburse the Bank for any amount
paid by the Bank under any Letter of Credit no later than 1:00 p.m. on the date
on which the Bank makes such payment. So long as no Event of Default shall have
occurred and be continuing and the Borrower has the necessary availability
hereunder, it may reimburse the Bank for any payments made by it under Letters
of Credit with the proceeds of Loans. Failure to reimburse the Bank for any
payment made by it under a Letter of Credit by 1:00 p.m. on the date on which
the Bank makes such payment shall constitute a borrowing notice by the Borrower
under Section 2.3 for a Loan in the principal amount equal to the amount of such
payment by the Bank, to be made on the date on which the Borrower is obligated
to reimburse the Bank for such payment pursuant to this Section 2.10(d). Subject
to this Section 2.10, the Borrower's obligation to reimburse the Bank in
accordance with the terms hereof for all payments made by the Bank under each
Letter of Credit and to pay interest on the unpaid amount of each such
reimbursement obligation shall be absolute, irrevocable and unconditional under
any and all circumstances whatsoever and shall not be terminated for any reason
whatsoever.
(e) In the event that the Borrower does not reimburse the Bank as
provided in paragraph (d) of this Section 2.10 for any payment made by the Bank
under a Letter of Credit, the outstanding amount of such reimbursement
obligation shall bear interest from the date when due pursuant to said paragraph
(d) until paid in full at a rate per annum equal to the Base Rate in effect from
time to time plus two and one-quarter percent (2-1/4%).
(f) The Bank shall examine documents delivered under each Letter of
Credit so as to ascertain that said documents on their face appear to comply
with the terms of such Letter of Credit, but the Bank shall have no liability or
responsibility (i) for the genuineness or authenticity of any document which
appears on such examination to be regular on its face; (ii) for honoring a draft
or demand for payment after notification from the Borrower of fraud, forgery or
other defect not apparent on the face of the documents; (iii) for the ultimate
correctness of the Bank's decision regarding documentary compliance where its
decision is based on its examination of the documents pursuant to its normal
examination procedures or in a manner not unreasonable or where the Bank's
decision is based on its exercise of judgment and that judgment is not
unreasonable. The Borrower hereby waives any right it may have to bring any
action against the Bank based on fraud, forgery or other defects (which are not
the result of the Bank's gross negligence or wilful misconduct, as finally
determined by a court of competent jurisdiction) not apparent on the face of the
documents presented under any Letter of Credit; provided, however, that nothing
herein contained shall prohibit the Borrower from bringing an action to enjoin
the Bank from making a payment under a Letter of Credit. For the purpose of
determining whether the Bank has met its obligations to the Borrower to examine
documents delivered under each Letter of Credit, documents which substantially
or otherwise reasonably comply with the terms of the relevant Letter of Credit
may be accepted, and the tests of literal or strict construction as regards
acceptability of documents shall not be applied in any dispute which may develop
between the Bank and the Borrower.
(g) The Borrower hereby agrees that: (i) the Bank may accept or pay,
as complying with the terms of a Letter of Credit, any drafts or other documents
otherwise in order which may be signed or issued by a trustee in bankruptcy,
debtor in possession, assignee for benefit of creditors, liquidator, receiver,
successor or other legal representative of the party who is authorized under
such Letter of Credit to draw or issue any drafts or other documents; and (ii)
to the extent not inconsistent with the express terms of the relevant Letter of
Credit, the Bank and any of its correspondents may, without limiting any other
provisions of this Agreement, accept documents of any character which comply
with the provisions, definitions, interpretations and practices contained in The
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 (the "UCP"), and accept or
pay any draft dated on or before the expiration of any time limit expressed in
such Letter of Credit, regardless of when drawn and when or whether negotiated,
provided the other required documents are dated prior to the expiration date of
such Letter of Credit.
(h) The Borrower's obligation to reimburse the Bank in full for each
payment made by the Bank under a Letter of Credit in compliance with the terms
of such Letter of Credit, this Agreement and the relevant LC Application is
absolute and unconditional, under all circumstances whatsoever, and shall not be
affected by:
(1) any invalidity or unenforceability of any Letter of
Credit, LC Application, this Agreement, any Note or any other Loan
Document; or
(2) any amendment or waiver of, or any consent to departure
from, this Agreement, any LC Application, any Note or any other Loan
Document; or
(3) the failure by the Bank to make any Loan hereunder; or
(4) any exchange or release of any collateral or of any
security interest therein, any failure to perfect a security
interest in any collateral, or any release of any guarantor; or
(5) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against any
beneficiary of any Letter of Credit, or any other Person, whether in
connection with this Agreement, the transactions contemplated herein
or any unrelated transaction; or
(6) any statement or any other document (including
insurance), or endorsement thereof, presented under any Letter of
Credit proving to be forged, fraudulent, invalid or uncollectible in
any respect or any statement therein being untrue or inaccurate in
any respect whatsoever; or
(7) any irregularity in the transactions with respect to
which any Letter of Credit is issued, including, without limitation,
any fraud by any beneficiary thereunder; or
(8) any breach of contract between the Bank or the Borrower
and any beneficiary under a Letter of Credit or any other Person; or
(9) consequences of compliance with laws, orders,
regulations or customs in effect in places of negotiation or payment
of drafts drawn under any Letter of Credit; or
(10) failure of drafts to bear reference or adequate
reference to any Letter of Credit, or failure of documents to
accompany drafts at negotiation, or failure of any Person to
surrender or take up any Letter of Credit, or failure of any Person
to note the amount of any draft presented under any Letter of Credit
or forward documents apart from drafts as may be required by the
terms of any Letter of Credit (each of which requirements the
Borrower hereby waives, to the extent permitted under the UCP, even
if included in any Letter of Credit); or
(11) errors, omissions, interruptions or delays in
transmission or delivery of any messages, however sent and whether
plain or in code or cipher, or errors in translation or in
interpretation of technical or other terms; or
(12) without limiting the foregoing, any act or omission not
done or omitted in bad faith or as a result of the Bank's gross
negligence (in each case, as finally determined by a court of
competent jurisdiction).
(i) In case of any variation between the documents called for by any
Letter of Credit or any Borrower's instructions and documents accepted by the
Bank, the Borrower shall be conclusively deemed to have waived any right to
object to such variation with respect to any action of the Bank relating to such
documents, and to have ratified and approved such action as having been taken at
the Borrower's direction, unless promptly following receipt of such documents or
acquisition of knowledge of such variation the Borrower files an objection with
the Bank in writing.
(j) The Borrower hereby agrees to indemnify and hold harmless the
Bank from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever which the Bank may incur (or which may be claimed against
the Bank by any Person whatsoever) by reason of or in connection with the
issuance of, or payment or failure to pay under, any Letter of Credit in
compliance with the terms of such Letter of Credit, this Agreement and the
relevant LC Application; provided, however, that the Borrower shall not be
required to indemnify the Bank for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by the willful
misconduct or gross negligence of the Bank (as finally determined by a court of
competent jurisdiction). Nothing in this paragraph (j) is intended to limit the
Borrower's reimbursement obligations under Section 2.10(d).
2.11 Fees.
(a) The Borrower shall pay to the Bank on the Closing Date, as
consideration for the Bank's execution and delivery of this Agreement, a closing
fee in the amount of $20,000 (the "Closing Fee"), which shall be deemed earned
when paid and shall be non-refundable. The Bank hereby acknowledges that it has
previously received a portion of the Closing Fee in the amount of $10,000.
(b) The Borrower shall pay to the Bank a commitment fee (the
"Commitment Fee") calculated at the rate of one-half of one percent (1/2%) per
annum on the average daily unused amount of the Commitment from the Closing Date
through the date on which the Commitment is terminated. The accrued Commitment
Fee shall be paid on the first Business Day of each month, starting with July 1,
1997, and on the date on which the Commitment is terminated.
(c) The Borrower shall pay to the Bank in respect of each Standby
Letter of Credit a letter of credit fee (the "Letter of Credit Fee") for the
period from the issuance of such Standby Letter of Credit through its expiration
date, calculated at the rate of two and one quarter of one percent (2-1/4%) per
annum on the face amount of such Standby Letter of Credit (taking into account,
in calculating such fee, any scheduled reductions in said face amount). The
Letter of Credit Fees payable with respect to each month shall be paid on the
first Business Day of the immediately succeeding month.
(d) The Borrower shall pay to the Bank, in respect of each Standby
Letter of Credit and Commercial Letter of Credit, the customary administration,
issuance, amendment, transfer, drawing and negotiation fees and charges (the
"Customary Charges") charged by the Bank from time to time in connection with
letters of credit. The Customary Charges shall be paid by the Borrower promptly
upon request therefor by the Bank.
(e) The Borrower shall pay to the Bank promptly upon demand, for
each field examination or audit conducted by the Bank or any of its
representatives or agents with respect to the Borrower, its books and records or
the Collateral, (i) an audit fee (the "Audit Fee"), exclusive of expenses, in
the amount of $500 per day per auditor for each such field examination or audit
and (ii) all expenses relating to such field examination or audit for which the
Borrower is responsible pursuant to Section 9.2.
(f) In the event that the Borrower reduces or terminates the
Commitment pursuant to Section 2.5(a), refinances the credit facilities provided
hereunder, or voluntarily terminates this Agreement, at any time prior to the
Commitment Termination Date (the amount of any such reduction or termination
(which in the case of a refinancing of the credit facilities provided hereunder
or voluntary termination of this Agreement shall be equal to the full amount of
the Commitment then in effect) herein called an "Optional Reduction Amount"),
the Borrower shall pay to the Bank on the date on which such reduction,
refinancing or termination becomes effective a fee (the "Prepayment Fee") equal
to the Applicable Percentage of the Optional Reduction Amount. For purposes of
this Section, the term "Applicable Percentage" means (i) 3% with respect to any
optional reduction, refinancing or termination which becomes effective prior to
May 28, 1998, (ii) 2% with respect to any optional reduction, refinancing or
termination which becomes effective after May 28, 1998 but before May 28, 1999,
and (iii) 1% with respect to any optional reduction, refinancing or termination
which becomes effective after May 28, 1999.
2.12 Computation of Interest and Fees.
(a) Interest and Fees shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. Any change in the interest rate on a
Loan resulting from a change in the NBC Base Rate or the Federal Funds Rate
shall become effective as of the opening of business on the day on which such
change becomes effective. The Bank shall notify the Borrower as soon as
practicable of the effective date and the amount of each such change in interest
rate.
(b) Each determination of an interest rate by the Bank pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
in the absence of manifest error.
2.13 Place and Manner of Payment
(a) All payments of principal, interest, fees and other amounts
hereunder and under the other Loan Documents shall be made in Dollars and in
immediately available funds at the office of the Bank at 125 W. 55th Street, New
York, New York 10019 (or at such other office as the Bank may designate from
time to time by a prior notice in writing to the Borrower) no later than 1:00
p.m. on the date when due. The Bank is hereby authorized (but not required) to
debit the Borrower's deposit accounts with the Bank for any amount owing to the
Bank hereunder or under any other Loan Document (including any amount owing to
the Bank in respect of principal, interest or fees). The rights of the Bank
under this Section 2.13 are in addition to and not in lieu of the rights of
set-off under Section 9.8 and under applicable law.
(b) If any amount payable hereunder or under any other Loan Document
shall be due on a day which is not a Business Day, the maturity thereof shall be
extended to the immediately succeeding Business Day and interest thereon shall
accrue during the period of such extension (i) in the case of amounts payable in
respect of principal, at the rate provided in this Agreement for the relevant
Loan and (ii) in the case of all other amounts, at a rate per annum equal to the
Base Rate then in effect plus one quarter of one percent (1/4%).
2.14 Use of Letters of Credit and Loan Proceeds.
The Borrower shall use (a) the proceeds of the Loans solely to
finance its working capital needs and the working capital needs of its Domestic
Subsidiaries and to repay its outstanding Indebtedness to Mr. Thomas E. Feil not
exceeding $210,000 in the aggregate (including unpaid principal and accrued
interest and fees, if any), (b) the Commercial Letters of Credit solely to
provide for payments in connection with the purchase of materials, goods or
services by it or its Domestic Subsidiaries in the ordinary course of business,
and (c) the Standby Letters of Credit solely to support its or its Domestic
Subsidiaries' workers' compensation liabilities, obligations to insurers,
obligations under leases and other payment, performance, deposit or surety
obligations incurred in the ordinary course of business; provided, however, that
(i) the Borrower shall in no event use any Letters of Credit or the proceeds of
any Loans to finance or support any offices, plants or other facilities of the
Borrower or any of its Subsidiaries located outside the United States and (ii)
the Borrower may use the Letters of Credit and the proceeds of the Loans to
finance the acquisition, manufacturing and assembly of Inventory of the Borrower
or any of its Domestic Subsidiaries intended for sale outside the United States
having a fair market value which does not exceed $1,000,000 in the aggregate at
any one time.
ARTICLE 3
YIELD PROTECTION AND ILLEGALITY; TAXES.
3.1 Inability to Determine Interest Rate.
If prior to the first day of any Interest Period:
(a) the Bank shall have determined (which determination
shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, or
(b) the Bank shall have determined that the Eurodollar Rate
determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to the Bank of making or
maintaining its Loans during such Interest Period as Eurodollar
Loans,
the Bank shall give telecopy or telephonic notice thereof to the Borrower as
soon as practicable thereafter. If such notice is given, any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans. Until such notice has been withdrawn by the Bank, no further
Eurodollar Loans shall be made, nor shall the Borrower have the right to request
any Eurodollar Loans.
3.2 Illegality.
Notwithstanding any other provision herein, if the adoption of or
any change in any Requirement of Law or in the interpretation or application
thereof occurring after the date hereof shall make it unlawful for the Bank to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
Bank shall promptly give written notice of such circumstances to the Borrower
(which notice shall be withdrawn whenever such circumstances no longer exist),
(b) the obligation of the Bank hereunder to make any Eurodollar Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
the Bank to make and maintain Eurodollar Loans, the Bank shall have no
obligation to make or maintain Eurodollar Loans, and (c) any Eurodollar Loans
then outstanding shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrower shall pay to the Bank
such amounts, if any, as may be required pursuant to Section 3.5.
3.3 Additional Costs; Capital Adequacy.
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof applicable to the Bank, or compliance
by the Bank with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the date hereof:
(i) shall subject the Bank to any tax of any kind whatsoever with
respect to any Letter of Credit, any Eurodollar Loan, or its
obligation to issue Letters of Credit or make Eurodollar Loans, or
change the basis of taxation of payments to the Bank in respect
thereof (except for Taxes covered by Section 3.4 and changes in
taxes measured by or imposed upon the overall net income, or
franchise taxes (imposed in lieu of such net income tax), of the
Bank or its applicable lending office, branch, or any affiliate
thereof);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of,
advances, loans, letters of credit or other extensions of credit by,
or any other acquisition of funds by, any office of the Bank, which
requirement is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
issuing or maintaining Letters of Credit or of making or maintaining Eurodollar
Loans or to reduce any amount receivable hereunder in respect thereof or of its
Commitment hereunder, then from time to time, within 2 Business Days after
submission by the Bank to the Borrower of a written request therefor, the
Borrower shall pay to the Bank (i) any additional amounts necessary to
compensate the Bank for such increased cost or reduced amount receivable
attributable to its issuance or maintenance of any Letters of Credit or its
making or maintaining any Eurodollar Loans, and such additional amount or
amounts as will compensate the Bank for such increased cost or reduced amounts
receivable attributable to this Agreement, the Bank's obligation to issue or
maintain Letters of Credit, the Bank's Commitment and the credit facilities
provided hereunder; provided that, in any such case, if the compensation
required to be provided by it hereunder relates to Eurodollar Loans, the
Borrower may elect to convert the Eurodollar Loans to Base Rate Loans by giving
the Bank at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to the Bank upon demand, without duplication, such
amounts, if any, as may be required pursuant to Section 3.5. If the Bank becomes
entitled to claim any additional amounts pursuant to this Section 3.3, it shall
provide prompt notice thereof to the Borrower. Such notice as to any additional
amounts payable pursuant to this Section 3.3 submitted by the Bank to the
Borrower shall be conclusive in the absence of manifest error. This covenant
shall survive the termination of this Agreement and the other Loan Documents and
the payment in full of the Notes and all other amounts payable hereunder.
(b) If the Bank shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by the Bank or any
corporation controlling the Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) from any Governmental
Authority, in each case made subsequent to the date hereof, does or shall have
the effect of reducing the rate of return on the Bank's or such corporation's
capital as a consequence of its obligations hereunder to a level below that
which the Bank or such corporation could have achieved but for such change or
compliance (taking into consideration the Bank's or such corporation's policies
with respect to capital adequacy), then from time to time, within 2 Business
Days after submission by the Bank to the Borrower of a written request therefor,
(i) the Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank for such reduction attributable to its issuance or
maintenance of the Letters of Credit hereunder, or its making or maintaining of
Eurodollar Loans hereunder, and (ii) the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank or such corporation for
such reduction attributable to this Agreement, its obligation to issue Letters
of Credit hereunder, its Commitment hereunder and the credit facilities provided
hereunder to the Borrower.
(c) If the Bank requests compensation from the Borrower pursuant to
paragraph (a) or (b) of this Section 3.3, the Bank will deliver to the Borrower
a certificate setting forth in reasonable detail the basis and amount of such
request and such certificate shall be conclusive as to the amount set forth
therein, absent manifest error. In determining such amount, the Bank may make
such uniformly applied estimates, assumptions, allocations among its assets and
liabilities and the like as it determines in good faith to be appropriate, and
the determinations made by the Bank on the basis thereof shall be final, binding
and conclusive upon the Borrower, except, in the case of such determinations,
for manifest errors. The covenants and obligations of the Borrower set forth in
this Section 3.3 shall survive the termination of this Agreement, the expiration
of the Letters of Credit and the payment of the Loans and all other amounts
payable hereunder.
3.4 Taxes.
(a) All payments made by the Borrower under this Agreement and the
other Loan Documents shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Bank as a result of a present or
former connection between the jurisdiction of the government or taxing authority
imposing such tax and the Bank (excluding a connection arising solely from the
Bank having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any other Loan Document) or any
political subdivision or taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any such Taxes are required
to be withheld from any amounts payable to the Bank or under any other Loan
Document, the amounts so payable shall be increased to the extent necessary to
yield to the Bank (after payment of all Taxes) interest, fees or any other
amounts payable hereunder or under any other Loan Document at the rates or in
the amounts specified in this Agreement or such other Loan Document; provided,
however, that the Borrower shall be entitled to deduct and withhold Taxes from
amounts payable to the Bank (and shall not be required to increase amounts
payable hereunder to gross up for Taxes) if the Bank fails to comply with the
requirements of paragraph (b) of this Section 3.4. Whenever any Taxes are
payable by the Borrower, as promptly as possible thereafter, the Borrower shall
send to the Bank a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the Bank the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Bank for any incremental taxes, interest or penalties that may
become payable by the Bank as a result of any such failure. The agreements in
this Section shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) The Bank shall:
(i) on or before the date of any payment by the Borrower
under this Agreement or any other Loan Document to the Bank, deliver
to the Borrower a duly completed copy of the United States Internal
Revenue Service Form 1001 or 4224, or any successor applicable form,
as the case may be, certifying that it is entitled to receive
payments under this Agreement and its Notes without deduction or
withholding of any United States federal income taxes; and
(ii) deliver to the Borrower further copies of any such form
or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recent form previously
delivered by it to the Borrower;
unless in any such case any change in any Requirement of Law has occurred after
the Closing Date which renders all such forms inapplicable or which would
prevent the Bank from duly completing and delivering any such form with respect
to itself.
3.5 Indemnity.
The Borrower agrees to indemnify the Bank against and to hold the
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of (a) any failure on the part of the Borrower to borrow a
Eurodollar Loan, convert a Base Rate Loan into a Eurodollar Loan or continue a
Eurodollar Loan as such, after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (b) any failure on the
part of the Borrower to make any payment in respect of principal of a Eurodollar
Loan after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making by the Borrower of a payment or
prepayment in respect of principal of a Eurodollar Loan on a day which is not
the last day of the Interest Period with respect thereto. Without limiting the
foregoing, such indemnification shall include (x) an amount equal to (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued for the period from the date of such prepayment
or of such failure to borrow, convert or continue to the last day of the
applicable Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the interest rate applicable to such Eurodollar Loans,
minus (ii) the amount of interest (as reasonably determined by the Bank) which
would have accrued to the Bank on such amount by placing such amount on deposit
for a comparable period with leading banks in the relevant interbank eurodollar
market, (y) any other breakage costs incurred by the Bank and (z) any
administrative costs or expenses incurred by the Bank (including
interdepartmental or other internal charges). This covenant shall survive the
termination of this Agreement and the other Loan Documents, the expiration of
the Letters of Credit and the payment of the Notes and all other amounts payable
hereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Loans and issue the Letters of
Credit, the Borrower hereby represents and warrants to the Bank that:
4.1 Organization, Powers, Compliance.
Each of the Borrower and its Domestic Subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to do business and is in
good standing in each jurisdiction in which the character of its respective
properties or the transaction of its respective business makes such
qualification necessary and where the failure to be so qualified would have a
Material Adverse Effect; (b) has full corporate power and authority to own the
properties and assets it currently owns and to carry on its business as it is
now being conducted; (c) has full corporate power and authority to execute,
deliver and perform this Agreement and the other Loan Documents to which each is
a party; and (d) is not in violation of any Requirement of Law that is
applicable to it or any of its properties, which violation could have a Material
Adverse Effect.
4.2 Capital Stock, Subsidiaries, Fiscal Year.
(a) The authorized, issued and outstanding shares of Capital Stock
of the Borrower and each of its Subsidiaries are as set forth in the Disclosure
Schedule. All such outstanding shares have been duly authorized, are validly
issued and outstanding and are fully paid and non-assessable. To the best of the
Borrower's knowledge, there are no outstanding options or other rights
pertaining to the Capital Stock of the Borrower or any of its Subsidiaries,
other than as set forth in the Disclosure Schedule. Neither the Borrower nor any
of its Subsidiaries has any obligation to repurchase or redeem any shares of its
Capital Stock.
(b) The Disclosure Schedule sets forth the names and jurisdictions
of incorporation of, and the ownership interest of the Borrower in, all of the
Borrower's Subsidiaries.
(c) The fiscal year of the Borrower and each of its Subsidiaries
ends on October 31 and its fiscal quarters end on January 31, April 30, July 31
and October 31, respectively.
4.3 Authorization, Absence of Conflicts.
The execution, delivery and performance by the Borrower and each of
its Domestic Subsidiaries of this Agreement and the other Loan Documents to
which each is a party, the borrowings and the requests for issuance of letters
of credit hereunder, and the creation of security interests in favor of the Bank
pursuant to the Security Documents (a) have been duly authorized by all
requisite corporate action of the Borrower and its Domestic Subsidiaries, (b) do
not require the consent or approval of any stockholders of the Borrower, and (c)
will not (i) violate any Requirement of Law applicable to the Borrower or any of
its Domestic Subsidiaries, (ii) violate or constitute (with due notice or lapse
of time or both) a breach of or a default under any Contractual Obligation of
the Borrower or any of its Domestic Subsidiaries, (iii) result in the creation
or imposition of any Lien of any nature whatsoever upon any properties or assets
of the Borrower or any of its Domestic Subsidiaries (other than Liens in favor
of the Bank), or (iv) require any authorization, consent, approval, license,
ruling, permit, tariff, rate, certification, exemption, or filing or
registration by or with any Governmental Authority or any consent or approval of
any other Person, except such filings as may be required in connection with the
Security Documents.
4.4 Binding Obligations.
This Agreement is, and, upon the delivery thereof to the Bank, each
other Loan Document executed and delivered by the Borrower or any of its
Subsidiaries will be, legal, valid and binding obligations of the Borrower or
such Subsidiary, as the case may be, enforceable against the Borrower or such
Subsidiary in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting enforceability of
creditors' rights generally at the time in effect and except as specific
performance and rights of acceleration may be subject to equitable principles of
general applicability.
4.5 Financial Condition and Statements.
The consolidated audited balance sheet of the Borrower and its
Subsidiaries as at October 31, 1996, and the related consolidated statements of
income, retained earnings and cash flows of the Borrower and its Subsidiaries
for the fiscal year ended on said date, and the unaudited balance sheet of the
Borrower and its Subsidiaries as at January 31, 1997 and the related
consolidated statements of income and cash flows of the Borrower for the three-
month period then ended, heretofore furnished to the Bank, are complete and
correct and fairly present the financial condition of the Borrower and its
Subsidiaries as at said dates and the results of its operations for the fiscal
year and the three-month period ended on said dates (subject, in the case of
such financial statements as at January 31, 1997, to normal year-end audit
adjustments), all in accordance with GAAP and practices applied on a consistent
basis. On said dates neither the Borrower nor its Subsidiaries had any material
obligations or liabilities, direct or contingent (including, without limitation,
any liabilities under Environmental Laws), liabilities for taxes, forward or
long-term commitments or unrealized or anticipated losses from any commitments,
except as referred to or reflected or provided for in said balance sheets as at
said dates, and except for liabilities set forth on the Disclosure Schedule.
Since October 31, 1996, (a) there has been no material adverse change in the
financial condition, operations or business taken as a whole of the Borrower and
its consolidated Subsidiaries from that set forth in said financial statements
as at said date and (b) there has been no development or event which has had or
could reasonably be expected to have a Material Adverse Effect. As of the
Effective Date, after giving effect to the transactions contemplated hereby, the
Borrower and each of its Subsidiaries is Solvent.
4.6 Taxes.
The Borrower and its Domestic Subsidiaries have filed all United
States Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all material taxes due pursuant to
such returns or pursuant to any assessment made against the Borrower or any of
its Domestic Subsidiaries or any of their respective assets and all other taxes,
fees and other charges imposed on the Borrower or any of its Domestic
Subsidiaries by any Governmental Authority, except such taxes, if any, which are
not yet delinquent or which are being Properly Contested. The charges, accruals
and reserves on the books of the Borrower and its Domestic Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Borrower, adequate. No tax Liens other than Permitted Liens have been filed and
no claims are being asserted with respect to any such taxes, fees or other
charges. Neither the Borrower nor any of its Domestic Subsidiaries is undergoing
any tax audits, other than as specified in the Disclosure Schedule.
4.7 Title to Properties.
Except as set forth in the Disclosure Schedule, each of the Borrower
and its Subsidiaries owns and has good and marketable title or leasehold rights
to all of its assets, free and clear of any Liens other than Permitted Liens,
and enjoys peaceful and undisturbed possession under all leases necessary in any
material respects for the operation of its assets. Except as set forth in the
Disclosure Schedule, no mortgage or financing statement or other evidence or
notice of a security interest covering all or any part of the assets of the
Borrower or any of its Subsidiaries is on file in any public office, except such
as have been filed in connection with Permitted Liens.
4.8 Proceedings.
Except as set forth in the Disclosure Schedule, there is no action,
suit, proceeding or claim, at law or in equity, by or before any arbitrator,
Governmental Authority or other body (including, without limitation, any
Environmental Proceeding), now pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its Subsidiaries or any
of their respective properties, rights or assets, which relates to the
transactions contemplated hereby or by the other Loan Documents or which, if
adversely determined, could have a Material Adverse Effect.
4.9 Labor Disputes; Collective Bargaining Agreements.
Except as set forth in the Disclosure Schedule, as of the date
hereof (a) there are no collective bargaining agreements or other labor
contracts covering the Borrower or any of its Subsidiaries; (b) no such
collective bargaining agreement or other labor contract will expire during the
term of this Agreement; (c) no union or other labor organization is seeking to
organize, or to be recognized as bargaining representative for, a bargaining
unit of employees of the Borrower or any of its Subsidiaries; (d) there is no
pending or threatened strike, work stoppage, material unfair labor practice
claim or charge, arbitration or other material labor dispute against or
affecting the Borrower or any of its Subsidiaries or their respective employees;
and (e) there are no actions, suits, charges, demands, claims, counterclaims or
proceedings pending or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries or, by or on behalf of, or with, its
employees, other than employee grievances arising in the ordinary course of
business which are not, in the aggregate, material.
4.10 Material Authorizations and Licenses.
To the best of the Borrower's knowledge, each of the Borrower and
its Subsidiaries has all necessary licenses, permits and approvals (including,
without limitation, all necessary licenses, permits and authorizations relating
to Environmental Laws) to own and operate its properties and assets and to carry
on their business as currently conducted, except where the failure to have such
license, permit or authorization would not have a Material Adverse Effect.
4.11 Intangible Assets.
Each of the Borrower and its Subsidiaries possesses all necessary
patents, know-how, trademarks, service marks, trade names, and copyrights, and
rights with respect to each of the foregoing, necessary to carry on its business
as currently conducted and the possession and use thereof in its business does
not, to the best of the Borrower's knowledge, conflict with the patents,
know-how, trademarks, service marks, trade names, and copyrights, and rights
with respect to the foregoing, of any other Person, except where such conflict
could not have a Material Adverse Effect.
4.12 Condition of Assets.
All of the assets and properties of the Borrower and its
Subsidiaries which are reasonably necessary for the operation of their
respective businesses are in good working condition, ordinary wear and tear
excepted, and are able to serve the function for which they are currently being
used or for which they are intended.
4.13 No Defaults, Compliance With Laws. With Laws
To the best of the Borrower's knowledge, neither the Borrower nor
its Subsidiaries is in default under any Contractual Obligation, which default
could have a Material Adverse Effect. Each of the Borrower and its Subsidiaries
has complied and is in compliance in all respects with all Requirements of Law
including, without limitation, all applicable Environmental Laws, non-compliance
with which would have a Material Adverse Effect. No Default or Event of Default
has occurred and is continuing.
4.14 Indebtedness.
Neither the Borrower nor its Subsidiaries has any Indebtedness,
except (i) Indebtedness set forth in the Disclosure Schedule and (ii)
Indebtedness set forth in the financial statements referred to in Section 4.5.
4.15 Not an Investment Company or Regulated Company.
(a) Neither the Borrower nor any of its Affiliates is subject to
regulation under the Investment Company Act of 1940, as amended, or is subject
to any statute or regulation which regulates the incurrence by the Borrower or
such corporation of indebtedness for or with respect to borrowed money.
(b) Neither the Borrower nor any of its Affiliates is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended.
(c) Neither the Borrower nor any of its Affiliates is subject to
regulation as a "public utility" or "public service corporation" or the
equivalent under the applicable law of any state relating to public utilities
and/or public service corporations.
4.16 Use of Proceeds.
(a) The Borrower shall use the Letters of Credit and the proceeds of
the Loans solely in accordance with Section 2.14.
(b) No part of the proceeds of the Loans or the Letters of Credit
will be used for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" (as such term is defined in Regulation
U of the Board of Governors of the Federal Reserve System as now and from time
to time hereafter in effect), or for the payment in full or in part of, or to
provide credit support for, Indebtedness which was or is to be incurred for such
purpose, or to extend credit or support credit extended to others for such
purpose. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying "margin stock".
4.17 Ranking of Loans.
The Obligations rank and will at all times rank at least pari passu
in priority of payment to all other Indebtedness of the Borrower. Neither the
Borrower nor any of its Domestic Subsidiaries has any secured Indebtedness other
than the Obligations, the Indebtedness reflected in the financial statements
described in Section 4.5, and the Indebtedness specified in the Disclosure
Schedule.
4.18 Burdensome Provisions.
Neither the Borrower nor any of its Subsidiaries is party to or is
it bound by any Requirement of Law or Contractual Obligation, compliance with
which could have a Material Adverse Effect.
4.19 ERISA.
During the five year period ending on the Effective Date (or, with
respect to (vi) or (viii) below, as of the date such representation is made or
deemed made), except as set forth in the Disclosure Schedule or as reflected in
the financial statements referred to in Section 4.5, none of the following
events or conditions has occurred which, either individually or in the
aggregate, has resulted or could reasonably be expected to result in a liability
to the Borrower which could have a Material Adverse Effect: (i) a Reportable
Event; (ii) an "accumulated funding deficiency" (within the meaning of Section
412 of the Code or Section 302 of ERISA); (iii) any material noncompliance with
the applicable provisions of ERISA or the Code; (iv) a termination of a Single
Employer Plan (other than a standard termination pursuant to Section 4041(b) of
ERISA); (v) a Lien in favor of the PBGC or a Plan; (vi) Underfunding with
respect to any Single Employer Plan; (vii) a complete or partial withdrawal from
any Multiemployer Plan by the Borrower or any of its Subsidiaries or any
Commonly Controlled Entity; (viii) any liability of the Borrower or any of its
Subsidiaries or any Commonly Controlled Entity under ERISA if the Borrower or
any such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the annual valuation date most closely preceding the
date on which this representation is made or deemed made; (ix) the
reorganization or insolvency (within the meaning of Section 4245 of ERISA) of
any Multiemployer Plan; (x) the excess of the present value (determined using
actuarial and other assumptions which are reasonable in respect of the benefits
provided and the employees participating) of the aggregate liability of the
Borrower or any of its Subsidiaries for post-retirement benefits to be provided
to their current and former employees under Plans which are welfare benefit
plans (as defined in Section 3(1) of ERISA) over the assets under all such
Plans; and (xi) an event or condition with respect to which the Borrower or any
of its Subsidiaries or any Commonly Controlled Entity could incur any liability
in respect of a Former Plan.
4.20 Environmental Matters.
Except as set forth in the Disclosure Schedule:
(a) To the best of the Borrower's knowledge, (i) the Elmsford
Facilities and all other facilities and properties owned, leased or operated by
the Borrower or any of its Subsidiaries (the "Properties") and all operations at
the Properties are in compliance with all applicable Environmental Laws, (ii)
there is no violation of any Environmental Law with respect to the Properties or
the business operated by the Borrower or any of its Subsidiaries, (the
"Business"), and (iii) there are no conditions relating to the Business or
Properties that could reasonably be expected to give rise to liability under any
applicable Environmental Law, except for any failure so to comply or violation
or condition, or any aggregation thereof, that could not reasonably be expected
to result in the payment of a Material Environmental Amount.
(b) To the best of the Borrower's knowledge after diligent inquiry,
the Properties do not contain, and have not previously contained, any Hazardous
Substances at, on or under the Properties in amounts or concentrations that
constitute or constituted a violation of, or could reasonably give rise to
liability under, Environmental Laws except insofar as the presence of any
Hazardous Substances is not reasonably likely to result in the payment of a
Material Environmental Amount.
(c) Neither the Borrower nor any of its Subsidiaries has received
any written or verbal notice of, or inquiry from any Governmental Authority, of
any violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business (including, without
limitation, any notice that any of the Properties has been listed on the
national priorities list or any similar state list), nor does the Borrower have
knowledge or reason to believe that any such notice will be received or is being
threatened, except insofar as such notice or threatened notice, or any
aggregation thereof, does not involve a matter or matters that is or are
reasonably likely to result in the payment of a Material Environmental Amount.
(d) To the best of the Borrower's knowledge, Hazardous Substances
have not been transported or disposed of from the Properties, or generated,
treated, stored or disposed of by or on behalf of the Borrower or any of its
Subsidiaries at, on or under any of the Properties or any other location in
violation of, or in a manner that would be reasonably likely to give rise to
liability under, any applicable Environmental Law, except insofar as any such
violation or liability referred to in this paragraph, or any aggregation
thereof, is not reasonably likely to result in the payment of a Material
Environmental Amount.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any of its Subsidiaries is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
the Borrower, any of its Subsidiaries, any of its Properties or its Business,
except insofar as such proceeding, action, decree, order or other requirement,
or any aggregation thereof, is not reasonably likely to result in the payment of
a Material Environmental Amount.
(f) There has been no release or, to the best knowledge of the
Borrower, after diligent inquiry, threat of release of Hazardous Substances at
or from the Properties, or arising from or related to the operations (including,
without limitation, disposal) of the Borrower or any of its Subsidiaries in
connection with the Properties or otherwise in connection with the Business, in
violation of or in amounts or in a manner that would be reasonably likely to
give rise to liability under Environmental Laws, except insofar as any such
violation or liability referred to in this paragraph, or any aggregation
thereof, is not reasonably likely to result in the payment of a Material
Environmental Amount.
(g) Neither the Borrower nor any of its Subsidiaries has knowingly
assumed any liability of any Person under any Environmental Law.
(h) The Borrower and its Domestic Subsidiaries conduct their
respective operations in compliance with applicable Environmental Laws, except
where the failure to do so could not reasonably be expected to result in the
payment of a Material Environmental Amount.
4.21 Correct Information.
The information, schedules, exhibits and reports furnished by the
Borrower and each of its Subsidiaries to the Bank in connection with the
negotiation and preparation of this Agreement and the other Loan Documents did
not contain any omissions or misstatements of fact which would make the
statements contained therein misleading or incomplete in any material respect
when furnished to the Bank. The Borrower knows of no fact that has not been
disclosed in writing to the Bank and which materially and adversely affects, or
which could reasonably be expected in the future to materially and adversely
affect, the Borrower, any of its Subsidiaries, or the ability of the Borrower to
perform its obligations hereunder and under the other Loan Documents.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Initial Credit Event.
The obligation of the Bank to make the initial Loan and to issue the
initial Letter of Credit hereunder is subject to the following conditions
precedent:
(a) Documents. The Bank shall have received each of the following
documents (dated or certified as of the Closing Date unless otherwise provided
herein, and in form and substance satisfactory to the Bank):
(i) Credit Agreement. A counterpart of this Agreement, duly
executed by the Borrower;
(ii) Note. The Note, appropriately completed and duly
executed by the Borrower;
(iii) Security Agreement. The Security Agreement, duly
executed by the Borrower and each of its Domestic Subsidiaries;
(iv) Intellectual Property Security Agreement. The
Intellectual Property Security Agreement, duly executed by the
Borrower and each of its Domestic Subsidiaries;
(v) Subsidiary Guarantee. The Subsidiary Guarantee, duly
executed by each of the Borrower's Domestic Subsidiaries;
(vi) Contribution Agreement. The Contribution Agreement,
duly executed by the Borrower and its Domestic Subsidiaries;
(vii) Pledge Agreement. The Pledge Agreement, duly executed
by the Borrower.
(viii) Perfection and Priority of Liens. (1) UCC-1 financing
statements duly executed by the Borrower and each of its Domestic
Subsidiaries and properly completed for filing in all public offices
specified by the Bank, (2) letters in form and substance
satisfactory to the Bank, duly executed by each public warehouse in
which the Borrower or any of its Domestic Subsidiaries maintains
Inventory, (3) evidence that no financing statements are currently
on record in any public office specified by the Bank naming the
Borrower or any of its Domestic Subsidiaries as debtor, other than
financing statements filed in connection with Permitted Liens and
financing statements with respect to which the Bank shall have
received UCC-3 termination statements duly executed by the secured
party named therein, (4) evidence satisfactory to the Bank that the
Collateral covered by the Intellectual Property Security Agreement
is owned by the Borrower and is not subject to any liens, licenses
or interests in favor of any other party, and (5) evidence
satisfactory to the Bank that its liens on the Collateral covered by
the Intellectual Property Security Agreement have been perfected
(including an escrow agreement satisfactory to the Bank with an
escrow agent acceptable to the Bank covering the source code of all
relevant software);
(ix) Pledged Stock and Stock Powers. Certificates
representing the Pledged Stock under and as defined in the Pledge
Agreement, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer or the
Borrower; (x) Lockbox Agreements. The Lockbox Agreements, duly
executed by the Borrower and each of its Domestic Subsidiaries;
(x) Lockbox Agreements. The Lockbox Agreements, duly
executed by the Borrower and each of its Domestic Subsidiaries;
(xi) Insurance. Certificates of insurance satisfactory in
form and substance to the Bank with respect to the insurance
required by the provisions of Section 6.6, together with copies of
the policies referred to therein, which shall include loss payable
clauses naming the Bank as loss-payee or additional insured, as
appropriate, and shall provide for not less than 30 days' prior
written notice to the Bank in the event of cancellation;
(xii) Field Examination and Audit. A written report prepared
by the Bank's auditors, based upon a recent field examination
conducted by them with respect to the Borrower and satisfaction on
the part of the Bank with the findings of such report;
(xiii) Corporate Authority, Actions and Incumbency.
Originals or copies of such documents as the Bank may require (all
of which shall be certified by such corporate officers or
governmental officials as the Bank may require) relating to the
existence and corporate authority of the Borrower and each of its
Domestic Subsidiaries, the taking of all necessary corporate action
to authorize the execution, delivery and performance by the Borrower
and its Subsidiaries of the Loan Documents to which they are party,
and the incumbency and authenticity of the signature of each officer
who executes a Loan Document on behalf of the Borrower or any of its
Subsidiaries;
(xiv) Compliance Certificate. A Compliance Certificate dated
the Effective Date, duly executed by a Responsible Officer of the
Borrower;
(xv) Opinion of Counsel. The favorable legal opinion of
counsel to the Borrower and its Domestic Subsidiaries, as to such
matters as the Bank may reasonably require;
(xvi) Financial Statements. Copies, certified to the Bank's
satisfaction, of the Borrower's financial statements specified in
Section 4.5; and
(xvii) Solvency Certificate. The Solvency Certificate, duly
executed by a Responsible Officer of the Borrower;
(xviii)Perfection Certificate. A perfection certificate in
form and substance satisfactory to the Bank, duly executed by the
Borrower and each of its Domestic Subsidiaries;
(xix) Additional Documents. Such other statements,
certificates, documents or information as the Bank may reasonably
specify.
(b) Payments. The Bank shall have received:
(i) payment in full of the Closing Fee; and
(ii) payment in full of all disbursements and reasonable
fees of its counsel relating to this transaction, for which an
invoice shall have been presented on or before the Closing Date.
(c) Lockboxes and Operating Account. The Borrower shall have
established the Operating Account and the Borrower and each of its Subsidiaries
shall have established one or more Lockboxes satisfactory to the Bank pursuant
to the Lockbox Agreements.
5.2 Conditions Precedent to Each Credit Event.
The obligation of the Bank to make any Loan hereunder and its
obligation to issue or renew any Letter of Credit hereunder (including the
initial Letter of Credit), are subject to all of the conditions precedent set
forth in Section 5.1 and the following conditions precedent (it being agreed
that any certificates or other documents required hereunder shall be dated or
certified as of the Borrowing Date for such Loan or Letter of Credit unless
otherwise provided herein, and shall be in form and substance satisfactory to
the Bank):
(a) Compliance, Representations and Warranties. The Borrower and
each of its Subsidiaries shall be in compliance with all of the terms, covenants
and conditions of this Agreement on such date. Each of the representations and
warranties set forth in Article 4 shall be true and correct as to the Borrower
and as to any Subsidiary of the Borrower to which such representations and
warranties relate in all material respects on and as of such date as if made on
and as of such date (except to the extent that such representations and
warranties expressly relate to an earlier date) and, if the Bank so requests,
the Bank shall have received a certificate duly executed by a Responsible
Officer of the Borrower to such effect.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans requested to
be made and the Letters of Credit requested to be issued on such date and, if
the Bank so requests, the Bank shall have received a certificate duly executed
by a Responsible Officer of the Borrower to such effect.
(c) No Material Adverse Change. The Bank shall have determined that
no material adverse change has occurred in the financial condition or results of
operations of the Borrower and its Domestic Subsidiaries taken as a whole from
the condition and results reflected in the financial statements referred to in
Section 4.5.
(d) Request of Borrowing or Issuance. The Bank shall have received
an appropriate Notice of Borrowing or LC Application, as the case may be, with
respect to the Loans to be made or Letters of Credit to be d) Request of
Borrowing or Issuance. The Bank shall have received an appropriate Notice of
Borrowing or LC Application, as the case may be, with respect to the Loans to be
made or Letters of Credit to be issued on such date.
(e) Borrowing Base Certificate. The Bank shall have received the
most recent Borrowing Base Certificate required to be delivered by the Borrower
to the Bank pursuant to Section 6.3(f), which certificate shall indicate that
the requested Loan or Letter of Credit does not exceed the Available Commitment
on such date.
(f) Additional Matters. The Bank shall have received such additional
instruments, certificates or other documents, and such additional information,
as the Bank may reasonably require.
ARTICLE 6
COVENANTS
The Borrower hereby covenants and agrees that so long as the
Commitment remains in effect or any Letter of Credit remains outstanding and
until the payment in full of the Obligations and the complete performance of all
of the Borrower's other obligations hereunder and under the other Loan
Documents, unless the Bank shall otherwise consent in writing:
6.1 Corporate Existence, Properties.
The Borrower shall, and shall cause each of its Domestic
Subsidiaries to, do or cause to be done all things necessary to:
(a) preserve and keep in full force and effect its legal existence;
(b) remain or become a corporation qualified to engage in business
in good standing in all jurisdictions in which the character of its
properties or the transaction of its business make such
qualification necessary;
(c) maintain, preserve and protect all permits, rights and
privileges necessary for the proper conduct of its business and all
franchises, licenses, patents, trade names, trademarks and
copyrights owned by or licensed to it that are necessary or
desirable in the normal conduct of its business;
(d) ensure that all property used or useful in the conduct of its
business is maintained and kept in good repair, working order and
condition, and from time to time take all reasonable action to make,
or cause to be made, all needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that, in the
reasonable judgment of the Borrower or such Subsidiaries, the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
6.2 Payment of Indebtedness, Taxes
The Borrower shall, and shall cause each of its Subsidiaries to, pay
all of its Indebtedness and obligations promptly and in accordance with normal
terms and trade practices and shall promptly pay and discharge or cause to be
paid or discharged all taxes, assessments or other governmental charges or
levies imposed upon it or upon its income and profits or upon its property,
real, personal or mixed, or upon any part thereof, before the date on which
penalties attach thereto, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might become a lien or charge upon such
properties or any part thereof; provided, however, that the Borrower shall not
be required to pay and discharge or cause any of its Subsidiaries to pay or
discharge any such debt, obligation, tax, assessment, charge, levy or claim so
long as it is Properly Contested. For purposes of this Agreement, any debt or
obligation of, any tax, assessment, charge, levy or claim against, and any
litigation or other legal proceeding involving, any Person shall be deemed to be
"Properly Contested" only if (a) it shall be contested diligently and in good
faith by appropriate proceedings, (b) such Person shall have assigned on its
books adequate reserves with respect to any such debt, obligation, tax,
assessment, charge, levy or claim so contested, and (c) no material portion of
such Person's assets shall be subject to encumbrance, loss or forfeiture by
reason of such contest.
6.3 Financial Statements, Reports, etc.
The Borrower shall furnish to the Bank (in reasonable detail
satisfactory to the Bank):
(a) as soon as available but in any event no later than 45 days
after the close of each month, the consolidated and consolidating balance sheet
of the Borrower and its Subsidiaries as of the close of such month and the
related consolidated and consolidating profit and loss statement and the
consolidated and consolidating statement of cash flows for such month and for
the period from the beginning of the then current fiscal year to the end of such
month, such financial statements to be accompanied by a certificate of a
Responsible Officer of the Borrower, stating that said financial statements
fairly present the consolidated financial condition and results of operations,
as the case may be, of the Borrower and its Subsidiaries in accordance with
generally accepted accounting principles consistently applied, as at the end of,
and for, such month (except for the absence of footnotes and subject to normal
year-end audit adjustments);
(b) as soon as available but in any event no later than 90 days
after the close of each fiscal year of the Borrower, the consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of the close
of such fiscal year and the related consolidated and consolidating profit and
loss statement and consolidated and consolidating statement of cash flows for
such fiscal year, such financial statements to be audited by, and accompanied by
a report of, any firm of independent certified public accountants generally
recognized as one of the "big six" accounting firms or any other firm of
independent certified public accountants of recognized national standing
acceptable to the Bank (the "Accountants") to the effect that such financial
statements have been prepared in conformity with generally accepted accounting
principles consistently applied, which audit and accompanying report shall not
contain any qualification or exception, together with a certificate of such
accountants (1) stating that, in connection with their audit of the Borrower and
its Subsidiaries they have reviewed the provisions of this Agreement and that in
the course of their audit of the Borrower nothing has come to their attention to
lead them to believe that any Event of Default hereunder exists or, if such is
not the case, specifying such Event of Default and the nature thereof (it being
understood that the examination of such accountants cannot be relied upon to
give them knowledge of any Event of Default except as it relates to accounting
or auditing matters) and (2) setting forth in detail reasonably satisfactory to
the Bank the calculations made to determine compliance with the financial
covenants contained in Article 7 and the information required to make such
calculations;
(c) as soon as available, but in any event not later than 90 days
after the beginning of each fiscal year of the Borrower, financial projections
prepared by a Responsible Officer of the Borrower covering such fiscal year and
the remaining fiscal years (or portions thereof) during the Commitment Period,
which projections shall be prepared in detail reasonably satisfactory to the
Bank, shall contain forecasts prepared on a quarterly basis, and shall be
certified by such officer to have been prepared in good faith and based upon
reasonable assumptions;
(d) together with each delivery of financial statements of the
Borrower pursuant to clause (a) or (b) above, a certificate of a Responsible
Officer of the Borrower substantially in the form of Exhibit C (a "Compliance
Certificate");
(e) as soon as available, but in any event no later than fifteen
Business Days after the close of each calendar month or with such greater
frequency as the Bank may require, accounts receivable aging reports, accounts
payable aging reports, and inventory reports for such month, prepared in form
and detail satisfactory to the Bank and certified by a Responsible Officer of
the Borrower;
(f) as soon as available, but in any event no later than 11:00 a.m.
on the second Business Day of each week (or with such greater frequency as the
Bank may require) and on each Borrowing Date, a Borrowing Base Certificate
prepared on the Bank's standard form, setting forth the information requested
therein for the immediately preceding week (or, if such Certificate is being
delivered on a Borrowing Date that is not the second Business Day of a week, for
the portion of the current week ending on the day immediately preceding such
Borrowing Date), certified by a Responsible Officer of the Borrower (each such
certificate herein called a "Borrowing Base Certificate");
(g) as soon as available, but in any event no later than ten
Business Days after the end of each calendar month, a Period End Recapitulation
Report and a Period End Accounts Receivable and Loan Reconciliation Report for
such month, in each case in form and detail satisfactory to the Bank and
certified by a Responsible Officer of the Borrower;
(h) as soon as available, but in any event no later than 11:00 a.m.
on each Business Day, daily reports of sales, remittances and credits of the
Borrower and its Subsidiaries for the immediately preceding Business Day;
(i) promptly upon their becoming available, copies of (x) all
financial statements, reports, notices and proxy statements sent or made
available generally by the Borrower to its security holders, (y) all regular and
periodic reports and all registration statements and prospectuses, if any, filed
by the Borrower with any securities exchange or with the Securities and Exchange
Commission, and (z) all press releases and other statements made available
generally by the Borrower to the public concerning material developments in the
business of the Borrower; and
(j) with reasonable promptness, such other information regarding the
Borrower as the Bank may reasonably request.
6.4 Notice of Adverse Events and Significant Changes.
The Borrower shall furnish to the Bank prompt written notice of:
(a) the occurrence of any event which constitutes a Default or Event
of Default hereunder, promptly after any senior officer of the Borrower becomes
aware or could reasonably be expected to become aware, that such event
constitutes a Default or Event of Default,
(b) the commencement of any action or proceeding involving or
affecting the Borrower or any Subsidiary thereof or any properties or assets of
the Borrower or such Subsidiary an adverse determination of which could
reasonably be expected to have a Material Adverse Effect,
(c) any default or event of default under any material Contractual
Obligation of the Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect,
(d) any litigation, investigation or proceeding which may exist at
any time between the Borrower and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect,
(e) the occurrence of any of the following events: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Single Employer Plan which could reasonably be expected to have a Material
Adverse Effect, (ii) a failure on the part of the Borrower or any of its
Subsidiaries to make any required contribution to a Single Employer or
Multiemployer Plan (other than a failure to make a contribution which (1)
together with all other contributions that are then past due does not exceed
$100,000 in the aggregate, (2) does not constitute or result in a violation of
any provision of ERISA or the Code or any regulation adopted thereunder, (3)
does not cause an Underfunding of such Plan and (4) does not result in the
imposition of any fees or penalties against the Borrower or any of its
Subsidiaries, other than the requirement to pay interest accrued on such
contribution to the relevant Plan), (iii) the creation of any Lien in favor of
the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
insolvency (within the meaning of Section 4245 of ERISA) of, any Multiemployer
Plan; (iv) Underfunding with respect to any Single Employer Plan which could
result in a material liability to the Borrower; (v) the institution of
proceedings or the taking of any other action by the PBGC or the Borrower or any
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or insolvency (within the
meaning of Section 4245 of ERISA) of, any Single Employer or Multiemployer Plan;
or (vi) the occurrence or expected occurrence of any event or condition under
which the Borrower or any Commonly Controlled Entity has incurred or could incur
any liability in respect of a Former Plan which could reasonably be expected to
have a Material Adverse Effect,
(f) any material adverse change in the business, operations,
property or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole,
(g) (i) any release or discharge by the Borrower or any Subsidiary
of any Hazardous Substances required to be reported under Environmental Laws to
any Governmental Authority; (ii) any condition, circumstance, occurrence or
event that could result in material Environmental Costs or could result in the
imposition of any lien or other restriction on the title, ownership or
transferability of any Property; and (iii) any proposed action to be taken by
the Borrower or any Subsidiary that could subject the Borrower or any of its
Subsidiaries to any material additional or different requirements or liabilities
under Environmental Laws, and
(h) the execution by the Borrower or any of its Domestic
Subsidiaries of any new collective bargaining agreements or other labor
contract, the recognition of any union or other labor organization as bargaining
representative for a bargaining unit of employees of the Borrower or any of its
Domestic Subsidiaries any pending or threatened strike, work stoppage, material
unfair labor practice claim or charge, arbitration or other material labor
dispute against or affecting the Borrower or any of its Domestic Subsidiaries
and any actions, suits, charges, demands, claims, counterclaims or proceedings
pending or, to the knowledge of the Borrower, threatened against the Borrower or
any of its Domestic Subsidiaries by or on behalf of, or with, its employees,
other than employee grievances arising in the ordinary course of business which
are not, in the aggregate, material.
6.5 Books and Records; Inspection; Audits.
The Borrower shall maintain, and shall cause each of its Domestic
Subsidiaries to maintain, proper books and records with respect to the operation
of its business in accordance with GAAP consistently applied; the Borrower shall
permit, and shall cause each of its Domestic Subsidiaries to permit, authorized
representatives of the Bank to visit and inspect from time to time upon
reasonable notice during business hours (or at any time after the occurrence and
during the continuance of an Event of Default hereunder) any of the offices,
inventory locations and other facilities of the Borrower or such Subsidiary, to
examine the books and records of the Borrower or such Subsidiary and make copies
or extracts therefrom, to examine the Inventory of the Borrower or such
Subsidiary, to conduct field examinations with respect to the assets of the
Borrower and its Domestic Subsidiaries, to verify the eligibility of the
Inventory and Accounts of the Borrower and its Domestic Subsidiaries for
inclusion in the Borrowing Base, and to discuss the affairs, inventory and
accounts of the Borrower and its Domestic Subsidiaries with its officers and
accountants. The Borrower shall permit, and shall cause each of its Domestic
Subsidiaries to permit, the Bank to conduct field examinations thereof every 90
days, or with such greater frequency as the Bank may require.
6.6 Insurance.
The Borrower shall, and shall cause each of its Subsidiaries to, (i)
keep its assets that are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other
hazards insured against by extended coverage in amounts sufficient to prevent it
from becoming a co-insurer (other than maintaining reasonable deductibles) and
in any event not less than 80% of the full insurable value (replacement value if
available) of the property insured, (ii) maintain with financially sound and
reputable insurers, insurance against hazards, risks and liability to persons
and property to the extent and in the manner customary for companies in similar
business similarly situated, (iii) provide to the Bank no later than 10 days
prior to the scheduled expiration date of any insurance policy, evidence
satisfactory to the Bank that such expiration date has been extended for at
least one year (including evidence of payment of the relevant premiums), (iv)
file with the Bank annually, within 30 days prior to each anniversary of the
Closing Date (or at such other time as may be mutually agreed upon by the
Borrower and the Bank), a detailed list of the insurance then in effect, stating
the names of the insurance companies, the amounts of insurance, dates of
expiration thereof and the properties and risks covered thereby, and (v)
promptly upon request by the Bank, such other information regarding the
insurance maintained by the Borrower or any of its Subsidiaries as the Bank may
require.
6.7 Compliance with Laws.
The Borrower shall, and shall cause each of its Subsidiaries to,
observe and comply in all material respects with all Requirements of Law which
now or at any time hereafter may be applicable to the Borrower or any of its
Subsidiaries (including all applicable provisions of ERISA and the Code),
noncompliance with which could reasonably be expected to have a Material Adverse
Effect.
6.8 Environmental Laws.
The Borrower, and shall cause each of its Subsidiaries to, shall (a)
comply with, and use all reasonable efforts to ensure compliance by all tenants
and subtenants of the Properties, if any, with, all applicable Environmental
Laws and obtain and comply with and maintain and use all reasonable efforts to
ensure that all tenants and subtenants obtain and comply with and maintain, any
and all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, except in each case to the extent that the
failure to do so could not reasonably be expected to result in the payment of a
Material Environmental Amount, (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other similar
actions required of the Borrower under Environmental Laws and promptly comply
with all orders and directives of all Governmental Authorities regarding
Environmental Laws, except to the extent that the same are being contested in
good faith by appropriate proceedings, and except in each case to the extent
that the failure to do so could not reasonably be expected to result in the
payment of a Material Environmental Amount.
6.9 Use of Proceeds.
The Borrower shall use the Letters of Credit and the proceeds of the
Loans solely in accordance with its representations and warranties in Section
4.16.
6.10 Indebtedness.
The Borrower shall not, and shall not permit any of its Domestic
Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness at
any time, except:
(a) Indebtedness owing to the Bank hereunder and under the other
Loan Documents;
(b) taxes, assessments and governmental charges that are not yet due
and payable;
(c) Indebtedness secured by purchase money liens permitted under
Section 6.11(f) and obligations under Capital Leases, so long as the
total amount of such Indebtedness and obligations does not exceed
$500,000 in the aggregate;
(d) Indebtedness specified in the financial statements referred to
in Section 4.5 or in the Disclosure Schedule, and any extensions,
renewals and refinancings thereof, so long as such extensions,
renewals or refinancings do not increase the amount of the original
Indebtedness; and
(e) Unsecured Subordinated Debt.
6.11 Liens.
The Borrower shall not, and shall not permit any of its Domestic
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind
upon, or any security interest in, any of its property or assets, whether now
owned or hereafter acquired, except:
(a) Liens in favor of the Bank securing the Obligations;
(b) liens for taxes not delinquent or being contested in good faith
and by appropriate proceedings;
(c) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment
insurance;
(d) deposits or pledges to secure bids, tenders, contracts (other
than contracts for borrowed money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising
in the ordinary course of business;
(e) mechanics', workers', carriers', warehousemen's, materialmen's,
suppliers' or other like liens arising in the ordinary course of
business with respect to obligations which are not due, which are
bonded or discharged within 30 days of the date of filing or which
are being contested in good faith;
(f) purchase money liens on fixed assets of the Borrower or such
Subsidiary securing Indebtedness permitted under Section 6.10(c),
which liens secure the purchase price of such fixed assets and apply
only to the fixed assets so purchased, provided that the principal
amount of the indebtedness secured by any such lien shall at no time
exceed an amount equal to the lesser of the cost to the Borrower or
such Subsidiary of the fixed assets so purchased and the fair market
value of such fixed assets (as determined in good faith by the board
of directors of the Borrower or such Subsidiary) at the time of such
acquisition, and that any such Lien shall be created within 12
months after, in the case of property, its acquisition, and in the
case of improvements, their completion;
(g) liens arising out of Capital Leases permitted under Section
6.10(c), so long as such liens attach only to the fixed assets
subject to such Capital Leases;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial and do not interfere with the
ordinary conduct of the business of the Borrower; and
(i) the Liens set forth in the Disclosure Schedule, provided that no
such Lien is extended to cover any additional property after the
Closing Date and that the amount of Indebtedness secured thereby is
not increased.
6.12 Contingent Liabilities.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon any obligation of any Person, except (a) by the endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business, (b) guarantees in favor of the Bank hereunder and under the
other Loan Documents, (c) the guarantees disclosed in the financial statements
referred to in Section 4.5, (d) the guarantees listed in the Disclosure
Schedule, and (e) guarantees which replace any of the guarantees referred to in
clause (c) or (d) of this Section 6.12, so long as such replacement guarantees
cover the same Indebtedness as the original guarantees (or extensions, renewals
or refinancings of such Indebtedness) and the maximum liability of the Borrower
thereunder does not exceed its maximum liability under the original guarantees.
6.13 Merger and Consolidation; Acquisition and Disposition of
Assets.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any merger, consolidation or voluntary dissolution, or lease or
acquire all or substantially all of the assets of any Person or of any division
or business unit of any Person, or sell, lease, license or otherwise dispose of
any of its assets, except (a) acquisitions, sales, leases, licenses or
dispositions in the ordinary course of business, (b) mergers and consolidations
with, and acquisitions of all or substantially all of the assets or capital
stock of, any Person or any division or business unit of any Person, provided
that the Borrower or such Subsidiary is the surviving entity of such merger or
consolidation, that no Default or Event of Default has occurred or would occur
after giving effect to such merger, consolidation or acquisition, and that (in
the case of an acquisition of capital stock) such acquisition is permitted under
Section 6.14 and the Borrower complies with Section 6.22, if applicable, (c)
mergers by the Borrower with one of its Subsidiaries (provided that the Borrower
is the surviving entity of such merger) or mergers of Subsidiaries of the
Borrower with each other.
6.14 Investments.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, make any Investment, except (a) obligations issued or guaranteed by the
United States of America or any agency thereof or short term repurchase
agreements with respect thereto, in each case maturing within 12 months after
the date of acquisition thereof, (b) short-term certificates of deposit issued
by, and deposits in, the Bank or, subject to Section 6.21, any other commercial
bank having a combined capital and surplus of not less than $500,000,000 or the
equivalent thereof in another currency, in each case maturing within 12 months
after the date of acquisition thereof, (c) short-term commercial paper maturing
within 12 months after the date of acquisition thereof, which has been given the
highest rating by Standard & Poor's Corporation, Moody's Investors Service,
Inc., or another nationally recognized credit rating agency of similar standing,
(d) shares of money market mutual funds having net assets of not less than
$1,000,000,000, which invest solely in securities referred to in clauses (a),
(b) or (c) above, (e) loans and advances to employees of the Borrower for
travel, entertainment and relocation expenses in the ordinary course of business
in an aggregate amount not to exceed $250,000 at any one time outstanding, (f)
Investments in the Borrower, and (g) Investments in Subsidiaries, so long as the
Borrower shall be in compliance with, or shall concurrently with the making of
such Investments comply with, Section 6.22 with respect to such Subsidiaries.
6.15 Change in Nature of Business.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, engage at any time in any business or business activity other than the
business currently conducted by it and business activities reasonably incidental
thereto.
6.16 Transactions with Affiliates.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, (a) make any Investment in any Affiliate of the
Borrower or such Subsidiary (other than Investments which are permitted by
Section 6.14), (b) transfer, sell, lease, assign or otherwise dispose of any
assets to any Affiliate of the Borrower or such Subsidiary (other than a
Domestic Subsidiary), (c) purchase or acquire assets from any Affiliate of the
Borrower or such Subsidiary; or (d) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate of the Borrower or such
Subsidiary (including, without limitation, any Guarantee Obligation or
assumption of obligations thereof); provided, however, that: (x) any Affiliate
of the Borrower or of a Subsidiary who is a natural person may serve as an
employee or director of the Borrower or such Subsidiary and receive reasonable
compensation for his or her services in such capacity and (y) the Borrower or
any of its Subsidiaries may enter into any transaction with any of their
respective Affiliates providing for the leasing of property, the rendering or
receipt of services or the purchase or sale of product, inventory or other
assets in the ordinary course of business on terms that are no less favorable to
the Borrower or such Subsidiary than those which might be obtained at the time
from Persons who are not Affiliates of the Borrower or such Subsidiary.
6.17 Restricted Payments.
The Borrower shall not, and shall not permit any of its Subsidiaries
that is not a wholly owned Subsidiary to, make any Restricted Payment, or set
apart any sum for the purpose of making any Restricted Payment; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, the Borrower may (a) pay dividends on its Capital Stock and (b) make
payments in respect of its Subordinated Debt to the extent permitted under the
agreement or instrument setting forth the terms of subordination thereof.
6.18 Management Fees.
The Borrower shall not pay any fees or other compensation to any
Person in respect of services rendered by such Person in connection with the
management or supervision of the management of the Borrower, except salaries,
bonuses and other compensation to employees of the Borrower in respect of such
employment.
6.19 Leases.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any operating lease as lessee or guarantee the obligations of any
lessee under an operating lease, other than operating leases in effect on the
date of this Agreement and extensions, renewals and replacements thereof (each,
an "Existing Operating Lease"); provided, however, that so long as no Default or
Event of Default has occurred and is continuing and entering into such leases
would not cause a Default or Event of Default to occur, the Borrower may enter
into operating leases (in addition to the Existing Operating Leases) which
provide for total scheduled payments (including base rent, supplemental rent and
other amounts, however characterized) not exceeding $250,000 in the aggregate
for all such leases in any fiscal year of the Borrower.
6.20 Capital Expenditures.
The Borrower shall not make any Capital Expenditures; provided,
however, that if immediately prior and after giving effect thereto no Event of
Default shall exist, the Borrower may make Capital Expenditures not exceeding
$1,000,000 in the aggregate in any fiscal year of the Borrower.
6.21 Cash Dominion.
(a) The Borrower shall maintain, and shall cause each Domestic
Subsidiary which bills its customers directly for goods sold or services
rendered by it to maintain, one or more Lockboxes with the Bank at all times in
accordance with the Lockbox Agreement and shall specify, and cause each such
Domestic Subsidiary to specify, on all of its invoices for goods sold or
services rendered that payment is to be made (x) if by check, to a Lockbox and
(y) if by wire transfer or other electronic means, to a reconcilement account at
the Bank in accordance with the Bank's instructions.
(b) The Borrower shall not, and shall not permit any of its Domestic
Subsidiaries to, maintain balances in excess of $100,000 in the aggregate with
Ineligible Financial Institutions.
6.22 Formation or Acquisition of Subsidiaries.
(a) The Borrower shall not form or acquire any direct or indirect
Subsidiary other than those which are in existence on the date hereof unless (1)
it has given the Bank, prior to the formation or acquisition of such Subsidiary,
written notice of its intention to form or acquire such Subsidiary, (2) it has
provided the Bank, prior to such formation or acquisition, with such information
about such Subsidiary, its assets and its contemplated operations as the Bank
may reasonably require, (3) if such Subsidiary is a Domestic Subsidiary, it has
caused such Subsidiary, immediately after its formation, to execute and deliver
to the Bank such guarantees, security agreements and other documents as the Bank
may reasonably require, (4) it has pledged to Bank, immediately after the
formation of such Subsidiary, pursuant to the Pledge Agreement, all of the
voting stock of such Subsidiary owned by the Borrower (or, if such Subsidiary is
not a Domestic Subsidiary, voting stock representing up to 65% of the total
outstanding voting stock of such Subsidiary) and (5) the Bank is satisfied that
the formation or acquisition of such Subsidiary will have no adverse effect on
its ability to collect the Obligations and to enforce its rights and remedies
hereunder and under the other Loan Documents against the Borrower, such
Subsidiary and their respective assets.
(b) In the event that the Borrower forms or acquires any new
Subsidiary, the Borrower shall cause such Subsidiary to comply with the
covenants set forth in this Article 6 to the same extent as the Borrower.
6.23 Location of Inventory.
The Borrower shall, and shall cause each of its Domestic
Subsidiaries to, maintain all of its Inventory at locations controlled by the
Borrower or its Domestic Subsidiaries; provided, however, that the Borrower may
permit Inventory of the Borrower or any of its Domestic Subsidiaries to be
located at the premises of their respective suppliers so long as the aggregate
book value of such Inventory does not exceed at any one time (a) on or prior to
October 31, 1997, an amount equal to the sum of the aggregate book value of the
Inventory that is located at the premises of suppliers on the Closing Date, plus
$500,000 and (b) after October 31, 1997, $500,000.
6.24 Change in Fiscal Dates or Accounting Practices.
The Borrower shall not change its fiscal year or any of its fiscal
quarters from those in effect on the date hereof, change any of its accounting
or auditing policies, practices or procedures in effect on the date hereof, or
permit any of its Domestic Subsidiaries to do so, unless the Borrower has given
the Bank not less than thirty days' prior written notice of its intention to do
so and has amended the financial covenants set forth in Article 7 to the extent
necessary, in the opinion of the Bank, to preserve the usefulness to the Bank of
such financial covenants as a means of ascertaining the financial condition of
the Borrower.
<PAGE>
ARTICLE 7
FINANCIAL COVENANTS
7.1 Financial Covenants.
The Borrower hereby covenants and agrees that so long as the
Commitment remains in effect or any Letter of Credit remains outstanding and
until the payment in full of the Obligations and the complete performance of all
of the Borrower's other obligations hereunder and under the other Loan
Documents, unless the Bank shall otherwise consent in writing, the Borrower
shall not:
(a) Permit its Consolidated EBITDA for any fiscal quarter specified
below to be less than the amount set forth below for such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Year
Ending First Quarter Second Quarter Third Quarter Fourth Quarter
------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
October 31, 1997 Not Applicable $228,000 $225,000 $456,000
October 31, 1998 $60,000 $300,000 $300,000 $550,000
October 31, 1999 $185,000 $438,000 $438,000 $690,000
</TABLE>
(b) Permit its Leverage Ratio to exceed during any fiscal year
specified below the ratio set forth below opposite such fiscal year:
<TABLE>
<CAPTION>
Fiscal Year
Ending Ratio
------ -----
<S> <C>
October 31, 1997 0.60:1.00
October 31, 1998 0.55:1.00
October 31, 1999 0.45:1.00
</TABLE>
(c) Permit its Consolidated Tangible Net Worth as at the end of any
fiscal quarter specified below to be less than the amount set forth below for
such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Year
Ending First Quarter Second Quarter Third Quarter Fourth Quarter
------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
October 31, 1997 $11,655,000 $11,868,000 $12,053,000 $12,469,000
October 31, 1998 $12,491,000 $12,760,000 $13,029,000 $13,544,000
October 31, 1999 $13,693,000 $14,096,000 $14,449,000 $15,157,000
</TABLE>
<PAGE>
(d) Permit its Interest Coverage Ratio to be less than 4.50 to 1.00
for any Calculation Period ending on or before April 30, 1998, or less than 5.00
to 1.00 for any Calculation Period ending thereafter.
(e) Permit its Current Ratio to be less than 2.50 to 1.00 as at the
end of any fiscal quarter ending on or before April 30, 1998, or less than 3.00
to 1.00 as at the end of any fiscal quarter ending thereafter.
7.2 Definitions Relating to Financial Covenants. As used in this
Agreement, the following terms have the following meanings:
"Calculation Period" means, each period consisting of four
consecutive fiscal quarters of the Borrower (irrespective of whether they are
part of the same fiscal year), taken as a single fiscal period.
"Consolidated EBITDA": with respect to any period, the net income of
the Borrower and its consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, plus Consolidated Interest Expense,
income tax payments, provisions for deferred income taxes, depreciation,
amortization and other non-cash charges (to the extent that such items were
included in the calculation of consolidated net income for such period).
"Consolidated Interest Expense" shall mean, with respect to any
period, the aggregate amount of interest payable by the Borrower and its
consolidated Subsidiaries, determined on a consolidated basis in accordance with
GAAP, during such period in respect of their respective Indebtedness (including
interest payable hereunder and imputed interest under Capital Leases), whether
or not actually paid.
"Consolidated Tangible Net Worth" shall mean, with respect to any
period, (a) the sum of (i) the total of the amounts that would be shown on the
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at such date in accordance with GAAP as the par or stated value of all
outstanding shares of Capital Stock, paid-in capital or capital surplus, and
retained earnings (excluding, however, the value of any treasury stock and any
redeemable preferred stock or similar capital stock) and (ii) the Subordinated
Debt of the Borrower as at such date, less (b) the sum of (x) any accumulated
deficit that would be shown on such balance sheet as at such date in accordance
with GAAP and (y) the total amount that would be shown on such balance sheet as
at such date in accordance with GAAP as goodwill, trademarks, trade names,
patents, copyrights or other intangible assets.
"Current Ratio" shall mean, with respect to any period, the ratio of
(i) the current assets of the Borrower and its consolidated Subsidiaries as at
the last day of such period, to (ii) the current liabilities (including current
maturities of long-term debt) of the Borrower and its consolidated Subsidiaries
as at the last day of such period, determined in each case on a consolidated
basis in accordance with GAAP.
"Interest Coverage Ratio" shall mean, with respect to any period,
the ratio of (i) the Consolidated EBITDA for such period, minus the aggregate
amount of Capital Expenditures incurred by the Borrower and its consolidated
Subsidiaries during such period, to (ii) Consolidated Interest Expense for such
period.
"Leverage Ratio" shall mean, with respect to any period, the ratio
of (a) total Indebtedness of the Borrower and its consolidated Subsidiaries
(other than Subordinated Debt) to (b) Consolidated Tangible Net Worth as at the
end of such period.
ARTICLE 8
EVENTS OF DEFAULT
8.1 Events of Default.
If one or more of the following events (each, an "Event of Default")
shall occur:
(a) The Borrower shall default in (i) the punctual payment when due
(whether at stated maturity or otherwise) of any principal of any Loan or the
punctual reimbursement when due (whether at the due date thereof or otherwise)
of any LC Disbursement or (ii) the punctual payment when due of any interest on
any Loan or LC Disbursement, any Fees or any other amounts payable by it
hereunder, under any Note or under any other Loan Document and, in the case of a
default in the payment of any amount specified in this clause (ii), such default
shall continue unremedied for more than three (3) days after written notice is
given by the Bank to the Borrower; or
(b) The Borrower shall default in the due observance or performance
of any term, covenant or agreement contained in Section 6.4(a) or Sections 6.10
through 6.22 (inclusive) or Article 7; provided, however, that failure to comply
with the financial covenants set forth in subsection (b), (c) or (e) of Section
7.1 as at the end of any fiscal quarter shall not constitute an Event of Default
hereunder if the Borrower is in compliance with such financial covenants by the
earlier to occur of (i) the tenth day following the delivery to the Bank of the
financial statements required to be delivered with respect to the last month of
such fiscal quarter pursuant to Section 6.3(a) and (ii) the 55th day following
the end of such fiscal quarter (such date herein called the "Outside Date") and
furnishes to the Bank by the Outside Date a Compliance Certificate showing in
detail satisfactory to the Bank the calculations necessary to determine such
compliance, or
(c) The Borrower shall default in the due observance or performance
of any other term, covenant or agreement contained in this Agreement or any
other Loan Document on its part to be observed or performed and such default
shall continue unremedied for a period of 30 days after the earlier of (i) the
first date on which the Borrower obtains knowledge thereof or (ii) written
notice thereof is given to the Borrower by the Bank; or
(d) Any representation or warranty made by the Borrower herein or in
any other Loan Document, or any statement or representation made in any
certificate, report or opinion delivered by the Borrower, or any officer of the
Borrower pursuant to this Agreement or any other Loan Document shall prove to
have been incorrect or misleading in any material respect when made; or
(e) The Borrower or any of its Subsidiaries shall fail to make any
payment when due (after giving effect to any applicable grace periods) on any
Indebtedness aggregating at least $100,000 with respect to which the Borrower or
any of its Domestic Subsidiaries is a primary obligor or a guarantor or which is
secured by any assets of the Borrower or any of its Domestic Subsidiaries
("Material Indebtedness"); or any Material Indebtedness shall be accelerated or
shall be required to be paid prior to the stated maturity thereof or prior to
any regularly scheduled dates of payment, or shall be required to be purchased
by the Borrower or any of its Subsidiaries prior to its stated maturity or
regularly scheduled date of payment, or the Borrower or any of its Subsidiaries
shall default in the performance of any term contained in, or any event or
condition shall exist under, any agreement or instrument pursuant to which it
has outstanding any Material Indebtedness if the effect of such default, event
or condition is to cause, or permit holder(s) of such Indebtedness to cause (i)
any Material Indebtedness to become due and payable prior to its stated maturity
or regularly scheduled dates of payment or (ii) the Borrower or any of its
Subsidiaries to be required to purchase or otherwise acquire any Material
Indebtedness; or
(f) The Borrower or any of its Subsidiaries shall be insolvent or
shall generally cease paying, or be unable to pay, its debts as they become due
or shall make any admission in writing to the foregoing effect; or a substantial
part of the operations or business of the Borrower or any of its Subsidiaries
shall be suspended and such suspension shall, in the opinion of the Bank, have a
material adverse effect on the condition (financial or otherwise) or operations
of the Borrower or on the ability of the Borrower to repay the Obligations; or
the Borrower or any of its Subsidiaries shall make an assignment for the benefit
of creditors, or shall commence (as debtor) a case under the Federal Bankruptcy
Code, or shall commence any proceeding with respect to itself, or a substantial
portion of its properties or assets, under any other insolvency, bankruptcy,
arrangement, reorganization, liquidation, dissolution or similar law of the
United States or Canada or any other jurisdiction, or shall apply for a trustee,
receiver or custodian (however named) for all or a substantial portion of its
properties or assets for the purpose of general administration of such
properties or assets for the benefit of creditors or for any other purpose or
shall take any action to authorize any of the foregoing actions; or a court or
competent jurisdiction in the premises shall enter an order for relief against
the Borrower as a debtor in a case or proceeding under the Federal Bankruptcy
Code or any similar law of the United States, or any other jurisdiction; or any
case or proceeding under the Federal Bankruptcy Code or any other insolvency,
bankruptcy, reorganization, arrangement, liquidation, dissolution or similar law
of the United States, or any other jurisdiction shall be commenced against the
Borrower or any of its Subsidiaries and such case or proceeding shall remain
undismissed, undischarged or unbonded for 60 days or an order for relief shall
be issued in any such case or proceeding or the Borrower or any of its
Subsidiaries shall consent to or admit in writing the material allegations
against it in any such case or proceeding; or any trustee, receiver or similar
officer, however named, shall be appointed for all or a substantial part of the
property of the Borrower or any of its Subsidiaries and the Borrower or any of
its Subsidiaries, shall consent thereto or such trusteeship or receivership
shall continue for a period of 60 days; or
(g) One or more judgment or judgments for the payment of money the
uninsured portion of which exceeds in the aggregate $100,000 shall be rendered
against the Borrower or any of its Subsidiaries and shall not be stayed,
released, discharged or fully bonded within 60 days after the issuance thereof;
or
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is reasonably likely to result in the termination of such Plan for
purposes of Title IV of ERISA (other than a standard termination pursuant to
Section 4041(b) of ERISA), (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled
Entity shall, or is reasonably likely to, incur any liability in connection with
a withdrawal from, or the insolvency (within the meaning of Section 4245 of
ERISA) or Reorganization of, a Multiemployer Plan, (vi) the occurrence or
expected occurrence of any event or condition which results or is reasonably
likely to result in the Borrower's or any Commonly Controlled Entity's becoming
responsible for any liability in respect of a Former Plan, or (vii) any other
event or condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vii) above, such event or condition, together with all
other such events or conditions, if any, could result in liability which could
have a Material Adverse Effect; or
(i) The Borrower or any of its Subsidiaries shall assert, or
institute any proceedings seeking to establish, that any provision of any Loan
Document is invalid, not binding or unenforceable; or
(j) Any Security Document shall cease to be in full force and effect
or shall cease to be effective to grant to the Bank a perfected security
interest in the collateral described therein, with the priority purported to be
created thereby;
then, upon the happening of any of the foregoing Events of Default
or at any time thereafter so long as any such Event of Default shall be
continuing, the Bank, by a notice to the Borrower, may take any one or more of
the following actions: (1) terminate the Commitment, whereupon the Commitment
shall immediately terminate and/or (2) declare the outstanding principal amount
of the Loans and all interest accrued thereon, the reimbursement of the LC
Disbursements and all interest accrued thereon, and all fees and other amounts
payable hereunder or under any of the other Loan Documents to be immediately due
and payable, whereupon said principal, interest, fees and other amounts shall
become immediately due and payable and/or (3) require that the Borrower Cash
Collateralize all Letters of Credit then outstanding, whereupon the amount of
such cash collateral shall become immediately due and payable; provided,
however, that upon the happening of any event specified in clause (f) above the
Commitment shall immediately terminate and the Loans, the LC Disbursements, all
accrued interest thereon and all fees and other amounts payable hereunder or
under any other Loan Document, shall be immediately due and payable, and the
Borrower shall immediately Cash Collateralize all Letters of Credit then
outstanding, all without declaration or other notice to the Borrower.
8.2 Waivers.
The Borrower hereby waives, to the extent permitted by applicable
law, (a) all presentments, demands for performance, notices of nonperformance
(except to the extent required by the provisions of this Agreement or of any
other Loan Document), protests, notices of protest, notices of intent to
accelerate and notices of dishonor in connection with the Notes and the Loans
and (b) any requirement of diligence or promptness on the part of the Bank in
the enforcement of its rights under the provisions of this Agreement, the Notes
or any other Loan Document.
ARTICLE 9
MISCELLANEOUS
9.1 Notices.
All notices, requests, demands, instructions, directions and other
communications provided for hereunder shall be in writing (which term shall
include telecopied communications) and shall be telecopied or delivered by hand
or overnight courier to the applicable party at the address or telecopier number
specified for such party on the signature pages hereto or, as to any party, to
such other address or telecopier number as such party shall specify by a notice
in writing to the other parties hereto delivered in accordance with the
provisions of this Section 9.1. Each notice, request, demand, instruction,
direction or other communication provided for hereunder shall be deemed
delivered (a) if by hand or overnight courier, when delivered to the applicable
party at such address, and (b) if by telecopy, when sent to the applicable party
at such telecopier number.
9.2 Expenses, Indemnity.
(a) The Borrower agrees to pay, promptly upon demand of the Bank,
whether or not the transactions contemplated hereby are consummated, the
following fees, disbursements, costs, expenses, taxes and charges: (i) the
reasonable fees and disbursements of counsel for the Bank (including reasonable
fees and disbursement of outside counsel and reasonable allocated costs of
in-house counsel) in connection with the preparation of this Agreement and the
other Loan Documents and the transactions contemplated hereby and thereby, (ii)
the reasonable fees and disbursements of counsel for the Bank (including
reasonable fees and disbursement of outside counsel and reasonable allocated
costs of in-house counsel) in connection with any amendment, supplement or
modification of this Agreement or of any other Loan Document, and any consent or
waiver hereunder or thereunder (or any such instrument which is proposed but not
executed and delivered); (iii) all reasonable costs and expenses incurred by the
Bank in connection with due diligence conducted by it in preparation for
entering into this Agreement or any amendment or waiver relating hereto or to
any other Loan Document and (iv) all reasonable expenses incurred by the Bank in
connection with the performance of any inspections, field examinations or audits
performed by the Bank or any of its agents or representatives with respect to
the Borrower, its books and records, or any of its assets (including the
inspections, examinations and audits referred to in Article 6 and the
preparation of reports with respect thereto), and (v) all recording and release
taxes, all transfer taxes, all documentary, stamp, intangible and similar taxes
(other than income or franchise taxes), all search filing and recording fees and
taxes, and any other excise or property taxes, charges, or similar taxes at any
time payable in respect of this Agreement or any other Loan Document, the
incurrence of obligations hereunder and under the other Loan Documents, or any
payment made hereunder or under any other Loan Document (collectively, the
"Other Taxes"). The Borrower further agrees to pay, promptly upon demand by the
Bank, all expenses incurred by the Bank in connection with the enforcement or
preservation of any rights and remedies with respect to the Borrower or any of
its assets hereunder or under any other Loan Document, including all costs of
collection, all reasonable fees and disbursements of outside counsel, all
reasonable allocated costs of in-house counsel, and all out-of-pocket expenses
of the Bank. The Bank hereby acknowledges that it has previously received on
account the sum of $10,000, which sum shall be applied by the Bank to the
partial payment of fees and expenses (including legal expenses) incurred by it
in connection with the performance of pre-closing field audits and the
preparation of this Agreement and the other Loan Documents.
(b) The Borrower agrees to indemnify the Bank and each Person, if
any, controlling the Bank, and each of their respective directors, officers,
employees, attorneys and agents (each of the foregoing herein called an
"Indemnitee") against, and to hold each Indemnitee harmless from (i) any losses,
liabilities, damages, claims, costs and expenses (collectively, "Losses")
suffered or incurred by such Indemnitee arising out of, resulting from or in any
manner connected with, the execution, delivery and performance of this Agreement
or any other Loan Document, the making or maintenance of any Loans, the issuing
or maintenance of any Letter of Credit, or any transaction related to or
consummated in connection with this Agreement, the Loans or the Letters of
Credit, including any Losses suffered or incurred by such Indemnitee arising out
of or related to the violation of, noncompliance with or liability under, any
Environmental Laws or any orders, requirements or demands of Governmental
Authorities related thereto, or in investigating, preparing for, defending
against, or providing evidence, producing documents or taking any other action
in respect of any commenced or threatened litigation, administrative proceeding
or investigation, under any Environmental Laws or any other statute of any
jurisdiction, or any regulation, or at common law or otherwise, other than
Losses arising out of or relating to the gross negligence or willful misconduct
of such Indemnitee; (ii) any and all Losses (including, without limitation, all
reasonable fees and disbursements of counsel with whom any Indemnitee may
consult in connection therewith and all expenses of litigation or preparation
therefor) that any Indemnitee may incur or which may be asserted against any
Indemnitee in connection with any litigation or investigation involving or
relating to the Borrower, any of its Subsidiaries, any of its Affiliates or any
of its officers, directors, employees or agents, or any of its assets, other
than Losses arising out of or relating to the gross negligence or willful
misconduct of such Indemnitee; and (iii) the full amount of any Other Taxes paid
by the Bank and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Other Taxes were
correctly or legally asserted, which relate to this Agreement or any other Loan
Document or the credit facilities provided hereunder.
(c) The covenants contained in clauses (a) and (b) of this Section
9.2 shall be in addition to any other obligations or liabilities of the Borrower
to the Bank hereunder, under any other Loan Document, or at common law or
otherwise and shall survive the termination of the Commitment, the expiration of
the Letters of Credit and the repayment of the Obligations.
9.3 Amendments and Waivers.and Waivers
This Agreement may not be amended or modified except by an
instrument in writing signed by the Borrower and the Bank.
9.4 Waivers.
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof or of any Event of Default, nor shall any single or partial exercise by
the Bank of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. No waiver
of any provision of this Agreement nor consent to any departure 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 purpose for which given. No notice to or demand on the
Borrower in any case shall, of itself, entitle the Borrower to any other or
further notice or demand in similar or other circumstances. No course of dealing
between the Borrower and the Bank shall operate as a waiver of the Bank's rights
under this Agreement or any other Loan Document or with respect to any of the
Borrower's obligations hereunder or thereunder. If notice, whether before or
after an Event of Default has occurred, is required by law to be given by the
Bank to the Borrower, the parties hereto agree that, except as otherwise
provided in any Loan Document or required by law, five (5) days' notice given in
the manner provided in Section 9.1 shall be reasonable notice.
9.5 Cumulative Remedies.
This Agreement and the obligations of the Borrower hereunder are in
addition to and not in substitution for any other obligations or security
interests now or hereafter held by the Bank and shall not affect the rights,
remedies or powers of the Bank in respect of any obligation or other security
interest held by the Bank. The remedies herein provided are cumulative and are
not exclusive of any remedy provided by law.
9.6 Survival.
All covenants, agreements, representations and warranties made
hereunder and in the other Loan Documents (or in any amendment, modification or
supplement hereto or thereto) and in any certificate delivered pursuant hereto
or such other Loan Documents shall survive the execution and delivery of this
Agreement and the other Loan Documents and the making of the Loans and issuance
of the Letters of Credit hereunder, and unless specified otherwise, shall
continue in full force and effect until all of the Loans and all other
Obligations shall have been indefeasibly paid in full, the Letters of Credit
shall have expired or been terminated and the Commitments shall have been
terminated.
9.7 Successors and Assigns.
This Agreement and the other Loan Documents shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and permitted assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement or under any
other Loan Document without the prior written consent of the Bank. The Bank may
freely assign its rights and remedies hereunder, under any Note or under any
other Loan Document, in whole or in part, to any other Person (an "Assignee"),
without the need for consent by the Borrower. Upon any such assignment, the
relevant Assignee shall become a party hereto and, to the extent of the interest
assigned to it, shall have all the rights and obligations of the Bank hereunder;
provided, however, that no Assignee which as of the effective date of the
assignment to it would be entitled to receive any greater payment under Sections
3.3 or 3.4 than the Bank would have been entitled to receive as of such date
under said Section with respect to the interest assigned, shall be entitled to
receive such greater payment unless the Borrower has consented in writing to the
assignment.
9.8 Set-off.
In addition to any rights and remedies of the Bank provided by law,
the Bank shall have the right, without prior notice to the Borrower, any such
notice being expressly waived by the Borrower, to the extent permitted by
applicable law, upon the occurrence of an Event of Default to set off and
appropriate and apply against any amount then due and payable by the Borrower to
the Bank hereunder or under any other Loan Document, any and all deposits
(general or special, time or demand, provisional or final), and any other
credits, indebtedness or claims, in each case whether direct or indirect,
absolute or contingent, matured or unmatured, at any time held or owing by the
Bank or any branch or agency thereof to or for the credit or the account of the
Borrower.
9.9 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.
9.10 JUDICIAL PROCEEDINGS.
(A) THE BORROWER HEREBY EXPRESSLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY OF NEW YORK,
STATE OF NEW YORK IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING RELATING TO
THIS AGREEMENT, ANY NOTE ANY OTHER LOAN DOCUMENT OR ANY INSTRUMENT OR DOCUMENT
RELATING HERETO OR THERETO, AND, IN CONNECTION WITH ANY SUCH ACTION, SUIT OR
PROCEEDING, AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO
ANY OF SAID COURTS OR A JUDGE THEREOF MAY BE SERVED UPON THE BORROWER WITHIN OR
WITHOUT SUCH COURT'S JURISDICTION BY REGISTERED OR CERTIFIED MAIL, AT THE
ADDRESS OF THE BORROWER SPECIFIED ON THE SIGNATURE PAGES HERETO (OR AT SUCH
OTHER ADDRESS AS THE BORROWER SHALL SPECIFY BY A PRIOR NOTICE IN WRITING
DELIVERED TO THE BANK IN ACCORDANCE WITH SECTION 8.1), PROVIDED A REASONABLE
TIME FOR APPEARANCE IS ALLOWED.
(B) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY NOTE OR ANY OTHER
LOAN DOCUMENT BROUGHT IN ANY FEDERAL OR STATE COURT SITTING IN THE CITY OF NEW
YORK, STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(C) NOTWITHSTANDING THE FOREGOING, THE BANK MAY SUE THE BORROWER IN
ANY JURISDICTION WHERE THE BORROWER OR ANY OF ITS ASSETS MAY BE FOUND AND MAY
SERVE LEGAL PROCESS UPON THE BORROWER IN ANY OTHER MANNER PERMITTED BY LAW.
9.11 WAIVER OF JURY TRIAL.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT, ANY
NOTE OR ANY OTHER LOAN DOCUMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED
BEFORE A JUDGE SITTING WITHOUT A JURY.
9.12 Further Assurances.
At any time and from time to time, upon the request of the Bank, the
Borrower shall execute, deliver and acknowledge, or cause to be executed,
delivered and acknowledged, such further documents and instruments, and shall
take or refrain from taking such other action, as the Bank may reasonably
request in order to fully effect the purposes of this Agreement, the other Loan
Documents and any other agreements, instruments and documents delivered pursuant
hereto or in connection with the Loans or the Letters of Credit.
9.13 Integration Clause.
This Agreement and the other Loan Documents embody the entire
agreement and understanding among the Borrower and the Bank and supersede all
prior agreements and understandings, whether written or oral, between the
parties hereto relating to the subject matter of this Agreement.
9.14 Severability.
If any part of this Agreement is contrary to, prohibited by, or
deemed invalid under, any applicable law of any jurisdiction, such provision
shall, as to such jurisdiction, be inapplicable and deemed omitted to the extent
so contrary, prohibited or invalid, without invalidating the remainder hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.15 Counterparts.
This Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute one and the same agreement. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.
9.16 Acknowledgements.
The Borrower hereby acknowledges that:
(a) it has been represented and advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents;
(b) the Bank has no fiduciary relationship with or duty to the
Borrower arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Bank, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
the Borrower and Bank.
(d) This agreement contains a waiver of trial by jury. In waiving
trial by jury, the Borrower hereby knowingly, intentionally, voluntarily, and
unconditionally waives any and all rights it has or may have to trial by jury
under the constitutions and laws of the United States and the State of New York.
[Remainder of page intentionally left blank; signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, as of the day and year first
above written.
Address for Notices: V BAND CORPORATION
565 Taxter Road
Elmsford, New York 10523-2330
Attention: Mr. Mark R. Hahn By: /s/Thomas E. Feil
Telephone: (914) 789-5017 ----------------------
Telecopier: (914) 789-5068 Name: Thomas E. Feil
Title: Chairman & Chief Executive Officer
Address for Notices: NATIONAL BANK OF CANADA,
125 West 55th Street NEW YORK BRANCH
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Telephone: (212) 632-8551 By: /s/Gaetan R. Frosina
Telecopier: (212) 632-8545 --------------------
Name: Gaetan R. Frosina
Title: Vice President
By: /s/Joseph A. Klapkowski
-----------------------
Name: Joseph A. Klapkowski
Title: Assistant Vice President
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE
1. The authorized, issued and outstanding shares of capital stock of
the Borrower and each of its Subsidiaries, and the direct or indirect ownership
of such shares, are as follows:
BORROWER
(a New York corporation)
Beneficial Number of Percentage
Owner Shares Owned Class of Class
- ---------- ------------ ----- ---------
Various Persons 5,328,303 Common 100%
LICOM INCORPORATED
(a Delaware corporation)
Beneficial Number of Percentage
Owner Shares Owned Class of Class
- ---------- ------------ ----- ---------
Borrower 100 Common 100%
V BAND NE, INC.
(a New York corporation)
Beneficial Number of Percentage
Owner Shares Owned Class of Class
- ---------- ------------ ----- ---------
Borrower 100 Common 100%
V BAND SERVICES, INC.
(a New York corporation)
Beneficial Number of Percentage
Owner Shares Owned Class of Class
- ---------- ------------ ----- ---------
Borrower --- Common 100%
V BAND PLC
(registered in England No. 1855636)
Beneficial Number of Percentage
Owner Shares Owned Class of Class
- ---------- ------------ ----- ---------
Borrower 50,049 Ordinary App.
Licom 1 Ordinary
<PAGE>
VBI CORPORATION
(a U.S. Virgin Island corporation)
Beneficial Number of Percentage
Owner Shares Owned Class of Class
- ---------- ------------ ----- ---------
Borrower 1,000 Common 100%
Options to purchase shares of the Borrower's common stock have been
issued to employees, officers, directors, and consultants of the Borrower.
2. Liabilities of the Borrower or any of its Subsidiaries which are not
shown on the balance sheet delivered to the Bank pursuant to Section 4.5:
The Borrower and its Subsidiaries have material obligations and
liabilities to customers, suppliers, landlords, employees, and other
incurred in the ordinary course of business which are not required to
be reflected in the Borrowers balance sheet.
3. The Borrower and the following Subsidiaries are currently undergoing
the following tax audits:
The Borrower is undergoing a New York State Franchise Tax audit for
the period November 1, 1990 through October 31, 1993. The Borrower has
recently received from the New York State Department of Taxation and
Finance a "Summary of Additional Taxes and Interest" in the amount of
$84,576, with interest computed through March 1, 1997. This document is
currently being reviewed by the Borrower's outside tax accountants,
Deloitte & Touch LLP.
The Borrower recently received correspondence from the State of
California Tax Board, with a statement reflecting an apparent balance
due to the State of California of $23,454.74. Deloitte & Touch LLP is
also reviewing the document.
4. The exceptions to title and financing statement referred to in
Section 4.7:
Under the terms of the System Sales Agreement (the NYMEX Agreement")
by and between the New York Mercantile Exchange ("NYMEX") the Borrower,
title to certain materials and equipment pre-purchased by the Borrower
to be incorporated in the equipment being sold to NYMEX under the NYMEX
Agreement is held by the Battery Park City Authority.
The Borrower has indebtedness outstanding to Thomas E. Feil in the
principal amount of $200,000 which is secured by an assignment of, and
a security interest in, all of the Borrower's accounts receivable.
Financing statements are on file in the Department of State of New York
and Westchester County, New York relating to that security interest.
<PAGE>
5. Proceedings referred to in Section 4.8:
In October 1994, the Borrower commenced an action against Technical
Telephone Systems, Inc. ("TTSI") in New York State Supreme Court, New
York County, for minimum payments due to the Borrower in the amount of
$650,00 under a distribution agreement between the Borrower and TTSI.
In November 1994, TTSI filed a counterclaim against the Borrower
denying all allegation stated in the Borrower's complaint and alleging
a breach of good faith and fair dealing by the Borrower, claiming
damages of $1 million. The Borrower believes its claim against TTSI is
meritorious and believes TTSI's counterclaim against the Borrower.
Which the Borrower will vigorously defend, is without merit and will
not have a material impact on the consolidated financial condition of
the Borrower.
By letter dated September 5, 1996, Telefonia Vazquez S.R.L.
("Telefonia Vazquez") has asserted a claim that the Borrower had
violated certain exclusive sales rights it claims were granted to it in
Argentina. In its letter, Telefonia Vazquez asserts a claim for an
aggregate of $92,785.00 for the recovery of certain expenses and an
aggregate of $2,000,000.00 in lost future profits and "business image
loss." The Borrower received the letter after Telefonia Vazquez
ordered, received, and failed to pay for, approximately $152,000 of the
Borrower's equipment. While the September 5, 1996 letter threatens to
initiate "pertinent legal action" the Borrower is not aware of any
action taken to initiate litigation by Telefonia Vazquez. The Borrower
believes its claim against Telefonia Vazquez is meritorious and intends
to initiate a collection proceeding. The Borrower believes that the
Claims made by Telefonia Vazquez against the Borrower are without merit
and will not have a material impact on the consolidated financial
condition of the Borrower.
6. Collective bargaining agreements and other labor contracts referred
to in Section 4.9:
Agreement between V Band NE, Inc. and Local 2222 of the IBEW.
7. The following events or conditions specified in Section 4.19 have
occurred:
NONE
8. Environmental disclosures required by Section 4.20:
NONE
9. Indebtedness referred to in Sections 4.14:
The Borrower has indebtedness outstanding to Thomas E. Feil in the
principal amount of $200,000 which is secured by an assignment of, and
a security interest in, all of the Borrower's accounts receivable.
<PAGE>
Obligations to the following entities relating to the following
equipment, to the extent such obligations may constitute Indebtedness:
Entity Equipment
------ ---------
GECC Refurbished Universal Dual In Line Package
Insertion System with Expandable DIP IC Sequencer,
Rotary Table Option, Board Error Correction
Option, Auto Stick Option, and Three Model 6770
Forty Eight Station Add On Modules with Storage
Genrad Test System Serial No. 125, Module 2283
Copelco Credit Ricoh 8880 Copier
Corporation
Interactive, Inc. HP 9000 Model G40, US Robotics Sportster 14.4 Baud
Modem, HP-UX Operating System, Unidata RDBMS-AE &
USAM Print/Batch, SB+ Runtime & Developer,
Manufacturer's INFOFLO Version 7.0, INFOFLO
Manuals, and SB Termite Network Version
AT&T Capital Millennia Transport Notebook, Millennia Series C,
Leasing Millennia Series B Minitower, 17" Monitor, 15"
Monitor
10. Liens referred to in Section 6.11:
Any Liens arising under the obligations described in Paragraph 9 of
the Disclosure Schedule.
<PAGE>
EXHIBIT A
FORM OF PROMISSORY NOTE
$4,000,000.00 May 28, 1997
FOR VALUE RECEIVED, V BAND CORPORATION, a New York
corporation (the "Borrower"), hereby promises to pay to the order of NATIONAL
BANK OF CANADA, NEW YORK BRANCH (the "Bank"), at its office located at 125 West
55th Street, New York, New York 10019 (or at such other place as the holder
hereof shall designate by a notice in writing to the Borrower) on May 28, 2000,
the principal sum of Four Million Dollars ($4,000,000.00) or such lesser amount
as shall equal the aggregate unpaid principal amount of the Loans made by the
Bank to the Borrower under the Credit Agreement, in lawful money of the United
States of America and in immediately available funds, and to pay interest on the
unpaid principal amount of each such Loan, at such office, in like money and
funds, for the period commencing on the date of such Loan until such Loan shall
be paid in full, at the rates per annum and on the dates specified in the Credit
Agreement.
This Note is the Note referred to in the Credit Agreement
dated as of May 28, 1997 (said Credit Agreement, as from time to time amended,
herein called the "Credit Agreement") between the Borrower and the Bank. This
Note is secured by the Collateral referred to in the Credit Agreement and
evidences Loans made by the Bank to the Borrower thereunder. Capitalized terms
used in this Note and not otherwise defined herein have the respective meanings
assigned to them in the Credit Agreement.
Upon the occurrence of an Event of Default under the Credit
Agreement, the principal amount hereof and accrued interest hereon shall become,
or may be declared to be, forthwith due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement. The Borrower
may at its option prepay all or any part of the principal of this Note before
maturity upon the terms provided in the Credit Agreement and shall make
mandatory prepayments of this Note as required by the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
PRINCIPLES OF CONFLICTS OF LAW.
V BAND CORPORATION
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT B-1
FORM OF NOTICE OF BORROWING
_______________, 19__
National Bank of Canada,
New York Branch
125 West the Street
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Gentlemen:
The undersigned, V Band Corporation, a New York corporation,
refers to the Credit Agreement dated as of May 28, 1997 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
between the undersigned and the Bank. Capitalized terms that are defined in the
Credit Agreement and are not otherwise defined herein shall have the respective
meanings given to them in the Credit Agreement.
We hereby request a Loan under the Credit Agreement and in
that connection set forth below the information relating to such Loan (the
"Proposed Loan") as required by Section 2.2(b) of the Credit Agreement:
(i) The date of the Proposed Loan is ______________, 199__(1)
(ii) The amount of the Proposed Loan is $______________(2)
(iii) The Proposed Loan is comprised of _________________________(3)
(iv) The initial Interest Period shall be ______________________(4)
(v) The proceeds of the Proposed Loan are to be disbursed to the
following account of the Borrower: _______________________(5)
- -----------
(1) Must be a Business Day.
(2) Must be an integral multiple of $25,000 (for Borrowings comprised of
Base Rate Loans) or an integral multiple of $100,000, not less than
$500,000 (for Borrowings comprised of Eurodollar Loans).
(3) Specify Base Rate Loans or Eurodollar Loans.
(4) Insert Interest Period of one, two or three months, ending no later
than the Commitment Termination Date (applicable to Eurodollar Loans
only).
(5) Insert number of Borrower's Operating Account.
<PAGE>
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Loan after
giving effect to the Proposed Loan:
(a) the Exposure does not and, after giving effect to the Proposed
Loan, will not exceed the lesser of (x) the Commitment or (y)
the Borrowing Base;
(b) no event has occurred and is continuing, or would result from
such Proposed Loan or from the application of the proceeds
thereof, which constitutes a Default or an Event of Default;
(c) the representations and warranties made in the Credit
Agreement are true and correct in all material respects, both
before and after giving effect to the Proposed Loan and the
application of the proceeds thereof, as though made on and as
of the date of such Proposed Loan, except to the extent that
such representations and warranties expressly relate to an
earlier date (in which case such representations and
warranties shall have been true and accurate on and as of such
earlier date); and
(d) all conditions precedent to the Proposed Loan specified in
Article 5 of the Credit Agreement have been satisfied.
Very truly yours,
V BAND CORPORATION
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT B-2
FORM OF NOTICE OF CONVERSION OR CONTINUATION
_______________, 19__
National Bank of Canada,
New York Branch
125 West the Street
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Gentlemen:
The undersigned, V Band Corporation, a New York corporation,
refers to the Credit Agreement dated as of May 28, 1997 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
between the undersigned and the Bank. Capitalized terms that are defined in the
Credit Agreement and are not otherwise defined herein shall have the respective
meanings given to them in the Credit Agreement.
We hereby request pursuant to Section 2.3(a) of the Credit
Agreement that the Designated Loans specified below [be converted into the
Resulting Loans specified below on the Conversion Date specified below] [be
continued as Loans of the same Type for the additional Interest Period specified
below]:
A. Designated Loans(6):
Type: _________________
Last day of Current
Interest Period: _________________ (7)
Principal Amount: $_________________
B. Resulting Loans(8):
Type: _________________
- ---------
(6) If the Designated Loans are of more than one Type, provide the
requested information for each Type of Designated Loan.
(7) Insert only if Designated Loans are Eurodollar Loans.
(8) If the Resulting Loans are of more than one Type, provide the
requested information for each Type of Resulting Loan.
<PAGE>
Initial Interest Period: _________________ (9)
Principal Amount: $_________________ (10)
C. Date of Requested
Conversion/Continuation: _________________ (11)
D. Additional Interest Period: (5)_________________
Very truly yours,
V BAND CORPORATION
By:___________________________
Name:
Title:
- ----------
(9) Insert Interest Period of one, two or three months, ending no
later than the Commitment Termination Date (applicable to
Eurodollar Loans only).
(10) Complete only if applicable.
(11) Must be a Business Day and, if the Designated Loans are
Eurodollar Loans, must be the last day of the Interest Period
applicable thereto.
<PAGE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
I, ___________________ , the [Chief Executive Officer/Chief Financial
Officer] of V Band Corporation, a New York corporation (the "Borrower"), hereby
certify to National Bank of Canada, New York Branch (the "Bank") that:
This Compliance Certificate is being delivered pursuant to Section
6.3(d) of the Credit Agreement, dated as of May 28, 1997, between the Borrower
and the Bank (the "Credit Agreement") and accompanies the financial statements
delivered by the Borrower to the Bank pursuant to Section 6.3 of the Credit
Agreement as at the Determination Date (as hereafter defined). All capitalized
terms which are defined in the Credit Agreement and are not otherwise defined
herein have the respective meanings given to them in the Credit Agreement.
Unless otherwise specified, all section numbers refer to sections of the Credit
Agreement.
1. [No condition or event exists on the date hereof which constitutes a
Default and no such condition or event has occurred since the date of the last
Compliance Certificate delivered to the Bank] or [The following Default has
occurred and the Borrower has taken or proposes to take the following action
with respect to it:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. The Borrower is in compliance with the financial covenants set forth
in Section 7.1 of the Credit Agreement.
3. The calculations below accurately set forth the Borrower's
Consolidated EBITDA, Leverage Ratio, Consolidated Tangible Net Worth, Interest
Coverage Ratio, and Current Ratio as at ________________ (the "Determination
Date") and for the fiscal quarter and Calculation Period then ended, all
determined on a consolidated basis in accordance with GAAP, based upon the
financial statements delivered by the Borrower to the Bank as at the
Determination Date pursuant to Section 6.3 of the Credit Agreement:
Consolidated EBITDA:
1. Actual:
a. Consolidated net income for the fiscal quarter $________
b. Consolidated Interest Expense reflected in item a ________
c. Income tax payments and deferred income taxes
reflected in item a ________
d. Depreciation, amortization and other non-cash charges
reflected in item a
e. Sum of items a, b, c and d ________
f. Actual Consolidated EBITDA: $________
2. Required: Minimum Consolidated EBITDA
required under Section 7.1(a) $________
Leverage Ratio:
1. Actual:
a. Principal amount of Loans outstanding on
the Determination Date $________
b. Other Indebtedness outstanding on the Determination Date ________
c. Subordinated Debt outstanding on the Determination Date ________
d. Total amount of senior Indebtedness outstanding on
the Determination Date (sum of a and b, minus c) ________
e. Borrower's Consolidated Tangible Net Worth as at
the Determination Date ________
f. Actual leverage ratio (d divided by e) ______ to 1.00
2. Required: Maximum Leverage Ratio permitted under ______
Section 7.1(b) to 1.00
Consolidated Tangible Net Worth:
1. Actual (as at the Determination Date or, if the Determination
Date is not the end of a fiscal quarter, as at the end of the
most recent fiscal quarter):
a. Par or stated value of Capital Stock, paid-in capital
or capital surplus and retained earnings (excluding
treasury stock and redeemable preferred or similar
Capital Stock) as at the Determination Date $________
b. Subordinated Debt as at the Determination Date ________
c. Actual net worth as at the Determination Date
(sum of a and b) ________
d. Accumulated deficit as at the Determination Date
e. Goodwill, trademarks, trade names, patents, copyrights,
and other intangible assets as at the Determination Date
f. Adjustments to net worth (sum of d and e)
g. Actual Consolidated Tangible Net Worth as at
the Determination Date (c minus f) $________
2. Required: Minimum Consolidated Tangible Net Worth
required under Section 7.1(c) $________
Interest Coverage Ratio:
1. Actual:
a. Consolidated EBITDA for Calculation Period $________
b. Aggregate amount of Capital Expenditures incurred
during Calculation Period ________
c. Adjusted Consolidated EBITDA (a minus b) ________
d. Consolidated Interest Expense for Calculation Period ________
e. Actual Interest Coverage Ratio (c divided by d) _______ to 1.00
2. Required: Minimum Interest Coverage Ratio required
under Section 7.1(d) _______ to 1.00
Current Ratio:
1. Actual:
a. Current assets as at the Determination Date
(if fiscal quarter-end) $ _______
b. Current liabilities as at the Determination Date _______
c. Actual Current Ratio as at the Determination Date
(a divided by b) _______ to 1.00
2. Required: Minimum Current Ratio required under
Section 7.1(e) _______ to 1.00
Date: _______________ _______________________________
Name:
Title:
<PAGE>
SUBSIDIARY GUARANTEE
GUARANTEE dated as of May 28, 1997 among V Band NE, Inc., a
New York corporation, V Band Services, Inc., a New York corporation, and Licom
Incorporated, a Delaware corporation (each a "Guarantor" and collectively the
"Guarantors") and National Bank of Canada, New York Branch (the "Bank").
RECITALS:
A. V Band Corporation, a New York corporation, that is the
parent company of the Guarantors (the "Borrower"), and the Bank are entering
into a Credit Agreement, dated as of the date hereof (said Credit Agreement, as
it may be amended, restated, supplemented or otherwise modified from time to
time, the "Credit Agreement") providing for the making of loans to and the
issuance of letters of credit for the account of the Borrower in the amounts,
and subject to the terms and conditions, specified in the Credit Agreement.
B. The execution and delivery of this Guarantee constitutes a
condition precedent to the obligation of the Bank to continue to make Loans and
issue Letters of Credit pursuant to the terms of the Credit Agreement.
C. The Borrower finances the operations of the Guarantors and
provides various services and other benefits to the Guarantors, and accordingly
the Guarantors will benefit from the execution and delivery of the Credit
Agreement by securing access to sources of financing on favorable terms and at
favorable rates, and by obtaining other material benefits.
ACCORDINGLY, in consideration of the premises, and in order to
induce the Bank to execute and deliver the Credit Agreement and to make and
maintain Loans and issue and maintain Letters of Credit thereunder, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby agrees with the Bank as follows:
1. Defined Terms.
(a) Capitalized terms that are defined in the Credit Agreement
and are not otherwise defined herein have the respective meanings given to them
in the Credit Agreement and, in addition, the following terms have the following
meanings:
"Credit Agreement" has the meaning specified in Recital A.
"Obligations" means all indebtedness and other liabilities and
obligations of the Borrower under the Credit Agreement and the other Loan
Documents including, without limitation, (i) the obligation to repay the Loans
in full when due, (ii) the obligation to pay interest on the Loans and the LC
Disbursements (including, without limitation, interest accrued on the Loans and
the LC Disbursements after the commencement of a bankruptcy proceeding or any
similar proceeding with respect to the Borrower) at the rates and on the dates
specified in the Credit Agreement, (iii) the obligation to pay the Fees in full
when due at the rates and on the dates specified in the Credit Agreement, (iv)
the obligation to reimburse the Bank in full for any LC Disbursement as provided
in the Credit Agreement, (v) the obligation to Cash Collateralize the Letters of
Credit as provided in the Credit Agreement, (vi) the obligation to indemnify the
Bank as provided in the Credit Agreement or any other Loan Document, (vii) the
obligation to pay costs and expenses as provided in the Credit Agreement or any
other Loan Document, and (viii) the obligation to pay all other amounts
specified in the Credit Agreement or any other Loan Document.
(b) Unless otherwise expressly specified herein, defined terms
denoting the singular number shall, when in the plural form, denote the plural
number of the matter or item to which such defined terms refer, and vice-versa.
(c) Words of the neuter gender mean and include correlative
words of the masculine and feminine gender.
(d) Section and Schedule headings used in this Guarantee are
for convenience only and shall not affect the construction or meaning of any
provisions of this Guarantee.
(e) Unless otherwise specified, the words "hereof", "herein",
"hereunder" and other similar words refer to this Guarantee as a whole and not
just to the Section, subsection or clause in which they are used; and the words
"this Guarantee" refer to this Guarantee, as amended, restated, supplemented or
otherwise modified from time to time.
(f) Unless otherwise specified, references to Sections,
Recitals and Schedules are references to Sections of, and Recitals and Schedules
to, this Guarantee.
2. Guarantee.
(a) Each Guarantor hereby irrevocably and unconditionally
guarantees, jointly with the other Guarantors and severally, as a primary
obligor and not merely as a surety, the due and punctual payment and performance
in full of the Obligations. Each Guarantor further agrees that the Obligations
may be extended or renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee hereunder
notwithstanding any extension or renewal of any Obligation.
(b) Anything contained in this Guarantee to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be limited to
a maximum aggregate amount equal to the greatest amount that would not render
such Guarantor's obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any provisions of applicable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor in respect of (a) intercompany indebtedness to the Borrower or
Affiliates of the Borrower to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(b) liabilities of such Guarantor that are subordinated in right of payment to
the Obligations) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, contribution, reimbursement, indemnity or similar rights of such
Guarantor pursuant to (i) applicable law, (ii) Section 2(c), (iii) the Security
Agreement and the Intellectual Property Security Agreement or (iv) any other
agreement providing for an equitable allocation among such Guarantor and the
Borrower, the other Guarantors or any other Affiliates of the Borrower of
obligations arising under this Guarantee, any other guarantees extended by such
parties or any other Loan Documents.
(c) Each Guarantor (a "Contributing Guarantor") agrees that,
in the event a payment shall be made by any other Guarantor under this Guarantee
or assets of any other Guarantor shall be sold pursuant to any Security Document
to satisfy a claim of the Bank and such other Guarantor (the "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided in
the Contribution Agreement or otherwise, the Contributing Guarantor shall
indemnify the Claiming Guarantor in an amount equal to the amount of such
payment or the greater of the book value or the fair market value of such
assets, as the case may be, in each case multiplied by a fraction of which the
numerator shall be the net worth of the Contributing Guarantor on the date
hereof and the denominator shall be the aggregate net worth of all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 22, the date of the Supplement hereto executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to a
Claiming Guarantor pursuant to this Section 2(c) shall be subrogated to the
rights of such Claiming Guarantor to the extent of such payment, subject to the
subordination set forth in Section 3.
3. Agreement to Pay; Subordination.
In furtherance of the foregoing and not in limitation of any
other right that the Bank has at law or in equity against any Guarantor by
virtue hereof, upon the failure of the Borrower to pay any Obligation when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, each Guarantor hereby promises to and will forthwith
pay to the Bank in cash the amount of such unpaid Obligations. Upon payment by
any Guarantor of any sums to the Bank as provided above, all rights of such
Guarantor against the Borrower arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior indefeasible
payment in full in cash of all the Obligations. In addition, with respect to any
indebtedness of the Borrower now or hereafter held by any Guarantor, after the
occurrence and during the continuance of an Event of Default, no payment
(whether of principal or interest, and whether before, after or in connection
with any dissolution, winding up, liquidation or reorganization or receivership
proceeding or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of the Borrower) may be made, directly
or indirectly, on such indebtedness until all the Obligations have been
indefeasibly paid in full in cash. If any amount shall erroneously be paid to
any Guarantor on account of (i) such subrogation, contribution, reimbursement,
indemnity or similar right or (ii) any such indebtedness of the Borrower, such
amount shall be held in trust for the benefit of the Bank and shall forthwith be
paid to the Bank to be credited against the payment of the Obligations, whether
matured or unmatured, in accordance with the terms of the Credit Agreement.
4. Guarantee of Payment.
Each Guarantor hereby agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Bank to any of the security held for
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Bank in favor of the Borrower or any other person.
5. Guarantee Not Affected.
To the fullest extent permitted by applicable law, each
Guarantor waives presentment to, demand of payment from and protest to the
Borrower of any of the Obligations, and also waives notice of acceptance of its
guarantee and notice of protest for nonpayment. To the fullest extent permitted
by applicable law, the obligations of each Guarantor hereunder shall not be
affected by (a) the failure of the Bank to assert any claim or demand or to
enforce or exercise any right or remedy against the Borrower or any other
Guarantor under the provisions of the Credit Agreement, any other Loan Document
or otherwise, (b) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of any Loan Document, any other
guarantee or any other agreement, including with respect to any other Guarantor
under this Guarantee or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Bank.
6. Security.
Each of the Guarantors authorizes the Bank to (a) take and
hold security for the payment of this Guarantee and the Obligations and
exchange, enforce, waive and release any such security, (b) apply such security
and direct the order or manner of sale thereof as they in their sole discretion
may determine and (c) release or substitute any one or more endorsees, other
guarantors or other obligors.
7. No Discharge or Diminishment of Guarantee.
The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason
(other than the indefeasible payment in full in cash of the Obligations),
including any claim of waiver, release, surrender, alteration or compromise of
any of the Obligations, and to the fullest extent permitted by law, shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Bank to assert any claim or demand or
to enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise operate as
a discharge of any Guarantor as a matter of law or equity (other than the full,
final and indefeasible payment in full in cash of all the Obligations).
8. Defenses of Borrower Waived.
To the fullest extent permitted by applicable law, each of the
Guarantors waives any defense based on or arising out of any defense of the
Borrower or the unenforceability of the Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Borrower, other
than the final and indefeasible payment in full in cash of the Obligations. The
Bank may, at its election, foreclose on any security held by it by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other guarantor or exercise any other
right or remedy available to it against the Borrower or any other guarantor,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Obligations have been fully, finally and
indefeasibly paid in cash. Pursuant to applicable law, each of the Guarantors
waives any defense arising out of any such election even though such election
operates, pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other Guarantor or guarantor, as the case may be, or any
security.
9. Information.
Each of the Guarantors assumes all responsibility for being
and keeping itself informed of the Borrower's financial condition and assets,
and of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that such Guarantor
assumes and incurs hereunder, and agrees that the Bank will not have any duty to
advise any of the Guarantors of information known to it or any of them regarding
such circumstances or risks.
10. Representations and Warranties.
Each Guarantor hereby makes the following representations and
warranties, which shall be deemed to be repeated and confirmed upon the creation
of any Obligation:
(a) All representations and warranties relating to it
contained in the Credit Agreement are true and correct.
(b) Its execution, delivery and performance of this Guarantee
and its guarantee of the Obligations pursuant hereto (i) have all been duly
authorized by all requisite action of such Guarantor, (ii) do not require the
approval of its stockholders and (iii) will not (1) violate any provision of
law, or its certificate of incorporation or by-laws, (2) violate, be in conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any indenture, agreement or other instrument to which it
is a party or by which it or any of its properties is bound, (3) violate any
governmental or agency rule or regulation or any order of any court, tribunal or
governmental agency or (4) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of its properties or
assets. No authorizations, approvals and consents of, and no filings and
registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by such Guarantor of this
Guarantee or for the validity or enforceability hereof. No consent of any Person
is required in connection with the Guarantor's execution, delivery and
performance of this Guarantee.
(c) This Guarantee constitutes the legal, valid and binding
obligation of such Guarantor, enforceable against it in accordance with its
terms.
11. Exercise of Rights; Remedies Cumulative.
The Bank shall have the right in its sole discretion to
determine which rights, security, liens, guaranties, security interests or
remedies it shall retain, pursue, release, subordinate, modify or take any other
action with respect to, without in any way modifying or affecting any of the
other of them or any of the Bank's rights hereunder. The remedies herein
provided are cumulative and not exclusive of any remedy provided by law.
12. Notices.
All notices, requests, demands, instructions, directions and
other communications provided for hereunder shall be in writing (which term
shall include telecopied communications) and shall be sent by overnight courier,
telecopied or hand delivered to the applicable party at the address set forth
opposite such party's signature line below or, as to any party, to such other
address as such party shall specify by a notice in writing to the other party
hereto. Each notice, request, demand, instruction, direction or other
communication provided for hereunder shall be deemed delivered (i) if by hand or
overnight courier, when delivered to the applicable party at such address, and
(ii) if by telecopy, when sent to the applicable party at such address.
13. Costs and Expenses.
The Guarantors jointly and severally agree to pay, on demand,
whether or not any Event of Default shall have occurred and regardless of
whether or not any proceeding to enforce this Guarantee or the Obligations shall
have been commenced, all of the costs and expenses (including, without
limitation, all fees and disbursements of legal counsel) (x) incurred by the
Bank in connection with (i) the preparation of this Guarantee and any related
instruments and documents or (ii) the preparation of any requested amendments to
this Guarantee or waivers or consents in connection herewith or (y) incurred by
the Bank in connection with the enforcement of this Guarantee. Any such costs
and expenses so incurred by the Bank shall be a part of the Obligations.
14. Successors and Assigns.
This Guarantee shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Bank and its
successors, transferees and assigns. No Guarantor may assign its rights or
obligations hereunder or any portion thereof without the prior written consent
of the Bank. The Bank may assign its rights and powers under this Guarantee with
all or any of the Obligations owing to it and, in the event of such assignment,
the assignee of such rights and powers, to the extent of such assignment, shall
have the same rights and remedies hereunder as if originally named herein as the
Bank.
15. Severability.
If any part of this Guarantee is contrary to, prohibited by or
deemed invalid under the applicable laws or regulations of any jurisdiction,
such provision shall, as to such jurisdiction, be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but the remainder
hereof shall not be invalidated thereby and shall be given full force and effect
so far as possible, and any such prohibition or invalidity in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
16. Indemnification.
The Guarantors jointly and severally agree to pay, and to save
the Bank harmless from, any and all liabilities, costs, expenses, losses or
damages (including, without limitation, legal fees and expenses) which may be
imposed on, incurred by or asserted against the Bank in connection with any of
the transactions contemplated by this Guarantee or the enforcement of any of the
terms hereof; provided, however, that no Guarantor shall be liable for any of
the foregoing to the extent that they arise from the gross negligence or willful
misconduct of the Bank.
17. Survival; Termination.
(a) All covenants, agreements, representations and warranties
made herein by any Guarantor shall survive the execution and delivery of this
Guarantee and shall continue in full force and effect so long as the Bank has an
obligation to make Loans or issue Letters of Credit under the terms of the
Credit Agreement, any Letters of Credit remain outstanding or any of the
Obligations remain unpaid.
(b) This Guarantee shall terminate when the Bank's obligations
to make Loans and issue Letters of Credit under the Credit Agreement have
terminated, all of the Letters of Credit have expired or been terminated and all
of the Obligations have been paid in full; provided, however, that this
Guarantee shall be reinstated if any payment in respect of the Obligations is
rescinded, invalidated, declared to be fraudulent or preferential or otherwise
required to be restored or returned by any Creditor for any reason, including
without limitation by reason of the insolvency, bankruptcy or reorganization of
the Borrower, any Guarantor or any other Person.
18. GOVERNING LAW.
THIS GUARANTEE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS PRINCIPLES OF CONFLICT OF LAWS.
19. SUBMISSION TO JURISDICTION.
(A) EACH GUARANTOR HEREBY EXPRESSLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY
OF NEW YORK, STATE OF NEW YORK, IN CONNECTION WITH ANY ACTION, SUIT OR
PROCEEDING RELATING TO THIS GUARANTEE, ANY INSTRUMENT OR DOCUMENT REFERRED TO
HEREIN OR RELATED HERETO, AND IN CONNECTION THEREWITH AGREES THAT ANY PROCESS OR
NOTICE OF MOTION OR OTHER APPLICATION TO ANY OF SAID COURTS OR A JUDGE THEREOF
MAY BE SERVED UPON ANY GUARANTOR WITHIN OR WITHOUT SUCH COURT'S JURISDICTION BY
REGISTERED OR CERTIFIED MAIL, AT THE ADDRESS OF SUCH GUARANTOR SPECIFIED IN
SECTION 12 (OR AT SUCH OTHER ADDRESS AS SUCH GUARANTOR SHALL SPECIFY BY A PRIOR
NOTICE IN WRITING TO THE AGENT), PROVIDED A REASONABLE TIME FOR APPEARANCE IS
ALLOWED.
(B) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE OR ANY INSTRUMENT OR
DOCUMENT REFERRED TO HEREIN OR RELATED HERETO BROUGHT IN ANY FEDERAL OR STATE
COURT SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) NOTWITHSTANDING THE FOREGOING, THE BANK MAY SUE ANY
GUARANTOR IN ANY JURISDICTION WHERE SUCH GUARANTOR OR ANY OF ITS ASSETS MAY BE
FOUND AND MAY SERVE LEGAL PROCESS UPON ANY GUARANTOR IN ANY OTHER MANNER
PERMITTED BY LAW.
20. WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS GUARANTEE, ANY
INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR RELATED HERETO, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
21. Execution in Counterparts.
This Guarantee may be executed in any number of counterparts
and by different parties on separate counterparts, all of which when taken
together shall constitute but one and the same agreement.
22. Additional Guarantors.
Pursuant to Section 6.22 of the Credit Agreement, each
Domestic Subsidiary of the Borrower that was not in existence on the date of the
Credit Agreement is required to enter into this Guarantee as a Guarantor upon
becoming a Subsidiary. Upon execution and delivery after the date hereof by the
Bank and such a Subsidiary of a Supplement in the form of Annex 1, such
Subsidiary shall become a Guarantor hereunder with the same force and effect as
if originally named as a Guarantor herein. The execution and delivery of any
instrument adding an additional Guarantor as a party to this Guarantee shall not
require the consent of any other Guarantor hereunder. The rights and obligations
of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Guarantee.
23. Right of Setoff.
The Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by the Bank to or for the credit
or the account of any Guarantor against any or all the obligations of such
Guarantor now or hereafter existing under this Guarantee and the other Loan
Documents held by the Bank, irrespective of whether or not the Bank shall have
made any demand under this Guarantee or any other Loan Document and although
such obligations may be unmatured. The rights of the Bank under this Section 23
are in addition to other rights and remedies (including other rights of setoff)
which the Bank may have.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Guarantee to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
Guarantors:
Address: V BAND NE, INC.
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: President
Address: V BAND SERVICES, INC.
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: President
Address: LICOM INCORPORATED
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: President
Bank:
Address: NATIONAL BANK OF CANADA,
125 West 55th Street NEW YORK BRANCH
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Telephone: (212) 632-8551 By: /s/Gaetan R. Frosina
--------------------
Telecopier: (212) 632-8545 Name: Gaetan R. Frosina
Title: Vice President
By: /s/Joseph A. Klapkowski
-----------------------
Name: Joseph A. Klapkowski
Title: Assistant Vice President
<PAGE>
Annex 1 to
[Subsidiary Guarantee]
[Security Agreement]
[Intellectual Property Security Agreement]
[Contribution Agreement]
SUPPLEMENT NO. dated as of , to
(a) the Subsidiary Guarantee dated as of May 28, 1997 (as the
same may be amended, restated, supplemented or otherwise
modified from time to time, the "Subsidiary Guarantee") among
V BAND NE, Inc., a New York corporation, V BAND SERVICES,
INC., a New York corporation, and LICOM INCORPORATED, a
Delaware corporation (each a "Subsidiary" and collectively the
"Subsidiaries") and NATIONAL BANK OF CANADA, NEW YORK BRANCH
(the "Bank"), and
(b) the Security Agreement dated as of May 28, 1997 (as the
same may be amended, supplemented or otherwise modified from
time to time, the "General Security Agreement") by V BAND
CORPORATION, a New York corporation (the "Borrower") and the
Subsidiaries in favor of the Bank, and
(c) the Security Agreement-Patents, Trademarks and Copyrights
dated as of May 28, 1997 (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Intellectual Property Security Agreement") by the Borrower
and the Subsidiaries in favor of the Bank, and
(d) the Contribution Agreement dated as of May 28, 1997 (as
the same may be amended, supplemented or otherwise modified
from time to time, the "Contribution Agreement") among the
Borrower, the Subsidiaries and the Bank (the Subsidiary
Guarantee, the General Security Agreement, the Intellectual
Property Security Agreement and the Contribution Agreement
herein collectively called the "Relevant Agreements" and each
a "Relevant Agreement").
RECITALS:
A. The Borrower and the Bank are entering into a Credit
Agreement dated as of May 28, 1997 (said Credit Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement") providing for the making of loans to and the issuance of letters of
credit for the account of the Borrower in the amounts, and subject to the terms
and conditions, specified in the Credit Agreement.
B. The Borrower and the Subsidiaries have entered into the
Relevant Agreements in order to induce the Bank to make loans to, and issue
letters of credit for account of, the Borrower. Pursuant to Section 6.22 of the
Credit Agreement, each Domestic Subsidiary of the Borrower that is subsequently
acquired or organized is required to enter into the Subsidiary Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement as a Debtor, and the Contribution Agreement as a Guarantor upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security Agreement, Section 10 of the Intellectual Property Security
Agreement, and Section 16 of the Contribution Agreement provide that additional
Subsidiaries of the Borrower may become Guarantors under the Subsidiary
Guarantee, Debtors under the General Security Agreement and the Intellectual
Property Security Agreement, and Guarantors under the Contribution Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee, a Debtor under the General Security
Agreement and the Intellectual Property Security Agreement, and a Guarantor
under the Contribution Agreement in order to induce the Bank to make additional
Loans and issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Now therefor, the New Subsidiary agrees as follows for the
benefit of the Bank:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Relevant Agreements and
the Credit Agreement.
2. Agreement to be Bound by Relevant Agreements.
In accordance with Section 22 of the Subsidiary Guarantee,
Section 27 of the General Security Agreement, Section 10 of the Intellectual
Property Security Agreement, and Section 16 of the Contribution Agreement, the
New Subsidiary by its signature below becomes a Guarantor under the Subsidiary
Guarantee, a Debtor under the General Security Agreement and the Intellectual
Property Security Agreement, and a Guarantor under the Contribution Agreement
with the same force and effect as if originally named therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and provisions of Subsidiary Guarantee, the General Security
Agreement, the Intellectual Property Security Agreement and the Contribution
Agreement applicable to it as a Guarantor, Debtor or Guarantor, as the case may
be, thereunder. Each reference to a "Guarantor" in the Subsidiary Guarantee, a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement, or a "Guarantor" in the Contribution Agreement shall be deemed to
include the New Subsidiary. Each Relevant Agreement is hereby incorporated
herein by reference.
3. Representations and Warranties.
The New Subsidiary represents and warrants to the Bank that
this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
4. Miscellaneous.
(a) This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Bank shall have
received a counterpart of this Supplement signed by the New Subsidiary.
(b) Except as expressly supplemented hereby, each Relevant
Agreement shall remain in full force and effect.
(c) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OF CONFLICT OF LAWS.
(d) In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Relevant Agreements shall not in any way be affected or
impaired.
(e) All communications and notices hereunder shall be in
writing and given as provided in the Relevant Agreements. All communications and
notices hereunder to the New Subsidiary shall be given to it at the address set
forth next to its signature.
(f) The New Subsidiary agrees to reimburse the Bank for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the Bank.
IN WITNESS WHEREOF, the New Subsidiary has duly executed this
Supplement to the Subsidiary Guarantee, the General Security Agreement, the
Intellectual Property Security Agreement, and the Contribution Agreement as of
the day and year first above written.
Address: [Name of New Subsidiary]
- ----------------------
______________________ By: __________________________
______________________ Name:
Attention: _____________ Title:
Telecopier: ____________
<PAGE>
GENERAL SECURITY AGREEMENT
SECURITY AGREEMENT dated as of May 28, 1997 by V BAND
CORPORATION, a New York corporation (the "Borrower"), V BAND NE, INC., a New
York corporation ("Northeast"), V BAND SERVICES, INC., a New York corporation
("Service") and LICOM INCORPORATED, a Delaware corporation ("Licom") (the
Borrower, Northeast, Service and Licom herein collectively called the "Debtors",
and each a "Debtor") in favor of NATIONAL BANK OF CANADA, NEW YORK BRANCH (the
"Secured Party").
RECITALS:
A. The Borrower and the Secured Party are entering into a
Credit Agreement dated as of the date hereof (as it may be amended, modified or
supplemented from time to time, the "Credit Agreement") providing for extensions
of credit to the Borrower in the amounts, and subject to the terms and
conditions, specified in the Credit Agreement.
B. The execution and delivery of this Security Agreement and
the grant by the Debtors to the Secured Party of the security interests in their
respective Collateral specified herein constitute conditions precedent to the
obligation of the Secured Party to extend credit to the Borrower pursuant to the
terms of the Credit Agreement.
ACCORDINGLY, in consideration of the premises, and in order to
induce the Secured Party to execute and deliver the Credit Agreement and to
extend credit to the Debtor pursuant thereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Debtors hereby agree with the Secured Party as follows:
1. Defined Terms. (a) Capitalized terms that are defined in
the Credit Agreement and are not otherwise defined herein have the respective
meanings given to them in the Credit Agreement and, in addition, the following
terms have the following meanings:
"Debtors" has the meaning specified in the Preamble.
"Chattel Paper" means any "chattel paper", as such term is
defined in Section 9-105(b) of the UCC, now owned or hereafter acquired by the
Debtors.
"Collateral" has the meaning specified in Section 2.
"Contract Rights" means any right of any Debtor to payment
under a Contract not yet earned by performance and not evidenced by an
Instrument or Chattel Paper, now in existence or hereafter arising (including,
without limitation, (i) all rights of any Debtor to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights of any
Debtor to damages arising out of, or for, breach or default in respect thereof
and (c) all rights of any Debtor to perform and to exercise all remedies
thereunder).
"Contracts" means all contracts to which any Debtor is, or may
at any time hereafter become, a party and all agreements and undertakings of any
third parties in favor or for the benefit of any Debtor.
"Copyright Licenses" means any agreement, written or oral,
naming any Debtor as licensor or licensee, granting any right to use any
Copyright, now in existence or hereafter arising.
"Copyrights" means all of the following to the extent that any
Debtor now has or hereafter acquires any right, title or interest therein: (i)
all copyrights in all works, whether published or unpublished, now existing or
hereafter created or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Copyright
Office, and (ii) all renewals thereof.
"Credit Agreement" has the meaning specified in Recital A.
"Debtor" and "Debtors" have the respective meanings specified
in the preamble hereto.
"Documents" means any "documents", as such term is defined in
Section 9-105(1) of the Uniform Commercial Code, now owned or hereafter acquired
by any Debtor.
"Equipment" means all machinery, equipment and furniture now
owned or hereafter acquired by any Debtor or in which any Debtor now has or
hereafter may acquire any right, title or interest, and any and all additions,
substitutions and replacements thereof, wherever located, together with all
attachments, components, parts, equipment and accessories installed therein or
affixed thereto, including, but not limited to, all equipment as defined in
Section 9-109(2) of the Uniform Commercial Code.
"Fixtures" means any "fixture", as such term is defined in
Section 9-313(1) of the Uniform Commercial Code, now owned or hereafter acquired
by any Debtor.
"General Intangibles" means any "general intangibles", as such
term is defined in Section 9-106 of the Uniform Commercial Code, now owned or
hereafter acquired by any Debtor.
"Goods" means any "goods", as such term is defined in Section
9-105(1) of the Uniform Commercial Code, now owned or hereafter acquired by any
Debtor .
"Instrument" means any "instrument", as such term is defined
in Section 9-105(l)(i) of the Uniform Commercial Code, now owned or hereafter
acquired by any Debtor.
"Intellectual Property" means, collectively, Patents, Patent
Licenses, Trademarks, Trademark Licenses, Copyrights and Copyright Licenses.
"Inventory" means all inventory, wherever located, now owned
or hereafter acquired by any Debtor or in which any Debtor now has or hereafter
may acquire any right, title or interest, including, without limitation, all
goods and other personal property now or hereafter owned by any Debtor which are
held for sale or lease or are furnished or are to be furnished under a contract
of service or which constitute raw materials, work in process or materials used
or consumed or to be used or consumed in any Debtor's business, or in the
processing, packaging or shipping of the same, and all finished goods,
including, but not limited to, all inventory as defined in Section 9-109(4) of
the Uniform Commercial Code.
"Leases" means all leasehold interests held by any Debtor.
"Licenses" and "Licensing Agreements" means the Copyright
Licenses and the Trademark Licenses.
"Patent License" means any agreement, written or oral,
providing for the grant by or to any Debtor of any right to use any Patent, now
in existence or hereafter arising.
"Patents" means (i) all patents and patent applications and
the inventions and improvements described and claimed therein, and all
patentable inventions, now owned or hereafter acquired or obtained by any
Debtor, (ii) all registrations and recordings thereof, whether in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, (iii) all reissues, divisions, continuations,
renewals, extensions and continuations-in-part of any of the foregoing, (iv) all
income, royalties, damages or payments now and hereafter due and/or payable
under or with respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the foregoing,
(v) the right to sue for past, present and future infringements of any of the
foregoing throughout the world, and (vi) all rights and obligations pursuant to
any Patent License with respect thereto, whether any Debtor is a licensor or
licensee under any such Patent License, and, subject to the terms of such
licenses, the right to prepare for sale, sell and advertise for sale, all
inventory now or hereafter owned by any Debtor and now or hereafter covered by
such licenses.
"Proceeds" means (i) all "proceeds", as such term is defined
in Section 9-306(1) of the Uniform Commercial Code, and (ii) to the extent not
included in such definition, (1) any and all proceeds of any insurance,
indemnity, warranty, guaranty or letter of credit payable to any Debtor from
time to time with respect to any of the Collateral, (2) all payments (in any
form whatsoever) paid or payable to any Debtor from time to time in connection
with any taking of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental authority), (3) all
judgments in favor of any Debtor in respect of the Collateral, (4) any claim of
any Debtor against third parties for past, present or future infringement or
dilution of any Trademark or Trademark License, Copyright or Copyright License
and (5) all other amounts from time to time paid or payable or received or
receivable under or in connection with any of the Collateral.
"Receivables" means all accounts receivable, book debts,
notes, drafts, instruments, documents, acceptances and other forms of
obligations now owned or hereafter received or acquired by or belonging or owing
to any Debtor (including, without limitation, under any trade names, styles or
divisions thereof), whether arising out of goods sold by any Debtor or services
rendered by it or from any other transaction, whether or not the same involves
the sale of goods or performance of services by any Debtor (including, without
limitation, any such obligation which would be characterized as an account,
general intangible or chattel paper under the Uniform Commercial Code) and all
of each Debtor's rights in, to and under all purchase orders now owned or
hereafter received or acquired by it for goods or services, and all of each
Debtor's rights to any goods represented by any of the foregoing (including
returned or repossessed goods and unpaid seller's rights) and all moneys due or
to become due to any Debtor under all contracts for the sale of goods and/or the
performance of services by it (whether or not yet earned by performance) or in
connection with any other transaction, now in existence or hereafter arising,
including without limitation the right to receive the proceeds of said purchase
orders and contracts, and all collateral security and guarantees of any kind
given by any person or entity with respect to any of the foregoing.
"Trademark License" means any agreement, written or oral,
providing for the grant by or to any Debtor of any right to use any Trademark,
now in existence or hereafter arising.
"Trademarks" means (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired by any
Debtor, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and (ii)
all renewals thereof.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of New York.
"Vehicles" means all cars, trucks, trailers, construction and
earth moving equipment and other vehicles covered by a certificate of title law
of any state, in which any Debtor has or hereafter acquires any right, title or
interest, and all tires and other appurtenances to any of the foregoing.
(c) Unless otherwise expressly specified herein, defined
terms denoting the singular number shall, when in the plural form, denote the
plural number of the matter or item to which such defined terms refer, and
vice-versa.
(d) Words of the neuter gender mean and include
correlative words of the masculine and feminine gender.
(e) The Table of Contents and Section and Schedule
headings used in this Agreement are for convenience only and shall not affect
the construction or meaning of any provisions of this Agreement.
(f) Unless otherwise specified, the words "hereof",
"herein", "hereunder" and other similar words refer to this Agreement as a whole
and not just to the Section, subsection or clause in which they are used; and
the words "this Agreement" refer to this Security Agreement, as amended,
modified or supplemented from time to time.
(g) Unless otherwise specified, references to Sections,
Recitals and Schedules are references to Sections of, and Recitals and Schedules
to, this Agreement.
2. Security Interest. As security for the due and punctual
payment and performance of the Obligations, each Debtor hereby pledges and
assigns to the Secured Party, and hereby grants to the Secured Party a first
priority lien upon and a continuing first priority security interest in, all
rights, title and interest of such Debtor in, to and under all personal property
and fixtures of such Debtor, whether now owned or hereafter acquired by such
Debtor and wherever located and whether now existing or hereafter arising or
created (all such property and assets are herein collectively called the
"Collateral"), including, without limitation, the following:
(a) all Receivables of such Debtor;
(b) all Inventory of such Debtor;
(c) all Equipment of such Debtor, including, without
limitation, all Vehicles of such Debtor (excluding
any Equipment subject to purchase money liens if
the terms of the Indebtedness secured by such
liens expressly prohibit such Debtor from granting
any lien thereon or security interest therein and
any Equipment subject to a capital lease which
expressly prohibits such Debtor from granting any
lien thereon or security interest therein);
(d) all Contracts and Contract Rights of such Debtor
(excluding any Contract that expressly prohibits
such Debtor from granting any lien thereon or
security interest therein);
(e) all Instruments and Chattel Paper of such Debtor;
(f) all General Intangibles of such Debtor, including,
without limitation, all Intellectual Property of
such Debtor;
(g) all Leases of such Debtor;
(h) all Fixtures of such Debtor;
(i) all computers;
(j) all books and records (including, without
limitation, computer programs, tapes and related
electronic data processing software) relating to
such Debtor's Receivables, Inventory, Equipment,
Contracts, Intellectual Property and other assets;
and
(k) to the extent not otherwise included, all cash and
non-cash Proceeds and products of any of the
foregoing.
3. Obligations Absolute. (a) Each Debtor hereby agrees that
this Agreement shall be binding upon such Debtor, and the grant to the Secured
Party of a security interest in such Debtor's Collateral hereunder shall be
irrevocable and unconditional, irrespective of the validity, legality or
enforceability of the Credit Agreement, the Note, any other Loan Document or any
of the Obligations, the absence of any action to enforce the same, the waiver or
consent by the Secured Party with respect to any provision thereof, the recovery
of any judgment against any other Person, or any action to enforce the same or
any other similar circumstances. Each Debtor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Borrower or any other Debtor, any notice to require
a proceeding first against any other Person, protest or notice with respect to
the Note or any other promissory notes or evidences of indebtedness secured
hereby or the indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Agreement will remain in full force and effect so long as
the Borrower may borrow or request the issuance of letters of credit under the
Credit Agreement or any Obligations remain unpaid.
(b) Each Debtor agrees that, without notice to or further
assent by such Debtor, the liability of any other Person for or upon any of the
Obligations may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised or released by the Secured Party, as the
Secured Party may deem advisable, and that any other collateral or liens
securing any of the Obligations may, from time to time, in whole or in part
(subject, in the case of such Debtor's Collateral, to the provisions of this
Agreement), be exchanged, sold or surrendered by the Secured Party, as the
Secured Party may deem advisable, all without impairing, abridging, affecting or
diminishing this Agreement or the rights of the Secured Party hereunder or with
respect to the Collateral.
4. Representations and Warranties. Each Debtor hereby makes
the following representations and warranties, which shall be deemed to be
repeated and confirmed upon the creation or acquisition by such Debtor of each
item of Collateral and upon the creation of any Obligation:
(a) Such Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has full power and authority to own its properties and to carry
on its business as now being conducted, is duly qualified to do business and is
in good standing in each jurisdiction in which the character of its properties
and the transaction of its business make such qualification necessary and where
the failure to be so qualified would have a Material Adverse Effect, and has
full power and authority to execute, deliver and perform this Agreement.
(b) Its execution, delivery and performance of this
Security Agreement and the granting of the security interest in the Collateral
hereunder (i) have all been duly authorized by all requisite action of such
Debtor, (ii) do not require the approval of its stockholders and (iii) will not
(1) violate any provision of law, or its certificate of incorporation or
by-laws, (2) violate, be in conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any indenture,
agreement or other instrument to which it is a party or by which it or any of
its properties is bound, (3) violate any governmental or agency rule or
regulation or any order of any court, tribunal or governmental agency or (4)
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the Collateral, except for the security interest
created by this Agreement. No authorizations, approvals and consents of, and no
filings and registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by such Debtor
of this Security Agreement or for the validity or enforceability hereof. No
consent of any party to any Contract or any account debtor in respect of any
Receivable is required in connection with the execution, delivery and
performance of this Agreement or the creation of a security interest in such
Contract or Receivable pursuant hereto.
(c) This Security Agreement constitutes the legal, valid
and binding obligation of such Debtor, enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting enforceability
of creditors rights generally and except as specific performance may be subject
to equitable principles of general applicability. Except for Permitted Liens,
this Security Agreement creates in favor of the Secured Party a valid first
priority lien and first priority security interest in the Collateral,
enforceable against such Debtor and all third parties and superior in right to
all other security interests, liens, encumbrances, or charges, existing or
future.
(d) Except for the security interest of the Secured Party
therein, such Debtor is, and as to Collateral acquired from time to time after
the date hereof such Debtor will be, the owner of all the Collateral, having
good and marketable title thereto, free from any lien, security interest,
encumbrance or other right, title or interest of any Person, other than
Permitted Liens.
(e) Appropriate financing statements with respect to the
security interest created hereunder have been or will be duly filed in all
appropriate offices; no filing of any other financing statements or other
instruments and no recording, filing or indexing of this Agreement is necessary
or appropriate in order to preserve and protect the liens and security interests
created or intended to be created by this Security Agreement as legal, valid and
enforceable perfected liens on and security interests in the Collateral (other
than filings or appropriate assignments with the United States Patent and
Trademark Office or the United States Copyright Office with respect to
Intellectual Property of such Debtor, if any).
(f) Except as set forth in the Disclosure Schedule, there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) now on file or registered in any public
office (other than in respect of Permitted Liens) covering any interest of such
Debtor in the Collateral, or intended so to be, and so long as the Credit
Agreement is in effect or any of the Obligations remain unpaid such Debtor will
not execute, and will not permit the filing or the continued existence on file
of any financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) relating to the Collateral in any public
office, except financing statements filed or to be filed with respect to the
security interest granted hereunder to the Secured Party or with respect to
Permitted Liens.
(g) The chief executive office and principal place of
business of such Debtor is located at the address set forth for it in Schedule
I. Schedule I lists the correct Federal Employer Identification Number of such
Debtor and such Debtor has never used any other Federal Employer Identification
Number other than that shown in Schedule I. The originals of all documents (as
well as all duplicates thereof) evidencing or relating to the Receivables,
Contracts, Leases and Intellectual Property and the only original books of
account and records of such Debtor relating thereto are kept at the office or
offices specified in Schedule I. All Inventory and Equipment are held on the
date hereof at the locations specified in Schedule II. While owned by a Debtor,
the Inventory and Equipment has either been in transit to, or located at, the
locations specified in Schedule II.
(h) The name of such Debtor set forth in the preamble
hereto is correct. Such Debtor is not currently doing, and has not at any time
during the five years immediately preceding the date hereof done, business under
any trade name or other assumed name. During the five years immediately
preceding the date hereof such Debtor has not had any name other than its
present name. Such Debtor has not merged or consolidated with any other entity
during the five years immediately preceding the date hereof.
(i) None of the Collateral constitutes farm products (as
such term is defined in Section 9-109(3) of the Uniform Commercial Code) or the
Proceeds thereof.
(j) None of the account debtors on any Receivables, and
none of the parties to any Contracts, is a governmental entity.
(k) To such Debtor's knowledge, the information,
schedules, exhibits and reports furnished by any Debtor to the Secured Party in
connection with the negotiation and preparation of this Agreement did not
contain any omissions or misstatements of fact which would make the statements
contained therein misleading or incomplete in any material respect.
5. Covenants. (a) At all reasonable times the Secured Party
shall have full access to, and the right to audit, check, inspect and make
abstracts and copies of, each Debtor's books, records, audits, correspondence
and all other papers and computer tapes and programs relating to the Collateral.
The Secured Party shall have the right to confirm and verify the Receivables and
other Collateral and to do whatever the Secured Party may deem necessary to
protect the Secured Party's interests and each Debtor shall furnish such
assistance and information as the Secured Party may require in connection
therewith. The Secured Party or its agent may enter from time to time the
premises of each Debtor at any reasonable time during business hours for the
purpose of inspecting the Collateral and any and all records pertaining thereto.
(b) Each Debtor will keep the Collateral, at its own
expense, in good repair and condition, and will not misuse, abuse or waste the
Collateral or allow the Collateral to deteriorate (or permit any of the
foregoing), except for normal wear and tear, and will make the Collateral
available for inspection by the Secured Party at all reasonable times during
business hours.
(c) Each Debtor shall comply in all material respects
with all acts, rules, regulations, orders, decrees and directions of any
governmental authority applicable to the Collateral or any part thereof or to
the operation of its business; provided, however, that any Debtor may contest
any act, regulation, order, decree or direction in any reasonable manner which
shall not in the reasonable opinion of the Secured Party adversely affect the
Secured Party's rights or the first priority of the Secured Party's security
interest in the Collateral.
(d) Each Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested by any Debtor in
good faith by appropriate proceedings, (ii) such proceedings do not involve, in
the reasonable opinion of the Secured Party, any danger of the sale, forfeiture
or loss of any of the Collateral or any interest therein and (iii) such charge
is adequately reserved against in accordance with generally accepted accounting
principles.
(e) No Debtor will create, permit or suffer to exist, and
each Debtor will defend the Collateral against, and take such other action as is
necessary to remove, any lien, security interest or encumbrance on the
Collateral, other than Permitted Liens, and each Debtor will defend the right,
title and interest of the Secured Party in and to any of such Debtor's rights to
the Collateral against the claims and demands of all Persons whomsoever claiming
an interest therein adverse to the Secured Party, other than holders of
Permitted Liens.
(f) Each Debtor will advise the Secured Party promptly,
in reasonable detail, of (i) any security interest, lien or encumbrance placed
on or asserted against any of the Collateral, (ii) any material change in the
composition of the Collateral and (iii) the occurrence of any other event which
could have a material effect on the aggregate value of the Collateral or on the
security interest created by any Debtor hereunder.
(g) No Debtor will (x) change the location specified in
Section 4(g) of its chief executive office, principal place of business or the
office where records concerning its Receivables, Contracts, Leases or
Intellectual Property are kept, (y) keep Inventory or Equipment at any location
other than the location specified in Schedule II, or (z) change its name,
identity or corporate structure, until, in each case, (i) it shall have given to
the Secured Party not less than 30 days' prior written notice of its intention
so to do, clearly describing such new location, name, identity or corporate
structure and providing such other information in connection therewith as the
Secured Party may reasonably request, and (ii) it shall have taken such other
actions satisfactory to the Secured Party (including, without limitation, the
delivery of additional financing statements duly signed by any Debtor), as are
necessary to maintain the security interest of the Secured Party in the
Collateral at all times senior and fully perfected and in full force and effect.
(h) Each Debtor will maintain its Vehicles, if any, in
good operating condition, ordinary wear and tear excepted, and will provide all
maintenance, service and repairs necessary for such purpose. No Vehicle shall be
removed from the state which has issued the certificate of title or ownership
therefor for a period in excess of four months. Within 15 days of any request
therefor by the Secured Party, each Debtor will file all applications for
certificates of title or ownership indicating the Secured Party's first priority
security interest on the Vehicle covered by such certificate, and any other
necessary documentation, in each office in each jurisdiction which the Secured
Party shall deem advisable to perfect its security interests in the Vehicles.
(i) Each Debtor will furnish to the Secured Party within
ten (10) days after any request therefor by the Secured Party, statements
(prepared by any Debtor or, if the Secured Party so requires, by independent
public accountants satisfactory to the Secured Party in form, substance and
detail satisfactory to the Secured Party) of all Receivables of such Debtor
(showing reconciliations, aging and test verifications thereof and trial
balances therefor), itemized by account debtor, and of the location (and
aggregate book value at each such location) of all Inventory of such Debtor,
each such statement to be certified by its chief financial officer, and,
promptly from time to time, such other information as the Secured Party may
reasonably request regarding the Collateral and its operations, business,
affairs and financial condition.
(j) No Debtor will sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so, except
as permitted by Section 6.13 of the Credit Agreement.
(k) Each Debtor will, at its own expense, make, execute,
endorse, acknowledge, file and/or deliver to the Secured Party from time to time
such lists, descriptions, schedules, invoices, warehouse receipts, bills of
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other assurance or
instruments and take such further steps relating to the Collateral and other
property or rights covered by the security interest hereby granted by it, as the
Secured Party in its reasonable judgment deems appropriate or advisable to
perfect, preserve or protect its security interest in the Collateral.
6. Special Provisions Concerning Receivables. (a) As of the
time when any Receivable arises, each Debtor shall be deemed to have warranted
as to such Receivable that such Receivable and all papers and documents relating
thereto are genuine and in all respects what they purport to be, and that each
such Receivable (i) will represent the genuine, legal, valid and binding
obligation of the account debtor thereon for the unpaid amount owed by such
account debtor for the sale and delivery by such Debtor of the goods, or the
performance by such Debtor of the services, listed therein, (ii) will be the
only original writings evidencing and embodying such obligation of the account
debtor named therein, (iii) will evidence true and undisputed obligations,
enforceable in accordance with their respective terms and not subject to any
defenses, set-offs or counterclaims known to such Debtor, or stamp or other
taxes, except as shall be disclosed to the Secured Party, and (iv) will be, to
the best knowledge of such Debtor, in compliance and will conform with all
applicable federal, state and local laws and applicable laws of any relevant
foreign jurisdiction. Each Debtor shall use its best efforts to take all steps
necessary to preserve the liability of each account debtor, guarantor, endorser,
obligor or secondary party on or with respect to the Receivables.
(b) Each Debtor will keep and maintain, at its own
expense, satisfactory and complete records of the Receivables, including, but
not limited to, records of all payments received, all credits granted thereon,
all merchandise returned and all other dealings therewith, and each Debtor will
make the same available to the Secured Party, at such Debtor's expense, at any
and all reasonable times upon demand of the Secured Party. At the request of the
Secured Party, each Debtor shall legend, in form and manner satisfactory to the
Secured Party, its Receivables and its books, records and documents evidencing
or pertaining to its Receivables with an appropriate reference to the fact that
such Receivables have been assigned to the Secured Party and that the Secured
Party has a security interest therein.
(c) No Debtor will rescind or cancel any indebtedness
evidenced by any of the Receivables or modify any term thereof or make any
adjustment with respect thereto, or extend or renew the same, or compromise or
settle any dispute, claim, suit or legal proceeding relating thereto, or sell
any of such Receivables or interest therein, without the prior written consent
of the Secured Party, except as permitted by Section 6(e).
(d) Each Debtor will duly fulfill all obligations on its
part to be fulfilled under or in connection with the Receivables and will do
nothing to impair the rights of the Secured Party in the Receivables.
(e) Each Debtor will endeavor to collect or cause to be
collected from the account debtor on each of its Receivables (including, without
limitation, Receivables which are delinquent, such Receivables to be collected
in accordance with generally accepted lawful collection procedures), as and when
due, any and all amounts owing under or on account of such Receivables, except
that prior to the occurrence of an Event of Default such Debtor may allow in the
ordinary course of business as adjustments to amounts owing under its
Receivables (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which such Debtor finds
necessary in accordance with sound business and credit judgment and (ii) a
refund or credit due as a result of returned or damaged inventory or improper or
faulty performance of services. The costs and expenses (including attorney's
fees) of collection, whether incurred by such Debtor or the Secured Party, shall
be borne by the Debtors jointly and severally.
(f) Each Debtor shall, promptly upon learning thereof,
report to the Secured Party all delays in performance, notices of default,
claims made or disputes asserted by any account debtor or other obligor on any
Receivable and any other matters materially affecting the value, enforceability
or collectibility of any Receivable.
(g) The Secured Party is authorized and empowered in its
sole discretion to accept the return of goods, if any, represented by any
Receivable or contract rights, without notice to or consent by any Debtor, all
without discharging or in any way affecting any Debtor's liability hereunder or
on the Obligations.
(h) After the occurrence and during the continuance of an
Event of Default, the Secured Party shall have the right, without notice to
(unless specifically provided for herein), or assent by, any Debtor, and without
affecting the Obligations, in the name of any Debtor or in the name of the
Secured Party or otherwise: (i) to notify any or all account debtors under any
or all of the Receivables to make payment thereof directly to the Secured Party
for the account of any Debtor or the Secured Party and to require any Debtor to
forthwith give similar notice to the account debtors; (ii) to demand, collect,
sue for, receive, compound and give acquittance for any of the Receivables or
any part thereof; (iii) to extend the time of payment of, compromise or settle
for cash, credit or otherwise, and upon any terms and conditions, any of the
Receivables; (iv) to endorse the name of any Debtor on any checks, drafts or
other orders or instruments for the payment of moneys payable to any Debtor
which shall be issued in respect of any Receivable; (v) to file any claims and
commence, maintain or discontinue any actions, suits or other proceedings deemed
by the Secured Party to be necessary or advisable for the purpose of collecting
or enforcing payment of any Receivable; (vi) to execute any instrument and do
any and all other things necessary and proper to protect and preserve and
realize upon the Receivables and the other rights contemplated hereby; (vii) to
require any Debtor to forthwith account for and transmit to the Secured Party in
the same form as received all proceeds (other than physical property) of
collection of Receivables received by such Debtor and, until so transmitted, to
hold the same in trust for the Secured Party and not commingle such proceeds
with any other funds of such Debtor; (viii) to require any Debtor to deliver, at
the expense of such Debtor or the Borrower, any or all papers, documents,
correspondence, records and computer programs and tapes and other electronic
data processing software evidencing or relating to such Debtor's Receivables to
the Secured Party at a place designated by the Secured Party (and after delivery
thereof such Debtor shall have no further claim to or interest in such
Receivables); (ix) to notify the Post Office authorities to change the address
for delivery of mail addressed to any Debtor to such address as the Secured
Party may designate; and (x) to do all other acts and things necessary to carry
out this Agreement. The Secured Party shall not be obligated to do any of the
acts hereinabove authorized, but in the event that the Secured Party elects to
do any such act, the Secured Party shall not be responsible to any Debtor except
for its gross negligence or willful misconduct.
(i) If any Receivable of a Debtor becomes evidenced by a
promissory note or similar instrument in the sum of more than $25,000, such
Debtor will promptly notify the Secured Party thereof, and upon request by the
Secured Party will promptly deliver such instrument to the Secured Party
appropriately endorsed to the order of the Secured Party as further security for
the payment in full of the Obligations.
7. Special Provisions Concerning Inventory and Equipment. (a)
Each Debtor will at all times keep all of the Inventory and Equipment insured at
its expense, to the Secured Party's satisfaction, against fire, theft, and all
other risks to which the Inventory and Equipment may be subject; all policies or
certificates with respect to such insurance shall be endorsed to the Secured
Party's satisfaction for the benefit of the Secured Party, including, without
limitation, by naming the Secured Party as loss payee, and evidence of such
insurance satisfactory to the Secured Party shall be deposited with the Secured
Party. If any Debtor shall fail to insure the Inventory and Equipment to the
Secured Party's satisfaction, or if any Debtor shall fail so to endorse and
deposit all policies or certificates with respect thereto in accordance
herewith, the Secured Party shall have the right (but shall be under no
obligation) to procure such insurance and each Debtor agrees to reimburse the
Secured Party for all costs and expenses of procuring such insurance that it
failed to procure. The Secured Party may, after consultation with the relevant
Debtor, apply any proceeds of such insurance with respect to the Inventory and
Equipment, when received by it, toward the payment of any of the Obligations,
whether or not the same shall then be due. Each Debtor shall give immediate
written notice to the insurers and to the Secured Party of any loss or damage to
the Collateral or any part thereof and shall promptly file all necessary or
appropriate proofs of loss with the insurers. Each Debtor hereby appoints the
Secured Party the attorney-in-fact for such Debtor in obtaining, adjusting and
cancelling any such insurance and endorsing settlement drafts.
(b) The Secured Party shall have the right, upon the
occurrence and during the continuance of an Event of Default, without notice to
(unless specifically provided for herein), or assent by, any Debtor but without
affecting the Obligations, in the name of any Debtor or in the name of the
Secured Party or otherwise: (i) upon notice to such effect, to require any
Debtor to deliver, at the expense of such Debtor or the Borrower, any or all of
the Inventory and Equipment of such Debtor to the Secured Party at a place
designated by the Secured Party (and after delivery thereof such Debtor shall
have no further claim to or interest in such Inventory and Equipment); (ii) to
take possession of any or all of the Inventory and Equipment and, for that
purpose, to enter, with the aid and assistance of any Person, any premises where
such Inventory and Equipment, or any part thereof, is, or may be, placed or
assembled, to remove any such Inventory or Equipment, and to dispose of or store
such Inventory or Equipment in such premises at the expense of the Debtors; and
(iii) to execute or endorse any instrument (including, without limitation, any
invoice, bill of lading, and storage or warehouse receipt) and do all the things
necessary and proper to protect and preserve and realize upon the Inventory and
Equipment and the other rights contemplated hereby. The Secured Party shall not
be obligated to do any of the acts hereinabove authorized, but in the event that
the Secured Party elects to do any such act, the Secured Party shall not be
responsible to any Debtor except for the Secured Party's own gross negligence or
willful misconduct.
(c) Upon taking possession of any Inventory or Equipment
pursuant hereto following the occurrence of an Event of Default, the Secured
Party shall have the right to hold, store and/or use, manage, control and sell
such Inventory or Equipment. Upon any such taking of possession of any Inventory
or Equipment, the Secured Party may, from time to time at the expense of the
Debtors, make all such repairs, replacements, alterations, additions and
improvements to and of such Inventory or Equipment as the Secured Party may deem
proper. In any such case, the Secured Party shall have the right to manage and
control such Inventory or Equipment and to carry on the business and exercise
all rights and powers of any Debtor respecting its Inventory and Equipment, all
as the Secured Party shall deem best; and the Secured Party shall be entitled to
collect and receive all issues, profits, fees, revenues and other income of the
same and every part thereof. Such issues, profits, fees, revenues and other
income shall be applied to pay the expenses incurred by the Secured Party or its
agents in (i) holding such Inventory or Equipment; (ii) performing all repairs,
replacements, alterations, additions and improvements which the Secured Party
may be required or may elect to make, if any; and (iii) paying all taxes,
assessments, insurance, warehouse fees and other charges upon such Inventory or
Equipment or any part thereof, and all other payments, which the Secured Party
may be required or authorized or elect to make (including legal costs and
attorneys' fees). Any remaining rents, issues, profits, fees, revenues and other
income shall be applied to the payment of the Obligations in accordance with
Section 11.
8. Financing Statements; Documentary Stamp Taxes. (a) Each
Debtor agrees to sign and deliver to the Secured Party such financing
statements, in form acceptable to the Secured Party, as the Secured Party may
from time to time reasonably request or as are necessary in the opinion of the
Secured Party to establish and maintain a valid, enforceable and perfected
security interest in the Collateral and the other rights and security
contemplated hereby which is superior and prior to the rights of all third
Persons. The Debtors hereby jointly and severally agree to pay any applicable
filing fees and related expenses. Each Debtor authorizes the Secured Party to
file any such financing statements without the signature of such Debtor.
(b) Each Debtor agrees to procure, pay for, affix to any
and all documents and cancel any documentary tax stamps or similar taxes
required by, and in accordance with, applicable law, and the Debtors hereby
jointly and severally agree to indemnify the Secured Party for and hold the
Secured Party harmless against any liability (including interest and penalties)
in respect of such taxes.
9. Additional Provisions Concerning Remedies and Sale of
Collateral. (a) In addition to any rights and remedies contained herein or now
or hereafter granted under applicable law and not by way of limitation of any
such rights and remedies, upon the occurrence and during the continuance of an
Event of Default, the Secured Party shall have all of the rights and remedies of
a secured party under the Uniform Commercial Code as enacted in any applicable
jurisdiction in addition to the rights and remedies provided herein. The Secured
Party may take legal proceedings for the appointment of a receiver or receivers
(to which the Secured Party shall be entitled as a matter of right) to take
possession of the Collateral pending the sale thereof pursuant either to the
powers of sale granted by this Agreement or to a judgment, order or decree made
in any judicial proceeding for the foreclosure or involving the enforcement of
this Agreement.
(b) Upon the occurrence and during the continuance of any
Event of Default the Secured Party shall have the right to seize and take
possession of any Collateral (or any paper, documents, correspondence, computer
tapes and programs and other electronic data processing software relating to the
Collateral), and may enter the premises where such Collateral (or such paper,
documents, correspondence, tapes, programs or software) are located for the
purpose of effecting such seizure. The Secured Party shall not be liable to any
Debtor for any damage suffered by such Debtor by reason thereof and the Debtors
hereby jointly and severally agree to indemnify the Secured Party for any
liability which may accrue to any Person by reason of such entry or seizure. At
any time or from time to time after the occurrence and during the continuance of
an Event of Default the Secured Party may hire and maintain on any of the
premises of any Debtor a custodian or independent contractor selected by the
Secured Party who shall have full authority to do all lawful acts necessary to
protect the Secured Party's interests and to report to the Secured Party
thereon. Each Debtor hereby agrees to cooperate with any such Person and to do
whatever the Secured Party may reasonably request to preserve the Collateral.
All expenses incurred by the Secured Party by reason of the employment of any
such Person shall be payable by the Debtors, jointly and severally, and shall be
secured hereby and shall be a part of the Obligations.
(c) Upon the occurrence and during the continuance of an
Event of Default the Secured Party may, without obligation to resort to other
security, at any time and from time to time, sell, re-sell, assign and deliver
all or any of the Collateral, in one or more parcels at the same or different
times, and all right, title and interest, claim and demand therein and right of
redemption thereof, at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices and on such terms as the Secured
Party may determine, with the amounts realized from any such sale to be applied
in the manner provided in Section 11. Each Debtor hereby agrees that all of the
foregoing may be effected without demand, advertisement or notice (except as
required by law or as expressly provided herein), all of which (to the extent
permitted by law) are hereby expressly waived. Upon any sale of any of the
Collateral, whether made under the power of sale hereby given or under judgment,
order or decree in any judicial proceeding for the foreclosure involving the
enforcement of this Agreement, (i) the Secured Party may bid for the property
being sold, and upon compliance with the terms of sale may hold, retain and
possess and dispose of such property in its own absolute right without further
accountability, and may, in paying the purchase money therefor, discharge a
portion of the Obligations owing to the Secured Party in an amount equal to such
purchase price; (ii) the Secured Party may make and deliver to the purchaser or
purchasers a good and sufficient deed, bill of sale and instrument of assignment
and transfer of the property sold; (iii) the Secured Party may make all
necessary deeds, bills of sale and instruments of assignment and transfer of the
property thus sold; but if so requested by the Secured Party or such purchaser,
the appropriate Debtors shall ratify and confirm any such sale or transfer by
executing and delivering to the Secured Party or such purchaser all property,
deeds, bills of sale, instruments of assignment and transfer and releases as may
be designated in any such request; (iv) all right, title, interest, claim and
demand whatsoever, either in law or in equity or otherwise, of any Debtor of, in
and to the property so sold shall be divested and such sale shall be a perpetual
bar both at law and in equity against each Debtor, its successors and assigns,
and against any and all Persons claiming or who may claim the property sold or
any part thereof from, through or under any Debtor, its successors or assigns;
and (v) the receipt of the Secured Party or of the officer thereof making such
sale shall be a sufficient discharge to the purchaser or purchasers at such sale
for his or their purchase money, and such purchaser or purchasers, and his, its
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Secured Party or of such
officers thereof, be obligated to see to the application of such purchase money
or be in any way answerable or responsible for any loss, misapplication or
non-application thereof.
(d) To the extent that it may lawfully do so, each Debtor
agrees that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption laws, or any law permitting it to
direct the order in which the Collateral or any part thereof shall be sold, now
or at any time hereafter in force, which may delay, prevent or otherwise affect
the performance or enforcement of this Agreement or the Obligations, and each
Debtor hereby expressly waives all benefit or advantage of any such laws and
covenants that it will not hinder, delay or impede the execution of any power
granted or delegated to the Secured Party in this Agreement, but will suffer and
permit the execution of every such power as though no such laws were in force.
In the event of any sale of Collateral pursuant to this Security Agreement by
the Secured Party, the Secured Party shall, at least 10 days before such sale,
give such Debtor written notice (which notice may be given by telecopier) of its
intention to sell, except that, if the Secured Party shall determine in its sole
discretion that any of the Collateral is perishable or threatens to decline
speedily in value, any such sale may be made upon one day's written notice
(which notice may be given by telecopier) to the Borrower.
(e) Each Debtor agrees that upon the occurrence of any
Event of Default and at any time during the continuance thereof, any of the
monies, deposit balances and other property of such Debtor held by, or coming
into the possession of, the Secured Party may be applied (including, without
limitation, by way of set-off) by the Secured Party to a reduction of the
Obligations.
10. Secured Party Appointed Attorney-in-Fact. Each Debtor
hereby appoints the Secured Party as such Debtor's attorney-in-fact, with full
power of substitution, for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the Secured
Party may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, the Secured Party shall have the right and power,
in its own name or as attorney-in-fact for such Debtor, (i) to take any of the
actions specified in Section 6(h) or 7(b) under the circumstances described
therein and (ii) generally, to do, at the Secured Party's option and at the
expense of the Debtors, at any time, or from time to time, all acts and things
that the Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Secured Party's security interest therein; and each Debtor
hereby ratifies all that the Secured Party, acting as attorney-in-fact for any
Debtor, shall lawfully do or cause to be done by virtue hereof.
11. Application of Moneys; Reassignment of Collateral. Except
as otherwise provided herein, all moneys which the Secured Party shall receive
pursuant to this Agreement or with respect to the Collateral shall be applied in
the following manner: First, to the payment of all costs and expenses incurred
in connection with the administration and enforcement of, or the preservation of
any rights under, this Agreement and the realization on such Collateral
(including, without limitation, the fees and disbursements of the Secured
Party's counsel and agents); and Second, to the payment of all other Obligations
in such order and manner as the Secured Party shall determine. The balance, if
any, of such moneys shall be paid over to the Borrower (for allocation to the
Debtors, it being understood and agreed that the Secured Party shall have no
obligation to determine how to allocate such balance among the Debtors) or as
otherwise required by law or as directed by a court of competent jurisdiction.
Upon the payment in full of the Obligations and the termination of this
Agreement, all Collateral not sold or otherwise disposed of pursuant hereto
shall, at the request of the Borrower and at the sole expense of the Debtors, be
reassigned by the Secured Party to any Debtor specified by the Borrower (or as
otherwise directed by a court of competent jurisdiction), without recourse and
without any representations, warranties or agreements of any kind. Each Debtor
shall remain liable to the Secured Party (in accordance with the terms of the
Credit Agreement, in the case of the Borrower, and in accordance with the terms
of the Subsidiary Guarantee, in the case of the other Debtors) for any
deficiency remaining on the Obligations after the aforesaid application of such
monies to the Obligations.
12. Exercise of Rights. The Secured Party shall have the right
in its sole discretion to determine which rights, security, liens, guaranties,
security interests or remedies it shall retain, pursue, release, subordinate,
modify or take any other action with respect to, without in any way modifying or
affecting any of the other of them or any of the Secured Party's rights
hereunder.
13. Waivers, Amendments, Required Notices. Each Debtor hereby
waives notice of acceptance of this Agreement, notice of nonpayment of any
Obligations or of any Receivables or of any instrument relating thereto, demand,
presentment, protest and notice thereof with respect to any and all instruments,
notice of Collateral received or delivered, or any other action taken in
reliance hereon and all other demands and notices of any description, except
such as are expressly provided for herein or which by applicable law may not be
waived on the date hereof. No course of dealing between the Secured Party and
any Debtor or any other Person, and no failure on the part of the Secured Party
to exercise, and no delay in exercising, any right, power or remedy hereunder,
shall operate as a waiver thereof or as a waiver of any Event of Default, nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy hereunder or with respect to the Obligations preclude any other or
further exercise thereof or the exercise of any other right, power or remedy. No
amendment or modification of this Agreement nor any waiver of any provision of
this Agreement or consent to any departure by any Debtor therefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party, and then any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
any Debtor in any case shall, of itself, entitle any Debtor to any other or
further notice or demand in similar or other circumstances. If notice, whether
before or after any Event of Default has occurred, is required by law to be
given by the Secured Party to any Debtor, the Debtors agree that, unless
otherwise specifically provided herein, five (5) days' notice given in the
manner provided below shall be reasonable notice.
14. Cumulative Rights and Remedies. This Agreement and the
liens and security interests granted hereunder are in addition to and not in
substitution for any other security interest or collateral now or hereafter held
by or on behalf of the Secured Party to secure the Obligations and shall not
operate as a merger of any contract debt or suspend the fulfillment of or affect
the rights, remedies or powers of the Secured Party in respect of the
Obligations or any other security interests held by the Secured Party for the
fulfillment thereof. The remedies herein provided are cumulative and not
exclusive of any remedy provided by law.
15. Notices. All notices, requests, demands, instructions,
directions and other communications provided for hereunder shall be in writing
(which term shall include telecopied communications) and shall be telecopied or
delivered by hand or overnight courier to the applicable party at the address
specified below for such party:
If to any Debtor, at:
c/o V Band Corporation
565 Taxter Road
Elmsford, New York 10523-2330
Attention: Mr. Mark R. Hahn
Telephone No.: (914) 789-5000
Telecopier No.: (914) 789-5068
If to the Secured Party, at:
National Bank of Canada, New York Branch
125 W. 55th Street
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Telephone No.: (212) 632-8551
Telecopier No.: (212) 632-8545
or, as to any party, to such other address as such party shall specify by a
notice in writing to the other party hereto. Each notice, request, demand,
instruction, direction or other communication provided for hereunder shall be
deemed delivered (i) if by hand or overnight courier, when delivered to the
applicable party at such address, and (ii) if by telecopy, when sent to the
applicable party at such telecopier number.
16. Costs and Expenses. (a) Each Debtor agrees to pay, on
demand, whether or not any Event of Default shall have occurred and regardless
of whether or not any proceeding to enforce this Agreement or the Obligations
shall have been commenced, all of the costs and expenses (including, without
limitation, all reasonable fees and disbursements of legal counsel) incurred by
the Secured Party in connection with (i) the preparation of this Agreement and
any related financing statements and other instruments and documents, (ii) the
enforcement of this Agreement and the security interests granted hereunder,
(iii) any filings or recordings with respect to the security interests granted
hereunder (including all filing and recording fees, stamp taxes, recording taxes
and intangible property taxes), (iv) the receipt of proceeds of the Receivables
hereunder, (v) the care and preservation of the Collateral, (vi) the sale or
other disposition of, or other realization upon, the Collateral, or (vii) the
preparation of any requested amendments to this Agreement or waivers or consents
in connection herewith. Any such costs and expenses so incurred by the Bank
shall be secured hereby and be a part of the Obligations.
(b) If any lien or tax shall be claimed with respect to
the Collateral which, in the opinion of the Secured Party, may possibly create a
valid obligation having priority over the security interest granted to it
herein, the Secured Party may in its sole discretion and without notice to any
Debtor pay such taxes and/or the amount secured by such lien and the amount of
such payment shall be charged to the Borrower and added to the Obligations
secured hereby: provided, however, that the Secured Party shall not make such
payment with respect to any lien or tax being contested in good faith by any
Debtor by appropriate proceedings if (i) such proceedings shall suspend the
enforcement of such lien or collection of such tax, (ii) no part of such
Debtor's rights in and under the Collateral shall be subject to sale, forfeiture
or diminution, and (iii) such Debtor shall have furnished such security that is
not part of the Collateral as may be required in such proceedings or reasonably
requested by the Secured Party.
(c) Upon any failure by any Debtor to perform any of its
duties and obligations hereunder, the Secured Party may, but shall not be
obligated to, perform any or all of such duties, and the Debtors shall pay to
the Secured Party, forthwith upon written demand therefor, an amount equal to
the cash or out-of-pocket expense incurred by the Secured Party in so doing plus
interest thereon, from the date such expense is incurred until it is paid in
full at a rate per annum equal to the highest rate of interest payable by the
Borrower from time to time on the Obligations.
17. Successors and Assigns. This Agreement shall be binding
upon each Debtor and its successors and assigns and shall inure to the benefit
of the Secured Party and its successors, transferees and assigns. No Debtor may
assign its rights or obligations hereunder or any portion thereof without the
prior written consent of the Secured Party. The Secured Party may assign its
rights and powers under this Agreement with all or any of the Obligations and,
in the event of such assignment, the assignee of such rights and powers, to the
extent of such assignment, shall have the same rights and remedies hereunder,
and shall be secured hereby to the same extent, as if originally named herein in
the place of the Secured Party.
18. Severability. If any part of this Agreement is contrary
to, prohibited by or deemed invalid under the applicable laws or regulations of
any jurisdiction, such provision shall, as to such jurisdiction, be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible, and any such prohibition or invalidity in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
19. No Assumption of Duties; Limitation on Liabilities;
Preservation of Collateral. (a) Nothing herein contained shall be construed to
constitute the Secured Party as any Debtor's agent for any purpose whatsoever
except for the limited purposes of receiving proceeds of the Collateral as
provided above. The Secured Party does not, by anything contained herein or in
any assignment or otherwise, assume any Debtor's obligations under any
Receivable or other Collateral or any contract or agreement relating thereto,
and the Secured Party shall not be responsible in any way for any Debtor's
performance of any of the terms and conditions thereof.
(b) Neither the Secured Party nor any of its directors,
officers, employees or agents shall be liable to any Person for any action taken
or omitted by the Secured Party or its officers, directors, employees or agents
hereunder or with respect to any transaction contemplated by this Agreement,
except for the Secured Party's or such officers', directors', employees' or
agents' gross negligence or willful misconduct. Without limiting the generality
of the foregoing, the Secured Party shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof unless due
to the Secured Party's gross negligence or willful misconduct. The Secured Party
shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof or for any damage resulting therefrom.
(c) The Secured Party's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Uniform Commercial Code or otherwise,
shall be to deal with it in the same manner as the Secured Party deals with
similar property for its own account. Neither the Secured Party nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Debtor or otherwise.
20. Indemnification. The Debtors hereby jointly and severally
agree to pay, and to save the Secured Party harmless from, any and all
liabilities, costs, expenses, losses or damages (including, without limitation,
legal fees and expenses) which may be imposed on, incurred by or asserted
against the Secured Party (i) with respect to, or resulting from, any delay by
any Debtor in paying any and all excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, any delay by any Debtor in complying with
any requirement of law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Agreement or the
enforcement of any of the terms hereof in accordance with such terms. In any
suit, proceeding or action brought by the Secured Party under or with respect to
any Receivable, License or Contract for any sum owing thereunder, or to enforce
any provisions of any Receivable, License or Contract, the Debtors will jointly
and severally save, indemnify and keep the Secured Party harmless from and
against all liabilities, costs, expense, loss or damage suffered by reason of
any defense, setoff, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach
by any Debtor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from any Debtor. Notwithstanding the
foregoing, no Debtor shall be liable for any of the foregoing to the extent that
they arise from the gross negligence or willful misconduct of the Secured Party.
21. Survival; Termination. (a) All covenants, agreements,
representations and warranties made herein by any Debtor shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect so long as the Secured Party has any obligation to make Loans under the
terms of the Credit Agreement or any of the Obligations remain outstanding.
(b) This Agreement shall terminate when the Secured
Party's obligation to make Loans under the terms of the Credit Agreement has
terminated and all of the Obligations have been paid in full; provided, however,
that this Agreement shall be reinstated if any payment in respect of the
Obligations is rescinded, invalidated, declared to be fraudulent or preferential
or otherwise required to be restored or returned by the Secured Party for any
reason, including without limitation by reason of the insolvency, bankruptcy or
reorganization of any Debtor or any other Person.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.
23. SUBMISSION TO JURISDICTION.
(A) EACH DEBTOR HEREBY EXPRESSLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY
OF NEW YORK, STATE OF NEW YORK, IN CONNECTION WITH ANY ACTION, SUIT OR
PROCEEDING RELATING TO THIS AGREEMENT, ANY INSTRUMENT OR DOCUMENT REFERRED TO
HEREIN OR RELATED HERETO, OR ANY ITEM OF COLLATERAL, AND IN CONNECTION THEREWITH
AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO ANY OF SAID
COURTS OR A JUDGE THEREOF MAY BE SERVED UPON ANY DEBTOR WITHIN OR WITHOUT SUCH
COURT'S JURISDICTION BY REGISTERED OR CERTIFIED MAIL, AT THE ADDRESS OF SUCH
DEBTOR SPECIFIED IN SECTION 17 HEREOF (OR AT SUCH OTHER ADDRESS AS SUCH DEBTOR
SHALL SPECIFY BY A PRIOR NOTICE IN WRITING TO THE SECURED PARTY), PROVIDED A
REASONABLE TIME FOR APPEARANCE IS ALLOWED.
(B) EACH DEBTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY INSTRUMENT OR
DOCUMENT REFERRED TO HEREIN OR RELATED HERETO BROUGHT IN ANY FEDERAL OR STATE
COURT SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) NOTWITHSTANDING THE FOREGOING, THE SECURED PARTY MAY
SUE ANY DEBTOR IN ANY JURISDICTION WHERE SUCH DEBTOR OR ANY OF ITS ASSETS MAY BE
FOUND AND MAY SERVE LEGAL PROCESS UPON ANY DEBTOR IN ANY OTHER MANNER PERMITTED
BY LAW.
24. WAIVER OF JURY TRIAL.
EACH DEBTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT, ANY INSTRUMENT
OR DOCUMENT REFERRED TO HEREIN OR RELATED HERETO, OR ANY ITEM OF COLLATERAL, AND
AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
25. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
all of which when taken together shall constitute but one and the same
agreement.
26. Joint and Several Obligations All payment and
indemnification obligations of the Debtors hereunder shall be joint and several
and each Debtor shall be responsible to the Secured Party hereunder for the full
amount of such obligations.
27. Additional Debtors. Pursuant to Section 6.22 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that was not in existence on
the date of the Credit Agreement is required to enter into this Agreement as a
Debtor upon becoming a Subsidiary. Upon execution and delivery after the date
hereof by such Subsidiary of a Supplement in the form of Annex 1 hereto, such
Subsidiary shall become a Debtor hereunder with the same force and effect as if
originally named as a Debtor herein. The execution and delivery of any
instrument adding an additional Debtor as a party to this Agreement shall not
require the consent of any other Debtor hereunder. The rights and obligations of
each Debtor hereunder shall remain in full force and effect notwithstanding the
addition of any new Debtor as a party to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
V BAND CORPORATION
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: Chairman and Chief Executive Officer
V BAND NE, INC.
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: President
V BAND SERVICES, INC.
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: President
LICOM INCORPORATED
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: President
Acknowledged and accepted:
NATIONAL BANK OF CANADA, NEW YORK BRANCH
By: /s/Gaetan R. Frosina
--------------------
Name: Gaetan R. Frosina
Title: Vice President
By: /s/Joseph A. Klapkowski
-----------------------
Name: Joseph A. Klapkowski
Title: Assistant Vice President
<PAGE>
SCHEDULE I
SCHEDULE OF OFFICES
1. Addresses of Debtors' chief executive offices and principal places of
business:
<TABLE>
<CAPTION>
Name of Entry Mailing Address County State
------------- --------------- ------ -----
<S> <C> <C> <C>
V Band Corporation 565 Taxter Road, Elmsford, NY 10523 Westchester NY
V Band Services, Inc. 58 West 40th Street, New York, NY 10018 New York NY
V Band NE, Inc. 112 Water Street, Boston, MA 02109 Suffolk MA
Licom Incorporated 565 Taxter Road, Elmsford, NY 10523 Westchester NY
</TABLE>
2. Addresses of all offices where the original books of account and
records of any Debtor relating to the Receivables, Contracts, Leases
and Intellectual Property are kept:
<TABLE>
<CAPTION>
Name of Entry Mailing Address County State
------------- --------------- ------ -----
<S> <C> <C> <C>
V Band Corporation 565 Taxter Road, Elmsford, NY 10523 Westchester NY
3 Westchester Plaza, Elmsford, NY 10523 Westchester NY
58 West 40th Street, New York, NY 10018 New York NY
One Exchange Plaza, 55 Broadway New York, NY
10006-0008 New York NY
208 S. LaSalle Street, Chicago, IL 60604 Cook IL
88 Kearny Street, San Francisco, CA 94108 San Francisco CA
V Band Services, Inc. 58 West 40th Street, New York, NY 10018 New York NY
One Exchange Plaza, 55 Broadway New York, NY
10006-0008 New York NY
V Band NE, Inc. 112 Water Street, Boston, MA 02109 Suffolk MA
Licom Incorporated 565 Taxter Road, Elmsford, NY 10523 Westchester NY
</TABLE>
3. Federal Tax Identification Numbers of the Debtors:
V Band Corporation 13-2990015
Licom Incorporated 54-1256093
V Band Services, Inc. 13-2990015
V Band NE, Inc. 13-3752313
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
SCHEDULE OF INVENTORY LOCATIONS
Name of Entry Mailing Address County State
------------- --------------- ------ -----
<S> <C> <C> <C>
V Band Corporation 565 Taxer Road, Elmsford, NY 10523 Westchester NY
3 Westchester Plaza, Elmsford, NY 10523 Westchester NY
58 West 40th Street, New York, NY 10018
One Exchange Plaza, 55 Broadway, New York, NY New York NY
10006-0008
208 S. LaSalle Street, Chicago, IL 60604 New York NY
88 Kearny Street, San Francisco, CA 94108 Cook IL
San Francisco CA
V Band Services, Inc. 58 West 40th Street, New York, NY 10018
One Exchange Place New York NY
New York NY
V Band NE, Inc. 112 Water Street, Boston, MA 02109 Suffolk MA
Licom Incorporated 565 Taxter Road, Elmsford, NY 10523 Westchester NY
Ogden Atlantic Design 150 Corporate Drive, Binghamton, NY 13904
Broome NY
Kimchuk Incorporated Commerce Industrial Park, Corporate Drive,
Danbury, CT 06810-4130 Fairfield CT
IEC Electronics Corporation 105 Norton Street, Newark, NY 14513-0271
Wayne NY
AI Aecutek, Inc. 350 11th Street, S.W., Arab, Alabama 35016 Marshall AL
</TABLE>
<PAGE>
Annex 1 to
[Subsidiary Guarantee]
[Security Agreement]
[Intellectual Property Security Agreement]
[Contribution Agreement]
SUPPLEMENT NO. dated as of , to
(g) the Subsidiary Guarantee dated as of May 28, 1997 (as the
same may be amended, restated, supplemented or otherwise
modified from time to time, the "Subsidiary Guarantee") among
V BAND NE, Inc., a New York corporation, V BAND SERVICES,
INC., a New York corporation, and LICOM INCORPORATED, a
Delaware corporation (each a "Subsidiary" and collectively the
"Subsidiaries") and NATIONAL BANK OF CANADA, NEW YORK BRANCH
(the "Bank"), and
(h) the Security Agreement dated as of May 28, 1997 (as the
same may be amended, supplemented or otherwise modified from
time to time, the "General Security Agreement") by V BAND
CORPORATION, a New York corporation (the "Borrower") and the
Subsidiaries in favor of the Bank, and
(i) the Security Agreement-Patents, Trademarks and Copyrights
dated as of May 28, 1997 (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Intellectual Property Security Agreement") by the Borrower
and the Subsidiaries in favor of the Bank, and
(j) the Contribution Agreement dated as of May 28, 1997 (as
the same may be amended, supplemented or otherwise modified
from time to time, the "Contribution Agreement") among the
Borrower, the Subsidiaries and the Bank (the Subsidiary
Guarantee, the General Security Agreement, the Intellectual
Property Security Agreement and the Contribution Agreement
herein collectively called the "Relevant Agreements" and each
a "Relevant Agreement").
RECITALS:
A. The Borrower and the Bank are entering into a Credit
Agreement dated as of May 28, 1997 (said Credit Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement") providing for the making of loans to and the issuance of letters of
credit for the account of the Borrower in the amounts, and subject to the terms
and conditions, specified in the Credit Agreement.
B. The Borrower and the Subsidiaries have entered into the
Relevant Agreements in order to induce the Bank to make loans to, and issue
letters of credit for account of, the Borrower. Pursuant to Section 6.22 of the
Credit Agreement, each Domestic Subsidiary of the Borrower that is subsequently
acquired or organized is required to enter into the Subsidiary Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement as a Debtor, and the Contribution Agreement as a Guarantor upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security Agreement, Section 10 of the Intellectual Property Security
Agreement, and Section 16 of the Contribution Agreement provide that additional
Subsidiaries of the Borrower may become Guarantors under the Subsidiary
Guarantee, Debtors under the General Security Agreement and the Intellectual
Property Security Agreement, and Guarantors under the Contribution Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee, a Debtor under the General Security
Agreement and the Intellectual Property Security Agreement, and a Guarantor
under the Contribution Agreement in order to induce the Bank to make additional
Loans and issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Now therefor, the New Subsidiary agrees as follows for the
benefit of the Bank:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Relevant Agreements and
the Credit Agreement.
2. Agreement to be Bound by Relevant Agreements.
In accordance with Section 22 of the Subsidiary Guarantee,
Section 27 of the General Security Agreement, Section 10 of the Intellectual
Property Security Agreement, and Section 16 of the Contribution Agreement, the
New Subsidiary by its signature below becomes a Guarantor under the Subsidiary
Guarantee, a Debtor under the General Security Agreement and the Intellectual
Property Security Agreement, and a Guarantor under the Contribution Agreement
with the same force and effect as if originally named therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and provisions of Subsidiary Guarantee, the General Security
Agreement, the Intellectual Property Security Agreement and the Contribution
Agreement applicable to it as a Guarantor, Debtor or Guarantor, as the case may
be, thereunder. Each reference to a "Guarantor" in the Subsidiary Guarantee, a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement, or a "Guarantor" in the Contribution Agreement shall be deemed to
include the New Subsidiary. Each Relevant Agreement is hereby incorporated
herein by reference.
3. Representations and Warranties.
The New Subsidiary represents and warrants to the Bank that
this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
4. Miscellaneous.
(a) This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Bank shall have
received a counterpart of this Supplement signed by the New Subsidiary.
(b) Except as expressly supplemented hereby, each Relevant
Agreement shall remain in full force and effect.
(c) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OF CONFLICT OF LAWS.
(d) In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Relevant Agreements shall not in any way be affected or
impaired.
(e) All communications and notices hereunder shall be in
writing and given as provided in the Relevant Agreements. All communications and
notices hereunder to the New Subsidiary shall be given to it at the address set
forth next to its signature.
(f) The New Subsidiary agrees to reimburse the Bank for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the Bank.
IN WITNESS WHEREOF, the New Subsidiary has duly executed this
Supplement to the Subsidiary Guarantee, the General Security Agreement, the
Intellectual Property Security Agreement, and the Contribution Agreement as of
the day and year first above written.
Address: [Name of New Subsidiary]
______________________ By: __________________________
______________________ Name:
Attention: _____________ Title:
Telecopier: ____________
<PAGE>
SECURITY AGREEMENT - PATENTS, TRADEMARKS AND COPYRIGHTS
Security Agreement - Patents, Trademarks and Copyrights, dated
as of May 28, 1997, among V Band Corporation, a New York corporation (the
"Borrower"), V Band NE, Inc., a New York corporation ("Northeast"), V Band
Services, Inc., a New York corporation ("Service") and Licom Incorporated, a
Delaware corporation ("Licom") (the Borrower, Northeast, Service and Licom
herein collectively called the "Debtors", and each a "Debtor"), and National
Bank of Canada, New York Branch (the "Secured Party").
RECITALS
A. The Borrower and the Secured Party are entering into a Credit
Agreement dated as of the date hereof (as it may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
providing for extensions of credit to the Borrower in the amounts, and subject
to the terms and conditions, specified in the Credit Agreement.
B. The execution and delivery of this Security Agreement-Patents,
Trademarks and Copyrights and the grant by each Debtor to the Secured Party of a
security interest in the Collateral specified herein constitute conditions
precedent to the obligation of the Secured Party to extend credit to the
Borrower pursuant to the terms of the Credit Agreement.
ACCORDINGLY, in consideration of the premises, and in order to induce
the Secured Party to execute and deliver the Credit Agreement and to extend and
maintain credit to the Borrower thereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
as collateral security for the full and prompt payment and performance of all
Obligations, as hereinafter defined, each Debtor hereby mortgages, pledges and
assigns to the Secured Party, and hereby grants to the Secured Party a security
interest in, all of such Debtor's right, title and interest in and to (i) each
of the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks; (ii) each of the Copyrights (as
hereinafter defined) and all registrations and recordings thereof; (iii) all
customer lists and other records of such Debtor relating to the distribution of
products bearing or including any Trademark or Copyright; (iv) each of the
Patents (as hereinafter defined); and (iv) any and all receivables and other
proceeds of the foregoing, including, without limitation, any claims by such
Debtor against third parties for infringement of any Trademark, Copyright or
Patent (collectively, the "Collateral").
1. Defined Terms. (a) Capitalized terms that are defined in
the Credit Agreement and are not otherwise defined herein have the respective
meanings given to them in the Credit Agreement and, in addition, the following
terms have the following meanings:
"Collateral" has the meaning specified in the paragraph
immediately preceding Section 1 hereof.
"Copyrights" means (i) all copyrights of any Debtor, whether
now in existence or at any time hereafter created or acquired, including without
limitation all copyrights listed on Schedule C annexed hereto and made a part
hereof, (ii) all registrations and recordings thereof, including without
limitation registrations and recordings in the United States Copyright Office or
any similar office or agency of the United States, any State thereof, or any
other country or any political subdivision thereof, (iii) all applications in
connection therewith, including without limitation applications submitted to or
filed in the United States Copyright Office or any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, (iv) all reissues, extensions or renewals thereof, (v) all
income, royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, damages and payments for
past, present or future infringements thereof, (vi) the right to sue for past,
present and future infringements thereof and (vii) all rights and obligations
pursuant to any license agreements with respect thereto, whether such Debtor is
a licensor or licensee under any such license agreements, including, without
limitation, the licenses listed on Schedule A annexed hereto and made a part
hereof, if any, and, subject to the terms of such licenses, the right to prepare
for sale, sell and advertise for sale, all inventory now or hereafter owned by
any Debtor and now or hereafter covered by such licenses.
"Event of Default" means any event which constitutes an Event
of Default under, and as such term is defined in, the Credit Agreement, taking
into account any applicable notice or grace period.
"Obligations" means all indebtedness, liabilities and
obligations of any Debtor to the Secured Party under or pursuant to the Credit
Agreement, the Note, the Subsidiary Guarantee, this Security Agreement or any
other Loan Document, including without limitation the "Obligations" (as such
term is defined in the Credit Agreement) and the obligations of the Debtors
under the Subsidiary Guarantee.
"Patents" means (i) all patents and patent applications and
the inventions and improvements described and claimed therein, and all
patentable inventions, now owned or hereafter acquired or obtained by any
Debtor, including without limitation the patents listed on Schedule A annexed
hereto and made a part hereof, (ii) all registrations and recordings thereof,
whether in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof, or otherwise, (iii) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing, (iv) all income, royalties, damages or payments now and hereafter due
and/or payable under or with respect to any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing, (v) the right to sue for past, present and future infringements of
any of the foregoing throughout the world, and (vi) all rights and obligations
pursuant to any license agreements with respect thereto, whether the relevant
Debtor is a licensor or licensee under any such license agreements, including,
without limitation, the licenses listed on said Schedule A and, subject to the
terms of such licenses, the right to prepare for sale, sell and advertise for
sale, all inventory now or hereafter owned by any Debtor and now or hereafter
covered by such licenses.
"Trademarks" means (i) all trademarks, trade names, trade
styles, and service marks of any Debtor, whether now owned or hereafter acquired
or created, including without limitation all trademarks described on Schedule B
annexed hereto and made a part hereof, all prints and labels on which said
trademarks, trade names, trade styles and service marks have appeared or appear,
all designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all right, title and interest therein and thereto, and all
applications, registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, or any other country or any political subdivision
thereof, (ii) all reissues, extensions or renewals thereof, (iii) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including, without limitation, damages and payments for past,
present or future infringements thereof, (iv) the right to sue for past, present
and future infringements thereof and (v) all rights and obligations pursuant to
any license agreements with respect thereto, whether the relevant Debtor is a
licensor or licensee under any such license agreements, including, without
limitation, the licenses listed on said Schedule B and, subject to the terms of
such licenses, the right to prepare for sale, sell and advertise for sale, all
inventory now or hereafter owned by any Debtor and now or hereafter covered by
such licenses.
2. Representations, Warranties and Covenants. Each Debtor
hereby represents, warrants, covenants and agrees as follows:
(a) Except as may be disclosed in the Credit Agreement, each
Debtor has the sole, full and clear title to the Trademarks, Copyrights and
Patents listed as owned by it in the Schedules hereto in the United States for
the goods and services covered by the registrations thereof and such
registrations are valid and subsisting and in full force and effect.
(b) Each Debtor shall (and the Borrower shall cause each of
the other Debtors to) perform all acts and execute all documents, including,
without limitation, assignments for security in forms suitable for a filing with
the United States Trademark Office and the United States Copyright Office,
reasonably requested by the Secured Party at any time to evidence, perfect,
maintain, record and enforce the Secured Party's interests in the Collateral or
otherwise in furtherance of the provisions of this Agreement, and each Debtor
hereby authorizes the Secured Party to execute and file one or more financing
statements (and similar documents) or copies thereof or of this Security
Agreement with respect to the Collateral signed only by the Secured Party.
(c) Except to the extent that the Secured Party, upon prior
written notice from any Debtor, shall consent in writing, each Debtor (either
itself or through licensees) will, consistent with sound business judgment,
continue to use its Trademarks on each and every trademark class of goods
applicable to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain its Trademarks in full force free from any
claim of abandonment for nonuse and the Debtors will not (and will not permit
any licensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated.
(d) The Debtors hereby jointly and severally agree to
reimburse the Secured Party promptly for any and all reasonable sums, costs, and
expenses which the Secured Party may pay or incur pursuant to the provisions of
this Agreement or in enforcing the Obligations or protecting the Collateral or
the security interests granted hereunder, including, but not limited to, all
filing or recording fees, governmental fees, court costs, collection charges,
travel, and reasonable attorneys' fees, all of which shall be part of the
Obligations and be payable on demand.
(e) Except as may be disclosed in the Credit Agreement, each
Debtor has the right and power to make the assignments and to grant the security
interests herein granted; and the Collateral is not now, and at all times
hereafter will not be, subject to any liens, mortgages, assignments, security
interests or encumbrances of any nature whatsoever, except Permitted Liens, and
none of the Collateral is subject to any claim.
(f) Except to the extent that the Credit Agreement permits or
the Secured Party, upon prior written request from any Debtor, shall consent in
writing (which consent, in the case of a request for permission to grant a
non-exclusive license, shall not be unreasonably withheld), no Debtor shall
assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security
interest in or lien upon, encumber, grant an exclusive or non-exclusive license
or otherwise dispose of any of the Collateral, and nothing in this Agreement
shall be deemed a consent by the Secured Party to any such action except as
expressly permitted herein.
(g) Each Debtor shall (and the Borrower shall cause each of
the other Debtors to) take all necessary steps, consistent with sound business
judgment, 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 each
application and registration of the Trademarks, Copyrights and Patents,
including, without limitation, filing of renewals, affidavits of use, affidavits
of incontestability and opposition, interference and cancellation proceedings
(except to the extent that dedication, abandonment or invalidation is permitted
under paragraph 2(c) hereof).
(h) The Debtors assume all responsibility and liability
arising from the use of the Trademarks, Copyrights or Patents, and hereby agree
to indemnify and hold the Secured Party harmless from and against any claim,
suit, loss, damage or expense (including reasonable attorneys' fees) arising out
of any alleged defect in any product manufactured, promoted or sold by any of
the Debtors (or any affiliate or subsidiary thereof) in connection with, or
which bears or includes, any Trademark, Copyright or Patent or out of the
manufacture, promotion, labelling, sale or advertisement of any such product by
any of the Debtors (or any affiliate or subsidiary thereof). Each Debtor agrees
that the Secured Party does not assume, and shall have no responsibility for,
the payment of any sums due or to become due under any agreement or contract
included in the Collateral or the performance of any obligations to be performed
under or with respect to any such agreement or contract by any Debtor, and each
Debtor hereby agrees to indemnify and hold the Secured Party harmless with
respect to any and all claims by any person relating thereto.
(i) The Secured Party may, in its sole discretion, but shall
have no obligation to, pay any reasonable amount or do any act required of any
Debtor hereunder or deemed necessary or appropriate by the Secured Party to
preserve, defend, protect, maintain, record or enforce any Debtor's obligations
contained herein, the Obligations, the Collateral, or the rights, title and
interests granted to the Secured Party herein, and which any Debtor fails to do
or pay (after notice, if required, and the expiration of any applicable grace
period), and any such payment shall be deemed an advance by the Secured Party to
the Borrower, shall constitute part of the Obligations, and shall be payable on
demand together with interest at the highest rate then payable on the
Obligations.
(j) Each Debtor agrees that if it, or any affiliate or
subsidiary thereof, learns of any use by any person of any term or design likely
to cause confusion with any Trademark, it shall promptly notify the Secured
Party of such use and, if requested by the Secured Party, shall join with the
Secured Party, at such Debtor's expense, in such action as the Secured Party, in
its reasonable discretion, may deem advisable for the protection of the Secured
Party's interests in and to the Trademarks.
(k) All licenses of its Trademarks, Copyrights or Patents
which any Debtor has granted to third parties are set forth in the Schedules
hereto.
(l) The Trademarks, Copyrights and Patents are subsisting,
have not been adjudged invalid or unenforceable in whole or in part, and are not
currently being challenged in any way.
(m) None of the Trademarks, Copyrights or Patents have lapsed
or expired or have been abandoned or cancelled, whether due to any failure to
pay any maintenance or other fees or make any filing or otherwise.
(n) Each of the Trademarks, Copyrights and Patents is valid
and enforceable and the Debtors are not aware of any impairments to the
Trademarks, Copyrights or Patents which would have a material effect on the
validity and/or enforceability thereof.
(o) No claim has been made that the use of any of the
Trademarks, Copyrights or Patents constitutes an infringement.
(p) Each Debtor will continue to use, consistent with past
practice, proper statutory notice in connection with its use of the Trademarks.
(q) Each Debtor will use standards of quality in its
manufacture of products sold under the Trademarks consistent with those
currently employed by it.
(r) No Debtor shall adopt or use any mark which is confusingly
similar or a colorable imitation of any Trademark unless it shall have granted
to the Secured Party a perfected security interest in such mark pursuant to this
Security Agreement.
(s) No Debtor will (either itself or through licensees) do any
act, or omit to do any act, whereby any Copyright may become injected into the
public domain. Each Debtor shall notify the Secured Party immediately if it
knows, or has reason to know, that any Copyright may become injected into the
public domain or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
court or tribunal in the United States or any other country) regarding any
Debtor's ownership of any such Copyright or its validity.
(t) Each Debtor shall promptly notify the Secured Party of any
infringement of any Trademark, Copyright or Patent of which it becomes aware and
shall take, consistent with sound business judgment, such actions as the Secured
Party may reasonably require to protect such Trademark, Copyright or Patent
including, where appropriate, the bringing of suit for infringement, seeking
injunctive relief and seeking to recover any and all damages for such
infringement.
3. Continuing Liability under the Collateral. Each Debtor
hereby expressly agrees that, anything herein to the contrary notwithstanding,
it shall remain liable under each license, interest and obligation pledged by it
to the Secured Party hereunder to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with and pursuant to the terms and provisions thereof. The Secured Party shall
have no obligation or liability under any such license, interest or obligation
by reason of or arising out of this Security Agreement or the receipt by the
Secured Party of any payment relating to any such license, interest or
obligation pursuant hereto nor shall the Secured Party be required or obligated
in any manner to perform or fulfill any of the obligations of any Debtor
thereunder or pursuant thereto, to make any payment, to make any inquiry as to
the nature or the sufficiency of any performance by any party under any such
license, interest or obligation, to present or file any claim or to take any
action to collect or enforce any performance or the payment of any amounts that
may have been granted to the Secured Party or to which the Secured Party may be
entitled at any time or times.
4. Remedies. Upon the occurrence and during the continuation
of an Event of Default after taking into account any applicable grace or cure
period, in addition to all other rights and remedies of the Secured Party,
whether contractual, at law, in equity or otherwise, all such rights and
remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently, without (except as provided herein) notice to, or
consent by, any Debtor, the Secured Party shall have the following rights and
remedies: (a) the Secured Party may at any time, upon written notice to any
Debtor (with a copy to the Borrower, if such Debtor is not the Borrower),
prohibit such Debtor from making any further use of the Trademarks or any mark
similar thereto, the Copyrights or the Patents for any purpose; (b) the Secured
Party may, at any time and from time to time, upon 10 days' prior notice to any
Debtor (with a copy to the Borrower, if such Debtor is not the Borrower),
license, whether general, special or otherwise, and whether on an exclusive or
nonexclusive basis, any of the Trademarks, Copyrights or Patents, throughout the
world for such term or terms, on such conditions, and in such manner, as the
Secured Party shall in its sole discretion determine; (c) the Secured Party may,
at any time and from time to time, upon 10 days' prior notice to any Debtor
(with a copy to the Borrower, if such Debtor is not the Borrower), assign, sell,
or otherwise dispose of, the Collateral or any of it, either with or without
special or other conditions or stipulations, with power to buy the Collateral or
any part of it, and with power also to execute assurances, and do all other acts
and things for completing the assignment, sale or disposition which the Secured
Party shall, in its sole discretion, deem appropriate or proper; and (d) in
addition to the foregoing, in order to implement the assignment, sale or other
disposition of any of the Collateral pursuant to subparagraph 0(c) hereof, the
Secured Party may, at any time, pursuant to the authority granted in the Special
Power of Attorney described in paragraph 0 hereof (such authority becoming
effective on the occurrence and remaining effective during the continuation as
hereinabove provided of an Event of Default), execute and deliver on behalf of
any Debtor one or more instruments of assignment of some or all of the
Collateral, in form suitable for filing, recording or registration in any
country. Each Debtor hereby agrees to pay when due all reasonable costs incurred
in any such transfer of the Collateral or any portion thereof, including any
taxes, fees and reasonable attorneys' fees, and all such costs shall be added to
the Obligations. The Secured Party may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation, reasonable attorneys' fees
and all legal, travel and other expenses which may be incurred by the Secured
Party, and then to the Obligations, in such order as to principal or interest as
the Secured Party may desire; and each Debtor will remain liable, to the extent
provided in the Credit Agreement (in the case of the Borrower) or the Subsidiary
Guarantee (in the case of the other Debtors) and will pay the Secured Party on
demand any deficiency remaining, together with interest thereon at a rate equal
to the highest rate then payable on the Obligations, and the balance of any
expenses unpaid. In the event that there should be any excess proceeds over the
Obligations, the Secured Party shall pay such excess to the Debtors or to such
other person as may be required by law or by court order. Nothing herein
contained shall be construed as requiring the Secured Party to take any such
action at any time. In the event of any such license, assignment, sale or other
disposition of the Collateral, or any of it, after the occurrence or
continuation as hereinabove provided of an Event of Default, each Debtor shall
supply its customer lists and other records relating to its Trademarks,
Copyrights and Patents or to the distribution of products bearing or including
any of the Trademarks, Copyrights or Patents to the Secured Party or its
designee.
5. Power of Attorney. Concurrently with the execution and
delivery hereof, each Debtor will execute and deliver to the Secured Party a
Special Power of Attorney substantially in the form of Exhibit I hereto for the
implementation of the assignment, sale or other disposition of the Collateral or
any portion thereof pursuant to paragraphs 0(c), 4(d) and 7 hereof and for the
other purposes specified in such Power of Attorney, and each Debtor hereby
releases the Secured Party from any claims, causes of action and demands at any
time arising out of or with respect to any actions taken or omitted to be taken
by the Secured Party under the power of attorney granted herein or therein,
other than actions taken or omitted to be taken through the gross negligence or
willful misconduct of the Secured Party.
6. Access to Media. For the purpose of enabling the Secured
Party to exercise rights and remedies hereunder, each Debtor hereby grants to
the Secured Party access upon the occurrence and during the continuance of an
Event of Default (after taking into account any applicable grace or cure period)
to all media in which any Collateral may be recorded or stored and to all
computer equipment and software programs used for the compilation or printout
thereof to the extent that such Debtor may lawfully do so, and hereby authorizes
any and all custodians thereof to release such media to the Secured Party or in
accordance with the Secured Party's instructions upon receipt of a letter
executed by the Secured Party stating that an Event of Default has occurred and
is continuing.
7. Grant of License to Use Trademarks, Copyrights and Patents.
For the purpose of enabling the Secured Party to exercise its rights and
remedies under this Agreement at such time as the Secured Party, without regard
to this Section 0, shall be lawfully entitled to exercise such rights and
remedies and for no other purpose, each Debtor hereby grants to the Secured
Party, effective upon the occurrence of an Event of Default and notice by the
Secured Party that it desires to exercise such rights and remedies, an
irrevocable, exclusive license, exercisable without payment of royalty or other
compensation to any of the Debtors, to use, assign, license or sublicense any of
the Collateral, including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof. The rights and remedies
of the Secured Party under this paragraph 7 shall be in addition to and not in
substitution for the rights and remedies of the Secured Party under paragraph 4
hereof or any other rights or remedies of the Secured Party hereunder or as
provided by law. All rights and remedies of the Secured Party under this
Agreement are cumulative and not exclusive of each other or of any right or
remedy provided by law.
8. Miscellaneous. No provision hereof may be modified, altered
or limited except by a written instrument expressly referring to this Agreement
and executed by all the parties hereto. No course of dealing between the Debtors
or any of them and the Secured Party, nor any failure to exercise, nor any delay
in exercising, on the part of the Secured Party, any right, power or privilege
hereunder or under any other agreement or document shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The execution and
delivery of this Security Agreement has been duly authorized by the respective
Boards of Directors of the Debtors and by any necessary vote or consent of
stockholders thereof. This Security Agreement shall be binding upon the
respective successors and assigns of the Debtors and shall, together with the
rights and remedies of the Secured Party hereunder, inure to the benefit of the
Secured Party and its successors and assigns. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND IN AND TO THE COLLATERAL SHALL BE
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE
LAWS OF THE STATE OF NEW YORK. EACH DEBTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK AND THE FEDERAL
COURTS OF THE UNITED STATES OF AMERICA LOCATED IN SUCH STATE IN ANY ACTION OR
PROCEEDING ARISING UNDER THIS AGREEMENT AND HEREBY IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION
WITH ANY DISPUTE HEREUNDER. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby.
9. Joint and Several Obligations. All payment and
indemnification obligations of the Debtors hereunder shall be joint and several
and each Debtor shall be responsible to the Secured Party hereunder for the full
amount of such obligations.
10. Additional Debtors. Pursuant to Section 6.22 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that was not in existence on
the date of the Credit Agreement is required to enter into this Agreement as a
Debtor upon becoming a Subsidiary. Upon execution and delivery after the date
hereof by such Subsidiary of a Supplement in the form of Annex 1 hereto, such
Subsidiary shall become a Debtor hereunder with the same force and effect as if
originally named as a Debtor herein. The execution and delivery of any
instrument adding an additional Debtor as a party to this Agreement shall not
require the consent of any other Debtor hereunder. The rights and obligations of
each Debtor hereunder shall remain in full force and effect notwithstanding the
addition of any new Debtor as a party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Debtors and the Secured Party have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
Debtors:
V BAND CORPORATION
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: Chairman and Chief Executive Officer
V BAND NE, INC.
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: President
V BAND SERVICES, INC.
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: President
LICOM INCORPORATED
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: President
Secured Party:
NATIONAL BANK OF CANADA,
NEW YORK BRANCH
By: /s/Gaetan R. Frosina
--------------------
Name: Gaetan R. Frosina
Title: Vice President
By: /s/Joseph A. Klapkowski
-----------------------
Name: Joseph A. Klapkowski
Title: Assistant Vice President
<PAGE>
Schedule A to Security Agreement - Patents, Trademarks and Copyrights
SCHEDULE OF PATENTS
I. ISSUED PATENTS
<TABLE>
<CAPTION>
COUNTRY PATENT NO. ISSUE DATE INVENTOR(S) TITLE
- ------- ---------- ---------- ----------- -----
<S> <C> <C> <C> <C>
U.S.A. Des. 349,709 08/16/94 Borrower 1994 Design of Power Deck
U.S.A. Des. 333,822 03/09/93 Borrower 1993 Design of Viax DN
U.S.A. 5,151,896 09/29/92 Borrower 1992 System Digital Switch
U.S.A. 1,681,595 03/03/92 Borrower 1992 ProMX (Licom)
U.S.A. 5,089,937 02/18/92 Borrower 1992 Power Interface
Apparatus for a DC Power
Distribution System
</TABLE>
II. PENDING PATENT APPLICATIONS
COUNTRY DOCKET NO. EXPECTED FILING DATE INVENTOR(S) TITLE
III. PATENT APPLICATIONS IN PREPARATION
IV. PATENT LICENSES
<PAGE>
Schedule B to Security Agreement - Patents, Trademarks and Copyrights
SCHEDULE OF TRADEMARKS
V Band
Licom
<PAGE>
Schedule C to Security Agreement - Patents, Trademarks and Copyrights
SCHEDULE OF COPYRIGHTS
<PAGE>
Exhibit I to
Security Agreement-Patents, Trademarks and Copyrights
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT , a corporation (the "Assignor")
hereby irrevocably appoints and constitutes National Bank of Canada, New York
Branch (the "Assignee"), its true and lawful attorney, with full power of
substitution, and with full power and authority to perform the following acts on
behalf of such Assignor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of such Assignor
in and to any and all trademarks, trade names, trade styles and service
marks listed in Schedule 1 hereto (the "Trademarks"), any and all
patents listed on Schedule 2 hereto (the "Patents"), any and all
copyrights listed in Schedule 3 hereto (the "Copyrights"), and all
registrations, recordings, reissues, extensions and renewals of any of
the foregoing, and all pending applications therefor, for the purpose
of continuing, protecting and preserving the Trademarks, the Copyrights
or the Patents, and for the purpose of the recording, registering and
filing of, or accomplishing any other formality with respect to, the
foregoing, (a) to execute on its own behalf and/or on the behalf and
stead of the Assignor and deliver any and all agreements, documents,
instruments of assignment or other papers necessary or advisable to
effect such purpose and (b) to take such other actions with respect to
the Trademarks, the Copyrights or the Patents as the Assignee deems in
its best interest; and
2. To execute on its own behalf and/or on the behalf and stead
of the Assignor any and all documents, statements, certificates or
other papers necessary or advisable in order to effectuate any of the
purposes described above as Assignee may in its sole discretion
determine.
The Assignor hereby ratifies all that Assignee shall lawfully do or
cause to be done under or by virtue of the powers of attorney granted herein and
hereby releases Assignee from any and all claims, causes of action and demands
at any time arising out of or with respect to any actions taken or omitted to be
taken by Assignee under the powers of attorney granted herein.
This power of attorney is made pursuant to a Security Agreement -
Patents, Trademarks and Copyrights dated as of the date hereof, among Assignor,
Assignee and certain other assignors party thereto (the "Security Agreement")
and takes effect, upon the occurrence of an Event of Default thereunder, for the
purposes of paragraphs 4(c), 4(d) and 7 thereof and is subject to the conditions
thereof and may not be revoked until the payment in full of all "Obligations" as
defined in such Security Agreement and the termination of the Commitment (as
defined in the Credit Agreement referred to in such Security Agreement).
Dated: May , 1997
By:_____________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this day of May, 1997, before me personally appeared , to me known,
who, being by me duly sworn, did depose and say that he is the of , the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was affixed pursuant to authority of the Board of
Directors of said corporation, and that he signed his name thereto pursuant to
such authority.
-----------------------
Notary Public
<PAGE>
Schedule A to Special Power of Attorney
SCHEDULE OF PATENTS
I. ISSUED PATENTS
<TABLE>
<CAPTION>
COUNTRY PATENT NO. ISSUE DATE INVENTOR(S) TITLE
- ------- ---------- ---------- ----------- -----
<S> <C> <C> <C> <C>
U.S.A. Des. 349,709 08/16/94 Borrower 1994 Design of Power Deck
U.S.A. Des. 333,822 03/09/93 Borrower 1993 Design of Viax DN
U.S.A. 5,151,896 09/29/92 Borrower 1992 System Digital Switch
U.S.A. 1,681,595 03/03/92 Borrower 1992 ProMX (Licom)
U.S.A. 5,089,937 02/18/92 Borrower 1992 Power Interface
Apparatus for a DC Power
Distribution System
</TABLE>
II. PENDING PATENT APPLICATIONS
COUNTRY DOCKET NO. EXPECTED FILING DATE INVENTOR(S) TITLE
III. PATENT APPLICATIONS IN PREPARATION
IV. PATENT LICENSES
<PAGE>
Schedule B to Special Power of Attorney
SCHEDULE OF TRADEMARKS
V Band
Licom
<PAGE>
Schedule C to Special Power of Attorney
SCHEDULE OF COPYRIGHTS
<PAGE>
Annex 1 to
[Subsidiary Guarantee]
[Security Agreement]
[Intellectual Property Security Agreement]
[Contribution Agreement]
SUPPLEMENT NO. dated as of , to
(i) the Subsidiary Guarantee dated as of May 28, 1997 (as the same may
be amended, restated, supplemented or otherwise modified from time to
time, the "Subsidiary Guarantee") among V BAND NE, Inc., a New York
corporation, V BAND SERVICES, INC., a New York corporation, and LICOM
INCORPORATED, a Delaware corporation (each a "Subsidiary" and
collectively the "Subsidiaries") and NATIONAL BANK OF CANADA, NEW YORK
BRANCH (the "Bank"), and
(ii) the Security Agreement dated as of May 28, 1997 (as the same may
be amended, supplemented or otherwise modified from time to time, the
"General Security Agreement") by V BAND CORPORATION, a New York
corporation (the "Borrower") and the Subsidiaries in favor of the Bank,
and
(iii) the Security Agreement-Patents, Trademarks and Copyrights dated
as of May 28, 1997 (as the same may be amended, supplemented or
otherwise modified from time to time, the "Intellectual Property
Security Agreement") by the Borrower and the Subsidiaries in favor of
the Bank, and
(iv) the Contribution Agreement dated as of May 28, 1997 (as the same
may be amended, supplemented or otherwise modified from time to time,
the "Contribution Agreement") among the Borrower, the Subsidiaries and
the Bank (the Subsidiary Guarantee, the General Security Agreement, the
Intellectual Property Security Agreement and the Contribution Agreement
herein collectively called the "Relevant Agreements" and each a
"Relevant Agreement").
RECITALS:
a. The Borrower and the Bank are entering into a Credit Agreement dated
as of May 28, 1997 (said Credit Agreement, as it may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement")
providing for the making of loans to and the issuance of letters of credit for
the account of the Borrower in the amounts, and subject to the terms and
conditions, specified in the Credit Agreement.
B. The Borrower and the Subsidiaries have entered into the Relevant
Agreements in order to induce the Bank to make loans to, and issue letters of
credit for account of, the Borrower. Pursuant to Section 6.22 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that is subsequently
acquired or organized is required to enter into the Subsidiary Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement as a Debtor, and the Contribution Agreement as a Guarantor upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security Agreement, Section 10 of the Intellectual Property Security
Agreement, and Section 16 of the Contribution Agreement provide that additional
Subsidiaries of the Borrower may become Guarantors under the Subsidiary
Guarantee, Debtors under the General Security Agreement and the Intellectual
Property Security Agreement, and Guarantors under the Contribution Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee, a Debtor under the General Security
Agreement and the Intellectual Property Security Agreement, and a Guarantor
under the Contribution Agreement in order to induce the Bank to make additional
Loans and issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Now therefor, the New Subsidiary agrees as follows for the benefit of
the Bank:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Relevant Agreements and the
Credit Agreement.
2. Agreement to be Bound by Relevant Agreements.
In accordance with Section 22 of the Subsidiary Guarantee, Section 27
of the General Security Agreement, Section 10 of the Intellectual Property
Security Agreement, and Section 16 of the Contribution Agreement, the New
Subsidiary by its signature below becomes a Guarantor under the Subsidiary
Guarantee, a Debtor under the General Security Agreement and the Intellectual
Property Security Agreement, and a Guarantor under the Contribution Agreement
with the same force and effect as if originally named therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and provisions of Subsidiary Guarantee, the General Security
Agreement, the Intellectual Property Security Agreement and the Contribution
Agreement applicable to it as a Guarantor, Debtor or Guarantor, as the case may
be, thereunder. Each reference to a "Guarantor" in the Subsidiary Guarantee, a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement, or a "Guarantor" in the Contribution Agreement shall be deemed to
include the New Subsidiary. Each Relevant Agreement is hereby incorporated
herein by reference.
3. Representations and Warranties.
The New Subsidiary represents and warrants to the Bank that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
4. Miscellaneous.
(a) This Supplement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. This Supplement shall become effective when the Bank shall have
received a counterpart of this Supplement signed by the New Subsidiary.
(b) Except as expressly supplemented hereby, each Relevant Agreement
shall remain in full force and effect.
(c) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES
OF CONFLICT OF LAWS.
(d) In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Relevant Agreements shall not in any way be affected or
impaired.
(e) All communications and notices hereunder shall be in writing and
given as provided in the Relevant Agreements. All communications and notices
hereunder to the New Subsidiary shall be given to it at the address set forth
next to its signature.
(f) The New Subsidiary agrees to reimburse the Bank for its reasonable
out-of-pocket expenses in connection with this Supplement, including the
reasonable fees, other charges and disbursements of counsel for the Bank.
<PAGE>
IN WITNESS WHEREOF, the New Subsidiary has duly executed this
Supplement to the Subsidiary Guarantee, the General Security Agreement, the
Intellectual Property Security Agreement, and the Contribution Agreement as of
the day and year first above written.
Address: [Name of New Subsidiary]
______________________ By: __________________________
______________________ Name:
Attention: _____________ Title:
Telecopier: ____________
<PAGE>
CONTRIBUTION AGREEMENT
AGREEMENT dated as of May 28, 1997 among V BAND CORPORATION, a New York
corporation (the "Borrower"), V BAND NE, INC., a New York corporation
("Northeast"), V BAND SERVICES, INC., a New York corporation ("Service") and
LICOM INCORPORATED, a Delaware corporation ("Licom") (Northeast, Service and
Licom herein collectively called the "Guarantors", and each a "Guarantor").
RECITALS:
A. The Borrower and National Bank of Canada, New York Branch (the
"Bank") are entering into a Credit Agreement dated as of the date hereof (as it
may be amended, modified or supplemented from time to time, the "Credit
Agreement") providing for extensions of credit to the Borrower in the amounts,
and subject to the terms and conditions, specified in the Credit Agreement.
B. (1) The Guarantors are entering into a Subsidiary Guarantee dated as
of the date hereof (said guarantee, as it may be amended, restated, supplemented
or otherwise modified from time to time, the "Subsidiary Guarantee"), pursuant
to which they are guaranteeing the payment and performance in full of all
obligations of the Borrower under the Credit Agreement and all related
instruments and documents and (2) the Borrower and the Guarantors are entering
into (i) a General Security Agreement dated as of the date hereof (said security
agreement, as it may be amended, restated, supplemented or otherwise modified
from time to time, the "General Security Agreement") and (ii) a Security
Agreement-Patents, Trademarks and Copyrights dated as of the date hereof (said
Security Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, the "Intellectual Property Security Agreement")
pursuant to which they are granting to the Bank a first priority perfected
security interest in all the Collateral specified therein as security for the
obligations of the Borrower under the Credit Agreement and all related
instruments and documents.
C. The execution and delivery of this Contribution Agreement
constitutes a condition precedent to the obligation of the Bank to extend credit
to the Borrower pursuant to the terms of the Credit Agreement.
ACCORDINGLY, in consideration of the premises, and in order to induce
the Bank to execute and deliver the Credit Agreement and to extend credit to the
Borrower pursuant thereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantors hereby
agree with the Bank as follows:
1. Defined Terms.
(g) Capitalized terms that are defined in the Credit Agreement and are
not otherwise defined herein have the respective meanings given to them in the
Credit Agreement.
(b) Unless otherwise expressly specified herein, defined terms denoting
the singular number shall, when in the plural form, denote the plural number of
the matter or item to which such defined terms refer, and vice-versa.
(c) Words of the neuter gender mean and include correlative words of
the masculine and feminine gender.
(d) Section and Annex headings used in this Agreement are for
convenience only and shall not affect the construction or meaning of any
provisions of this Agreement.
(e) Unless otherwise specified, the words "hereof", "herein",
"hereunder" and other similar words refer to this Agreement as a whole and not
just to the Section, subsection or clause in which they are used; and the words
"this Agreement" refer to this Contribution Agreement, as amended, modified or
supplemented from time to time.
(f) Unless otherwise specified, references to Sections, Recitals and
Annexes are references to Sections of, and Recitals and Annexes to, this
Agreement.
2. Indemnity and Subrogation.
In addition to all such rights of indemnity and subrogation as the
Guarantors may have under applicable law (but subject to Section 4), the
Borrower agrees that (a) in the event a payment shall be made by any Guarantor
under the Subsidiary Guarantee, the Borrower shall indemnify such Guarantor for
the full amount of such payment and such Guarantor shall be subrogated to the
rights of the person to whom such payment shall have been made to the extent of
such payment and (b) in the event any assets of any Guarantor shall be sold
pursuant to the General Security Agreement or the Intellectual Property Security
Agreement to satisfy a claim of the Bank, the Borrower shall indemnify such
Guarantor in an amount equal to the greater of the book value or the fair market
value of the assets so sold.
3. Contribution and Subrogation.
Each Guarantor (a "Contributing Guarantor") agrees (subject to Section
4) that, in the event a payment shall be made by any other Guarantor under the
Subsidiary Guarantee or assets of any other Guarantor shall be sold pursuant to
the General Security Agreement or the Intellectual Property Security Agreement
to satisfy a claim of the Bank and such other Guarantor (the "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided in
Section 2, the Contributing Guarantor shall indemnify the Claiming Guarantor in
an amount equal to the amount of such payment or the greater of the book value
or the fair market value of such assets, as the case may be, in each case
multiplied by a fraction of which the numerator shall be the net worth of the
Contributing Guarantor on the date hereof and the denominator shall be the
aggregate net worth of all the Guarantors on the date hereof (or, in the case of
any Guarantor becoming a party hereto pursuant to Section 16, the date of the
Supplement hereto executed and delivered by such Guarantor). Any Contributing
Guarantor making any payment to a Claiming Guarantor pursuant to this Section 3
shall be subrogated to the rights of such Claiming Guarantor under Section 2 to
the extent of such payment.
4. Subordination.
Notwithstanding any provision of this Agreement to the contrary, all
rights of the Guarantors under Sections 2 and 3 and all other rights of
indemnity, contribution or subrogation under applicable law or otherwise shall
be fully subordinated to the indefeasible payment in full in cash of the
Obligations. No failure on the part of the Borrower or any Guarantor to make the
payments required by Sections 2 and 3 (or any other payments required under
applicable law or otherwise) shall in any respect limit the obligations and
liabilities of any other Guarantor with respect to its obligations hereunder,
and each Guarantor shall remain liable for the full amount of the obligations of
such Guarantor hereunder.
5. No Effect on Obligations to the Bank. Nothing herein contained shall
be deemed to affect or limit in any way the obligations or liabilities of any
Guarantor to the Bank under the Loan Documents to which such Guarantor is a
party, which obligations and liabilities are and shall continue to be joint and
several. No failure on the part of the Borrower or any Guarantor to make the
payments required hereunder (or any other payments required under applicable law
or otherwise) shall in any respect limit the obligations and liabilities of any
Guarantor to the Bank under the Loan Documents to which such Guarantor is a
party.
6. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF
CONFLICT OF LAWS.
7. SUBMISSION TO JURISDICTION.
(A) EACH PARTY HERETO HEREBY EXPRESSLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ALL FEDERAL AND STATE COURTS SITTING IN NEW YORK COUNTY, STATE
OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THEIR RESPECTIVE OBLIGATIONS HEREUNDER AND EACH OF THEM AGREES THAT
ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO ANY OF SAID COURTS OR A
JUDGE THEREOF MAY BE SERVED UPON IT WITHIN OR WITHOUT SUCH COURT'S JURISDICTION
BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED) OR BY PERSONAL
SERVICE, AT THE ADDRESS OF SUCH PARTY SPECIFIED NEXT TO ITS SIGNATURE HERETO
(OR, IN THE CASE OF ANY GUARANTOR THAT BECOMES A PARTY HERETO BY EXECUTING A
SUPPLEMENT, NEXT TO ITS SIGNATURE THERETO) OR AT SUCH OTHER ADDRESS AS SUCH
PARTY SHALL SPECIFY BY A PRIOR NOTICE IN WRITING TO THE OTHER PARTIES HERETO.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN ANY FEDERAL
OR STATE COURT SITTING IN NEW YORK COUNTY, STATE OF NEW YORK, AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) NOTWITHSTANDING THE FOREGOING, ANY PARTY HERETO MAY SUE ANY OTHER
PARTY HERETO IN ANY JURISDICTION WHERE SUCH OTHER PARTY OR ANY OF ITS ASSETS MAY
BE FOUND AND MAY SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
8. WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT
ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
9. Termination; Payment in Full; Reinstatement.
(a) This Agreement is a continuing agreement and shall remain in full
force and effect so long as the Borrower may borrow or request the issuance of
letters of credit under the Credit Agreement or any letter of credit is
outstanding under the Credit Agreement, and until the indefeasible payment in
full of the Obligations.
(b) The Obligations shall not be deemed to have been indefeasibly paid
in full for purposes of this Agreement until all amounts owing thereon
(including, without limitation, any interest accrued on the Obligations after
the commencement of a case or proceeding with respect to the Borrower under
applicable bankruptcy, insolvency or similar laws) shall have been paid to the
Bank, whether or not a claim for such amounts (including a claim for such
post-petition interest) is enforceable, and any applicable preference periods
shall have expired.
(c) This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any Obligation
is rescinded or must otherwise be restored by the Bank or any Guarantor upon the
bankruptcy or reorganization of the Borrower or any Guarantor or otherwise.
10. Assignments.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither the Borrower nor any Guarantor shall transfer, sell or otherwise
dispose of any of its rights or obligations hereunder without the prior written
consent of the Bank.
11. Notices.
All notices, requests, demands, instructions, directions and other
communications provided for hereunder shall be in writing (which term shall
include telecopied communications) and shall be sent by overnight courier,
telecopied or delivered to the applicable party at the address or telecopier
number specified for such party opposite its signature line below (or, in the
case of any Guarantor that becomes a party hereto by executing a Supplement,
opposite its signature line on the Supplement) or, as to any party, to such
other address or telecopier number as such party shall specify by a notice in
writing to the other parties hereto. Each notice, request, demand, instruction,
direction or other communication provided for hereunder shall be deemed
delivered (i) if by overnight courier, one Business Day after being deposited
with the overnight courier, addressed to the applicable party at its address set
forth above, (ii) if by hand, when delivered to the applicable party at such
address, and (iii) if by telecopy, when sent to the applicable party at such
telecopier number.
12. Severability.
Any provision of this Agreement that 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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render such provision unenforceable in any
other jurisdiction.
13. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, all of which when taken together
shall constitute but one and the same agreement.
14. No Waiver; Amendment.
(a) No failure on the part of any Guarantor to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by any Guarantor preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. Neither
the Bank nor any of the Guarantors shall be deemed to have waived any rights
hereunder unless such waiver shall be in writing and signed by such parties.
(b) Neither this Agreement nor any provision hereof may be waived,
amended, modified or terminated except pursuant to a written agreement entered
into among the Borrower, the Guarantors and the Bank.
15. Survival of Agreement; Reliance by Bank.
All covenants and agreements made by the Borrower and each Guarantor
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement or the other Loan Documents shall be considered
to have been relied upon by the Bank and shall survive the making of the Loans
and the issuance of the Letters of Credit, and shall continue in full force and
effect as long as any Obligations remain outstanding and unpaid or any Letters
of Credit remain outstanding and until the Commitment has expired or been
terminated.
16. Additional Guarantors.
Pursuant to Section 6.22 of the Credit Agreement, each Domestic
Subsidiary of the Borrower is required to enter into this Agreement as a
Guarantor upon becoming a Subsidiary. Upon execution and delivery after the date
hereof by such Subsidiary of a Supplement in the form of Annex 1 hereto (a
"Supplement"), such Subsidiary shall become a "Guarantor" hereunder with the
same force and effect as if originally named as a Guarantor herein. The
execution and delivery of any instrument adding an additional Guarantor as a
party to this Agreement shall not require the consent of the Borrower or any
other Guarantor hereunder. The rights and obligations of the Borrower and each
Guarantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
Address: V BAND CORPORATION
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: Chairman and Chief
Executive Officer
Address: V BAND NE, INC.
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: President
Address: V BAND SERVICES, INC.
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: President
Address: LICOM INCORPORATED
565 Taxter Road
Elmsford, New York 10523 By: /s/Tomas E. Feil
Attention: Mr. Mark R. Hahn ----------------
Telephone: (914) 789-5000 Name: Thomas E. Feil
Telecopier: (914) 789-5068 Title: President
<PAGE>
Annex 1 to
[Subsidiary Guarantee]
[Security Agreement]
[Intellectual Property Security Agreement]
[Contribution Agreement]
SUPPLEMENT NO. dated as of , to
(a) the Subsidiary Guarantee dated as of May 28, 1997 (as the same may
be amended, restated, supplemented or otherwise modified from time to
time, the "Subsidiary Guarantee") among V BAND NE, Inc., a New York
corporation, V BAND SERVICES, INC., a New York corporation, and LICOM
INCORPORATED, a Delaware corporation (each a "Subsidiary" and
collectively the "Subsidiaries") and NATIONAL BANK OF CANADA, NEW YORK
BRANCH (the "Bank"), and
(b) the Security Agreement dated as of May 28, 1997 (as the same may be
amended, supplemented or otherwise modified from time to time, the
"General Security Agreement") by V BAND CORPORATION, a New York
corporation (the "Borrower") and the Subsidiaries in favor of the Bank,
and
(c) the Security Agreement-Patents, Trademarks and Copyrights dated as
of May 28, 1997 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Intellectual Property Security
Agreement") by the Borrower and the Subsidiaries in favor of the Bank,
and
(d) the Contribution Agreement dated as of May 28, 1997 (as the same
may be amended, supplemented or otherwise modified from time to time,
the "Contribution Agreement") among the Borrower, the Subsidiaries and
the Bank (the Subsidiary Guarantee, the General Security Agreement, the
Intellectual Property Security Agreement and the Contribution Agreement
herein collectively called the "Relevant Agreements" and each a
"Relevant Agreement").
RECITALS:
A. The Borrower and the Bank are entering into a Credit Agreement dated
as of May 28, 1997 (said Credit Agreement, as it may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement")
providing for the making of loans to and the issuance of letters of credit for
the account of the Borrower in the amounts, and subject to the terms and
conditions, specified in the Credit Agreement.
B. The Borrower and the Subsidiaries have entered into the Relevant
Agreements in order to induce the Bank to make loans to, and issue letters of
credit for account of, the Borrower. Pursuant to Section 6.22 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that is subsequently
acquired or organized is required to enter into the Subsidiary Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement as a Debtor, and the Contribution Agreement as a Guarantor upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security Agreement, Section 10 of the Intellectual Property Security
Agreement, and Section 16 of the Contribution Agreement provide that additional
Subsidiaries of the Borrower may become Guarantors under the Subsidiary
Guarantee, Debtors under the General Security Agreement and the Intellectual
Property Security Agreement, and Guarantors under the Contribution Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee, a Debtor under the General Security
Agreement and the Intellectual Property Security Agreement, and a Guarantor
under the Contribution Agreement in order to induce the Bank to make additional
Loans and issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Now therefor, the New Subsidiary agrees as follows for the benefit of
the Bank:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Relevant Agreements and the
Credit Agreement.
2. Agreement to be Bound by Relevant Agreements.
In accordance with Section 22 of the Subsidiary Guarantee, Section 27
of the General Security Agreement, Section 10 of the Intellectual Property
Security Agreement, and Section 16 of the Contribution Agreement, the New
Subsidiary by its signature below becomes a Guarantor under the Subsidiary
Guarantee, a Debtor under the General Security Agreement and the Intellectual
Property Security Agreement, and a Guarantor under the Contribution Agreement
with the same force and effect as if originally named therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and provisions of Subsidiary Guarantee, the General Security
Agreement, the Intellectual Property Security Agreement and the Contribution
Agreement applicable to it as a Guarantor, Debtor or Guarantor, as the case may
be, thereunder. Each reference to a "Guarantor" in the Subsidiary Guarantee, a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement, or a "Guarantor" in the Contribution Agreement shall be deemed to
include the New Subsidiary. Each Relevant Agreement is hereby incorporated
herein by reference.
3. Representations and Warranties.
The New Subsidiary represents and warrants to the Bank that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
4. Miscellaneous.
(a) This Supplement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. This Supplement shall become effective when the Bank shall have
received a counterpart of this Supplement signed by the New Subsidiary.
(b) Except as expressly supplemented hereby, each Relevant Agreement
shall remain in full force and effect.
(c) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES
OF CONFLICT OF LAWS.
(d) In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Relevant Agreements shall not in any way be affected or
impaired.
(e) All communications and notices hereunder shall be in writing and
given as provided in the Relevant Agreements. All communications and notices
hereunder to the New Subsidiary shall be given to it at the address set forth
next to its signature.
(f) The New Subsidiary agrees to reimburse the Bank for its reasonable
out-of-pocket expenses in connection with this Supplement, including the
reasonable fees, other charges and disbursements of counsel for the Bank.
<PAGE>
IN WITNESS WHEREOF, the New Subsidiary has duly executed this
Supplement to the Subsidiary Guarantee, the General Security Agreement, the
Intellectual Property Security Agreement, and the Contribution Agreement as of
the day and year first above written.
Address: [Name of New Subsidiary]
______________________ By: __________________________
______________________ Name:
Attention: _____________ Title:
Telecopier: ____________
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of May 28, 1997, by V BAND
CORPORATION, a New York corporation (the "Pledgor") to NATIONAL BANK OF CANADA,
NEW YORK BRANCH (the "Secured Party").
RECITALS:
A. The Pledgor and the Secured Party are entering into a
Credit Agreement dated as of the date hereof (as it may be amended, modified or
supplemented from time to time, the "Credit Agreement") providing for extensions
of credit to the Pledgor in the amounts, and subject to the terms and
conditions, specified in the Credit Agreement.
B. The execution and delivery of this Pledge Agreement
and the pledge by the Pledgor to the Secured Party of its rights in the Pledged
Collateral (as hereinafter defined) constitute conditions precedent to the
obligation of the Secured Party to extend credit to the Pledgor pursuant to the
terms of the Credit Agreement.
ACCORDINGLY, in consideration of the premises, and in
order to induce the Secured Party to execute and deliver the Credit Agreement
and to extend credit to it thereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby agrees with the Secured Party as follows:
Section 1. Definitions. (a) Capitalized terms that are not defined
herein have the respective meanings ascribed to them in the Credit Agreement
and, in addition, the following terms have the following meanings:
"Amount Realized" has the meaning specified in Section 10.
"Credit Agreement" has the meaning specified in Recital A.
"Issuer" means each issuer of Pledged Shares.
"Obligations" means all indebtedness and other liabilities and
obligations of the Pledgor to the Secured Party of every kind, nature and
description, present or future, direct or indirect, secured or unsecured, joint
or several, absolute or contingent, matured or not, in any currency, due or to
become due, now existing or hereafter arising, regardless of how they arise or
by what agreement or instrument or whether evidenced by any agreement or
instrument and whether as principal or surety, including, without limitation,
(i) the "Obligations" (as such term is defined in the Credit Agreement) and (ii)
the observance and performance by the Pledgor of the obligations to be observed
and performed by it under this Pledge Agreement and any other agreement executed
by the Pledgor from time to time which inures to the benefit of the Secured
Party.
"Permissible Amount" means the maximum amount of voting stock of a
Subsidiary of the Borrower that is not a Domestic Subsidiary which may be
pledged by the Borrower without causing such Subsidiary to be deemed a
"controlled foreign corporation" under Section 956 of the Internal Revenue Code
of 1986, as amended.
"Pledge" has the meaning specified in Section 2.
"Pledged Collateral" has the meaning specified in Section 2.
"Pledged Shares" means all shares of capital stock described in
paragraphs (a), (b), and (c) of Section 2.
"Uniform Commercial Code" means the Uniform Commercial Code as
adopted and in effect from time to time in the State of New York.
(b) Unless otherwise expressly specified herein, defined terms
denoting the singular number shall, when in the plural form, denote the plural
number of the matter or item to which such defined terms refer, and vice-versa.
(c) Words of the neuter gender mean and include correlative words
of the masculine and feminine gender.
(d) The Section, Schedule and Exhibit headings used in this
Agreement are for convenience only and shall not affect the construction or
meaning of any provisions of this Agreement.
(e) Unless otherwise specified, the words "hereof", "herein",
"hereunder" and other similar words refer to this Agreement as a whole and not
just to the Section, subsection or clause in which they are used; and the words
"this Agreement" refer to this Pledge Agreement, as amended, modified or
supplemented from time to time.
(f) Unless otherwise specified, references to Sections, Recitals,
Schedules and Exhibits are references to Sections of, and Recitals, Schedules
and Exhibits to, this Agreement.
Section 2. Pledge. As collateral security for the due and punctual
payment and performance of the Obligations, the Pledgor hereby pledges,
hypothecates and assigns to the Secured Party, and hereby grants to the Secured
Party a security interest in (all the foregoing herein called the "Pledge"), the
following described property, whether now owned by the Pledgor or hereafter
acquired and whether now existing or hereafter created (hereinafter collectively
called the "Pledged Collateral"):
(a) all of the shares of capital stock of each of the
Pledgor's Subsidiaries described in Schedule I, together with the
certificates evidencing such shares;
(b) all other shares of capital stock of the Pledgor's
Domestic Subsidiaries now or at any time hereafter owned by the
Pledgor;
(c) all other shares of capital stock of the Subsidiaries
of the Pledgor that are not Domestic Subsidiaries now or at any
time hereafter owned by the Pledgor, up to the Permissible Amount;
(d) all cash, instruments, securities or other property
representing a dividend or other distribution on any of the Pledged
Shares, or representing a distribution or return of capital upon or
in respect of the Pledged Shares, or resulting from a split-up,
revision, reclassification or other like change of the Pledged
Shares or otherwise received in exchange therefor, and any
warrants, rights or options issued to the holders of, or otherwise
in respect of, the Pledged Shares;
(e) in the event of any consolidation or merger of any
Issuer in which such Issuer is not the surviving corporation, all
shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Pledgor
itself) formed by or resulting from such consolidation or merger
(provided that nothing herein contained shall be deemed to
constitute consent under, or waiver of, any provision of this
Agreement, the Credit Agreement or any other Loan Document which
prohibits such consolidation or merger by any Issuer);
(f) all proceeds of any of the property of the Pledgor
described in subsections (a) through (c) above of this Section 2
and, to the extent related to any property described in said
clauses or such proceeds, all books, correspondence, credit files,
records, invoices and other documents.
Section 3. Pledge Absolute.
(a) The Pledgor hereby agrees that this Agreement shall
be binding upon the Pledgor and that the Pledge of the Pledged Collateral
hereunder shall be irrevocable and unconditional, irrespective of the validity,
legality or enforceability of the Credit Agreement, the Note, any other Loan
Document or any of the Obligations, the absence of any action to enforce the
same, the waiver or consent by the Secured Party with respect to any provision
thereof, the recovery of any judgment against the Pledgor, or any action to
enforce the same or any other similar circumstances. The Pledgor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of merger or bankruptcy of the Pledgor, any notice to require a proceeding
first against the Pledgor or any other Person, protest or notice with respect to
the Note or any other promissory notes or evidences of indebtedness secured
hereby or the indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Agreement will remain in full force and effect so long as
the Pledgor may borrow or request the issuance of letters of credit under the
Credit Agreement or any Obligations remain unpaid.
(b) The Pledgor agrees that, without notice to or further
assent by the Pledgor, the liability of the Pledgor or of any other Person for
or upon any of the Obligations may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised or released by the Secured
Party, as the Secured Party may deem advisable, and that the Pledged Collateral
or other collateral or liens securing any of the Obligations may, from time to
time, in whole or in part (subject, in the case of the Pledged Collateral, to
the provisions of this Agreement), be exchanged, sold or surrendered by the
Secured Party, as the Secured Party may deem advisable, all without impairing,
abridging, affecting or diminishing this Agreement or the rights of the Secured
Party hereunder or with respect to the Pledged Collateral.
Section 4. Representations and Warranties. The Pledgor hereby
represents and warrants as follows:
(a) The Pledgor is a corporation duly organized, validly
existing and in good standing under the laws of New York. The
Pledgor has full power and authority to execute and deliver this
Agreement, to Pledge the Pledged Collateral pursuant hereto, and to
incur and perform the obligations provided for herein.
(b) The execution, delivery and performance of this
Agreement by the Pledgor, the Pledge of the Pledged Collateral
pursuant hereto and the incurrence and performance of the
obligations provided for herein (i) have been duly authorized by
all requisite action of the Pledgor, (ii) do not require the
approval of the stockholders of the Pledgor, and (iii) will not (1)
violate any law or regulation or the certificate of incorporation
or by-laws of the Pledgor, (2) violate or constitute (with due
notice or lapse of time or both) a default under any provision of
any indenture, agreement, license or other instrument to which the
Pledgor is a party or by which it or any of its properties may be
bound or affected, (3) violate any order of any court, tribunal or
governmental agency binding upon the Pledgor or any of its
properties or (4) result in the creation or imposition of any lien
or encumbrance of any nature whatsoever upon any assets or revenues
of the Pledgor (except liens in favor of the Secured Party
hereunder).
(c) No authorizations, approvals and consents of, and no
filings and registrations with, any governmental or regulatory
authority or agency or any other Person are necessary for the
execution, delivery or performance by the Pledgor of this Agreement
or for the validity or enforceability hereof.
(d) This Agreement constitutes the legal, valid and
binding obligation of the Pledgor, enforceable against the Pledgor
in accordance with its terms.
(e) The Pledgor is the sole record and beneficial owner
of the Pledged Shares. The Pledged Shares are not subject to any
liens, security interests, charges or encumbrances of any kind or
nature, other than the liens created hereunder. The Pledged Shares
have been duly authorized and validly issued and are fully paid and
non-assessable. The Pledgor has legal title to the Pledged Shares
and the Pledgor has good and lawful authority to Pledge all of the
Pledged Shares in the manner hereby done or contemplated. The
Pledged Shares are not subject to any contractual restriction, or
any restriction under the certificate of incorporation or by-laws
of any Issuer, upon the transfer thereof, and no right, warrant or
option to acquire any of the Pledged Shares exists in favor of any
other Person. The Pledged Shares constitute all of the issued and
outstanding shares of capital stock of each Issuer beneficially
owned by the Pledgor (whether or not registered in the name of the
Pledgor). The Pledgor has taken all necessary action to create and
perfect a security interest in the Pledged Shares in favor of the
Secured Party, and the Secured Party has acquired a first and prior
perfected security interest therein.
(f) When any item of Pledged Collateral other than the
Pledged Shares is pledged hereunder, (i) the Pledgor will be the
owner of such item of Pledged Collateral free and clear of any
liens, security interests, charges or encumbrances of any kind or
nature (other than those created hereunder), (ii) each share of
stock comprising such Pledged Collateral will have been duly
authorized, validly issued and be fully paid and non-assessable,
and (iii) the Pledgor will have legal title to such item of Pledged
Collateral and the Pledgor will have good and lawful authority to
Pledge and deliver such item of Pledged Collateral in the manner
hereby contemplated.
(g) The Pledgor's chief executive office and principal
place of business is located at the address specified opposite its
signature hereto, and the Pledgor maintains all of its books and
records at such address.
(h) To the Pledgor's knowledge, the information,
schedules, exhibits and reports furnished by the Pledgor to the
Secured Party in connection with the negotiation and preparation of
this Agreement did not contain any omissions or misstatements of
fact which would make the statements contained therein misleading
or incomplete in any material respect.
Section 5. Covenants. The Pledgor hereby agrees that, unless the
Secured Party shall otherwise agree in writing, so long as the Pledgor may
borrow under the terms of the Credit Agreement and until the payment in full of
the Obligations:
(a) The Pledgor (i) shall defend its title to the Pledged
Collateral against all claims and demands whatsoever that are
adverse to the Secured Party, (ii) shall not create, incur, assume
or suffer to exist any liens, security interests, charges or
encumbrances of any kind or nature (other than those created
hereunder) in any Pledged Collateral and (iii) shall not sell,
assign, transfer, exchange or otherwise dispose of, or grant any
option or other right with respect to, any Pledged Shares.
(b) The Pledgor shall, upon demand of the Secured Party,
do the following: furnish further assurances of title, execute any
written agreement or do any other act(s) necessary to effectuate
the purposes and provisions of this Pledge Agreement, execute any
instrument, document or statement required by law or otherwise in
order to perfect, continue or preserve the security interests of
the Secured Party in the Pledged Collateral and pay all filing or
other costs incurred in connection therewith.
(c) The Pledgor shall not change the location of its
chief executive office or principal place of business or the office
where it keeps its books and records from the respective locations
thereof specified in Section 4(g) hereof, until (i) it shall have
given to the Secured Party not less than 30 days' prior written
notice of its intention so to do, clearly describing such new
location and providing such other information in connection
therewith as the Secured Party may reasonably request and (ii) with
respect to such new location, it shall have taken such action,
satisfactory to the Secured Party (including, without limitation,
the delivery of additional financing statements duly signed by the
Pledgor), to maintain the security interest of the Secured Party in
the Pledged Collateral at all times fully perfected and in full
force and effect.
(d) The Pledgor shall permit, and shall cause each Issuer
and each registrar and transfer agent with respect to the Pledged
Collateral to permit, representatives of the Secured Party, upon
reasonable notice, at any time during normal business hours, to
inspect and make abstracts from its or their books and records
pertaining to the Pledged Collateral.
(e) Before the making of any Loan, and upon the Secured
Party's request from time to time thereafter, the Pledgor will
make, execute, acknowledge and deliver, and file and record in the
proper filing and recording places, all such instruments
(including, without limitation, appropriate financing statements
and duly executed blank stock powers and other instruments of
transfer or assignment satisfactory in form and substance to the
Secured Party), and take all such action, as the Secured Party may
reasonably deem necessary or advisable to carry out the intent and
purpose of this Pledge Agreement and to establish and maintain in
favor of the Secured Party a valid, enforceable and perfected
security interest in the Pledged Collateral and the other rights
contemplated hereby that are superior and prior to the rights and
security interests of all other persons or entities. Without
limiting the generality of the foregoing sentence, (i) the Pledgor
will, from time to time upon the Secured Party's request, cause its
accounting books and records to be marked with such legends or
segregated in such manner as the Secured Party may specify, and
take or cause to be taken such other action and adopt such
procedures as the Secured Party may specify, to give notice of, and
to perfect, the security interests created hereby in the Pledged
Collateral.
(f) The Pledgor shall procure, pay for, affix to any and
all documents and cancel any documentary tax stamps required by,
and in accordance with, applicable law and will indemnify the
Secured Party, and hold the Secured Party harmless against, any
liability (including interest and penalties) in respect of such
documentary stamp taxes.
Section 6. Appointment of Agents; Registration in Nominee Name. The
Secured Party shall have the right to appoint one or more agents for the purpose
of retaining physical possession of the certificates representing or evidencing
the Pledged Collateral, which may be held (in the discretion of the Secured
Party) in the name of the Pledgor, endorsed or assigned in blank or in favor of
the Secured Party, or in the name of the Secured Party or any nominee or
nominees of the Secured Party or any agent appointed by the Secured Party. In
addition to all other rights possessed by the Secured Party, the Secured Party
may, from time to time after the occurrence and during the continuation of an
Event of Default, at the Secured Party's sole discretion and without notice to
the Pledgor, take any or all of the following actions: (a) transfer all or any
part of the Pledged Collateral into the name of the Secured Party or its
nominee, with or without disclosing that such Pledged Collateral is subject to
the lien and security interest created hereby; (b) take control of any proceeds
of any of the Pledged Collateral; and (c) exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations for any purpose consistent with its rights under
this Pledge Agreement; provided that all powers of the Secured Party under this
Section 6 shall be subject to the rights of the Pledgor under Section 9 hereof
to the extent that the exercise of such powers represents a sale of an item of
Pledged Collateral.
Section 7. Voting Rights; Dividends, Etc.
(g) So long as no Event of Default has occurred and is
continuing, the Pledgor shall be entitled to exercise any and all voting rights
and powers relating or pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Pledge Agreement.
(b) So long as no Event of Default has occurred and is
continuing, the Pledgor shall be entitled to receive and retain any and all cash
dividends paid on the Pledged Collateral. Any and all stock dividends,
liquidating dividends, distributions of property, redemptions or other
distributions made on or in respect of the Pledged Collateral, whether resulting
from a subdivision, combination or reclassification of the outstanding capital
stock of any Issuer or received in exchange for Pledged Collateral or any part
thereof or as a result of any merger, consolidation, acquisition or other
exchange of assets to which any Issuer may be a party or otherwise, and any and
all cash and other property received in payment of the principal of or in
redemption of or in exchange for any Pledged Collateral (either at maturity,
upon call for redemption or otherwise), shall become part of the Pledged
Collateral and, if received by the Pledgor, shall be held in trust for the
benefit of the Secured Party and shall forthwith be delivered to the Secured
Party or its designated agent (accompanied by proper instruments of assignment
and/or stock powers executed by the Pledgor in accordance with the Secured
Party's instructions) to be held subject to the terms of this Pledge Agreement.
(c) Upon the occurrence of an Event of Default and so
long as such Event of Default shall continue, at the option of the Secured Party
(subject to applicable law), (i) all rights of the Pledgor to exercise the
voting rights and powers which the Pledgor is entitled to exercise pursuant to
Section 7(a) shall cease, and all such rights shall thereupon become vested in
the Secured Party, and the Secured Party shall have the sole and exclusive right
and authority to exercise such voting and/or consensual rights and powers and
(ii) the Secured Party shall be entitled to receive and retain any and all cash
dividends, if any, paid on the Pledged Collateral. Any and all cash and other
property paid over to or received by the Secured Party pursuant to the
provisions of this subsection (c) shall be retained by the Secured Party as part
of the Pledged Collateral, and shall be applied in accordance with the
provisions hereof.
(d) Concurrently with its execution of this Agreement,
the Pledgor shall execute and deliver to the Secured Party an irrevocable proxy
to vote the Pledged Shares, substantially in the form of Exhibit A. After the
occurrence and during the continuance of an Event of Default, the Pledgor shall
deliver to the Secured Party such further evidence of such irrevocable proxy or
such further irrevocable proxies to vote any shares of stock constituting part
of the Pledged Collateral as the Secured Party may request.
(e) The Secured Party at any time may extend or renew for
one or more periods (whether or not longer than the original period) the
Obligations, and grant releases, compromises or indulgences with respect to the
Obligations or any extension or renewal thereof or any security therefor or to
any obligor hereunder or thereunder without impairing the Secured Party's
rights, or releasing the Pledgor from its obligations, hereunder.
Section 8. Remedies upon Default. Upon the occurrence of an Event
of Default, the Secured Party may, without being required to give any notice to
the Pledgor, apply the cash (if any) then held by it pursuant to Section 6 or 7
to the ratable payment in full of the Obligations and all other indebtedness
referred to in Section 10 in the order and manner specified in Section 10. If
there is no such cash, or the cash so applied is insufficient to pay all
Obligations then due and payable in full, the Secured Party may sell the Pledged
Collateral, or any part thereof, in accordance with Section 9 and shall apply
the proceeds of such sale to the ratable payment in full of the Obligations and
all other indebtedness referred to in Section 10 in the order and manner
specified in Section 10.
Section 9. Sale of Pledged Collateral. (a) The sale of the Pledged
Collateral or any portion thereof may be made at any public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery, as the Secured Party shall deem appropriate. The Secured
Party shall be authorized at any such sale (to the extent it deems it advisable
to do so) to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged Collateral then being
sold for their own account for investment and not with a view to the
distribution or resale thereof, and upon consummation of any such sale the
Secured Party shall have the right to assign, endorse, transfer and deliver to
the purchaser or purchasers thereof the Pledged Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to
the extent permitted by law) all right of redemption, stay and/or appraisal that
it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Except in the case of Pledged
Collateral which threatens to decline speedily in value or is of a type
customarily sold on a recognized exchange, the Secured Party shall give to the
Pledgor at least ten (10) days' written notice of the Secured Party's intention
to make any such public or private sale or sale at a broker's board or on any
such securities exchange. Such notice, in case of public sale, shall state the
time and place fixed for such sale, and, in the case of sale at a broker's board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Pledged Collateral, or any portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours,
and at such place or places, as the Secured Party may fix in the notice of such
sale. At any such sale, the Pledged Collateral, or any portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the
Secured Party may determine and the Secured Party may bid (which bid may be, in
whole or in part, in the form of cancellation of any Obligation) for and
purchase the whole or any part of the Pledged Collateral. The Secured Party may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case the sale of all or any
part of the Pledged Collateral is made on credit or for future delivery, the
Pledged Collateral so sold may be retained by the Secured Party until the sale
price is paid by the purchaser or purchasers thereof, but the Secured Party
shall not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Pledged Collateral so sold and, in the case of
any such failure, such Pledged Collateral may be sold again upon like notice. As
an alternative to exercising the power of sale herein conferred upon it, the
Secured Party may proceed by a suit or suits at law or in equity to foreclose
this Pledge Agreement and to sell the Pledged Collateral, or any portion
thereof, pursuant to a judgment or decree of a court or courts of competent
jurisdiction.
(b) In connection with any disposition of the Pledged
Collateral, if the Secured Party elects to obtain the advice of any one of three
independent, nationally known investment banking firms that are member firms of
the New York Stock Exchange, proposed by the Secured Party to the Pledgor and
chosen by the Pledgor within seven days of receiving notice thereof (or, if the
Pledgor fails to agree on such choice within such seven-day period, the advice
of any one of such firms chosen by the Secured Party) with respect to the method
or manner of sale or disposition of any of the Pledged Collateral, the best
price reasonably obtainable therefor and any other details concerning such sale
or disposition, then, to the extent permitted by law, any sale or other
disposition of any Pledged Collateral in reliance on such advice shall be deemed
to be commercially reasonable under the Uniform Commercial Code and otherwise
proper.
(c) The Pledgor understands that compliance with Federal
or state securities laws may very strictly limit the course of conduct of the
Secured Party if the Secured Party were to attempt to dispose of all or any part
of the Pledged Collateral and may also limit the extent to which or the manner
in which any subsequent transferee of the Pledged Collateral may dispose of the
same. The Pledgor agrees that in any sale of any of the Pledged Collateral the
Secured Party is hereby authorized to comply with any such limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to (i) avoid any violation of applicable law (including,
without limitation, compliance with such procedures as may restrict the number
of prospective bidders and purchasers and/or further restrict such prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or resale of such Pledged Collateral) or (ii) obtain any required
approval of the sale or of the purchaser by any governmental regulatory
authority or official. The Pledgor further agrees that such compliance shall not
result in such sale being considered or deemed not to have been made in a
commercially reasonable manner, and that the Secured Party shall not be liable
or accountable to the Pledgor for any discount allowed by reason of the fact
that the Pledged Collateral is sold in compliance with any such limitation or
restriction.
(d) The Secured Party shall be under no obligation to
sell or otherwise dispose of any Pledged Collateral, or to cause any Pledged
Collateral to be sold or otherwise disposed of, by reason of any diminution in
the fair market value thereof, and the failure of the Secured Party to do so
shall under no circumstances be deemed a failure to exercise reasonable care in
the custody or preservation of the Pledged Collateral.
(e) The Secured Party shall be under no obligation to
delay a sale or disposition of any of the Pledged Shares to permit the issuer of
such Pledged Shares to register them for public sale under the Securities Act of
1933 or under any applicable state securities or blue-sky laws.
(f) In addition to the rights and remedies granted to the
Secured Party in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to any of the Obligations, the Secured Party
shall have all the rights and remedies of a secured party under the Uniform
Commercial Code. The Secured Party shall have the right in its sole discretion
to determine which rights, security, liens, guaranties or remedies it shall
retain, pursue, release, subordinate, modify or enforce, without in any way
modifying or affecting any of the other of them or any of the Secured Party's
rights hereunder.
Section 10. Application of Proceeds of Collateral Sale.
(a) If the Pledgor shall fail to pay any of the
Obligations when due (whether at maturity, upon demand, by acceleration or
otherwise), the Secured Party shall apply all cash held by it pursuant to
Section 6 or 7 with respect to the Pledged Collateral and the proceeds of the
sale of any Pledged Collateral (such cash and proceeds being referred to
collectively as the "Amount Realized") as follows:
First: to the payment of the costs and expenses of such
sale or the collection of such cash, including the out-of-pocket
expenses of the Secured Party and the reasonable fees and
disbursements of counsel employed in connection therewith, and to
the payment of all advances made by the Secured Party for the
account of the Pledgor hereunder and the payment of all costs and
expenses incurred by the Secured Party in connection with the
administration and enforcement of this Agreement and the Pledged
Collateral;
Second: to the payment in full of the Obligations in such
order and manner as the Secured Party shall determine;
Third: the balance (if any) of such proceeds shall be
paid to the Pledgor or as a court of competent jurisdiction may
direct.
(b) The Pledgor shall remain liable for any deficiency in
its Obligations remaining after the application thereto of said payments.
Section 11. Compliance With Securities Laws.
(a) The Pledgor shall cause each Issuer to execute and
deliver to the Secured Party concurrently with the Pledgor's execution of this
Agreement an undertaking substantially in the form of Exhibit B hereto and
agrees that if any Event of Default shall occur the Pledgor shall, if so
requested by the Secured Party and at the Pledgor's sole expense, cause each
Issuer to perform its obligations under such undertaking.
(b) If the Secured Party determines to exercise its right
to sell any or all of the Pledged Shares, upon written request from the Secured
Party the Pledgor shall, furnish to the Secured Party all such information as
the Secured Party may request in order to determine the number of Pledged Shares
which may be sold by the Secured Party in exempt transactions under the
Securities Act of 1933 and the rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.
(c) The Pledgor further agrees to do or cause to be done
all such other acts and things as may be necessary to make any sale or
disposition of any portion or all of the Pledged Shares by the Secured Party
hereunder valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales or dispositions, all at the
Pledgor's sole expense. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 11 will cause irreparable injury to the
Secured Party, that the Secured Party has no adequate remedy at law in respect
of such breach and agrees that each and every covenant contained in this Section
11 shall be specifically enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants, except for a defense that no Event of Default has
occurred, that such Event of Default has been cured or waived, that all of the
Obligations have been paid in full or that the Secured Party has released the
Pledged Shares or that the performance sought would violate applicable law.
Section 12. Indemnification. The Pledgor hereby agrees to indemnify
the Secured Party for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Secured Party in any way relating to or arising out of this
Agreement or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or the enforcement of any of the terms hereof;
provided, however, that the Pledgor shall not be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
Secured Party or failure by the Secured Party to exercise reasonable care in the
custody and preservation of the Pledged Collateral as provided in Section 15.
Section 13. Secured Party Appointed Attorney-in-Fact. The Pledgor
hereby appoints the Secured Party as the Pledgor's attorney-in-fact, with full
power of substitution, for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument that the Secured
Party may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, the Secured Party shall have the right and power to
sign the name of the Pledgor to any financing statements, continuation
statements or other documents under the Uniform Commercial Code relating to the
Pledged Collateral, and, to the extent permitted under Section 7, shall have the
right and power to receive, endorse and collect all checks and other orders for
the payment of money made payable to the Pledgor representing any dividend,
interest payment or other distribution payable or distributable in respect of
the Pledged Collateral or any part thereof and to give full discharge therefor.
Section 14. No Subrogation. Notwithstanding any payment or payments
made by the Pledgor hereunder, the receipt of any amounts by the Secured Party
with respect to the Pledged Collateral or any setoff or application of funds of
the Pledgor by the Secured Party, the Pledgor shall not be entitled to be
subrogated to any of the rights of the Secured Party against the Pledgor, or any
collateral security, guaranty or right of offset held by the Secured Party for
the payment of the Obligations, and the Pledgor shall not seek any reimbursement
from the Pledgor in respect of payments made by the Pledgor hereunder.
Section 15. Limitations on Secured Party's Duty in Respect of
Collateral. Beyond the safe custody thereof, the Secured Party shall not have
any duty as to any Pledged Collateral in its possession or control or in the
possession or control of any agent or nominee of the Secured Party or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
Section 16. No Waiver; Cumulative Remedies. No course of dealing
between the Pledgor and the Secured Party, no failure on the part of the Secured
Party to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy by the Secured Party preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder are cumulative and not exclusive of any other
remedies provided by law, including without limitation the rights and remedies
of a secured party under the Uniform Commercial Code.
Section 17. Termination. This Agreement shall terminate when the
Secured Party's obligation to make Loans under the terms of the Credit Agreement
has terminated and all of the Obligations have been paid in full, at which time
the Secured Party shall reassign and redeliver to the Pledgor, without recourse
or warranty and at the sole expense of the Pledgor, against receipt, such of the
Pledged Collateral (if any) as shall not have been sold, assigned, collected,
received, appropriated or realized pursuant to Section 8 or 9 or otherwise
applied by the Secured Party to the payment of the Obligations pursuant to the
terms hereof and is then still held by it hereunder, together with appropriate
instruments of reassignment and release; provided, however, that this Agreement
shall be reinstated if any payment in respect of the Obligations is rescinded,
invalidated, declared to be fraudulent or preferential or otherwise required to
be restored or returned by the Secured Party for any reason, including without
limitation by reason of the insolvency, bankruptcy or reorganization of the
Pledgor or any other Person.
Section 18. Addresses for Notices, Etc. All notices, requests,
demands, instructions, directions and other communications provided for
hereunder shall be in writing (which term shall include telecopied
communications) and shall be telecopied or delivered by hand or overnight
courier to the applicable party at the address or telecopier number specified
below for such party:
If to the Pledgor, at:
V Band Corporation
565 Taxter Road
Elmsford, New York 10523-2330
Attention: Mr. Mark R. Hahn
Vice President and Chief Financial Officer
Telephone No.: (914) 789-5000
Telecopier No.: (914) 789-5068
If to the Secured Party, at:
National Bank of Canada
125 West 55th Street
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Telephone No.: (212) 632-8551
Telecopier No.: (212) 632-8545
or, as to any party, to such other address or telecopier number as such party
shall specify by a notice in writing to the other party hereto. Each notice,
request, demand, instruction, direction or other communication provided for
hereunder shall be deemed delivered (i) if by hand or overnight courier, when
delivered to the applicable party at such address, and (ii) if by telecopy, when
sent to the applicable party at such telecopier number.
Section 19. Severability. Any provision of this Agreement that 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render such
provision unenforceable in any other jurisdiction.
Section 20. Further Assurances. The Pledgor agrees to do such
further reasonable acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Secured Party may
at any time request in connection with the administration or enforcement of this
Pledge Agreement (including, without limitation, to aid the Secured Party in the
sale of all or any part of the Pledged Collateral) or related to the Pledged
Collateral or any part thereof or in order better to assure and confirm unto the
Secured Party rights, powers and remedies hereunder. The Pledgor hereby consents
and agrees that any registrar or transfer agent for any of the Pledged
Collateral shall be entitled to accept the provisions hereof as conclusive
evidence of the right of the Secured Party to effect any transfer pursuant to
Section 6, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by the Pledgor or any other person to any such
registrar to transfer agent.
Section 21. Binding Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Pledgor shall not assign this Agreement
or any interest herein or in the Pledged Collateral or any part thereof, or
otherwise pledge, encumber or grant any option with respect to the Pledged
Collateral or any part thereof, without the prior written consent of the Secured
Party. The Secured Party may assign this Agreement and its rights and remedies
hereunder in whole or in part to any assignee of the Obligations or any portion
thereof.
Section 22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Section 23. SUBMISSION TO JURISDICTION.
(A) THE PLEDGOR HEREBY EXPRESSLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY
OF NEW YORK, STATE OF NEW YORK, IN CONNECTION WITH ANY ACTION, SUIT OR
PROCEEDING RELATING TO THIS AGREEMENT, ANY INSTRUMENT OR DOCUMENT REFERRED TO
HEREIN OR RELATED HERETO, OR ANY ITEM OF PLEDGED COLLATERAL, AND IN CONNECTION
THEREWITH AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO
ANY OF SAID COURTS OR A JUDGE THEREOF MAY BE SERVED UPON THE PLEDGOR WITHIN OR
WITHOUT SUCH COURT'S JURISDICTION BY REGISTERED OR CERTIFIED MAIL, AT THE
ADDRESS OF THE PLEDGOR SPECIFIED IN SECTION 18 HEREOF (OR AT SUCH OTHER ADDRESS
AS THE PLEDGOR SHALL SPECIFY BY A PRIOR NOTICE IN WRITING TO THE SECURED PARTY),
PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED.
(B) THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY INSTRUMENT OR
DOCUMENT REFERRED TO HEREIN OR RELATED HERETO BROUGHT IN ANY FEDERAL OR STATE
COURT SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) NOTWITHSTANDING THE FOREGOING, THE SECURED PARTY MAY
SUE THE PLEDGOR IN ANY JURISDICTION WHERE THE PLEDGOR OR ANY OF ITS ASSETS MAY
BE FOUND AND MAY SERVE LEGAL PROCESS UPON THE PLEDGOR IN ANY OTHER MANNER
PERMITTED BY LAW.
Section 24. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR
RELATING TO THIS AGREEMENT, ANY INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR
RELATED HERETO, OR ANY ITEM OF PLEDGED COLLATERAL, AND AGREE THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
Section 25. Amendments. No provision of this Agreement may be
amended, waived or modified, and (unless otherwise provided herein) no item of
Pledged Collateral may be released, except in a writing signed by the Pledgor
and the Secured Party.
Section 26. Expenses. The Pledgor hereby agrees to reimburse the
Secured Party for all costs and expenses of the Secured Party (including,
without limitation, all reasonable fees and disbursements of counsel) incurred
by the Secured Party in connection with the preparation of this Agreement or any
amendments hereto, the filing or recording of this Agreement or any instrument
with respect hereto, the enforcement of the Secured Party's rights under this
Agreement, the sale of the Pledged Collateral or any part thereof and the
collection of payments due under or in respect of the Pledged Collateral and all
amounts due under this Agreement.
Section 27. Waiver of Notice of Acceptance. The Pledgor hereby
waives notice of the making of any Loan or the issuance of the Note and notice
from the Secured Party of its acceptance of and reliance upon this Agreement.
Section 28. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, all of which when taken together shall constitute but one and the
same agreement.
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed by
its duly authorized officer as of the date first above written.
Address of Pledgor's V BAND CORPORATION
Chief Executive Office
and Principal Place of
Business: By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
565 Taxter Road Title: Chairman and Chief Executive Officer
Elmsford, New York 10523-2330
<PAGE>
Schedule I to
Pledge Agreement
<TABLE>
<CAPTION>
SCHEDULE OF PLEDGED SHARES
Stock
Name of Beneficial Number of Class of Percentage of Par Certificate
Issuer Owner Shares Stock Class Value No.
- ------ ----- ------ ----- ----- ----- ---
<S> <C> <C> <C> <C> <C> <C>
Borrower (a New Various 5,328,303 Common 100%
York corporation) Persons
Licom Borrower 100 Common 100% $.01 1
Incorporated (a
Delaware
corporation)
V Band NE, Inc. Borrower 100 Common 100% $.01 1
(a New York
corporation)
V Band Services, Borrower 100 Common 100% $.01 1
Inc. (a New York
corporation)
V Band PLC Borrower 31,383 Ordinary App. 100% (pound)1.00 20
(Registered in Licom 1 Ordinary
England No.
1855636)
VBI Corporation Borrower 1,000 Common 100% $1.00 2
(a U.S. Virgin
Island
corporation)
</TABLE>
<PAGE>
Exhibit A to
Pledge Agreement
FORM OF IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS that the undersigned does hereby
make, constitute and appoint NATIONAL BANK OF CANADA (the "Secured Party") and
each of the Secured Party's officers and employees, its true and lawful
attorneys, for it and in its name, place and stead, to act as its proxy in
respect of all of the shares of capital stock of (i) V Band NE, Inc., a New York
corporation, (ii) V Band Services, Inc., a New York corporation, and (iii) Licom
Incorporated, a Delaware corporation (hereinafter referred to as the
"Subsidiaries"), which it now or hereafter may own or hold, including, without
limitation, the right, on its behalf, to demand the call by any proper officer
of each of the Subsidiaries pursuant to the provisions of the respective
certificates of incorporation or by-laws of each of the Subsidiaries and as
permitted by law of a meeting of each of the Subsidiaries respective
shareholders and at any meeting of shareholders, annual, general or special, to
vote for the transaction of any and all business that may come before such
meeting, or at any adjournment thereof, including, without limitation, the right
to vote for the sale of all or any part of the respective assets of each of the
Subsidiaries and/or the liquidation and dissolution of each of the Subsidiaries;
giving and granting to its said attorneys full power and authority to do and
perform each and every act and thing, whether necessary or desirable to be done
in and about the premises, as fully as it might or could do if personally
present, with full power of substitution, appointment and revocation, hereby
ratifying and confirming all that their respective attorneys shall do or cause
to be done by virtue hereof.
This Irrevocable Proxy is given to the Secured Party and to its
officers and employees in consideration of its execution and delivery the Credit
Agreement dated as of the date hereof between the undersigned and the Secured
Party (as it may be amended, modified or supplemented from time to time, the
"Credit Agreement"), and the transactions contemplated thereby, and in order to
carry out the covenant of the undersigned contained in a certain Pledge
Agreement of even date herewith by the undersigned in favor of the Secured Party
(as it may be amended, modified or supplemented from time to time, the "Pledge
Agreement"), and this Proxy shall be irrevocable and coupled with an interest,
and shall be effective and binding upon the undersigned and its successors and
assigns until the termination of the Secured Party's obligation to make loans
under the Credit Agreement and the payment in full of all of the Obligations (as
such term is defined in the Pledge Agreement) and may be exercised only after
the occurrence and during the continuance of an Event of Default (as such term
is defined in the Credit Agreement).
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Irrevocable
Proxy to be executed by its duly authorized officer as of this 28 day of May,
1997.
V BAND CORPORATION
By: _______________________
Name:
Title:
<PAGE>
Exhibit B to
Pledge Agreement
FORM OF ISSUER'S UNDERTAKING
The undersigned agrees that if an Event of Default shall occur
under the Credit Agreement (as such term is defined in the Pledge Agreement)
dated as of May 28, 1997 (said Pledge Agreement, as it may be amended, modified
or supplemented from time to time, the "Pledge Agreement"), by V Band
Corporation, a New York corporation (the "Pledgor") in favor of National Bank of
Canada, New York Branch (the "Secured Party"), the undersigned shall, at the
request of the Secured Party and at the sole expense of the undersigned, furnish
to the Secured Party such statements, prospectuses, opinions of counsel and
other documents as the Secured Party shall require to enable compliance with
applicable state and federal securities or blue sky laws in connection with the
public sale or other disposition of the Pledged Shares and to facilitate such
public sale or disposition. The undersigned agrees that a breach of any of its
obligations set forth in this undertaking will cause irreparable injury to the
Secured Party, that the Secured Party has no adequate remedy at law in respect
of such breach and agrees that each and every covenant contained herein shall be
specifically enforceable against the undersigned, and the undersigned hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants. The undertaking of the undersigned herein shall
remain in full force and effect notwithstanding any amendment or modification of
the Pledge Agreement, which amendment or modification may be made without notice
to or the consent of the undersigned.
[INSERT NAME OF ISSUER]
By: _______________________
Name:
Title:
<PAGE>
V BAND CORPORATION
565 Taxter Road
Elmsford, New York 10523
May 28, 1997
National Bank of Canada
125 West 55th Street
New York, New York 10019
Re: Post-Closing Satisfaction of Certain Conditions
Gentlemen:
Reference is made to the Credit Agreement dated as of the date
hereof between V Band Corporation and National Bank of Canada (the "Credit
Agreement"). All capitalized terms which are defined in the Credit Agreement and
are not otherwise defined herein shall have the respective meanings given to
them in the Credit Agreement.
We hereby request that you make Loans to us and issue Letters
of Credit for our account under the Credit Agreement notwithstanding the fact
that we have not delivered to you (i) the evidence required under Section
5.1(a)(viii) (4) and (5) that our patents, trademarks, copyrights and other
intellectual property (including the source code for all of our software) are
owned by us and are not subject to any rights or interests of third parties,
that your liens thereon have been duly perfected and that the source code has
been delivered to an escrow agent acceptable to you under an escrow arrangement
satisfactory to you (the "Intellectual Property Condition") and (ii)
certificates representing the Pledged Stock as provided in Section 5.1(a)(ix) of
the Credit Agreement, together with an opinion of counsel covering such pledge
and the Pledged Stock (the "Stock Pledge Condition"). In order to induce you to
make Loans to us and issue Letters of Credit for our account under the Credit
Agreement, we hereby (a) undertake to satisfy the Intellectual Property
Condition as soon as practicable but in any event no later than June 30, 1997,
and the Stock Pledge Condition as soon as practicable but in any event no later
than June 17, 1997, and (b) agree that failure to satisfy either Condition by
the date specified for it above will constitute an additional Event of Default
under the Credit Agreement.
<PAGE>
We hereby acknowledge that, notwithstanding anything to the
contrary contained in the Credit Agreement, until we satisfy the Intellectual
Property Condition we will not have the right to request and you will have no
obligation to make or issue Loans or Letters of Credit if, after giving effect
thereto, the Exposure would exceed 85% of the aggregate amount of the Eligible
Accounts at such time. We hereby acknowledge that Eligible Inventory will in no
event be included in the Borrowing Base until we have satisfied the Intellectual
Property Condition.
Very truly yours,
V BAND CORPORATION
By: /s/Thomas E. Feil
-----------------
Name: Thomas E. Feil
Title: Chairman and Chief Executive Officer
Accepted and Agreed:
NATIONAL BANK OF CANADA
By: /s/Gaetan R. Frosina
--------------------
Name: Gaetan R. Frosina
Title: Vice President
By: /s/Joseph A. Klapkowski
-----------------------
Name: Joseph A. Klapkowski
Title: Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 374
<SECURITIES> 0
<RECEIVABLES> 7,517
<ALLOWANCES> 383
<INVENTORY> 7,202
<CURRENT-ASSETS> 16,329
<PP&E> 9,474
<DEPRECIATION> (8,661)
<TOTAL-ASSETS> 19,722
<CURRENT-LIABILITIES> 5,912
<BONDS> 0
0
0
<COMMON> 19,943
<OTHER-SE> (6,133)
<TOTAL-LIABILITY-AND-EQUITY> 19,722
<SALES> 23,813
<TOTAL-REVENUES> 23,813
<CGS> 15,102
<TOTAL-COSTS> 6,990
<OTHER-EXPENSES> 2,478
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> (15)
<INCOME-PRETAX> (781)
<INCOME-TAX> 0
<INCOME-CONTINUING> (781)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (781)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
</TABLE>
