<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 10, 1996
Delta Computec Inc.
(Exact Name of Registrant as Specified in its Charter)
New York
(State or Other Jurisdiction of Incorporation)
0-14733 16-1146345
(Commission File Number) (I.R.S. Employer Identification No.)
366 White Spruce Blvd., Rochester, New York 14623
(Address of Principal Executive Offices) (Zip Code)
201-440-8585
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Total number of pages in Report (including Exhibits) 215
Exhibit Index located on page 6
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
A. The following Exhibits constituting the original Credit Agreement
entered into between the Registrant, Data Net, and SAI/Delta and NCFC on April
1, 1994, and Amendments Nos. 1 and 2 to the original Credit Agreement, have
previously been furnished as Exhibits to the Registrant's Annual Report on Form
10-K for the Fiscal Year ended October 31, 1994, and Amendments Nos. 3 through 5
to the original Credit Agreement, and the letter agreements dated May 1, 1995,
and May 4, 1995, with Lobozzo relating to Lobozzo providing a commitment to
advance up to $400,000 to the Registrant as part of an Overadvance Facility with
NCFC, and granting a stock option to Lobozzo which grants to Lobozzo the right
to purchase up to 11,440,475 of the Registrant's common shares, have previously
been furnished as Exhibits to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1995 or the Registrant's Current Report on
Form 8-K dated May 4, 1995. .
B. The following Exhibits: (a) letter between Data Net and NCFC dated March
8, 1996; (b) Forbearance Agreement between the Registrant, Data Net and NCFC
dated March 8, 1996; (c) Release and Indemnification Agreement between the
Registrant, Data Net and NCFC dated March 8, 1996; (d) Reaffirmation of Guaranty
between SAI/Delta and NCFC dated March 8, 1996; (e) Letter between NCFC and Data
Net dated March 6, 1996; and (f) Reaffirmation of Subordination dated March 8,
1996, between Lobozzo and NCFC, constituting documents relative to the
disposition of the assets of Data Net, have previously been furnished as
Exhibits to the Registrant's Current Report on Form 8-K filed March 21, 1996.
C. The following Exhibits, constituting promissory notes issued by the
Registrant under the Existing NCFC Loan, are filed as part of this Report:
1. Amended and Restated Promissory Note from the Registrant to NCFC dated
May 1, 1995.
2. Third Amended and Restated Promissory Note from the Registrant to NCFC
dated October 27, 1995.
D. The following Exhibits, constituting amendments to the Forbearance
Agreement, and letters extending the date of the expiration of the Forbearance
Period (as defined in the Forbearance Agreement), are filed as part of this
Report:
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3. Amendment No. 1 to Forbearance Agreement dated May 9, 1996.
4. Amendment No. 2 to Forbearance Agreement dated May 21, 1996.
5. Amendment No. 3 to Forbearance Agreement dated June 14, 1996.
6. Amendment No. 4 to Forbearance Agreement dated July 31, 1996.
7. Amendment No. 5 to Forbearance Agreement dated August 15, 1996.
8. Amendment No. 6 to Forbearance Agreement dated September 9, 1996.
9. Letter from NCFC to the Registrant dated October 1, 1996, extending the
Forbearance Period to October 3, 1996.
10. Letter from NCFC to the Registrant dated October 4, 1996, extending the
Forbearance Period to October 9, 1996.
11. Letter from NCFC to the Registrant dated October 10, 1996, extending
the Forbearance Period to October 10, 1996.
E. The following Exhibits, constituting the NCFC Restructuring Documents,
are filed as part of this Report:
12. Assignment from NCFC to Lobozzo dated October 10, 1996.
13. Amended and Restated Promissory Note from the Registrant to NCFC dated
October 10, 1996, in the principal face amount of $750,000.
14. Intercreditor Agreement between NCFC and Lobozzo dated October 10,
1996.
15. Amended and Restated Security Agreement between the Registrant and NCFC
dated October 10, 1996.
16. Pledge Security Agreement between Lobozzo and NCFC dated October 10,
1996.
17. Form of Warrant from the Registrant to Lobozzo (the "DCI Warrant"),
attached as Exhibit A to the Pledge Security Agreement, Exhibit 16, above, to be
used in the event the
<PAGE>
shareholders of the Registrant approve the issuance thereof.
18. Form of Stock Option from the Registrant to NCFC (the "Assigned
Option"), attached as Exhibit B to the Pledge Security Agreement, Exhibit 16,
above, to be used in the event the shareholders of the Registrant do not approve
the issuance of the DCI Warrant.
19. Form of Assignment Agreement from Lobozzo to NCFC to be used in the
event Lobozzo issues to NCFC the Assigned Option.
20. Form of Stock Option from the Registrant to Lobozzo to be issued in the
event Lobozzo issues to NCFC the Assigned Option.
21. Limited Non-Recourse Guaranty and Suretyship Agreement between Lobozzo
and NCFC dated October 10, 1996.
22. Document from NCFC showing the payoff amounts for the Existing NCFC
Loan as of October 10, 1996.
23. Letter from NCFC to the Registrant dated October 10, 1996,
acknowledging receipt from Lobozzo on October 10, 1996, of $1,544,661.10, with
regard to the NCFC Restructuring and assignment of a portion of the Existing
NCFC Loan to Lobozzo.
24. Form of letter sent to customers of the Registrant advising the
customers of a different lock box address.
25. Amended and Restated Credit Agreement between the Registrant, Data Net
and Lobozzo dated October 10, 1996.
26. Amended and Restated Promissory Note from the Registrant to Lobozzo in
the principal maximum face amount of $2,550,000, dated October 10, 1996.
27. Amended and Restated General Security Agreement between the Registrant,
Data Net and Lobozzo, dated October 10, 1996.
28. Amended and Restated Unlimited Continuing Guaranty from SAI/Delta to
Lobozzo, dated October 10, 1996.
29. Amended and Restated General Security Agreement from SAI/Delta to
Lobozzo, dated October 10, 1996.
<PAGE>
30. Cash Management Services Agreement between the Registrant and
Manufacturers & Traders Trust Company.
31. Letter from NCFC dated April 24. 1996, advising Data Net that
$122,182.10 had been applied by NCFC to the outstanding Data Net loan as a
result of the liquidation of the Data Net assets.
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 hereunto duly authorized.
Delta Computec Inc.
Registrant
Date: October 24, 1996 By: s/s John DeVito
John DeVito, President
<PAGE>
INDEX TO EXHIBITS
A. The following Exhibits constituting the original Credit Agreement
entered into between the Registrant, Data Net, and SAI/Delta and NCFC on April
1, 1994, and Amendments Nos. 1 and 2 to the original Credit Agreement, have
previously been furnished as Exhibits to the Registrant's Annual Report on Form
10-K for the Fiscal Year ended October 31, 1994. The following Exhibits
constituting Amendments Nos. 3 through 5 to the original Credit Agreement, and
the letter agreements dated May 1, 1995, and May 4, 1995, with Lobozzo relating
to Lobozzo providing a commitment to advance up to $400,000 to the Registrant as
part of an Overadvance Facility with NCFC, and granting a stock option to
Lobozzo which grants to Lobozzo the right to purchase up to 11,440,475 of the
Registrant's common shares, have previously been furnished as Exhibits to the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1995 or the Registrant's Current Report on Form 8-K dated May 4, 1995.
B. The following Exhibits: (a) letter between Data Net and NCFC dated March
8, 1996; (b) Forbearance Agreement between the Registrant, Data Net and NCFC
dated March 8, 1996; (c) Release and Indemnification Agreement between the
Registrant, Data Net and NCFC dated March 8, 1996; (d) Reaffirmation of Guaranty
between SAI/Delta and NCFC dated March 8, 1996; (e) Letter between NCFC and Data
Net dated March 6, 1996; and (f) Reaffirmation of Subordination dated March 8,
1996, between Lobozzo and NCFC, constituting documents relative to the
disposition of the assets of Data Net, have previously been furnished as
Exhibits to the Registrant's Current Report on Form 8-K filed March 21, 1996.
C. The following Exhibits, constituting promissory notes issued by the
Registrant under the Existing NCFC Loan, are filed as part of this Report:
1. Amended and Restated Promissory Note from the Registrant to NCFC dated
May 1, 1995.
2. Third Amended and Restated Promissory Note from the Registrant to NCFC
dated October 27, 1995.
D. The following Exhibits, constituting amendments to the Forbearance
Agreement, and letters extending the date of the expiration of the Forbearance
Period (as defined in the Forbearance Agreement), are filed as part of this
Report:
3. Amendment No. 1 to Forbearance Agreement dated May 9, 1996.
4. Amendment No. 2 to Forbearance Agreement dated May 21, 1996.
5. Amendment No. 3 to Forbearance Agreement dated June 14, 1996.
<PAGE>
6. Amendment No. 4 to Forbearance Agreement dated July 31, 1996.
7. Amendment No. 5 to Forbearance Agreement dated August 15, 1996.
8. Amendment No. 6 to Forbearance Agreement dated September 9, 1996.
9. Letter from NCFC to the Registrant dated October 1, 1996, extending the
Forbearance Period to October 3, 1996.
10. Letter from NCFC to the Registrant dated October 4, 1996, extending the
Forbearance Period to October 9, 1996.
11. Letter from NCFC to the Registrant dated October 10, 1996, extending
the Forbearance Period to October 10, 1996.
E. The following Exhibits, constituting the NCFC Restructuring Documents,
are filed as part of this Report:
12. Assignment from NCFC to Lobozzo dated October 10, 1996.
13. Amended and Restated Promissory Note from the Registrant to NCFC dated
October 10, 1996, in the principal face amount of $750,000.
14. Intercreditor Agreement between NCFC and Lobozzo dated October 10,
1996.
15. Amended and Restated Security Agreement between the Registrant and NCFC
dated October 10, 1996.
16. Pledge Security Agreement between Lobozzo and NCFC dated October 10,
1996.
17. Form of Warrant from the Registrant to Lobozzo (the "DCI Warrant"),
attached as Exhibit A to the Pledge Security Agreement, Exhibit 16, above, to be
used in the event the shareholders of the Registrant approve the issuance
thereof.
18. Form of Stock Option from the Registrant to NCFC (the "Assigned
Option"), attached as Exhibit B to the Pledge Security Agreement, Exhibit 16,
above, to be used in the event the shareholders of the Registrant do not approve
the issuance of the DCI Warrant.
19. Form of Assignment Agreement from Lobozzo to NCFC to be used in the
event Lobozzo issues to NCFC the Assigned Option.
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20. Form of Stock Option from the Registrant to Lobozzo to be issued in the
event Lobozzo issues to NCFC the Assigned Option.
21. Limited Non-Recourse Guaranty and Suretyship Agreement between Lobozzo
and NCFC dated October 10, 1996.
22. Document from NCFC showing the payoff amounts for the Existing NCFC
Loan as of October 10, 1996.
23. Letter from NCFC to the Registrant dated October 10, 1996,
acknowledging receipt from Lobozzo on October 10, 1996, of $1,544,661.10, with
regard to the NCFC Restructuring and assignment of a portion of the Existing
NCFC Loan to Lobozzo.
24. Form of letter sent to customers of the Registrant advising the
customers of a different lock box address.
25. Amended and Restated Credit Agreement between the Registrant, Data Net
and Lobozzo dated October 10, 1996.
26. Amended and Restated Promissory Note from the Registrant to Lobozzo in
the principal maximum face amount of $2,550,000, dated October 10, 1996.
27. Amended and Restated General Security Agreement between the Registrant,
Data Net and Lobozzo, dated October 10, 1996.
28. Amended and Restated Unlimited Continuing Guaranty from SAI/Delta to
Lobozzo, dated October 10, 1996.
29. Amended and Restated General Security Agreement from SAI/Delta to
Lobozzo, dated october 10, 1996.
30. Cash Management Services Agreement between the Registrant and
Manufacturers & Traders Trust Company.
31. Letter from NCFC dated April 24, 1996, advising Data Net that $
122,182.10 had been applied by NCFC to the outstanding Data Net loan as a result
of the liquidation of the Data Net assets.
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
PROMISSORY NOTE
---------------
$4,500,000.00 Syracuse, New York
May 1, 1995
For Value Received, DELTA COMPUTEC INC., and DELTA DATA NET, INC., each of
which is a New York corporation with its principal office at 6647 Old Thompson
Road, Syracuse, New York (collectively, Borrower"), jointly and severally
promise to pay to the order of NATIONAL CANADA FINANCE CORPORATION ("Lender") in
lawful money of the United States of America, at its office located at Suite+
2540, Main Place Tower, 250 Main Street, Buffalo, New York 14202 or, at Lender's
option, at such other place as may be designated from time to time by the
lender, a principal amount equal to the lesser of FOUR MILLION FIVE HUNDRED
THOUSAND DOLLARS ($4,500,000.00), or the aggregate unpaid principal amount of
all loans made by the Lender under a Credit Agreement ("Agreement") between the
borrower and the Lender dated April 1, 1994, as amended, together with interest
thereon.
This Note is intended to evidence "Revolving Credit Loans" made pursuant to
a Revolving Credit Facility under Section 2 of the Agreement, and "Overadvances"
made under the NCFC overadvance Facility under Section 9 of the Agreement. In
this Note loans under either facility are sometimes referred to collectively as
"Loans."
All Overadvances, with accrued interest thereon, shall be paid in full on
or before April 30, 1996 (the "Overadvance Maturity Date"). All Revolving Credit
Loans, with accrued interest thereon, shall be paid in full on or before April
30, 1997 ("Revolving Credit Maturity Date").
Loans evidenced by this Note shall bear interest from the date hereof until
maturity (whether by acceleration or otherwise) on the balance of principal
thereof from time to time unpaid at a rate per annum equal to 1.5% in excess of
the Prime Rate, as defined below, in the case of Revolving Credit Loans, and at
a rate per annum equal to 2.5% in excess of the Prime Rate in the case of
Overadvances. After maturity (whether by acceleration or otherwise) this note
shall bear interest on the unpaid principal hereof at a rate per annum equal to
3.5% in excess of the Prime Rate in the case in the case of Revolving Credit
Loans, and at a rate per annum equal to 4.5% in excess of the Prime Rate in the
case of Overadvances, provided, however, in no event shall the rate of interest
on this Note exceed the maximum rate authorized by applicable law. Interest
shall be calculated on the basis of one three hundred sixtieth (1/360th) of the
rate hereon for each calendar day such balance of principle is unpaid, which
will result in a higher effective annual rate. Interest shall be payable monthly
on the first day of each month until the applicable Maturity Date and on the
date the principle balance hereof is paid in full. The rate of interest on this
Note shall change simultaneously with a corresponding change in the Prime Rate.
The Prime Rate means the National Bank of Canada prime rate as announced in the
United States as it may change from time to time
Page 1 of 207 Pages
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The Lender's records shall constitute prima facie evidence of all loans,
and of all payments on this note.
No failure by Lender to exercise, and no delay in exercising, any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by lender of any right or power hereunder preclude any other
rights or power. The rights and remedies of Lender as herein specified are
cumulative and not exclusive of any other rights or remedies of Lender may
otherwise have.
No Modification, rescission, waiver, release or amendment of any provision
of this Note shall be made expect by written agreement subscribed by duly
authorized officers of the Company and the lender.
Reference is hereby made to the Agreement for provisions with respect to
prepayment, collateral and rights of acceleration of the principal hereof on the
occurrence of certain events.
Borrower agrees to pay all reasonable costs and expenses incurred by the
holder in enforcing this Note or in collecting the indebtedness evidenced
hereby, including, without limitation, if the holder retains counsel for any
such purpose, reasonable attorney' fees and expenses.
Borrower hereby waives diligence, presentment, protest and demand, and also
notice of protest, demand, dishonor and nonpayment of this Note.
This Note shall be construed under and governed by the internal laws of the
State of New York in effect from time to time without regard to principles of
conflicts of laws.
The obligations of the undersigned under this Note are joint and several.
This Note amends and restates a Promissory Note executed by Borrower on
April 1, 1994, and as previously amended and restated on November 17, 1994.
DELTA COMUTEC INC.
By:________________________
John DeVito, President
DELTA DATA NET, INC.
By:_________________________
John DeVito, President
Page 2 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
PROMISSORY NOTE
---------------
$4,500,000.00 Syracuse, New York
October, 1995
For Value Received, DELTA COMPUTEC INC., and DELTA DATA NET, INC., each of
which is a New York corporation with its principal office at 366 White Spruce
Boulevard, Rochester, NY 14623 (collectively, Borrower"), jointly and severally
promise to pay to the order of NATIONAL CANADA FINANCE CORPORATION ("Lender") in
lawful money of the United States of America, at its office located at Suite
2540, Main Place Tower, 250 Main Street, Buffalo, New York 14202 or, at Lender's
option, at such other place as may be designated from time to time by the
lender, a principal amount equal to the lesser of FOUR MILLION FIVE HUNDRED
THOUSAND DOLLARS ($4,500,000.00), or the aggregate unpaid principal amount of
all loans made by the Lender under a Credit Agreement ("Agreement") between the
borrower and the Lender dated April 1, 1994, as amended, together with interest
thereon.
This Note is intended to evidence "Revolving Credit Loans" made pursuant to
a Revolving Credit Facility under Section 2 of the Agreement, and "Overadvances"
made under the NCFC Overadvance Facility under Section 9 of the Agreement. In
this Note loans under either facility are sometimes referred to collectively as
"Loans."
All Overadvances, with accrued interest thereon, shall be paid in full on
or before April 30, 1996 (the "Overadvance Maturity Date"). All Revolving Credit
Loans, with accrued interest thereon, shall be paid in full on or before April
30, 1997 ("Revolving Credit Maturity Date").
Loans evidenced by this Note shall bear interest from the date hereof until
maturity (whether by acceleration or otherwise) on the balance of principal
thereof from time to time unpaid at a rate per annum which are stipulated in the
Credit Agreement as amended from time to time. After Maturity (whether by
acceleration or otherwise) this note shall bear interest on the unpaid principal
hereof at a rate per annum equal to 4.0% in excess of the Prime Rate, in the
case of Revolving Credit Loans, and at a rate per annum equal to 5.0% in excess
of the Prime Rate in the case of overadvances, provided, however, in no event
shall the rate of interest on this Note exceed the Maximum rate authorized by
applicable law. Interest shall be calculated on the basis of one three hundred
sixtieth (1/360th) of the rate hereon for each calendar day such balance of
principle is unpaid, which will result in a higher effective annual rate.
Interest shall be payable monthly on the first day of each month until the
applicable Maturity Date and on the date the principle balance hereof is paid in
full. The rate of interest on this Note shall change simultaneously with a
corresponding change in the Prime Rate. The Prime Rate means the National Bank
of Canada prime rate as announced in the United States as it may change from
time to time.
Page 3 of 207 Pages
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The Lender's records shall constitute prima facie evidence of all loans,
and of all payments on this note.
No failure by Lender to exercise, and no delay in exercising, any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by lender of any right or power hereunder preclude any other
rights or power. The rights and remedies of Lender as herein specified are
cumulative and not exclusive of any other rights or remedies of Lender may
otherwise have.
No Modification, rescission, waiver, release or amendment of any provision
of this Note shall be made expect by written agreement subscribed by duly
authorized officers of the Company and the lender.
Reference is hereby made to the Agreement for provisions with respect to
prepayment, collateral and rights of acceleration of the principal hereof on the
occurrence of certain events.
Borrower agrees to pay all reasonable costs and expenses incurred by the
holder in enforcing this Note or in collecting the indebtedness evidenced
hereby, including, without limitation, if the holder retains counsel for any
such purpose, reasonable attorney' fees and expenses.
Borrower hereby waives diligence, presentment, protest and demand, and also
notice of protest, demand, dishonor and nonpayment of this Note.
This Note shall be construed under and governed by the internal laws of the
State of New York in effect from time to time without regard to principles of
conflicts of laws.
The obligations of the undersigned under this Note are joint and several.
This Note amends and restates a Promissory Note executed by Borrower on
April 1, 1994, and as previously amended and restated on November 17, 1994.
DELTA COMUTEC INC.
By:________________________
John DeVito, President
DELTA DATA NET, INC.
By:_________________________
John DeVito, President
-2-
Page 4 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 1 TO
FORBEARANCE AGREEMENT
---------------------
THIS AMENDMENT NO. 1 TO FORBEARANCE AGREEMENT ("Amendment No.1") is made
and entered into as of May__, 1996, by and between Delta Computec, Inc. ("DCI")
and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and National
Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the " Forbearance Agreement"), a copy of which
is attached hereto as Exhibit "A", in which the Lender agreed to forbear from
exercising certain rights and remedies under its Loan Documents and under
applicable law against the Borrowers and their properties, provided that certain
conditions were met as more fully provided in the Forbearance Agreement; and
WHEREAS, all capitalized terms used in this Amendment No.1, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance Period
as more fully set forth in the Forbearance Agreement from May 8, 1996 to June
14, 1996 provided that the Borrowers comply with all terms and conditions of the
Forbearance Agreement and this Amendment No.1; and
WHEREAS, on March 8, 1996, DDI terminated its business operations and
closed its business facility located at 900 Huyler Street, Teterboro, New Jersey
07608, which action constituted an Event of Default under the Loan Agreements;
and
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for any
deficiency following the Public Auction Sale of the DDI Collateral in accordance
with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other liabilities
and obligations at any time or time owing by Borrowers to Lender, continue to be
secured by security interests granted by Borrowers to Lender in all of
Borrowers' then existing and thereafter acquired accounts, inventory, equipment,
general intangibles, chattel paper, contract rights, instruments and balances,
as more full set forth in the Loan Agreements; and
Page 5 of 207 Pages
<PAGE>
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements; and
WHEREAS, Borrowers desire that Lender continue to forebear from exercising
certain remedies available to Lender under the Loan Agreements, the Forbearance
Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue, during
the Forbearance Period to make Loans to DCI pursuant to the Loan Agreements, as
modified hereby;
WHEREAS, Lender is willing to continue to forbear, in accordance with the
terms of the Forbearance Agreement and the Amendment No. 1, from exercising
remedies available to it as a result of the continuing defaults under the Loan
Agreements, and to continue making Loans consistent with this Amendment No. 1
and the Forbearance Agreement, but only on the terms and conditions contained
herein;
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in consideration
of the premises and the mutual covenants herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Definitions:
"Forbearance Period" shall mean the period commencing on the date
hereof and ending at the close of business on May 22, 1996, provided,
however, that the foregoing date may be extended to a later date by written
agreement of the Lender, in its sole and absolute discretion.
2. Acknowledgments and Stipulations by Borrowers. The Borrowers
acknowledge, stipulate and agree that:
(a) as of the opening of business on May 9, 1996, the Indebtedness is
$486,775.83, exclusive of interest, costs and attorneys' fees chargeable to
Borrowers under the Loan Agreements;
(b) all of the Indebtedness is absolutely due and owing by Borrowers to
Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing under
the Loan Agreements;
2
Page 6 of 207 Pages
<PAGE>
(i) The cessation of the business operations by DDI;
(ii) Borrowers are not in compliance with the following financial
covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section 6.19-
Working Capital Ratio; Section 6.20 - Pre-Tax Income; and Section
6.21-Interest Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or unenumerated
Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements and the Forbearance Agreement executed by
Borrowers are legal, valid and binding obligations of Borrowers, enforceable
against Borrowers in accordance with their respective terms;
(f) the security interest granted by Borrowers to Lender in the Collateral
is a duly perfected, first priority security interest; and
(g) Lender shall be permitted in its sole and absolute discretion to apply
the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has occurred,
Lender agrees that during the Forbearance Period it will not, solely by reason
of the existence on this date of the Events of Default referenced in Section 2
of this Amendment No. 1, exercise any default remedy available to Lender under
the Loan Agreements to enforce collection from DCI of any of the Indebtedness or
to foreclose its security interest in any of the Collateral during the
Forbearance Period except with regards to the Collateral owned by DDI. Neither
this Amendment No.1 nor Lender's forbearance hereunder shall be deemed to be a
waiver of or a consent to the Events of Default referenced in Section 2 of this
Amendment No. 1.
4. Termination of Forbearance. If any one or more of the Termination Events
occur, Lender's agreement to forbear as set forth in Section 3 of this Amendment
No.1 shall, at Lender's election, upon written notice to or demand upon
Borrowers (it being agreed by the parties that such notice may be delivered by
facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
5. Loans. During the Forbearance Period, Borrowers may request, and Lender,
in its sole and absolute discretion, may make Loans to DCI in an aggregate
amount (when added to all then outstanding Loans, whether made prior to or
during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
3
Page 7 of 207 Pages
<PAGE>
(a) (1) Eighty Percent (80%) of DCI's eligible receivables;
(2) Eighty Percent (80%) of DDI's eligible receivables; and
(3) $300,000; less
(4) Outstanding Letter of Credit Obligations; or
(b) Three Million Two Hundred Fifty Thousand Dollars ($3,250,000),
including Letter of Credit Obligations, in the aggregate at any one
time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount.
All Loans made during the Forbearance Period shall be payable on demand,
and shall be entitled to all benefits and protections and secured in the same
manner and to the same extent as Loans made prior to the date hereof. All Loans
made during the Forbearance Period shall bear interest as provided in the Loan
Agreements.
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and agree that
all of the Loan Agreements are fully enforceable and in full force and effect
and have not been waived or modified in any manner except as expressly set forth
in this Amendment No. 1, and that the Loan Agreements, as modified by this
Amendment No. 1, are fully enforceable and in full force and effect on the date
of this Amendment No. 1.
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 1 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 1, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
4
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<PAGE>
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No. 1 and the consummation of the
transactions contemplated hereby are within the power of Borrowers and have been
duly authorized by all necessary corporate action on the part of the Borrowers,
do not require any approval or consent, or filing with, any governmental agency
or authority or any person, do not violate any provisions of any law, rule or
regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which Borrowers are named or any
provision of the charter documents of Borrowers and do not result in a breach of
or constitute a default under any agreement or instrument to which Borrowers are
a party or by which they or any of their properties are bound; (d) this
Amendment No. 1 constitutes the legal, valid and binding obligation of
Borrowers, enforceable against Borrowers in accordance with its terms; (e) the
Borrowers are entering into this Amendment No. 1 freely and voluntarily with the
advice of legal counsel of their own choosing; (f) the Borrowers have freely and
voluntarily agreed to the releases, waivers and undertakings set forth in this
Amendment No. 1; (g) the Public Auction Sale and all efforts taken by the
Lender, its agents, employees and attorneys to notice, conduct and conclude the
Public Auction Sale were proper by the Lender, its agents, employees and
attorneys and were performed in a commercially reasonable manner as provided for
in the Uniform Commercial Code and the Borrowers freely and voluntarily release
and waive any claims against the Lender, its agents, employees and attorneys for
any actions or undertakings in connection with the Public Auction Sale; and (h)
irrespective of the fact that the financial projections dated April 12, 1996,
for the two (2) years ending October 31, 1997, prepared by the Borrowers,
indicate loans in excess of the Maximum Loan Amount are required by the
Borrowers, Borrowers acknowledge that the Maximum Loan Amount will not be
exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants set
forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
1;
(b) deliver to the Lender, each of which shall be satisfactory in form and
substance to Lender:
(i) Release and Indemnification Agreement by the Borrowers;
(ii) A signed consent from Joseph M. Lobozzo, II agreeing to and
acknowledging to the delivery and execution of Amendment No. 1
and a Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.
(iv) Certified copies (certified by authorized officers of Borrowers)
of a corporate resolution taken by Borrowers to authorize the
execution, delivery and performance of this Amendment No. 1;
5
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<PAGE>
(v) Certificates of incumbency and specimen signatures with respect
to each of the officers of Borrowers who are authorized to
execute and deliver this Amendment No. 1 and the Loan
Agreements;
(vi) Certified Financial Statement for each Borrower prepared in
accordance with Generally Accepted Accounting Principals for the
fiscal year ending October 31, 1995 which shall be delivered to
lender by June 3, 1996;
(vii) An internally prepared Balance Sheet, Income Statement and
Statement of Cash Flows for each Borrower for the four month
period ending February 28, 1996 which shall be delivered to
Lender by May 17, 1996;
(viii)A Compilation and Cash Flow Statements for each Borrower for
the five month period ending March 31, 1996 which shall be
delivered to Lender by May 17, 1996;
(c) have executed and delivered this Amendment No. 1;
(d) Borrowers shall from 3/11/96, collect at least Eighty Percent (80%) of
the projected accounts receivable as set forth on page DDN-6 of the annexed
Exhibit "B", all as set forth on page DDN-6, identified in each instance as a
page from the Delta Data Net, Inc. Financial Projections for the two years ended
October 31, 1997.
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No. 1.
(f) Borrowers shall have paid to Lender a fee of $3,250.00 upon execution
of this Amendment No.1.
11. Termination. In the event the Lender shall terminate the Amendment No.
1, DCI agrees that , at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for bankruptcy
relief under 11 U.S.C. Section 101 et seq. or an involuntary petition is filed
against either of the Borrowers, then in such event, Borrowers agree that they
will consent to granting Lender relief from the automatic stay provided for
under 11 U.S.C. Section 362 and Borrowers shall not seek to restrain, enjoin or
otherwise interfere with Lender's rights pursuant to 11 U.S.C. Section 105 or
any other Federal or State statute. Borrowers will consent to any Order or
execute any document necessary for Lender to obtain the relief provided for
herein.
6
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<PAGE>
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in this
Amendment No. 1 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender. Nor is this Amendment No. 1 intended
to change or affect in any way the relationship. This Amendment No. 1 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 1.
14. Entire Agreement; Modification of Agreement. This Amendment No. 1, the
Forbearance Agreement and the other Loan Agreements constitute the entire
understanding of the parties with respect to the subject matter hereof and
thereof. This Amendment No. 1 may not be modified, altered or amended except by
agreement in writing signed by all the parties hereto.
15. Governing Law. This Amendment No. 1 shall be governed by and construed
in accordance with the law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 1 , Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 1 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this Amendment No. 1. Borrowers
agree that such Events of Default shall not be deemed to have been waived,
released or cured by virtue of such Loans, Lender's agreement to forbear
pursuant to the terms of this Amendment No. 1 or the execution of this Amendment
No. 1.
17. No Novation. This Amendment No. 1 is not intended to be, nor shall it
be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 1.
18. Miscellaneous. This Amendment No. 1 may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.
1, it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT NO. 1,
BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND LENDER'S
OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES
7
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<PAGE>
OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER ABSOLUTE OR CONTINGENT, DUE OR
TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY, THAT THE BORROWERS
NOW HAVE OR EVER HAD AGAINST LENDER RISING UNDER OR IN CONNECTION WITH ANY OF
THE LOAN AGREEMENTS, THE FORBEARANCE AGREEMENT, THE PUBLIC AUCTION SALE OR
OTHERWISE.
20. Severability. Wherever possible, each provision of this Amendment No. 1
is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No. 1 is to be prohibited
by or invalid under applicable law, such provision is to be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment No. 1.
21. Loan Agreements. This Amendment No. 1 shall be entitled to all of the
benefits of the Loan Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta Computec Inc. and Delta
Data Net, Inc., unless it gives Lender prior written notice of any such change
in the manner provided for under the Loan Agreements.
23. The Borrowers hereby acknowledge that all notices, requests and demands
in accordance with the Loan Agreements and this Amendment No. 1 shall be
addressed to:
E. Lynn Forgosh, Group V.P.
National Canada Finance Corp.
125 West 55th Street
New York, New York 10019-5366
-- with a copy to --
Walter J. Greenhalgh, Esq.
Robinson, St. John & Wayne
Two Penn Plaza East
Newark, New Jersey 07105-2249
Lenders hereby acknowledge that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 3 shall be
addressed to:
8
Page 12 of 207 Pages
<PAGE>
President
Delta Computec, Inc.
900 Huyler Stteet
teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
or
President
Delta Data Net, Inc.
900 Huyler Stret
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
- with a copy to -
Edwin M. Larkin, Esq.
Jacckle, Fleishman & Mugel
39 State Street, Suite 460
Rochester, New York 14614-1310
Telepcopy No. (716) 262-4133
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be
duly executed and delivered on the date first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: /s/ John DeVito
----------------------------
Name: John DeVito
--------------------------
Title: President/COO
-------------------------
By:_______________________
[CORPORATE SEAL]
DELTA DATA NET, INC.
ATTEST: By: /s/ John DeVito
----------------------------
Name: John DeVito
--------------------------
Title: President/COO
-------------------------
By:_____________________
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
9
Page 13 of 207 Pages
<PAGE>
LENDER:
NATIONAL CANADA FINANCE CORP.
By:
----------------------------
E. Lynn Forgosh, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
10
Page 14 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 2 TO
FORBEARANCE AGREEMENT
---------------------
THIS AMENDMENT NO. 2 TO FORBEARANCE AGREEMENT ("Amendment No. 2") is made
and entered into as of May 23, 1996, by and between Delta Computec, Inc. ("DCI")
and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and National
Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the " Forbearance Agreement"), a copy of which
is attached hereto as Exhibit "A", in which the Lender agreed to forbear from
exercising certain rights and remedies under its Loan Documents and under
applicable law against the Borrowers and their properties, provided that certain
conditions were met as more fully provided in the Forbearance Agreement; and
WHEREAS, Lender and Borrowers entered into Amendment No.1 to Forbearance
Agreement dated May 9, 1996 (" Amendment No.1"), a copy of which is attached
hereto as Exhibit "B", in which the Lender agreed to forbear from exercising
certain rights and remedies under its Loan Documents and under applicable law
against the Borrowers and their properties and to extend the term of the
Forbearance Period as more fully set forth in the Forbearance Agreement from May
8, 1996 to May 22, 1996, provided that certain conditions were met as more fully
provided in the Amendment No.1; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance Period
as more fully set forth in the Forbearance Agreement from May 23, 1996 to June
14, 1996 provided that the Borrowers comply with all terms and conditions of the
Forbearance Agreement, Amendment No. 1 and this Amendment No. 2; and
WHEREAS, on March 8, 1996, DDI terminated its business operations and
closed its business facility located at 900 Huyler Street, Teterboro, New Jersey
07608, which action constituted an Event of Default under the Loan Agreements;
and
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for any
deficiency following the Public Auction Sale of the DDI Collateral in accordance
with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other liabilities
and obligations at any time or time owing by Borrowers to Lender, continue to be
secured by security interests
Page 15 of 207 Pages
<PAGE>
granted by Borrowers to Lender in all of Borrowers' then existing and thereafter
acquired accounts, inventory, equipment, general intangibles, chattel paper,
contract rights, instruments and balances, as more full set forth in the Loan
Agreements; and
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements; and
WHEREAS, Borrowers desire that Lender continue to forebear from exercising
certain remedies available to Lender under the Loan Agreements, the Forbearance
Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue, during
the Forbearance Period to make Loans to DCI pursuant to the Loan Agreements, as
modified hereby;
WHEREAS, Lender is willing to continue to forbear, in accordance with the
terms of the Forbearance Agreement, Amendment No. 1 and this Amendment No. 2,
from exercising remedies available to it as a result of the continuing defaults
under the Loan Agreements, and to continue making Loans consistent with this
Amendment No. 2, Amendment No. 1 and the Forbearance Agreement, but only on the
terms and conditions contained herein;
WHEREAS, all capitalized terms used in this Amendment No. 2, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in consideration
of the premises and the mutual covenants herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Definitions:
"Forbearance Period" shall mean the period commencing on the date
hereof and ending at the close of business on June 14, 1996, provided,
however, that the foregoing date may be extended to a later date by written
agreement of the Lender, in its sole and absolute discretion.
2. Acknowledgments and Stipulations by Borrowers. The Borrowers
acknowledge, stipulate and agree that:
(a) as of the opening of business on May 23, 1996, the Indebtedness is $
2,503,065.22, exclusive of interest, costs and attorneys' fees chargeable to
Borrowers under the Loan Agreements;
2
Page 16 of 207 Pages
<PAGE>
(b) all of the Indebtedness is absolutely due and owing by Borrowers to
Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing under
the Loan Agreements;
(i) The cessation of the business operations by DDI;
(ii) Borrowers are not in compliance with the following financial
covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section 6.19-
Working Capital Ratio; Section 6.20 - Pre-Tax Income; and Section
6.21-Interest Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or unenumerated
Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements, the Forbearance Agreement and Amendment
No.1 executed by Borrowers are legal, valid and binding obligations of
Borrowers, enforceable against Borrowers in accordance with their respective
terms;
(f) the security interest granted by Borrowers to Lender in the Collateral
is a duly perfected, first priority security interest; and
(g) Lender shall be permitted in its sole and absolute discretion to apply
the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has occurred,
Lender agrees that during the Forbearance Period it will not, solely by reason
of the existence on this date of the Events of Default referenced in Section 2
of this Amendment No. 2, exercise any default remedy available to Lender under
the Loan Agreements to enforce collection from DCI of any of the Indebtedness or
to foreclose its security interest in any of the Collateral during the
Forbearance Period except with regards to the Collateral owned by DDI. Neither
this Amendment No. 2 nor Lender's forbearance hereunder shall be deemed to be a
waiver of or a consent to the Events of Default referenced in Section 2 of this
Amendment No. 2.
4. Termination of Forbearance. If any one or more of the Termination Events
occur, Lender's agreement to forbear as set forth in Section 3 of this Amendment
No. 2 shall, at Lender's election, upon written notice to or demand upon
Borrowers (it being agreed by the parties that such notice may be delivered by
facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
3
Page 17 of 207 Pages
<PAGE>
5. Loans. During the Forbearance Period, Borrowers may request, and Lender,
in its sole and absolute discretion, may make Loans to DCI in an aggregate
amount (when added to all then outstanding Loans, whether made prior to or
during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
(a) (1) Eighty Percent (80%) of DCI's Eligible Receivables on
service contracts that are based on a billing schedule of no
greater than ninety (90) days;
(2) Eighty Percent (80%) of DCI's Eligible Receivables on
service contracts which do not exceed $25,000 and that are
based on a billing schedule of in excess of ninety (90) days
but no greater than one year;
(3) Eighty Percent (80%) of DDI's Eligible Receivables on
service contracts that are based on a billing schedule of no
greater than ninety (90) days;
(4) Eighty Percent (80%) of DDI's Eligible Receivables on
service contracts which do not exceed $25,000 and that are
based on a billing schedule of in excess of ninety (90) days
but no greater than one year;
(5) Fifty Percent (50%) of DCI's Eligible Receivables on service
contracts which exceed $25,000 and that are based on a
billing schedule of in excess of ninety (90) days but no
greater than one hundred eighty (180) days;
(6) Twenty-five Percent (25%) of DCI's Eligible Receivables on
service contracts which exceed $25,000 and that are based on
a billing schedule of in excess of one hundred eighty (180)
days but no greater than one year; and
(7) $300,000; less
(8) Outstanding Letter of Credit Obligations; or
(b) Three Million Two Hundred Fifty Thousand Dollars ($3,250,000),
including Letter of Credit Obligations, in the aggregate at any one
time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount. The parties acknowledge that the only change made by
Paragraph 5(a) from Amendment No. 1 to this Amendment No. 2 is the percent
advanced by Lender to DCI on Eligible Receivables.
All Loans made during the Forbearance Period shall be payable on demand,
and shall be entitled to all benefits and protections and secured in the same
manner and to the same extent as Loans made prior to the date hereof. All Loans
made during the Forbearance Period shall bear interest as provided in the Loan
Agreements.
All payments of Receivables must be credited through a lock box arrangement
through Lender's offices which shall be held by Lender as collateral for payment
and/or performance of Borrowers' Obligations to Lender.
4
Page 18 of 207 Pages
<PAGE>
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and agree that
all of the Loan Agreements are fully enforceable and in full force and effect
and have not been waived or modified in any manner except as expressly set forth
in the Forbearance Agreement, Amendment No. 1, this Amendment No. 2, and that
the Loan Agreements, as modified by this Amendment No. 2, are fully enforceable
and in full force and effect on the date of this Amendment No. 2.
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 2 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 2, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No. 2 and the consummation of the
transactions contemplated hereby are within the power of Borrowers and have been
duly authorized by all necessary corporate action on the part of the Borrowers,
do not require any approval or consent, or filing with, any governmental agency
or authority or any person, do not violate any provisions of any law, rule or
regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which Borrowers are named or any
provision of the charter documents of Borrowers and do not result in a breach of
or constitute a default under any agreement or instrument to which Borrowers are
a party or by which they or any of their properties are bound; (d) this
Amendment No. 2 constitutes the legal, valid and binding obligation of
Borrowers, enforceable against Borrowers in accordance with its terms; (e) the
Borrowers are entering into this Amendment No. 2 freely and voluntarily with the
advice of legal counsel of their own choosing; (f) the Borrowers have freely and
voluntarily agreed to the releases, waivers and undertakings set forth in this
Amendment No. 2; (g) the Public Auction Sale and all efforts taken by the
Lender, its agents, employees and attorneys to notice, conduct and conclude the
Public Auction Sale were proper by the Lender, its agents, employees and
attorneys and were performed in a commercially reasonable manner as provided for
in the Uniform Commercial Code and the Borrowers freely and voluntarily release
and waive any claims against the Lender, its agents, employees and attorneys for
any actions or undertakings in connection with the Public Auction Sale; and (h)
irrespective of the fact that the financial projections dated April 12, 1996,
for the two (2) years ending October 31, 1997, prepared by the
5
Page 19 of 207 Pages
<PAGE>
Borrowers, indicate loans in excess of the Maximum Loan Amount are required by
the Borrowers, Borrowers acknowledge that the Maximum Loan Amount will not be
exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants set
forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
2;
(b) deliver to the Lender, each of which shall be satisfactory in form and
substance to Lender:
(i) Release and Indemnification Agreement by the Borrowers;
(ii) A signed consent from Joseph M. Lobozzo, II agreeing to and
acknowledging to the delivery and execution of Amendment No. 2
and a Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.
(iv) Certified copies (certified by authorized officers of
Borrowers) of a corporate resolution taken by Borrowers to
authorize the execution, delivery and performance of this
Amendment No. 2;
(v) Certificates of incumbency and specimen signatures with respect
to each of the officers of Borrowers who are authorized to
execute and deliver this Amendment No. 2 and the Loan
Agreements;
(vi) A Draft Consolidated Financial Statement for the Borrowers
prepared in accordance with Generally Accepted Accounting
Principals for the fiscal year ending October 31, 1995 which
shall be delivered to Lender by June 10, 1996;
(vii) An internally prepared Balance Sheet, Income Statement and
Statement of Cash Flows for each Borrower for the four month
period ending February 28, 1996 which shall be delivered to
Lender by May 22, 1996;
(viii) A Compilation and Cash Flow Statements for each Borrower for
the five month period ending March 31, 1996 which shall be
delivered to Lender by May 24, 1996;
(ix) A Capitalization Proposal for DCI, including a proposed
timetable, as prepared by management of DCI and approved by the
DCI Board of Directors which shall be delivered to Lender by
June 7, 1996;
6
Page 20 of 207 Pages
<PAGE>
(c) have executed and delivered this Amendment No. 2;
(d) Borrowers shall from March 1, 1996, collect at least Eighty Percent
(80%) of the projected accounts receivable as set forth on page DDN-6 of the
annexed Exhibit "C", all as set forth on page DDN-6, identified in each instance
as a page from the Delta Data Net, Inc. Financial Projections for the two years
ended October 31, 1997.
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No. 2.
11. Termination. In the event the Lender shall terminate this Amendment No.
2, DCI agrees that , at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for bankruptcy
relief under 11 U.S.C. Section 101 et seq. or an involuntary petition is filed
against either of the Borrowers, then in such event, Borrowers agree that they
will consent to granting Lender relief from the automatic stay provided for
under 11 U.S.C. Section 362 and Borrowers shall not seek to restrain, enjoin or
otherwise interfere with Lender's rights pursuant to 11 U.S.C. Section 105 or
any other Federal or State statute. Borrowers will consent to any Order or
execute any document necessary for Lender to obtain the relief provided for
herein.
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in this
Amendment No. 2 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender, nor is this Amendment No. 2 intended
to change or affect in any way the relationship. This Amendment No. 2 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 2.
14. Entire Agreement; Modification of Agreement. This Amendment No. 2,
amendment No. 1, the Forbearance Agreement and the other Loan Agreements
constitute the entire understanding of the parties with respect to the subject
matter hereof and thereof. This Amendment No. 2 may not be modified, altered or
amended except by agreement in writing signed by all the parties hereto.
15. Governing Law. This Amendment No. 2 shall be governed by and construed
in accordance with the law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 2 , Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 2 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this
7
Page 21 of 207 Pages
<PAGE>
Amendment No. 2. Borrowers agree that such Events of Default shall not be deemed
to have been waived, released or cured by virtue of such Loans, Lender's
agreement to forbear pursuant to the terms of this Amendment No. 2 or the
execution of this Amendment No. 2.
17. No Novation. This Amendment No. 2 is not intended to be, nor shall it
be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 2.
18. Miscellaneous. This Amendment No. 2 may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.
2, it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT NO. 2,
BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND LENDER'S
OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER ABSOLUTE OR
CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY,
THAT THE BORROWERS NOW HAVE OR EVER HAD AGAINST LENDER RISING UNDER OR IN
CONNECTION WITH ANY OF THE LOAN AGREEMENTS, THE FORBEARANCE AGREEMENT, THE
PUBLIC AUCTION SALE OR OTHERWISE.
20. Severability. Wherever possible, each provision of this Amendment No. 2
is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No. 2 is to be prohibited
by or invalid under applicable law, such provision is to be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment No. 2.
21. Loan Agreements. This Amendment No. 2 shall be entitled to all of the
benefits of the Loan Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta
8
Page 22 of 207 Pages
<PAGE>
Computec Inc. and Delta Data Net, Inc., unless it gives Lender prior written
notice of any such change in the manner provided for under the Loan Agreements.
23. Notices. The Borrowers hereby acknowledge that all notices, requests
and demands in accordance with the Loan Agreements and this Amendment No. 2
shall be addressed to:
E. Lynn Forgosh, Group V.P.
National Canada Finance Corp.
125 West 55th Street
New York, New York 10019-5366
-- with a copy to --
Walter J. Greenhalgh, Esq.
Robinson, St. John & Wayne
Two Penn Plaza East
Newark, New Jersey 07105-2249
Lender hereby acknowledges that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 2 shall be addressed
to:
President
Delta Computec, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
telecopy no. (201) 440-3985
or
President
Delta Data Net, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
telecopy no. (201) 440-3985
-- with a copy to --
Edwin M. Larkin, Esq.
Jaeckle, Fleishmann & Mugel
39 State Street, Suite 460
Rochester, New York 14614-1310
telecopy no. (716) 262-4133
9
Page 23 of 207 Pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be
duly executed and delivered on the date first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: /s/ John DeVito
---------------------------------
Name: John DeVito
-------------------------------
Title: President
------------------------------
By: /s/ [ILLEGIBLE]
-------------------------
[CORPORATE SEAL]
DELTA DATA NET, INC.
ATTEST: By: /s/ John DeVito
---------------------------------
Name: John DeVito
-------------------------------
Title: President
------------------------------
By: /s/ [ILLEGIBLE]
-------------------------
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
10
Page 24 of 207 Pages
<PAGE>
LENDER:
NATIONAL CANADA FINANCE CORP.
By: ______________________________
E. Lynn Forgosh, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
11
Page 25 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 3 TO
FORBEARANCE AGREEMENT
---------------------
THIS AMENDMENT NO. 3 TO FORBEARANCE AGREEMENT ("Amendment No. 3") is made
and entered into as of June 14, 1996, by and between Delta Computec, Inc.
("DCI") and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and
National Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the " Forbearance Agreement"), a copy of which
is attached hereto as Exhibit "A", in which the Lender agreed to forbear from
exercising certain rights and remedies under its Loan Documents and under
applicable law against the Borrowers and their properties, provided that certain
conditions were met as more fully provided in the Forbearance Agreement; and
WHEREAS, Lender and Borrowers entered into Amendment No.1 to Forbearance
Agreement dated May 9, 1996 (" Amendment No.1"), a copy of which is attached
hereto as Exhibit "B", in which the Lender agreed to forbear from exercising
certain rights and remedies under its Loan Documents and under applicable law
against the Borrowers and their properties and to extend the term of the
Forbearance Period as more fully set forth in the Forbearance Agreement from May
8, 1996 to May 22, 1996, provided that certain conditions were met as more fully
provided in the Amendment No.1; and
WHEREAS, Lender and Borrowers entered into Amendment No.2 to Forbearance
Agreement dated May 23, 1996 (" Amendment No.2"), a copy of which is attached
hereto as Exhibit "C", in which the Lender agreed to forbear from exercising
certain rights and remedies under its Loan Documents and under applicable law
against the Borrowers and their properties and to extend the term of the
Forbearance Period as more fully set forth in the Forbearance Agreement from May
22, 1996 to June 14, 1996, provided that certain conditions were met as more
fully provided in the Amendment No.2; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance Period
as more fully set forth in the Forbearance Agreement from June 14, 1996 to July
31, 1996 provided that the Borrowers comply with all terms and conditions of the
Forbearance Agreement, Amendment No. 1, Amendment No. 2 and this Amendment No.
3; and
WHEREAS, on March 8, 1996, DDI terminated its business operations and
closed its business facility located at 900 Huyler Street, Teterboro, New Jersey
07608, which action constituted an Event of Default under the Loan Agreements;
and
Page 26 of 207 Pages
<PAGE>
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for any
deficiency following the Public Auction Sale of the DDI Collateral in accordance
with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other liabilities
and obligations at any time or time owing by Borrowers to Lender, continue to be
secured by security interests granted by Borrowers to Lender in all of
Borrowers' then existing and thereafter acquired accounts, inventory, equipment,
general intangibles, chattel paper, contract rights, instruments and balances,
as more full set forth in the Loan Agreements; and
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the
Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements; and
WHEREAS, Borrowers desire that Lender continue to forebear from exercising
certain remedies available to Lender under the Loan Agreements, the Forbearance
Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue, during
the Forbearance Period to make Loans to DCI pursuant to the Loan Agreements, as
modified hereby;
WHEREAS, Lender is willing to continue to forbear, in accordance with the
terms of the Forbearance Agreement, Amendment No. 1, Amendment No. 2 and this
Amendment No. 3, from exercising remedies available to it as a result of the
continuing defaults under the Loan Agreements, and to continue making Loans
consistent with this Amendment No. 3, Amendment No. 2, Amendment No. 1 and the
Forbearance Agreement, but only on the terms and conditions contained herein;
WHEREAS, all capitalized terms used in this Amendment No. 3, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in consideration
of the premises and the mutual covenants herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:
2
Page 27 of 207 Pages
<PAGE>
1. Definitions:
"Forbearance Period" shall mean the period commencing on the date
hereof and ending at the close of business on July 31, 1996, provided,
however, that the foregoing date may be extended to a later date by written
agreement of the Lender, in its sole and absolute discretion.
2. Acknowledgments and Stipulations by Borrowers. The Borrowers acknowledge,
stipulate and agree that:
(a) as of the opening of business on June 14, 1996, the Indebtedness
is $2,305,358.98 exclusive of interest, costs and attorneys' fees
chargeable to Borrowers under the Loan Agreements;
(b) all of the Indebtedness is absolutely due and owing by Borrowers
to Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing
under the Loan Agreements;
(i) The cessation of the business operations by DDI;
(ii) Borrowers are not in compliance with the following financial
covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section
6.19- Working Capital Ratio; Section 6.20 - Pre-Tax Income; and
Section 6.21-Interest Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or
unenumerated Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements, the Forbearance Agreement, Amendment
No.1, Amendment No.2 and this Amendment No.3 executed by Borrowers are
legal, valid and binding obligations of Borrowers, enforceable against
Borrowers in accordance with their respective terms;
(f) the security interest granted by Borrowers to Lender in the
Collateral is a duly perfected, first priority security interest; and
3
Page 28 of 207 Pages
<PAGE>
(g) Lender shall be permitted in its sole and absolute discretion to
apply the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has occurred,
Lender agrees that during the Forbearance Period it will not, solely by reason
of the existence on this date of the Events of Default referenced in Section 2
of this Amendment No. 3, exercise any default remedy available to Lender under
the Loan Agreements to enforce collection from DCI of any of the Indebtedness or
to foreclose its security interest in any of the Collateral during the
Forbearance Period except with regards to the Collateral owned by DDI. Neither
this Amendment No. 3 nor Lender's forbearance hereunder shall be deemed to be a
waiver of or a consent to the Events of Default referenced in Section 2 of this
Amendment No. 3.
4. Termination of Forbearance. If any one or more of the Termination Events
occur, Lender's agreement to forbear as set forth in Section 3 of this Amendment
No. 3 shall, at Lender's election, upon written notice to or demand upon
Borrowers (it being agreed by the parties that such notice may be delivered by
facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
5. Loans. During the Forbearance Period, Borrowers may request, and Lender,
in its sole and absolute discretion, may make Loans to DCI in an aggregate
amount (when added to all then outstanding Loans, whether made prior to or
during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
4
Page 29 of 207 Pages
<PAGE>
(a) (1) Eighty Percent (80%) of DCI's Eligible Receivables on service
contracts that are based on a billing schedule of no greater than
ninety (90) days;
(2) Eighty Percent (80%) of DCI's Eligible Receivables on service
contracts which do not exceed $25,000 and that are based on a billing
schedule of in excess of ninety (90) days but no greater than one
year;
(3) Eighty Percent (80%) of DDI's Eligible Receivables on service
contracts that are based on a billing schedule of no greater than
ninety (90) days;
(4) Eighty Percent (80%) of DDI's Eligible Receivables on service
contracts which do not exceed $25,000 and that are based on a billing
schedule of in excess of ninety (90) days but no greater than one
year;
(5) Fifty Percent (50%) of DCI's Eligible Receivables on service contracts
which exceed $25,000 and that are based on a billing schedule of in
excess of ninety (90) days but no greater than one hundred eighty
(180) days;
(6) Twenty-five Percent (25%) of DCI's Eligible Receivables on service
contracts which exceed $25,000 and that are based on a billing
schedule of in excess of one hundred eighty (180) days but no greater
than one year; and
(7) $300,000; less
(8) Outstanding Letter of Credit Obligations; or
(b) Three Million Two Hundred Fifty Thousand Dollars ($3,250,000), including
Letter of Credit Obligations, in the aggregate at any one time outstanding,
provided Lender obtains a Loan participant in an amount not less than Three
Hundred Thousand Dollars ($300,000). In the event that Lender does not
obtain a Loan participant in an amount not less than Three Hundred Thousand
Dollars ($300,000), then the Maximum Loan Amount shall not exceed Two
Million Nine Hundred Fifty
5
Page 30 of 207 Pages
<PAGE>
Thousand Dollars ($2,950,000), including Letter of Credit Obligations in
the aggregate at any one time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount.
All Loans made during the Forbearance Period shall be payable on demand,
and shall be entitled to all benefits and protections and secured in the same
manner and to the same extent as Loans made prior to the date hereof. All Loans
made during the Forbearance Period shall bear interest as provided in the Loan
Agreements.
All payments of Receivables must be credited through a lock box arrangement
through Lender's offices which shall be held by Lender as collateral for payment
and/or performance of Borrowers' Obligations to Lender.
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and agree that
all of the Loan Agreements are fully enforceable and in full force and effect
and have not been waived or modified in any manner except as expressly set forth
in the Forbearance Agreement, Amendment No. 1, Amendment No. 2, this Amendment
No. 3, and that the Loan Agreements, as modified by this Amendment No. 3, are
fully enforceable and in full force and effect on the date of this Amendment No.
3.
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 3 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 3, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No. 3 and the consummation of the
transactions contemplated hereby are within
6
Page 31 of 207 Pages
<PAGE>
the power of Borrowers and have been duly authorized by all necessary corporate
action on the part of the Borrowers, do not require any approval or consent, or
filing with, any governmental agency or authority or any person, do not violate
any provisions of any law, rule or regulation or any provision of any order,
writ, judgment, injunction, decree, determination or award presently in effect
in which Borrowers are named or any provision of the charter documents of
Borrowers and do not result in a breach of or constitute a default under any
agreement or instrument to which Borrowers are a party or by which they or any
of their properties are bound; (d) this Amendment No. 3 constitutes the legal,
valid and binding obligation of Borrowers, enforceable against Borrowers in
accordance with its terms; (e) the Borrowers are entering into this Amendment
No. 3 freely and voluntarily with the advice of legal counsel of their own
choosing; (f) the Borrowers have freely and voluntarily agreed to the releases,
waivers and undertakings set forth in this Amendment No. 3; (g) the Public
Auction Sale and all efforts taken by the Lender, its agents, employees and
attorneys to notice, conduct and conclude the Public Auction Sale were proper by
the Lender, its agents, employees and attorneys and were performed in a
commercially reasonable manner as provided for in the Uniform Commercial Code
and the Borrowers freely and voluntarily release and waive any claims against
the Lender, its agents, employees and attorneys for any actions or undertakings
in connection with the Public Auction Sale; and (h) irrespective of the fact
that the financial projections dated
April 12, 1996, for the two (2) years ending October 31, 1997, prepared by the
Borrowers, indicate loans in excess of the Maximum Loan Amount are required by
the Borrowers, Borrowers acknowledge that the Maximum Loan Amount will not be
exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants set
forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
3;
(b) deliver to the Lender, each of which shall be satisfactory in form and
substance to Lender:
(i) Release and Indemnification Agreement by the Borrowers;
(ii) A signed consent from Joseph M. Lobozzo, II agreeing to and
acknowledging to the delivery and execution of Amendment No. 3 and a
Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.;
(iv) Certified copies (certified by authorized officers of Borrowers)
of a corporate resolution taken by Borrowers to authorize the execution,
delivery and performance of this Amendment No. 3;
7
Page 32 of 207 Pages
<PAGE>
(v) Certificates of incumbency and specimen signatures with respect to
each of the officers of Borrowers who are authorized to execute and deliver
this Amendment No. 3 and the Loan Agreements;
(vi) A Draft Consolidated Financial Statement for the Borrowers
prepared in accordance with Generally Accepted Accounting Principals for
the fiscal year ending October 31,1995 which shall be delivered to Lender
by July 1, 1996;
(c) have executed and delivered this Amendment No. 3;
(d) Borrowers shall from March 1, 1996, collect at least Eighty Percent
(80%) of the projected accounts receivable as set forth on page DDN-6 of the
annexed Exhibit "D", all as set forth on page DDN-6, identified in each instance
as a page from the Delta Data Net, Inc. Financial Projections for the two years
ended October 31, 1997; and
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No. 3.
11. Termination. In the event the Lender shall terminate this Amendment No.
3, DCI agrees that, at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for bankruptcy
relief under 11 U.S.C. Section 101 et seq. or an involuntary petition is filed
against either of the Borrowers, then in such event, Borrowers agree that they
will consent to granting Lender relief from the automatic stay provided for
under 11 U.S.C. Section 362 and Borrowers shall not seek to restrain, enjoin or
otherwise interfere with Lender's rights pursuant to 11 U.S.C. Section 105 or
any other Federal or State statute. Borrowers will consent to any Order or
execute any document necessary for Lender to obtain the relief provided for
herein.
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in this
Amendment No. 3 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender, nor is this Amendment No. 3 intended
to change or affect in any way the relationship. This Amendment No. 3 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 3.
14. Entire Agreement; Modification of Agreement. This Amendment No. 3,
Amendment No.2, Amendment No. 1, the Forbearance Agreement and the other Loan
Agreements constitute the entire understanding of the parties with respect to
the subject matter hereof and
8
Page 33 of 207 Pages
<PAGE>
thereof. This Amendment No. 3 may not be modified, altered or amended except by
agreement in writing signed by all the parties hereto.
15. Governing Law. This Amendment No. 3 shall be governed by and construed
in accordance with the -------------- law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 3, Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 3 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this Amendment No. 3. Borrowers
agree that such Events of Default shall not be deemed to have been waived,
released or cured by virtue of such Loans, Lender's agreement to forbear
pursuant to the terms of this Amendment No. 3 or the execution of this Amendment
No. 3.
17. No Novation. This Amendment No. 3 is not intended to be, nor shall it
be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 3.
18. Miscellaneous. This Amendment No. 3 may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.
3, it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT NO. 3,
BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND LENDER'S
OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER ABSOLUTE OR
CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY,
THAT THE BORROWERS NOW HAVE OR EVER HAD AGAINST LENDER ARISING UNDER OR IN
CONNECTION WITH ANY OF THE LOAN AGREEMENTS, THE FORBEARANCE AGREEMENT, AMENDMENT
NO. 1, AMENDMENT NO. 2 AND THIS AMENDMENT NO. 3, THE PUBLIC AUCTION SALE OR
OTHERWISE.
20. Severability. Wherever possible, each provision of this Amendment No. 3
is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No. 3 is to be prohibited
by or invalid under applicable law, such provision is to
9
Page 34 of 207 Pages
<PAGE>
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amendment No. 3.
21. Loan Agreements. This Amendment No. 3 shall be entitled to all of the
benefits of the Loan ---------------- Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta Computec Inc. and Delta
Data Net, Inc., unless it gives Lender prior written notice of any such change
in the manner provided for under the Loan Agreements.
23. Notices. The Borrowers hereby acknowledge that all notices, requests
and demands in accordance with the Loan Agreements and this Amendment No. 3
shall be addressed to:
E. Lynn Forgosh, Group V.P.
National Canada Finance Corp.
125 West 55th Street
New York, New York 10019-5366
-- with a copy to --
Walter J. Greenhalgh, Esq.
Robinson, St. John & Wayne
Two Penn Plaza East
Newark, New Jersey 07105-2249
Lender hereby acknowledges that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 3 shall be addressed
to:
President
Delta Computec, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
or
President
Delta Data Net, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
10
Page 35 of 207 Pages
<PAGE>
-- with a copy to --
Edwin M. Larkin, Esq.
Jaeckle, Fleishmann & Mugel
39 State Street, Suite 460
Rochester, New York 14614-1310
Telecopy No. (716) 262-4133
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be
duly executed and delivered on the date first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: /s/ John Devito
-----------------------
Name: John Devito
---------------------
Title: President
--------------------
By:_______________________
[CORPORATE SEAL]
DELTA DATA NET, INC.
ATTEST: By: /s/ John Devito
-----------------------
Name: John Devito
---------------------
Title: President
--------------------
By:_____________________
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
11
Page 36 of 207 Pages
<PAGE>
LENDER:
NATIONAL CANADA FINANCE CORP.
By: ___________________________
E. Lynn Forgosh, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
Page 37 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 4 TO
FORBEARANCE AGREEMENT
THIS AMENDMENT NO. 4 TO FORBEARANCE AGREEMENT ("Amendment No. 4") is made
and entered into as of July 31, 1996, by and between Delta Computec, Inc.
("DCI") and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and
National Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the " Forbearance Agreement"), a copy of which
is attached hereto as Exhibit "A", in which the Lender agreed to forbear from
exercising certain rights and remedies under its Loan Documents and under
applicable law against the Borrowers and their properties, provided that certain
conditions were met as more fully provided in the Forbearance Agreement; and
WHEREAS, Lender and Borrowers entered into Amendment No.1 to Forbearance
Agreement dated May 9, 1996 (" Amendment No.1"), a copy of which is attached
hereto as Exhibit "B", in which the Lender agreed to forbear from exercising
certain rights and remedies under its Loan Documents and under applicable law
against the Borrowers and their properties and to extend the term of the
Forbearance Period as more fully set forth in the Forbearance Agreement from May
8, 1996 to May 22, 1996, provided that certain conditions were met as more fully
provided in the Amendment No.1; and
WHEREAS, Lender and Borrowers entered into Amendment No.2 to Forbearance
Agreement dated May 23, 1996 (" Amendment No.2"), a copy of which is attached
hereto as Exhibit "C", in which the Lender agreed to forbear from exercising
certain rights and remedies under its Loan Documents and under applicable law
against the Borrowers and their properties and to extend the term of the
Forbearance Period as more fully set forth in the Forbearance Agreement from May
22, 1996 to June 14, 1996, provided that
certain conditions were met as more fully provided in the Amendment No.2; and
WHEREAS, Lender and Borrowers entered into Amendment No. 3 to
Forbearance Agreement dated June 14, 1996, ("Amendment No. 3"), a copy of which
is attached hereto as Exhibit "D", in which the Lender agreed to forbear from
exercising certain rights and remedies under its Loan Documents and under
applicable law against the Borrowers and their properties and to extend the term
of the Forbearance Period as more fully set forth in the Forbearance Agreement
from June 14, 1996 to July 31, 1996, provided that certain conditions were met
as more fully provided in the Amendment No. 3; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance Period
as more fully set forth in the Forbearance Agreement from July 31, 1996 to
August 15, 1996 provided that
Page 38 of 207 Pages
<PAGE>
the Borrowers comply with all terms and conditions of the Forbearance Agreement,
Amendment No. 1, Amendment No. 2, Amendment No. 3 and this Amendment No. 4; and
WHEREAS, on March 8, 1996, DDI terminated its business operations and
closed its business facility located at 900 Huyler Street, Teterboro, New Jersey
07608, which action constituted an Event of Default under the Loan Agreements;
and
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for
any deficiency following the Public Auction Sale of the DDI Collateral in
accordance with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other liabilities
and obligations at any time or time owing by Borrowers to Lender, continue to be
secured by security interests granted by Borrowers to Lender in all of
Borrowers' then existing and thereafter acquired accounts, inventory, equipment,
general intangibles, chattel paper, contract rights, instruments and balances,
as more full set forth in the Loan Agreements; and
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements; and
WHEREAS, Borrowers desire that Lender continue to forebear from exercising
certain remedies available to Lender under the Loan Agreements, the Forbearance
Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue, during
the Forbearance Period to make Loans to DCI pursuant to the Loan Agreements, as
modified hereby;
WHEREAS, Lender is willing to continue to forbear, in accordance with the
terms of the Forbearance Agreement, Amendment No. 1, Amendment No. 2, Amendment
No. 3 and this Amendment No. 4, from exercising remedies available to it as a
result of the continuing defaults under the Loan Agreements, and to continue
making Loans consistent with this Amendment No. 4, Amendment No. 3, Amendment
No. 2, Amendment No. 1 and the Forbearance Agreement, but only on the terms and
conditions contained herein;
2
Page 39 of 207 Pages
<PAGE>
WHEREAS, all capitalized terms used in this Amendment No. 4, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in consideration
of the premises and the mutual covenants herein contained, the parties hereto,
intending to be legally bound
hereby, agree as follows:
1. Definitions:
"Forbearance Period" shall mean the period commencing on the date
hereof and ending at the close of business on August 15, 1996, provided,
however, that the foregoing date may be extended to a later date by written
agreement of the Lender, in its sole and absolute discretion.
2. Acknowledgments and Stipulations by Borrowers. The Borrowers
acknowledge, stipulate and agree that:
(a) as of the opening of business on July 30, 1996, the Indebtedness is $
1,879,745.40 exclusive of interest, costs and attorneys' fees chargeable to
Borrowers under the Loan Agreements;
(b) all of the Indebtedness is absolutely due and owing by Borrowers to
Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing under
the Loan Agreements;
(i) The cessation of the business operations by DDI;
(ii) Borrowers are not in compliance with the following financial
covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section 6.19-
Working Capital Ratio; Section 6.20 - Pre-Tax Income; and Section
6.21-Interest Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or unenumerated
Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements, the Forbearance Agreement, Amendment No.1,
Amendment No.2, Amendment No. 3 and this Amendment No. 4 executed by Borrowers
are legal, valid and binding obligations of Borrowers, enforceable against
Borrowers in accordance with their respective terms;
3
Page 40 of 207 Pages
<PAGE>
(f) the security interest granted by Borrowers to Lender in the Collateral
is a duly perfected, first priority security interest; and
(g) Lender shall be permitted in its sole and absolute discretion to apply
the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has occurred,
Lender agrees that during the Forbearance Period it will not, solely by reason
of the existence on this date of the Events of Default referenced in Section 2
of this Amendment No. 4, exercise any default remedy available to Lender under
the Loan Agreements to enforce collection from DCI of any of the Indebtedness or
to foreclose its security interest in any of the Collateral during the
Forbearance Period except with regards to the Collateral owned by DDI. Neither
this Amendment No. 4 nor Lender's forbearance hereunder shall be deemed to be a
waiver of or a consent to the Events of Default referenced in Section 2 of this
Amendment No. 4.
4. Termination of Forbearance. If any one or more of the Termination Events
occur, Lender's agreement to forbear as set forth in Section 3 of this Amendment
No. 4 shall, at Lender's election, upon written notice to or demand upon
Borrowers (it being agreed by the parties that such notice may be delivered by
facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
5. Loans. During the Forbearance Period, Borrowers may request, and Lender,
in its sole and absolute discretion, may make Loans to DCI in an aggregate
amount (when added to all then outstanding Loans, whether made prior to or
during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
(a) (1) Eighty Percent (80%) of DCI's Eligible Receivables on service
contracts that are based on a billing schedule of no greater than
ninety (90) days;
(2) Eighty Percent (80%) of DCI's Eligible Receivables on service
contracts which do not exceed $25,000 and that are based on a billing
schedule of in excess of ninety (90) days but no greater than one
year;
(3) Eighty Percent (80%) of DDI's Eligible Receivables on service
contracts that are based on a billing schedule of no greater than
ninety (90) days;
(4) Eighty Percent (80%) of DDI's Eligible Receivables on service
contracts which do not exceed $25,000 and that are based on a billing
schedule of in excess of ninety (90) days but no greater than one
year;
(5) Fifty Percent (50%) of DCI's Eligible Receivables on service contracts
which exceed $25,000 and that are based on a billing schedule of in
excess of ninety (90) days but no greater than one hundred eighty
(180) days;
4
Page 41 of 207 Pages
<PAGE>
(6) Twenty-five Percent (25%) of DCI's Eligible Receivables on service
contracts which exceed $25,000 and that are based on a billing
schedule of in excess of one hundred eighty (180) days but no greater
than one year; and
(7) $300,000; less
(8) Outstanding Letter of Credit Obligations; or
(b) Three Million Two Hundred Fifty Thousand Dollars ($3,250,000), including
Letter of Credit Obligations, in the aggregate at any one time outstanding,
provided Lender obtains a Loan participant in an amount not less than Three
Hundred Thousand Dollars ($300,000). In the event that Lender does not
obtain a Loan participant in an amount not less than Three Hundred Thousand
Dollars ($300,000), then the Maximum Loan Amount shall not exceed Two
Million Nine Hundred Fifty Thousand Dollars ($2,950,000), including Letter
of Credit Obligations in the aggregate at any one time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount.
All Loans made during the Forbearance Period shall be payable on demand,
and shall be entitled to all benefits and protections and secured in the same
manner and to the same extent as Loans made prior to the date hereof. All Loans
made during the Forbearance Period shall bear interest as provided in the Loan
Agreements.
All payments of Receivables must be credited through a lock box arrangement
through Lender's offices which shall be held by Lender as collateral for payment
and/or performance of Borrowers' Obligations to Lender.
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and agree that
all of the Loan Agreements are fully enforceable and in full force and effect
and have not been waived or modified in any manner except as expressly set forth
in the Forbearance Agreement, Amendment No. 1, Amendment No. 2, Amendment No. 3,
this Amendment No. 4, and that the Loan Agreements, as modified by this
Amendment No. 4, are fully enforceable and in full force and effect on the date
of this Amendment No. 4.
5
Page 42 of 207 Pages
<PAGE>
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 4 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 4, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No. 4 and the consummation of the
transactions contemplated hereby are within the power of Borrowers and have been
duly authorized by all necessary corporate action on the part of the Borrowers,
do not require any approval or consent, or filing with, any governmental agency
or authority or any person, do not violate any provisions of any law, rule or
regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which Borrowers are named or any
provision of the charter documents of Borrowers and do not result in a breach of
or constitute a default under any agreement or instrument to which Borrowers are
a party or by which they or any of their properties are bound; (d) this
Amendment No. 4 constitutes the legal, valid and binding obligation of
Borrowers, enforceable against Borrowers in accordance with its terms; (e) the
Borrowers are entering into this Amendment No. 4 freely and voluntarily with the
advice of legal counsel of their own choosing; (f) the Borrowers have freely and
voluntarily agreed to the releases, waivers and undertakings set forth in this
Amendment No. 4; (g) the Public Auction Sale and all efforts taken by the
Lender, its agents, employees and attorneys to notice, conduct and conclude the
Public Auction Sale were proper by the Lender, its agents, employees and
attorneys and were performed in a commercially reasonable manner as provided for
in the Uniform Commercial Code and the Borrowers freely and voluntarily release
and waive any claims against the Lender, its agents, employees and attorneys for
any actions or undertakings in connection with the Public Auction Sale; and (h)
irrespective of the fact that the financial projections dated April 12, 1996,
for the two (2) years ending October 31, 1997, prepared by the Borrowers,
indicate loans in excess of the Maximum Loan Amount are required by the
Borrowers, Borrowers acknowledge that the Maximum Loan Amount will not be
exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants set
forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
4;
(b) deliver to the Lender, each of which shall be satisfactory in form and
substance to Lender:
(i) Release and Indemnification Agreement by the Borrowers;
6
Page 43 of 207 Pages
<PAGE>
(ii) A signed consent from Joseph M. Lobozzo, II agreeing to and
acknowledging to the delivery and execution of Amendment No. 4 and a
Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.;
(iv) Certified copies (certified by authorized officers of Borrowers) of a
corporate resolution taken by Borrowers to authorize the execution,
delivery and performance of this Amendment No. 4;
(v) Certificates of incumbency and specimen signatures with respect to
each of the officers of Borrowers who are authorized to execute and
deliver this Amendment No. 4 and the Loan Agreements;
(c) have executed and delivered this Amendment No. 4;
(d) Borrowers shall from March 1, 1996, collect at least Eighty Percent
(80%) of the projected accounts receivable as set forth on page DDN-6 of the
annexed Exhibit "E", all as set forth on page DDN-6, identified in each instance
as a page from the Delta Data Net, Inc. Financial Projections for the two years
ended October 31, 1997; and
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No. 4.
11. Termination. In the event the Lender shall terminate this Amendment No.
4, DCI agrees that , at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for bankruptcy
relief under 11 U.S.C. Section 101 et seq. or an involuntary petition is filed
against either of the Borrowers, then in such event, Borrowers agree that they
will consent to granting Lender relief from the automatic stay provided for
under 11 U.S.C. Section 362 and Borrowers shall not seek to restrain, enjoin or
otherwise interfere with Lender's rights pursuant to 11 U.S.C. Section 105 or
any other Federal or State statute. Borrowers will consent to any Order or
execute any document necessary for Lender to obtain the relief provided for
herein.
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in this
Amendment No. 4 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender, nor is this Amendment No. 4 intended
to change or affect in any way the relationship. This Amendment No. 4 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
7
Page 44 of 207 Pages
<PAGE>
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 4.
14. Entire Agreement; Modification of Agreement. This Amendment No. 4,
Amendment No. 3, Amendment No.2, Amendment No. 1, the Forbearance Agreement and
the other Loan Agreements constitute the entire understanding of the parties
with respect to the subject matter hereof and thereof. This Amendment No. 4 may
not be modified, altered or amended except by agreement in writing signed by all
the parties hereto.
15. Governing Law. This Amendment No. 4 shall be governed by and construed
in accordance with the law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 4, Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 4 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this Amendment No. 4. Borrowers
agree that such Events of Default shall not be deemed to have been waived,
released or cured by virtue of such Loans, Lender's agreement to forbear
pursuant to the terms of this Amendment No. 4 or the execution of this Amendment
No. 4.
17. No Novation. This Amendment No. 4 is not intended to be, nor shall it
be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 4.
18. Miscellaneous. This Amendment No. 4 may be executed inany number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.
4, it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT NO. 4,
BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND LENDER'S
OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER ABSOLUTE OR
CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY,
THAT THE BORROWERS NOW HAVE OR EVER HAD AGAINST LENDER ARISING UNDER OR IN
CONNECTION WITH ANY OF THE LOAN AGREEMENTS,
8
Page 45 of 207 Pages
<PAGE>
THE FORBEARANCE AGREEMENT, AMENDMENT NO. 1, AMENDMENT NO. 2, AMENDMENT NO. 3 AND
THIS AMENDMENT NO. 4, THE PUBLIC AUCTION SALE OR OTHERWISE.
20. Severability. Wherever possible, each provision of this Amendment No. 4
is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No. 4 is to be prohibited
by or invalid under applicable law, such provision is to be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment No. 4.
21. Loan Agreements. This Amendment No. 4 shall be entitled to all of the
benefits of the Loan Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta Computec Inc. and Delta
Data Net, Inc., unless it gives Lender prior written notice of any such change
in the manner provided for under the Loan Agreements.
23. Notices. The Borrowers hereby acknowledge that all notices, requests
and demands in accordance with the Loan Agreements and this Amendment No. 4
shall be addressed to:
E. Lynn Forgosh, Group V.P.
National Canada Finance Corp.
125 West 55th Street
New York, New York 10019-5366
-- with a copy to --
Walter J. Greenhalgh, Esq.
Robinson, St. John & Wayne
Two Penn Plaza East
Newark, New Jersey 07105-2249
Lender hereby acknowledges that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 4 shall be addressed
to:
President
Delta Computec, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
9
Page 46 of 207 Pages
<PAGE>
or
President
Delta Data Net, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
-- with a copy to --
Edwin M. Larkin, Esq.
Jaeckle, Fleischmann & Mugel
39 State Street, Suite 460
Rochester, New York 14614-1310
Telecopy No. (716) 262-4133
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to
be duly executed and delivered on the date first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: ______________________
Name: ____________________
Title: ___________________
By:_______________________
[CORPORATE SEAL]
DELTA DATA NET, INC.
ATTEST: By: ______________________
Name: ____________________
Title: ___________________
By:_____________________
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
10
Page 47 of 207 Pages
<PAGE>
LENDER:
NATIONAL CANADA FINANCE CORP.
By:_______________________
E. Lynn Forgosh, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
11
Page 48 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 5 TO
FORBEARANCE AGREEMENT
THIS AMENDMENT NO. 5 TO FORBEARANCE AGREEMENT ("Amendment No.5") is
made and entered into as of August 15, 1996, by and between Delta Computec, Inc.
("DCI") and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and
National Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the "Forbearance Agreement"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties, provided that certain conditions were met as more fully provided in
the Forbearance Agreement; and
WHEREAS, Lender and Borrowers entered into Amendment No.1 to
Forbearance Agreement dated May 9, 1996 ( "Amendment No.1"), in which the Lender
agreed to forbear from exercising certain rights and remedies under its Loan
Documents and under applicable law against the Borrowers and their properties
and to extend the term of the Forbearance Period as more fully set forth in the
Forbearance Agreement from May 8, 1996 to May 22, 1996, provided that certain
conditions were met as more fully provided in the Amendment No.1; and
WHEREAS, Lender and Borrowers entered into Amendment No.2 to
Forbearance Agreement dated May 23, 1996 (" Amendment No.2"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from May 22, 1996 to June 14, 1996, provided
that certain conditions were met as more fully provided in the Amendment No.2;
and
WHEREAS, Lender and Borrowers entered into Amendment No. 3 to
Forbearance Agreement dated June 14, 1996, ("Amendment No. 3"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from June 14, 1996 to July 31, 1996, provided
that certain conditions were met as more fully provided in the
Page 49 of 207 Pages
<PAGE>
Amendment No. 3; and
WHEREAS, Lender and Borrowers entered into Amendment No. 4 to
Forbearance Agreement dated July 31, 1996, ("Amendment No. 4"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from July 31, 1996 to August 15, 1996,
provided that certain conditions were met as more fully provided in the
Amendment No. 4; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance
Period as more fully set forth in the Forbearance Agreement from August 15,
1996, to September 30, 1996 provided that the Borrowers comply with all terms
and conditions of the Forbearance Agreement, Amendment No.1, Amendment No.2,
Amendment No.3, Amendment No.4, and this Amendment No. 5; and
WHEREAS, on March 8, 1996, DDI terminated its business operations and
closed its business facility located at 900 Huyler Street,
Teterboro, New Jersey 07608, which action constituted an Event of Default under
the Loan Agreements; and
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for
any deficiency following the Public Auction Sale of the DDI Collateral in
accordance with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other
liabilities and obligations at any time or time owing by Borrowers to Lender,
continue to be secured by security interests granted by Borrowers to Lender in
all of Borrowers' then existing and thereafter acquired accounts, inventory,
equipment, general intangibles, chattel paper, contract rights, instruments and
balances, as more full set forth in the Loan Agreements; and
Page 50 of 207 Pages
<PAGE>
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements;
and
WHEREAS, Borrowers desire that Lender continue to forebear from
exercising certain remedies available to Lender under the Loan Agreements, the
Forbearance Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue,
during the Forbearance Period to make Loans to DCI pursuant to the Loan
Agreements, as modified hereby;
WHEREAS, Lender is willing to continue to forbear, in accordance with
the terms of the Forbearance Agreement, Amendment No. 1, Amendment No. 2,
Amendment No. 3, Amendment No. 4, and this Amendment No. 5. from exercising
remedies available to it as a result of the continuing defaults under the Loan
Agreements, and to continue making Loans consistent with this Amendment No. 5,
Amendment No. 4, Amendment No. 3, Amendment No.2, Amendment No. 1, and the
Forbearance Agreement, but only on the terms and conditions contained herein;
WHEREAS, all capitalized terms used in this Amendment No. 5, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in
consideration of the premises and the mutual covenants herein contained, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions:
"Forbearance Period" shall mean the period commencing on
September 3, 1996 and ending at the close of business on September 30,
1996, provided, however, that the foregoing date may be extended to a
later date by written agreement of the Lender, in its sole and absolute
discretion.
Page 51 of 207 Pages
<PAGE>
2. Acknowledgments and Stipulations by Borrowers. The Borrowers
acknowledge, stipulate and agree that:
(a) as of the opening of business on August 15, 1996, the Indebtedness
is $ 1,635,559 exclusive of interest, costs and attorneys' fees chargeable to
Borrowers under the Loan Agreements;
(b) all of the Indebtedness is absolutely due and owing by Borrowers to
Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing
under the Loan Agreements;
(i) The cessation of the business operations by DDI;
(ii) Borrowers are not in compliance with the following
financial covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section 6.19-
Working Capital Ratio; Section 6.20 - Pre-Tax Income; and Section 6.21-Interest
Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or
unenumerated Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements, the Forbearance Agreement, Amendment
No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, and this Amendment No.
5 executed by Borrowers are legal, valid and binding obligations of Borrowers,
enforceable against Borrowers in accordance with their respective terms;
(f) the security interest granted by Borrowers to Lender in the
Collateral is a duly perfected, first priority security interest; and
(g) Lender shall be permitted in its sole and absolute discretion to
apply the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has
occurred, Lender agrees that during the Forbearance Period it will not, solely
by reason of the existence on this date of the Events of Default referenced in
Section 2 of this Amendment No. 5, exercise any default remedy available to
Lender under the Loan Agreements to enforce collection from DCI of any of the
Indebtedness or to foreclose its security interest in any of the Collateral
during
Page 52 of 207 Pages
<PAGE>
the Forbearance Period except with regards to the Collateral owned by DDI.
Neither this Amendment No. 5 nor Lender's forbearance hereunder shall be deemed
to be a waiver of or a consent to the Events of Default referenced in Section 2
of this Amendment No. 5.
4. Termination of Forbearance. If any one or more of the Termination
Events occur, Lender's agreement to forbear as set forth in Section 3 of this
Amendment No. 5 shall, at Lender's election, upon written notice to or demand
upon Borrowers (it being agreed by the parties that such notice may be delivered
by facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
5. Loans. During the Forbearance Period, Borrowers may request, and
Lender, in its sole and absolute discretion, may make Loans to DCI in an
aggregate amount (when added to all then outstanding Loans, whether made prior
to or during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
(a) (1) Eighty Percent (80%) of DCI's Eligible Receivables on
service contracts that are based on a billing schedule of no
greater than ninety (90) days;
(2) Eighty Percent (80%) of DCI's Eligible
Receivables on service contracts which do not exceed $25,000
and that are based on a billing schedule of in excess of
ninety (90) days but no greater than one year;
(3) Eighty Percent (80%) of DDI's Eligible
Receivables on service contracts that are based on a billing
schedule of no greater than ninety (90) days;
(4) Eighty Percent (80%) of DDI's Eligible
Receivables on service contracts which do not exceed $25,000
and that are based on a billing schedule of in excess of
ninety (90) days but no greater than one year;
(5) Fifty Percent (50%) of DCI's Eligible Receivables
on service contracts which exceed $25,000 and that are based
on a billing schedule of in excess of ninety (90) days but no
greater than one hundred eighty (180) days;
(6) Twenty-five Percent (25%) of DCI's Eligible
Receivables on service contracts which exceed $25,000
Page 53 of 207 Pages
<PAGE>
and that are based on a billing schedule of in excess of one
hundred eighty (180) days but no greater than one year; and
(7) $300,000; less
(8) Outstanding Letter of Credit Obligations; or
(b) Two Million Seven Hundred Thousand Dollars ($2,700,000),
including Letter of Credit Obligations, in the aggregate at
any one time outstanding, provided Lender obtains a loan
participant in an amount not less than Six Hundred Thousand
Dollars ($600,000). In the event that Lender does not obtain a
Loan participant in an amount not less than Six Hundred
Thousand Dollars ($600,000), than the Maximum Loan Amount
shall not exceed Two Million One Hundred Thousand Dollars
($2,100,000), including Letter of Credit Obligations, in the
aggregate at any one time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount.
All Loans made during the Forbearance Period shall be payable
on demand, and shall be entitled to all benefits and protections and secured in
the same manner and to the same extent as Loans made prior to the date hereof.
All Loans made during the Forbearance Period shall bear interest as provided in
the Loan Agreements.
All payments of Receivables must be credited through a lock
box arrangement through Lender's offices which shall be held by Lender as
collateral for payment and/or performance of Borrowers' Obligations to Lender.
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and
Page 54 of 207 Pages
<PAGE>
agree that all of the Loan Agreements are fully enforceable and in full force
and effect and have not been waived or modified in any manner except as
expressly set forth in the Forbearance Agreement, Amendment No. 1, Amendment No.
2, Amendment No. 3, Amendment No. 4, and this Amendment No. 5 and that the Loan
Agreements, as modified by this Amendment No. 5, are fully enforceable and in
full force and effect on the date of this Amendment No.5.
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 5 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 5, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No.5 and the consummation of the
transactions contemplated hereby are within the power of Borrowers and have been
duly authorized by all necessary corporate action on the part of the Borrowers,
do not require any approval or consent, or filing with, any governmental agency
or authority or any person, do not violate any provisions of any law, rule or
regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which Borrowers are named or any
provision of the charter documents of Borrowers and do not result in a breach of
or constitute a default under any agreement or instrument to which Borrowers are
a party or by which they or any of their properties are bound; (d) this
Amendment No. 5 constitutes the legal, valid and binding obligation of
Borrowers, enforceable against Borrowers in accordance with its terms; (e) the
Borrowers are entering into this Amendment No. 5 freely and voluntarily with the
advice of legal counsel of their own choosing; (f) the Borrowers have freely and
voluntarily agreed to the releases, waivers and undertakings set forth in this
Amendment No. 5; (g) the Public Auction Sale and all efforts taken by the
Lender, its agents, employees and attorneys to notice, conduct and conclude the
Public Auction Sale were proper by the Lender, its agents, employees and
attorneys and were performed in a commercially reasonable manner as provided for
in the Uniform Commercial Code and the Borrowers freely and voluntarily release
and waive any claims against the
Page 55 of 207 Pages
<PAGE>
Lender, its agents, employees and attorneys for any actions or undertakings in
connection with the Public Auction Sale; and (h) irrespective of the fact that
the financial projections dated April 12, 1996, for the two (2) years ending
October 31, 1997, prepared by the Borrowers, indicate loans in excess of the
Maximum Loan Amount are required by the Borrowers, Borrowers acknowledge that
the Maximum Loan Amount will not be exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants
set forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
5;
(b) deliver to the Lender, each of which shall be satisfactory in form
and substance to Lender:
(I) Release and Indemnification Agreement by the Borrowers;
(ii) A signed consent from Joseph M. Lobozzo, II agreeing to
and acknowledging to the delivery and execution of Amendment No. 5 and
a Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.;
(iv) Certified copies (certified by authorized officers of
Borrowers) of a corporate resolution taken by Borrowers to authorize
the execution, delivery and performance of this Amendment No. 5;
(v) Certificates of incumbency and specimen signatures with
respect to each of the officers of Borrowers who are authorized to
execute and deliver this Amendment No. 5 and the Loan Agreements. ;
(vi) Certified Consolidated Financial Statements for the
Borrowers prepared in accordance with Generally Accepted Accounting
Principals for the fiscal year ending October 31, 1995, which shall be
delivered to Lender so as to be received no later than September 30,
1996;
Page 56 of 207 Pages
<PAGE>
(c) have executed and delivered this Amendment No. 5;
(d) Borrowers shall from March 1, 1996, collect at least Eighty Percent
(80%) of the projected accounts receivable as set forth on page DDN-6 of the
annexed Exhibit "A", all as set forth on page DDN-6, identified in each instance
as a page from the Delta Data Net, Inc. Financial Projections for the two years
ended October 31, 1997; and
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No.5.
11. Termination. In the event the Lender shall terminate this Amendment
No. 5, DCI agrees that, at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for
bankruptcy relief under 11 U.S.C. Section 101 et seq. or an involuntary petition
is filed against either of the Borrowers, then in such event, Borrowers agree
that they will consent to granting Lender relief from the automatic stay
provided for under 11 U.S.C. Section 362 and Borrowers shall not seek to
restrain, enjoin or otherwise interfere with Lender's rights pursuant to 11
U.S.C. Section 105 or any other Federal or State statute. Borrowers will consent
to any Order or execute any document necessary for Lender to obtain the relief
provided for herein.
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in
this Amendment No. 5 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender, nor is this Amendment No. 5 intended
to change or affect in any way the relationship. This Amendment No. 5 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 5.
14. Entire Agreement; Modification of Agreement. This Amendment No. 5,
Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, the
Forbearance Agreement and the other Loan Agreements constitute the entire
understanding of the parties with respect to the subject matter hereof and
thereof. This Amendment No. 5 may not be modified, altered or amended except by
agreement in writing signed by all the parties hereto.
Page 57 of 207 Pages
<PAGE>
15. Governing Law. This Amendment No. 5 shall be governed by and
construed in accordance with the law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 5, Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 5 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this Amendment No. 5. Borrowers
agree that such Events of Default shall not be deemed to have been waived,
released or cured by virtue of such Loans, Lender's agreement to forbear
pursuant to the terms of this Amendment No. 5 or the execution of this Amendment
No. 5.
17. No Novation. This Amendment No. 5 is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 5.
18. Miscellaneous. This Amendment No. 5 may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.5,
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT
NO. 5, BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND
LENDER'S OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS,
DEMANDS, ACTIONS OR CAUSES OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER
ABSOLUTE OR CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR
IN EQUITY, THAT THE BORROWERS NOW HAVE OR EVER HAD AGAINST LENDER ARISING UNDER
OR IN CONNECTION WITH ANY OF THE LOAN AGREEMENTS, THE FORBEARANCE AGREEMENT,
AMENDMENT NO. 1, AMENDMENT NO. 2, AMENDMENT NO. 3, AMENDMENT NO. 4, AND THIS
AMENDMENT NO. 5 THE PUBLIC AUCTION SALE OR OTHERWISE.
Page 58 of 207 Pages
<PAGE>
20. Severability. Wherever possible, each provision of this Amendment
No.5 is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No.5 is to be prohibited
by or invalid under applicable law, such provision is to be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment No. 5.
21. Loan Agreements. This Amendment No. 5 shall be entitled to all of
the benefits of the Loan Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta Computec Inc. and Delta
Data Net, Inc., unless it gives Lender prior written notice of any such change
in the manner provided for under the Loan Agreements.
23. Notices. The Borrowers hereby acknowledge that all notices,
requests and demands in accordance with the Loan Agreements and this Amendment
No.5 shall be addressed to Lender as follows:
E. Lynn Forgosh, Group V.P.
National Canada Finance Corp.
125 West 55th Street
New York, New York 10019-5366
-- with a copy to --
Walter J. Greenhalgh, Esq.
Duane, Morris & Heckscher
The Legal Center, Suite 500
1037 Raymond Boulevard
Newark, New Jersey 07102
Lender hereby acknowledges that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 5 shall be addressed
to Borrowers as follows:
Page 59 of 207 Pages
<PAGE>
President
Delta Computec, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
or
President
Delta Data Net, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
-- with a copy to --
Edwin M. Larkin, Esq.
Jaeckle, Fleischmann & Mugel
39 State Street, Suite 460
Rochester, New York 14614-1310
Telecopy No. (716) 262-4133
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 5
to be duly executed and delivered on the year and day first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: ______________________
Name: ____________________
Title: _____________________
By:_______________________
[CORPORATE SEAL]
DELTA DATA NET, INC.
ATTEST: By: ______________________
Name: ____________________
Title: _____________________
By:________________________
[CORPORATE SEAL]
Page 60 of 207 Pages
<PAGE>
(SIGNATURES CONTINUED ON NEXT PAGE)
Page 61 of 207 Pages
<PAGE>
LENDER:
NATIONAL CANADA FINANCE CORP.
By: ______________________________
E. Lynn Forgosh, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
Page 62 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDMENT NO. 6 TO
FORBEARANCE AGREEMENT
THIS AMENDMENT NO. 6 TO FORBEARANCE AGREEMENT ("Amendment No. 6") is made
and entered into as of September 9, 1996, by and between Delta Computec, Inc.
("DCI") and Delta Data Net, Inc. ("DDI"), (collectively, the "Borrowers") and
National Canada Finance Corp. ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrowers entered into that certain Forbearance
Agreement dated March 8, 1996 ( the "Forbearance Agreement"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties, provided that certain conditions were met as more fully provided in
the Forbearance Agreement; and
WHEREAS, Lender and Borrowers entered into Amendment No.1 to Forbearance
Agreement dated May 9, 1996 ( "Amendment No.1"), in which the Lender agreed to
forbear from exercising certain rights and remedies under its Loan Documents and
under applicable law against the Borrowers and their properties and to extend
the term of the Forbearance Period as more fully set forth in the Forbearance
Agreement from May 8, 1996 to May 22, 1996, provided that certain conditions
were met as more fully provided in the Amendment No.1; and
WHEREAS, Lender and Borrowers entered into Amendment No.2 to Forbearance
Agreement dated May 23, 1996 (" Amendment No.2"), in which the Lender agreed to
forbear from exercising certain rights and remedies under its Loan Documents and
under applicable law against the Borrowers and their properties and to extend
the term of the Forbearance Period as more fully set forth in the Forbearance
Agreement from May 22, 1996 to June 14, 1996, provided that certain conditions
were met as more fully provided in the Amendment No.2; and
WHEREAS, Lender and Borrowers entered into Amendment No. 3 to
Forbearance Agreement dated June 14, 1996, ("Amendment No. 3"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from June 14, 1996 to July 31, 1996, provided
that certain conditions were met as more fully provided in the Amendment No. 3;
and
WHEREAS, Lender and Borrowers entered into Amendment No. 4 to
Forbearance Agreement dated July 31, 1996, ("Amendment No. 4"), in which the
Lender agreed to forbear from exercising certain rights and remedies under its
Loan Documents and under applicable law against the Borrowers and their
properties and to extend the term of the Forbearance Period as more fully set
forth in the Forbearance Agreement from July 31, 1996 to August 15, 1996,
provided that certain conditions were met as more fully provided in the
Amendment No. 4; and
Page 63 of 207 Pages
<PAGE>
WHEREAS, Lender and Borrowers entered into Amendment No. 5 to Forbearance
Agreement dated August 15, 1996, ("Amendment No. 5"), in which the Lender agreed
to forbear from exercising certain rights and remedies under its Loan Documents
and under applicable law against the Borrowers and their properties and to
extend the term of the Forbearance Period as more fully set forth in the
Forbearance Agreement from August 15, 1996 to September 3, 1996, provided that
certain conditions were met as more fully provided in the Amendment No. 5; and
WHEREAS, the Lender has agreed to extend the term of the Forbearance Period
as more fully set forth in the Forbearance Agreement from September 3, 1996 to
September 30, 1996 provided that the Borrowers comply with all terms and
conditions of the Forbearance Agreement, Amendment No. 1, Amendment No. 2,
Amendment No. 3, Amendment No. 4, Amendment No. 5 and this Amendment No. 6; and
WHEREAS, on March 8, 1996, DDI terminated its business operations and
closed its business facility located at 900 Huyler Street, Teterboro, New Jersey
07608, which action constituted an Event of Default under the Loan Agreements;
and
WHEREAS, DDI peaceably turned over to Lender on March 11, 1996, the DDI
Collateral, except the DDI accounts receivable; which DDI Collateral was sold at
public auction sale pursuant to the Uniform Commercial Code on April 9, 1996
(the "Public Auction Sale"); and
WHEREAS, DCI and DDI remain jointly and severally liable to Lender for any
deficiency following the Public Auction Sale of the DDI Collateral in accordance
with the Loan Documents and applicable law; and
WHEREAS, all Loans made by Lender to Borrowers, and all other liabilities
and obligations at any time or time owing by Borrowers to Lender, continue to be
secured by security interests granted by Borrowers to Lender in all of
Borrowers' then existing and thereafter acquired accounts, inventory, equipment,
general intangibles, chattel paper, contract rights, instruments and balances,
as more full set forth in the Loan Agreements; and
WHEREAS, the Guarantor by separate Guaranty Agreement, continues to
unconditionally guarantee payment to Lender of certain liabilities at any time
owing by Borrowers to Lender under the Loan Agreements, or otherwise, as more
fully set forth in the Guaranty Agreement; and
WHEREAS, there exists continuing defaults under the Loan Agreements; and
WHEREAS, Borrowers desire that Lender continue to forebear from exercising
certain remedies available to Lender under the Loan Agreements, the Forbearance
Agreement and applicable law;
WHEREAS, Borrowers and the Guarantor desire that Lender continue, during
the Forbearance Period to make Loans to DCI pursuant to the Loan Agreements, as
modified hereby;
2
Page 64 of 207 Pages
<PAGE>
WHEREAS, Lender is willing to continue to forbear, in accordance with the
terms of the Forbearance Agreement, Amendment No. 1, Amendment No. 2, Amendment
No. 3, Amendment No. 4, Amendment No. 5 and this Amendment No. 6, from
exercising remedies available to it as a result of the continuing defaults under
the Loan Agreements, and to continue making Loans consistent with Amendment No.
1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5 and this
Amendment No. 6 and the Forbearance Agreement, but only on the terms and
conditions contained herein;
WHEREAS, Lender and Borrowers have negotiated a restructuring of the Loans
and Loan Documents, which restructuring is to occur no latter than September 30,
1996, unless extended by Lender in writing, the general terms of which are to be
set forth in a Term Sheet the provisions of which are currently being negotiated
between the parties,, said restructuring to occur only in the sole and absolute
discretion of Lender and subject to proper documents satisfactory to Lender in
its sole and absolute discretion; and
WHEREAS, all capitalized terms used in this Amendment No. 6, unless
otherwise defined, shall have the meaning ascribed to such terms in the
Forbearance Agreement and the Loan Agreements; and
NOW, THEREFORE FOR TEN DOLLARS ($10.00) in hand paid and in
consideration of the premises and the mutual covenants herein contained, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions:
"Forbearance Period" shall mean the period commencing on September 3,
1996 and ending at the close of business on September 30, 1996, provided,
however, that the foregoing date may be extended to a later date by written
agreement of the Lender, in its sole and absolute discretion.
2. Acknowledgments and Stipulations by Borrowers. The Borrowers
acknowledge, stipulate and agree that:
(a) as of the opening of business on September 9, 1996, the
Indebtedness is $1,855,000.00 exclusive of interest, costs and attorneys'
fees chargeable to Borrowers under the Loan Agreements;
(b) all of the Indebtedness is absolutely due and owing by Borrowers
to Lender without any defense, deduction, offset or counterclaim;
(c) the following Events of Default have occurred and are continuing
under the Loan Agreements;
(i) The cessation of the business operations by DDI;
3
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<PAGE>
(ii) Borrowers are not in compliance with the following financial
covenants contained in the Credit Agreement as follows: Section 6.17-
Tangible Net Worth; Section 6.18 -Debt-to-Tangible Net Worth; Section 6.19-
Working Capital Ratio; Section 6.20 - Pre-Tax Income; and Section
6.21-Interest Coverage Ratio.
(d) the Lender does not waive as to Borrowers any unknown or unenumerated
Event of Default which exists under the Loan Agreements;
(e) each of the Loan Agreements, the Forbearance Agreement, Amendment No.
1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5 and this
Amendment No. 6 executed by Borrowers are legal, valid and binding obligations
of Borrowers, enforceable against Borrowers in accordance with their respective
terms;
(f) the security interest granted by Borrowers to Lender in the Collateral
is a duly perfected, first priority security interest; and
(g) Lender shall be permitted in its sole and absolute discretion to apply
the proceeds from the DDI Collateral to the Indebtedness.
3. Agreement to Forebear. Provided that no Termination Event has occurred,
Lender agrees that during the Forbearance Period it will not, solely by reason
of the existence on this date of the Events of Default referenced in Section 2
of this Amendment No. 6, exercise any default remedy available to Lender under
the Loan Agreements to enforce collection from DCI of any of the Indebtedness or
to foreclose its security interest in any of the Collateral during the
Forbearance Period except with regards to the Collateral owned by DDI. Neither
this Amendment No. 6 nor Lender's forbearance hereunder shall be deemed to be a
waiver of or a consent to the Events of Default referenced in Section 2 of this
Amendment No. 6.
4. Termination of Forbearance. If any one or more of the Termination Events
occur, Lender's agreement to forbear as set forth in Section 3 of this Amendment
No. 6 shall, at Lender's election, upon written notice to or demand upon
Borrowers (it being agreed by the parties that such notice may be delivered by
facsimile with a copy to Borrowers' counsel), terminate and Lender shall
thereupon have and may exercise from time to time all of the remedies available
to it under the Loan Agreements and applicable law as a consequence of an Event
of Default, without further notice, demand or presentment.
5. Loans. During the Forbearance Period, Borrowers may request, and Lender,
in its sole and absolute discretion, may make Loans to DCI in an aggregate
amount (when added to all then outstanding Loans, whether made prior to or
during the Forbearance Period) not to exceed the Maximum Loan Amount. The
Maximum Loan Amount shall mean the lesser of:
(a) (1) Eighty Percent (80%) of DCI's Eligible Receivables on service
contracts that are based on a billing schedule of no greater than
ninety (90) days;
4
Page 66 of 207 Pages
<PAGE>
(2) Eighty Percent (80%) of DCI's Eligible Receivables on service
contracts which do not exceed $25,000 and that are based on a billing
schedule of in excess of ninety (90) days but no greater than one
year;
(3) Eighty Percent (80%) of DDI's Eligible Receivables on service
contracts that are based on a billing schedule of no greater than
ninety (90) days;
(4) Eighty Percent (80%) of DDI's Eligible Receivables on service
contracts which do not exceed $25,000 and that are based on a billing
schedule of in excess of ninety (90) days but no greater than one
year;
(5) Fifty Percent (50%) of DCI's Eligible Receivables on service contracts
which exceed $25,000 and that are based on a billing schedule of in
excess of ninety (90) days but no greater than one hundred eighty
(180) days;
(6) Twenty-five Percent (25%) of DCI's Eligible Receivables on service
contracts which exceed $25,000 and that are based on a billing
schedule of in excess of one hundred eighty (180) days but no greater
than one year; and
(7) $300,000; less
(8) Outstanding Letter of Credit Obligations; or
(b) One Million Eight Hundred Fifty Five Thousand Dollars ($1,855,000),
including Letter of Credit Obligations, in the aggregate at any one time
outstanding, until such time as the Term Sheet has been agreed upon and
duly signed by the Lender, Borrowers and Joseph M. LoBozzo, II then upon
the execution of the Term Sheet this amount shall increase to Two Million
Two Hundred Thousand Dollars ($2,200,000), including Letter of Credit
Obligations, in the aggregate at any one time outstanding.
Notwithstanding the foregoing provision and any other provision contained in the
Loan Agreements or any course of dealing or conduct between Lender and Borrowers
prior to the date hereof, Lender shall have no obligation to make further Loans
to DCI; Lender may make, or refuse to make, Loans to DCI, in its discretion in
each instance; and Lender reserves the right to make Loans in excess of the
Maximum Loan Amount.
All Loans made during the Forbearance Period shall be payable on demand,
and shall be entitled to all benefits and protections and secured in the same
manner and to the same extent as Loans made prior to the date hereof. All Loans
made during the Forbearance Period shall bear interest as provided in the Loan
Agreements.
All payments of Receivables must be credited through a lock box arrangement
through Lender's offices which shall be held by Lender as collateral for payment
and/or performance of Borrowers' Obligations to Lender.
6. No Further Commitments by Lender. Borrowers further acknowledge and
agree that the Lender has no existing commitments, obligations or agreements to
make Loans or to make other loans, to issue letters of credit, or to extend
other financial accommodations to Borrowers, except the parties have agreed that
during the Forbearance Period they will negotiate in good faith to restructure
the debt of DCI to the Lender.
7. Reaffirmation of Loan Agreements. The Borrowers reaffirm and agree that
all of the Loan Agreements are fully enforceable and in full force and effect
and have not been waived or
5
Page 67 of 207 Pages
<PAGE>
modified in any manner except as expressly set forth in the Forbearance
Agreement, Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4,
Amendment No. 5 and this Amendment No. 6, and that the Loan Agreements, as
modified by this Amendment No. 6, are fully enforceable and in full force and
effect on the date of this Amendment No. 6.
8. Application of Payments and Collections. Borrowers hereby waive the
right, if any, to direct the manner in which Lender applies any payments or
collections to the Indebtedness and agrees that Lender may apply and reapply all
such payments to the Indebtedness as Lender in its sole and absolute discretion
elects from time to time.
9. Representations and Warranties of Borrowers. Borrowers represent and
warrant that (a) no Event of Default exists under the Loan Agreements, except
for Events of Default identified in Section 2 of this Amendment No. 6 that are
in existence on the date hereof; (b) subject to the existence of the Events of
Default specified in Section 2 of this Amendment No. 6, the representations and
warranties of Borrowers contained in the Loan Agreements were true and correct
in all material respects on the date hereof; (c) the execution, delivery and
performance by Borrowers of this Amendment No. 6 and the consummation of the
transactions contemplated hereby are within the power of Borrowers and have been
duly authorized by all necessary corporate action on the part of the Borrowers,
do not require any approval or consent, or filing with, any governmental agency
or authority or any person, do not violate any provisions of any law, rule or
regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which Borrowers are named or any
provision of the charter documents of Borrowers and do not result in a breach of
or constitute a default under any agreement or instrument to which Borrowers are
a party or by which they or any of their properties are bound; (d) this
Amendment No. 6 constitutes the legal, valid and binding obligation of
Borrowers, enforceable against Borrowers in accordance with its terms; (e) the
Borrowers are entering into this Amendment No. 6 freely and voluntarily with the
advice of legal counsel of their own choosing; (f) the Borrowers have freely and
voluntarily agreed to the releases, waivers and undertakings set forth in this
Amendment No. 6; (g) the Public Auction Sale and all efforts taken by the
Lender, its agents, employees and attorneys to notice, conduct and conclude the
Public Auction Sale were proper by the Lender, its agents, employees and
attorneys and were performed in a commercially reasonable manner as provided for
in the Uniform Commercial Code and the Borrowers freely and voluntarily release
and waive any claims against the Lender, its agents, employees and attorneys for
any actions or undertakings in connection with the Public Auction Sale; and (h)
irrespective of the fact that the financial projections dated April 12, 1996,
for the two (2) years ending October 31, 1997, prepared by the Borrowers,
indicate loans in excess of the Maximum Loan Amount are required by the
Borrowers, Borrowers acknowledge that the Maximum Loan Amount will not be
exceeded.
10. Covenants of the Borrowers. In addition to each of the covenants set
forth in the Loan Agreements, the Borrowers have, or will:
(a) duly and punctually observe, perform and discharge each and every
obligation and covenant on their parts to be performed under this Amendment No.
6;
6
Page 68 of 207 Pages
<PAGE>
(b) deliver to the Lender, each of which shall be satisfactory in form and
substance to Lender:
(I) Release and Indemnification Agreement by the Borrowers;
(ii) A signed consent from Joseph M. Lobozzo, II agreeing to and
acknowledging to the delivery and execution of Amendment No. 6 and a
Reaffirmation of Subordination;
(iii) A signed Reaffirmation of Guaranty by SAI/Delta, Inc.;
(iv) Certified copies (certified by authorized officers of Borrowers) of a
corporate resolution taken by Borrowers to authorize the execution,
delivery and performance of this Amendment No. 6;
(v) Certificates of incumbency and specimen signatures with respect to
each of the officers of Borrowers who are authorized to execute and
deliver this Amendment No. 6 and the Loan Agreements;
(vi) Certified Consolidated Financial Statements for the Borrowers prepared
in accordance with Generally Accepted Accounting Principals for the
fiscal year ending October 31, 1995, which shall be delivered to
Lender so as to be received no latter than September 30, 1996;
(c) have executed and delivered this Amendment No. 6;
(d) Borrowers shall from March 1, 1996, collect at least Eighty Percent
(80%) of the projected accounts receivable as set forth on page DDN-6 of the
annexed Exhibit "A", all as set forth on page DDN-6, identified in each instance
as a page from the Delta Data Net, Inc. Financial Projections for the two years
ended October 31, 1997; and
(e) Borrowers shall have paid all fees and expenses of Lender's counsel
incurred in the preparation, negotiation, execution, delivery and administration
of this Amendment No. 6.
11. Termination. In the event the Lender shall terminate this Amendment No.
6, DCI agrees that , at the option of Lender, it shall commence a voluntary
liquidation of its entire business. This provision is in addition to any of the
other rights and remedies available to the Lender under the Loan Agreements.
12. Bankruptcy. In the event either of the Borrowers files for bankruptcy
relief under 11 U.S.C. Section 101 et seq. or an involuntary petition is filed
against either of the Borrowers, then in such event, Borrowers agree that they
will consent to granting Lender relief from the automatic stay provided for
under 11 U.S.C. Section 362 and Borrowers shall not seek to restrain, enjoin or
7
Page 69 of 207 Pages
<PAGE>
otherwise interfere with Lender's rights pursuant to 11 U.S.C. Section 105 or
any other Federal or State statute. Borrowers will consent to any Order or
execute any document necessary for Lender to obtain the relief provided for
herein.
13. Relationship of Parties; No Third Party Beneficiaries. Nothing in this
Amendment No. 6 shall be construed to alter the existing borrower-creditor
relationship between Borrowers and Lender, nor is this Amendment No. 6 intended
to change or affect in any way the relationship. This Amendment No. 6 is not
intended, nor shall it be construed to create, a partnership or joint venture
relationship between or among any of the parties hereto. No person or entity
other than a party hereto is intended to be a beneficiary hereof and no person
or entity other than a party hereto shall be authorized to rely upon the
contents of this Amendment No. 6.
14. Entire Agreement; Modification of Agreement. This Amendment No. 6,
Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment
No. 5, the Forbearance Agreement and the other Loan Agreements constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof. This Amendment No. 6 may not be modified, altered or amended except
by agreement in writing signed by all the parties hereto.
15. Governing Law. This Amendment No. 6 shall be governed by and construed
in accordance with the law of the State of New York.
16. Non-Waiver of Default. Neither this Amendment No. 6, Lender's
forbearance hereunder nor Lender's continued making of Loans to DCI in
accordance with this Amendment No. 6 shall be deemed a waiver of or consent to
the Events of Default referenced in Section 2 of this Amendment No. 6. Borrowers
agree that such Events of Default shall not be deemed to have been waived,
released or cured by virtue of such Loans, Lender's agreement to forbear
pursuant to the terms of this Amendment No. 6 or the execution of this Amendment
No. 6.
17. No Novation. This Amendment No. 6 is not intended to be, nor shall it
be construed to create, a novation or accord and satisfaction, and, except as
otherwise expressly stated herein, the Loan Agreements (including, without
limitation, Borrowers' obligation under the Lockbox Agreement by and among
Borrowers and Lender) shall remain in full force and effect. Notwithstanding any
prior mutual temporary disregard of any of the terms of any of the Loan
Agreements, the parties agree that the terms of each of the Loan Agreements
shall be strictly adhered to on and after the date hereof, except as expressly
modified by this Amendment No. 6.
18. Miscellaneous. This Amendment No. 6 may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall constitute an original, but all of which taken
together shall be one and the same instrument. In enforcing this Amendment No.6,
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought. Notice of
Lender's acceptance hereof is hereby waived.
8
Page 70 of 207 Pages
<PAGE>
19. Release of Claims. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT NO. 6,
BORROWERS HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE LENDER, AND LENDER'S
OFFICERS, DIRECTORS, PROFESSIONALS, AUCTIONEERS, APPRAISERS, ATTORNEYS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES OF ACTIONS OF ANY KIND (IF ANY THERE BE), WHETHER ABSOLUTE OR
CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY,
THAT THE BORROWERS NOW HAVE OR EVER HAD AGAINST LENDER ARISING UNDER OR IN
CONNECTION WITH ANY OF THE LOAN AGREEMENTS, THE FORBEARANCE AGREEMENT, AMENDMENT
NO. 1, AMENDMENT NO. 2, AMENDMENT NO. 3, AMENDMENT NO. 4, AMENDMENT NO. 5 AND
THIS AMENDMENT NO. 6, THE PUBLIC AUCTION SALE OR OTHERWISE.
20. Severability. Wherever possible, each provision of this Amendment No.6
is to be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No.6 is to be prohibited
by or invalid under applicable law, such provision is to be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment No. 6.
21. Loan Agreements. This Amendment No. 6 shall be entitled to all of the
benefits of the Loan Agreements.
22. Further Representations. The Borrowers hereby represent and warrant
that after the date hereof they will have the same principal place of business,
DCI will continue to do business in the same location as it was doing prior to
the date hereof and will continue to use the names Delta Computec Inc. and Delta
Data Net, Inc., unless it gives Lender prior written notice of any such change
in the manner provided for under the Loan Agreements.
23. Notices. The Borrowers hereby acknowledge that all notices, requests
and demands in accordance with the Loan Agreements and this Amendment No.6 shall
be addressed to Lender as follows:
E. Lynn Forgosh, Group V.P.
National Canada Finance Corp.
125 West 55th Street
New York, New York 10019-5366
-- with a copy to --
9
Page 71 of 207 Pages
<PAGE>
Walter J. Greenhalgh, Esq.
Duane, Morris & Heckscher
Suite 500
One Riverfront Plaza
Newark, New Jersey 07102
Lender hereby acknowledges that all notices, requests and demands in
accordance with the Loan Documents and this Amendment No. 6 shall be addressed
to Borrowers as follows:
President
Delta Computec, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
or
President
Delta Data Net, Inc.
900 Huyler Street
Teterboro, New Jersey 07608
Telecopy No. (201) 440-3985
-- with a copy to --
Edwin M. Larkin, Esq.
Jaeckle, Fleischmann & Mugel
39 State Street, Suite 460
Rochester, New York 14614-1310
Telecopy No. (716) 262-4133
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 6 to
be duly executed and delivered on the year and day first written above.
BORROWERS:
DELTA COMPUTEC INC.
ATTEST: By: ______________________
Name: ____________________
Title: _____________________
By:_______________________
[CORPORATE SEAL]
10
Page 72 of 207 Pages
<PAGE>
DELTA DATA NET, INC.
ATTEST: By: ______________________
Name: ____________________
Title: _____________________
By:_____________________
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
11
Page 73 of 207 Pages
<PAGE>
LENDER:
NATIONAL CANADA FINANCE CORP.
By: ________________________
E. Lynn Forgosh, Group V.P.
ATTEST:
By:_________________________
[CORPORATE SEAL]
12
Page 74 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
NATIONAL CANADA FINANCE CORP
A National Bank Company
125 West 55th Street
New York, New York 10019-5366
Tel. (212) 632-8500 Fax (212)632-8775
October 1, 1996
Delta Computec, Inc.
900 Huyler Street
Teteboro, Nj 070608
Telecopier: 201-440-3985
Attention: John DeVito, President
Re: Extension to Amendment No. 6 to Forebearance Agreement
Dear John:
In consideration of the anticipated closing of the assignment transaction
among National Canada Finance Corp. ("NCFC"), Joseph L. Lobozzo,II ("Lobozzo")
and Delta Computecc, Inc. ("DCI"), I am writing to confirm that NCFC has agreed
to extend the "Forbearnace Period" under the Sixth Amendment to the close of the
Business, October 3, 1996. I will be out of the office tomorrow and not
reachable. We therefore need to resolve any remaining issues today.
All other provisions of the Sixth Amendment shall remain in place and , as
we discussed, NCFC will permit advances under the DCI credit facility only to
the extent that there is elegibility under the DCI facility.
Please contact me if you have any questions.
Sincerely,
E. Lynn Forgosh
Group Vice President
cc: James J. Holman, Esquire (by telecopier)
Joseph L. Lobozzo, II (by telecopier)
Page 75 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
NATIONAL CANADA FINANCE CORP
A National Bank Company
125 West 55th Street
New York, New York 10019-5366
Tel. (212) 632-8500 Fax (212)632-8775
October 4, 1996
Delta Computec, Inc.
900 Huyler Street
Teteboro, Nj 070608
Telecopier: 201-440-3985
Attention: John DeVito, President
Re: Extension to Amendment No. 6 to Forebearance Agreement
Dear John:
In consideration of the anticipated closing of the assignment transaction
among National Canada Finance Corp. ("NCFC"), Joseph L. Lobozzo,II ("Lobozzo")
and Delta Computecc, Inc. ("DCI"), I am writing to confirm that NCFC has agreed
to extend the "Forbearnace Period" under the Sixth Amendment to the close of the
Business, October 9, 1996.
All other provisions of the Sixth Amendment shall remain in place and , as
we discussed, NCFC will permit advances under the DCI credit facility only to
the extent that there is elegibility under the DCI facility.
Please contact me if you have any questions.
Sincerely,
E. Lynn Forgosh
Group Vice President
cc: James J. Holman, Esquire (by telecopier)
Joseph L. Lobozzo, II (by telecopier)
Page 76 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
NATIONAL CANADA FINANCE CORP
A National Bank Company
125 West 55th Street
New York, New York 10019-5366
Tel. (212) 632-8500 Fax (212)632-8775
October 10, 1996
Delta Computec, Inc.
900 Huyler Street
Teteboro, Nj 070608
Telecopier: 201-440-3985
Attention: John DeVito, President
Re: Extension to Amendment No. 6 to Forebearance Agreement
Dear John:
In consideration of the anticipated closing of the assignment transaction
among National Canada Finance Corp. ("NCFC"), Joseph L. Lobozzo,II ("Lobozzo")
and Delta Computecc, Inc. ("DCI"), I am writing to confirm that NCFC has agreed
to extend the "Forbearnace Period" under the Sixth Amendment to the close of the
Business, October 10, 1996.
All other provisions of the Sixth Amendment shall remain in place and , as
we discussed, NCFC will permit advances under the DCI credit facility only to
the extent that there is elegibility under the DCI facility.
Please contact me if you have any questions.
Sincerely,
E. Lynn Forgosh
Group Vice President
cc: James J. Holman, Esquire (by telecopier)
Joseph L. Lobozzo, II (by telecopier)
Page 77 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
ASSIGNMENT
NATIONAL CANADA FINANCE CORP., a Delaware corporation with an office at 125
West 55th Street, New York, New York 10019 ("Assignor"), for in consideration of
the sum of One Million Four Hundred Forty-nine Thousand Eight Hundred Fifteen
and 99/100 Dollars ($1,449,815.99), the receipt of which is hereby acknowledged,
does hereby, without recourse, sell, grant assign, convey, transfer, set over
and deliver unto JOSEPH M. LOBOZZO II, with an office at 690 Portland Avenue,
Rochester, New York 14621 ("Assignee"), all of the Assignor's right, title and
interest, in and to those certain documents identified on Exhibit A annexed
hereto (the "Loan Instruments"), except to the extent that such right, title and
interest relates to indebtedness of Delta Computec Inc. (but not Delta Data Net,
Inc.) to Assignor in the principal sum of $750,000 and accrued and unpaid
interest on such principal sum except that Assignor retains a shared security
interest with Assignee in the spare parts inventory of Delta Computec Inc.
THIS ASSIGNMENT, (2) ANY OF THE LOAN INSTRUMENTS OR THE VALIDITY,
SUFFICIENCY OR ENFORCEABILITY OF ANY THEREOF, (3) ANY ASPECT OF ANY TRANSACTION
BETWEEN ASSIGNOR AND DELTA COMPUTEC INC, DELTA DATA NET, INC., OR SAI/DELTA INC.
OR (4) ANY OTHER MATTER WHATSOEVER, except that Assignor represents to Assignee
that there is due and owing under the Loan Instruments the principal sum of Two
Million One Hundred
Page 78 of 207 Pages
<PAGE>
Ninety-nine Thousand, Eight Hundred Fifteen and 89/100 Dollars ($2,199,815.99),
plus accrued and unpaid interest of Five Thousand Nine Hundred Sixty-two and
50/100 Dollars ($5,962.50) as of October 10, 1996, which includes principal of
$750,000.00 that is not being assigned to Assignee.
Assignee acknowledges that prior to the date hereof the balance due to
Assignor under the Loan Instruments may have been reduced by checks or other
instruments (collectively, the "Returned Items") which may not be honored upon
presentation by Assignor after the date hereof. To the extent that any such
Returned Items are not honored for the account of Assignor in the ordinary
course of Assignor's business, Assignee agrees to indemnify the Assignor upon
demand for such Returned Items by remitting to Assignor an amount sufficient to
restore to $750,000, the principal sum due to the Assignor as of the assignment
date pursuant to the Loan Instruments, but not assigned to Assignee.
IN WITNESS WHEREOF, this Assignment has been duly executed by Assignor,
intending to be legally bound, the 10th day of October, 1996.
NATIONAL CANADA FINANCE CORP.
By: /s/ E. Lynn Forgosh
Name: E. Lynn Forgosh
Title: Group V.P.
2
Page 79 of 207 Pages
<PAGE>
STATE OF ______________ )
COUNTY OF _____________ ) SS:
On this 10 day of October, 1996, before me, the subscriber, personally came
E. Lynn Forgosh to me known, who, being by me duly sworn, did depose and say
that (s)he resides at 125 West 55th St., New York New York; that (s)he is the
Group Vice President of NATIONAL CANADA FINANCE CORP., the corporation described
in and such executed the above instrument; and that (s)he executed said
instrument by authority of the Board of Directors of said corporation.
/s/ Una Teresa Finn
Notary Public
[NOTARY STAMP]
Una Teresa Finn
Notary Public, State of New York
Qualified in Queens County
Commission Expires March 11, 1998
3
Page 80 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE is made this 10th day of October
1996 by and between DELTA COMPUTEC INC., a New York corporation with its
principal office and place of business 900 Huyler Street, Teterboro, New Jersey
07608 ("Borrower") and NATIONAL CANADA FINANCE CORP., a Delaware corporation
with an office and place of business at 125 West 55th Street, New York, New York
10019-5366 ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower, Delta Data Net, Inc. ("DDI") and Lender entered into a
certain Credit Agreement dated as of April 1, 1994, as amended by Credit
Agreement Amendment No. 1 dated November 17, 1994, Credit Agreement Amendment
No. 2 dated January 24, 1995, Credit Agreement Amendment No. 3 dated April 3,
1995, Credit Agreement Amendment No. 4 dated May 1, 1995 and Credit Agreement
Amendment No. 5 dated October 27, 1995 (as amended, the "Credit Agreement"); and
WHEREAS, Borrower and DDI executed and delivered to Lender a Promissory
Note dated April 1, 1994, as amended and restated by an Amended and Restated
Promissory Note dated May 1, 1995 and as further amended and restated by a Third
Amended and Restated Promissory Note dated October 27, 1995 (as amended and
restated, the "Promissory Note"); and
WHEREAS, on the date hereof, Lender is assigning to Joseph M. Lobozzo II
("Lobozzo") all indebtedness of DDI to Lender and all but $750,000 of the
indebtedness owed to Lender by Borrower evidenced by the Credit Agreement and
the Promissory Note; and
WHEREAS, Borrower and Lender desire to enter into a new agreement which
amends and restates, in its entirety, the portions of the Credit Agreement and
the Promissory Note evidencing the indebtedness which Lender is not assigning to
Lobozzo.
NOW, THEREFORE, Borrower and Lender agree as follows:
1. Promise to Pay. For value received, Borrower promises to pay to Lender,
on the earlier to occur of: (a) October 10, 2001 (the "Maturity Date"); or (b)
the day upon which Lender accelerates the Indebtedness (as herein defined)
following the occurrence of an Event of Default and, if applicable, the
expiration of any cure period related to such Event of Default, the principal
sum of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) (the
"Principal"), plus interest as agreed below and all reasonable attorneys' fees
and disbursements Lender incurs in order to collect any amount due
Page 81 of 207 Pages
<PAGE>
under this Note. All of Borrower's obligations to Lender described in the
preceding sentence, together with Borrower's obligations to make Quarterly
Premium Payments, as such term is defined below, are collectively referred to as
the "Indebtedness".
2. Interest. The unpaid Principal balance of this Note shall earn interest
calculated on the basis of a 360-day year for the actual number of days of each
year (365 or 366) from and including the date hereof to but not including the
date all amounts hereunder are paid in full at a rate per year that shall on
each day be one percent (1%) above the rate in effect on that day as the rate
announced by Lender as its Prime Rate of interest. Until the outstanding
Principal is paid in full, payments of all accrued and unpaid interest in
amounts which will vary will become due and payable on the first day of each
month commencing on November 1, 1996. "Prime Rate" shall mean the interest rate
per annum announced from time to time by Lender as its Prime Rate. The Prime
Rate may be greater or lesser than other interest rates charged by Lender to
other borrowers and is not solely based or dependent upon the interest rate
which Lender may charge any particular borrower or class of borrowers.
3. Interest Rate Cap. It is the intent of Lender and Borrower that in no
event shall interest be payable at a rate in excess of the maximum rate
permitted by applicable law (the "Maximum Legal Rate"). Solely to the extent
necessary to prevent interest under this Note from exceeding the Maximum Legal
Rate, any amount that would be treated as excessive under a final judicial
interpretation of applicable law shall be deemed to have been a mistake and
automatically canceled, and, if received by Lender, shall be refunded to
Borrower.
4. Prepayment Premium.
(a) During the period from the date hereof through and including
October 10, 1997, Borrower may prepay all or any portion of this Note at
any time without premium or penalty. During the period from October 10,
1997 through and including October 10, 1999, Borrower may prepay all or any
portion of this Note at any time; provided, however, any prepayment of this
Note in full must be accompanied by all accrued and unpaid Quarterly
Premium Payments, as such term is defined below. Thereafter, Borrower may
prepay all or any portion of this Note at any time without premium or
penalty.
(b) A premium of $25,000 per quarter (a "Quarterly Premium Payment")
shall accrue as of the first day of each three-month period beginning on
October 10, 1997, but the aggregate of all Quarterly Premium Payments shall
not exceed $200,000.
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(c) If a portion of this Note, but not the entire Note, is paid as of
the date any Quarterly Premium Payment accrues (a "QPP Reduction Ratio
Date"), the Quarterly Premium Payment accruing as of such QPP Reduction
Ratio Date shall be reduced by the proportion that all prepayments made on
this Note as of that QPP Reduction Ratio Date (the "QPP Prepayment Total")
bears to $750,000; provided, however, that, except to the extent provided
in the Pledge Agreement, as hereinafter defined, no such prepayment shall
affect Lender's right to Warrant Shares or Option Shares, as these terms
are defined in that certain Pledge Security Agreement dated the date hereof
between Lender and Lobozzo (the "Pledge Agreement").
5. Additional Consideration. As of the date hereof, for and in
consideration of Lender's agreement, at the request of Borrower and Lobozzo to
enter into this Note and related documents: (a) Lobozzo, pursuant to that
certain Limited Nonrecourse Guaranty and Suretyship Agreement (the "Lobozzo
Guaranty") and the Pledge Agreement, has agreed to deliver to Lender certain
common shares of Borrower and warrants or options related to common shares of
Borrower in such amounts as are set forth in the Lobozzo Guaranty and the Pledge
Agreement; and (b) Borrower, pursuant to Section 6(l) of this Note, has agreed
to take certain action. The agreements set forth in clauses (a) and (b) above
are referred to herein as the "Security Obligations".
6. Representations and Covenants. Borrower represents to and agrees with
Lender that now and until this Note is paid in full:
(a) Good Standing; Authority. Borrower is a corporation (i) duly
organized and existing and in good standing under the laws of the
jurisdiction in which it was formed, (ii) duly qualified, in good standing
and authorized to do business in every jurisdiction in which failure to be
so qualified would have a material adverse effect on its business or assets
and (iii) having the power and authority to own each of its assets and to
use them as contemplated now or in the future.
(b) Legality. The execution, issuance, delivery to Lender and
performance by Borrower of this Note (i) are in furtherance of Borrower's
purposes and within its power and authority; (ii) do not violate Borrower's
certificate of incorporation or other governing instrument or result in a
lien or encumbrance on any assets of Borrower; and (iii) have been duly
authorized by all necessary corporate action.
(c) Compliance. Borrower conducts its business and operations and the
ownership of its assets in compliance with each applicable statute,
regulation and other law, including without limitation environmental laws.
All approvals, including without
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<PAGE>
limitation authorizations, permits, consents, franchises, licenses,
registrations, filings, declarations, reports and notices (the "Approvals")
necessary to the conduct of Borrower's business and for Borrower's due
issuance of this Note have been duly obtained and are in full force and
effect. Borrower is in compliance with all conditions of each Approval.
(d) Financial and Other Information. For each year until this Note is
paid in full, Borrower shall provide to Lender: (i) within 60 days after
the end of each fiscal quarter of Borrower, unaudited consolidated
quarterly financial statements certified by an officer of Borrower to have
been prepared in accordance with generally accepted accounting principles
and to be correct, complete and in accordance with Borrower's records, (ii)
on or before the earlier to occur of (A) the date on which Borrower files
its annual 10K report with the U.S. Securities and Exchange Commission, or
(B) 120 days after the end of Borrower's fiscal year, audited annual
consolidated financial statements of Borrower.
(e) Accounting; Tax Returns and Payment of Claims. Borrower will
maintain a system of accounting and reserves in accordance with generally
accepted accounting principles, will file each tax return required of it
and, except as disclosed in an attached schedule, will pay when due each
tax, assessment, fee, charge, fine and penalty imposed by any taxing
authority upon Borrower or any of its assets, income or franchises.
(f) Insurance. Borrower will maintain its property in good repair and
will maintain and on request provide Lender with evidence of insurance
coverage satisfactory to Lender including without limitation fire and
hazard, liability, worker's compensation and flood hazard insurance as
required.
(g) Judgments and Litigation. There is no pending claim, action or
other legal proceeding or judgment, order or award of any court, agency or
other governmental authority or arbitrator (each an "Action") which
involves Borrower or its assets and would have a material adverse effect
upon Borrower or threaten the validity of this Note. Borrower will
immediately notify Lender in writing upon acquiring knowledge of any such
Action.
(h) Notice of Change of Address and of Default. Borrower will
immediately notify Lender in writing (i) of any change in its address or of
the location of any collateral securing this Note, (ii) of the occurrence
of any Event of Default defined below and (iii) of any material change in
Borrower's ownership or management.
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<PAGE>
(i) Payment of a portion of equity proceeds. In the event that DCI
raises capital in any offering of additional equity, DCI shall, within ten
(10) business days of the receipt of immediately available funds as a
result of such offering, remit fifty percent (50%) of such immediately
available funds to Lender to be applied by Lender as a permanent reduction
in the Indebtedness.
(j) Spare Parts Inventory Certification. Subject to the Inventory
Covenant Cure Period, as such term is defined below, Borrower shall furnish
to Lender on or before the fifth business day of any month a certification
in the form attached hereto as Exhibit A (a "Spare Parts Inventory
Certificate") as of the last day of the preceding month of the value
(determined in accordance with generally accepted accounting principles) of
Borrower's Spare Parts Inventory, as such term is defined in the Amended
and Restated Security Agreement dated the dated hereof between Borrower and
Lender.
(k) Collateral Coverage Ratio. Subject to the Inventory Covenant Cure
Period, Borrower shall have, as of the last day of each month and as
certified on the Spare Parts Inventory Certificate, a ratio (the "Spare
Parts Inventory Ratio") of the value (determined in accordance with
generally accepted accounting principles) of the Spare Parts Inventory to
an amount equal to the outstanding principal balance of this Note, plus the
amount of any indebtedness secured by a lien in favor of the Internal
Revenue Service or purchase money security interest, which lien or security
interest encumbers the Spare Parts Inventory and has priority over NCFC's
security interest in the Spare Parts Inventory, less any cash collateral
securing this Note, of at least 2.5 to 1. Lender agrees that Borrower's
failure to have the Spare Parts Inventory Ratio required by the preceding
sentence and as required by clause 7(d) below, may be cured by (i) a
reduction in the principal amount of this Note, (ii) delivery of cash
collateral to the Lender, (iii) the acquisition of additional Spare Parts
Inventory or (iv) furnishing a further Spare Parts Inventory Certificate
certifying that Borrower has a Spare Parts Inventory Ratio that meets the
requirements of the foregoing covenant.
(l) Warrant. Borrower shall use its reasonable efforts to present to
its shareholders for approval a resolution authorizing Borrower to issue to
Lender by October 10, 1999, a warrant, in substantially the form attached
as Exhibit A to the Pledge Agreement, for a number of common shares of
Borrower that when added to the Pledged Shares, as such term is defined in
the Pledge Agreement, will give Lender rights to 17 1/2% of the issued and
outstanding common shares of Borrower, subject, however, to adjustment as
provided in Section 4 of the Pledge Agreement. If such resolution is
approved, Borrower shall promptly issue such warrant.
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7. Events of Default; Acceleration. An event of default ("Event of
Default") will have occurred if, prior to the payment in full by Borrower of its
Indebtedness hereunder:
(a) Borrower fails to pay any amount of interest due under this Note
within forty-five (45) days after receipt of a written notice from Lender
that an amount of interest was not timely paid in accordance with paragraph
2 hereof;
(b) Borrower fails to pay when due, whether upon maturity, by
acceleration or otherwise, any other amount due under this Note within
forty-five (45) days after receipt of a written notice from Lender that any
other amount due under this Note was not timely paid;
(c) Borrower fails to furnish to Lender on or before the fifth
business day of any month a Spare Parts Inventory Certificate as of the
last day of the preceding month of the value (determined in accordance with
generally accepted accounting principles) of Borrower's spare parts
inventory and such failure continues unremedied for at least forty-five
days (the "Inventory Covenant Cure Period"); provided, however, that Lender
shall provide Borrower with at least twenty five days prior written notice
(which twenty five day period may run concurrently with the Inventory
Covenant Cure Period) before taking any remedial action against Borrower
based upon this subsection (c);
(d) Borrower fails to have, as of the last day of each month, and as
certified on a Spare Parts Inventory Certificate, a Spare Parts Inventory
Ratio of at least 2.5 to 1 and such failure continues unremedied for at
least the Inventory Covenant Cure Period; provided, however, that Lender
shall provide Borrower with at least twenty five days prior written notice
(which twenty five day period may run concurrently with the Inventory
Covenant Cure Period) before taking any remedial action against Borrower
based upon this subsection (d);
(e) Lobozzo declares an event of default under any of the documents
evidencing the indebtedness of Borrower to Lobozzo and any such event of
default continues beyond the expiration of all applicable grace and cure
periods, and any such event of default is further not waived in writing by
Lobozzo, and thereafter, Lobozzo actively takes action to enforce, realize
upon or foreclose his security interest in any tangible assets which secure
the indebtedness of Borrower to Lobozzo under an Amended and Restated
Promissory Note dated the date hereof;
(f) Borrower breaches or is in default under any other agreement with
Lender and any such event of default continues beyond the expiration of any
applicable grace or cure period(s);
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(g) Borrower is dissolved;
(h) A receiver or similar trustee is appointed for Borrower or its
assets (with or without its consent), or Borrower makes an assignment for
the benefit of creditors or commences or has commenced against it a
proceeding pursuant to any bankruptcy law and, with respect to the
appointment of any such receiver or trustee or the commencement of any such
proceeding against Borrower, the failure to have such appointment vacated,
or such proceeding dismissed, within ninety (90) days;
(i) Any representation or warranty made in a Spare Parts Inventory
Certificate proves to have been made with the affirmative intention of
deceiving Lender as to the value (determined in accordance with generally
accepted accounting principles) of Borrower's spare parts inventory.
(j) Lobozzo breaches or is in default under the Pledge Agreement and
any such breach or default continues beyond the expiration of any
applicable grace or cure period(s);
(k) A final judgment or judgements are entered or an order or orders
of any judicial authority or governmental entity is issued against Borrower
(such judgment(s) and order(s) hereinafter collectively referred to as
"Judgment") for payment of money, which Judgment exceeds Two Hundred Fifty
Thousand Dollars ($250,000) and which is not covered by insurance or
otherwise the subject of an appeal as to which a bond has been provided; or
(l) Borrower raises capital in any offering of additional equity and
fails, within ten (10) business days of the receipt of immediately
available funds as a result of such equity offering, to remit fifty percent
(50%) of such immediately available funds to Lender to be applied as a
permanent reduction to the Indebtedness; or
(m) Lender's agent fails to deliver to Lender a share certificate for
the Pledged Shares within twenty one days of the date of this Note.
Upon the occurrence of any Event of Default and the expiration of any grace
or cure period applicable thereto, all amounts hereunder shall become
immediately due and payable at Lender's option and, subject to the provisions of
the Intercreditor Agreement, Lender may thereupon exercise all rights and
remedies available to it under this Note and all documents entered into in
connection with this Note and applicable law.
8. Cumulative Nature of Bank's Rights and Remedies. All rights and remedies
of Lender under applicable law and this and other agreements of Borrower are
cumulative and not
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exclusive. No single, partial or delayed exercise by Lender of any right or
remedy shall preclude full and timely exercise by Lender at any time of any
right or remedy of Lender without notice. No course of dealing or other conduct,
no oral agreement or representation made by Lender or usage of trade shall
operate as a waiver of any right or remedy of Lender. No waiver shall be
effective against either party unless made specifically in writing by the party
against whom such waiver is sought to be charged.
9. Miscellaneous. This Note, with any related security agreements and
guaranties, contains the entire agreement between Lender and Borrower with
respect to this Note, and supersedes every course of dealing, other conduct,
oral agreement and representation previously made by Lender. No change in this
Note shall be effective unless made in a writing duly executed by both parties.
This Note shall be governed by the internal laws of the State of New York,
without regard to its principles of conflict of laws. This Note is a binding
obligation enforceable against Borrower and its successors and assigns and shall
inure to the benefit of Lender and its successors and assigns. Each provision of
this Note shall survive until all amounts due under this Note are paid to
Lender, shall be interpreted as consistent with existing law and shall be deemed
amended to the extent necessary to comply with any conflicting law. If a court
deems any provision invalid, the remainder of the Note shall remain in effect.
Section headings are for convenience only. Singular number includes plural and
neuter gender includes masculine and feminine as appropriate.
10. Notices. Notices to Borrower by Lender and to Lender by Borrower must
be in writing, refer specifically to this Note and be delivered by telecopy and
confirmed by overnight mail or other nationally recognized overnight delivery
service directed to Borrower or Lender, as the case may be, at the address of
each stated on the first page of this Agreement and, when forwarded to Borrower,
with a copy to Edwin M. Larkin, Esq., Jaeckle Fleischmann & Mugel, LLP, Suite
460, 39 State Street, Rochester, New York 14614, and when forwarded to Lender,
with a copy to Walter J. Greenhalgh, Esq., Duane, Harris & Hecksher, One
Riverfront Plaza, Suite 500, Newark, New Jersey 07102. Notices shall be deemed
delivered only when actually received by an officer of Borrower or Lender or by
addressee, as the case may be. Telecopy numbers are as follows: Lender
212-632-8775; Walter J. Greenhalgh, Esq. at 201-733-9881; Borrower,
201-440-3985, Attention: President; and Edwin M. Larkin, Esq. at 716-262-4133.
11. Borrower's Waivers and Consents. In any action or other legal
proceeding relating to this Note, Borrower (1) consents to the personal
jurisdiction of any state or federal court located in the State of New York and
(2) agrees that in any
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<PAGE>
legal proceeding, a copy of this Note kept in Lender's course of business may be
admitted into evidence as an original.
12. Trial by Jury. Borrower agrees that any suit, action or proceeding,
whether claim or counterclaim, brought or instituted by Borrower or any
successor or assign of Borrower on or with respect to this Note or any other
document executed and delivered in connection with this Note or the dealings of
the parties with respect hereto, shall be tried only by a court and not by a
jury. BORROWER HEREBY KNOWING, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, Borrower waives
any right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. BORROWER ACKNOWLEDGES AND
AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT
LENDER WOULD NOT ENTER INTO THIS SECTION WERE NOT A PART OF THIS NOTE.
13. Amendment and Restatement. THIS NOTE IS ISSUED IN ORDER TO AMEND,
RESTATE AND EVIDENCE AND TO BE A SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT,
SATISFACTION, CANCELLATION OR A NOVATION OF A PORTION OF THE INDEBTEDNESS
EVIDENCED BY THE THIRD AMENDED AND RESTATED PROMISSORY NOTE DATED OCTOBER 27,
1995 OF BORROWER AND DDI TO LENDER (THE "SUPERSEDED NOTE"); PROVIDED, HOWEVER,
THAT THE SUBSTITUTION OF THIS AMENDED AND RESTATED NOTE FOR THE SUPERSEDED NOTE
DOES NOT EXTINGUISH THE INDEBTEDNESS EVIDENCED BY THE SUPERSEDED NOTE OR ANY
PORTION THEREOF AND THE LIABILITIES OF BORROWER THEREUNDER AND HEREUNDER ARE
CONTINUOUS. THIS AMENDED AND RESTATED NOTE DOES NOT EVIDENCE ANY NEW ADVANCES OF
CREDIT OR REFLECT ANY AGREEMENT BY LENDER FOR THE EXTENSION OF ANY ADDITIONAL
CREDIT TO BORROWER.
14. Releases. (a) Recognizing and in consideration of Lender's undertakings
as herein set forth, Borrower hereby waives and releases Lender and its
officers, attorneys, agents, and employees from any liability, suit, damage,
claim, loss or expense of any kind or nature whatsoever and howsoever arising
out of or relating to Lender's acts or omissions with respect to Borrower or any
of its lending relationships with Borrower arising on or before the date hereof.
(b) Recognizing and in consideration of Borrower's undertakings as
herein set forth, Lender hereby waives and releases Borrower and its
officers, attorneys, agents and employees from any liability, suit, damage,
claim, loss or expense of any kind or nature whatsoever or howsoever
arising out of or relating to Borrower's acts or omissions with respect to
Lender or any of its lending relationships with Lender arising on or before
the date hereof; provided, however, this paragraph 14(b) is subject in all
respects to paragraph 13 of this Note and specifically excepted from the
terms of the release set forth in
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<PAGE>
this paragraph 14(b) shall be the obligations of Borrower pursuant to this
Note and all other documents executed in connection with this Note and
dated the date hereof.
15. Assignment. This Note and the other documents entered into in
connection with this Note: (i) shall be binding upon Lender and Borrower and
upon their respective successors and assigns, and (ii) shall inure to the
benefit of Lender and Borrower; provided, however, that neither Borrower nor
Lender may assign any rights hereunder or any interest herein without obtaining
the prior written consent of the non-assigning party, and any such assignment or
attempted assignment shall be void and of no effect with respect to the
non-assigning party; provided, however, notwithstanding the foregoing, if
Lobozzo sells, assigns or otherwise transfers more than fifty percent of the
shares of common stock of Borrower owned by him on the date of this Note, then
Lender may assign this Note and the other documents entered into in connection
with this Note to a financial institution, as such term is defined in Section
3(a)(46) of the Securities Exchange Act of 1934, as amended or any other entity
in the business of buying and selling loans, but in no event shall Lender assign
this Note to a competitor of Borrower.
16. Negation of Partnership or Joint Venture. No provision contained in
this Note nor in any other document executed between or among Borrower, Lender
or Lobozzo shall constitute, or be construed to be or to create, a partnership,
joint venture or other non-lending relationship between Borrower, Lender or
Lobozzo or any of them. Borrower and Lender specifically acknowledge that no
such relationship is intended hereby, and that Lender has entered into this Note
and all documents entered into in connection with this Note solely in its
capacity as lender to Borrower.
17. Counterparts. This Note may be executed in several counterparts, and
all so executed shall constitute one agreement, binding on all of the parties
hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.
DELTA COMPUTEC INC.
By: /s/ Michael Julian
Name:
Title: Secretary
NATIONAL CANADA FINANCE CORP.
By: /s/ E. Lynn Forgash
Name:
Title:
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<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
INTERCREDITOR AGREEMENT
-----------------------
THIS INTERCREDITOR AGREEMENT is made this 10th day of October 1996 by and
between NATIONAL CANADA FINANCE CORP., a Delaware corporation with an office and
place of business at 125 West 55th Street, New York, New York 10019 ("NCFC"),
and JOSEPH M. LOBOZZO II, with an office at 690 Portland Avenue, Rochester, New
York 14621 ("Lobozzo").
W I T N E S S E T H :
WHEREAS, Delta Computec Inc. ("DCI") and Delta Data Net, Inc. ("DDI") are
parties with NCFC to a Credit Agreement as of April 1, 1994, as the same has
been amended from time to time; and
WHEREAS, contemporaneously with the execution of this Intercreditor
Agreement, NCFC has assigned to Lobozzo all of its right, title and interest in
and to the Credit Agreement, the indebtedness evidenced by the Credit Agreement
and all related promissory notes and all security agreements relating thereto,
except to the extent that such right, title and interest relates to indebtedness
of DCI (but not DDI) to NCFC under the NCFC Note (as hereinafter defined) and
except that NCFC retains a shared security interest with Lobozzo in the spare
parts inventory of DCI ("Shared Collateral"); and
WHEREAS, following such assignment, the indebtedness of DCI retained by
NCFC shall be evidenced by an Amended and Restated Promissory Note dated the
date hereof in the principal
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amount of $750,000 (the "NCFC Note") and shall be secured by a security interest
in the Shared Collateral pursuant to an Amended and Restated Security Agreement;
and
WHEREAS, following the assignment, the indebtedness of DCI and DDI to
Lobozzo shall be evidenced by an Amended and Restated Credit Agreement dated the
date hereof (the "Lobozzo Credit Agreement") and an Amended and Restated
Promissory Note dated the date hereof in the maximum principal amount of
$2,550,000 (the "Lobozzo Note"), shall be secured by a security interest in all
of DCI's and DDI's personal property, including the Shared Collateral, and shall
be guaranteed by SAI/Delta, Inc. ("SAI"), which guaranty shall be secured by a
security interest in all of SAI's personal property; and
WHEREAS, NCFC and Lobozzo desire to set forth in writing their agreement
concerning the application of the proceeds of Shared Collateral and certain
other matters;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, NCFC and
Lobozzo agree as follows:
1. Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the NCFC Note.
2. Any proceeds realized from the sale or other disposition of Shared
Collateral (the "Proceeds of Shared Collateral") shall be applied as follows:
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(a) The Proceeds of Shared Collateral shall be applied first to pay the
actual costs and expenses of the party liquidating the Shared Collateral, to the
extent, and only to the extent, such expenses are specifically related to
exercising rights of a creditor against the Shared Collateral.
(b) After payment of such costs and expenses, any of the Proceeds of Shared
Collateral remaining shall be applied to repayment of all amounts outstanding
under the NCFC Note.
(c) After repayment in full of all amounts outstanding under the NCFC Note,
any of the Proceeds of Shared Collateral remaining shall be applied to repayment
of all amounts outstanding under the Lobozzo Credit Agreement and the Lobozzo
Note.
3. The application of proceeds of collateral described above shall be
effective irrespective of the time or order in which the security interests
described above arise, attach or perfected by filing, recording or otherwise.
The liens of Lobozzo and NCFC with regard to the Shared Collateral relate back
to the original NCFC loan to DCI and DDI, and the division of interests taking
place in the transaction to which this Intercreditor Agreement relates is as a
result of the assignment of a portion of that original NCFC Loan to Lobozzo by
NCFC pursuant to an Assignment being executed of even date with this
Intercreditor Agreement.
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4. NCFC agrees that so long as no Event of Default pursuant to clause 7(a),
(b), (c), (d), (e), (g), (i), (l) or (m) of the NCFC Note occurs, taking into
consideration any and all cure periods, that NCFC will not take any action
whatsoever to enforce the NCFC Note or to enforce, realize upon or foreclose its
security interest in the Shared Collateral or take any action which in any other
manner affects NCFC Note or the Shared Collateral, including, in the case of
bankruptcy, any action seeking relief from the automatic stay. No event of
default under the NCFC Note except for those which are described in clause 7(a),
(b), (c), (d), (e), (g), (i), (l) or (m) thereof shall entitle NCFC to take
action to enforce the NCFC Note or to take action related to the seizure,
replevin, liquidation or other disposition of Shared Collateral without the
prior written consent of Lobozzo. Notwithstanding the foregoing, if NCFC is
unable by operation of section 362 of the United States Bankruptcy Code or any
other insolvency stay provision, to give notice or commence the running of any
grace or cure period under Section 7 of the NCFC note, then the giving of such
notice and/or the commencement of such cure period shall be deemed to have
occurred on the date any one or more of the specified events (other than the
giving of notice) enumerated in Section 7 shall have occurred, so long as any
otherwise-required written notice shall have been given to Lobozzo.
5. If an Event of Default exists pursuant to clause 7(a) or 7(h) of the
NCFC Note and (i) all scheduled payments of
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Indebtedness are current and (ii) no Event of Default exists pursuant to clause
7(d) of the NCFC Note, NCFC agrees that it will not take any action to enforce
its rights under the Pledge Agreement or the Lobozzo Guaranty until October 10,
1999. Notwithstanding the foregoing, if NCFC is unable by operation of section
362 of the United States Bankruptcy Code or any other insolvency stay provision,
to give notice or commence the running of any grace or cure period under Section
7 of the NCFC note, then the giving of such notice and/or the commencement of
such cure period shall be deemed to have occurred on the date of the specified
events (other than the giving of notice) enumerated in Section 7 shall have
occurred, so long as such written notice shall have been given to Lobozzo.
6. This Intercreditor Agreement shall be governed by the internal laws of
the State of New York without regard to the principles of conflicts of laws and
shall be binding upon the parties hereto and their respective successors and
assigns.
7. This Intercreditor Agreement may not be amended by any party except in
writing signed by all the parties hereto.
8. This Intercreditor Agreement is solely for the benefit of the parties
hereto and their respective successors and assigns and no other person shall
have any right, benefit or interest under, or because of the existence of this
Intercreditor Agreement.
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9. This Intercreditor Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
10. In the event that, as a result of a lock box arrangement which exists
among DCI, DDI and NCFC, any checks or instruments of payment are received by
NCFC at its existing lock box, NCFC will take such checks or instruments as
agent for DCI, and, as soon as practicable, will take such steps as are
necessary to deliver by courier or overnight delivery service to such bank or
other recipient as DCI and DDI direct by written instructions to NCFC, all such
checks or instruments, uncashed and undeposited. The actual cost of any courier
or overnight delivery will be borne by DCI. In the event that Lobozzo ever
determines that the foregoing arrangement results in unacceptable delays in the
receipt of funds, the parties hereto agree to execute such documents as are
reasonably necessary to effectuate a transfer of funds in a more prompt manner.
In no event shall NCFC cash or deposit any checks or instrument received by it
as a result of such lock box arrangement or exercise in any way any right of
offset against the assets of DCI or DDI or apply any such checks or instruments
to the payment of any obligations of DCI to NCFC.
6
Page 96 of 207 Pages
<PAGE>
11. Recognizing and in consideration of Lobozzo's undertakings as herein
set forth, NCFC hereby waives and releases Lobozzo and his representatives,
attorneys, agents, and employees from any liability, suit, damage, claim, loss,
or expense of any kind or nature whatsoever and howsoever arising out of or
relating to Lobozzo's acts or omissions with respect to NCFC or any of its
lending relationships with the Borrower arising on or before the date hereof;
provided, however, that specifically excepted from the terms of the release set
forth in this paragraph 11 shall be the obligations of Lobozzo pursuant to a
Pledge Security Agreement of even date herewith between Lobozzo and NCFC.
11. No provision contained in this Intercreditor Agreement nor in any other
document executed between or amongDCI, NCFC or Lobozzo shall constitute, or be
construed to be or to create, a partnership, joint venture or other non-lending
relationship between DCI, NCFC or Lobozzo or any of them. DCI, NCFC and Lobozzo
specifically acknowledge that no such relationship is intended hereby and that
NCFC has entered into this Intercreditor Agreement and all documents entered
into and in connection with this Intercreditor Agreement solely in its capacity
as lender to DCI.
7
Page 97 of 207 Pages
<PAGE>
IN WITNESS WHEREOF, NCFC and Lobozzo have caused this Intercreditor
Agreement to be executed, intending to be legally bound, as of the date first
above written.
NATIONAL CANADA FINANCE CORP.
By: /s/ E. Lynn Forgash
----------------------------------
Name:
Title:
/s/ Joseph M. Lobozzo II
--------------------------------------
Joseph M. Lobozzo II
The undersigned acknowledge receipt of a copy of the above Intercreditor
Agreement and agree to, and are entitled to rely upon, the terms thereof.
DELTA COMPUTEC INC.
By: /s/ Michael Julian
----------------------------------
Name:
Title:
DELTA DATA NET, INC.
By: /s/ Michael Julian
----------------------------------
Name:
Title:
8
Page 98 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
SECURITY AGREEMENT
------------------
THIS AMENDED AND RESTATED SECURITY AGREEMENT is made this 10th day of
October 1996 by and between DELTA COMPUTEC INC., a New York corporation with its
principal office and place of business at 900 Huyler Street, Teterboro, New
Jersey 07608 ("Debtor"), and NATIONAL CANADA FINANCE CORP., a Delaware
corporation with an office and place of business at 125 West 55th Street, New
York, New York 10019 ("Secured Party").
W I T N E S S E T H :
WHEREAS, Debtor and Delta Data Net, Inc. ("DDI") executed and delivered to
Secured Party a General Security Agreement dated April 1, 1994 (the "1994
Security Agreement"); and
WHEREAS, on the date hereof, Secured Party is assigning to Joseph M.
Lobozzo II ("Lobozzo") a portion of its rights under the 1994 Security
Agreement, including all rights with respect to DDI; and
WHEREAS, to the extent not assigned to Lobozzo, Debtor and Secured Party
desire to amend and restate the 1994 Security Agreement in its entirety; and
NOW, THEREFORE, Debtor and Secured Party agree as follows:
1. Security Interest. Debtor hereby reaffirms and grants to Secured Party a
security interest ("Security Interest") in all of Debtor's Spare Parts Inventory
(as such term is defined below) of whatever kind and type and wherever located,
whether now owned or hereafter acquired (collectively, "Collateral"). "Spare
Parts Inventory" means the Debtor's inventory of piece parts and whole units
kept in reserve to support its contract customer base. Piece parts are used to
repair customers' units that fail. Whole units are kept on hand generally to be
used as loaners in the event that a customer's unit cannot be repaired promptly.
Contemporaneously with the execution and delivery of this Security Agreement,
Debtor will deliver to Secured Party a complete list of Debtor's Spare Parts
Inventory as of a date within five days prior to October 9, 1996.
2. Indebtedness Secured. The Security Interest secures payment of a certain
Amended and Restated Promissory Note dated the date hereof between Debtor and
Secured Party in the original principal amount of $750,000 and any substitution
for or replacement or modification thereof, including principal, interest and
other amounts (i.e., attorney's fees, costs and expenses) due under the Amended
and Restated Promissory Note ("Indebtedness").
Page 99 of 207 Pages
<PAGE>
3. Representations and Warranties of Debtor. Debtor represents and
warrants, and so long as any Indebtedness remains unpaid shall be deemed
continuously to represent and warrant, that:
(a) Debtor is the owner of the Collateral free of all security
interests or other encumbrances, except the Security Interest and except as
shown on Schedule 3(a) annexed hereto (collectively, "Permitted
Encumbrances"), if any;
(b) Debtor is duly organized and validly existing under the laws of
the State of New York and is duly qualified and in good standing in every
jurisdiction in which failure to do so qualified would have a material
adverse effect on its business or assets;
(c) Debtor is authorized to enter into this Security Agreement and the
execution, delivery and performance of this Agreement by Debtor will not
violate, or be in contravention of, Debtor's certificate of incorporation,
by-laws, or other corporate documents or any indenture, agreement or
undertaking to which Debtor is a party or by which Debtor may be bound;
(d) Debtor is engaged in business operations; Debtor's chief executive
office is specified in the first paragraph of this Agreement; and Debtor's
records concerning the Collateral are kept at one of the addresses
specified on Schedule 3(e) of this Agreement;
(e) All of the Collateral is located at one of the addresses specified
on Schedule 3(e) to this Agreement; and
(f) Any and all tradenames, division names, assumed names and other
names under which Debtor transacts any part of its business are specified
on Schedule 3(f) annexed hereto, if any.
4. Covenants of Debtor. So long as any Indebtedness remains unpaid, Debtor:
(a) Will defend the Collateral against the claims and demands of all
other parties, except purchasers and lessees in the ordinary course of
Debtor's business; will keep the Collateral free from all security
interests or other encumbrances, except the Security Interest and except as
shown of Schedule 3(a) hereto; and, except with respect to the sale or
lease of Collateral in the ordinary course of Debtor's business, will not
sell, transfer, lease, assign, deliver or otherwise dispose of any
Collateral or any interest therein, or move the Collateral to any location
except those specified on Schedule 3(e) without the prior written consent
of Secured Party;
2
Page 100 of 207 Pages
<PAGE>
(b) Will keep, in accordance with generally accepted accounting
principles consistently applied, accurate and complete records concerning
the Collateral; at Secured Party's request, will mark any and all such
records to indicate the Security Interest; and will permit Secured Party or
its agents at any reasonable time during regular business hours to inspect
the Collateral and to audit and make extracts from such records or any of
Debtor's books, ledgers, reports, correspondence or other records;
(c) Will notify Secured Party promptly in writing of any change in
Debtor's chief executive office, of any change in the address at which the
Collateral or records concerning the Collateral are kept and of any change
in Debtor's name, identity or corporate structure;
(d) Will keep the Collateral in good condition and repair; and will
not use the Collateral in violation of any provisions of this Security
Agreement, of any applicable statute, regulation or ordinance or of any
policy insuring the Collateral;
(e) Will pay all taxes, assessments and other charges of every nature
which may be levied or assessed against the Collateral; will insure the
Collateral against risks, and in coverage, form and amount, satisfactory to
Secured Party, and, will cause each policy to be payable additionally to
Secured Party and deliver each policy or certificate of insurance therefor
to Secured Party; and
(f) In connection herewith, will execute and deliver to Secured Party
such financing statements and other documents, do such other things
relating to the Security Interest as Secured Party may reasonably request,
pay all costs of title searches and filing financing statements,
assignments or other documents in all public offices requested by Secured
Party; but will not, without the prior written consent of Secured Party,
file or authorize or permit to be filed in any public office any financing
statement naming Debtor as debtor and not naming Secured Party as secured
party, except in connection with any Permitted Encumbrances.
5. Verification of Collateral. Secured Party shall have the right to verify
all or any Collateral in any reasonable manner and through any medium Secured
Party may consider reasonably appropriate, and Debtor agrees to furnish all
assistance and information and perform any acts which Secured Party may
reasonably require in connection therewith.
6. Payments. After the occurrence of an Event of Default, and the
expiration of any cure period related to such Event of Default, all payments on
and from Collateral received by Secured Party directly or from Debtor shall be
applied to the
3
Page 101 of 207 Pages
<PAGE>
Indebtedness in such order and manner and at such time as Secured Party shall,
in its sole discretion, determine.
7. Events of Default.
(a) The occurrence of an Event of Default under the Amended and
Restated Promissory Note dated the date hereof between Debtor and Secured
Party, as the same may be amended from time to time ("Note"), shall
constitute an Event of Default hereunder.
(b) Upon the happening of any Event of Default, and the expiration of
any cure period related to such Event of Default, Secured Party's rights
and remedies with respect to the Collateral shall be those of a Secured
Party under the Uniform Commercial Code and under any other applicable law,
as the same may from time to time be in effect, in addition to those rights
granted herein and in any other agreement now or hereafter in effect
between Debtor and Secured Party. Secured Party may require Debtor to
assemble the Collateral and make it available to Secured Party at a place
or places designated by Secured Party.
(c) Without in any way requiring notice to be given in the following
manner, Debtor agrees that any notice by Secured Party of sale or
disposition of any Collateral, whether required by the Uniform Commercial
Code or otherwise, shall constitute reasonable notice to Debtor if such
notice is mailed by regular mail, postage prepaid, at least ten (10) days
prior to such action, to the address of Debtor set forth in the first
paragraph of this Security Agreement or to any other address which Debtor
has specified in writing to Secured Party as the address to which notices
hereunder shall be given to Debtor.
(d) Debtor agrees to pay on demand all reasonable costs and expenses
incurred by Secured Party in enforcing this Security Agreement, in
realizing upon or protecting any Collateral, including, without limitation,
if Secured Party retains counsel for advise, suit, insolvency proceedings
or any of the above purposes, the reasonable attorneys' fees and expenses
incurred by Secured Party.
8. Miscellaneous.
(a) Debtor hereby authorizes Secured Party, at Debtor's expense, to
file such financing statement or statements relating to the Collateral
without Debtor's signature thereon as Secured Party at its option may
reasonably deem appropriate, and appoints Secured Party as Debtor's
attorney-in-fact (without requiring Secured Party) to execute any such
financing statement or statements in Debtor's name and to perform all other
acts which Secured Party deems reasonably appropriate to perfect and
4
Page 102 of 207 Pages
<PAGE>
continue the Security Interest and to protect and preserve the Collateral.
(b) Upon Debtor's failure to perform any of its duties hereunder,
Secured Party may, but shall not be obligated to, perform any or all such
duties in any reasonable manner, and Debtor shall pay an amount equal to
the expense thereof to Secured Party forthwith upon written demand by
Secured Party.
(c) No course of dealing and no delay or omission by Secured Party in
exercising any right or remedy hereunder shall operate as a waiver thereof
or of any other right or remedy, and no single or partial exercise thereof
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy. Secured Party may remedy any default by Debtor
hereunder or within any reasonable manner without waiving the default
remedied and without waiving any other prior or subsequent default by
Debtor. All rights and remedies of, Secured Party hereunder are cumulative.
(d) The rights and benefits of Secured Party hereunder shall, if
Secured Party so agrees, inure to any party acquiring any interest in the
Indebtedness or any part thereof.
(e) Secured Party and Debtor as used herein shall include the heirs,
executors or administrators, or successors or assigns, of those parties.
(f) No modification, rescission, waiver, release or amendment of any
provisions of this Security Agreement shall be binding except by a written
agreement subscribed by Debtor and by Secured Party.
(g) This Security Agreement is made under, and shall be governed by
and construed under the laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York
and without giving effect to choice of law principles of the State of New
York.
(h) All terms, unless otherwise defined in this Security Agreement or
in any financing statement, shall have the definitions set forth in the
Uniform Commercial Code adopted in New York State, as the same may from
time to time be in effect.
(i) This Security Agreement is and is intended to be a continuing
Security Agreement and shall remain in full force and effect until all of
the Indebtedness shall be finally and irrevocably paid in full.
(j) This Security Agreement amends and restates the 1994 Security
Agreement except to the extent of the
5
Page 103 of 207 Pages
<PAGE>
assignment by Secured Party of its rights in the 1994 Security Agreement to
Lobozzo.
9. Waiver of Jury Trial. The Debtor agrees that any suit, action or
proceeding, whether claim or counterclaim, brought or instituted by the Debtor
or any successor or assign of the Debtor on or with respect to this Security
Agreement or the dealings of the parties with respect hereto, shall be tried
only by a court and not by a jury. THE DEBTOR HEREBY KNOWING, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. Further, the Debtor waives any right it may have to claim or
recover, in any such suite, action or proceeding, any special exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. THE DEBTOR ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE SECURED PARTY WOULD
NOT ENTER INTO THIS DOCUMENT WITH THE DEBTOR IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS DOCUMENT.
10. Counterparts. This Security Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on all
of the parties hereto, notwithstanding that all of the parties are not signatory
to the original or the same counterpart.
DELTA COMPUTEC INC.
By: /s/ Michael Julian
-------------------------------------
Name:
Title:
NATIONAL CANADA FINANCE CORP.
By: /s/ E. Lynn Forgash
-------------------------------------
Name:
Title:
6
Page 104 of 207 Pages
<PAGE>
SCHEDULE 3(a)
-------------
Permitted Liens and Encumbrances
Security Interest granted to Joseph M. Lobozzo II.
Page 105 of 207 Pages
<PAGE>
SCHEDULE 3(e)
-------------
Collateral Locations
Chicago Rochester
DCI c/o Harris Bank 366 White Spruce Boulevard
311 West Monroe Rochester, New York 14623
3rd Floor
Chicago, Illinois 60606
Dallas Teterboro
2100 N. Highway 360 900 Huyler Street
Suite 1804 Teterboro, New Jersey 07608
Grand Prarie, Texas 75050
Houston Washington
14515 Briar Hills Parkway 122 Lafayette Avenue
Suite 117 Laurel, Maryland 20707
Houston, Texas 77077
Philadelphia
1621 Loretta Avenue
Feasterville, Pennsylvania 19053
Page 106 of 207 Pages
<PAGE>
SCHEDULE 3(f)
-------------
Trade Names
1. DCI
2. The DCI Companies
3. PC Reserve
4. R & M Associates
5. Data Net
6. Data Span
7. SAI/Delta
8. Computer Support Inc.
9. Delta CompuTec Inc.
Page 107 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
PLEDGE SECURITY AGREEMENT
-------------------------
THIS PLEDGE SECURITY AGREEMENT is made the 10th day of October 1996 by
JOSEPH M. LOBOZZO II, an individual with an office at 690 Portland Avenue,
Rochester, New York 14621 (the "Pledgor"), to NATIONAL CANADA FINANCE CORP., a
Delaware corporation, with an office for the conduct of business at 125 West
55th Street, New York, New York 10019 (the "Secured Party").
SECTION 1. Pledge and Covenant with respect to Additional Security.
(A) The Pledgor hereby pledges and grants to the Secured Party a first
priority security interest in the following (the "Pledged Collateral") to
secure the Obligations (as such term is defined in Section 2 below):
480,000 common shares of Delta Computec Inc. ("DCI"), a New York
corporation (the "Pledged Shares") and the certificates representing the
Pledged Shares and any interest of the Pledgor in the entries on the books
of any financial intermediary pertaining to the Pledged Shares, and all
dividends, cash, options, warrants, rights, instruments and other property
or proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the Pledged Shares.
(B) The Pledgor will use his reasonable best efforts to cause DCI to
issue to the Secured Party before October 10, 1999 a warrant in
substantially the form attached hereto as Exhibit A (the "DCI Warrant")
approved by the shareholders of DCI for a number of common shares of DCI
(the "Warrant Shares") which when added to the Pledged Shares, will give
NCFC rights to 17 1/2% of the issued outstanding common shares of DCI. In
the event that the Pledgor is unable to cause DCI to issue the DCI Warrant,
the Pledgor agrees to assign to the Secured Party, pursuant to an
assignment in substantially the form attached hereto as Exhibit B, a
portion of the Pledgor's option issued to the Pledgor in May, 1995 (such
portion assigned, the "Assigned Option"), such portion to be for a number
of common shares of DCI (the "Option Shares") which when added to the
Pledged Shares shall give NCFC rights to 17 1/2% of the issued and
outstanding shares of DCI. Collectively, the Pledged Shares and the Warrant
Shares or the Option Shares are referred to as the "NCFC Shares". The
number of NCFC Shares is subject to adjustment as provided in Section 4
below. The Secured Party acknowledges that it is possible that any Option
Shares may be subject to dispute if they are issued to the Pledgor or the
Secured Party. In such event, if the Pledgor is ever required to return any
Option Shares to DCI, the Secured Party covenants and agrees to return
those Option Shares if they are in the possession of, or under the control
of, the Secured Party pursuant to this Agreement.
SECTION 2. Obligations Secured. This Agreement secures, and the Pledged
Collateral is collateral security for,
Page 108 of 207 Pages
<PAGE>
the prompt payment or performance in full when due, whether at stated maturity,
by acceleration or otherwise, of the Security Obligations, as that term is
defined in a certain Amended and Restated Promissory Note dated the date hereof
by and between DCI and the Secured Party (the "NCFC Note").
SECTION 3. Delivery of NCFC Shares. All certificates or instruments
representing or evidencing the Pledged Shares, and, if ever issued, any Warrant
Shares or Option Shares, shall be delivered to the Secured Party and shall be
held by the Secured party in accordance with the terms of this Agreement, such
certificates or instruments shall be held by the Secured Party pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Secured Party. From and after October 10, 1999, or
after an Event of Default and the expiration of any cure period related to such
Event of Default, the Secured Party shall have the right, at any time and
without notice to the Pledgor, to transfer to or to register in the name of the
Secured Party or any of its nominees any or all of the Pledged Shares, and, if
ever issued, any Warrant Shares or Option Shares. In addition, from and after
October 10, 1999, or after an Event of Default and the expiration of any cure
period related to such Event of Default, the Secured Party shall have the right
at any time to exchange certificates or instruments representing or evidencing
Pledged Shares, and, if ever issued, any Warrant Shares or Option Shares, for
certificates or instruments of smaller or larger denominations.
SECTION 4. Adjustments in NCFC Shares.
(A) The parties acknowledge that DCI may, from time to time, make
partial prepayments on the NCFC Note to the effect that the Principal, as
that term is defined in the NCFC Note, may be reduced in amount. In the
event that any prepayments are ever made on the NCFC Note prior to October
10, 1999 (a "Collateral Reducing Prepayment"), then, if the Pledged Shares
and any Warrant Shares or Option Shares held by NCFC or to which NCFC may
be entitled pursuant to the DCI Warrant or the Assigned Option constitute
17 1/2% or more issued and outstanding shares of DCI, the amount of the
Pledged Shares, and the amount of any such Warrant Shares or Option Shares,
shall be reduced by a fraction, the numerator of which shall be the amount
of any Collateral Reducing Prepayment, and the denominator of which shall
be the face amount of the NCFC Note immediately prior to the Collateral
Reducing Prepayment, the resulting number of whole shares calculated
pursuant to this sentence being referred to as the "Returnable Shares".
(B) If any Collateral Reducing Prepayment occurs, then, at the option
of the Pledgor, the amount of any Returnable
2
Page 109 of 207 Pages
<PAGE>
Shares which are, at the time of the Collateral Reducing Prepayment, a part
of the NCFC Shares, shall be returned promptly to the Pledgor if such
shares are Pledged Shares or Option Shares or to DCI if such shares are
Warrant Shares.
(C) Anything to the contrary in this Agreement notwithstanding, the
NCFC Shares shall not, at any time, exceed seventeen and one-half percent
(17.5%) of the issued and outstanding common shares of DCI in existence at
any one time.
SECTION 5. Representations and Warranties. The Pledgor represents, warrants
and agrees as follows:
(A) The Pledgor is the legal and beneficial owner of all of the
Pledged Shares free and clear of any lien except for the lien and security
interest created by this Agreement.
(B) The Pledgor has full power, authority and legal right to pledge
all of the Pledged Collateral pursuant to this Agreement.
(C) No consent of any other party (including, without limitation,
stockholders or creditors of the Pledgor), and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the
pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the
Pledgor or (ii) for the exercise by the Secured Party of the voting or
other rights provided for in this Agreement or the remedies in respect of
the Pledged Collateral provided for in this Agreement, except as may be
required in connection with such disposition by laws affecting the offering
and sale of securities generally.
(D) The execution, delivery and performance by the Pledgor of this
Agreement and consummation of the transactions contemplated hereby do not
and will not contravene any law or any contractual obligation binding on or
affecting the Pledgor, and do not and will not conflict with or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in
the creation or imposition of (or the obligation to create or impose) any
lien upon any of the property or assets of the Pledgor pursuant to the
terms of any contractual obligation binding on or affecting the Pledgor,
except for the lien created by this Agreement.
(E) The Pledgor has duly executed and delivered this Agreement. This
Agreement constitutes the legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms,
except as enforceability
3
Page 110 of 207 Pages
<PAGE>
may be limited by bankruptcy, insolvency or other similar laws affecting
the rights of creditors generally or by the application of general equity
principles.
(F) All of the Pledged Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(G) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the
Pledged Collateral securing the payment of the Obligations.
(H) The Pledgor at all times shall be the sole beneficial owner of the
Pledged Collateral.
(I) All information set forth herein relating to the Pledged
Collateral is accurate and complete in all material aspects.
SECTION 6. Supplements, Further Assurances. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor shall
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Secured Party
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral.
SECTION 7. Voting Rights; Dividends; Etc. (A) As long as no Event of
Default, as defined below, and the expiration of any cure period related to such
Event of Default has occurred:
(i) The Pledgor shall be entitled to exercise or direct the exercise
of any and all voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with the
terms of this Agreement;
(ii) The Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement, any and all dividends
and distributions paid in respect of the Pledged Collateral; provided that
any and all dividends and other distributions paid in respect of the
Pledged Collateral which are made in the form of equity securities shall be
forthwith delivered to the Secured Party to hold as Pledged Collateral and
shall, if received by the Pledgor, be received in trust for the benefit of
the Secured Party, be segregated from the other property or funds of the
Pledgor, and be forthwith
4
Page 111 of 207 Pages
<PAGE>
delivered to the Secured Party as Pledged Collateral in the same form as so
received (with any necessary endorsement); and
(iii) The Secured Party shall, if necessary, upon written request of
the Pledgor, from time to time execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies, dividend payment orders and
other instruments as the Pledgor may reasonably request in order to permit
the Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 7(A)(i) above.
(B) Upon the occurrence of an Event of Default, as defined below, and the
expiration of any cure period related to such Event of Default:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant
to Section 7(A)(i) above shall cease, and all such rights shall thereupon
become vested in the Secured Party which shall thereupon have the sole
right at its option to exercise such voting and other consensual rights;
(ii) All rights of the Pledgor to receive the dividends and
distributions which it would otherwise be authorized to receive and retain
pursuant to Section 7(A)(ii) above shall cease and all such rights shall
thereupon become vested in the Secured Party who shall thereupon have the
sole right to receive and hold as Pledged Collateral such dividends and
distributions; and
(iii) In order to permit the Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to
Section 7(A)(i) above, the Pledgor shall, if necessary, upon written notice
from the Secured Party, from time to time execute and deliver to the
Secured Party appropriate proxies, dividend payment orders and other
instruments as the Secured Party may reasonably request.
SECTION 8. Transfers and Other Liens. The Pledgor agrees that it will not
(i) sell or otherwise dispose of, or grant any option or warrant with respect
to, any of the Pledged Collateral, or (ii) create or permit to exist any lien
upon or with respect to any of the Pledged Collateral, except for the liens and
security interests under or permitted by this Agreement.
SECTION 9. The Secured Party Appointed Attorney-in-Fact. Upon the
occurrence of an Event of Default, and the expiration of any cure period related
to such Event of Default, the Pledgor hereby appoints the Secured Party the
Pledgor's attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise,
5
Page 112 of 207 Pages
<PAGE>
from time to time, to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect, as
permitted by this Agreement, any instruments made payable to the Pledgor
representing any dividend or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same.
SECTION 10. Secured Party May Perform. If the Pledgor fails to perform any
agreement contained herein after receipt of a written request to do so from the
Secured Party, the Secured Party may itself perform or cause performance of,
such agreement.
SECTION 11. Reasonable Care. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equivalent to that which the Secured Party, in its individual
capacity, accords its own property consisting of negotiable securities, it being
understood that the Secured Party shall have no responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, unless
the Secured Party has received written notice of such matters, or (ii) taking
any necessary steps (other than steps taken in accordance with the standard of
care set forth above to maintain possession of the Pledged Shares) to preserve
rights against any person with respect to any Pledged Collateral.
SECTION 12. Events of Default. The occurrence of any Event of Default under
the NCFC Note and the expiration of any cure period related to such Event of
Default shall constitute an "Event of Default" hereunder.
SECTION 13. Remedies. Upon the occurrence of an Event of Default and the
expiration of any cure period related to such Event of Default:
(A) (i) The Secured Party may in its sole discretion declare all or
any part of the Security Obligations due and payable immediately without
demand or notice of any kind irrespective of any other agreement or
instrument fixing the maturity thereof.
(ii) The Secured Party may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
on default under the Uniform Commercial Code (the "Code") in effect in the
State of New York at that time, and the Secured Party may also, without
6
Page 113 of 207 Pages
<PAGE>
notice, except as specified below, and to the extent permitted under
applicable law, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's board or
at any of the Secured Party's offices or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms
as the Secured Party may deem commercially reasonable, irrespective of the
impact of any of such sales on the market price of any of the Pledged
Collateral. To the extent permitted under applicable law, the Secured Party
may be the purchaser of any or all of the Pledged Collateral at any such
sale. Each 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 rights of
redemption, stay and/or appraisal which it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to the Pledgor of the time and
place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Secured Party shall not
be obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(iii) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, the Secured Party may be compelled,
with respect to any sale of all or any part of the Pledged Collateral and,
if ever issued, any Warrant Shares or Option Shares, to limit purchases to
those who will agree, among other things, to acquire the Pledged
Collateral, the Warrant Shares or the Option Shares for their own account,
for investment and not with a view to the distribution or resale thereof.
The Pledgor acknowledges that any sales under such restrictions may be at
prices and on terms less favorable to the Secured Party than those
obtainable through a sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement
under the Securities Act), and, notwithstanding such circumstances, agrees
that any sale under such restrictions shall be deemed to have been made in
a commercially reasonable manner and that the Secured Party shall have no
obligation to engage in sales without such restrictions and no obligation
to delay the sale of any Pledged Collateral, Warrant Shares or Option
Shares for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if the
Pledgor would agree to do so.
7
Page 114 of 207 Pages
<PAGE>
(B) If the Secured Party exercises its right to sell any or all of the
Pledged Collateral, and, if ever issued, any Warrant Shares or Option Shares,
upon written request, the Pledgor shall furnish and shall cause each issuer of
any Pledged Shares, and, if ever issued, any Warrant Shares or Option Shares, to
be sold hereunder from time to time to furnish to the Secured Party all such
information as the Secured Party may request in order to determine the number of
shares and other instruments included in the Pledged Collateral, the Warrant
Shares or the Option Shares which may be sold by the Secured Party as exempt
transactions under the Securities Act and pursuant to the rules of the
Securities and Exchange Commission thereunder, and under applicable state
securities laws, as all of the same are from time to time in effect.
SECTION 14. Application of Proceeds. Any cash held by the Secured Party as
Pledged Collateral and all cash proceeds received by the Secured Party in
respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by the Secured Party of
its remedies as a secured creditor as provided in Section 13 of this Agreement
shall be applied promptly from time to time by the Secured Party to payment of
the Security Obligations.
SECTION 15. [Reserved].
SECTION 16. No Waiver. No failure on the part of the Secured Party to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are to the
fullest extent permitted by law cumulative and are not exclusive of any remedies
provided by law.
SECTION 17. Amendments. None of the terms or provisions of this Agreement
may be amended, supplemented, waived or otherwise modified except by an
instrument in writing, duly executed by the Pledgor and the Secured Party.
SECTION 18. Addresses for Notices. Any notices to the Pledgor or to the
Secured Party must also be given to DCI. Notices to the Pledgor, the Secured
Party and DCI must be in writing, refer specifically to this Agreement, and be
delivered by telecopy and confirmed by overnight mail or other nationally
recognized overnight delivery service directed to DCI at 900 Huyler Street,
Teterboro, New Jersey 07608, ATTENTION: PRESIDENT, and to the Pledgor or the
Secured Party, as the case may be, at the address of each stated on the first
page of this Agreement, and when forwarded to DCI, with a copy to Edwin M.
Larkin, Esq.,
8
Page 115 of 207 Pages
<PAGE>
Jaeckle Fleischmann & Mugel, LLP, Suite 460, 39 State Street, Rochester, New
York 14614, when forwarded to the Pledgor, with a copy to Shawn M. Griffin,
Esq., Harris, Beach & Wilcox, LLP, 130 Main Street East, Rochester, New York
14604, and when forwarded to the Secured Party with a copy to Walter J.
Greenhalgh, Esq., Duane, Morris & Hecksher, One Riverfront Plaza, Suite 500,
Newark, New Jersey 07102. Notices shall be deemed delivered only when actually
received by an officer of DCI or the Secured Party, or by the Pledgor or the
addressee, as the case may be. Telecopy numbers are as follows: the Pledgor
(716) 342-6125; the Secured Party (212) 632-8775; DCI (201) 440-3985; Edwin M.
Larkin (716) 262-4133; Shawn M. Griffin (716) 232-6925; and Walter J.
Greenhalgh, Esq. (201) 733-9881.
SECTION 19. Governing Law; Terms. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without regard to the principles of conflict of laws thereof.
SECTION 20. Severability. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
SECTION 21. WAIVER OF JURY TRIAL. The Pledgor agrees that any suit, action
or proceeding, whether claim or counterclaim, brought or instituted by the
Pledgor or any successor or assign of the Pledgor on or with respect to this
Agreement or the dealings of the parties with respect hereto, shall be tried
only by a court and not by a jury. THE PLEDGOR HEREBY KNOWING, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. Further, the Pledgor waives any right it may have to claim or
recover, in any such suit, action or proceeding, any special, exemplar, punitive
or consequential damages or any damages other than, or in addition to, actual
damages. THE PLEDGOR ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE SECURED PARTY WOULD NOT ENTER
INTO THIS DOCUMENT WITH THE Pledgor IF THE WAIVERS SET FORTH IN THIS SECTION
WERE NOT A PART OF THIS DOCUMENT.
SECTION 22. Headings Descriptive. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
or construction of any provision of this Agreement.
9
Page 116 of 207 Pages
<PAGE>
SECTION 23. Reliance by DCI. The Pledgor and the Secured Party shall
deliver a copy of this Agreement to DCI which may rely upon it.
SECTION 24. Negation of Partnership or Joint Venture. No provision
contained in this Agreement nor in any other document executed between or among
DCI, the Secured Party or the Pledgor shall constitute, or be construed to be or
to create, a partnership, joint venture or any other non-lending relationship
between DCI, the Secured Party or the Pledgor or any of them. DCI, the Secured
Party and the Pledgor specifically acknowledge that no such relationship is
intended hereby, and that the Secured Party has entered into this Agreement and
all documents entered into in connection with this Agreement solely in its
capacity as lender to DCI.
SECTION 25. Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on all
of the parties hereto, notwithstanding that all the parties are not signatory to
the original or the same counterpart.
IN WITNESS WHEREOF, the Pledgor and the Secured Party have caused this
Agreement to be duly executed and delivered, and intending to be legally bound,
as of the date first above written.
/s/ Joseph M. Lobozzo II
----------------------------------------
JOSEPH M. LOBOZZO II (the "Pledgor")
NATIONAL CANADA FINANCE CORP.
(the "Secured Party")
By: /s/ E. Lynn Forgash
-------------------------------------
Name:
Title:
DELTA COMPUTEC INC. acknowledges receiving a copy of this Pledge Security
Agreement.
DELTA COMPUTEC INC.
By: /s/ Michael Julian
-------------------------------------
Name:
Title:
10
Page 117 of 207 Pages
<PAGE>
DELTA COMPUTEC INC.
900 Huyler Street
Teterboro, New Jersey 07608
National Canada Finance Corp.
125 West 55th Street
New York City, New York 10019
Dear Sirs:
This letter agreement dated as of __________________, 199__ (the "Warrant
Issuance Date") constitutes a Warrant Agreement (the "Warrant Agreement")
between Delta Computec Inc. ("Delta"), and National Canada Finance Corp.
("NCFC").
As partial consideration for the agreement of NCFC to agree to accept from
Delta, Delta's Amended and Restated Promissory Note in the amount of $750,000
(the "NCFC Note") in connection with a buy-out (the "Buy-out") of a portion of
the indebtedness of Delta by Joseph M. Lobozzo II ("Lobozzo"), which
indebtedness existed prior to October 10, 1996, Delta agreed to propose to its
shareholders a resolution to authorize an increase in the authorized common
shares of Delta and the issuance of a Warrant. This Warrant Agreement is issued
following such amendment of the Delta Restated Certificate of Incorporation
authorizing the increase of common shares, and relates to a portion of those
additional common shares. It is acknowledged that this Warrant Agreement is part
of a negotiated transaction between Delta and NCFC and it is not issued to NCFC
as an incentive to service or continued service to Delta by NCFC. The documents
executed by NCFC as a part of the Buy-out are referred to as the "Buy-out
Documents".
This Warrant Agreement is hereby granted to NCFC on the following terms and
conditions:
1. From the Warrant Issuance Date through October 9, 2001, NCFC shall have,
and is hereby granted, this Warrant Agreement which provides NCFC with a right
(the "Right") to purchase up to __________________ common shares (the "Warrant
Shares") of Delta as determined below. The number of Warrant Shares as to which
this Warrant Agreement shall apply shall be the number of common shares of Delta
which, when added to the number of Pledged Shares held by NCFC pursuant to a
certain Pledge Security Agreement dated October 10, 1996, equals seventeen and
one-half percent (17.5%) of Delta's issued and outstanding common shares
(including the Warrant Shares), as of the date of the exercise of this Warrant,
subject to reduction as determined below. NCFC may exercise the Right in whole
or in part from time to time but not in amounts less than 100,000 common shares
per exercise.
Page 118 of 207 Pages
<PAGE>
2. (a) NCFC acknowledges that Delta may, from time to time, make partial
prepayments on the NCFC Note, to the effect that the Principal (as defined in
the NCFC Note) may be reduced in amount. In the event that any prepayments are
ever made on the NCFC Note prior to the first day of the thirty-seventh month (a
"Collateral Reducing Prepayment"), then, if the Pledged Shares and any Warrant
Shares ever constitute more than seventeen and one-half percent (17.5%), or
more, of the issued and outstanding common shares of Delta (including the
Warrant Shares), the amount of the Warrant Shares as to which this Warrant shall
be applicable shall be reduced by a fraction, the numerator of which shall be
the amount of any Collateral Reducing Prepayment, and the denominator of which
shall be the Principal face amount of the NCFC Note immediately prior to the
Collateral Reducing Prepayment, the resulting number of whole Warrant Shares
calculated pursuant to this sentence being referred to as the "Returnable
Shares".
(b) If any Collateral Reducing Prepayment occurs, then, at the option
of Delta, this Warrant shall be promptly returned to Delta by NCFC for
reissuance, and, upon reissuance of the Warrant, the amount of Returnable
Shares shall be deducted from the amount of Warrant Shares shown in
paragraph 1 of this Warrant.
3. The cash exercise price (the "Cash Exercise Price") for the exercise of
the Right and for the purchase of the Warrant Shares, shall be the payment of a
price calculated by multiplying Ten Dollars ($10.00) by a fraction, the
numerator of which shall be the number of Warrant Shares and the denominator of
which shall be 11,440,475, such amount to be filled in at this space at the time
of issuance of this Warrant Agreement ($____.___), such Cash Exercise Price to
be payable by certified or bank check or money order payable to the order of
Delta. The consideration (the "NCFC Consideration") provided to Delta by NCFC
pursuant to the transactions set forth in the Buy-out Documents is also a
portion of the exercise price of the Right.
4. The Board of Directors of Delta has determined that the fair market
value of the NCFC Consideration, plus the Cash Exercise Price exceeds the fair
value and the par value of the Warrant Shares, although no representation is
made that the Warrant Shares will not be assessable.
5. Delta acknowledges that it has reserved for issuance a sufficient number
of Delta's authorized and unissued common shares, representing the Warrant
Shares and that it will keep the Warrant Shares reserved during the life of this
Warrant Agreement.
6. The NCFC may exercise the Right by sending to Delta a written notice of
exercise which notice is received at any time prior to October 10, 2001.
7. This Warrant Agreement, and the Warrant Shares, are each restricted
securities and are subject to the provisions of paragraphs 9, 10 and 11 of a
certain Lobozzo Commitment Letter
Page 119 of 207 Pages
<PAGE>
dated May 1, 1995, a copy of which is annexed hereto.
8. Delta agrees to pay any and all fees or costs associated with the
exercise of the Right, including, if necessary, any listing fee for the Warrant
Shares with the National Association of Securities Dealers, Inc., and any and
all state, federal or other fees or costs associated therewith.
9. If, and whenever, before the expiration of the Right, Delta shall effect
a subdivision or consolidation of its common shares, or the payment of a share
dividend on its common shares without receipt of consideration by Delta, the
number of common shares with respect to which the Right may thereafter be
exercised: (i) in the event of an increase in the number of outstanding common
shares, shall be proportionately increased; and (ii) in the event of a reduction
in the number of outstanding common shares, shall be proportionately reduced.
10. This Warrant Agreement is binding on, and shall inure to the benefit
of, Delta and NCFC, and each of their successors and assigns. If this Warrant
Agreement is ever held by an individual, it is transferrable by will or by the
laws of descent and distribution. This Warrant Agreement is otherwise not
transferrable without the prior written consent of Delta, which consent will not
be unnecessarily withheld, except that this Warrant Agreement shall be freely
assignable by NCFC as soon as it becomes exercisable by NCFC.
11. This Warrant Agreement supersedes any and all prior discussions and
negotiations with regard to the subject matter hereof and may only by amended by
a writing executed by Delta and NCFC.
12. This Warrant Agreement will be governed by the laws of the State of New
York without consideration of its conflicts of laws principles.
Very truly yours,
DELTA COMPUTEC INC.
By: _____________________
John DeVito
President
Accepted and agreed to:
NATIONAL CANADA FINANCE CORP. ("NCFC")
By: _______________________________
Name:
Title:
Page 120 of 207 Pages
<PAGE>
DELTA COMPUTEC INC.
900 Huyler Street
Teterboro, New Jersey 07608
October 10, 1996
Mr. Joseph M. Lobozzo
690 Portland Avenue
Rochester, New York 14621
Dear Mr. Lobozzo:
This letter agreement constitutes an Amended and Restated Stock Option
Agreement (the "Option Agreement") between Delta Computec Inc. ("Delta"), and
Joseph M. Lobozzo II (the "Optionee"), and this Option Agreement supersedes in
part a certain Stock Option Agreement dated May 1, 1996, between Delta and
Joseph M. Lobozzo II (the "Original Option") which entitled Joseph M. Lobozzo II
("Lobozzo") to acquire up to 11,440,475 common shares of Delta. The common
shares covered by this Option Agreement constitute a portion of the common
shares as to which the Original Option applied.
This Option Agreement is issued as consideration for Lobozzo agreeing to
assist Delta (and their affiliated companies) in their relationship with their
commercial lender, National Canada Finance Corp. ("NCFC"), and as further
consideration for Lobozzo's agreement to provide the Lobozzo Commitment to Delta
as set forth in a letter agreement between Delta and Lobozzo of May 1, 1995 (the
"Lobozzo Commitment Letter"), and as further consideration for Lobozzo
purchasing a portion of Delta's obligation to NCFC as of October 10, 1996, Delta
has issued to Optionee this Option Agreement. It is acknowledged that this
Option Agreement is part of a negotiated transaction between Delta and Lobozzo
and it is not issued to Optionee as an incentive to service or continued service
to Delta by Optionee.
This Option Agreement is hereby granted to Optionee on the following terms
and conditions:
1. From May 20, 1995 through October 9, 2001, Optionee shall have, and is
hereby granted, an option (the "Option") to purchase up to 3,020,000 common
shares, subject to adjustment as described below (the "Option Shares"), of
Delta. The Optionee may exercise the Option in whole or in part from time to
time but not in amounts less than 100,000 common shares per exercise.
2. The cash exercise price (the "Cash Exercise Price") for the exercise of
the Option and for the purchase of the Option Shares, shall be the payment of a
price calculated by multiplying Ten Dollars ($10.00) by a fraction, the
numerator of which shall be
13
Page 121 of 207 Pages
<PAGE>
the number of Option Shares as of the date of exercise and the denominator of
which shall be 11,440,475, such amount calculated as of the date of issuance of
this Option Agreement being $2.64, and, if the number of Option Shares ever
changes, such amount to be recalculated and restated at that time. The Cash
Exercise Price is to be paid by certified or bank check or money order payable
to the order of Delta. The consideration provided to Delta by Lobozzo pursuant
to the transactions set forth in the Lobozzo Commitment Letter (the "Lobozzo
Consideration") is also a portion of the exercise price of this Option.
3. The Board of Directors of Delta has determined that the fair market
value of the Lobozzo Consideration plus the Cash Exercise Price exceeds the fair
value and the par value of the Option Shares, although no representation is made
that the Option Shares will not be assessable.
4. Delta acknowledges that it has reserved for issuance a sufficient number
of Delta's authorized and unissued common shares, representing the Option Shares
and that it will keep the Option Shares reserved during the life of this Option
Agreement.
5. The Optionee may exercise this Option by sending to Delta a written
notice of exercise which notice is received at any time prior to October 10,
2001.
6. This Option Agreement, and the Option Shares, are each restricted
securities and are subject to the provisions of paragraphs 9, 10 and 11 of the
Lobozzo Commitment Letter, a copy of which is annexed hereto.
7. Delta agrees to pay any and all fees or costs associated with the
exercise of the Option, including, if necessary, any listing fee for the Option
Shares with the National Association of Securities Dealers, Inc., and any and
all state, federal or other fees or costs associated therewith.
8. If, and whenever, before the expiration of the Option, Delta shall
effect a subdivision or consolidation of its common shares, or the payment of a
share dividend on its common shares without receipt of consideration by Delta,
the number of common shares with respect to which this Option may thereafter be
exercised: (i) in the event of an increase in the number of outstanding common
shares, shall be proportionately increased; and (ii) in the event of a reduction
in the number of outstanding common shares, shall be proportionately reduced.
9. This Option Agreement is binding on, and shall inure to the benefit of,
Delta and the Optionee, and each of their successors and assigns. This Option
Agreement shall not terminate in the event of the death or disability of Lobozzo
or as a result of his ceasing to be an officer or director of Delta. This Option
if transferrable, if Optionee is an individual, by will or by the laws of
descent and distribution, but is otherwise not
Page 122 of 207 Pages
<PAGE>
transferrable without the prior written consent of Delta, which consent will not
be unnecessarily withheld. Delta hereby grants its consent to the assignment of
this Option Agreement to NCFC provided that, at the time of such assignment,
Optionee, NCFC and Delta each execute that certain Assignment Agreement drafted
October 10, 1996, to which a copy of this Option Agreement is annexed as Exhibit
A. In addition, Delta hereby consents to the assignment of this Option Agreement
by NCFC at and after such time as it may be exercisable.
10. This Option Agreement supersedes: (i) the May 1, 1995 Original Option
between Lobozzo and Delta; and (ii) any and all prior discussions and
negotiations with regard to the subject matter hereof and may only by amended by
a writing executed by Delta and Optionee.
11. This Option Agreement will be governed by the laws of the State of New
York without consideration of its conflicts of laws principles.
Very truly yours,
DELTA COMPUTEC INC.
By: ____________________
John DeVito
President
Accepted and agreed to:
_______________________________ ("Optionee")
Page 123 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made the ____ day of _____________, 199_ by
\and\ among JOSEPH M. LOBOZZO II ("Lobozzo"), NATIONAL CANADA FINANCE CORP.
("NCFC") and DELTA COMPUTEC INC. ("Delta"), a New York corporation.
RECITALS
A. Delta has granted Lobozzo options to purchase 11,440,475 of its
authorized but unissued shares of common stock (the "Option Shares"),
which options are evidenced by Amended and Restated Option Agreements
between Delta and Lobozzo of even date herewith (individually an
"Option Agreement" and collectively the "Option Agreements").
B. On the date hereof Delta, Lobozzo and NCFC have entered into an
agreement pursuant to which Lobozzo has purchased a portion of the
indebtedness due from Delta to NCFC, and $750,000 of indebtedness to
NCFC from Delta remains due and payable to NCFC, which $750,000 debt
is evidenced by an Amended and Restated Promissory Note dated October
10, 1996 (the "NCFC Note").
C. In connection with this transaction Lobozzo has agreed to assign a
portion of his rights under the Option Agreements to NCFC.
NOW THEREFORE, the parties agree as follows:
1. Lobozzo hereby assigns and transfers the entire right, title and
interest in the Option Agreement attached hereto as Exhibit A benefically held
by Lobozzo to NCFC (such right, title and interest hereinafter referred to as
the "Assigned Option"). The exercise of the Assigned Option shall become
effective only if the NCFC Loan is not repaid in full prior to the earlier to
occur of: (i) the occurrence of an Event of Default (which is not cured upon the
expiration of any applicable cure period) under the NCFC Note; or (ii) the first
day of the thirty-seventh month after the date hereof. NCFC agrees that it will
not exercise the Assigned Option until the earlier to occur of: (i) the
occurrence of an Event of Default (which is not cured upon the expiration of any
applicable cure period) under the NCFC Note; or (ii) the first day of the
thirty-seventh month after the date hereof (the "Exercise Date").
Page 124 of 207 Pages
<PAGE>
2. It is understood that the Assigned Option represents the right to
purchase 17.5% of Delta's common shares on a fully diluted basis. The term
"fully diluted basis" as used in this Agreement means, during the earlier to
occur of the period of time that the Assigned Option remains unexercised, or the
date that the NCFC Loan is paid in full, that NCFC shall be entitled to receive
17.5% of all issued and outstanding common shares for shares reserved for
issuance pursuant to any existing option or warrant of the currently authorized
20,000,000 common shares of Delta.
3. Delta approves of and consents to the assignment of the Assigned Option
\pursuant to this Agreement\, but does not consent to any other assignment or
transfer of the Assigned Option. In addition to the Assigned Option, Delta
covenants and agrees with NCFC that, in the event the Delta Certificate of
Incorporation is ever amended or restated by a vote of the Delta shareholders to
increase the authorized common shares over the existing 20,000,000 common shares
and, as a result of such amendment or restatement, the Board of Directors of
Delta issues common shares, options or warrants for action taken after the date
of this Agreement, then: (i) if any such issuance is to Lobozzo, JML Optical
Industries ("JML"), or affiliates thereof, Delta agrees to issue to NCFC,
without any cost to NCFC, common shares, warrants or options equal to 17.5% of
the amount of common shares, options or warrants issued to Lobozzo, JML or
affiliates thereof or (ii) if any such issuance is to persons ("Independent
Third Parties") other than Lobozzo, JML or affiliates thereof, Delta agrees to
permit NCFC to purchase any such common shares, options or warrants at the same
time and for the same consideration as are paid to Delta for the issuance of any
such common shares, options or warranties to any Independent Third Parties.
Page 125 of 207 Pages
<PAGE>
4. All rights of NCFC to receive any common shares, warrants or options
pursuant to this Agreement, including but not limited to the Assigned Option,
are referred to as the "NCFC Equity Acquisition Rights."
5. NCFC acknowledges and agrees that the acquisition of NCFC Equity
Acquisition Rights is subject to reduction upon prepayments on the NCFC Note as
provided in Section 8.
6. In addition to those NCFC Equity Acquisition Rights set forth above, in
the event that Delta raises capital in any offering of additional equity, Delta
shall immediately apply fifty percent (50%) of the proceeds of such additional
equity to the NCFC Note.
7. If the NCFC Note remains unpaid as of the Exercise Date, then at any
time after the Exercise Date, NCFC may exercise the Assigned Option without
restriction and the call feature of the Warrant set forth in Section 8 will be
cancelled.
8. If a portion of the NCFC Note, but not the entire NCFC Note, is paid as
of the date any Quarterly Premium Payment (as defined in <________)> \the NCFC
Note)\ accrues (the "QPP Reduction Ratio Date"), or on the Exercise Date (the
"Option Reduction Ratio Date"), then:
a. in the case of Quarterly Premium Payments, the Quarterly Premium
Payment accruing as of any QPP Reduction Ratio Date will be reduced by
the proportion that all prepayments made to the NCFC Note as of that
QPP Reduction Ratio Date (the "QPP Prepayment Total") bears to the
original $750,000 principal amount of the NCFC Note. The ratio of the
QPP Prepayment Total to the original $750,000 principal amount of the
NCFC Loan shall be referred to as the "QPP Reduction Ratio"; < and >
Page 126 of 207 Pages
<PAGE>
b. in the case of the exercise of the Assigned Option, the amount of
common shares to be issued under the Assigned Option will be reduced
by multiplying: (i) the number of common shares equal to seventeen and
one-half percent (17.5%) of the common shares of Delta on a fully
diluted basis as of any NCFC Warrant Exercise Date; by (ii) the QPP
Reduction Ratio\; and\<.>
c. in the event that any NCFC Equity Acquisition Right ever occurs in
addition to the Assigned Option, the parties acknowledge and agree
that the formula providing for the reduction of the amount of common
shares to which the Assigned Option shall be applicable pursuant to
<under> a. and b. above, shall be equally applicable, at the same
times, to all such other types of NCFC Equity Acquisition Rights as
may ever be issued to NCFC by Lobozzo, by JML or by Delta.
9. In consideration of its unconditional right to exercise the Warrant on
or after the first day of the thirty seventh month, NCFC shall be deemed to have
waived its right to collect any accrued Quarterly Premium Payments as of the
first day of the thirty seventh month.
10. This Agreement shall be in interpreted and enforced in accordance with
the laws of New York.
Page 127 of 207 Pages
<PAGE>
11. This Agreement is binding on, and shall inure to the benefit of the
parties and each of their successors and assigns. This Agreement shall not
terminate in the event of the death or disability of Lobozzo or as a result of
his ceasing to be an officer or director of Delta. This Agreement supersedes any
and all prior discussions and negotiations with regard to the subject matter
hereof and may only be amended by a writing executed by all parties.
IN WITNESS WHEREOF, the parties hereof executed this Agreement on the date
first above written.
_________________________________________
JOSEPH M. LOBOZZO II
NATIONAL CANADA FINANCE CORP.
By ______________________________________
Name:
Title:
Page 128 of 207 Pages
<PAGE>
DELTA COMPUTEC INC.
By ______________________________________
Name:
Title:
Page 129 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
DELTA COMPUTEC INC.
900 Huyler Street
Teterboro, New Jersey 07608
October 10, 1996
Mr. Joseph M. Lobozzo
690 Portland Avenue
Rochester, New York 14621
Dear Mr. Lobozzo:
This letter agreement constitutes an Amended and Restated Stock Option
Agreement (the "Option Agreement") between Delta Computec Inc. ("Delta"), and
Joseph M. Lobozzo II (the "Optionee"), and this Option Agreement supersedes in
part a certain Stock Option Agreement dated May 1, 1996, between Delta and
Joseph M. Lobozzo II (the "Original Option") which entitled Joseph M. Lobozzo II
("Lobozzo") to acquire up to 11,440,475 common shares of Delta. The common
shares covered by this Option Agreement constitute a portion of the common
shares as to which the Original Option applied.
This Option Agreement is issued as consideration for Lobozzo agreeing to
assist Delta (and their affiliated companies) in their relationship with their
commercial lender, National Canada Finance Corp. ("NCFC"), and as further
consideration for Lobozzo's agreement to provide the Lobozzo Commitment to Delta
as set forth in a letter agreement between Delta and Lobozzo of May 1, 1995 (the
"Lobozzo Commitment Letter"), and as further consideration for Lobozzo
purchasing a portion of Delta's obligation to NCFC as of October 10, 1996, Delta
has issued to Optionee this Option Agreement. It is acknowledged that this
Option Agreement is part of a negotiated transaction between Delta and Lobozzo
and it is not issued to Optionee as an incentive to service or continued service
to Delta by Optionee.
This Option Agreement is hereby granted to Optionee on the following terms
and conditions:
1. From May 20, 1995 through October 9, 2001, Optionee shall have, and is
hereby granted, an option (the "Option") to purchase up to 8,420,475 common
shares, subject to adjustment as described below (the "Option Shares"), of
Delta. The Optionee may exercise the Option in whole or in part from time to
time but not in amounts less than 100,000 common shares per exercise.
2. The cash exercise price (the "Cash Exercise Price") for the exercise of
the Option and for the purchase of the Option Shares, shall be the payment of a
price calculated by multiplying Ten Dollars ($10.00) by a fraction, the
numerator of which shall be
Page 130 of 207 Pages
<PAGE>
the number of Option Shares as of the date of exercise and the denominator of
which shall be 11,440,475, such amount calculated as of the date of issuance of
this Option Agreement being $7.36, and, if the number of Option Shares ever
changes, such amount to be recalculated and restated at that time. The Cash
Exercise Price is to be paid by certified or bank check or money order payable
to the order of Delta. The consideration provided to Delta by Lobozzo pursuant
to the transactions set forth in the Lobozzo Commitment Letter (the "Lobozzo
Consideration") is also a portion of the exercise price of this Option.
3. The Board of Directors of Delta has determined that the fair market
value of the Lobozzo Consideration plus the Cash Exercise Price exceeds the fair
value and the par value of the Option Shares, although no representation is made
that the Option Shares will not be assessable.
4. Delta acknowledges that it has reserved for issuance a sufficient number
of Delta's authorized and unissued common shares, representing the Option Shares
and that it will keep the Option Shares reserved during the life of this Option
Agreement.
5. The Optionee may exercise this Option by sending to Delta a written
notice of exercise which notice is received at any time prior to October 10,
2001.
6. This Option Agreement, and the Option Shares, are each restricted
securities and are subject to the provisions of paragraphs 9, 10 and 11 of the
Lobozzo Commitment Letter, a copy of which is annexed hereto.
7. Delta agrees to pay any and all fees or costs associated with the
exercise of the Option, including, if necessary, any listing fee for the Option
Shares with the National Association of Securities Dealers, Inc., and any and
all state, federal or other fees or costs associated therewith.
8. If, and whenever, before the expiration of the Option, Delta shall
effect a subdivision or consolidation of its common shares, or the payment of a
share dividend on its common shares without receipt of consideration by Delta,
the number of common shares with respect to which this Option may thereafter be
exercised: (i) in the event of an increase in the number of outstanding common
shares, shall be proportionately increased; and (ii) in the event of a reduction
in the number of outstanding common shares, shall be proportionately reduced.
9. This Option Agreement is binding on, and shall inure to the benefit of,
Delta and the Optionee, and each of their successors and assigns. This Option
Agreement shall not terminate in the event of the death or disability of Lobozzo
or as a result of his ceasing to be an officer or director of Delta. This Option
if transferrable, if Optionee is an individual, by will or by the laws of
descent and distribution, but is otherwise not
Page 131 of 207 Pages
<PAGE>
transferrable without the prior written consent of Delta, which consent will not
be unnecessarily withheld.
10. This Option Agreement supersedes: (i) the May 1, 1995 Original Option
between Lobozzo and Delta; and (ii) any and all prior discussions and
negotiations with regard to the subject matter hereof and may only by amended by
a writing executed by Delta and Optionee.
11. This Option Agreement will be governed by the laws of the State of New
York without consideration of its conflicts of laws principles.
Very truly yours,
DELTA COMPUTEC INC.
By: _____________________
John DeVito
President
Accepted and agreed to:
_______________________________ ("Optionee")
Page 132 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
LIMITED NON-RECOURSE GUARANTY AND SURETYSHIP AGREEMENT
DATED: October 10, 1996
To induce National Canada Finance Corp. (the "Lender") to enter into that
certain Amended and Restated Promissory Note (the "Restated Note") and related
restructuring and settlement documents (together with the Restated Note, the
"Restructuring Documents") dated the date hereof by and among the Lender and
Delta Computec Inc. (The "Borrower"), and to secure the observance, payment, and
performance of the Security Liabilities (as defined below), and with full
knowledge that the Lender would not enter into the Restructuring Documents
without this Limited Guaranty and Suretyship Agreement (together with any
amendments or modifications hereto in effect from time to time, the "Guaranty"),
which shall be a contract of suretyship, the Guarantor (as defined below),
intending to be legally bound hereby, agrees as follows:
BACKGROUND
----------
NOW, THEREFORE, for good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as
follows:
a. Liabilities Secured. The Guarantor hereby guarantees the full, prompt, and
unconditional performance of the Security Liabilities (as defined below),
when and as the same shall become due, whether at the stated maturity date,
upon the occurrence of an Event of Default under the Restated Note, by
acceleration, or otherwise. This Guaranty is a primary obligation of the
Guarantor and shall be a continuing inexhaustible Guaranty without
limitation except that the Lender's recourse against the Guarantor shall be
limited to amounts that can be realized by the Lender with respect to the
Collateral (hereafter defined).
b. Limitation of Guarantor's Liability. Notwithstanding anything to the
contrary contained herein, Lender's recourse against Guarantor under this
Guaranty shall be solely limited to foreclosing and/or exercising its other
remedies against the Collateral under the Pledge Security Agreement.
c. Definitions. As used herein, the following terms shall have the following
meanings:
i. Collateral. The term "Collateral" means all property of the Guarantor
subject to a pledge, lien or other encumbrance in favor of the Lender
under the Pledge Security Agreement.
ii. Guarantor. The term "Guarantor" means Joseph M. Lobozzo II.
iii. DCI Dollar Liabilities. The term "DCI Dollar Liabilities" means all
Indebtedness of the Borrower as that term is defined in the NCFC Note.
iv. Security Liabilities. The term "Security Liabilities" shall have the
meaning given to such term in the NCFC Note.
v. Loan Documents. The term "Loan Documents" means this Guaranty, the
Restructure Documents and any and all credit accommodations, notes,
loan agreements, and any other agreements and documents, now or
hereafter existing, creating, evidencing, guarantying, securing or
relating to any or all of the DCI Dollar Liabilities, together with
all amendments, modifications, renewals, or extensions thereof.
vi. Liabilities. The term "Liabilities" means, collectively, the DCI
Dollar Liabilities and the Security Liabilities.
vii. NCFC Note. The term "NCFC Note" shall have the meaning given to such
term in the Pledge Security Agreement.
Page 133 of 207 Pages
<PAGE>
viii. Pledge Security Agreement. The term "Pledge Security Agreement" shall
mean that certain Pledge Security Agreement dated the date hereof by
and between the Lender and the Guarantor.
d. Representations and Warranties; Covenants. The Guarantor covenants,
represents and warrants as of the date hereof and at all times hereafter
until the Security Liabilities are fully satisfied and performed, that the
accommodations made by the Lender to the Borrower under the Loan Documents
will result in material benefits to the Guarantor. This Guaranty was
entered into by the Guarantor for commercial purposes.
e. Events of Default. The occurrence of any one of the following shall
constitute an Event of Default under this Guaranty:
i. Breach. A breach by the Guarantor of any term, obligation, provision,
covenant, representation or warranty arising under this Guaranty;
ii. Defaults Under Other Loan Document(s). Any one or more Event(s) of
Default occurs under the Restated Note;
iii. Failure of the Borrower to Pay Dollar Liabilities. The Borrower fails
to satisfy the DCI Dollar Liabilities on or before October 10, 1999.
f. Remedies.
i. Acceleration of Liabilities; Rights of Lender. Upon the occurrence of
an Event of Default described in Section E hereof at the Lender's sole
option, all Security Liabilities shall immediately become due in full,
all without protest, presentment, demand or further notice of any kind
to the Guarantor, all of which are expressly waived. Upon and
following an Event of Default, the Lender may, at its option, exercise
any and all rights and remedies it has under this Guaranty.
ii. Remedies Cumulative; No Waiver. The rights, powers and remedies of the
Lender provided in this Guaranty are cumulative and concurrent, and
are not exclusive of any right, power or remedy available to the
Lender. No failure or delay on the part of the Lender in the exercise
of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further
exercise thereof, or the exercise of any other right, power or remedy.
iii. Continuing Enforcement of the Loan Documents. If, after satisfaction
of all or any part of the Security Liabilities, the Lender is
compelled or agrees, for settlement purposes, to surrender such
payment to any person or entity for any reason, then this Guaranty and
the other Loan Documents shall continue in full force and effect or be
reinstated, as the case may be. The provisions of this Paragraph shall
survive the termination of this Guaranty and the other Loan Documents
and shall be and remain effective notwithstanding the payment of the
Liabilities, the cancellation of the Guaranty or any other Loan
Document, the release of any security interest, lien or encumbrance
securing the Liabilities or any other action which the Lender may have
taken in reliance upon its receipt of such payment.
2
Page 134 of 207 Pages
<PAGE>
g. Miscellaneous.
i. Notices. Notices and communications under this Guaranty shall be in
writing and shall be given by: (i) hand-delivery, (ii) first class
mail (postage prepaid) or (iii) reliable overnight commercial courier
(charges prepaid), to the addresses set forth in this Guaranty. Notice
by overnight courier shall be deemed to have been given and received
on the date scheduled for delivery. Notice by mail shall be deemed to
have been given and received three (3) calendar days after the date
first deposited in the United States Mail. Notice by hand delivery
shall be deemed to have been given and received upon delivery. A party
may change its address by giving written notice to the other party as
specified herein.
ii. Governing Law. This Guaranty shall be construed in accordance with and
governed by the substantive laws of the State of New York without
reference to conflict of laws principles.
iii. Integration; Amendment; No Third Party Beneficiary. This Guaranty and
the other Loan Documents constitute the sole agreement of the parties
with respect to the subject matter hereof and thereof and supersede
all oral negotiations and prior writings with respect to the subject
matter hereof and thereof. No amendment of this Guaranty and no waiver
of one or more of the provisions hereof shall be effective unless set
forth in writing and signed by the parties hereto. The Guarantor and
the Lender do not intend any benefits of this Guaranty to inure to any
third party and no third party (including the Borrower) shall have any
status, right or entitlement under this Guaranty.
iv. Successors and Assigns. This Guaranty (i) shall be binding upon the
Guarantor and the Lender and, where applicable, their respective
heirs, executors, administrators, successors and permitted assigns,
and (ii) shall inure to the benefit of the Guarantor and the Lender
and, where applicable, their respective heirs, executors,
administrators, successors and permitted assigns; provided, however,
that the Guarantor may not assign his rights or obligations hereunder
or any interest herein without the prior written consent of the
Lender, and any such assignment or attempted assignment by the
Guarantor shall be void and of no effect with respect to the Lender.
The Lender may from time to time sell or assign, in whole or in part,
or grant participations in some or all of the Loan Documents and/or
the obligations evidenced thereby. The Guarantor authorizes the Lender
to provide information concerning the Guarantor to any prospective
purchaser, assignee or participant.
v. Severability and Consistency. The illegality, unenforceability or
inconsistency of any provision of this Guaranty or any instrument or
agreement required hereunder shall not in any way affect or impair the
legality, enforceability or consistency of the remaining provisions of
this Guaranty or any instrument or agreement required hereunder. The
Loan Documents are intended to be consistent. However, in the event of
any inconsistencies among any of the Loan Documents, such
inconsistency shall not affect the validity or enforceability of any
Loan Document. The Guarantor agrees that in the event of any
inconsistency or ambiguity in any of the Loan Documents, the Loan
Documents shall not be construed against any one party but shall be
interpreted consistent with the Lender's policies and procedures.
vi. Consent to Jurisdiction and Service of Process. The Guarantor hereby
consents that: (i) any action or proceeding against such Guarantor be
commenced and maintained in any court within any County in the State
of New York or in the United States District Court for any District of
New York by service of process on such owner, partner and/or officer;
and (ii) such courts shall have jurisdiction with respect to the
subject matter hereof and the person of the Guarantor and all
Collateral for the Liabilities. The Guarantor agrees that any action
brought by the Guarantor shall be commenced and maintained only in a
court in the United States District Court for the District of New York
or in any court within any County in the State of New York.
Page 135 of 207 Pages
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered to
the Lender by the Guarantor on the day and year first above written.
/s/ [ILLEGIBLE] /s/ Joseph M. Lobozzo II
- ------------------------------ ------------------------------------
WITNESS JOSEPH M. LOBOZZO II
c/o JML Optical
690 Portland Avenue
Rochester, NY 14621
NATIONAL CANADA FINANCE CORP.
By: /s/ E. Lynn Forgosh
- ------------------------------
E. Lynn Forgosh
GroupVice President
125 W. 55th Street
New York, NY 10019-5366
Telecopier No.: (212) 632-8775
Page 136 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
[LOGO] NATIONAL
BANK
OF CANADA
RE: Payoff Delta Computec
- --------------------------------------------------------------------------------
$2,199,815.89
Interest $ 5,962.50
Chech presentments and payroll $ 193,586.80
Estimated cash mgmt. fees Oct $ 1,150.00
Legal fees not related to restructuring;
Aug., Sept., Oct $ 4,745.50
Legal fees related to restructuring (cap) $ 4,000.00
Less: lockbox 10/9 $ 18,484.48
Less: lockbox 10/10 $ 96,115.17
Less: NCFC Note $ 770,000.00
$1,544,661.10
- --------------------------------------------------------------------------------
SPECIAL LOANS CORPORATE
Page 137 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
October 10, 1996
Mr. John DeVito, President
Delta Computec, Inc.
900 Huyler Street
Teterboro, NJ 07608
Dear John:
This will confirm receipt of a wire transfer in the amount of $1,544,661.10 in
connection with the closing of the NCFC/Lobozzo assignment and restructuring.
Very truly yours,
/s/ E. Lynn Forgosh
- -----------------------
E. Lynn Forgosh
Group Vice President
Baltimore o Charlotte 0 Chicago o Cincinnati o Cleveland o Memphis
New York o Pittsburgh o Roseland, N.J. o San Francisco o Southfield, MI
Page 138 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
Corporate Headquarters
900 Huyler Street, Teterboro, NJ 07808
800-477-8586
[LOGO] Delta CompuTec Inc. 201-440-8585 Fax 201-440-3985
- --------------------------------------------------------------------------------
Innovative Service Solutions
October 10, 1996
VIA FAX
- -------
Dear Customer:
Please be advised that, effective October 11, 1996, our lockbox address has been
changed, and you should no longer remit any payments made to Delta CompuTec,
Inc. to our former lockbox at National Canada Finance Corp.
Please send all checks to our new lockbox address at M&T Bank as follows:
Delta CompuTec, Inc.
c/o M&T Bank
626 Commerce Drive
Amherst, N.Y. 14228
Att: Lockbox Dept.
Dept. No. 205
The "remit to" address on our invoice has been changed to reflect the new
address,
Very truly yours,
Frank J. Donnelly
Chief Financial Officer
CONFIRMED AND ACKNOWLEDGED
THIS 10th DAY OF OCTOBER, 1996
NATIONAL CANADA FINANCE CORP.
BY: __________________________
E. LYNN FORGOSH
GROUP VICE PRESIDENT
Page 139 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
CREDIT AGREEMENT
This Amended and Restated Credit Agreement is made as of the 10th day of
October, 1996 by and among JOSEPH M. LOBOZZO II, an individual having an office
at 690 Portland Avenue, Rochester, New York 14621 (the "Lender"), DELTA COMPUTEC
INC. a New York corporation having its principal place of business at 900 Huyler
Street, Teterboro, New Jersey 07608 ("DCI"), and DELTA DATA NET, INC., a New
York corporation having its principal place of business at 900 Huyler Street,
Teterboro, New Jersey 07608("DDI"). DCI and DDI are referred to collectively as
the "Borrowers".
W I T N E S S E T H:
WHEREAS, the Borrower and National Canada Finance Corp. ("NCFC") entered
into a certain Credit Agreement dated as of April 1, 1994, as amended by Credit
Agreement Amendment No. 1 dated November 17, 1994, Credit Agreement Amendment
No. 2 dated January 24, 1995, Credit Agreement Amendment No. 3 dated April 3,
1995, Credit Agreement Amendment No. 4 dated May 1, 1995 and Credit Agreement
Amendment No. 5 dated October 27, 1995 (as amended, the Credit Agreement"); and
WHEREAS, the Borrower executed and delivered to NCFC a Promissory Note
dated April 1, 1994, as amended and restated by an Amended and Restated
Promissory Note dated May 1, 1995 and as further amended and restated by a Third
Amended and Restated Promissory Note dated October 27, 1995 (as amended and
restated, the "Promissory Note"); and
WHEREAS, on the date hereof, NCFC is assigning to the Lender all but
$750,000 of the indebtedness owed to NCFC by DCI evidenced by the Credit
Agreement and the Promissory Note; and
WHEREAS, the Borrower and the Lender desire to enter into a new agreement
which amends and restates, in its entirety, the portions of the Credit Agreement
and the Promissory Note evidencing the indebtedness which NCFC is assigning to
the Lender.
NOW, THEREFORE, it is agreed as follows:
1. Defined Terms.
1.1 Capitalized terms used but not otherwise defined herein have the
following meanings in this Agreement:
"Account Debtor" means a person or entity obligated to pay a
receivable.
Page 140 of 207 Pages
<PAGE>
"Additional Collateral" means (a) all general intangibles of the
Borrower of every kind and description, including without limitation
federal, state and local tax refund claims of all kinds, whether now
existing or hereafter arising; (b) all of the Borrower's deposit
accounts, whether now owned or hereafter credited, wherever located;
(c) all monies, securities, instruments, cash and other property of
the Borrower and the proceeds thereof, now or hereafter held or
received by, or in transit to, the Lender from or for the Borrower,
and (d) all books, records, customer lists, ledger cards, computer
programs, computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or relating to
any of the foregoing, whether now in existence or hereafter created;
and all proceeds of the foregoing and all proceeds of any insurance on
the foregoing.
"Collateral" means Receivables, Inventory, Equipment, Patents,
Field Spare Parts, Trademarks and Additional Collateral.
"Declaration" a declaration of the occurrence of an Event of
Default.
"Eligible Receivables" means the net amount of those Receivables
which continually meet the following requirements: (a) the account is
due and payable not more than 90 days from the date of the invoice
evidencing the Receivable; (b) the Receivable arose from the
performance of services by the Borrower which have been fully and
satisfactorily performed or from the absolute sale or lease of goods
by the Borrower in which the Borrower had the sole and complete
ownership and the goods have been shipped or delivered to the Account
Debtor evidencing which the Borrower or the Lender has the possession
of shipping and delivery receipts; (c) the Receivable is not subject
to any prior or subsequent assignment, claim, lien or security
interest other than that of the Lender; (d) the Receivable is not
subject to setoff, counterclaim, defense, allowance or adjustment
other than discounts for prompt payment shown on the invoice, or to
dispute, objection or complaint by the Account Debtor concerning its
liability on the Receivable and the goods, the sale or lease of which
gave rise to the Receivable, have not been returned, rejected, lost or
damaged; (e) the Receivable arose in the ordinary course of business;
(f) no petition in bankruptcy or other application for relief under
the Bankruptcy Code or other insolvency law has been filed with
respect to the Account Debtor, and the Account Debtor has not made an
assignment for the benefit of creditors, become insolvent or suspended
or terminated business, and the Account Debtor is generally paying its
debts as they become due; (g) the Account Debtor is not an affiliate,
subsidiary, officer, shareholder or employee of the Borrower, nor
owned or controlled by any such entity; (h) the Account Debtor
maintains its chief executive office in the United States and is
2
Page 141 of 207 Pages
<PAGE>
organized under the laws of the United States or a state thereof, or
payment of the Receivable is secured by a letter of credit acceptable
to the Lender; (i) the full amount reflected on the Borrower's books
and on any invoice delivered to the Lender relating to any Receivable
is owing to the Borrower and no partial prepayments thereon have been
made; (j) the Lender's security interest in the Receivable is a
perfected first lien; (k) the Receivable does not arise from a
consignment or other arrangement pursuant to which the subject
Inventory is returnable if not sold or otherwise disposed of by the
Account Debtor; and (l) the Receivable is not of a class, type or
category which the Lender hereafter reasonably determines, on notice
to the Borrower, is not eligible for inclusion in the Borrowing Base
under Section 2.1 of this Agreement.
"Equipment" means all machinery, equipment, furniture, fixtures,
tools, parts, supplies and motor vehicles, now owned and hereafter
acquired by the Borrower of whatsoever name, nature, kind or
description, wherever located, and all additions and accessions
thereto and replacements or substitutions therefor, and all proceeds
thereof and all proceeds of any insurance thereon.
"Inventory" means all inventory, as defined in the New York
Uniform Commercial Code.
"Loans" means all advances or loans made to the Borrower by the
Lender pursuant to this Agreement.
"Maturity Date" means December 10, 1996.
"Obligations" means all loans, advances, debts, liabilities,
obligations and duties owing by the Borrower to the Lender of every
kind and description, direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, pursuant to this
Agreement and the Loans and to no other transaction, whether such
obligations are form time to time reduced and thereafter increased, or
entirely extinguished and thereafter reincurred, including without
limitation, all interest, fees, charges, expenses and attorneys' fees
chargeable to the Borrower or incurred by the Lender in connection
with this Agreement.
"Patents" means all of the Borrower's right, title and interest,
present and future, in and to (a) all letters patent of the United
States or any other country, all right, title and interest therein and
thereto, and all registrations and recordings thereof, including
without limitation applications, registrations and recordings in the
United States Patent and Trademark Office or in any similar office or
agency of the United States and any State thereof or any other country
or any political subdivision thereof; all
3
Page 142 of 207 Pages
<PAGE>
whether now owned or hereafter acquired by the Borrower; and (b) all
reissues, continuations, continuations-in-part or extensions thereof
and all licenses thereof; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
"Receivables" means (a) all of the Borrower's now owned and
hereafter acquired accounts, chattel paper, documents and instruments,
and all proceeds of the foregoing and all proceeds of any insurance on
the foregoing; (b) all of the Borrower's rights, remedies, security
and liens, in, to and in respect of the accounts, including without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor
or secured party, guarantees or other contracts of suretyship with
respect to the accounts, deposits or other security for the obligation
of any debtor or obligor in any way obligated on or in connection with
any accounts and credit and other insurance, and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing; and (c)
all of the Borrower's right, title and interest, present and future,
in, to and in respect of, all goods relating to, or which by sale have
resulted in, accounts, including without limitation all goods
described in invoices or other documents or instruments with respect
to, or otherwise representing or evidencing any accounts and all
returned, reclaimed or repossessed goods, and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
"SAI/Delta" means SAI/Delta, Inc., a Florida corporation.
"Subordinated Debentures" means the following outstanding
Debentures issued by the Borrower: (i) 8% Subordinated Debenture dated
October 28, 1992, in the original principal amount of $600,001.00,
payable to Joseph M. Lobozzo II, as amended and restated, and now due
on January 31, 1998; and (ii) 8% Subordinated Debenture dated October
31, 1992, in the original principal amount of $475,000.00, payable to
Dataspan Systems, Inc. and Willcox & Gibbs Data Net, Inc., due October
3, 1997.
"Supplemental Agreements" means any and all agreements,
instruments, documents, security agreements, guaranties, mortgages,
financing statements, assignment agreements, repurchase agreements and
supplements thereto granting or intending to grant to lender any lien,
security interest, pledge, assignment or indemnification to secure the
obligations.
"Trademarks" means all of the Borrower's right, title and
interest, in and to (a) all trademarks, trade names, trade styles,
service marks, prints and labels on which
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said trademarks, trade names, trade styles and service marks have
appeared or appear, designs and general intangibles of like nature,
now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all registrations and recordings
thereof, including without limitation applications, registrations and
recordings 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, all whether
now owned or hereafter acquired by the Borrower; (b) all reissues,
extensions or renewals thereof and all licenses thereof; and (c) the
goodwill of the business symbolized by each of the Trademarks, and all
customer lists and other records of the Borrower relating to the
distribution of products bearing the Trademarks; and all proceeds of
the foregoing and all proceeds of any insurance on the foregoing.
1.2 UCC Definitions. The words "debtor", "secured party",
"collateral", "perfection", "authorization", "consent", "security
agreement", "proceeds", "financing statement", "assignee", "assignment",
action , "creditor", "goods", "equipment", "inventory", "accounts",
"documents", "instruments", "chattel paper", and "general intangibles", and
all other terms used in this Agreement and in all documents referred to
herein shall have the meanings given such terms in the New York Uniform
Commercial Code.
1.3 Accounting Terms. All accounting terms used but not defined in
this Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied.
2. Terms of Borrowing.
2.1 Borrowing Base. As long as neither DCI nor DDI are in default of
any of their Obligations to the Lender, the Lender may lend to the
Borrower, and the Borrower may borrow from the Lender, from time to time,
up to an aggregate outstanding principal amount at any time of $2,550,000,
or such lesser amount which is 105% (subject to reduction as set forth on
Schedule 2.1) of DCI's, DDI's and SAI/Delta's Eligible Receivables.
2.2 Borrowing Base Reports Etc. For purposes of computing the
Borrowing Base, the Borrower shall furnish to the Lender information
adequate to identify Receivables and Inventory at times and in form and
substance as may be required by the Lender. Without limiting the foregoing,
the Borrower shall provide to the Lender in form and content satisfactory
to the Lender (a) a Borrowing Certificate in the form mutually agreeable to
Borrower and Lender to be provided at least weekly and at such other
intervals as the Lender may request in the event a Loan would exceed the
Borrowing Base as calculated by the
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Lender; and (b) monthly, within 15 days after month-end, an Accounts
Receivable Aging based on invoice date and listed in sequence by number.
From time to time, the Borrower shall provide the Lender with such other
schedules and information as the Lender may reasonably request. Together
with such schedules, the Borrower shall, upon the reasonable request of the
Lender, furnish copies of customers' invoices or the equivalent, and
original shipping or delivery receipts for all merchandise sold, and the
Borrower warrants the genuineness thereof. The Borrower further warrants
that all Receivables are and will be bona fide existing obligations created
by the sale and delivery of merchandise or the rendition of services to
customers in the ordinary course of business, free of liens, encumbrances
and security interests, except as permitted hereunder, and unconditionally
owed to the Borrower and, to the best of the Borrower's knowledge, without
defense, offset or counterclaim.
2.3 Loans.
(a) Subject to the terms of this Agreement, the Borrower may
receive Loans upon request made by a person authorized by the Borrower
no later than 1:00 p.m. Rochester, New York time in a writing
satisfactory to the Lender; provided that no Loan shall be made which,
by itself or together with the principal balance then outstanding of
prior Loans, would cause the total outstanding principal balance of
the Loans to exceed the Borrowing Base described in paragraph 2.1 of
this Agreement.
(b) Subject to the required terms of payment set forth in
Paragraph 2.5 below, the Borrower may make principal payments upon its
indebtedness for Loans in its discretion and until maturity as
provided in Paragraph 2.5(a), may reborrow subject to the limits set
forth in this Agreement.
2.4 Interest.
(a) Until the Maturity Date, whether by acceleration or
otherwise, the Borrower agrees to pay interest on the outstanding
principal balance of the Loans at the rate of one and three quarters
of one percent (1 3/4%) per annum above the highest prime rate
published form time to time in the "Money Rates" column of the Wall
Street Journal or any successor to such publication ("Prime Rate") as
it may change from time to time based upon a 360-day year for the
actual number of days the Loans are outstanding which may result in a
higher effective annual rate. After maturity, whether by acceleration
or otherwise, the Borrower agrees to pay interest on the outstanding
principal balance of the Loans at a rate equal to three and three
quarters percent (3 3/4%) per annum above the Prime Rate.
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(b) Any change in the Prime Rate shall, without notice to the
Borrower, be effective hereunder commencing at the same time such new
rate becomes effective.
2.5 Payments.
(a) The Borrower further agrees to pay the outstanding principal
and accrued interest on the Loans on the earlier of (i) the Maturity
Date; or (ii) the occurrence of an event of default under Paragraph
7.1 below in respect of which the Lender has delivered a Declaration.
In addition, the Borrower agrees to make, on demand, such principal
payments as are necessary so that the unpaid principal balance of the
Loans does not at any time exceed the Borrowing Base. Without limiting
the right of the Lender to demand payment as provided herein, the
Borrower shall pay accrued interest on the first day of each month
commencing the month following the date of this Agreement and
continuing until all of the Obligations are paid in full.
(b) Each payment received by the Lender shall be applied first to
interest accrued and billed and the balance, if any, to principal,
provided that if there has occurred an event of default under
Paragraph 7.1 below, the Lender may apply payments in the Lender's
absolute discretion.
(c) Any non-cash payment of Loans, i.e, payment in other than
immediately available U.S. funds, shall be deemed paid, for purposes
of calculating the principal amount available for borrowing under this
Agreement, on the date such non-cash payments are received by the
Lender; however, for the purpose of calculating interest pursuant to
Paragraph 2.4 of this Agreement, such payments shall be deemed to have
been received two (2) days after actual receipt of such payment by the
Lender. Notwithstanding the foregoing, if any such non-cash payment
presented for collection by the Lender is not paid in Lender may,
without prior notice to the Borrower, reverse the provisional credit
which has been given, and make appropriate adjustments to the amount
of principal and interest due, and the amount of the Borrowing Base
available.
2.6 Prepayment. The Borrower shall have the right to prepay the
outstanding principal balance of the Loans in whole, at any time, or in
part, from time to time.
2.7 Fees and Expenses.
(a) Audit Fees. The Borrower shall pay to the Lender field
examination fees in the amount of $400 per day per examiner for all
audits or field examinations of the Borrower conducted in reasonable
scope at reasonable intervals and shall reimburse the Lender for all
reasonable airfare, hotel
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accommodations and other out-of-pocket expenses in connection with
such audits or examinations.
(b) Expenses. If the Obligations are placed in the hands of any
attorneys employed by the Lender for collection, the Borrower agrees
to pay on demand, the Lender's reasonable attorneys' fees, together
with reasonable costs and expenses, whether or not a legal proceeding
or action is commenced, including those incurred in a bankruptcy or
insolvency proceeding.
2.8 Purpose of Line of Credit. The Borrower agrees to use the
proceeds of the Loans solely as working capital and for general
corporate purposes.
2.9 Collection of Receivables. After the occurrence of an event
of default hereunder in respect of which the Lender has delivered a
Declaration, the Lender or its designee may notify Account Debtors
that Receivables have been assigned to the Lender or of the Lender's
security interest therein and collect them directly and charge the
collection costs and expenses to the Borrower's account; but, unless
and until the Lender does so or gives the Borrower other instructions,
the orrower shall make collection of all Receivables. Until credited
to the Borrower's account as hereinafter set forth, all payments of
Receivables through a lock box arrangement to be established with the
Lender shall be held by the Lender as collateral for payment and/or
performance of the Borrower's Obligations to the Lender.
2.10 Returns, Credits. Etc. Any merchandise which is returned by
an Account Debtor or otherwise recovered shall be set aside, marked
with the Lender's name and held by the Borrower as the Lender's
trustee, and shall remain part of the Lender's security. The Borrower
shall notify the Lender promptly of all returns and recoveries and, on
request, deliver the merchandise to the Lender. The Borrower shall
also notify the Lender promptly of all disputes and claims exceeding
$25,000 in the aggregate, and settle or adjust them at no expense to
the Lender, but no discount, credit or allowance (other than in the
ordinary course of the Borrower's business) shall be granted to any
Account Debtor, and no returns of merchandise (other than in the
ordinary course of the Borrower's business) shall be accepted by the
Borrower without the Lender's consent. After the occurrence of an
event of default hereunder in respect of which the Lender has
delivered a Declaration, the Lender may settle or adjust disputes and
claims directly with Account Debtors for amounts and upon terms which
the Lender reasonably determines, on notice to the Borrower, to be
advisable, and in all cases the Lender will credit the Borrower's
account with only the net amounts received by the Lender in payment of
such Receivables.
2.11 Further Assurance. Upon the Lender's request, the Borrower
shall appropriately mark the Borrower's books of account to disclose
the Lender's security interest in all the Borrower's Receivables, and
shall perform all other steps reasonably requested by the Lender to
create and maintain in the Lender's favor a valid first priority
security interest, or lien in or on all Receivables and all other
security held by or for the Lender.
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2.12 Power of Attorney. The Borrower appoints the Lender, or any
person whom the Lender may designate as its attorney, with power of
attorney to sign the Borrower's name on such financing statements as
may be necessary to perfect the Lender's security interest in the
Collateral; and, after the occurrence of an event of default hereunder
in respect of which the Lender has delivered to the Borrower a
Declaration to endorse the Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or
security that may come into the Lender's possession; to sign the
Borrower's name on any invoice or bill of lading relating to any
Receivables, on verifications of accounts, notices of assignment and
notices to customers; to notify the post office authorities to change
the address for delivery of the Borrower's mail to an address
designated by the Lender; to send requests for verification of
Receivables to Account Debtors; and to do all things necessary to
carry out this Agreement. The Borrower ratifies and approves all acts
of such attorney. Neither the Lender nor the attorney will be liable
for any acts or omissions nor for any error of judgment or mistake of
fact or law. This power, being coupled with an interest, is
irrevocable so long as any Receivables in which the Lender has a
security interest remain unpaid or until the Obligations have been
fully satisfied. the Lender may file one or more financing statements
disclosing the Lender's security interest without the Borrower's
signature appearing thereon.
3. Collateral.
3.1 Security Interest. As security for payment and performance of all
Obligations, the Borrower hereby assigns and grants to the Lender a
continuing security interest in the Collateral. The Lender shall retain its
security interest in all Collateral, until all Obligations have been
finally and irrevocably satisfied.
3.2 Possession of Collateral. After the occurrence of an event of
default hereunder in respect of which the Lender has delivered to the
Borrower a Declaration, the Lender will at all times have the right to take
physical possession of the Collateral and to maintain such possession of
the Collateral on the Borrower's premises or to remove the Collateral or
any part thereof to such other places as the Lender may desire. If the
Lender exercises its right to take possession
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of the Collateral, the Borrower shall, upon the Lender's demand, assemble
the Collateral and make it available to the Lender at a place reasonably
convenient to the Lender.
3.3 Location of Collateral. All Collateral is owned by the Borrower
free of all other liens and encumbrances, except as set forth on Schedule 1
hereto and shall be kept by the Borrower at the location(s) set forth in
Schedule 2 hereto; and the Borrower will not (without the Lender's prior
written approval) remove the Collateral therefrom, except for the purposes
of sale or lease in the regular course of the Borrower's business.
3.4. Limitation on Disposition of Assets. The Borrower will not sell,
exchange or otherwise dispose of the Collateral, or any part thereof, or
any interest therein without the express written consent of the Lender
other than (a) finished products or field spare parts sold in the ordinary
course of business, and (b) fully depreciated obsolete equipment or
equipment which is replaced by items of comparable kind and value. In the
event of any other sale, exchange or other disposition of the Collateral or
any part thereof or any interest therein (and no such sale, exchange or
other disposition is hereby otherwise authorized or consented to), the
security interest of the Lender shall nevertheless continue in said
Collateral (including all proceeds, cash and non-cash) notwithstanding said
sale, exchange or other disposition; all of said proceeds shall remain
Collateral hereunder and shall be transferred and paid over to the Lender
immediately following said sale, exchange or other disposition, and shall
be applied at the option of the Lender to the payment of Obligations due
hereunder; and the receipt by the Lender of all or any of said proceeds
shall not be deemed or construed to be an authorization or consent of the
Lender to such sale, exchange or other disposition of said Collateral.
3.5 Further Assurances Regarding Inventory. The Borrower shall perform
any and all steps reasonably requested by the Lender to perfect the
Lender's security interest in the Inventory, such as leasing warehouses to
the Lender or the Lender's designee, placing and maintaining signs,
appointing custodians, executing and filing financing or continuation
statements in form and substance satisfactory to the Lender, maintaining
stock records and transferring Inventory to warehouses. If any Inventory is
in the possession or control of any of the Borrower's agents or processors,
the Borrower shall notify such agents or processors of the Lender's
security interest therein, and, upon request, instruct them to hold all
such Inventory for the Lender's account and subject to the Lender's
instructions. A physical listing of all Inventory, wherever located, shall
be taken by the Borrower at least annually and whenever requested by the
Lender, and a copy of each
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such physical listing shall be supplied to the Lender. the Lender may
examine and inspect the Inventory at any reasonable time during regular
business hours.
3.6 Compliance. The Borrower will comply with the terms and conditions
of any leases covering the premises wherein the Collateral is located and
any orders, ordinances, laws or statutes of any city, state or other
governmental department having jurisdiction with respect to such premises
or the conduct of business thereon.
3.7 Discharge of Liens. The Lender may, at its option, discharge any
taxes, liens, security interests or other encumbrances at any time levied
or placed on the Collateral, and the Lender may pay insurance premiums or
procure insurance and otherwise pay for the maintenance and preservation of
the Collateral and the Borrower will reimburse the Lender on demand for any
payment made or expense incurred by the Lender pursuant to the foregoing
authority, with interest at the rate provided in this Agreement.
3.8 Corporate Existence, Properties. The Borrower will at all times
maintain, preserve and protect all franchises, patents, and trade names and
preserve all the remainder of its property used or useful in the conduct of
its business and keep the same in good condition and repair (normal wear
and tear and obsolescence excepted), and from time to time make, or cause
to be made, all needed and proper repairs, renewals, replacements,
betterments and improvements thereto, and will pay or cause to be paid,
except when the same may be contested in good faith, all rent due on any
premises where any property is held or may be held, so that the business
carried on in connection therewith may be continuously conducted.
3.9 Insurance. The Borrower will have and maintain insurance at all
times with respect to all Collateral against risks of fire (including
so-called extended coverage), theft and such risks as the Lender may
require containing such terms, in such form, and for such periods, and
written by such companies as may be satisfactory to the Lender, such
insurance to be payable to the Lender and the Borrower as their interests
may appear; each policy of insurance shall have a loss payee endorsement in
form satisfactory to the Lender providing (a) that loss or damage, if any
under the policy, shall be payable to the Lender, as secured party, as its
interests may appear; (b) that the insurance as to the interest of the
Lender shall not be invalidated by any act or neglect of the insured or
owner of the property described in said policy, nor by any foreclosure, or
other proceeding, nor by any change in the title of ownership of said
property, nor by the occupation of the premises where the property is
located for purposes more hazardous than are permitted by said policy; (c)
that, if the policy is canceled at
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any time by the insurance carrier, in such case the policy shall continue
in force for the benefit of the Lender for not less than thirty (30) days
after written notice of cancellation to the Lender from the insurance
carrier; and (d) that the policy will not be reduced or canceled at the
request of the insured nor will said loss payee endorsement be amended or
deleted without thirty (30) days' prior written notice to the Lender from
the insurance carrier. The Borrower will furnish the Lender with
certificates or other evidence satisfactory to the Lender of compliance
with the foregoing insurance provisions, and, after the occurrence of an
event of default hereunder in respect of which the Lender shall have
delivered to the Borrower a Declaration, the Lender may act as attorney for
the Borrower in obtaining, adjusting, settling, and canceling such
insurance and receiving and endorsing any drafts. The Borrower hereby
assigns to the Lender any and all monies which may become due and payable
under any policy insuring the Collateral covered by this Agreement,
including return of unearned premiums, and hereby directs any insurance
company issuing any such policy to make payment directly to the Lender and
authorizes the Lender, at its option: (i) to apply such monies in payment
on account of any Obligation hereunder, whether or not due, and remit any
surplus to the Borrower; or (ii) to return said funds to the Borrower for
the purpose of replacement of the Collateral. The Borrower will also at all
times maintain necessary workers' compensation insurance and such other
insurance as may be required by law or as may be reasonably required in
writing by the Lender.
4. Representations and Warranties.
4.1 Representations and Warranties. DCI and DDI each warrants and
represents to the Lender that (a) each Borrower is and shall at all times
hereafter be a corporation duly organized and existing in good standing
under the laws of the state of its incorporation and qualified and licensed
to do business in any other state in which its ownership of property or its
conduct of business requires it to be so qualified and/or licensed; (b)
each Borrower has the right and power and is duly authorized to enter into
this Agreement and the Supplemental Agreements; (c) the execution by each
Borrower of this Agreement and the Supplemental Agreements shall not
constitute a breach of any provision contained in either Borrower's
Certificate of Incorporation or By-Laws or contained in any agreement to
which either Borrower is now or hereafter becomes a party; (d) the
performance by each Borrower of all of the terms and provisions contained
in this Agreement and in the Supplemental Agreements' shall not constitute
a default or an event of default under any agreement to which each Borrower
is now or hereafter a party; (e) the Borrower has good and indefeasible
title to the Collateral; (f) all financial statements and information
relating to each Borrower which have been or may hereafter be delivered by
each Borrower to the Lender are true and correct and have been
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prepared in accordance with generally accepted accounting principles, and
there has been no material adverse change in the financial condition of
either Borrower since the submission of any such financial information to
the Lender; and (g) there are no actions or proceedings which are pending
or threatened against either Borrower which might result in any material
adverse change in the Borrower's financial condition or which might in any
material way affect any of the assets of the Borrower.
[Intentionally left blank]
5. Affirmative Covenants. The Borrower agrees as follows:
5.1 Monthly Financial Reports. To furnish to the Lender, within thirty
(30) days after the end of each calendar month, internally prepared
consolidated and consolidating financial reports of the operations of the
Borrower for such month and for the fiscal year-to-date, certified by the
Chief Financial Officer of the Borrower.
5.2 Quarterly Financial Reports. To furnish to the Lender, within
forty-five (45) days after the end of each fiscal quarter, internally
prepared 10Q financial consolidated reports of the Operations of the
Borrower for such quarter, certified by the Chief Financial Officer of the
Borrower.
5.3 Annual Statements. To furnish to the Lender within the earlier to
occur of the date that such credited financial statement are filed by DCI
with the Securities and Exchange Commission or one hundred twenty (120)
days after the end of each of the Borrower's fiscal years, audited
financial statements consisting of a balance sheet, income statement and
associated cash flows of the Borrower for such year prepared on a
consolidated and consolidating basis, in accordance with generally accepted
accounting principles, by a firm of independent certified public
accountants satisfactory to the Borrower and the Lender and certified by
the Borrower's Chief Financial Officer.
5.4 Forecast. For each fiscal year of the Borrower during the term
hereof, furnish to the Lender a consolidated and consolidating financial
forecast for the Borrower's upcoming fiscal year, consisting of monthly
projections of the Borrower's balance sheet, income statement, cash flows,
and Loan availability. Such reports shall be furnished to the Lender within
the first thirty (30) days of the
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Borrower's fiscal year. Anything to the contrary notwithstanding, so long
as DDI is not actively conducting business, the financial reports,
statements and forecasts to be furnished pursuant to paragraphs 5.1 and 5.4
need not contain information concerning DDI.
5.5 Certification. The reports required under Paragraph 5.1 through
5.4 shall be accompanied by a certificate of the chief financial officer of
the Borrower (i) certifying that no event of default under Paragraph 7.1 of
this Agreement has occurred or, if such an event has occurred, the nature
of the event of default and the action which the Borrower proposes to take
to cure it, and (ii) with computations demonstrating compliance with the
covenants contained in this Agreement.
5.6 Securities Regulation Reports. Promptly after the sending or
filing thereof, to furnish copies of all proxy statements, financial
statements and reports which the Borrower sends to its stockholders, and
copies of all regular, periodic and special reports, and all registration
statements which the Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor,
or with any national securities exchange.
5.7 Management. To notify the Lender thirty (30) days prior to any
reasonably foreseeable change in the management of the Borrower.
5.8 Taxes. To pay promptly all tax assessments and other governmental
charges, provided, however, that nothing herein contained shall be
interpreted to require the payment of any tax assessments and other
governmental charges long as its validity is being contested in good faith
in appropriate proceedings diligently pursued, provided such contest does
not impair the rights and security of the Lender.
5.9 Maintenance of Property. To maintain and keep its real and
personal property in good condition and in compliance with applicable
federal, state and local laws, rules and regulations.
5.10 Litigation. To notify the Lender of any litigation instituted
against the Borrower and any judgments entered against the Borrower in any
court involving more than $250,000 in the aggregate at any one time which
is not covered by insurance or where the insurance coverage is questioned
by the carrier.
5.11 Corporate Existence. To maintain each Borrower's corporate
existence in good standing.
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5.12 Other Information. To furnish such other information and at such
times as may be reasonably requested by the Lender.
5.13 Environmental Matters. To comply with all applicable
environmental laws and regulations, and to promptly correct any violation
of any applicable environmental law or regulation.
5.14 Audits. To permit the Lender and its agents at all reasonable
times and from time to time during normal business hours to examine, audit,
and make extracts from, or copies of, any of the Borrower's books, ledgers,
reports and other records and to otherwise verify all or any Collateral in
any manner the Lender considers appropriate.
5.15 Ownership. To notify the Lender within five (5) business days of
any change in voting control of either DCI or DDI.
6. Negative Covenants. The Borrower will not, without the prior written
consent of the Lender:
6.1 Capital Expenditures. Expend for fixed assets, or enter into
leases which must be capitalized under generally accepted accounting
principles (but excluding field spare parts), or make leasehold
improvements during any one fiscal year in an aggregate amount in excess of
$100,000.
6.2 Liens. Create or permit to exist against any of its property or
assets, real or personal, tangible or intangible, now owned or hereafter
acquired, any mortgage or other lien or encumbrance, except (a) liens and
mortgages listed on Schedule l hereto; (b) liens for taxes not delinquent
or being contested in good faith and by appropriate proceedings; (c) liens
granted to the Lender; and (d) liens granted to NCFC.
6.3 Borrowed Money. Incur other indebtedness for borrowed money,
except (a) indebtedness described on Schedule 3 hereto, (b) indebtedness
permitted by Section 6.14 hereof, (c) indebtedness to the Lender, (d)
intercompany transfers between DCI, DDI and SAI/Delta; and (e) indebtedness
to NCFC.
6.4 Sell Real Property. Sell or dispose of any presently owned real
property.
6.5 Sell Fixed Assets. Sell or dispose of a substantial portion of
presently owned fixed assets, such as furniture, fixtures, and equipment,
except as required for normal replacement due to age and/or obsolescence,
provided (a) the same are replaced by fixed assets of equal value and
quality or
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(b) the Borrower delivers to the Lender written notice of such sale or
disposition and remits the proceeds of such sale or disposition to reduce
the outstanding principal balance of the Loans, and following such sale or
disposition the Borrower is in compliance with the Borrowing Base.
6.6 Declare Dividends. Declare any dividends or make any other
distribution on any shares of its capital stock or set apart any sum for
the payment of any such dividends.
6.7 Capital Stock. Purchase or retire any of its capital stock.
6.8 Purchase Other Business. Purchase or acquire all or substantially
all of the property, assets, or business of any other person, firm or
corporation.
6.9 Contingent Debt. Assume, guarantee, endorse, contingently agree to
purchase, or otherwise become liable upon the obligation of any person,
firm, or corporation, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business, or (b) guarantees of any obligations owed to
the Lender.
6.10 Purchase Stock: Merge or Consolidate. Enter into any merger or
consolidation, or purchase or acquire the obligations or stock of, or any
other interest in, any person, firm, corporation, or other enterprise
whatsoever, except the purchase of direct obligations of the United States
of America or of any state, county, or municipality.
6.11 Sale-Leaseback. Directly or indirectly enter into any arrangement
whereby the Borrower shall sell or transfer all or any substantial part of
its fixed assets then owned by it and shall thereafter or thereupon rent or
lease such property or a substantial part thereof.
6.12 Accounts Receivable. Sell, assign, transfer, or dispose of any of
its Receivables, except to the Lender.
6.13 Loans. Make loans or advances to any person, firm, or
corporation.
6.14 Lease of Real and Personal Property. Enter into any arrangements
for the lease of real or personal property where the annual lease payments
for all such leases would exceed in the aggregate $350,000.00 in any fiscal
year.
16
Page 155 of 207 Pages
<PAGE>
6.15 Prepay Debt. Make any prepayment in regard to any indebtedness
that is subordinated in any respect to indebtedness owing to the Lender.
6.16 ERISA Compliance.
(a) Engage in any "prohibited transaction" (as such term is
defined in Section 406 or Section 2003(a) of the Employee Retirement
Income Security Act of 1974 and the regulations thereunder, as now or
hereafter in effect, ("ERISA"));
(b) Incur any "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA) whether or not waived; or
(c) Terminate any pension plan in a manner which could result in
the imposition of a lien on any property of the Borrower or any
affiliate pursuant to Section 4068 of Erlsa.
6.17 [Intentionally Omitted].
6.18 [Intentionally Omitted].
6.19 [Intentionally Omitted].
6.20 [Intentionally Omitted].
6.21 [Intentionally Omitted].
6.21 Subordinated Debentures. Make any principal payments on any of
the Subordinated Debentures prior to the dates upon which such payments are
scheduled to be made under the Subordinated Debentures.
7. Default.
7.1 Events of Default. If one or more of the following events of
default shall occur, the Lender, at its option, may terminate the
Borrower's right to receive any further Loans, and regardless of whether
the Lender exercises such option, the indebtedness of the Borrower under
this Agreement and any note or other agreement executed pursuant hereto
shall become immediately due and payable upon declaration to that effect
delivered by the Lender to the Borrower:
(a) Default shall be made by the Borrower (i) in the payment of
any principal or interest payable under this Agreement within ten (10)
days when due or (ii) in the payment of any fees or other expenses due
and payable in pursuant to this Agreement or any other document
executed and delivered to the Lender in connection with this Agreement
within ten (10) days
17
Page 156 of 207 Pages
<PAGE>
after the Lender notifies the Borrower that such fees or expenses are
due;
(b) Default shall be made in (i) the due observance and
performance of any term, covenant, or agreement contained in this
Agreement (other than Section 6 of this Agreement) or in any other
present or future agreement, note, or instrument between or among the
Borrower and the Lender, including, without limitation, any default
under any Supplemental Agreements and, to the extent such default is
capable of being cured, such default shall remain uncured for a period
of twenty (20) days after the Lender notifies the Borrower in writing
of such default, or (ii) the due observance and performance of any
term, covenant, or agreement contained in Section 6 of this Agreement;
(c) any representation or warranty made in this Agreement or any
certificate or statement furnished pursuant to or in connection with
this Agreement shall prove to have been false in any material respect
at the date of which the facts therein set forth were certified, or
shall have omitted any substantial contingent or unliquidated
liability or claim against the Borrower, or if upon the date of the
execution of this Agreement there shall have been any material adverse
change in any of the material facts disclosed on any such statement,
which change shall not have been disclosed to the Lender in writing at
or prior to the time of such execution;
(d) the termination of existence or business, failure of, or the
making of an assignment for the benefit of creditors by, the Borrower;
(e) the entry of any judgment or judgments against the Borrower
aggregating as to any one of them at any one time in excess of
$250,000 which shall remain unsatisfied, undischarged, or unsecured
for a period of thirty (30) days or as to which a stay of execution
shall not have been obtained within thirty (30) days of the entry
thereof; provided, however, the Borrower may not, however, be declared
in default by reason of the entry of any such judgment so long as the
same shall be contested in good faith by appropriate proceedings
diligently conducted, and proper security be given therefor;
(f) if any governmental agency or department shall take control
of a substantial part of the property of the Borrower and shall
continue such control for thirty (30) days;
(g) if any tax lien is filed against the property of the Borrower
and remains unsatisfied, undischarged, or unsecured for a period of
thirty (30) days unless such lien is
18
Page 157 of 207 Pages
<PAGE>
contested in good faith by proper proceedings diligently conducted;
(h) failure by the Borrower to generally pay its debts as such
debts become due;
(i) a material decrease in the value of the Collateral, or any
other collateral securing payment of the Obligations.
(j) if the Borrower (i) shall file a petition or request for
liquidation, reorganization, arrangement, adjudication as a bankrupt,
relief as a debtor or other relief under the bankruptcy, insolvency or
similar laws of the United States of America or any state or territory
thereof or any foreign jurisdiction, now or hereafter in effect; (ii)
shall make a general assignment for the benefit of creditors; (iii)
shall consent to the appointment of a receiver or trustee for the
Borrower or any of its assets, including, without limitation, the
appointment of or taking possession by a "custodian" as defined in the
federal Bankruptcy Code; (iv) make any, or send notice of any
intended, bulk sale; or (v) shall execute a consent to any other type
of insolvency proceeding (under the federal Bankruptcy Code or
otherwise) or any formal or informal proceeding for the dissolution or
liquidation of, or settlement of claims against or winding up of
affairs of, the Borrower; provided, however, that the consent by DDI
to the transfer of its assets to NCFC in March 1996, and the
subsequent sale and disposition of those assets by NCFC, and the
termination of DDI's business operations, is not deemed to be an event
of default under paragraph 7.1(d), (j) or (k).
(k) the appointment of a receiver, trustee, custodian or officer
performing similar functions for the Borrower or any of its assets,
including, without limitation, the appointment of or taking possession
by a "custodian" as defined in the federal Bankruptcy Code; or the
filing against the Borrower of a request or petition for liquidation,
reorganization, arrangement, adjudication as a bankrupt or other
relief under the bankruptcy, insolvency or similar laws of the United
States of America or any state or territory thereof or any foreign
jurisdiction, now or hereafter in effect; or the institution against
the Borrower of any other type of insolvency (under the federal
Bankruptcy Code otherwise) or of any formal or informal proceeding for
the dissolution or liquidation of, settlement of claims against or
winding up of affairs of the Borrower, and the failure to have such
appointment vacated or such petition or proceeding dismissed within
sixty (60) days after such appointment, filing or institution.
7.2 Rights of the Lender. Upon the occurrence of an event of default
under Section 7.1 hereof: (a) the Lender
19
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<PAGE>
shall have, in addition to all other rights provided herein, the rights and
remedies of a secured party under the New York Uniform Commercial Code; and
(b) the Lender may sell and deliver any or all Receivables and any or all
other security and Collateral held by the Lender or for the Lender at
public or private sale upon prior notice to the Borrower if required by
law, for cash, upon credit or otherwise, at such prices and upon such terms
as are commercially reasonable; and (c) in addition to all other sums due
the Lender, the Borrower will pay to the Lender upon demand all costs and
expenses incurred by the Lender, including reasonable attorneys' fees and
expenses, to obtain or enforce payment of Receivables or Obligations, or in
the prosecution or defense of any action or proceeding either against the
Lender or against the Borrower concerning any matter arising out of or
connected with this Agreement or the Collateral or Obligations and all
Supplemental Agreements, if any, or otherwise due pursuant to the terms of
this Agreement. Any requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to the Borrower at the Borrower's address
as set forth herein at least ten (10) days before the time of sale or other
disposition. The Lender may be the purchaser at any such sale, if it is
public, and, in the event the Lender is the purchaser, the Lender shall
have all the rights of a good faith, bona fide purchaser for value from a
secured party after default. The proceeds of sale shall be applied first to
all costs and expenses of sale, including reasonable attorneys' fees and
expenses, and second to the payment (in whatever order the Lender elects)
of all Obligations, and any remaining proceeds shall be applied in
accordance with the provisions of Part 5 of Article 9 of the New York
Uniform Commercial Code. The Borrower shall remain liable to the Lender for
any deficiency. Failure by the Lender to exercise any right, remedy or
option under this Agreement or any present or future Supplemental Agreement
or in any other agreement between the Borrower and the Lender, or delay by
the Lender in exercising the same will not operate as a waiver. No waiver
by the Lender will be effective unless it is in writing and then only to
the extent specifically stated. Neither the Lender nor any party acting as
the Lender's attorney pursuant to paragraph 2.12 hereof shall be liable for
any good faith error of judgment or mistake of fact or law. The Lender's
rights and remedies under this Agreement will be cumulative and not
exclusive of any other right or remedy which the Lender may have.
8. Other Provisions.
8.1 Joint and Several Obligations. The obligations of DCI and DDI
under this Agreement and the Supplemental Agreements shall be joint and
several.
8.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall
20
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<PAGE>
be deemed to have been duly given or made when delivered by hand, or one
(1) business day after being delivered to a courier for overnight delivery,
or five (5) business days after being deposited in the mail, certified or
registered mail, with return receipt requested, addressed to the addresses
set forth in the preamble to this Agreement, or to such other address as
may be hereafter notified by the respective parties hereto.
8.3 Setoff. All sums at any time standing to the Borrower's credit on
the Lender's books and all of the Borrower's property at any time in the
Lender's possession, or upon or in which the Lender has a lien or security
interest shall be security for all Obligations. In addition to and not in
limitation of the above, with respect to any deposits or property of the
Borrower in the Lender's possession or control, now or in the future, the
Lender shall have the right after default and demand hereunder to setoff
all or any portion thereof, at any time, against any Obligations hereunder,
without prior notice or demand to the Borrower.
8.4 Counsel Fees and Expenses. The Borrower agrees to pay all
reasonable counsel fees and expenses, including recording and filing fees,
incurred by the Lender in connection with the financing evidenced by this
Agreement as well as any reasonable fees and expenses of counsel which the
Lender may hereafter reasonably incur in protecting, enforcing, increasing
or releasing any security held by the Lender. The Borrower specifically
authorizes the Lender to pay all such fees and expenses and charge the same
to its loan account.
8.5 Further Assurance. The Borrower agrees that at any time, or from
time to time, upon the written request of the Lender, the Borrower will
execute and deliver such further documents and do such other acts and
things as the Lender may reasonably request in order to fully effect the
purposes of this Agreement and the Supplemental Agreements.
8.6 Construction. This Agreement and the Supplemental Agreements may
not be amended orally.
8.7 Successors. All rights of the Lender hereunder shall inure to the
benefit of its successors and assigns, and all Obligations of the Borrower
shall bind the successors and assigns of the Borrower.
8.8 Duration of Lien. All Collateral described in this Agreement shall
remain Collateral as security for the performance of all Obligations of the
Borrower under this Agreement until all monies required to be paid under
this Agreement have been finally and irrevocably paid in full and all
Obligations on the part of the Borrower to be paid, kept and
21
Page 160 of 207 Pages
<PAGE>
performed under this Agreement have been paid, kept and performed.
8.9 Payments. The acceptance of any check, draft or money order
tendered in full or partial payment of any Obligation hereunder is
conditioned upon and subject to the receipt of final payment in cash.
8.10 Exhibits and Schedules. All exhibits and schedules referred to
herein and annexed hereto are hereby incorporated into this Agreement and
made a part hereof.
8.11 Governing Law. This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York, without regard
to principles of conflicts of law.
8.12 WAIVER OF RIGHT TO TRIAL BY JURY. THE BORROWER AND THE LENDER
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY
KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT
OF THIS AGREEMENT, THE COLLATERAL AND SUPPLEMENTAL AGREEMENTS OR ANY
ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OF DISPUTE BETWEEN THE
BORROWER AND THE LENDER.
8.13 CONSENT TO JURISDICTION. THE BORROWER AND THE LENDER AGREE THAT
ANY ACTION OR PROCEEDING TO ENFORCE, OR ARISING OUT OF, THIS AGREEMENT OR
ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH, MAY BE COMMENCED IN NEW YORK
STATE IN MONROE COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF NEW YORK, AND THE BORROWER WAIVES PERSONAL SERVICE OF
PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL CONFER
PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
BORROWER, OR AS OTHERWISE PROVIDED BY THE LAWS OF NEW YORK STATE OR THE
UNITED STATES.
8.14 Reaffirmation. (a) DDI hereby reaffirms its obligations to
Lobozzo pursuant to a Restated and Amended Subordinated Debenture in the
face amount of $600,001, due January 31, 1998 (the "Lobozzo Debenture"),
and DCI reaffirms its guaranty of the Lobozzo Debenture.
(b) (i) DCI and DDI hereby reaffirm their obligations to Lobozzo
to repay to Lobozzo $400,000 which Lobozzo advanced to the Borrowers
pursuant to an Overadvance Agreement entered into between Lobozzo,
NCFC and the Borrowers in May, 1995, and (ii) DCI hereby reaffirms its
obligation to Lobozzo to repay to Lobozzo $500,000 additional advances
which Lobozzo has advanced to DCI between the date of the Overadvance
Agreement and the date of this Agreement.
22
Page 161 of 207 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by the proper and duly authorized officers as of the date
first above written.
/s/ Joseph M. Lobozzo II
-------------------------------
JOSEPH M. LOBOZZO II
DELTA COMPUTEC INC.
By: /s/ Michael Julian
----------------------------
Name:
Title:
DELTA DATA NET, INC.
By: /s/ Michael Julian
----------------------------
Name:
Title:
23
Page 162 of 207 Pages
<PAGE>
SCHEDULE 1
----------
Secured Party Collateral Debtor
- ------------------------------ ------------------------ --------------------
Forsythe/McArthur Assoc. Communications Equipment Delta Data Net, Inc.
First United Leasing Communications Equipment Delta Data Net, Inc.
VMX Credit Corp. Computer Equipment Delta Data Net, Inc.
Canon Financial Services Communications Equipment Delta Data Net, Inc.
Bell Atlantic Systems Leasing Computer Equipment Delta Computec Inc.
Oliver Allen Company Computer Equipment Delta Computec Inc.
National Canada Finance Corp. Spare Parts Inventory Delta Computec Inc.
Page 163 of 207 Pages
<PAGE>
SCHEDULE 2
----------
Collateral Locations
Chicago Rochester
DCI c/o Harris Bank 366 White Spruce Boulevard
311 West Monroe Rochester, New York 14623
3rd Floor
Chicago, Illinois 60606
Dallas Teterboro
2100 N. Highway 360 900 Huyler Street
Suite 1804 Teterboro, New Jersey 07608
Grand Prarie, Texas 75050
Houston Washington
14515 Briar Hills Parkway 122 Lafayette Avenue
Suite 117 Laurel, Maryland 20707
Houston, Texas 77077
Philadelphia
1621 Loretta Avenue
Feasterville, Pennsylvania 19053
Page 164 of 207 Pages
<PAGE>
SCHEDULE 2.1
------------
The eligibility factor for Eligible Inventory during the term of this
Agreement shall be as follows:
105% for the month of October, 1996.
103 3/4% for the month of November, 1996.
102 1/2% for the month of December, 1996.
Page 165 of 207 Pages
<PAGE>
SCHEDULE 3
----------
Permitted Indebtedness (for Borrowed Money)
Bell Atlantic Systems Capital Lease dated ________________.
8% Subordinated Debenture dated October 28, 1992, in the original principal
amount of $600,001.00, payable to Joseph M. Lobozzo II, as amended and restated,
and not due on January 31, 1998.
%8 Subordinated Debenture dated October 31, 1992, in the original principal
amount of $475,000.00, payable to Dataspan Systems, Inc. and Willcox & Gibbs
Dated Net, Inc., due October 3, 1997.
Amended and Restated Promissory Note dated as of October 10, 1996, of Delta
Computec Inc. in the original principal amount of $750,000, payable to National
Canada Finance Corp.
Page 166 of 207 Pages
<PAGE>
SCHEDULE 3(f)
-------------
Trade Names
1. DCI
2. The DCI Companies
3. PC Reserve
4. R & M Associates
5. Data Net
6. Data Span
7. SAI/Delta
8. Computer Support Inc.
9. Delta CompuTec Inc.
Page 167 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
PROMISSORY NOTE
---------------
$2,550,000.00 October 10, 1996
For value received, DELTA COMPUTEC INC. and DELTA DATA NET, INC., each of
which is a New York corporation with its principal office at 690 Huyler Street,
Teterboro, New Jersey 07608 (collectively, "Borrower"), jointly and severally
promise to pay to the order of JOSEPH M. LOBOZZO II ("Lender") on or before
December 10, 1996 ("Maturity Date") in lawful money of the United States of
America, at his office located at 690 Portland Avenue, Rochester, New York 14621
or, at Lender's option, at such other place as may be designated from time to
time by the Lender the principal sum of Two Million Five Hundred Fifty Thousand
and 00/100 Dollars ($2,550,000.00), or, if less, the aggregate unpaid principal
amount of all loans ("Loans") made by the Lender under an Amended and Restated
Credit Agreement ("Agreement") between the Borrower and the Lender, date of even
date herewith, as the same may be amended or supplemented from time to time,
together with interest thereon.
This Note shall bear interest from the date hereof until maturity (whether
by acceleration or otherwise) on the balance of principal hereof from time to
time unpaid at a rate per annum equal to 1 3/4% in excess of the Prime Rate, as
defined below. After maturity (whether by acceleration or otherwise) this Note
shall bear interest on the unpaid principal hereof at a rate per annum equal to
3 3/4% in excess of the Prime Rate; provided, however, in no event shall the
rate of interest on this Note exceed the maximum rate authorized by applicable
law. Interest shall be calculated on the basis of one three hundred sixtieth
(1/360th) of the rate hereon for each calendar day such balance of principal is
unpaid, which will result in a higher effective annual rate. Interest shall be
payable monthly on the first day of each month, commencing November 1, 1996
until the Maturity Date and on the date the principal balance hereof is paid in
full. The rate of interest on this Note shall change simultaneously with a
corresponding change in the Prime Rate. The "Prime Rate" means the highest prime
rate published from time to time in the "Money Rates" column of the Wall Street
Journal or any successor to such publication.
The Lender shall inscribe on a schedule attached to this Note, and any
continuation thereof, all Loans and payments made on account of principal hereof
and the dates thereof. Each such inscription shall be prima facie evidence of
facts so set forth. No failure by the Lender to make and no error by the Lender
in making such inscription shall affect the undersigned's obligation to repay
when due all sums advanced under this Note.
No failure by the Lender hereof to exercise, and no delay in exercising,
any right or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by
Page 168 of 207 Pages
<PAGE>
the holder of any right or power hereunder preclude any other right or power.
The rights and remedies of the holder as herein specified are cumulative and not
exclusive of any other rights or remedies which the holder may otherwise have.
No modification, rescission, waiver, release or amendment of any provision
of this Note shall be made except by a written agreement subscribed by duly
authorized officers of the Borrower and the Lender.
Reference is hereby made to the Agreement for provisions with respect to
prepayment, collateral and rights of acceleration of the principal hereof on the
occurrence of certain events.
Borrower agrees to pay all reasonable costs and expenses incurred by the
holder in enforcing this Note or in collecting the indebtedness evidenced
hereby, including, without limitation, if the holder retains counsel for any
such purpose, reasonable attorneys' fees and expenses.
Borrower hereby waives diligence, presentment, protest and demand, and also
notice of protest, demand, dishonor and nonpayment of this Note.
This Note shall be construed under and governed by the internal laws of the
State of New York in effect from time to time without regard to principles of
conflicts of laws.
The obligations of the undersigned under this Note are joint and several.
THIS NOTE IS ISSUED IN ORDER TO AMEND, RESTATE AND EVIDENCE AND TO BE A
SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT, SATISFACTION, CANCELLATION OR A
NOVATION OF A PORTION OF THE INDEBTEDNESS EVIDENCED BY THE THIRD AMENDED AND
RESTATED PROMISSORY NOTE DATED OCTOBER 27, 1995 FROM THE BORROWER TO NATIONAL
CANADA FINANCE CORP. (the "SUPERSEDED NOTE"), WHICH SUPERSEDED NOTE WAS
ASSIGNED, IN PART, TO THE LENDER; PROVIDED, HOWEVER, THAT THE SUBSTITUTION OF
THIS AMENDED AND RESTATED NOTE FOR THE SUPERSEDED NOTE DOES NOT EXTINGUISH THE
INDEBTEDNESS EVIDENCED BY THE SUPERSEDED NOTE OR ANY PORTION THEREOF AND THE
LIABILITIES OF THE BORROWER THEREUNDER AND HEREUNDER ARE CONTINUOUS.
DELTA COMPUTEC INC.
By: /s/ Michael Julian
---------------------------
Name:
Title:
Page 169 of 207 Pages
<PAGE>
DELTA COMPUTEC INC.
By: /s/ Michael Julian
---------------------------
Name:
Title:
Page 170 of 207 Pages
<PAGE>
SCHEDULE
--------
Principal Amount Date Payments Additional Loans Balance
1544,661 10/10/96
Page 171 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
GENERAL SECURITY AGREEMENT
--------------------------
THIS AMENDED AND RESTATED GENERAL SECURITY AGREEMENT is made this 10th day
of October, 1996 by and among DELTA COMPUTEC INC. and DELTA DATA NET, INC., both
New York corporations with their principal offices and places of business at 900
Huyler Street, Teterboro, New Jersey 07608 (collectively, "Debtor"), and JOSEPH
M. LOBOZZO II, an individual with an office and place of business at 690
Portland Avenue, Rochester, New York (collectively, the "Secured Party").
W I T N E S S E T H :
WHEREAS, Debtor executed and delivered to National Canada Finance
Corporation ("NCFC") a General Security Agreement dated April 1, 1994 (the "1994
Security Agreement");
WHEREAS, on the date hereof, NCFC is assigning to Secured Party a portion
of its rights under the 1994 Security Agreement; and
WHEREAS, to the extent assigned to Secured Party, Debtor and Secured Party
desire to amend and restate the 1994 Security Agreement in its entirety;
NOW, THEREFORE, Debtor and Secured Party agree as follows:
1. Security Interest. Debtor hereby grants to Secured Party a security
interest ("Security Interest") in all personal property and fixtures of Debtor,
of whatever kind and type and wherever located, whether now owned or hereafter
acquired, including, without limitation, all fixtures, equipment, inventory,
accounts, general intangibles, documents, instruments and chattel paper,
together with all proceeds and products thereof in any form, and parts,
accessories, attachments, special tools, additions and accessions thereto, and
all increases therein or profits received therefrom, and in all substitutions
therefore, and including any account items received by, or amounts deposited in,
an account maintained by Borrower at any Lock Box maintained for the benefit of
Secured Party (collectively, "Collateral").
2. Indebtedness Secured. The Security Interest secures payment of a certain
Amended and Restated Promissory Note dated the date hereof between Debtor and
Secured Party and any substitution for or replacement or modification thereof,
including principal, interest and other amounts (i.e., attorney's fees, costs
and expenses) under the Amended and Restated Promissory Note (the
"Indebtedness"), which Amended and Restated Promissory Note is governed by the
terms of a certain Amended and
Page 172 of 207 Pages
<PAGE>
Restated Credit Agreement dated the date hereof between the Debtor and the
Secured Party (the "Credit Agreement").
3. Representations and Warranties of Debtor. Debtor represents and
warrants, and so long as any Indebtedness remains unpaid shall be deemed
continuously to represent and warrant, that:
(a) Debtor is the owner of the Collateral free of all security
interests or other encumbrances, except the Security Interest and except as
shown on Schedule 3(a) annexed hereto (collectively, "Permitted
Encumbrances"), if any;
(b) Debtor is duly organized and validly existing under the laws of
the State of New York and is duly qualified and in good standing in every
jurisdiction in which failure to do so qualified would have a material
adverse effect on its business or assets;
(c) Debtor is authorized to enter into this Security Agreement and the
execution, delivery and per ormance of this Agreement by Debtor will not
violate, or be in contravention of, Debtor's certificate of incorporation,
by-laws, or other corporate documents or any indenture, agreement or
undertaking to which Debtor is a party or by which Debtor may be bound;
(d) Debtor is engaged in business operations; Debtor's chief executive
office is specified in the first paragraph of this Agreement; and Debtor's
records concerning the Collateral are kept at one of the addresses
specified on Schedule 3(e) of this Agreement;
(e) All of the Collateral is located at one of the addresses specified
on Schedule 3(e) to this Agreement;
(f) Any and all tradenames, division names, assumed names and other
names under which Debtor transacts any part of its business are specified
on Schedule 3(f) annexed hereto, if any;
(g) Each account, general intangible and Chattel Paper constituting
Collateral is genuine and enforceable in accordance with its terms against
the party obligated to pay it "Account Debtor"); and
(h) The amount represented by Debtor to Secured Party as owing by each
Account Debtor or by all Account Debtors is the correct amount actually and
unconditionally owing by such Account Debtor or Debtors, except for normal
cash discounts where applicable.
2
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<PAGE>
4. Covenants of Debtor. So long as any Indebtedness remains unpaid, Debtor:
(a) Will defend the Collateral against the claims and demands of all
other parties including, without limitation, defenses, setoffs, claims and
counterclaims asserted by any Account Debtor against Debtor and/or Secured
Party, except, as to inventory, purchasers and lessees in the ordinary
course of Debtor's business; will keep the Collateral free from all
security interests or other encumbrances, except the Security Interest and
except as shown of Schedule 3(a) hereto; and, except with respect to the
sale or lease of Inventory in the ordinary course of Debtor's business,
will not sell, transfer, lease, assign, deliver or otherwise dispose of any
Collateral or any interest therein, or move the Collateral to any location
except those specified on Schedule 3(e) without the prior written consent
of Secured Party;
(b) Will keep, in accordance with generally accepted accounting
principles consistently applied, accurate and complete records concerning
the Collateral; at Secured Party's request, will mark any and all such
records to indicate the Security Interest; and will permit Secured Party or
its agents at any reasonable time during regular business hours to inspect
the Collateral and to audit and make extracts from such records or any of
Debtor's books, ledgers, reports, correspondence or other records;
(c) Will deliver to Secured Party upon demand, any Chattel Paper
constituting, representing or relating to the Collateral or any part
thereof, and any schedules, invoices, shipping, documents, delivery
receipts, purchase orders, contracts or other documents representing or
relating to the Collateral or any part thereof;
(d) Will notify Secured Party promptly in writing of any change in
Debtor's chief executive office, of any change in the address at which the
Collateral or records concerning the Collateral are kept and of any change
in Debtor's name, identity or corporate structure;
(e) Will not, without Secured Party's written consent which consent
will not be unreasonably withheld or delayed, make or agree to make any
alteration, modification or cancellation of, or substitution for, or
credits, adjustments or allowances on accounts, general intangibles or
chattel paper constituting any Collateral (other than in the ordinary
course of Debtor's business), and will notify Secured Party promptly of any
material default by any Account Debtor in payment or other performance of
his obligations with respect to any such Collateral;
3
Page 174 of 207 Pages
<PAGE>
(f) Will keep the tangible Collateral in good condition and repair;
and will not use the Collateral in violation of any provisions of this
Security Agreement, of any applicable statute, regulation or ordinance or
of any policy insuring the Collateral;
(g) Will pay all taxes, assessments and other charges of every nature
which may be levied or assessed against the Collateral; will insure the
Collateral against risks, and in coverage, form and amount, satisfactory to
Secured Party, and, will cause each policy to be payable additionally to
Secured Party and deliver each policy or certificate of insurance therefor
to Secured Party; and
(h) In connection herewith, will execute and deliver to Secured Party
such financing statements, assignments (including, without limitation, if
any of Debtor's accounts arise out of contracts with the United States or
any department, agency or instrumentality thereof, assignments required to
comply with the Federal Assignment of Claims Act) and other documents, do
such other things relating to the Security Interest as Secured Party may
reasonably request, pay all costs of title searches and filing financing
statements, assignments or other documents in all public offices requested
by Secured Party; but will not, without the prior written consent of
Secured Party, file or authorize or permit to be filed in any public office
any financing statement naming Debtor as debtor and not naming Secured
Party as secured party, except in connection with any Permitted
Encumbrances.
5. Verification of Collateral. Secured Party shall have the right to verify
all or any Collateral in any reasonable manner and through any medium Secured
Party may consider reasonably appropriate, and Debtor agrees to furnish all
assistance and information and perform any acts which Secured Party may
reasonably require in connection therewith.
6. Notification and Payments. From time to time while the Lock Box
Operating Agreement dated the date hereof between the Debtor and Manufacturers
and Traders Trust Company is in force and effect, or any substitute arrangement,
and in any event, after the occurrence of an Event of Default, (a) Secured Party
may notify all or any Account Debtors of the Security Interest and may also
direct such Account Debtors to make all payments on Collateral to Secured Party
and (b) Secured Party may notify Debtor in writing, before or after notification
to Account Debtors and without waiving in any manner the Security Interest, that
any payment on and from the Collateral received by Debtor (i) shall be held by
Debtor in trust for Secured Party in the medium in which received; (ii) shall
not be commingled with any assets of Debtor; and (iii) shall be turned over to
Secured Party not later than the next business day following the day of their
4
Page 175 of 207 Pages
<PAGE>
receipt. All payments on and from Collateral received by Secured Party directly
or from Debtor shall be applied to the Indebtedness in such order and manner and
at such time as Secured Party shall, in its sole discretion, determine.
7. Events of Default.
(a) The occurrence of an Event of Default under the Credit Agreement
shall constitute an Event of Default hereunder.
(b) Upon the happening of any Event of Default, Secured Party's rights
and remedies with respect to the Collateral shall be those of a Secured
Party under the Uniform Commercial Code and under any other applicable law,
as the same may from time to time be in effect, in addition to those rights
granted herein and in any other agreement now or hereafter in effect
between Debtor and Secured Party. Secured Party may require Debtor to
assemble the Collateral and make it available to Secured Party at a place
or places designated by Secured Party.
(c) Without in any way requiring notice to be given in the following
manner, Debtor agrees that any notice by Secured Party of sale or
disposition of any Collateral, whether required by the Uniform Commercial
Code or otherwise, shall constitute reasonable notice to Debtor if such
notice is mailed by regular mail, postage prepaid, at least ten (10) days
prior to such action, to the address of Debtor set forth in the first
paragraph of this Security Agreement or to any other address which Debtor
has specified in writing to Secured Party as the address to which notices
hereunder shall be given to Debtor.
(d) Debtor agrees to pay on demand all reasonable costs and expenses
incurred by Secured Party in enforcing this Security Agreement, in
realizing upon or protecting any Collateral, including, without limitation,
if Secured Party retains counsel for advise, suit, insolvency proceedings
or any of the above purposes, the reasonable attorneys' fees and expenses
incurred by Secured Party.
8. Miscellaneous.
(a) Debtor hereby authorizes Secured Party, at Debtor's expense, to
file such financing statement or statements relating to the Collateral
without Debtor's signature thereon as Secured Party at its option may
reasonably deem appropriate, and appoints Secured Party as Debtor's
attorney-in-fact (without requiring Secured Party) to execute any such
financing statement or statements in Debtor's name and to perform all other
acts which Secured Party deems reasonably appropriate to perfect and
5
Page 176 of 207 Pages
<PAGE>
continue the Security Interest and to protect and preserve the Collateral.
(b) After the occurrence of an Event of Default hereunder, Secured
Party may demand, collect and sue on any of the accounts, chattel paper and
general intangibles (in either Debtor's or Secured Party's name at the
latter's option) with the right to enforce, compromise, settle or discharge
such Collateral, and may indorse Debtor's name on any and all checks,
commercial paper, and any other instruments pertaining to or constituting
such Collateral.
(c) Upon Debtor's failure to perform any of its duties hereunder,
Secured Party may, but shall not be obligated to, perform any or all such
duties in any reasonable manner, and Debtor shall pay an amount equal to
the expense thereof to Secured Party forthwith upon written demand by
Secured Party.
(d) No course of dealing and no delay or omission by Secured Party in
exercising any right or remedy hereunder shall operate as a waiver thereof
or of any other right or remedy, and no single or partial exercise thereof
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy. Secured Party may remedy any default by Debtor
hereunder in any reasonable manner without waiving the default remedied and
without waiving any other prior or subsequent default by Debtor. All rights
and remedies of, Secured Party hereunder are cumulative.
(e) The rights and benefits of Secured Party hereunder shall, if
Secured Party so agrees, inure to any party acquiring any interest in the
Indebtedness or any part thereof.
(f) Secured Party and Debtor as used herein shall include the heirs,
executors or administrators, or successors or assigns, of those parties.
(g) No modification, rescission, waiver, release or amendment of any
provisions of this Security Agreement shall be binding except by a written
agreement subscribed by Debtor and by Secured Party. This Security
Agreement is made under, and shall be governed by and construed under the
laws of the State of New York applicable to contracts made and to be
performed entirely within the State of New York and without giving effect
to choice of law principles of the State of New York.
(i) All terms, unless otherwise defined in this Security Agreement or
in any financing statement, shall have the definitions set forth in the
Uniform Commercial Code adopted in New York State, as the same may from
time to time be in effect.
6
Page 177 of 207 Pages
<PAGE>
(j) This Security Agreement is and is intended to be a continuing
Security Agreement and shall remain in full force and effect until all of
the Indebtedness shall be finally and irrevocably paid in full.
(k) This Security Agreement amends and restates the 1994 Security
Agreement to the extent of the assignment by NCFC of its rights in the 1994
Security Agreement to the Secured Party.
DELTA COMPUTEC INC.
By: /s/ Michael Julian
---------------------------
Name:
Title:
DELTA DATA NET, INC.
By: /s/ Michael Julian
---------------------------
Name:
Title:
/s/ Joseph M. Lobozzo II
------------------------------
JOSEPH M. LOBOZZO II
7
Page 178 of 207 Pages
<PAGE>
SCHEDULE 3(a)
-------------
Permitted Liens and Encumbrances
Security Interest in spare parts inventory granted to NCFC.
Page 179 of 207 Pages
<PAGE>
SCHEDULE 3(e)
-------------
Collateral Locations
Chicago Rochester
DCI c/o Harris Bank 366 White Spruce Boulevard
311 West Monroe Rochester, New York 14623
3rd Floor
Chicago, Illinois 60606
Dallas Teterboro
2100 N. Highway 360 900 Huyler Street
Suite 1804 Teterboro, New Jersey 07608
Grand Prairie, Texas 75050
Houston Washington
14515 Briar Hills Parkway 122 Lafayette Avenue
Suite 117 Laurel, Maryland 20707
Houston, Texas 77077
Philadelphia
1621 Loretta Avenue
Feasterville, Pennsylvania 19053
Page 180 of 207 Pages
<PAGE>
SCHEDULE 3(f)
-------------
Trade Names
1. DCI
2. The DCI Companies
3. PC Reserve
4. R & M Associates
5. Data Net
6. Data Span
7. SAI/Delta
8. Computer Support Inc.
9. Delta CompuTec Inc.
Page 181 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
UNLIMITED CONTINUING GUARANTY
-----------------------------
AMENDED AND RESTATED UNLIMITED CONTINUING GUARANTY, ("Guaranty") dated the
10th day of October, 1996, made by SAI/DELTA, INC. (the "Guarantor"), a Florida
Corporation, in favor of JOSEPH M. LOBOZZO II (the "Lender") whose address is
690 Portland Avenue, Rochester, New York.
WHEREAS, Delta Computec, Inc. and Delta Data Net, Inc. (collectively,
"Borrower") and National Canada Finance Corp. ("NCFC") entered into a certain
Credit Agreement dated as of April 1, 1994, as amended by Credit Agreement
Amendment No. 1 dated November 17, 1994, Credit Agreement Amendment No. 2 dated
January 24, 1995, Credit Agreement Amendment No. 3 dated April 3, 1995, Credit
Agreement Amendment No. 4 dated May 1, 1995 and Credit Agreement Amendment No. 5
dated October 27, 1995 (as amended, the "Credit Agreement");
WHEREAS, Borrower executed and delivered to NCFC a Promissory Note dated
April 1, 1994, as amended and restated by an Amended and Restated Promissory
Note dated May 1, 1995 and as further amended and restated by a Third Amended
and Restated Promissory Note dated October 27, 1995 (as amended and restated,
the "Promissory Note");
WHEREAS, Guarantor is a wholly owned subsidiary of the Borrower;
WHEREAS, on March ___, 1995, Guarantor executed and delivered to NCFC its
Continuing Unlimited Guaranty (the "Guaranty") pursuant to which it guarantied
all of the obligations of Borrower to NCFC under the Credit Agreement and the
Promissory Note;
WHEREAS, on the date hereof, NCFC is assigning to the Lender all but
$750,000 of the indebtedness owed to NCFC by Borrower evidenced by the Credit
Agreement and the Promissory Note and all of its right, title and interest in
certain ocuments executed in connection with the Credit Agreement and the
Promissory Note, including all of its right, title and interest in the Guaranty;
WHEREAS, on the date hereof the Lender and the Borrower are amending and
restating the Credit Agreement (as amended and restated, the "Amended and
Restated Credit Agreement") and the Promissory Note (as amended and restated,
the "Amended and Restated Promissory Note") as such documents relate to the
indebtedness assigned by NCFC to Lender; and
WHEREAS, Lender and the Guarantor desire to amend and restate the Guaranty;
Page 182 of 207 Pages
<PAGE>
NOW, THEREFORE, the Guarantor hereby unconditionally guarantees to Lender
the full and prompt payment when due of all sums at any time owing by, and the
punctual performance of all liabilities and obligations of, the Borrower to the
Lender, now existing or hereafter arising, under the Amended and Restated Credit
Agreement and the Amended and Restated Promissory Note or in connection with any
transaction occurring pursuant thereto, however and whenever created, whether
primary or secondary, joint or several, absolute, contingent, or conditional,
due or to become due.
1. The Guarantor shall be liable to Lender for all reasonable attorneys'
and paralegals' fees and expenses reasonably incurred, if any action or
proceeding is brought to enforce this Amended and Restated Unlimited Continuing
Guaranty or if any claim hereunder is referred to an attorney for collection.
2. This Amended and Restated Unlimited Continuing Guaranty is a primary
obligation of the Guarantor. The liability of the Guarantor hereunder is direct
and may be enforced without requiring Lender first to resort to any other right,
remedy or security. Nothing shall discharge or satisfy the liability of the
Guarantor hereunder except the full payment and performance of all of the
obligations hereby guaranteed, with interest (as provided in the Amended and
Restated Credit Agreement) until fully paid. This Amended and Restated Unlimited
Continuing Guaranty shall not be impaired or affected by, nor shall the
Guarantor have any defense hereto based upon: (a) any modification, supplement,
extension, or amendment of any contract or agreement to which the parties
thereto may hereafter agree (including, without limitation, any modification,
supplement, extension, or amendment that has the effect of increasing the
outstanding or maximum amount of the obligations hereby guaranteed); (b) any
modification, release or other alteration of any of the obligations hereby
guaranteed or of any security therefore; (c) any agreement or arrangement
whatsoever with the Guarantor or anyone else; (d) any failure of Lender to
perfect its security interest in and liens on, or to preserve its rights to, any
collateral; or (e) the validity, legality, regularity, or enforceability of any
of the obligations hereby guaranteed, or of the Amended and Restated Credit
Agreement or any other agreement or instrument relating to the obligations
hereby guaranteed. This Amended and Restated Unlimited Continuing Guaranty is a
continuing guaranty which shall remain effective during the term of the Amended
and Restated Credit Agreement, and any renewal, replacement or restatement
thereof, and until all obligations hereby guaranteed have been paid in full. The
death, dissolution, liquidation, merger, consolidation, or other change of form
of the Guarantor or any other guarantor of the obligations hereby guaranteed
shall not cause the termination of this Amended and Restated Unlimited
Continuing Guaranty. Any
2
Page 183 of 207 Pages
<PAGE>
releases which may be given by Lender to any one or more other guarantors of the
obligations hereby guaranteed shall not release the Guarantor from this Amended
and Restated Unlimited Continuing Guaranty. Termination by any other guarantor
of any guaranty of the obligations hereby guaranteed shall not affect the
continuing liability of the Guarantor hereunder.
3. Lender's books and records showing the accounts between Lender and the
Guarantor shall be admissible in any action or proceeding and shall constitute
prima facie proof thereof.
4. All rights of the Guarantor to subrogation, reimbursement or indemnity
of any kind, or to recourse to security for the debts and obligations to Lender,
arising from payment by the Guarantor hereunder, are hereby subrogated to the
rights of Lender under this Amended and Restated Unlimited Continuing Guaranty
until all Obligations (as such term is defined in the Amended and Restated
Credit Agreement) of Borrower to Lender are paid in full.
5. All sums at any time to the credit of the Guarantor and any property of
the Guarantor at any time in the possession of Lender or any affiliate may be
held by Lender or such affiliate as security for any and all obligations of the
Guarantor to Lender, no matter how or when arising, whether absolute or
contingent, whether due or to become due and whether under this Amended and
Restated Unlimited Continuing Guaranty or the Amended and Restated Credit
Agreement, and the Amended and Restated Promissory Note and other documents
relating thereto. In addition, whenever the obligations hereby guaranteed, or
any part thereof, are due and payable by the Guarantor, then Lender or any
affiliate may without prior notice to or demand on the Guarantor, elect in its
sole discretion to set off against the obligations hereby guaranteed any and all
moneys then or thereafter owed to the Guarantor by Lender or such affiliate,
whether or not the indebtedness or the obligation to pay such moneys is then
due. Lender or such affiliate shall be deemed to have exercised this right
immediately at the time of its election even through any charge therefor is made
or entered on Lender's or such affiliate's records subsequent to that time. All
reasonable costs and expenses, including, without limitation, attorneys' and
paralegals' fees (based on hours expended at standard hourly billing rates) paid
or incurred by Lender or such affiliate in connection with any such setoff shall
be paid by the Guarantor upon demand.
6. All payments by the Guarantor pursuant to this Amended and Restated
Unlimited Continuing Guaranty shall be made to Lender at the address for
payments specified in the Amended and Restated Credit Agreement. Any payment
received by Lender from the Guarantor shall be applied Lender as follows:
3
Page 184 of 207 Pages
<PAGE>
First, to the payment of the reasonable costs and expenses of collection
and all expenses (including, without limitation, any reasonable legal fees
and disbursements and the allocated costs of in-house counsel), liabilities
and advances made or incurred by Lender in connection therewith;
Next, to Lender in accordance with the Amended and Restated Credit
Agreement until all Obligations shall have been indefeasibly paid in full;
and
Finally, after payment in full of all Obligations and the termination of
the Amended and Restated Credit Agreement, to the payment to the Guarantor,
or its respective successors or assigns, or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
7. Upon the occurrence of an Event of Default as provided in the Amended
and Restated Credit Agreement, Lender may proceed to enforce this Amended and
Restated Unlimited Continuing Guaranty against the Guarantor.
8. The Guarantor represents and warrants that it has adequate means to
obtain on a continuing basis information concerning the financial condition and
operating of the Borrower, and that it is not relying on Lender to provide such
information at any time.
9. The Guarantor acknowledges and agrees that it has received and expects
to continue to receive material benefits as a result of entering into this
Amended and Restated Unlimited Continuing Guaranty and the transactions
contemplated by the Credit Agreement. If, however, a court of competent
jurisdiction finally determines that, a to the Guarantor, the creation or the
enforcement of this Amended and Restated Unlimited Continuing Guaranty to any
extent constitutes a fraudulent transfer under applicable law, then this Amended
and Restated Unlimited Continuing Guaranty shall thereupon be deemed modified so
that the liability of the Guarantor under this Amended and Restated Unlimited
Continuing Guaranty shall be limited to the maximum amount for which this
Amended and Restated Unlimited Continuing Guaranty could be enforced without
constituting a fraudulent transfer by the Guarantor.
10. If, after receipt of any payment of all or any part of the obligations
hereby guaranteed, Lender is for any reason compelled to refund or surrender
such payment to any person or entity, because such payment is determined to be
void or voidable as a preference, impermissible setoff, or a diversion of trust
funds, or based on any claim of breach of contract, breach of warranty,
illegality, invalidity, or fraud, or for any
4
Page 185 of 207 Pages
<PAGE>
other reason, then this Amended and Restated Unlimited Continuing Guaranty and
the obligations intended to be paid by such payment shall be reinstated, if
necessary, and shall continue in full force notwithstanding any contrary action
which may have been taken by Lender in reliance upon such payment. Any such
contrary action so taken shall be without prejudice to Lender's rights under
this Amended and Restated Unlimited Continuing Guaranty and shall be deemed to
have been conditioned upon such payment having become final and irrevocable.
Lender may defend, compromise, or pay any such claim to recover such payment as
it elects in its sole discretion. The provisions of this paragraph shall survive
the termination of this Amended and Restated Unlimited Continuing Guaranty.
11. No election by Lender to proceed in one form of action or proceeding,
or against any party, or on any obligation, shall constitute a waiver of
Lender's right to proceed in any other form of action or proceeding or against
any other form of action or obligation. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Lender against the
Guarantor under any document or instrument evidencing or securing indebtedness
of the Guarantor to Lender shall serve to diminish the liability of the
Guarantor hereunder, except to the extent Lender realizes payment by such action
or proceeding. The Guarantor hereby waives any defense based upon an election of
remedies by Lender with respect to any property of the Guarantor or any other
person which now or hereafter secures the obligations of the Guarantor to
Lender, including but not limited to judicial foreclosure, exercise of power of
sale or taking a deed or assignment in lieu of foreclosure as to any collateral,
and the Guarantor shall be liable to Lender for any deficiency resulting from
the exercise by Lender of any such remedy, even though any right of subrogation,
reimbursement, or other right which the Guarantor may have against others might
be diminished or destroyed. The Guarantor agrees that Lender shall not be under
any obligation to marshal any assets in favor of the Guarantor or against or in
payment of any or all of the obligations hereby guaranteed.
12. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE GUARANTOR WAIVES:
NOTICE OF ACCEPTANCE OF This Amended and Restated Unlimited Continuing Guaranty;
THE RIGHT TO A JURY TRIAL IN ANY ACTION HEREUNDER OR ARISING OUT OF LENDER'S
TRANSACTIONS WITH THE GUARANTOR, AND THE RIGHT TO ASSERT DEFENSES OTHER THAN
PAYMENT, SETOFFS, AND COUNTERCLAIMS IN ANY SUCH ACTION; PRESENTMENT, DEMAND,
PROTEST AND NOTICE OF DEMAND, DISHONOR, AND PROTEST AS TO ANY INSTRUMENT; NOTICE
OF DEFAULT; NOTICE OF ANY AND ALL FAVORABLE AND UNFAVORABLE INFORMATION,
FINANCIAL OR OTHER, ABOUT THE GUARANTOR HERETOFORE, NOW OR HEREAFTER LEARNED OR
ACQUIRED BY LENDER; AND ALL OTHER NOTICES TO WHICH THE GUARANTOR MIGHT OTHERWISE
BE ENTITLED. THE GUARANTOR CONFIRMS THAT THE FOREGOING WAIVER IS INFORMED AND
VOLUNTARY.
5
Page 186 of 207 Pages
<PAGE>
13. The Guarantor hereby represents and warrants that: (a) it has the
corporate power and authority to execute, deliver, and perform this Amended and
Restated Unlimited Continuing Guaranty; (b) it has taken all necessary corporate
action (including without limitation, obtaining any required approval of its
stockholders) to authorize its execution, delivery, and performance of this
Amended and Restated Unlimited Continuing Guaranty; (c) no consent, approval, or
authorization of, or filing with, any governmental authority, and on consent of
any other person, is required in connection with its execution, delivery, and
performance of this Amended and Restated Unlimited Continuing Guaranty, except
for those already duly obtained or made; (d) this Amended and Restated Unlimited
Continuing Guaranty has been duly executed and delivered by the Guarantor and
constitutes its legal, valid, and binding obligation, enforceable against it in
accordance with its terms without defense, setoff, or counterclaim; and (e) the
Guarantor's execution, delivery, and performance of this Amended and Restated
Unlimited Continuing Guaranty do not and will not conflict with, or constitute a
violation or breach of, or constitute a default under, or result in the creation
or imposition of any lien or encumbrance upon this property of the Guarantor
(except as contemplated by this Amended and Restated Unlimited Continuing
Guaranty) by reason of the terms of (i) any mortgage, lease, agreement, or
instrument to which it is a party or which is binding upon it, (ii) any
judgment, law, statute, rule, or governmental regulation applicable to it, or
(iii) its Certificate or Articles of Incorporation or By-Laws.
14. This Amended and Restated Unlimited Continuing Guaranty shall be
binding upon the Guarantor's successors and assigns. Upon any assignment by
Lender of its rights and obligations, or any part thereof, in accordance with
the Amended and Restated Credit Agreement, such assignee shall become vested
with Lender's rights and benefits hereunder to the extent of such assignment.
15. All acts and transactions hereunder and the rights and obligations of
the parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of New York, except that no doctrine of choice of law
shall be used to apply the laws of any other state or jurisdiction.
16. This Amended and Restated Unlimited Continuing Guaranty constitutes the
entire agreement of the Guarantor and Lender with respect to the subject matter
hereof, and represents a restatement and replacement of the Guaranty in its
entirety. This Amended and Restated Unlimited Continuing Guaranty may not be
modified, nor may any provision hereof or the observance thereof by waived,
except in a written agreement signed by the Guarantor and Lender.
6
Page 187 of 207 Pages
<PAGE>
17. The Guarantor agrees that, in addition to any other courts that may
have jurisdiction under applicable law and rules, the Supreme Court of the State
of New York in the County of Erie, and the United Stated District Court for the
Western District of New York shall each have jurisdiction to hear and determine
any claims or disputes pertaining directly or indirectly to this Amended and
Restated Unlimited Continuing Guaranty or to any matter arising herefrom. The
Guarantor expressly submits and consents, in advance, to such jurisdiction in
any action or proceeding in such courts, and agrees that venue shall be proper
in such courts for all such matters, hereby waiving personal service of the
summons and complaint, or other process or papers issued therein, and agreeing
that service of such summons or complaint or other process or papers may be made
by registered or certified mail (return receipt requested) addressed to it at
900 Huyler Street, Teterboro, New Jersey 07608, or at such other address of
which it shall have notified Lender in writing.
18. Notwithstanding anything to the contrary in this Amended and Restated
Unlimited Continuing Guaranty, Lender may exercise all rights and remedies
provided for herein and by law.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Unlimited Continuing Guaranty the date first above written.
SAI/DELTA, INC.
By: /s/ Michael Julian
-------------------------------
Name:
Title:
/s/ Joseph M. Lobozzo II
----------------------------------
JOSEPH M. LOBOZZO II
7
Page 188 of 207 Pages
<PAGE>
STATE OF NEW YORK )
COUNTY OF MONROE ) SS.:
On this 10th day of October, 1996, before me personally came
___________________________________, to me known, who, being by me duly sworn,
did depose and say that he resides in
____________________________________________, that he is the _____________ of
SAI/DELTA, INC., the corporation described in and which executed the above
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation.
----------------------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF MONROE ) ss.:
On this 10th day of October 1996 before me personally came JOSEPH M.
LOBOZZO II, to me personally known and known to me to be the same person
described in and who executed the foregoing instrument, and he acknowledged to
me that he executed the same.
----------------------------------------
Notary Public
8
Page 189 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
GENERAL SECURITY AGREEMENT
--------------------------
THIS AMENDED AND RESTATED GENERAL SECURITY AGREEMENT is made this 10th day
of October, 1996 by and among SAI/DELTA, INC., a Florida corporation with its
principal office and place of business at 10258 N.W. 46th Street, Sunrise,
Florida 33351 ("Debtor"), and JOSEPH M. LOBOZZO II, an individual with an office
and place of business at 690 Portland Avenue, Rochester, New York (collectively,
the "Secured Party").
W I T N E S S E T H :
WHEREAS, Debtor executed and delivered to National Canada Finance Corp.
("NCFC") a General Security Agreement dated March ___, 1995 (the "1995 Security
Agreement");
WHEREAS, on the date hereof, NCFC is assigning to Secured Party a portion
of its rights under the 1995 Security Agreement; and
WHEREAS, to the extent assigned to Secured Party, Debtor and Secured Party
desire to amend and restate the 1995 Security Agreement in its entirety;
NOW, THEREFORE, Debtor and Secured Party agree as follows:
1. Security Interest. Debtor hereby grants to Secured Party a security
interest ("Security Interest") in all personal property and fixtures of Debtor,
of whatever kind and type and wherever located, whether now owned or hereafter
acquired, including, without limitation, all fixtures, equipment, inventory,
accounts, general intangibles, documents, instruments and chattel paper,
together with all proceeds and products thereof in any form, and parts,
accessories, attachments, special tools, additions and accessions thereto, and
all increases therein or profits received therefrom, and in all substitutions
therefor (collectively, "Collateral").
Page 190 of 207 Pages
<PAGE>
2. Indebtedness Secured. The Security Interest secures payment of any and
all obligations of the Debtor to the Secured Party under a certain Amended and
Restated Unlimited Continuing Guaranty dated the date hereof from the Debtor to
the Secured Party, as the same may be amended from time to time (the
"Indebtedness"), which Amended and Restated Unlimited Continuing Guaranty
guaranties payment of a certain Amended and Restated Promissory Note dated the
date hereof from DELTA COMPUTEC INC., a New York corporation and the sole
shareholder of the Debtor (the "Borrower"), to Secured Party in the original
principal amount of $1,450,000 and any substitution for or replacement or
modification thereof, which Amended and Restated Promissory Note is governed by
the terms of a certain Amended and Restated Credit Agreement dated the date
hereof between the Borrower and the Secured Party (the "Credit Agreement").
3. Representations and Warranties of Debtor. Debtor represents and
warrants, and so long as any Indebtedness remains unpaid shall be deemed
continuously to represent and warrant, that:
(a) Debtor is the owner of the Collateral free of all security
interests or other encumbrances, except the Security Interest and except as
shown on Schedule 3(a) annexed hereto (collectively, "Permitted
Encumbrances"), if any;
(b) Debtor is duly organized and validly existing under the laws of
the State of New York and is duly qualified and in good standing in every
jurisdiction in which failure to do so qualified would have a material
adverse effect on its business or assets;
(c) Debtor is authorized to enter into this Security Agreement and the
execution, delivery and performance of this Agreement by Debtor will not
violate, or be in contravention of, Debtor's certificate of incorporation,
by-laws, or other corporate documents or any indenture, agreement or
undertaking to which Debtor is a party or by which Debtor may be bound;
2
Page 191 of 207 Pages
<PAGE>
(d) Debtor is engaged in business operations; Debtor's chief executive
office is specified in the first paragraph of this Agreement; and Debtor's
records concerning the Collateral are kept at one of the addresses
specified on Schedule 3(e) of this Agreement;
(e) All of the Collateral is located at one of the addresses specified
on Schedule 3(e) to this Agreement;
(f) Any and all tradenames, division names, assumed names and other
names under which Debtor transacts any part of its business are specified
on Schedule 3(f) annexed hereto, if any;
(g) Each account, general intangible and Chattel Paper constituting
Collateral is genuine and enforceable in accordance with its terms against
the party obligated to pay it "Account Debtor"); and
(h) The amount represented by Debtor to Secured Party as owing by each
Account Debtor or by all Account Debtors is the correct amount actually and
unconditionally owing by such Account Debtor or Debtors, except for normal
cash discounts where applicable.
4. Covenants of Debtor. So long as any Indebtedness remains unpaid, Debtor:
(a) Will defend the Collateral against the claims and demands of all
other parties including, without limitation, defenses, setoffs, claims and
counterclaims asserted by any Account Debtor against Debtor and/or Secured
Party, except, as to inventory purchasers and lessees in the ordinary
course of Debtor's business; will keep the Collateral free from all
security interests or other encumbrances, except the Security Interest and
except as shown of Schedule 3(a) hereto; and, except with respect to the
sale or lease of Inventory in the ordinary
3
Page 192 of 207 Pages
<PAGE>
course of Debtor's business, will not sell, transfer, lease, assign,
deliver or otherwise dispose of any Collateral or any interest therein, or
move the Collateral to any location except those specified on Schedule 3(e)
without the prior written consent of Secured Party;
(b) Will keep, in accordance with generally accepted accounting
principles consistently applied, accurate and complete records concerning
the Collateral; at Secured Party's request, will mark any and all such
records to indicate the Security Interest; and will permit Secured Party or
its agents at any reasonable time during regular business hours to inspect
the Collateral and to audit and make extracts from such records or any of
Debtor's books, ledgers, reports, correspondence or other records;
(c) Will deliver to Secured Party upon demand, any Chattel Paper
constituting, representing or relating to the Collateral or any part
thereof, and any schedules, invoices, shipping, documents, delivery
receipts, purchase orders, contracts or other documents representing or
relating to the Collateral or any part thereof;
(d) Will notify Secured Party promptly in writing of any change in
Debtor's chief executive office, of any change in the address at which the
Collateral or records concerning the Collateral are kept and of any change
in Debtor's name, identity or corporate structure;
(e) Will not, without Secured Party's written consent which consent
will not be unreasonably withheld or delayed, make or agree to make any
alteration, modification or cancellation of, or substitution for, or
credits, adjustments or allowances on accounts, general intangibles or
chattel paper constituting any Collateral (other than in the ordinary
course of Debtor's business), and will notify Secured Party promptly of any
material default by any Account Debtor in payment or other performance of
his obligations with respect to any such
Collateral;
3
Page 193 of 207 Pages
<PAGE>
(f) Will keep the tangible Collateral in good condition and repair;
and will not use the Collateral in violation of any provisions of this
Security Agreement, of any applicable statute, regulation or ordinance or
of any policy insuring the Collateral;
(g) Will pay all taxes, assessments and other charges of every nature
which may be levied or assessed against the Collateral; will insure the
Collateral against risks, and in coverage, form and amount, satisfactory to
Secured Party, and, will cause each policy to be payable additionally to
Secured Party and deliver each policy or certificate of insurance therefor
to Secured Party; and
(h) In connection herewith, will execute and deliver to Secured Party
such financing statements, assignments (including, without limitation, if
any of Debtor's accounts arise out of contracts with the United States or
any department, agency or instrumentality thereof, assignments required to
comply with the Federal Assignment of Claims Act) and other documents, do
such other things relating to the Security Interest as Secured Party may
reasonably request, pay all costs of title searches and filing financing
statements, assignments or other documents in all public offices requested
by Secured Party; but will not, without the prior written consent of
Secured Party, file or authorize or permit to be filed in any public office
any financing statement naming Debtor as debtor and not naming Secured
Party as secured party, except in connection with any Permitted
Encumbrances.
5. Verification of Collateral. Secured Party shall have the right to verify
all or any Collateral in any reasonable manner and through any medium Secured
Party may consider reasonably appropriate, and Debtor agrees to furnish all
assistance and information and perform any acts which Secured Party may
reasonably require in connection therewith.
4
Page 194 of 207 Pages
<PAGE>
6. Notification and Payments. From time to time while the Lock Box
Operating Agreement dated the date hereof between the Debtor and Manufacturers
and Traders Trust Company is in force and effect, or any substitute arrangement,
and in any event, after the occurrence of an Event of Default, (a) Secured Party
may notify all or any Account Debtors of the Security Interest and may also
direct such Account Debtors to make all payments on Collateral to Secured Party
and (b) Secured Party may notify Debtor in writing, before or after notification
to Account Debtors and without waiving in any manner the Security Interest, that
any payment on and from the Collateral received by Debtor (i) shall be held by
Debtor in trust for Secured Party in the medium in which received; (ii) shall
not be commingled with any assets of Debtor; and (iii) shall be turned over to
Secured Party not later than the next business day following the day of their
receipt. All payments on and from Collateral received by Secured Party directly
or from Debtor shall be applied to the Indebtedness in such order and manner and
at such time as Secured Party shall, in its sole discretion, determine.
7. Events of Default.
(a) The occurrence of an Event of Default under the Credit Agreement
shall constitute an Event of Default hereunder.
(b) Upon the happening of any Event of Default, Secured Party's rights
and remedies with respect to the Collateral shall be those of a Secured
Party under the Uniform Commercial Code and under any other applicable law,
as the same may from time to time be in effect, in addition to those rights
granted herein and in any other agreement now or hereafter in effect
between Debtor and Secured Party. Secured Party may require Debtor to
assemble the Collateral and make it available to Secured Party at a place
or places designated by Secured Party.
(c) Without in any way requiring notice to be given in the following
manner, Debtor agrees that any notice by
5
Page 195 of 207 Pages
<PAGE>
Secured Party of sale or disposition of any Collateral, whether required by
the Uniform Commercial Code or otherwise, shall constitute reasonable
notice to Debtor if such notice is mailed by regular mail, postage prepaid,
at least ten (10) days prior to such action, to the address of Debtor set
forth in the first paragraph of this Security Agreement or to any other
address which Debtor has specified in writing to Secured Party as the
address to which notices hereunder shall be given to Debtor.
(d) Debtor agrees to pay on demand all reasonable costs and expenses
incurred by Secured Party in enforcing this Security Agreement, in
realizing upon or protecting any Collateral, including, without limitation,
if Secured Party retains counsel for advise, suit, insolvency proceedings
or any of the above purposes, the reasonable attorneys' fees and expenses
incurred by Secured Party.
8. Miscellaneous.
(a) Debtor hereby authorizes Secured Party, at Debtor's expense, to
file such financing statement or statements relating to the Collateral
without Debtor's signature thereon as Secured Party at its option may
reasonably deem appropriate, and appoints Secured Party as Debtor's
attorney-in-fact (without requiring Secured Party) to execute any such
financing statement or statements in Debtor's name and to perform all other
acts which Secured Party deems reasonably appropriate to perfect and
continue the Security Interest and to protect and preserve the Collateral.
(b) After the occurrence of an Event of Default hereunder, Secured
Party may demand, collect and sue on any of the accounts, chattel paper and
general intangibles (in either Debtor's or Secured Party's name at the
latter's option) with the right to enforce, compromise, settle or discharge
such Collateral, and may endorse Debtor's name on any and all checks,
commercial paper, and any other instruments pertaining to or constituting
such Collateral.
6
Page 196 of 207 Pages
<PAGE>
(c) Upon Debtor's failure to perform any of its duties hereunder,
Secured Party may, but shall not be obligated to, perform any or all such
duties in any reasonable manner, and Debtor shall pay an amount equal to
the expense thereof to Secured Party forthwith upon written demand by
Secured Party.
(d) No course of dealing and no delay or omission by Secured Party in
exercising any right or remedy hereunder shall operate as a waiver thereof
or of any other right or remedy, and no single or partial exercise thereof
shall preclude any other or further exercise thereof or the exercise of any
other right or remedy. Secured Party may remedy any default by Debtor
hereunder in any reasonable manner without waiving the default remedied and
without waiving any other prior or subsequent default by Debtor. All rights
and remedies of, Secured Party hereunder are cumulative.
(e) The rights and benefits of Secured Party hereunder shall, if
Secured Party so agrees, inure to any party acquiring any interest in the
Indebtedness or any part thereof.
(f) Secured Party and Debtor as used herein shall include the heirs,
executors or administrators, or successors or assigns, of those parties.
(g) No modification, rescission, waiver, release or amendment of any
provisions of this Security Agreement shall be binding except by a written
agreement subscribed by Debtor and by Secured Party.
(h) This Security Agreement is made under, and shall be governed by
and construed under the laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York
and without giving effect to choice of law principles of the State of New
York.
(i) All terms, unless otherwise defined in this Security Agreement or
in any financing statement, shall have the
7
Page 197 of 207 Pages
<PAGE>
definitions set forth in the Uniform Commercial Code adopted in New York
State, as the same may from time to time be in effect.
(j) This Security Agreement is and is intended to be a continuing
Security Agreement and shall remain in full force and effect until all of
the Indebtedness shall be finally and irrevocably paid in full.
(k) This Security Agreement amends and restates the 1995 Security
Agreement to the extent of the assignment by NCFC of its rights in the 1995
Security Agreement to the Secured Party.
SAI/DELTA, INC.
By: /s/ Michael Julian
-------------------------
Name:
Title:
/s/ Joseph M. Lobozzo II
-----------------------------
JOSEPH M. LOBOZZO II
8
Page 198 of 207 Pages
<PAGE>
SCHEDULE 3(a)
-------------
Permitted Liens and Encumbrances
None.
Page 199 of 207 Pages
<PAGE>
SCHEDULE 3(e)
-------------
Collateral Locations
10258 N.W. 46th Street
Sunrise, Florida 33351
528 S. North Lake Boulevard
Ata Monte Springs, Florida 32701
900 Huyler Street
Teterboro, New Jersey 07608
366 White Spruce Boulevard
Rochester, New York 14623
Page 200 of 207 Pages
<PAGE>
SCHEDULE 3(f)
-------------
Trade Names
None.
Page 201 of 207 Pages
<PAGE>
LOCK BOX OPERATING AGREEMENT
This is a Lock Box Operating Agreement (the "Agreement"), entered into as
of this ____ day of October, 1996, by and between Manufacturers and Traders
Trust Company, with an office for the conduct of business located at 44 Exchange
Street, Rochester, New York, 14614 (the "Bank") and Delta Computec Inc. ("DCI"),
and DCI's wholly-owned subsidiary, Delta Data Net, Inc. ("DDI" and, collectively
with DCI, the "Customer"), each of which have an office for the conduct of
business located at 900 Huyler Street, Teterboro, New Jersey 07608, to govern a
post office lock box arrangement between the parties to this Agreement. This
Agreement is for the benefit of Joseph M. Lobozzo II ("Lobozzo") pursuant to a
certain Amended and Restated Promissory Note of even date herewith. The Bank
acknowledges that it is acting as agent for Lobozzo for the purpose of
perfecting Lobozzo's security interest in certain assets of the Customer under
the Uniform Commercial Code.
PROCEDURES:
The Bank will rent a United States Post Office Lock Box (the "Lock Box")
for acceptance of the Customer's items to be processed by the Bank.
All envelopes containing items to be processed through the Lock Box will be
mailed to the following address:
________________________________________________________________.
The Customer hereby authorizes and directs the Bank to collect mail from
the Lock Box.
The Bank will collect the contents of the Lock Box on a daily basis, in
accordance with the Bank's schedule in effect from time to time, on all days
when the Bank is open for business. The Bank will open the envelopes removed
from the
Page 202 of 207 Pages
<PAGE>
Lock Box and remove any checks contained therein. Any remittance supporting
detail, such as invoices or correspondence, will be left inside the envelope,
unless the Customer specifically requests that such items be removed as set
forth in Section 2(i) of this Agreement.
The Bank will record the amount of the check on the accompanying envelope.
A photocopy of any checks can be provided to the Customer upon request of the
Customer as set forth under Section 2(i) of this Agreement.
The Bank will deposit checks upon which the payee or endorsee is DCI or
DDI, and shall have the option of returning to the Customer any check bearing a
different payee or endorsee.
At the Customer's option, the Bank will mail to the Customer or deliver to
a customer-designated Bank branch for customer pickup daily, invoices and other
material, including copies of the checks. If the Customer requests that
remittance detail be returned via the United States mail, or other delivery
services, the following address will be used by the Bank until further notice
from the Customer: 900 Huyler Street, Teterboro, New Jersey 06708.
The Bank will maintain a microfilm record of all checks processed in order
that a duplicate photocopy may be prepared should the need arise.
The Bank will provide additional processing options specifically requested
by the Customer. The Customer will be charged an additional assessment for each
option. Such options may include express mail service, daily deposit reporting,
computer tape, or other services made available by the Bank from time to time.
Those processing options requested by the Customer are listed
below:__________________________________________________________.
Page 203 of 207 Pages
<PAGE>
DEPOSIT OF CHECKS:
The Bank will endorse all checks and other instruments received as directed
by the Customer, using either Option A or Option B.
______ Option A CREDITED TO THE ACCOUNT OF WITHIN NAMED PAYEE. ENDORSEMENT
GUARANTEED THE BANK.
______ Option B RESTRICTIVE ENDORSEMENT -- FOR DEPOSIT ONLY AND CUSTOMER NAME.
The Bank will make at least one deposit on each banking day and will credit
the Customer's deposit account(s) listed
below:__________________________________.
RETURNED CHECKS:
The Bank will debit the Customer's deposit account for any checks which are
returned unpaid. The Bank will not redeposit these checks unless it has received
written authorization from the Customer to do so.
CHARGES:
The Customer agrees that the Bank may direct charge the DCI account number
__________________ for the annual items' bundling and post office Lock Box
rental fees (payable in advance) as assessed by the United States Post Office.
The Customer also agrees to pay for the use of the Bank's Lock Box Services to
be provided pursuant to this Agreement in the manner and amount listed below:
_____________________________________________________. If no account has been
established by the Customer with the Bank, the Customer agrees to pay the
estimated annual fees in advance, with a reconciliation of such amounts on an
annual basis.
Page 204 of 207 Pages
<PAGE>
INCONSISTENCIES WITH OTHER AGREEMENTS:
In carrying out this Agreement, the parties shall also be bound by the
terms of any Customer account agreements with the Bank. If there is an
inconsistency between this Agreement and any such account agreement, the terms
of this Agreement shall prevail.
TERMS AND TERMINATIONS:
This Agreement shall be effective as of the above date, and shall continue
in force until terminated at the end of any calendar month by either party
giving to the other prior written notice of not less than thirty (30) days, or
until terminated by the Bank for the Customer's failure to make timely payment.
MISCELLANEOUS:
This Agreement shall be interpreted and construed in all respects under the
laws of the State of New York and the parties hereto consent to the jurisdiction
and venue of the State and/or Federal courts located within Monroe County, State
of New York for the resolution of any such disputes.
ASSIGNMENTS; PARTIES
Neither party to this Agreement may assign its rights or obligations under
this Agreement without the express written consent of all other parties, except
that the obligations of the Bank under this Agreement may be provided or
fulfilled by any subsidiary, affiliate or subcontractor. No third party to this
Agreement shall have any right or benefit hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and to be effective as of the date
first written above.
Page 205 of 207 Pages
<PAGE>
MANUFACTURERS AND TRADERS TRUST
COMPANY
By: _______________________
Name:
Title:
DELTA COMPUTEC INC.
By: _______________________
Name:
Title:
DELTA DATA NET, INC.
By: _______________________
Name:
Title:
Page 206 of 207 Pages
<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
DALEY-HODKIN CORPORATION
AUCTIONEERS - APPRAISERS
135 Pinelawn Road (516) 293-0200
MELVILLE, NEW YORK 11747-3144 FAX. (516) 293-0328
April 24, 1996
VIA UNITED PARCEL SERVICE
National Bank of Canada
125 West 55th Street - 23rd Floor
New York, New York 10019-5366
Attention: E. Lynn Forgosh
Re: Delta Data Net, Inc.
900 Huyler Street
Teterboro, NJ
Dear Ms. Forgosh:
Enclosed is our remittance report and a check in the amount of $122,182.10 which
represents the net proceeds for the above referenced auction sale which was
conducted on Tuesday, April 9, 1996.
In addition to our remittance report we have enclosed the following
documentation:
Exhibit "A" - Auction Sale Sheets
Exhibit "B" - Sold After Sale
Exhibit "C" - Refunds and Adjustments
Exhibit "D" - Auction Expenses
Exhibit "E" - Miscellaneous Expenses
Exhibit "F" - Registered Bidders
The adjusted gross proceeds of the auction sale were $156,670.40. There were 112
registered bidders from New York, New Jersey, Pennsylvania and Connecticut.
Yours truly,
DALEY-HODKIN CORPORATION
Joseph Hodkin
JH/ef
enclosure
cc: Walter Greenhalgh, Esq. (w/o detail)
Page 207 of 207 Pages
