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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--OR--
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
Commission File Number: 0-16207
ALL AMERICAN SEMICONDUCTOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2814714
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16115 NORTHWEST 52ND AVENUE, MIAMI, FLORIDA 33014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 621-8282
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. _X_ Yes ___ No
As of May 9, 1996, 20,418,894 shares (including 160,703 shares held by a
wholly-owned subsidiary of the Registrant) of the common stock of All American
Semiconductor, Inc. were outstanding.
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<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
FORM 10-Q - INDEX
PART ITEM PAGE
NO. NO. DESCRIPTION NO.
- --------------------------------------------------------------------------------
I FINANCIAL INFORMATION:
1. Financial Statements
Consolidated Condensed Balance Sheets at March 31, 1996
(Unaudited) and December 31, 1995................................ 1
Consolidated Condensed Statements of Income for the Quarters
Ended March 31, 1996 and 1995 (Unaudited)........................ 2
Consolidated Condensed Statements of Cash Flows for the
Quarters Ended March 31, 1996 and 1995 (Unaudited)............... 3
Notes to Consolidated Condensed Financial Statements (Unaudited).. 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 6
II OTHER INFORMATION:
5. Other Information..................................................10
6. Exhibits and Reports on Form 8-K...................................10
SIGNATURES.........................................................11
i
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31 December 31
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Current assets: (UNAUDITED)
<S> <C> <C>
Cash.............................................................. $ 374,000 $ 276,000
Accounts receivable, less allowances for doubtful
accounts of $1,075,000 and $921,000........................... 40,343,000 35,101,000
Inventories....................................................... 74,596,000 67,463,000
Other current assets.............................................. 2,605,000 1,959,000
----------------- ------------------
Total current assets.......................................... 117,918,000 104,799,000
Property, plant and equipment-net..................................... 4,601,000 3,882,000
Deposits and other assets............................................. 2,598,000 2,316,000
Excess of cost over fair value of net assets acquired-net............. 3,494,000 3,477,000
----------------- ------------------
$ 128,611,000 $ 114,474,000
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt................................. $ 508,000 $ 844,000
Accounts payable and accrued expenses............................. 36,358,000 43,451,000
Income taxes payable.............................................. 177,000 199,000
Other current liabilities......................................... 287,000 953,000
----------------- ------------------
Total current liabilities..................................... 37,330,000 45,447,000
Long-term debt:
Notes payable..................................................... 51,798,000 29,900,000
Subordinated debt................................................. 6,491,000 6,515,000
Other long-term debt.............................................. 414,000 345,000
----------------- ------------------
96,033,000 82,207,000
----------------- ------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued....................................... - -
Common stock, $.01 par value, 40,000,000 shares
authorized, 20,413,894 and 19,863,895 shares
issued, 19,923,895 and 19,863,895
shares outstanding............................................ 199,000 199,000
Capital in excess of par value.................................... 25,661,000 25,511,000
Retained earnings................................................. 7,169,000 7,008,000
Less treasury stock, at cost, 180,295 shares...................... (451,000) (451,000)
----------------- ------------------
32,578,000 32,267,000
----------------- ------------------
$ 128,611,000 $ 114,474,000
================= ==================
</TABLE>
See notes to consolidated condensed financial statements
1
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
QUARTERS ENDED MARCH 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES............................................................... $ 67,197,000 $ 38,286,000
Cost of sales........................................................... (52,541,000) (29,418,000)
------------------ ------------------
Gross profit............................................................ 14,656,000 8,868,000
Selling, general and administrative expenses............................ (12,557,000) (7,259,000)
Nonrecurring expenses................................................... (445,000) -
------------------- ------------------
INCOME FROM OPERATIONS.................................................. 1,654,000 1,609,000
Interest expense........................................................ (997,000) (665,000)
------------------ ------------------
Income before income taxes and extraordinary expense.................... 657,000 944,000
Provision for income taxes.............................................. (282,000) (406,000)
------------------ ------------------
Net income before extraordinary expense................................. 375,000 538,000
Extraordinary expense (net of $161,000
income tax benefit)................................................... (214,000) -
------------------ ------------------
NET INCOME.............................................................. $ 161,000 $ 538,000
================== ==================
Primary and fully diluted earnings per share:
Net income before extraordinary expense............................ $ .02 $ .04
Extraordinary expense.............................................. (.01) -
------- -------
Net income......................................................... $ .01 $ .04
======= =======
Average number of common shares outstanding:
Primary............................................................ 20,441,431 12,683,546
========== ==========
Fully diluted...................................................... 20,441,431 12,693,881
========== ==========
</TABLE>
See notes to consolidated condensed financial statements
2
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<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
QUARTERS ENDED MARCH 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Used By Operating Activities................................ $ (20,351,000) $ (1,704,000)
---------------- -----------------
Cash Flows From Investing Activities:
Acquisition of property and equipment.................................. (828,000) (173,000)
Increase in other assets............................................... (220,000) (150,000)
---------------- -----------------
Cash flows used for investing activities.......................... (1,048,000) (323,000)
----------------- -----------------
Cash Flows From Financing Activities:
Net borrowings under line of credit agreement.......................... 21,992,000 2,138,000
Repayments of notes payable............................................ (495,000) (169,000)
Net proceeds from issuance of equity securities........................ - 30,000
---------------- -----------------
Cash flows provided by financing activities....................... 21,497,000 1,999,000
----------------- -----------------
Increase (decrease) in cash............................................ 98,000 (28,000)
Cash, beginning of period.............................................. 276,000 200,000
---------------- -----------------
Cash, end of period.................................................... $ 374,000 $ 172,000
================ =================
Supplemental Cash Flow Information:
Interest paid.......................................................... $ 770,000 $ 492,000
================ =================
Income taxes paid...................................................... $ 185,000 $ 10,000
================ =================
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities:
During the three months ended March 31, 1996, the Company purchased all of the
capital stock of Programming Plus Incorporated ("PPI"). The consideration paid
by the Company for such capital stock consisted of 549,999 shares of common
stock of the Company valued at $1,375,000 (or $2.50 per share); however, only
60,000 shares of common stock (valued at $150,000) were released to the PPI
selling shareholders at closing, with the balance retained in escrow subject to
certain conditions subsequent.
See notes to consolidated condensed financial statements
3
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments (consisting of normal recurring
accruals or adjustments only) necessary to present fairly the financial position
at March 31, 1996, and the results of operations and the cash flows for all
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the entire year.
For a summary of significant accounting policies (which have not changed from
December 31, 1995) and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, including the
consolidated financial statements and notes thereto which should be read in
conjunction with these financial statements.
2. LONG-TERM DEBT
On May 3, 1996, subsequent to the balance sheet date, the Company entered into a
new $100 million line of credit facility with a group of banks (the "New Credit
Facility") which expires May 3, 2001. Borrowings under the New Credit Facility
bear interest, at the Company's option, at either prime plus one-quarter of one
percent (.25%) or LIBOR plus two and one-quarter percent (2.25%) and are secured
by all of the Company's assets including accounts receivable, inventories and
equipment. The amounts that the Company may borrow under the New Credit Facility
are based upon specified percentages of the Company's eligible accounts
receivable and inventories (as defined). Under the New Credit Facility, the
Company is required to comply with certain affirmative and negative covenants as
well as to comply with certain financial ratios. These covenants, among other
things, place limitations and restrictions on the Company's borrowings,
investments and transactions with affiliates and prohibit dividends and stock
redemptions. Furthermore, the New Credit Facility requires the Company to
maintain certain minimum levels of tangible net worth throughout the term of the
agreement and a minimum debt service coverage ratio which is tested on a
quarterly basis.
In connection with the New Credit Facility, on May 6, 1996, the Company repaid
all outstanding borrowings under the Company's previous $45 million line of
credit facility and repaid the Company's $15 million senior subordinated
promissory note (the "Subordinated Note"). The Subordinated Note had been issued
on March 18, 1996 and was scheduled to mature on July 31, 1997. As a result of
the early extinguishment of the Subordinated Note, the Company recognized an
extraordinary after-tax expense of $214,000, net of a related income tax benefit
of $161,000. The extraordinary expense as well as the related decrease in
subordinated debt and increase in notes payable are reflected in the
consolidated financial statements at March 31, 1996.
At March 31, 1996, outstanding borrowings under the Company's then existing $45
million line of credit facility aggregated $36,702,000.
3. ACQUISITIONS
Effective January 1, 1996, the Company purchased all of the capital stock of
Programming Plus Incorporated ("PPI"), which provides programming and tape and
reel services with respect to electronic components. The purchase price for PPI
consisted of $1,375,000 of common stock of the Company, valued at $2.50 per
share. Only 60,000 shares of the Company's common stock, valued at $150,000,
were released to the PPI selling shareholders at closing. The $1,225,000 balance
of the consideration ("Additional Consideration"), represented by 489,999 shares
of common stock of the Company, was retained in escrow by the Company, as escrow
agent.
4
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
The Additional Consideration will be released to the PPI selling shareholders
annually if and based upon certain levels of pre-tax net income being attained
by the acquired company for the years ended December 31, 1996 through December
31, 2000. If, as of December 31, 2000, all of the Additional Consideration has
not been released, the balance held in escrow will be canceled. The PPI selling
shareholders must vote all of the Company's common stock issued to them (whether
or not held in escrow) as directed by the Company until the escrow is
terminated. In addition, the PPI selling shareholders entered into a four-year
consulting obligation with PPI in consideration of certain automobile benefits,
and a covenant not to compete with PPI. The total amount paid by PPI for such
automobile benefits and covenant was $150,000. The acquisition was accounted for
by the purchase method of accounting which resulted in the recognition of
approximately $70,000 of excess cost over fair value of net assets acquired. The
assets, liabilities and operating results of PPI are included in the
consolidated financial statements of the Company from the date of acquisition.
On December 29, 1995, the Company purchased through two separate mergers with
and into the Company's wholly-owned subsidiaries all of the capital stock of
Added Value Electronics Distribution, Inc. and A.V.E.D.-Rocky Mountain, Inc.
(collectively, the "Added Value Companies"). The assets, liabilities and
operating results of the Added Value Companies are included in the consolidated
financial statements from the date of the acquisitions.
The following unaudited pro forma consolidated income statement data presents
the consolidated results of operations of the Company for the quarter ended
March 31, 1995 as if the acquisitions of the Added Value Companies and PPI had
occurred at the beginning of the period presented:
QUARTER ENDED MARCH 31 1995
- --------------------------------------------------------------------------------
Net sales................................................. $ 48,819,000
Net income................................................ 790,000
Primary and fully diluted earnings per share.............. $.05
The above pro forma information does not purport to be indicative of what would
have occurred had the acquisitions been made as of such date or of the results
which may occur in the future.
4. OPTIONS
During the quarter ended March 31, 1996, the Company issued an aggregate of
226,500 stock options to 27 individuals pursuant to the Employees', Officers',
Directors' Stock Option Plan, as previously amended and restated. These options
have an exercise price of $2.31 per share and are exercisable over a five-year
period.
5. SUBSEQUENT EVENT
In May 1996, the Company decided to close its cable assembly division in Lisle,
Illinois and to relocate certain of such operations to its Miami distribution
facility. Accordingly, the Company accrued $445,000 of nonrecurring expenses
relating to such decision, including the writedown of certain cable
assembly-specific inventory, operating costs through the anticipated date of
relocation (June 1996) and severance pay. These expenses are reflected in the
consolidated financial statements at March 31, 1996.
5
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
All American Semiconductor, Inc. and its subsidiaries (the "Company") is a
national distributor of electronic components manufactured by others. The
Company distributes a full range of semiconductors (active components),
including transistors, diodes, memory devices and other integrated circuits, as
well as passive components, such as capacitors, resistors, inductors and
electromechanical products, including cable, connectors, filters and sockets.
These products are sold primarily to original equipment manufacturers ("OEMs")
in a diverse and growing range of industries, including manufacturers of
consumer goods, satellite and communications products, computers and
computer-related products, robotics and industrial equipment, defense and
aerospace equipment and medical instrumentation. In June 1995, the Company began
distributing a very limited offering of computer products, consisting of
microprocessors, motherboards and computer upgrade kits. The Company's computer
products are sold primarily to retailers, value added resellers and distributors
of computer products. As a result of certain acquisitions completed in December
1995, the Company is also involved in the design, manufacture and sale of flat
panel display products, as well as standard and custom memory module products.
RESULTS OF OPERATIONS
The Company achieved another record-breaking sales quarter by reaching $67.2
million in net sales for the first quarter of 1996. This represented a 75.5%
increase over net sales of $38.3 million for the first quarter of 1995. This
dramatic increase in sales primarily reflects revenues generated by newly
acquired companies, as well as the general increase in demand for electronic
products, an increase in sales in substantially all territories, revenues
generated by new sales offices and revenues generated by the computer products
division created in the third quarter of 1995.
Gross profit was $14.7 million in the first quarter of 1996, a $5.8 million
increase over gross profit of $8.9 million for the same period of 1995. The
increase was due to the significant growth in sales. Gross profit margins as a
percentage of net sales were 21.8% for the first quarter of 1996 compared to
23.2% for the first quarter of 1995. The decline in gross margins was
attributable to several factors, including the development of long-term
strategic relationships with accounts who have required aggressive pricing, the
competitive environment in the electronic distribution marketplace as well as
the increase in sales of memory products and the addition of microprocessors and
motherboards to the Company's product mix, all of which carry lower gross
margins but either substantially higher unit prices or larger volume and
consequently generate higher gross profit dollars. While gross profit margins
are expected to continue to decline slightly, the Company believes that any
future decline should be offset by increases in sales and improved operating
efficiencies.
Selling, general and administrative expenses ("SG&A") was $12.6 million for the
first quarter of 1996 compared to $7.3 million for the first quarter of 1995.
The increase was primarily the result of the recent acquisitions as well as the
Company's rapid growth and aggressive expansion. In December 1995, the Company
completed the acquisitions of two companies which affected all categories of
SG&A and accounted for approximately 24% of the increase. In addition, the
Company incurred consulting fees associated with the systems conversions of the
acquired companies. In connection with these acquisitions, the Company created
two new divisions. The first division, Aved Industries, is intended to
concentrate on the design, manufacture, sales and marketing of flat panel
display products and technical support for these products. Additionally, Aved
Industries will be involved in the design, manufacture, sales and marketing of
standard and custom memory module products. The second division, Apex Solutions,
was created to expand the Company's ability to support kitting and turnkey
services on a national basis. In connection with these two new divisions, the
Company increased staff and incurred additional operating expenses. In addition
to the impact of these acquisitions, variable SG&A expenses,
6
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
including sales commissions and telephone expenses, increased as a result of the
$28.9 million increase in sales for the quarter ended March 31, 1996 over the
same period of 1995.
In order to drive and support future growth as well as to support the operations
of the above referenced acquisitions, the Company expanded its sales personnel,
during the latter part of 1995 and early 1996 opened three new sales offices,
created and staffed northeast and southwest credit departments and increased
staffing in almost all corporate departments. Furthermore, in order to diversify
its business and expand its service capabilities and product offerings, the
Company (i) during the second half of 1995, created a computer products division
("CPD") which distributes microprocessors, motherboards and other computer
products and created a cable assembly division in Lisle, Illinois and (ii)
during 1996, relocated its west coast programming and distribution center into a
significantly larger facility and acquired Programming Plus Incorporated as
discussed below. As a result of all of the foregoing, SG&A for the first quarter
of 1996 reflects increased salaries, payroll taxes and employee benefit costs as
well as additional operating expenses such as rent and office supplies.
SG&A as a percentage of net sales improved slightly to 18.7% for the first
quarter ended March 31, 1996, from 19.0% for the same period of 1995. The slight
improvement in SG&A as a percentage of sales reflects increased operating
efficiencies and benefits from economies of scale which more than offset the
impact from the additional expenses described above.
The Company expects to further expand its service capabilities and increase
staffing to support its programming center, CPD as well as the new divisions and
new sales offices discussed above. As a result, SG&A in absolute dollars and as
a percentage of sales may increase in the near term. While these expansions and
increases will have a negative impact on profitability in the short term, the
Company believes that these investments will enable it to develop better service
capabilities in order to provide the Company with a greater competitive
advantage. The Company believes that this should enable it to continue to
increase its market share and ultimately result in improved financial
performance in the future.
Income from operations increased slightly to $1.7 million for the first quarter
of 1996 compared to $1.6 million for the first quarter of 1995, notwithstanding
nonrecurring expenses in the first quarter of 1996 of $445,000 relating to the
closing of the Company's cable assembly division in Lisle, Illinois. See Note 5
to Notes to Consolidated Condensed Financial Statements. The increase in income
from operations, excluding the nonrecurring expenses, was attributable to the
significant increase in sales as well as the profit generated by the Company's
recent acquisition of Programming Plus Incorporated ("PPI"), see Note 3 to Notes
to Consolidated Condensed Financial Statements, all of which more than offset
the decline in gross profit margins and the additional expenses associated with
the Company's expansion.
Interest expense increased to $997,000 for the first quarter of 1996, as
compared to $665,000 for the same period of 1995. The increase resulted from
additional borrowings required to fund the Company's continued growth, including
additional borrowings incurred in connection with the two acquisitions completed
in December 1995. In connection with the New Credit Facility, beginning with the
second quarter of 1996, interest expense will reflect the amortization of
deferred financing fees of approximately $200,000 per quarter as well as the
impact from the increase in the Company's borrowing rate under the New Credit
Facility. See Note 2 to Notes to Consolidated Condensed Financial Statements.
Net income before extraordinary expense was $375,000 for the quarter ended March
31, 1996 compared to $538,000 for the quarter ended March 31, 1995. The decrease
in net income before extraordinary expense was
7
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
attributable to the increase in SG&A, the recording of nonrecurring expenses of
$254,000 on an after-tax basis relating to the closing of the Company's cable
assembly division in Lisle, Illinois as well as the increased interest expense.
Earnings per share before extraordinary expense was $.02 for the first quarter
of 1996 compared to $.04 for the same period of 1995. As a result of the early
extinguishment of the Company's $15 million senior subordinated promissory note,
the Company incurred an extraordinary after-tax expense of $214,000 (or $.01 per
share) as of March 31, 1996. See Note 2 to Notes to Consolidated Condensed
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1996 increased to approximately $80.6 million from
working capital of $59.4 million at December 31, 1995. The current ratio was
3.16:1 at March 31, 1996, as compared to 2.31:1 at December 31, 1995. The
increase in the current ratio was primarily due to an increase in accounts
receivable and inventory as well as a reduction in accounts payable and accrued
expenses. Accounts receivable levels at March 31, 1996 were $40.3 million, up
from accounts receivable of $35.1 million at December 31, 1995 reflecting the
record level of sales for the first quarter of 1996. Inventory increased to
$74.6 million at March 31, 1996 from $67.5 million at December 31, 1995. The
increase in inventory was primarily to support the increases in sales as well as
to support budgeted future growth. Accounts payable and accrued expenses
decreased to $36.4 million at March 31, 1996, from $43.5 million at December 31,
1995, primarily as a result of the payment of liabilities incurred in connection
with the two acquisitions completed in December 1995.
On May 3, 1996, subsequent to the balance sheet date, the Company entered into a
new $100 million line of credit facility with a group of banks (the "New Credit
Facility") which expires May 3, 2001. Borrowings under the New Credit Facility
bear interest, at the Company's option, at either prime plus one-quarter of one
percent (.25%) or LIBOR plus two and one-quarter percent (2.25%) and are secured
by all of the Company's assets including accounts receivable, inventories and
equipment. The amounts that the Company may borrow under the New Credit Facility
are based upon specified percentages of the Company's eligible accounts
receivable and inventories (as defined). Under the New Credit Facility, the
Company is required to comply with certain affirmative and negative covenants as
well as to comply with certain financial ratios. These covenants, among other
things, place limitations and restrictions on the Company's borrowings,
investments and transactions with affiliates and prohibit dividends and stock
redemptions. Furthermore, the New Credit Facility requires the Company to
maintain certain minimum levels of tangible net worth throughout the term of the
agreement and a minimum debt service coverage ratio which is tested on a
quarterly basis. See Note 2 to Notes to Consolidated Condensed Financial
Statements.
At March 31, 1996, outstanding borrowings under the Company's then existing $45
million line of credit facility aggregated $36.7 million.
Effective January 1, 1996, the Company purchased all of the capital stock of
PPI. The purchase price for PPI consisted of $1,375,000 of common stock of the
Company, valued at $2.50 per share. Only 60,000 shares of the Company's common
stock, valued at $150,000, were released to the PPI selling shareholders at
closing. The $1,225,000 balance of the consideration ("Additional
Consideration"), represented by 489,999 shares of common stock of the Company,
was retained in escrow by the Company, as escrow agent. The Additional
Consideration will be released to the PPI selling shareholders annually if and
based upon certain levels of pre-tax net income being attained by the acquired
company for the years ended December 31, 1996 through December 31, 2000. If, as
of December 31, 2000, all of the Additional Consideration has not been released,
the balance held in escrow will be canceled. The PPI selling shareholders must
vote all of the Company's common
8
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
stock issued to them (whether or not held in escrow) as directed by the Company
until the escrow is terminated. In addition, the PPI selling shareholders
entered into a four-year consulting obligation with PPI in consideration of
certain automobile benefits, and a covenant not to compete with PPI. The total
amount paid by PPI for such automobile benefits and covenant was $150,000. The
acquisition was accounted for by the purchase method of accounting which
resulted in the recognition of approximately $70,000 of excess cost over fair
value of net assets acquired. The assets, liabilities and operating results of
PPI are included in the consolidated financial statements of the Company from
the date of acquisition.
The Company expects that its cash flows from operations and additional
borrowings available under the New Credit Facility will be sufficient to meet
its current financial requirements over the next twelve months.
9
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
================================================================================
ITEM 5. OTHER INFORMATION
See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital
Resources" and Notes 2 and 3, respectively, to Notes to
Consolidated Condensed Financial Statements in Part I of this
report for discussions of the Company's New Credit Facility
and the Company's acquisition of Programming Plus
Incorporated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Stock Purchase Agreement (without schedules) dated as
of January 1, 1996 among the Company, as purchaser,
and Steven E. Culligan, Alan G. Bowen and Robert
Harrington, as sellers
10.2 Loan and Security Agreement (without exhibits or
schedules) among Harris Trust and Savings Bank, as a
lender and administrative agent, American National
Bank and Trust Company of Chicago, as a lender and
collateral agent, and the Other Lenders Party hereto
and the Company, as borrower, together with six (6)
Revolving Credit Notes, all dated May 10, 1996,
aggregating $100,000,000
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K
during the quarter ended March 31, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALL AMERICAN SEMICONDUCTOR, INC.
----------------------------------------------
(Registrant)
Date: May 14, 1996 /s/ PAUL GOLDBERG
----------------------------------------------
Paul Goldberg, Chairman of the Board and
Chief Executive Officer
(Duly Authorized Officer)
Date: May 14, 1996 /s/ HOWARD L. FLANDERS
----------------------------------------------
Howard L. Flanders, Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
- -------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
AMONG
ALL AMERICAN SEMICONDUCTOR, INC.
AS PURCHASER,
AND
STEVEN E. CULLIGAN, ALAN G. BOWEN AND ROBERT HARRINGTON
AS SELLERS
------------------------------
DATED AS OF JANUARY 1, 1996
------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 Defined Terms............................................ 1
1.1 Defined Terms................................... 1
ARTICLE 2 Purchase and Sale........................................ 7
2.1 Purchase and Sale............................... 7
2.2 Delivery of Certificates and Other
Instruments of Transfer......................... 7
2.3 Purchase Price.................................. 7
ARTICLE 3 Other Agreements......................................... 10
3.1 Restrictive Covenant............................ 10
3.2 Release of Corporation.......................... 10
3.3 Legal Opinion................................... 10
3.4 Further Assurances.............................. 10
3.5 Consulting Obligations.......................... 10
3.6 Verification of Net Income...................... 11
3.7 Intent Regarding Operation of the Business
Prospectively................................... 11
3.8 Relationship of Transactions to Sellers'
Employment with Purchaser Subsidiary and Matters
Relating to Techvision.......................... 12
3.9 Voting Agreement................................ 13
3.10 Piggyback Registration Rights................... 13
ARTICLE 4 Representations and Warranties of Seller................. 17
4.1 Organization and Good Standing.................. 17
4.2 Authority....................................... 17
4.3 No Subsidiaries................................. 18
4.4 Financial Statements............................ 18
4.5 Leaseholds...................................... 18
4.6 Personal Property and Title to Property......... 18
4.7 Intellectual Property Rights.................... 19
4.8 Litigation...................................... 19
4.9 Compliance with Laws............................ 19
4.10 Entire Business................................. 20
4.11 Contracts....................................... 20
4.12 Receivables..................................... 21
4.13 Certain Transactions............................ 21
4.14 Employees....................................... 22
4.15 Employee Benefit Plans.......................... 23
4.16 Licenses and Permits............................ 23
4.17 Transactions with Affiliates.................... 23
4.18 Truthfulness.................................... 24
4.19 Payments........................................ 24
4.20 Insurance....................................... 24
4.21 Environmental Matters........................... 24
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PAGE
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4.22 Tax Matters..................................... 25
4.23 No Sale......................................... 26
4.24 Purchase Commitments............................ 26
4.25 Certain Reports................................. 26
4.26 Certain Payments to Key Employees............... 27
4.27 Bank and Securities Accounts.................... 27
4.28 Status of Stock................................. 27
4.29 Title to the Stock.............................. 27
4.30 Charter Documents and Corporate Records......... 27
4.31 Capitalization.................................. 28
4.32 Representations and Warranties Relating to
Sale of All American Shares and Securities Laws. 28
ARTICLE 5 Representations and Warranties of Purchaser.............. 31
5.1 Organization; Authority......................... 31
5.2 Conflicting Instruments; Consents............... 31
5.3 Litigation...................................... 31
5.4 Capital Stock................................... 32
5.5 Securities Reports and Financial Statements..... 32
5.6 Current Information............................. 32
5.7 Truthfulness.................................... 32
ARTICLE 6 Miscellaneous............................................ 33
6.1 Brokers......................................... 33
6.2 Expenses........................................ 33
6.3 Amendments and Waivers.......................... 33
6.4 Successors and Assigns.......................... 33
6.5 Notices......................................... 33
6.6 Governing Law; Choice of Forum.................. 34
6.7 Partial Invalidity.............................. 35
6.8 Section Headings................................ 35
6.9 Counterparts.................................... 35
6.10 Entire Agreement................................ 35
6.11 Survival, Indemnification and Set-Off........... 35
6.12 Disputes........................................ 37
6.13 Gender.......................................... 37
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EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT "A" RESTRICTIVE COVENANT
EXHIBIT "B" STOCKHOLDER RELEASE
SCHEDULES
Schedule 4.4 Balance Sheet
Schedule 4.11 Contracts
Schedule 4.14 Employees
Schedule 4.20 Insurance
Schedule 4.27 Bank and Securities Accounts
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, effective as of January 1, 1996
("Agreement"), among ALL AMERICAN SEMICONDUCTOR, INC., a Delaware corporation
("Purchaser"), and STEVEN E. CULLIGAN ("Culligan"), ALAN G. BOWEN ("Bowen"), and
ROBERT HARRINGTON ("Harrington") (individually, a "Seller" and, collectively,
"Sellers").
WHEREAS, Culligan, Bowen and Harrington each own 2,000 shares
of common stock, having no par value (collectively, the "Stock"), of Programming
Plus Incorporated, a Utah corporation (the "Corporation");
WHEREAS, the Stock constitutes all of the issued and
outstanding shares of capital stock of the Corporation and there are no
outstanding contingent or other rights to acquire any of the capital stock of
the Corporation; and
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser
desires to purchase from Seller, all of the Stock, and all other rights owned by
Seller in or to the Corporation, upon the terms and subject to the conditions
set forth in this Agreement, intending that such purchase and sale transaction
constitute a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the
respective agreements hereinafter set forth, the parties agree as follows:
ARTICLE 1
DEFINED TERMS
1.1 DEFINED TERMS. The following terms shall have
the respective meanings ascribed to them below:
"Affiliate" shall mean, with respect to any party, any person
who directly or indirectly through stock ownership or through any other
arrangement either controls, or is controlled by, or is under common control
with, such party. The term "control" shall mean the power to direct the affairs
of such party by reason of ownership of voting stock or other equity interests,
by contract or otherwise.
"All American Share" shall mean a share of common stock, $.01
par value, of Purchaser.
"All American Share Value" shall mean $2.50 per share.
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"Assets" shall mean all of the assets, properties, interests,
cash on hand and in bank accounts, cash equivalents, investments, marketable
securities, business, good will, claims and other rights of the Corporation of
every kind and nature whatever, tangible or intangible, vested or unvested,
contingent or otherwise, real, personal or mixed, and wherever located, whether
or not reflected on the books and records of the Corporation and whether or not
described herein or in any of the exhibits or schedules delivered or to be
delivered to Purchaser hereunder, including, without limitation, all right,
title and interest of the Corporation in, to and under the name "Programming
Plus"; the Tangible Personal Property; all rights, benefits, privileges and
interests under the Contracts (including all security and other deposits
thereunder); Receivables; Licenses; Intellectual Property Rights; Records;
prepaid expenses; backlog; advances; rights, benefits, claims, credits,
prorations and refunds due or belonging to the Corporation under any Contracts
or insurance policies or otherwise; and all rights to any deposits made by the
Corporation to obtain goods, services, rights or privileges of any kind.
"Balance Sheet" shall mean the unaudited balance sheet of the
Corporation as of March 31, 1996, a copy of which is attached as Schedule 4.4.
"Business" shall mean the Corporation's business, which
consists of the provision of programming services and tape and reeling services
and similar and related value added services relating to electronic components.
"Contracts" shall mean, collectively, and "Contract" shall
mean, individually, all leases relating to real property, all agreements
relating to the provision of value added services, distribution agreements,
franchise agreements and arrangements, maintenance agreements, service
agreements, equipment or other personal property leases, arrangements regarding
the loaning of equipment, use, loan or financing agreements of any kind,
security agreements, chattel or leasehold mortgages, license agreements, agency
agreements, purchase orders, sales orders, blanket or master agreements with
customers, supply contracts, output or requirements contracts, commitments to
purchase or sell goods, products or services of any kind, stockholders
agreements, buy-sell agreements, indentures, notes and other contracts and
agreements of any kind or nature, whether written or oral, to which the
Corporation is a party or by which the Corporation, the Stock, the Assets or the
Business are subject, and all rights, interests, benefits and privileges arising
thereunder.
"Employee" shall mean any former or current, active or
inactive, employee, officer, agent, consultant, independent contractor or
subcontractor of the Corporation.
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"Escrow Release Events" shall have the meaning
specified in Section 2.3.
"Escrowed Purchase Price" shall have the meaning
specified in Section 2.3.
"GAAP" shall mean generally accepted accounting
principles, consistently applied.
"Historical Financial Statements" shall mean the balance
sheet, and the results of operations (including statements of income and loss,
cash flows and stockholders equity), of the Corporation as of and for the fiscal
years ended December 31, 1995, and December 31, 1994, respectively, true and
complete copies of which have been delivered to Purchaser.
"Indebtedness" shall mean (i) all debt for the payment of
money or borrowed money or for the deferred purchase price of property or
services, (ii) obligations evidenced by notes, bonds, debentures or other
instruments, (iii) lease obligations which would normally be capitalized under
GAAP, and (iv) obligations under direct or indirect guarantees of (including
obligations, contingent or otherwise, to assure a creditor against loss in
respect of) indebtedness or obligations of others of types referred to in
clauses (i), (ii) and (iii) above.
"Intellectual Property Rights" shall mean (i) Patents, (ii)
Know-how, (iii) Trademarks, (iv) Trade Names, and (v) shop rights, copyrights,
inventions, technology, service marks and all other intellectual property
rights, whether registered or not.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended.
"Know-how" shall mean all trade secrets, know-how (including,
without limitation, product know-how and use and application know-how),
processes, product designs, specifications, work flow analyses, charts and
designs, selling, quoting, bidding and other business techniques, methods and
systems, customer requirements, quality control procedures, testing procedures,
manufacturing, engineering and other drawings, blueprints, computer databases
and software, telephone numbers, facsimile numbers, technology and all other
information and similar intangibles, including, without limitation, technical
information, safety information, engineering data and designs and engineering
specifications, research records, market information and surveys and all
promotional literature, customer and supplier lists (and all other information
relating to suppliers and customers) and similar data.
"Lease" shall mean that certain Lease Agreement, dated October
1, 1995, by and between Potomac Corporation, d/b/a
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Creekview Plaza, and the Corporation, for the premises located at 7145 South 94
B, Building C, Suite 103, East Midvale, Utah 84047.
"Liabilities" shall mean, with respect to the Corporation, all
types of Indebtedness, liabilities, obligations, debts, duties and
responsibilities of, and all claims, demands, judgments, orders, fines and
penalties against, the Corporation of any kind or nature whatever, fixed or
contingent, known or unknown, disclosed or undisclosed.
"Licenses" shall mean all local, municipal, state and federal
licenses, franchises, permits, consents, approvals, waivers, rights and
authorizations used or required for use in connection with the conduct of the
Business, and all industry certifications, such as, by way of example only,
ISO-9000.
"Lien" shall mean any mortgage, pledge, deed of trust,
assignment, lien, charge, encumbrance, judgment, restriction or security
interest of any kind or nature whatever, or the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Megahertz" shall mean Megahertz Corporation.
"Megahertz Agreement" shall mean the Corporate Purchasing
Agreement currently in effect between Megahertz and the Corporation.
"Net Income" shall mean, with respect to any calendar year or
other period, the pre-tax net income of the Business, determined in accordance
with GAAP by Purchaser or its independent accountants. In making such
calculation, (a) any cumulative losses of the Business (not previously taken
into account) as of the commencement of the calendar year or other period in
question shall be charged against earnings for the period being measured, (b)
any portion of the Net Income Threshold which has not already been charged
against the cumulative net income of the Business as of the commencement of the
calendar year or other period in question shall be charged against earnings for
the period being measured, (c) annual interest at the prime commercial lending
rate of SunTrust Bank/Miami, N.A. plus 1% (or the rate of interest then being
charged by Purchaser's then senior lender) shall be imputed and charged against
earnings on any capital provided by Purchaser to the Business, and (d) an amount
equal to 3% of the gross revenues of the Business shall be charged against
earnings to reflect central overhead costs of Purchaser allocable to the
Business; PROVIDED, HOWEVER, in no event shall capital expenditures made after
the date of execution and delivery of this Agreement result in depreciation or
interest charges for the purpose of computing Net Income unless the capital
expenditure is used to purchase a
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<PAGE>
replacement of an existing capital asset which requires replacement.
"Net Income Threshold" shall mean $300,000.
"Patents" shall mean patents (including all reissues,
divisions, continuations, continuations in part and extensions thereof), patent
applications and patent disclosures docketed and all other patent rights
(including, without limitation, all claims against third parties for past
infringement not heretofore asserted).
"person" shall mean any natural person, corporation,
association, partnership, governmental agency or subdivision thereof, joint
venture or other entity.
"Purchase Price" shall mean the sum of $1,375,000, payable by
the issuance to Sellers of All American Shares valued at the All American Share
Value, $1,225,000 of which shall be retained by Purchaser in escrow subject to
the occurrence of certain conditions subsequent, as more particularly set forth
in Section 2.3. Based upon the definition of All American Share Value, the
maximum number of All American Shares which may be issued as Purchase Price is
550,000.
"Purchaser" shall mean All American Semiconductor,
Inc., a Delaware corporation.
"Recapitalization Event" shall mean any stock split or reverse
stock split of All American Shares, or any merger, exchange, combination, sale
or other transaction in which All American Shares are converted into other
securities and/or property of any kind.
"Receivables" shall mean all accounts receivable, claims,
notes and other amounts receivable by or owed to the Corporation or which may be
claimed by the Corporation as a result of the operation or ownership of the
Business, including, without limitation, all amounts due from customers, vendors
and Employees, together with any unpaid financing charges accrued thereon,
whether or not arising in the ordinary course of business.
"Records" shall mean originals, or, to the extent originals
are not available, true and complete copies, of all business, accounting and
financial records, including corporate minute books and records, and stock
ledgers and records, property records, contract records, personnel records,
correspondence, files, books and documents of the Corporation, including,
without limitation, manufacturing, production, processing, testing, quality
control, backlog, sales, marketing and advertising data and materials, customer
and supplier records and mailing lists of any and all
5
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types, vendor and customer invoices, billing records, software and related
documentation, art work, photographs and advertising material, manuals and
teaching aids, customer provided designs, drawings or blueprints of any kind,
and all other records relating to the Business as presently or heretofore
conducted, including, without limitation, all certifications and records
concerning sources of supply, date codes, and testing, all certificates of
compliance and conformance and other documentation relating to products sold or
to be sold in compliance with military specifications or to original equipment
manufacturers, and all documentation relating to backlog, purchase orders (sent
or received), current shipments and work-in-process.
"Restrictive Covenant" shall mean the restrictive covenant to
be executed and delivered to Purchaser by Sellers concurrently herewith pursuant
to which Sellers agree to certain confidentiality and non-competition
restrictions, and certain restrictions on the transferability of the All
American Shares to be given to them, the form of which is attached as Exhibit
"A."
"Retained Liabilities" shall mean any Liabilities of the
Corporation of any kind or nature not reflected in the Balance Sheet or
otherwise specifically disclosed in this Agreement or the Schedules to this
Agreement.
"Seller" shall mean each, and "Sellers" shall mean all (and,
with respect to all obligations of Sellers hereunder, jointly and severally), of
Culligan, Bowen and Harrington.
"Set-Off Losses" shall have the meaning specified in
Section 6.11.
"Stock" shall mean, collectively, the six thousand (6,000)
shares of common stock of the Corporation, having no par value, owned by
Culligan, Bowen and Harrington (2,000 shares each), which constitute all of the
issued and outstanding capital stock of the Corporation.
"Stockholder Release" shall have the meaning specified
in Section 3.2.
"Tangible Personal Property" shall mean all fixed assets,
machinery, equipment, tools, computers, vehicles, furniture, fixtures, leasehold
improvements, office equipment, plant, inventory and other tangible personal
property owned by the Corporation of any kind or nature.
"Taxes" shall mean all taxes of any kind, including, without
limitation, those on, or measured by or referred to as, income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance,
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stamp, documentary stamp, intangible (recurring and non-recurring), occupation,
premium, property or windfall profits taxes, customs duties or similar fees,
import or export duties, assessments or charges of any kind whatever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority, domestic or foreign.
"Trademarks" shall mean trademarks, registrations thereof,
pending applications therefor and such unregistered rights as may exist through
use.
"Trade Names" shall mean trade names, brand marks, trade
dress, brand names and all other names and slogans used in connection with the
Business embodying the Corporation's good will for which no trademark
registration has been obtained and for which no application is pending.
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth in this Agreement, Seller hereby sells, assigns, transfers,
conveys and delivers to Purchaser, and Purchaser hereby purchases and accepts
from Seller, effective as of January 1, 1996, the Stock and all of each Seller's
right, title and interest in, to and in respect of, and to receive payments or
property of any kind or nature from, the Corporation and the Business, free and
clear of any and all Liens.
2.2 DELIVERY OF CERTIFICATES AND OTHER INSTRUMENTS OF
TRANSFER. Concurrently herewith, Seller shall deliver to Purchaser such specific
assignments, stock powers, stock certificates, endorsements and other good and
sufficient instruments of conveyance and transfer, in form and substance
satisfactory to Purchaser and its counsel, as shall be effective to vest in
Purchaser unencumbered and unrestricted record and beneficial title to the
Stock.
2.3 PURCHASE PRICE. In consideration of the transfer and
assignment to Purchaser of the Stock, Purchaser shall pay to Sellers the
Purchase Price as follows:
(a) Concurrently with the execution and delivery
of this Agreement, Purchaser shall cause to be issued to Sellers in equal shares
(one-third each) that number of All American Shares which is equal to $1,375,000
divided by the All American Share Value. Purchaser shall cause to be delivered
to Sellers immediately upon such issuance, in equal shares (one-third each),
that number of All American Shares so issued to Sellers which is equal to
$150,000 divided by the All American Share Value. Sellers
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<PAGE>
authorize Purchaser to place in escrow, for the benefit of Sellers (subject to
the provisions of subsection (b) below and other applicable provision of this
Agreement), with Purchaser as escrow agent, that number of All American Shares
so issued to Sellers equal to $1,225,000 divided by the All American Share Value
(the "Escrowed Purchase Price"), subject to the provisions of subsection (b)
below. The All American Shares representing the Escrowed Purchase Price shall be
held by Purchaser separate from any All American Shares held by Purchaser as
treasury stock or otherwise and shall be reflected in Purchaser's stock records
as issued and outstanding shares owned by Sellers.
(b) The Escrowed Purchase Price, upon and to the
extent of (but only upon and to the extent of) the occurrence of the following
results ("Escrow Release Events") shall be released to Sellers from time to time
as follows:
(i) With respect to the 1996 calendar
year, to the extent that the Net Income of the Business exceeds the Net Income
Threshold, an amount equal to 100% of such excess Net Income, up to $50,000
thereof, shall be released to Sellers in All American Shares valued at the All
American Share Value.
(ii) To the extent that Net Income of
the Business for 1996 exceeds the sum of the Net Income Threshold and $50,000,
an amount equal to 75% of such excess Net Income shall be released to Sellers in
All American Shares valued at the All American Share Value.
(iii) For the period January 1, 1997 to
December 31, 2000, an amount equal to 75% of the Net Income of the Business for
such period shall be released to Sellers in All American Shares valued at the
All American Share Value until the entire Escrowed Purchase Price has been
released to Sellers.
(iv) Net Income of the Business shall
be calculated and the appropriate releases, if any, from the escrow shall be
made, on an annual basis, each such release to be made no later than the 90th
day following the end of the calendar year to which it relates.
(v) Subject to the provisions of
Section 3.9, Sellers shall have and may exercise all voting rights with respect
to all All American Shares constituting the Purchase Price, including the
Escrowed Purchase Price, as well as the right to receive any cash or stock
dividends paid or distributed from time to time in respect thereof. Sellers may
not sell, transfer, pledge, hypothecate, encumber or in any manner dispose of,
directly or indirectly, by operation of law or otherwise, or possess, any of the
Escrowed Purchase Price (or any interest therein) unless and until, and only to
the extent, released to Sellers in accordance
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with this Section 2.3. If a Recapitalization Event occurs, the securities and/or
other property (if any) issued or given to Sellers in exchange for the All
American Shares constituting the Escrowed Purchase Price shall be substituted
therefor and continue to constitute Escrowed Purchase Price, subject to all of
the provisions hereof, and, in determining the proper amounts, if any, to be
released from escrow in accordance with subsections (i) - (iv) above, such
equitable and appropriate adjustments shall be made so that the same economic
results are reached (as nearly as practicable) as would have resulted had no
Recapitalization Event occurred. In order to secure Sellers' obligations set
forth in the preceding sentences, and Sellers' obligation to permit Purchaser to
retain the Escrowed Purchase Price in escrow and otherwise take actions with
respect thereto in accordance with this Article 2, Purchaser shall have, and
Sellers hereby grant to Purchaser, a perfected first priority lien in the
Escrowed Purchase Price (and any proceeds thereof) which, as to the All American
Shares covered thereby, shall be deemed automatically terminated upon release of
such shares to Sellers pursuant to this Section 2.3. If any of the Escrowed
Purchase Price is, for whatever reason, transferred by operation of law or
otherwise in contravention of these provisions, the transferee's or recipient's
rights therein shall be subject to this Agreement, including this Section 2.3
and the aforementioned lien.
(vi) Any All American Shares which are
held as Escrowed Purchase Price at December 31, 2000 which are not required to
be released to Sellers by application of the above formulae shall, once Net
Income for the 2000 calendar year has been determined, be cancelled, and the
number of All American Shares cancelled (multiplied by the All American Share
Value) shall be credited against, and shall adjust (by way of reduction by such
amount), the Purchase Price (and in no event shall a value other than the All
American Share Value be used in calculating such credit). In order that
Purchaser may exercise the foregoing rights and its rights under Section 6.11,
Sellers shall execute and deliver to Purchaser, concurrently with the execution
and delivery of this Agreement, and from time to time thereafter upon request,
such powers of attorney and stock powers as Purchaser requests in order to allow
Purchaser to satisfy its stock transfer agent and other third parties that it is
authorized to effectuate any cancellations (and reissuances to release any
balance due) of certificates for All American Shares in the names of Sellers, as
well as for the purpose of effectuating releases of the Escrowed Purchase Price
to Sellers to the extent required hereunder. Additionally, Sellers shall fully
cooperate, by signing and swearing to any required or requested documents and
otherwise, as reasonably requested by Purchaser in order to facilitate any of
the foregoing.
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ARTICLE 3
OTHER AGREEMENTS
3.1 RESTRICTIVE COVENANT. Concurrently herewith, Sellers
shall execute and deliver to Purchaser and the Corporation the Restrictive
Covenant.
3.2 RELEASE OF CORPORATION. Concurrently herewith, Sellers
shall execute and deliver to the Corporation a general release dated as of the
date of execution and delivery of this Agreement, in the form attached as
Exhibit "B" (the "Stockholder Release").
3.3 LEGAL OPINION. Concurrently with the execution and
delivery of this Agreement, Sellers shall cause their legal counsel, Holland &
Hart, LLP, to execute and deliver to Purchaser a legal opinion in form and
substance reasonably acceptable to Purchaser and its counsel, and Purchaser
shall cause its legal counsel, Rubin Baum Levin Constant Friedman & Bilzin, to
execute and deliver to Sellers a legal opinion in form and substance reasonably
acceptable to Sellers and their counsel.
3.4 FURTHER ASSURANCES. From and after the date of execution
and delivery of this Agreement, upon request of Purchaser, each Seller shall do,
execute, acknowledge and deliver all such further acts, assurances, deeds,
assignments, transfers, conveyances and other instruments and papers as may be
required to sell, assign, transfer, convey and deliver to and vest in Purchaser
full unrestricted and unencumbered record and beneficial right, title and
ownership in and to the Stock, and as otherwise may be appropriate to carry out
the transactions contemplated by this Agreement.
3.5 CONSULTING OBLIGATIONS. For no additional consideration or
compensation (except the transfer of title to the automobiles to Sellers by the
Corporation, as described below) each Seller agrees to consult with Purchaser
and the Corporation concerning the Business during the period commencing January
1, 1996 and ending December 31, 1999 (the "Consulting Period"). During the
Consulting Period, each Seller shall provide such consulting, advisory and
related services, including assistance with production, administration, customer
service and customer relations, as Purchaser or the Corporation may from time to
time request, it being the intent of the parties that Sellers in essence
continue to provide such services for the Business as they currently provide.
Each Seller acknowledges that Purchaser is relying heavily on Sellers' expertise
with respect to the Business and relationships with the customers of the
Business (particularly Megahertz) in entering into this Agreement, and,
accordingly, any breach by any Seller of the foregoing consulting obligations
(the
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"Consulting Obligations") would be material. In order to facilitate the
performance of each Seller's consulting duties, Purchaser agrees that the
Corporation shall purchase the leased vehicle currently leased by the
Corporation and used by Culligan, and transfer title to such vehicle to Culligan
for a purchase price of $1.00, and the Corporation shall pay off the
purchase-money liens on the two automobiles owned by the Corporation and used by
Bowen and Harrington, respectively, and transfer title to such vehicles to Bowen
and Harrington, respectively, for a purchase price of $1.00 per vehicle.
3.6 VERIFICATION OF NET INCOME. Sellers and their
representatives shall have the collective right, upon reasonable notice, once
per calendar year, to inspect and audit, at their expense, all of Purchaser's or
the Corporation's books and records relevant to the calculation of Net Income of
the Business in order to verify the accuracy of Net Income. Once books and
records for a particular period have been inspected or audited, they may not be
the subject of a subsequent inspection, and no inspection shall relate to any
period more than 18 months prior to the date the inspection is requested.
Purchaser shall also make its appropriate personnel and, if necessary, its
accountants available by telephone to Sellers to answer any questions Sellers
may have in connection with the calculation of Net Income of the Business.
Absent manifest error, the determination or verification of Net Income of the
Business by Purchaser's independent accountants shall be conclusive and binding
on the parties. In order to keep Sellers apprised of Net Income on a more
frequent basis, Purchaser shall deliver to Sellers on a calendar-quarterly basis
(within 45 days following the end of each quarter) copies of such income
statements for the Corporation as Purchaser prepares or causes to be prepared in
the ordinary course of business. Purchaser shall also deliver to Sellers within
90 days following the end of each calendar year an income statement showing Net
Income for the year then ended.
3.7 INTENT REGARDING OPERATION OF THE BUSINESS PROSPECTIVELY.
Although the parties acknowledge and agree that following the sale of the Stock
to Purchaser the Corporation's Board of Directors will make such decisions
regarding the business, affairs and operations of the Corporation as such Board,
solely in its good faith judgment, deems to be in the best interests of the
Corporation and the group of affiliated companies of which the Corporation will
be a part, it is Purchaser's present intention not to make any material changes
to the manner in which the operations of the Corporation are now conducted.
Recognizing that material changes could, in the judgment of the Board of
Directors of the Corporation, become necessary, desirable or appropriate in the
future, before implementing any such material change at any time prior to
December 31, 2000, Purchaser shall use reasonable efforts to cause one or more
of Sellers to be consulted concerning their views and comments regarding any
proposed material change.
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3.8 RELATIONSHIP OF TRANSACTIONS TO SELLERS'
EMPLOYMENT WITH PURCHASER SUBSIDIARY AND MATTERS RELATING TO TECHVISION.
(a) The parties acknowledge that, as of January
1, 1996, each Seller has been a full-time employee of a wholly-owned subsidiary
of Purchaser engaged chiefly in the distribution of electronic components and
related products. Sellers represent and warrant that their involvement with the
Corporation since January 1, 1996 has not conflicted with such full-time
employment obligations or otherwise resulted in a breach of such employment
obligations. Purchaser agrees that performance by Sellers of their consulting
duties under this Agreement shall not, of itself, be deemed a breach of any of
such employment obligations (even if such consulting obligations are from time
to time performed during normal business hours); PROVIDED, HOWEVER, the
performance of such consulting obligations shall not in any manner excuse any
Seller from the due and proper performance of all of his employment obligations,
and the performance of such employment obligations shall not excuse any Seller
from the due and proper performance of all of his consulting obligations under
this Agreement, it being incumbent upon each Seller to devote whatever time is
reasonably necessary to fulfill all of such obligations in good faith and in a
competent manner and in accordance with all agreements governing same.
(b) Sellers have advised Purchaser that Sellers
have invested (as founders) in a "start-up" company known as "Techvision" which
subsequently raised additional funds in a private offering, and that Sellers own
collectively approximately 41% of its capital stock. Sellers jointly and
severally represent and warrant to Purchaser and the Corporation that (i) the
business of Techvision is wholly unrelated to, and is not in any manner directly
or indirectly similar to or competitive with, the business of Purchaser, its
subsidiaries or the Corporation, (ii) no Seller currently has or, except at such
times as such Seller has no employment obligation with Purchaser or any of its
subsidiaries and no consulting obligations under this Agreement, will have an
active role with respect to Techvision, its business, operations or affairs
other than occasional consulting for no compensation outside of normal business
hours, and (iii) other than with respect to Techvision as aforesaid (and the
Corporation), no Seller is currently involved as consultant, promoter, owner,
agent or otherwise in any company or business venture of any kind or nature
(other than passive ownership of publicly-traded securities). Based solely upon
the foregoing representations and warranties, Purchaser agrees that Sellers
investment in, and occasional consulting during non-business hours for,
Techvision shall not, of itself, constitute a breach of any Seller's employment
obligations to Purchaser's subsidiary or his consulting obligations under this
Agreement; provided, however, the foregoing agreement of Purchaser shall not in
any manner be deemed to excuse the due and proper
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performance of all of such employment and consulting obligations. Sellers agree
jointly and severally to indemnify and hold harmless Purchaser, its subsidiaries
and the Corporation from and against, and in respect of, any claims, demands,
losses, damages, liabilities, judgments, fines, costs and expenses (including
reasonable attorneys' fees and costs incurred before and at any trial, at all
tribunal levels, and whether or not any suit is commenced) asserted against or
suffered or incurred by Purchaser, any of its subsidiaries or the Corporation
which result or arise from or relate to Techvision, the raising of funds for
Techvision, or any Seller's activities, acts or omissions relating to
Techvision, its business, operations, formation, development or affairs, whether
or not any of the foregoing in any manner directly or indirectly involved the
Corporation.
3.9 VOTING AGREEMENT. For the period commencing on the date of
issuance of the All American Shares constituting the Purchase Price and ending
on the earlier of (a) the release from escrow to Sellers of all of the All
American Shares subject thereto pursuant to the Escrow Release Events described
in Section 2.3 of this Agreement and (b) December 31, 2000, all of the All
American Shares constituting the Purchase Price shall be voted by Sellers only
as directed by Purchaser. With respect to any matter upon which stockholders of
Purchaser may vote or consent, including, without limitation, election of
directors, mergers, sales of assets, dissolution and amendment to Purchaser's
certificate of incorporation, Purchaser shall direct, in Purchaser's sole and
absolute discretion, how the All American Shares issued to Sellers shall be
voted. Sellers shall accept the direction and instructions of Purchaser's Chief
Executive Officer or President with respect to all such voting decisions, and
shall vote their All American Shares in accordance with such direction and
instructions, and shall not vote any All American Shares absent receiving such
direction and instructions. Any shares of capital stock received by Sellers as a
stock dividend or received as a result of a stock split, recapitalization or the
like in exchange for such All American Shares shall be subject to this voting
agreement. This voting agreement is intended to be, and shall be, specifically
enforceable against Sellers, as Sellers acknowledge and agree there is no remedy
at law which adequately and fully would redress a breach by any Seller of such
voting agreement.
3.10 PIGGYBACK REGISTRATION RIGHTS.
(a) If, during any Applicable Period (as defined
below), Purchaser shall propose to file a registration statement or statements
under the Securities Act of 1933, as amended (the "Act") in respect of any
underwritten distribution of Purchaser's common stock (other than a registration
statement on Form S-8, S-9, or S-14 or a registration statement relating to an
exchange offer, provided that this exception shall not preclude Seller Common
Stock
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from being included in an exchange offer), Purchaser shall each such time give
written notice to Sellers of such proposal not later than twenty (20) days prior
to the date each such registration statement is so filed and, upon the written
request of any Seller received no later than ten (10) days prior to such filing,
Purchaser shall (subject to all of the provisions of this Section 3.10) include
therein such number of the All American Shares issued to such Seller pursuant to
this Agreement and owned by such Seller free of the escrow created under this
Agreement ("Seller Common Stock") which are specifically designated in such
written request as being proposed to be distributed by him and requested to be
included in such registration statement. Purchaser further agrees to use
reasonable efforts to keep effective any registration statement which pursuant
to this Section 3.10 includes any of the Seller Common Stock for a period
commencing on the initial effective date of such registration statement and
ending on the earlier of (i) nine months thereafter and (ii) the completion of
the offering of the Seller Common Stock which is covered thereby; PROVIDED,
HOWEVER, that such obligation of Purchaser to keep such registration statement
effective shall be subject to the exceptions set forth below. "Applicable
Period" means, with respect to All American Shares issued to Sellers pursuant to
this Agreement, the period during which such All American Shares cannot be sold
in compliance with Rule 144 promulgated under the Act.
(b) Purchaser shall bear all costs and expenses
in connection with any registration statement which pursuant to this Section
3.10 includes Seller Common Stock, including the fees and expenses for the
audited and other financial statements concerning the operations of Purchaser
required to be included in such registration statement, and the expenses of
printing fees, filing fees and other similar categories of expenses not
specifically included above, including the expenses of any filing or similar
fees arising from the qualification or exemption of the issuance of any of
Purchaser's common stock (including Seller Common Stock) under state securities
or "Blue Sky" laws. Sellers shall bear the costs of their own counsel and any
discounts or commissions applicable to the sale of the Seller Common Stock
pursuant to the registration statement.
(c) Notwithstanding anything to the contrary set
forth elsewhere herein: (i) Purchaser shall not be obligated to file any
post-effective amendment to any registration statement which includes Seller
Common Stock if such post-effective amendment would require (a) the inclusion of
any financial statements of Purchaser other than the financial statements of
Purchaser regularly prepared in the ordinary course as of the end of Purchaser's
most recently ended fiscal year preceding the effective date of such
registration statement, or (b) the inclusion of any financial statements of any
other corporation (other than a parent or subsidiary of Purchaser for which
Purchaser has the required
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financial statements); and (ii) Purchaser shall have the right to suspend at any
time any Seller's right to sell Seller Common Stock under any such registration
statement for such interval of time, from time to time, as may be necessary in
order to enable Purchaser to supplement or amend such registration statement so
that it complies in all respects with the requirements of the Act.
(d) Notwithstanding anything to the contrary set
forth herein, and consistent with the definition of "Applicable Period,"
Purchaser shall not be required to include any Seller Common Stock in a
registration statement filed under the Act if such securities, in the opinion of
outside counsel to Purchaser, may properly be disposed of by such Seller without
such registration.
(e) In connection with any registration
statement which includes Seller Common Stock, Purchaser agrees to take
reasonable steps to comply with such Blue Sky or state securities laws as may be
reasonably requested by Sellers (except that it shall in no event be required to
qualify as a foreign corporation), and to furnish Sellers such reasonable number
or prospectuses or other documents incident to such registration as they may
from time to time reasonably request.
(f) All of Purchaser's obligations under this
Section 3.10 shall be conditioned upon Sellers furnishing to Purchaser all such
information and material as may be reasonably requested by Purchaser or its
counsel in connection with any registration statement in which Seller Common
Stock is included, and any public offering thereunder, including without
limitation all information and material concerning Sellers as may be required to
be included in such registration statement under the Act and the applicable
rules and regulations of the Securities and Exchange Commission, and upon the
further condition that Sellers shall undertake (i) to do all such things and
execute all such additional instruments as may be reasonably necessary or
desirable in the opinion of Purchaser or its outside counsel in connection with
such registration statement or public offering, and (ii) to comply in all
respects with the Act and all applicable rules and regulations thereunder and
with the securities laws of the states in which any such public offering is
made.
(g) In connection with any registration
statement which includes Seller Common Stock, Purchaser will indemnify each
Seller participating therein and hold him harmless against and in respect of any
losses, claims, damages or liabilities, joint or several (including legal or
other expenses reasonably incurred by him in connection with investigating or
defending any such loss, claim, damage, liability or action) to which such
Seller may become subject under the Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions with respect thereto) arise out
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of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent that any such untrue statement or omission is
based upon information furnished in writing to Purchaser by any Seller or any of
such Seller's representatives for use in such registration statement, or
resulted from acts or omissions of any Seller not previously disclosed to
Purchaser.
(h) In connection with any registration
statement which includes Seller Common Stock, Sellers will indemnify and hold
Purchaser, its officers and its directors and any controlling persons of
Purchaser harmless against and in respect of any losses, claims, damages or
liabilities, joint or several (including legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action) to which Purchaser or any such persons
may become subject under the Act or otherwise insofar as such losses, claims,
damages or liabilities (or actions with respect thereto) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that any such untrue statement or omission is based upon
information furnished in writing to Purchaser by any Seller or any of Sellers
representatives for inclusion in such registration statement, or resulted from
acts or omissions of any Seller not previously disclosed to Purchaser.
(i) (i) If the managing underwriters advise
Purchaser, with respect to any registration that Sellers have requested include
Seller Common Stock, that in their opinion the number of securities to be
included in such registration exceeds the number which can be sold in such
offering, Purchaser will include in such registration (i) first, the securities
Purchaser proposes to sell, (ii) second, the securities requested to be included
therein by the holders, if any, requesting such registration pursuant to a
demand registration right, and (iii) third, the securities requested or proposed
to be included by those holders requesting such registration pursuant to rights
similar to Sellers (i.e., piggyback registration rights), pro rata among such
persons and holders. Each Seller acknowledges and consents to the foregoing.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Sellers hereby represent and warrant to Purchaser, jointly and
severally (as of January 1, 1996 and as of the date of execution and delivery of
this Agreement), which representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah with full power and authority to own or lease its
properties and assets as presently owned or leased and to conduct its businesses
as presently conducted. The Corporation is in good standing and duly qualified
to do business in each other jurisdiction in which the ownership, leasing or
operation of the Assets or the conduct of the Business requires such
qualification.
4.2 AUTHORITY. Each Seller has full power and authority to
execute and deliver this Agreement and the other agreements and instruments to
be executed and delivered by him pursuant hereto and to consummate the
transactions contemplated hereby and thereby. This Agreement, the Stockholder
Release and the Restrictive Covenant constitute legal, valid and binding
obligations of each Seller enforceable against such Seller in accordance with
their respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors as well as general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity). The execution and delivery by each Seller of this
Agreement and such other agreements and the consummation by each Seller of the
transactions contemplated hereby and thereby will not violate, or conflict with,
result in any breach of, constitute a default (or an event which with notice or
lapse of time or both would become a default) under, permit the cancellation of,
or result in the creation of a Lien on the Stock, the Business or any of the
Assets pursuant to, the Articles of Incorporation or By-laws of the Corporation,
or any indenture, mortgage, deed of trust, lease, Contract or other agreement,
or instrument, judgment, order, decree, law, ordinance, rule or regulation, to
which any Seller or the Corporation is a party or by which any Seller or the
Corporation or the Stock or the Business or the Assets is or are bound or
affected, or the terms of any License held by the Corporation. No approval,
authorization, consent or other order or action of or filing with any court,
administrative agency or other governmental authority or any other person is
required or desirable to obtain for or in connection with the execution and
delivery by
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any Seller of this Agreement or such other agreements and instruments or the
consummation by any Seller of the transactions contemplated hereby or thereby.
4.3 NO SUBSIDIARIES. The Corporation does not own stock or
have any other equity interest in, and does not control, directly or indirectly,
any corporation, association, partnership, joint venture or other entity or
person. The Corporation is not a party to any joint venture or partnership
agreement.
4.4 FINANCIAL STATEMENTS. The Historical Financial Statements,
and the Balance Sheet, a true, correct and complete copy of which is attached as
Schedule 4.4 hereto, (a) were prepared in accordance with the books of account
and records of the Corporation, (b) present fairly in all material respects the
financial position and results of operations of the Corporation as of the dates
and for the periods indicated therein, and (c) make full and adequate disclosure
of, and provision for, all Liabilities of the Corporation as of the dates
thereof. The Corporation does not and will not have any Liabilities, except such
Liabilities which are accrued or reserved against in the Balance Sheet or are
otherwise specifically disclosed in this Agreement. Other than the two
automobile financing agreements and the automobile lease described in Section
4.11, the Corporation has no Indebtedness.
4.5 LEASEHOLDS. Other than the Lease and the Sub-Lease
Agreement described in Section 4.11, the Corporation is party to no lease, as
landlord or tenant, for real property, and uses no real property in the Business
or otherwise other than the property subject to the Lease. A true, complete and
correct copy of the Lease (and such Sub-Lease Agreement) and any other documents
relating to the Lease have been delivered to Purchaser.
4.6 PERSONAL PROPERTY AND TITLE TO PROPERTY.
(a) All Tangible Personal Property owned, leased
or used by the Corporation is in good working and operating condition and fit
for operation in the usual course of business, ordinary wear and tear excepted,
and all such Tangible Personal Property (other than the three automobiles owned
or leased by the Corporation) is located on the real property covered by the
Lease.
(b) (i) The Corporation has good and
marketable title to all of the Assets, and a good and valid leasehold interest
in all property leased by the Corporation, free and clear of all Liens, other
than the Liens on the three automobiles owned or leased by the Corporation.
(ii) All of the Tangible Personal
Property owned or leased by the Corporation is being used and operated in
conformity with all applicable laws, statutes, codes, regulations
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and ordinances. The Assets are, in the aggregate, sufficient in all material
respects to continue operating the Business as has been heretofore conducted and
as currently being conducted.
4.7 INTELLECTUAL PROPERTY RIGHTS. The Corporation does not
own, and has never owned, or licensed or obtained the right to use, any Patents.
The Corporation has used no Trademark or Trade Name in connection with the
Business other than the name "Programming Plus," and the Corporation validly
owns, beneficially and of record, and holds the entire right, title and interest
in and to, all of the Intellectual Property Rights (including, without
limitation, the Know-how) used in the Business, free and clear of any Lien. The
operation of the Business by the Corporation does not infringe any patent, trade
secret, trademark, intellectual property rights or any other rights of any
nature whatever of others. No action, suit, arbitration, or legal,
administrative or other proceeding, or governmental investigation is pending,
or, to the best of Seller's knowledge, threatened, nor has any claim been
asserted or threatened, which involves any Intellectual Property Rights of or
used by the Corporation nor does any state of facts exist under which any such
action, suit, arbitration, proceeding or investigation might be based. The
Corporation is not subject to any judgment, order, writ, injunction or decree of
any court or any federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitrator, nor has the Corporation entered into nor is it a party to any
Contract, which restricts or impairs the use of any such Intellectual Property
Rights.
4.8 LITIGATION. There is no claim, legal action, counterclaim,
suit, arbitration, governmental investigation or other legal, administrative or
tax proceeding, or any order, decree, judgment, settlement agreement or order,
in effect, in progress or pending, or to the knowledge of any Seller,
threatened, against or relating to any Seller, the Corporation, the Stock, the
Business or the Assets, nor does any Seller know or have reason to be aware of
any basis for the same. There is outstanding no order, writ, injunction,
judgment or decree of any court, governmental agency or arbitration tribunal or
any settlement agreement or arrangement of any kind against, with, binding upon
or involving any Seller, the Stock, the Corporation, the Business or any of the
Assets.
4.9 COMPLIANCE WITH LAWS. The Corporation has complied and is
currently in compliance in all material respects with all laws, ordinances,
regulations, licensing requirements, rules, decrees, awards and orders
applicable to it, the Business or the Assets, the violation of which, either
individually or in the aggregate, would have a material adverse effect on the
Corporation, the Business or the Assets, including, without limitation, any
thereof relating to wages, hours, hiring, promotions, retirement,
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working conditions, use and occupancy of the buildings and improvements, air or
water pollution, disposal of wastes or hazardous or toxic substances, other
environmental matters, nondiscrimination, health, safety, pensions, employee
benefits, the production, marketing, sale and distribution of products, labeling
of products, trade regulation, antitrust and warranties.
4.10 ENTIRE BUSINESS. Each Seller has the complete and
unrestricted power and the unqualified right to sell, transfer, convey, assign
and deliver the Stock owned by him to Purchaser free and clear of any Liens. The
sale of the Stock by Sellers to Purchaser pursuant to this Agreement will
effectively convey to Purchaser unrestricted, unencumbered, 100% beneficial
ownership of the Corporation and of the entire Business. The assets, properties
and rights which will be owned or possessed by the Corporation constitute all
of the tangible and intangible property used by the Corporation (whether owned
by it or by any of its Affiliates or any Seller) in connection with the conduct
of the Business as now conducted.
4.11 CONTRACTS.
(a) Schedule 4.11 contains a true and complete
list of all Contracts currently in force to which the Corporation is a party and
which in any way relate to the operations or properties of the Corporation or
which are or will be binding upon the Corporation, the Business or the Assets,
including all Contracts with customers of the Corporation (other than purchase
orders).
(b) The Corporation has in all material respects
performed all obligations required to be performed by it under all Contracts
(including, without limitation, the Megahertz Agreement); neither the
Corporation nor, to the best of any Seller's knowledge, any other party to a
Contract with the Corporation (including, without limitation, Megahertz) is in
material default under any such Contract, and no event exists which with the
giving of notice or the passage of time, or both, would create such a default;
and no Seller knows of any meritorious basis for any claim of any such default.
(c) Each of the Contracts (including, without
limitation, the Megahertz Agreement) has been lawfully entered into and is valid
and in full force and effect and is enforceable in accordance with its terms for
the period stated in such Contract. Except as previously disclosed to Purchaser
in writing, there are no currently threatened cancellations of, nor are there
any outstanding disputes under, any Contracts (including, without limitation,
the Megahertz Agreement). The term of the Megahertz Agreement has been extended
to December 31, 1996. Except as previously disclosed to Purchaser in writing, no
Seller has received any notice, or has any basis to believe, that Megahertz
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will cease doing business with the Corporation or reduce the volume of business
presently conducted with the Corporation or in any manner change the nature of
such business or profitability to the Corporation of such business.
(d) Except as specifically described in Schedule
4.11, the consummation of the transactions contemplated by this Agreement does
not require any consent under any Contract (including, without limitation, the
Megahertz Agreement), and such consummation will not result in the termination
of any right or privilege under any Contract (including, without limitation, the
Megahertz Agreement). Except as previously disclosed to Purchaser in writing,
neither any Seller nor the Corporation has received notice that any party to any
Contract (including, without limitation, the Megahertz Agreement) intends to
cancel such Contract nor has any party given any Seller or the Corporation
notice of any alleged breach of any Contract (including, without limitation, the
Megahertz Agreement) or of its intent to take any legal action in order to
enforce its rights thereunder. All liabilities and obligations of the
Corporation which are due and payable or which are to be performed on or before
the date of execution and delivery of this Agreement under such Contracts have
been duly paid in full or performed in all material respects (including, without
limitation, the Megahertz Agreement).
4.12 RECEIVABLES. All of the Corporation's Receivables arose
from valid sales and bona fide transactions in the ordinary course of business
of the Corporation, subject to no defense, offset, allowance or credit, and
there exist no disputes with regard to any Receivables.
4.13 CERTAIN TRANSACTIONS. Since (but not including) December
31, 1995, the Corporation has conducted its business only in the ordinary course
consistent with past practices and has not (1) paid, or made any accrual or
arrangement for the payment of, bonuses or special compensation of any kind or
any severance or termination pay to any Employee (other than a contemplated
severance payment of $1,500 to LuAnn Culligan upon termination of her
employment, which is scheduled to occur within a short time following execution
and delivery of this Agreement); (2) made any general wage or salary increases
to its Employees or increased or altered in any material respect any other
benefits or insurance provided to or maintained on behalf of any Employee by it
or declared or paid any bonus to any Employee (except as set forth in Schedule
4.14); (3) mortgaged, pledged or subjected to Lien or any other restriction any
of the Assets; (4) sold, assigned or transferred or agreed to sell, assign or
transfer any of the Assets, other than in the ordinary course of business
consistent with past practice or as expressly permitted pursuant to this
Agreement; (5) granted any rights or licenses relating to any Intellectual
Property Rights or entered into any licensing, agency,
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distributorship, requirements, output or similar arrangements; (6) canceled or
agreed to cancel any debts or claims; (7) waived or agreed to waive any material
rights; (8) made or permitted any amendment or termination of any Contracts
other than the extension of the term of the Megahertz Agreement; (9) effected
any change in the accounting methods and principles used in connection with its
books, records and financial statements; (10) suffered any damage, destruction,
deterioration, impairment or loss to any Assets or the Business, whether or not
covered by insurance, or suffered any event or condition of any character,
which, individually or in the aggregate, might reasonably be expected to have a
material adverse effect on the Corporation, the Business or the financial
condition or prospects of the Corporation or the Business; (11) suffered any
adverse change in its financial condition or operations; (12) incurred, assumed
or guaranteed, or paid, discharged or satisfied, any obligations or Liabilities,
except in the ordinary course of business consistent with past practice; (13)
suffered any default under, or suffered any event which with notice or lapse of
time or both would constitute a default under, any Contract, debt instrument or
other agreement to which the Corporation is a party or by which it, the Business
or any of the Assets is bound; (14) terminated or amended, or suffered a
termination or amendment of, any material Contract, agreement, lease or License;
or (15) made or paid any distributions, dividends, salary, benefits or payments
to any of its shareholders other than automobile benefits to Sellers.
4.14 EMPLOYEES.
(a) Schedule 4.14 contains a list setting forth
the name and current annual salary and other compensation (of any kind) payable
by the Corporation to each current Employee, and the profit sharing, bonus or
other form of additional compensation paid or payable by the Corporation to or
for the benefit of each such person for the current fiscal year. There are no
oral or written contracts, agreements or arrangements obligating the Corporation
to increase the compensation or benefits presently being paid or hereafter
payable to any of its Employees or other persons or, except as set forth in
Schedule 4.14, to pay any bonus. To the best of each Seller's knowledge, there
is not any liability or basis for liability of the Corporation arising out of
claims made or suits brought or which could be made or brought (including,
without limitation, workers' compensation claims and claims or suits for
contribution to, or indemnification of, third parties, occupational health and
safety, COBRA, ERISA, environmental, consumer protection or equal employment
matters) for injury, sickness, disease, discrimination, death or termination of
employment of any Employee or other employment matter.
(b) Neither the Corporation nor any Affiliate of
the Corporation is party to any collective bargaining agreements,
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written or oral, which covers any Employees or which is binding upon the
Corporation.
(c) The Corporation has not engaged in any
unfair labor practice or discriminatory practice on the basis of race, age,
gender, disability or otherwise in its employment conditions or practices with
respect to Employees.
4.15 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule
4.14, there is no plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits of any kind, whether formal or informal, proposed or final, funded or
unfunded and whether or not legally binding, including, without limitation, any
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Employee Plan")
which is now, or ever has been, maintained, contributed to, or required to be
contributed to, for the benefit of any Employee, nor is there now or has there
been any management, employment, severance or consulting agreement or contract
between the Corporation and any Employee.
4.16 LICENSES AND PERMITS. The Corporation has all Licenses
required for the operation of the Business and the use of its assets and
properties as presently operated or used by it. All Licenses held by the
Corporation are valid and in full force and effect and no proceedings which
could result in the termination or impairment of any such License are pending,
or, to the best of any Seller's knowledge, threatened. The Corporation is not in
violation of, nor has it or any Seller received any notice of any violation of,
nor to any Seller's knowledge, does any state of facts exist which could lead to
a penalty in respect of or termination of, any License the failure of which to
maintain could have a material adverse effect on the Corporation, the Business
or the Assets. The consummation of this Agreement will not result in or create
the loss or impairment of, or a reduction of the benefits or privileges
conferred by, or an obligation to make payments of any kind to maintain, any
License.
4.17 TRANSACTIONS WITH AFFILIATES. Except as specifically
provided for in this Agreement, the Corporation has not purchased, acquired or
leased any property or services from, or sold, transferred or leased any
property or services to, or loaned or advanced any money to, or borrowed any
money from, or guaranteed or otherwise become liable for any indebtedness or
other obligations of, or acquired any capital stock, obligations or securities
of, or made any management, consulting or similar fee arrangement with, any
Affiliate, or any officer, director or Employee, of the Corporation or any
Affiliate of any thereof, nor is the Corporation party to any agreement oral or
written with
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respect to any of the foregoing, with respect to which the Corporation has any
Liabilities.
4.18 TRUTHFULNESS. No statement, representation or warranty of
Sellers in this Agreement (including the Exhibits and Schedules hereto) or in
any written document or certificate delivered by or on behalf of any Seller in
connection with the transactions contemplated hereby (or during the negotiation
or development of such transactions) contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
materially misleading.
4.19 PAYMENTS. Neither the Corporation nor any director,
officer or Employee thereof, nor, to the knowledge of any Seller, any other
person (including, without limitation, any representative of, or broker for, the
Corporation acting on behalf of the Corporation), has ever, directly or
indirectly, on behalf of or with respect to the Corporation, had any
transactions or payments which are not recorded in the Corporation's books and
records or disclosed in its financial statements, or had any off-book bank or
cash accounts or "slush funds".
4.20 INSURANCE. Schedule 4.20 contains a complete list of
all insurance policies or binders insuring the property, assets or business
liabilities of the Corporation and with respect to the Business, true and
complete copies of which have been made available to Purchaser. All properties
and assets of the Corporation are insured by reputable insurance companies
against loss or damage by fire and other risks to the extent and in the manner
customary for companies engaged in similar businesses and no other insurance is
necessary to the conduct of the Business. The Corporation is in compliance with
the terms of all policies and instruments of insurance it owns and coverage
thereunder will not be affected by the transactions contemplated hereby. With
respect to the Business, there are no pending or asserted material claims
against such insurance by the Corporation as to which the insurers have denied
liability. Schedule 4.20 sets forth each claim (if any) made against said
insurance for the preceding two years (both insured and self-insured).
4.21 ENVIRONMENTAL MATTERS. There has been no manufacture,
refining, storage, disposal or treatment of Hazardous Substances (as hereinafter
defined) by any Seller or the Corporation or any other person at any real
property currently or in the past owned, operated, used, leased or contracted
for by any Seller or the Corporation or otherwise in violation of any
Environmental Laws (as hereinafter defined) or which would require remedial
action under any Environmental Law. During the past five years neither any
Seller nor the Corporation has received any (A) notice of any such violation
with respect to any Hazardous
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Substance at or by any of such real property, (B) notice from any governmental
agency that it or he, or any present or former owner, lessee or operator of such
real property is a potentially responsible party for cleanup liability with
respect to the emission, discharge or release of any Hazardous Substance or for
any other matter arising under the Environmental Laws or in any litigation,
administrative proceeding, finding, order, citation, notice, investigation or
complaint under any Environmental Law, or (C) notice of violation, citation,
complaint, request for information, order, directive, compliance schedule,
notice of claim, proceeding or litigation from any party concerning any Seller's
or the Corporation's compliance with any Environmental Law. There are no
incinerators, septic tanks or cesspools located on any such real property, all
sewage is discharged into a public sanitary sewer system and no Hazardous
Substances are emitted, discharged or released, directly or indirectly, by any
Seller or the Corporation into the atmosphere or any body of water. No permits,
licenses or other authorizations issued pursuant to the Environmental Laws are
required for any Seller's or the Corporation's ownership, use or occupancy of,
or any Seller's or the Corporation's present ownership, use or occupancy of, any
such real property. As used herein "Environmental Laws" means the Resource
Conservation Recovery Act, the Comprehensive Environmental Responsibility
Compensation and Liability Act, the Superfund Amendments and Reauthorization
Act, the Toxic Substances Control Act, the Hazardous Materials Transportation
Act, the Clean Air Act, the Clean Water Act, and other similar Federal, state
and local laws, as amended, together with all regulations issued or promulgated
thereunder, relating to pollution, the protection of the environment or the
health and safety of workers or the general public. As used herein "Hazardous
Substance" means any hazardous substance, hazardous or toxic waste, hazardous
material, pollutant or contaminant, as those or similar terms are used in the
Environmental Laws, including, without limitation, asbestos and asbestos-related
products, chlorofluorocarbons, oils or petroleum-derived compounds,
polychlorinated biphenyls, pesticides and radon.
4.22 TAX MATTERS. The Corporation has timely filed all
federal, state and local Tax returns and all information returns and reports
required to be filed by or with respect to it under the laws of the United
States or any state or other jurisdiction for all periods ending on or prior to
the date of execution and delivery of this Agreement. True and complete copies
of such reports and returns filed within three years prior to the date hereof
have been delivered to Purchaser. All such reports and returns were accurately
prepared in accordance with all applicable statutes, rules and regulations and
are correct as filed. The Corporation has paid all Taxes (including, without
limitation, Taxes for which the Corporation is a collection agent - e.g.,
withholding, excise, sales, use, Social Security and similar Taxes), which have
become due and payable on or prior to the date
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of execution and delivery of this Agreement. The Corporation has never been
included in a consolidated federal income tax return or combined or unitary
state tax return. The Corporation is not a party to nor has it been notified
that it is the subject of any pending, proposed or threatened action,
investigation, proceeding, audit, claim or assessment by or before the Internal
Revenue Service or any other governmental authority and no claim for assessment,
deficiency or collection of Taxes, or proposed assessment, deficiency or
collection, for which the Corporation may be liable, has been asserted or
threatened against it. The Corporation has received no notice of deficiency,
assessment or collection or proposed deficiency, assessment or collection from
the Internal Revenue Service or any other governmental authority which has not
been satisfied, nor does any Seller or the Corporation have any reason to
believe that any such notice will be received in the future. Neither the
Internal Revenue Service nor any state taxing authority has ever audited any Tax
return of the Corporation. There are no material unpaid assessments or proposals
for additional Taxes for which the Corporation does not have adequate reserves,
nor does any Seller know of any basis therefor for any such period. There are no
Tax rulings, requests for rulings or closing agreements relating to the
Corporation which could affect its liability for Taxes for any period. No power
of attorney has been granted by the Corporation or any of its Affiliates or any
Seller with respect to any matter relating to Taxes of the Corporation which is
currently in force. The Corporation has not executed or filed with the Internal
Revenue Service or any other governmental authority any agreement which is still
in effect waiving or extending the period for assessment or collection of any
Taxes.
4.23 NO SALE. Seller has not entered into any contract to
sell, mortgage, pledge or encumber any of the Stock other than this Agreement.
The Corporation has not entered into any contract to sell, mortgage, pledge or
encumber any of its Assets.
4.24 PURCHASE COMMITMENTS. No purchase commitment of or
by which the Corporation is bound is in excess of the normal, ordinary and usual
requirements of the Business or at an excessive price.
4.25 CERTAIN REPORTS. The Corporation has filed all reports,
applications, documents, instruments and information required to be filed by it
pursuant to applicable rules and regulations or requests of every regulatory
body or other governmental authority having jurisdiction over the Corporation,
the Business or the use of the Assets, except where the failure so to file could
not have a material adverse effect on the Corporation, the Business or the
Assets.
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4.26 CERTAIN PAYMENTS TO KEY EMPLOYEES. Except as specifically
set forth in Schedule 4.14, no amount, benefit, fringe benefit, dividend,
distribution, loan, loan repayment, salary, consulting fee, other fee, bonus or
other payment or benefit has been paid or provided to any stockholder (i.e., any
Seller) or any spouse, Affiliate or relative of any Seller by or on behalf of
the Corporation since (but not including) December 31, 1995.
4.27 BANK AND SECURITIES ACCOUNTS. Schedule 4.27 contains a
true and complete list of the names and addresses of (i) all bank, investment
and securities accounts of the Corporation, together with the names of all
persons authorized to draw thereon or withdraw therefrom, and (ii) all persons
to whom powers of attorney have been granted by the Corporation. The cash and
securities held in such accounts are not subject to restrictions or limitations
as to withdrawals, margin balances or compensating balances. Schedule 4.27 also
includes all accounts, deposits or safe deposit boxes and the names of all
persons authorized to draw on such accounts or deposits or to have access to
such safe deposit boxes. The books of account of the Corporation show all checks
and drafts outstanding, and there are sufficient funds in the bank accounts
listed on Schedule 4.27 to pay any and all checks or drafts presented, or
outstanding, but not yet presented on said accounts.
4.28 STATUS OF STOCK. The Stock is subject to no restrictions
on transferability (other than any restrictions on resales or distributions by
Purchaser under applicable federal and state securities laws). There are no
outstanding options, warrants, calls, preemptive rights, rights of first
refusal, or other rights to purchase or acquire from any Seller, or the
Corporation, or any plans, contracts or commitments providing for the issuance
of, or the granting of rights to any Seller or any other person to acquire: (i)
any capital stock of the Corporation or (ii) any securities convertible into or
exchangeable for any capital stock of the Corporation. Neither any Seller nor
any other person or the Corporation, is contractually or otherwise obligated or
entitled to repurchase or otherwise acquire any outstanding shares of capital
stock of the Corporation.
4.29 TITLE TO THE STOCK. Each Seller owns and holds title to
the Stock set forth in this Agreement as owned by him free and clear of any Lien
of any kind. Purchaser is acquiring title to the Stock free and clear of any
Lien of any kind.
4.30 CHARTER DOCUMENTS AND CORPORATE RECORDS.
(a) Seller has heretofore delivered to Purchaser
true and complete copies of the Articles of Incorporation and Bylaws of the
Corporation as in effect on the date hereof. True and
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complete copies of the corporate minute, stock and transfer books of the
Corporation have been delivered to Purchaser.
(b) All financial, business and accounting
books, ledgers, accounts and official and other records relating to the
Corporation have been properly and accurately kept and completed in all material
respects, and there are no material inaccuracies or discrepancies contained or
reflected therein. The Corporation does not have any records, systems,
Contracts, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
Corporation's exclusive ownership and direct control.
4.31 CAPITALIZATION. The authorized capital stock of the
Corporation consists of 10,000 shares of common stock, having no par value.
There are 6,000 shares of Corporation common stock issued and outstanding, 2,000
of which are owned by each of Culligan, Bowen and Harrington. All outstanding
shares of capital stock of the Corporation are duly authorized and validly
issued, are fully paid and nonassessable and were not issued in violation of any
preemptive right, right of first refusal or any other contractual or legal
restriction of any kind. There are no outstanding (i) securities of the
Corporation convertible into or exchangeable for shares of capital stock or
voting securities of the Corporation or (ii) options, warrants, calls,
preemptive rights, rights of first refusal or other rights to acquire from the
Corporation, or obligations of the Corporation to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Corporation. There are no outstanding
obligations of the Corporation to repurchase, redeem or otherwise acquire any
securities of the Corporation.
4.32 REPRESENTATIONS AND WARRANTIES RELATING TO SALE
OF ALL AMERICAN SHARES AND SECURITIES LAWS.
(a) Each Seller and his representatives and
agents (i) have received and read and are familiar with this Agreement
including, without limitation, the exhibits attached hereto, and are familiar
with the current and contemplated businesses and operations of the Corporation
and Purchaser, (ii) have been given access to and have examined or have had an
opportunity to examine before the date hereof all documents filed with the
Securities and Exchange Commission ("SEC") relating to Purchaser and all
agreements, documents, instruments, litigation papers, records and books and
such other information as are relevant to this transaction, Purchaser and
Purchaser's current and contemplated businesses and operations and to enable him
to verify the accuracy
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of any information, documents, records or books provided or made available to
him or his representatives or agents and to evaluate the merits and risks of his
investment and any potential investment in Purchaser.
(b) Each Seller understands that no assurances,
representations or warranties of any kind relating to the anticipated profits or
losses or cash flow of Purchaser or the profits, losses, capital gain, dividends
or distributions that are to be realized, if any, by such Seller as a result of
this transaction or the investment in Purchaser or when (if at all) his
investment or any future investment in Purchaser will be recovered have been
made to such Seller or his representatives or agents by Purchaser or any of
Purchaser's employees, officers, directors, shareholders, affiliates,
accountants, attorneys or any of them; it being specifically understood and
agreed that it is not contemplated that any cash dividends will be paid or
distributed by Purchaser over the next several years, if ever, since profits
will be reinvested and used in Purchaser's business.
(c) With respect to the tax aspects of this
transaction, each Seller is relying solely upon the advice of his own tax
advisors and upon his knowledge with respect thereto, and no representations,
warranties or assurances of any kind are being made to Sellers that the
transactions set forth herein will qualify as a tax-free reorganization under
the Code.
(d) Each Seller and/or his representatives and
agents have had an opportunity to ask questions of, and receive answers from,
Purchaser and/or a person or persons authorized to act on Purchaser's behalf,
concerning Purchaser's current businesses and operations and future prospects
and businesses, and all such questions have been answered to the full
satisfaction of such Seller and his agents and representatives, if any.
(e) Each Seller is receiving All American Shares
issued as Purchase Price for investment purposes only and not with a view to the
sale or other distribution of such All American Shares, in whole or in part, or
directly or indirectly.
(f) Each Seller understands that such All
American Shares issued to him pursuant hereto have not been registered under the
Act, or registered or qualified under the securities laws of any state
(including the State of Utah), and are being issued to him in reliance on
exemptions therefrom for non-public limited offerings, and further understands
that such All American Shares have not been approved or disapproved by the SEC,
any state securities administrator or any other federal or state agency.
(g) Each Seller has adequate means of providing
for his current needs and possible personal contingencies and he has no
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need and anticipates no need in the foreseeable future for liquidity of any All
American Shares received by him hereunder, and is able to bear the economic risk
of such investment in Purchaser and, consequently, without limiting the
generality of the foregoing, he is able to hold such investment for an
indefinite period of time and has sufficient net worth to sustain a loss of his
entire investment in Purchaser should such loss occur.
(h) Each Seller understands that such investment
in Purchaser involves a high degree of risk which could result in the loss of
his entire investment in Purchaser or a large portion thereof.
(i) Each Seller understands that (i) there are
substantial restrictions under federal and state securities laws on the
transferability of the All American Shares being acquired by him, all of which
may not be sold unless such sale is registered under, or exempt from
registration under, the Act and applicable state securities laws, (ii) Purchaser
has no present intention or plan to register any of such All American Shares or
any sale thereof under the Act or state securities laws, (iii) he has no right
to require any such registration and (iv) he may not be able to liquidate his
investment in Purchaser for an indefinite period of time.
(j) Each Seller has sufficient knowledge and
experience in financial and business matters to evaluate the merits and risks of
the investment in Purchaser set forth herein and to make an informed decision
with respect thereto without the services of a purchaser representative.
(k) Each Seller is at least twenty-one (21)
years of age and a citizen of the United States and such Seller's principal
residence and domicile on the date hereof is located in the State of Utah, and
such Seller has no present intention of locating such principal residence or
domicile outside such State.
(l) Each Seller understands that a restrictive
legend shall be placed on all certificates evidencing All American Shares issued
to him under or pursuant to this Agreement and acknowledges and agrees that
appropriate "stop transfer" orders will be placed with Purchaser's stock
transfer agent in respect of all certificates issued to such Seller pursuant to
this Agreement; provided, however, the foregoing shall not interfere with any
Seller's ability to sell All American Shares received hereunder in compliance
with Rule 144 promulgated under the Act.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers, which
representations and warranties shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, as
follows:
5.1 ORGANIZATION; AUTHORITY. Purchaser is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware. Purchaser has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by Purchaser, constitutes the valid and
binding agreement of Purchaser and is enforceable against Purchaser in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors as well as general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
5.2 CONFLICTING INSTRUMENTS; CONSENTS.
(a) The execution and delivery by Purchaser of
this Agreement does not, and the performance by Purchaser of its obligations
hereunder and the consummation of the transactions contemplated hereby will not:
(i) violate any provision of the charter documents or the bylaws of Purchaser;
or (ii) result in the creation of any lien, security interest, charge, claim or
encumbrance upon the All American Shares issued to Sellers (other than in
connection with this Agreement).
(b) The execution and delivery by Purchaser of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, result in a violation of, or require any authorization,
approval, consent or other action by, or registration, declaration or filing
with or notice to, any court or administrative or governmental body pursuant to,
any statute, law, rule, regulation or ordinance applicable to Purchaser.
5.3 LITIGATION. There is no action, suit, claim, proceeding,
inquiry or investigation pending or threatened, at law or in equity, or before
or by any arbitrator or any federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, relating to or involving, or affecting, the transaction contemplated by
this Agreement.
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5.4 CAPITAL STOCK.
(a) The authorized share capital of Purchaser is
set forth in the Purchaser's annual report for the financial year ended December
31, 1995 previously delivered to Sellers.
(b) The All American Shares issuable in
connection with this Agreement have been duly and validly authorized by
Purchaser and, when issued in exchange for the Stock in accordance with the
terms hereof, will be validly issued, and, subject to and except as otherwise
provided in the provisions of Section 2.3, fully paid up and free from any
Liens. The All American Shares issued to Sellers, upon issuance, will be free of
preemptive or similar rights. The All American Shares issued to Sellers will,
subject to the provisions of Section 3.9, entitle Sellers to the same voting
rights in Purchaser as all other shareholders of shares of the same class of
stock of Purchaser are entitled.
5.5 SECURITIES REPORTS AND FINANCIAL STATEMENTS. Purchaser has
provided to Sellers, prior to the execution of this Agreement, a true and
complete copy of its Annual Report on Form 10-K for Purchaser's 1995 fiscal
year, and its registration proxy statement on Form S-4 filed in the fourth
fiscal quarter of 1995 (together with all amendments thereof and supplements
thereto) filed by Purchaser with the SEC (as such documents have since the time
of their filing been amended or supplemented, the "SEC Reports").
5.6 CURRENT INFORMATION. For so long as Sellers shall hold any
All American Shares acquired pursuant to this Agreement, Sellers shall file with
the SEC and the NASDAQ or other exchange upon which the All American Shares are
then traded, all reports and documents required to be filed by Purchaser to meet
the "current public information requirements" under paragraph (c) of Rule 144
promulgated under the Act.
5.7 TRUTHFULNESS. No statement, representation or warranty of
Purchaser in this Agreement (including the Exhibits and Schedules hereto) or in
any written document or certificate delivered by or on behalf of any Purchaser
in connection with the transactions contemplated hereby (or during the
negotiation or development of such transactions) (including the SEC Reports)
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not materially misleading.
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ARTICLE 6
MISCELLANEOUS
6.1 BROKERS. Sellers represent and warrant to Purchaser, and
Purchaser represents and warrants to Sellers, that neither they or it, nor any
party acting on their or its behalf, has incurred any liability, either express
or implied, to any "broker", "finder", financial adviser, Employee, or similar
person in respect of any of the transactions contemplated hereby.
6.2 EXPENSES. Each party will pay its or his own expenses
incident to this Agreement and the transactions contemplated hereby, including
legal and accounting fees and disbursements, provided that the Corporation may
pay its legal fees and disbursements in connection with this transaction in an
amount not to exceed $23,500.
6.3 AMENDMENTS AND WAIVERS. The parties hereto may, by written
agreement signed by the parties, modify any of the covenants or agreements or
extend the time for the performance of any of the obligations contained in this
Agreement or in any document delivered pursuant to this Agreement. Any party
hereto may waive, by written instrument signed by such party, any inaccuracies
in the representations and warranties of another party or compliance by another
party with any of its obligations contained in this Agreement or in any
document delivered pursuant to this Agreement. This Agreement may be amended
only by written instrument signed by the parties hereto.
6.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assignees. An assignment by any party of its rights or
delegation of its duties hereunder shall not release or relieve the assignor
from any of its or his obligations under this Agreement. In no event may any
Seller delegate any of his consulting duties under this Agreement. Nothing
herein expressed or implied is intended to confer upon any person (including,
without limitation, any Employees), other than the parties hereto and their
respective successors and permitted assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
6.5 NOTICES. Any notice, request or other document to be given
hereunder to a party hereto shall be in writing and delivered in person or sent
by registered or certified mail, postage prepaid, return receipt requested, or
by facsimile or telex, or an overnight air courier service, as follows:
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If to Purchaser, addressed to it at:
All American Semiconductor, Inc.
16115 Northwest 52nd Avenue
Miami, Florida 33014
Attention: Bruce M. Goldberg, President
Telecopier No.: (305) 624-5258
With a copy to:
Marc J. Stone, Esq.
Rubin Baum Levin Constant Friedman & Bilzin
2500 First Union Financial Center
Miami, Florida 33131
Telecopier No.: (305) 374-7593
If to Sellers, addressed to them at:
Steven Culligan, Alan Bowen and Robert Harrington
942 East 7145 South, Suite A-101
Midvale, Utah 84047
Telecopier No.: (801) 565-9983
With a copy to:
Bruce N. Lemons, Esq.
Holland & Hart, LLP
215 South State Street, Suite 500
Salt Lake City, Utah 84111
Telecopier No.: (801) 364-9124
All such notices, requests and other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; when answered back, if telexed; when receipt
confirmed, if sent by facsimile; and the next business day after timely delivery
to the courier, if sent by an overnight air courier service guaranteeing next
day delivery. Any party hereto may change its address for receiving notices,
requests and other documents by giving written notice of such change to the
other parties hereto.
6.6 GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
If any Seller wishes to commence an action against Purchaser relating to this
Agreement, such action shall be brought in any court of competent subject matter
jurisdiction sitting in the County of Dade in the City of Miami. If Purchaser
wishes to commence an action against any Seller relating to this Agreement, such
action shall be brought in any court of competent
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jurisdiction sitting in the County of Salt Lake in Salt Lake City, Utah.
6.7 PARTIAL INVALIDITY. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof, except if such holding materially adversely affects
Purchaser or Purchaser's ability to realize the benefits of the proposed
transaction.
6.8 SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
6.10 ENTIRE AGREEMENT. This Agreement, together with the
Schedules and Exhibits and the agreements and instruments delivered pursuant
hereto or thereto, contain the entire Agreement between or among the parties
hereto, and supersede all prior agreements and undertakings between or among the
parties hereto relating to the subject matter hereof and thereof, including,
without limitation, any term sheet, letter of intent or proposal executed or
delivered by or on behalf of any of the parties prior to the date of execution
and delivery of this Agreement.
6.11 SURVIVAL, INDEMNIFICATION AND SET-OFF.
(a) The representations, warranties, covenants
and agreements contained in this Agreement, and in any agreements, certificates
or other instruments delivered pursuant to this Agreement, shall survive the
consummation of the transactions contemplated hereby, and shall remain in full
force and effect, regardless of any investigation made by or on behalf of any
party or of the actual or constructive knowledge by any party of any inaccuracy
or breach thereof, until March 31, 2001.
(b) Purchaser hereby agrees to indemnify and
hold harmless each Seller (individually, a "Seller Indemnified Party") from and
against all claims, losses, damages, liabilities, costs and expenses (including,
without limitation, interest, penalties and reasonable attorneys' fees and
expenses incurred before and at trial or any other proceeding, at all tribunal
levels, and whether or not suit or any other proceeding is instituted, and in
establishing the right to be indemnified hereunder) incurred by a Seller
Indemnified Party, directly or indirectly, by reason of or resulting from (i)
any breach or inaccuracy of any of the representations or warranties of
Purchaser contained in or made pursuant to this Agreement or any Exhibit hereto,
(ii) any breach
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of any of the covenants or agreements of Purchaser contained in or made pursuant
to this Agreement, and/or (iii) any claim by a third party alleging facts,
which, if true, would entitle a Seller Indemnified Party to indemnification
pursuant to this Section 6.11.
(c) Sellers hereby agree, jointly and severally,
to indemnify and hold harmless Purchaser, Purchaser's Affiliates and the
Corporation (individually, a "Purchaser Indemnified Party") from and against all
claims, losses, damages, liabilities, costs and expenses (including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses
incurred before and at trial or any other proceeding, at all tribunal levels,
and whether or not suit or any other proceeding is instituted, and in
establishing the right to be indemnified hereunder) (collectively, "Losses")
incurred directly or indirectly by a Purchaser Indemnified Party by reason of or
resulting from:
(i) any breach or inaccuracy of any of
the representations or warranties of Sellers contained in or made pursuant to
this Agreement or any Schedule or Exhibit hereto;
(ii) any breach of any of the covenants
or agreements of Sellers contained in or made pursuant to this Agreement, the
Stockholder Release or the Restrictive Covenant;
(iii) the existence or occurrence from
time to time of any Retained Liabilities;
(iv) all Liabilities and claims under
any Contract not listed in Schedule 4.11 (which shall constitute Retained
Liabilities); and/or
(v) any claim made by a third party
alleging facts, which, if true, would entitle a Purchaser Indemnified Party to
indemnification pursuant to this Section 6.11.
(d) Purchaser is hereby authorized by Sellers,
at any time and/or from time to time, to set off against and deduct from the
Purchase Price (as a credit thereto) and/or any other amounts or benefits owed
to Sellers under this Agreement or otherwise the amount of any Losses reasonably
believed suffered by any Purchaser Indemnified Party and, without duplication,
the amount of any Retained Liabilities which Purchaser reasonably believes,
after consultation with Sellers, exist (collectively, "Set-Off Losses"). To
exercise such right of set-off, Purchaser shall notify Sellers in writing of the
amount of the set-off, together with a reasonably detailed explanation of the
reason therefor, and to which obligation owed to Sellers such amount is to be
applied, and shall consult with Culligan (as the Sellers' representative for
these purposes) regarding same. Purchaser may apply Set-Off Losses to any
obligation, in whole or in part, owed
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by Purchaser to Sellers, as Purchaser from time to time or at any time elects in
its sole and absolute discretion, including cancellation of an appropriate
number of All American Shares constituting the Escrowed Purchase Price.
(e) The remedies provided herein shall be
cumulative and shall not preclude the assertion by any Purchaser Indemnified
Party or Seller Indemnified Party of any other rights or the seeking of any
other remedies against any party hereto, including, with respect to Purchaser's
rights, the right to seek and recover damages or reimbursement and indemnity
with respect to items defined as Set-Off Losses; provided, however, that, except
with respect to (i) intentional or wilful breaches of representations,
warranties or covenants, (ii) breaches of noncompetition, nonsolicitation or
confidentiality covenants under the Restrictive Covenant, and (iii) fraud, the
total liability of Sellers (collectively) to Purchaser, and of Purchaser to
Sellers (collectively), shall not exceed the sum of $1,525,000.
6.12 DISPUTES. In the event of a dispute hereunder or relating
to the transactions contemplated hereby, the prevailing party in such dispute
shall be entitled to recover from the other party all of its costs and expenses
incurred in connection with the enforcement of its rights hereunder, including
reasonable attorneys' fees and costs incurred before and at trial or any other
proceeding, at all tribunal levels, and whether or not suit or any other
proceeding is brought.
6.13 GENDER. With respect to the language of this Agreement,
the use of the masculine gender shall include the feminine and neuter, and the
use of the neuter shall include the masculine, in each case, as the context
reasonably requires.
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
PURCHASER:
ALL AMERICAN SEMICONDUCTOR, INC.
By: /s/ HOWARD FLANDERS
-----------------------------------------
Name: Howard Flanders
Title: VP & CFO
SELLERS:
/s/ STEVEN E. CULLIGAN
---------------------------------------------
STEVEN E. CULLIGAN
/s/ ALAN G. BOWEN
---------------------------------------------
ALAN G. BOWEN
/s/ ROBERT HARRINGTON
---------------------------------------------
ROBERT HARRINGTON
38
<PAGE>
EXHIBIT "A"
RESTRICTIVE COVENANT
<PAGE>
RESTRICTIVE COVENANT
RESTRICTIVE COVENANT ("Agreement"), dated as of January 1, 1996, by and
among STEVEN E. CULLIGAN, ALAN G. BOWEN, and ROBERT HARRINGTON (each, a "Seller"
and, collectively, the "Sellers"), in favor of ALL AMERICAN SEMICONDUCTOR, INC.,
a Delaware corporation ("Purchaser"), and PROGRAMMING PLUS INCORPORATED, a Utah
corporation (the "Corporation").
PRELIMINARY STATEMENT
Reference is made to the Stock Purchase Agreement pursuant to which
this Agreement is executed and delivered ("Purchase Agreement") among Purchaser
and Sellers. Capitalized terms used herein, which are not defined herein, shall
have the respective meanings ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the Purchase Price to be received
by each Seller, and in order to induce Purchaser to consummate the transactions
contemplated by the Purchase Agreement, Sellers hereby jointly and severally
make the following covenants and agreements in favor of Purchaser and the
Corporation.
1. CONFIDENTIAL INFORMATION. Each Seller acknowledges that he has been
informed of the policy of Purchaser and the Corporation to maintain as secret
and confidential all information and materials relating to (i) the financial
condition, businesses and interests of the Corporation, (ii) the systems,
Know-how and Records, products, services, costs, inventions, computer software
programs, marketing and sales techniques and/or programs, methods,
methodologies, manuals, lists and other trade secrets heretofore or hereafter
acquired, sold, developed, maintained and/or used by the Corporation and (iii)
the nature and terms of the Corporation's relationships with its customers,
suppliers, lenders, underwriters, vendors, consultants, independent contractors,
attorneys, accountants and employees (all such information and materials being
hereinafter collectively referred to as "Confidential Information"). Each Seller
further acknowledges that such Confidential Information is of great value to
the Corporation and Purchaser. Each Seller understands that it is reasonably
necessary to protect the Corporation's good will and business interests that
such Seller agree and, accordingly, such Seller does hereby agree, that such
Seller will not directly or indirectly (except where authorized by the President
of Purchaser for the benefit of Purchaser or the Corporation and/or as required
in the course of his consulting duties for the Corporation) at any time
hereafter divulge or disclose for any purpose whatever to any persons, firms,
corporations or other entities other than the Purchaser or the Corporation
(hereinafter referred to collectively as "Third Parties"), or use or cause or
authorize any Third Parties to use,
<PAGE>
any such Confidential Information, except as otherwise required by law.
2. COVENANT-NOT-TO-COMPETE. In view of (a) the Confidential Information
known to each Seller, (b) the substantial consideration paid and payable to such
Seller under or pursuant to the Purchase Agreement, and (c) the sale of the good
will of the business embodied in the Purchase Agreement, and as a material
inducement to Purchaser to consummate the Purchase Agreement and to pay the
Purchase Price, each Seller covenants and agrees that such Seller shall not,
directly or indirectly, at any time during the period commencing on the date
hereof and ending on the fifth anniversary of the date hereof or ending on the
first anniversary of the last release to Sellers of Escrowed Purchase Price
(whichever period is longer), (A) sell any products or sell or perform any
services sold or offered by the Corporation to any customer of the Corporation,
(B) solicit the services of, or hire, directly or indirectly, whether on his own
behalf or on behalf of others, any managerial employee, executive employee,
production or design employee or engineer or salesperson of the Corporation who
is or was employed by the Corporation at any time during the period commencing
one year prior to the date hereof and ending five years following the date
hereof, (C) obtain any interest in, any employment with, or any right to
participate in, directly or indirectly, any enterprise competitive with the
business of the Corporation anywhere within the continental United States (the
"Geographical Territory"), (D) otherwise assist any person or entity in so
competing, or in any capacity engage in any activity or business, passively or
actively, as an owner, participant, employee or agent, competitive with the
business of the Corporation anywhere within the Geographical Territory, or (E)
transact any business, or be involved in any manner or capacity, as an owner,
participant, employee, agent or otherwise, with any enterprise, company or
business which transacts any business, with Megahertz relating to the
distribution to Megahertz of electronic components or related products or the
performance of any assembly, programming, tape and reeling or any other value
added services for Megahertz, or in any manner or capacity become an employee,
consultant, contractor or agent of, or perform services for, Megahertz. Each
Seller acknowledges that one can effectively compete with the business of the
Corporation in the Geographical Territory from anywhere in the Geographical
Territory, and that, therefore, such geographical area of restriction is
reasonable in the circumstances to protect the Corporation's legitimate business
interests. As consideration for the respective covenants of Sellers made
pursuant to Sections 1 and 2 of this Agreement, each Seller shall, upon the
execution and delivery of this Agreement by all Sellers, receive the payment set
forth opposite his name in Schedule I attached.
3. REMEDIES FOR BREACH OF SECTIONS 1 AND 2. Each Seller covenants and
agrees that if he shall violate or breach any of his
2
<PAGE>
covenants or agreements provided for in Section 1 or 2 hereof, Purchaser and the
Corporation shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remunerations and benefits which such Seller directly
or indirectly has realized and realizes as a result of, growing out of or in
connection with any such violation or breach. In addition, in the event of a
breach or violation or threatened or imminent breach or violation of any
provisions of Section 1 or 2 hereof, Purchaser and the Corporation shall be
entitled to a temporary and permanent injunction or any other appropriate decree
of specific performance or equitable relief (without being required to post bond
or other security) from a court of competent jurisdiction in order to prevent,
prohibit or restrain any such breach or violation or threatened or imminent
breach or violation by such Seller, by such Seller's partners, agents,
representatives, servants, employers or employees and/or by any Third Parties.
Purchaser and the Corporation shall be entitled to such injunctive or other
equitable relief in addition to any ascertainable damages which are suffered,
together with reasonable attorneys' and paralegals' fees and costs and other
costs incurred in connection with any such litigation, both before and at trial
and at all tribunal levels. It is understood that resort by the Purchaser or the
Corporation to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any other rights or remedies which Purchaser or
the Corporation may have with respect to such breach or violation.
4. REASONABLENESS OF RESTRICTIONS.
(a) Each Seller acknowledges that any breach or violation of
the covenants set forth in Section 1 or 2 hereof will cause irreparable injury
and damage and incalculable harm to Purchaser and the Corporation and that it
would be very difficult or impossible to measure all of the damages resulting
from any such breach or violation. Each Seller further acknowledges that such
Seller has carefully read and considered the provisions of Sections 1, 2 and 3
hereof and, having done so, agrees that the restrictions and remedies set forth
in such Sections (including, but not limited to, the time period, geographical
and types of restrictions imposed) are fair and reasonable and are reasonably
required for the protection of the business, trade secrets, interests and good
will of Purchaser and the Corporation. Each Seller further acknowledges that his
covenants in Sections 1 and 2 have been made to induce Purchaser to complete the
transactions set forth in the Purchase Agreement, and that Purchaser would not
have done so (and no Seller would be receiving or receive any Purchase Price)
absent the covenants and agreements of such Seller herein contained.
(b) Each Seller understands and intends that each provision
and restriction agreed to by him in Sections 1, 2 and 3 hereof shall be
construed as separate and divisible from every
3
<PAGE>
other provision and restriction. In the event that any one of the provisions of,
or restrictions in, Sections 1, 2 and/or 3 hereof shall be held to be invalid or
unenforceable, and is not reformed by a court of competent jurisdiction, the
remaining provisions thereof and restrictions therein shall nevertheless
continue to be valid and enforceable as though the invalid or unenforceable
provisions or restrictions had not been included. In the event that any such
provision relating to time period, geographical and/or type of restriction shall
be declared by a court of competent jurisdiction to exceed the maximum or
permissible time period, geographical or type of restriction such court deems
reasonable and enforceable, said time period, geographical and/or type of
restriction shall be deemed to become and shall thereafter be the maximum time
period, geographical area and/or type of restriction which such court deems
reasonable and enforceable.
5. RESTRICTIONS ON SALE BY SELLERS OF ALL AMERICAN SHARES.
(a) The sale, transfer or other disposal of All American
Shares which have been issued to Sellers as Purchase Price are and will be
subject to substantial securities law restrictions as more particularly set
forth in the Purchase Agreement. In the event that Purchaser determines, in good
faith, based upon a legal opinion of its counsel, that a legal restriction on
the transferability of All American Shares by a Seller (in whole or in part) may
exist, Purchaser may cause its stock transfer agent not to process any
potentially violative transfers unless registration of such shares occurs or
until a legal opinion, in form and content, and from a law firm, reasonably
acceptable to Purchaser, is obtained and delivered to Purchaser (at the expense
of the Sellers) to the effect that the proposed transfers are not restricted
under any applicable securities or other laws, and unless appropriate investment
representation letters or other appropriate documents are executed and delivered
to Purchaser. All stock certificates evidencing All American Shares issued to
Sellers shall bear appropriate restrictive legends, and appropriate "stop
transfer" orders shall be placed with Purchaser's stock transfer agent;
provided, however, that none of the foregoing shall prevent Sellers from selling
any All American Shares in compliance with Rule 144 promulgated under the
Securities Act of 1933, as amended.
(b) Each Seller represents, warrants and covenants to
Purchaser and that no Seller has any present plan, intention or arrangement to
dispose of any of the All American Shares received or to be or which may be
received by him pursuant to the Purchase Agreement.
6. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of Purchaser
or the Corporation to exercise, and no delay in the exercise of, any right,
power, privilege or remedy of Purchaser or the Corporation hereunder, or under
the Purchase Agreement or any
4
<PAGE>
other agreement or instrument executed in connection herewith or therewith or
pursuant hereto or thereto, or pursuit of any particular right, power, privilege
or remedy hereunder or thereunder at any particular time, singly or together
with others, or any partial exercise thereof, shall operate as a waiver of, or
preclude the exercise or availability of, any right, power, privilege or remedy
of Purchaser or the Corporation under this Agreement or the Purchase Agreement
or any other agreement or instrument executed or delivered in connection
herewith or therewith or pursuant hereto or thereto.
7. AMENDMENTS AND WAIVERS. The parties may, by written agreement signed
by the parties, modify any of the covenants or agreements or extend the time for
the performance of any of the obligations contained in this Agreement or in any
document delivered pursuant to this Agreement. Any party may waive, by written
instrument signed by such party, compliance by another party with any of its
obligations contained in this Agreement or in any document delivered pursuant to
this Agreement. This Agreement may be amended only by written instrument signed
by the parties hereto.
8. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
9. NOTICES. Any notice, request or other document to be
given hereunder to a party shall be in writing and delivered as required under
the Purchase Agreement.
10. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, and is not reformed by such court, such holding shall not
invalidate or render unenforceable any other provision hereof.
11. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
13. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Schedules and Exhibits thereto and the agreements and
instruments delivered pursuant hereto or thereto, contains the entire agreement
among the parties hereto, and supersedes all prior agreements and undertakings
between or among the parties hereto relating to the subject matter hereof and
5
<PAGE>
thereof, including, without limitation, any term sheet, letter of intent or
proposal executed or delivered by or on behalf of any of the parties prior to
the date hereof.
14. GENDER. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and the use
of the neuter shall include the masculine and/or feminine, in each case, as the
context reasonably requires.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
-------------------------
STEVEN E. CULLIGAN
-------------------------
ALAN G. BOWEN
-------------------------
ROBERT HARRRINGTON
6
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE I
================================================================================
SELLER PAYMENT
================================================================================
Steven E. Culligan $43,100
- --------------------------------------------------------------------------------
Alan G. Bowen $35,700
- --------------------------------------------------------------------------------
Robert Harrington $36,300
================================================================================
<PAGE>
EXHIBIT "B"
STOCKHOLDER RELEASE
<PAGE>
GENERAL RELEASE AND COVENANT NOT TO SUE
This General Release and Covenant Not to Sue dated as of May 2, 1996 is
made by STEVEN E. CULLIGAN, ALAN G. BOWEN and ROBERT HARRINGTON (individually
and collectively, "Releasing Party"), in favor of PROGRAMMING PLUS INCORPORATED,
a Utah corporation (the "Corporation"), and its predecessors, successors and
subsidiaries and affiliates (individually and collectively, "Released Party").
In consideration of the substantial amounts of monetary and other
consideration being paid to Releasing Party pursuant to that certain Stock
Purchase Agreement of even date herewith ("Agreement") among All American
Semiconductor, Inc., a Delaware corporation ("All American"), and each of STEVEN
E. CULLIGAN, ALAN G. BOWEN and ROBERT HARRINGTON, and other valuable
consideration received from or on behalf of All American and the Released Party,
receipt of which is acknowledged, Releasing Party hereby remises, releases,
acquits, satisfies and forever discharges Released Party of and from any, and
all manner of, action and actions, cause and causes of action, suits, debts,
dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, claims and demands whatever, at law or in equity, known
or unknown, asserted or unasserted, against Released Party which Releasing Party
ever had, now has, or which any heir, representative, successor, predecessor or
assign of Releasing Party subsequently can, shall or may have, against Released
Party for, upon or by reason of any matter, cause or thing whatever, from the
beginning of the world through and including the date of this instrument;
provided, however, nothing herein shall be deemed to release, or shall release,
All American from or in respect of any of its representations, warranties,
covenants, agreements or obligations under or pursuant to the Agreement or any
agreement entered into pursuant thereto.
Except with respect to the proviso above, Releasing Party covenants and
agrees never to institute or cause to be instituted or continue prosecution of
any suit or other form of action or proceeding of any kind or nature whatever
against, or to execute upon or attempt to satisfy any judgment against, Released
Party, or any of their respective assets or properties, by reason of or in
connection with any of the foregoing matters, claims or causes of action so
remised, released, acquitted, satisfied and forever discharged.
This General Release and Covenant Not to Sue may be executed in several
counterparts, and all counterparts so executed shall constitute one instrument
binding on all of the undersigned, notwithstanding that all of the undersigned
are not signatories to the same counterpart.
<PAGE>
This General Release and Covenant Not to Sue is made pursuant to the
requirements of the Agreement.
-----------------------------------
STEVEN E. CULLIGAN
-----------------------------------
ALAN G. BOWEN
-----------------------------------
ROBERT HARRINGTON
2
LOAN AND SECURITY AGREEMENT
AMONG
HARRIS TRUST AND SAVINGS BANK, AS A LENDER
AND ADMINISTRATIVE AGENT,
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO, AS A LENDER AND COLLATERAL AGENT,
AND THE OTHER LENDERS PARTY HERETO AND
ALL AMERICAN SEMICONDUCTOR, INC., AS BORROWER
MAY 3, 1996
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS.......................................................... 1
1.1. General Terms.............................................. 1
1.2. Accounting Terms........................................... 19
1.3. Others Defined in Code..................................... 19
2. CREDIT............................................................... 19
2.1. Revolving Loans............................................ 19
2.2. Letters of Credit.......................................... 22
2.3. Principal Balance of Liabilities Not to Exceed
the Facility Limits and Sublimits.......................... 23
2.4. Borrower's Loan Account.................................... 24
2.5. Statements................................................. 24
2.6. Interest................................................... 24
2.7. Fees....................................................... 26
2.8. Term of this Agreement..................................... 27
2.9. Optional Prepayments....................................... 27
2.10. Limitation on Charges...................................... 28
2.11. Method for Making Payments................................. 28
2.12. Method of Selecting Rate Options; Additional
Provisions Regarding LIBOR Portions........................ 29
2.13. Yield Protection........................................... 30
3. REPORTING AND ELIGIBILITY REQUIREMENTS/COLLATERAL.................... 31
3.1. Monthly Reports and Weekly Reports......................... 31
3.2. Eligible Accounts.......................................... 32
3.3. Account Warranties......................................... 34
3.4. Verification of Accounts................................... 35
3.5. Account Covenants.......................................... 35
3.6. Collection and Application of
Accounts and Payments...................................... 35
3.7. Appointment of the Collateral Agent as the
Borrower's Attorney-in-Fact................................ 37
3.8. Chattel Paper and Instruments;
Export Letters of Credit................................... 38
3.9. Notice to Account Debtors.................................. 38
3.10. Eligible Inventory......................................... 38
3.11. Inventory Warranties....................................... 39
3.12. Inventory Records.......................................... 39
3.13. Safekeeping of Inventory and
Inventory Covenants........................................ 40
3.14. Equipment Warranties....................................... 40
3.15. Safekeeping of Equipment................................... 41
3.16. Real Property.............................................. 41
3.17. Maintenance of Properties.................................. 41
3.18. Communications with the Agents and the Lenders............. 41
i
<PAGE>
4. CONDITIONS OF ADVANCES............................................... 42
4.1. Conditions Precedent to Initial
Loans and Letters of Credit................................ 42
4.2. Conditions to all Advances................................. 45
5. COLLATERAL........................................................... 45
5.1. Security Interest.......................................... 45
5.2. Preservation of Collateral and
Perfection of Security Interests Therein................... 46
5.3. Loss of Value of Collateral................................ 46
5.4. Cash Collateral............................................ 47
5.5. Collateral Agent Not Obligated or Liable................... 47
6. WARRANTIES........................................................... 48
6.1. Corporate Existence........................................ 48
6.2. Corporate Authority........................................ 48
6.3. Binding Effect............................................. 48
6.4. Financial Data............................................. 49
6.5. Liens and Encumbrances; Locations.......................... 49
6.6. Solvency................................................... 49
6.7. Principal Place of Business................................ 50
6.8. Other Corporate Names...................................... 50
6.9. Tax Liabilities............................................ 50
6.10. Loans...................................................... 50
6.11. Margin Securities.......................................... 51
6.12. Subsidiaries; Joint Ventures; Partnerships................. 51
6.13. Litigation and Proceedings................................. 51
6.14. Other Agreements........................................... 51
6.15. Employee Controversies..................................... 51
6.16. Compliance with Laws and Regulations....................... 52
6.17. Patents, Trademarks, Licenses.............................. 52
6.18. Environmental Matters...................................... 52
6.19. Fees to Third Parties...................................... 52
6.20. Securities Matters......................................... 53
6.21. Disclosure................................................. 53
6.22. Pension Related Matters.................................... 53
6.23. Affiliate Transactions..................................... 54
6.24. Investment Company; Public Utility
Holding Company............................................ 54
7. AFFIRMATIVE COVENANTS................................................ 55
7.1. Financial Statements....................................... 55
7.2. Inspection................................................. 56
7.3. Conduct of Business........................................ 57
7.4. Claims and Taxes........................................... 57
7.5. Costs and Expenses as Additional Liabilities............... 58
7.6. Liability Insurance........................................ 58
ii
<PAGE>
7.7. Property Insurance......................................... 58
7.8. Pension Plans.............................................. 59
7.9. Notice of Suit or Adverse Change in Business............... 60
7.10. Supervening Illegality..................................... 60
7.11. Environmental Matters...................................... 60
7.12. Use of Proceeds............................................ 61
7.13. Notice of Business Interruption............................ 61
7.14. Vendor Credit Terms........................................ 61
7.15. Designated Companies....................................... 61
7.16. Inventory Reporting........................................ 61
8. NEGATIVE COVENANTS................................................... 62
8.1. Encumbrances............................................... 62
8.2. Indebtedness............................................... 62
8.3. Consolidations, Mergers or Acquisitions.................... 63
8.4. Investments or Loans....................................... 63
8.5. Guarantees................................................. 64
8.6. Subordinated Indebtedness.................................. 64
8.7. Disposal of Property....................................... 64
8.8. Capital Expenditure Limitations............................ 65
8.9. Loans to Officers; Consulting and
Management Fees............................................ 65
8.10. Dividends and Stock Redemptions............................ 65
8.11. Amendment of Certificate of Incorporation
or By-Laws................................................. 66
8.12. Operating Lease Limitations................................ 66
8.13. Fiscal Year End............................................ 66
8.14. Transactions with Affiliates............................... 66
8.15. Termination Events......................................... 67
8.16. Executive Compensation/Bonuses............................. 67
8.17. Minimum Tangible Net Worth................................. 67
8.18. Minimum Debt Service Coverage Ratio........................ 68
8.19. Minimum Inventory Turnover................................. 68
8.20. Inventory Purchases........................................ 68
8.21. Added Value Purchase....................................... 69
9. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER........................... 69
9.1. Acceleration............................................... 69
9.2. Rights and Remedies Generally.............................. 69
9.3. Entry Upon Premises and
Access to Information...................................... 70
9.4. Sale or Other Disposition of
Collateral by the Collateral Agent......................... 70
9.5. Waiver of Demand........................................... 71
9.6. Waiver of Notice........................................... 71
9.7. Advice of Counsel.......................................... 71
10. MISCELLANEOUS................................................... 71
iii
<PAGE>
10.1. Waiver..................................................... 71
10.2. Costs and Attorneys' Fees.................................. 71
10.3. Expenditures by the Lenders................................ 72
10.4. Custody and Preservation of Collateral..................... 72
10.5. Reliance by the Agents and Lenders......................... 72
10.6. Successors and Assigns of the Borrower..................... 72
10.7. Applicable Law; Severability............................... 73
10.8. Submission to Jurisdiction; Waiver of
Bond and Trial by Jury..................................... 73
10.9. Application of Payments.................................... 73
10.10. Marshalling; Payments Set Aside............................ 74
10.11. Section Titles............................................. 74
10.12. Continuing Effect.......................................... 74
10.13. Notices.................................................... 74
10.14. Equitable Relief........................................... 75
10.15. Entire Agreement........................................... 76
10.16. Indemnity.................................................. 76
10.17. Representations and Warranties;
Conditions to Loans and Letters of Credit.................. 76
10.18. Approval of the Requisite Lenders
or the Lenders............................................. 77
11. AGENCY PROVISIONS.................................................... 77
11.1. Appointment and Powers..................................... 77
11.2. Agents in Their Capacities as Lenders...................... 77
11.3. Independent Credit Analysis................................ 78
11.4. General Immunity........................................... 78
11.5. Right to Indemnity......................................... 79
11.6. Action by Agents............................................79
11.7. Proportionate Interest of
Lenders under the Financing Agreements..................... 81
11.8. Resignation of Either Agent................................ 81
11.9. Disbursement of Proceeds of Loans and Other
Advances; Issuance of Letters of Credit.................... 81
11.10. Apportionment of Payments.................................. 84
11.11. Release of Collateral...................................... 84
11.12. Agreement to Cooperate..................................... 84
11.13. Lenders to Act as Agents................................... 85
11.14. Amendments................................................. 85
11.15. Assignments and Participations by
the Lenders; Information................................... 85
11.16. Ratable Sharing............................................ 88
iv
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement"), made as of the 3rd day
of May, 1996, by and among All American Semiconductor, Inc., a Delaware
corporation, with its principal place of business and chief executive office at
16115 Northwest 52nd Avenue, Miami, Florida 33014 ("Borrower"), Harris Trust and
Savings Bank (in its individual capacity, "Harris"), with an office at 111 West
Monroe Street, Chicago, Illinois 60603, as a Lender hereunder and as
Administrative Agent (on behalf of itself and all other Lenders), American
National Bank and Trust Company of Chicago (in its individual capacity, "ANB"),
with an office at 33 North LaSalle Street, Chicago, Illinois 60690, as a Lender
hereunder and as Collateral Agent (on behalf of itself and all other Lenders)
and the other Lenders from time to time party hereto:
W I T N E S S E T H
WHEREAS, the Borrower desires to obtain financial accommodations of up
to One Hundred Million Dollars ($100,000,000) from the Lenders, and the Lenders
are willing to make certain loans and to extend credit to the Borrower of up to
such amount upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or financial accommodations heretofore, now or
hereafter made to or for the benefit of the Borrower by the Lenders, the parties
hereto hereby agree as follows:
1. DEFINITIONS.
1.1. GENERAL TERMS.
When used herein, the following terms shall have the
following meanings:
"ACCOUNT DEBTOR" shall mean the party who is obligated on
or under an Account.
"ACCOUNTS" shall mean all present and future accounts
receivable and other rights of each Designated Company to payment for goods sold
or leased or for services rendered, which are not evidenced by instruments or
chattel paper, and whether or not they have been earned by performance.
"ACCOUNTS TRIAL BALANCE" shall have the meaning assigned
to such term in SECTION 3.1.
"ADJUSTED LIBOR" shall mean a rate per annum determined by
the Administrative Agent in accordance with the following formula:
<PAGE>
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"ADMINISTRATIVE AGENT" shall mean Harris Trust and Savings
Bank in its capacity as administrative agent hereunder, and shall include any
successor administrative agent hereunder.
"AFFILIATE" shall mean any Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with the Borrower, (b) that directly or beneficially
owns or holds twenty-five percent (25%) or more of any class of the voting stock
of the Borrower or (c) twenty-five percent (25%) or more of any class of whose
voting stock (or in the case of a Person which is not a corporation, twenty-five
percent (25%) or more of the equity interest) is owned directly or beneficially
or held by the Borrower.
"AGENT'S REPORT" shall have the meaning assigned to such
term in SECTION 11.9(B).
"AGENTS" shall mean, collectively, the Administrative
Agent and the Collateral Agent; and "Agent" shall mean either one of the Agents.
"ANB" shall have the meaning assigned to such term in the
Preamble.
"APPLICABLE DOMESTIC MARGIN" shall mean an amount equal to
one-quarter of one percent (.25%), subject to a prospective decrease of
one-quarter of one percent (.25%) upon the occurrence of each Rate Decrease
Event, and subject to a prospective increase of one-quarter of one percent
(.25%) upon the occurrence of each Rate Increase Event.
"APPLICABLE LIBOR MARGIN" shall mean an amount equal to
two and one-quarter percent (2.25%), subject to a prospective decrease of
one-quarter of one percent (.25%) upon the occurrence of each Rate Decrease
Event, and subject to a prospective increase of one-quarter of one percent
(.25%) upon the occurrence of each Rate Increase Event; PROVIDED, FURTHER that
any increase or decrease of the Applicable LIBOR Margin will only be applicable
with respect to LIBOR Portions selected or continued after the effective date of
the applicable Rate Increase Event or Rate Decrease Event.
"APPLICATION" shall have the meaning assigned to such term
in SECTION 2.2(D).
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" shall mean an
agreement in the form of EXHIBIT F hereto, pursuant to which a Lender assigns
all or a portion of its rights, and delegates all or such portion of its
obligations, under this Agreement and the other Financing Agreements, to another
Person.
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"BANK" shall mean Harris Trust and Savings Bank.
"BLOCKED ACCOUNTS" shall have the meaning assigned to such
term in SECTION 3.6.
"BORROWER" shall have the meaning assigned to such term in
the Preamble.
"BORROWER'S CASH REQUIREMENTS" shall have the meaning
assigned to such term in SECTION 2.1(E).
"BUSINESS DAY" shall mean any day other than a Saturday or
Sunday on which the Bank, each Agent and each Lender is not authorized or
required to close and when used with respect to LIBOR Portions, a day on which
the Bank is also dealing in United States Dollar deposits in London, England and
Nassau, Bahamas.
"CLOSING DATE" shall mean the date the initial Loans are
made or Letters of Credit are issued hereunder.
"CODE" shall mean the Uniform Commercial Code of the State
of Illinois; provided, that for purposes of perfection and enforcement of the
Collateral Agent's liens on and security interests in the Collateral, for the
benefit of the Lenders, "Code" shall mean the Uniform Commercial Code of each
applicable state determined in accordance with Section 9-103 of the Uniform
Commercial Code of the State of Illinois.
"COLLATERAL" shall mean all property and interests in
property now owned or hereafter acquired by the Borrower, each Designated
Company or any other Person in or upon which a security interest, lien or
mortgage is granted to the Collateral Agent, for its benefit and the benefit of
the Lenders, or to the Administrative Agent or any Lender by the Borrower, such
Designated Company or such other Person in order to secure the Liabilities,
whether under this Agreement, the other Financing Agreements or any other
documents, instruments or writings executed by the Borrower, such Designated
Company or any other Person and delivered to the Collateral Agent, the
Administrative Agent or any Lender.
"COLLATERAL AGENT" shall mean American National Bank and
Trust Company of Chicago in its capacity as collateral agent hereunder, and
shall include any successor collateral agent hereunder.
"COMMERCIAL LETTER OF CREDIT LIMIT" shall mean Twenty
Million Dollars ($20,000,000).
"COMPANIES" shall mean, collectively, the Borrower and its
Subsidiaries; and "Company" shall mean any one of the Companies.
"DEBT SERVICE COVERAGE RATIO" shall mean, with respect to
the Designated Companies for any period, the ratio of (a) the sum of (i) Net
Income from
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continuing and discontinued operations before interest expense and taxes, (ii)
with respect only to calculations made for any testing period ending on or prior
to December 31, 1996, the Special Amount and (iii) depreciation and amortization
expenses, minus tax payments, minus capital expenditures, to the extent not
financed, and minus dividends paid, to (b) the sum of (i) all interest payments
in respect of the Revolving Loans and (ii) all payments of principal and
interest in respect of capitalized leases and other long-term indebtedness of
the Designated Companies, including without limitation the Junior Debt (but
specifically excluding principal payments in respect of the Revolving Loans),
all determined for such period on a consolidated basis and in accordance with
GAAP.
"DEFAULT" shall mean the occurrence or existence of any
one or more of the following events: (a) the Borrower fails to pay any of the
Liabilities when such Liabilities are due, properly declared due or properly
demanded; (b) the Borrower, any other Designated Company or any Guarantor fails
or neglects to perform, keep or observe any of the applicable covenants,
conditions, promises, or agreements contained in (i) any of SECTION 3.2 through
3.16, 3.18, 5, 7.2, 7.7 or 8 of this Agreement, (ii) SECTION 3.1, with respect
to provision of Weekly Reports, and such failure continues for one (1) day after
the occurrence thereof, (iii) SECTION 3.1, with respect to provision of Monthly
Reports, and such failure continues for three (3) days after the occurrence
thereof, (iv) SECTION 7.1, 7.9 or 7.13 of this Agreement and such failure
continues for five (5) days after the occurrence thereof, (v) any other Section
of this Agreement and such failure continues for fifteen (15) days after the
occurrence thereof or (vi) any of the other Financing Agreements and such
failure continues after the expiration of any applicable grace or cure period
contained therein, (c) any material warranty or representation heretofore, now
or hereafter made by the Borrower, any other Designated Company, or any
Guarantor in connection with this Agreement or any of the other Financing
Agreements is untrue or incorrect in any material respect, or any material
information contained in any schedule, certificate, statement, report, financial
data, notice, or writing furnished at any time by the Borrower, any other
Designated Company or any Guarantor to either Agent or any Lender is untrue or
incorrect in any material respect, on the date as of which the facts set forth
therein are stated or certified; (d) a judgment or order requiring payment in
excess of Five Hundred Thousand Dollars ($500,000) shall be rendered against the
Borrower, any other Designated Company or any Guarantor and such judgment or
order shall remain unsatisfied, undischarged or unstayed and in effect for
thirty (30) consecutive days without a stay of enforcement or execution;
PROVIDED that this CLAUSE (D) shall not apply to any judgment for which the
Borrower, such other Designated Company or such Guarantor is insured and with
respect to which the insurer has, within thirty (30) days after the rendering
thereof, accepted (or, in the Administrative Agent's reasonable discretion, can
be deemed to have accepted) liability, unless the uninsured portion thereof
exceeds Five Hundred Thousand Dollars ($500,000); (e) a notice of lien, levy, or
assessment is filed or recorded with respect to all or a material portion of the
aggregate assets of the Designated Companies and any
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Guarantors (including without limitation the Collateral) by the United States,
or any department, agency or instrumentality thereof, or by any state, county,
municipality or other governmental agency or any taxes or debts owing at any
time or times hereafter to any one or more of them become a lien upon all or any
material portion of the aggregate assets of the Designated Companies and any
Guarantors (including without limitation the Collateral); PROVIDED, that this
CLAUSE (E) shall not apply to any liens, levies, or assessments which the
Borrower, another Designated Company or a Guarantor is contesting in good faith
(PROVIDED the Borrower, such Designated Company or such Guarantor has complied
with the provisions of CLAUSES (A) and (B) of SECTION 7.4) or which relate to
current taxes not yet due and payable; (f) any material portion of the
Collateral is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors and on or before the thirtieth (30th)
day thereafter such assets are not returned to the Borrower, or the applicable
other Designated Company or Guarantor and/or such writ, distress warrant or levy
is not dismissed, stayed or lifted; (g) a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency, readjustment of debt or
receivership law or statute is filed against the Borrower, any other Designated
Company or any Guarantor and such proceeding remains undismissed and unstayed
for a period of sixty (60) days, or a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency or receivership law or statute
is filed by the Borrower, any other Designated Company or any Guarantor, or the
Borrower, any other Designated Company or any Guarantor makes an assignment for
the benefit of creditors, or the Borrower, any other Designated Company or any
Guarantor authorizes any of the foregoing by proper corporate action, as
applicable; (h) the Borrower voluntarily or involuntarily dissolves or is
dissolved; or any one or more other Designated Companies or Guarantors that in
the aggregate has or have assets with a book value in excess of One Hundred
Thousand Dollars ($100,000) voluntarily or involuntarily dissolves or is
dissolved; (i) the Borrower, any other Designated Company or any Guarantor
becomes insolvent or fails generally to pay its debts as they become due; (j)
the Borrower, any Designated Company or any Guarantor is enjoined, restrained,
or in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business
affairs; (k) a breach by the Borrower, any other Designated Company or any
Guarantor shall occur under any material agreement, document or instrument
(other than an agreement, document or instrument evidencing the lending of
money), whether heretofore, now or hereafter existing between the Borrower,
other Designated Company or Guarantor and any other Person, such breach shall
continue beyond any applicable cure period contained in such agreement, document
or instrument and such breach would be reasonably likely to have a Material
Adverse Effect; (l) a breach by the Borrower, any other Designated Company or
any Guarantor shall occur under any agreement, document or instrument evidencing
the lending of money, with respect to which the aggregate principal balance is
equal to or greater than Five Hundred Thousand Dollars
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($500,000), whether heretofore, now or hereafter existing between the Borrower,
such Designated Company or such Guarantor and any other Person, including
without limitation the Junior Debt, and the effect thereof would be to permit
the acceleration of the indebtedness thereunder; (m) any Guarantor shall
terminate or revoke the obligations of such Guarantor under the applicable
guarantee agreement or breach any of the terms of such guarantee agreement or
any of the other Financing Agreements to which such Guarantor is a party; (n) a
breach shall occur under any intercreditor or subordination agreement or any
subordination provisions of any agreement, in each case evidencing or relating
to any indebtedness that is subordinated to the Liabilities, including without
limitation the Junior Debt; (o) there shall occur any loss, theft, substantial
damage or destruction of any item or items of Collateral (a "Loss") if (i) the
amount of such Loss with respect to which an insurer has not within thirty (30)
days accepted (or, in the Administrative Agent's reasonable discretion, can be
deemed to have accepted) liability, exceeds Five Hundred Thousand Dollars
($500,000) in the aggregate or (ii) any such Loss results in an interruption of
the business of the Borrower, any other Designated Company or any Guarantor
which would reasonably be expected to have a Material Adverse Effect and which
is not, in the Requisite Lenders' reasonable business judgment, adequately
covered by business interruption insurance; (p) there shall be instituted in any
court criminal proceedings against the Borrower, any other Designated Company or
any Guarantor, or, the Borrower, any other Designated Company or any Guarantor
shall be indicted for any crime, in either case for which forfeiture of a
material amount of its or his property is a potential penalty; (q) both Paul
Goldberg and Bruce Goldberg shall cease to function as senior management
officers of the Borrowers, unless each such Person is replaced within ninety
(90) days with a Person satisfactory to Requisite Lenders in their reasonable
judgment; or (r) a Material Adverse Change shall occur.
"DEFAULT NOTICE" shall have the meaning assigned to such
term in SECTION 11.6(A).
"DESIGNATED COMPANIES" shall mean collectively, (a) the
Borrower, (b) each other Company existing on the date hereof and listed on
SCHEDULE 2.1 and (c) each other Company so designated by the Borrower from time
to time hereafter and consented to by the Requisite Lenders or otherwise
approved to be a Designated Company pursuant to the terms of this Agreement.
"DISPROPORTIONATE ADVANCE" shall have the meaning assigned
to such term in SECTION 11.9(A).
"DOMESTIC RATE" means, for any day, the greater of (i) the
rate of interest announced by the Bank from time to time as its prime commercial
rate, as in effect on such day, it being understood and agreed that such rate
may not be the Bank's best or lowest rate; and (ii) the rate determined by the
Administrative Agent to be the average (rounded upwards, if necessary, to the
next higher 1/100 of 1%) of the
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rates per annum quoted to the Administrative Agent at approximately 10:00 a.m.
(Chicago time) (or as soon thereafter as is practicable) on such day (or, if
such day is not a Business Day, on the immediately preceding Business Day) by
two or more Federal funds brokers selected by the Administrative Agent for the
sale to the Administrative Agent at face value of Federal funds in an amount
equal or comparable to the principal amount owed to the Lenders for which such
rate is being determined.
"DOMESTIC RATE PORTIONS" shall have the meaning assigned
to such term in SECTION 2.6.
"ELIGIBLE ACCOUNTS" shall have the meaning assigned to
such term in SECTION 3.2.
"ELIGIBLE INVENTORY" shall have the meaning assigned to
such term in SECTION 3.10.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local
and foreign laws, statutes, rules, regulations, ordinances, programs, permits,
guidances, orders and consent decrees relating to health, safety and
environmental matters applicable to the business and property of the Borrower
and each other Designated Company. Such laws and regulations include but are not
limited to the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 ET
SEQ., as amended; the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 ET SEQ., as amended; the Toxic
Substance Act, 15 U.S.C. ss. 2601 ET SEQ., as amended; the Clean Water Act, 33
U.S.C. ss. 466 ET SEQ., as amended; the Clean Air Act, 42 U.S.C. ss. 7401 ET
SEQ., as amended; state and federal superlien and environmental cleanup
programs; and U.S. Department of Transportation regulations.
"ENVIRONMENTAL NOTICE" shall mean any summons, citation,
directive, information request, notice of potential responsibility, notice of
violation or deficiency, order, claim, complaint, investigation, proceeding,
judgment, letters or other communication, actual or threatened, from the United
States Environmental Protection Agency or other federal, state, local or foreign
agency or authority, or any other entity or individual, public or private,
concerning any intentional or unintentional act or omission which involves
Management of Hazardous Substances on or off the property of any Designated
Company; the imposition of any lien on property, including but not limited to
liens asserted by government entities in connection with Responses to the
presence or Release of Hazardous Substances; any alleged violation of or
responsibility under Environmental Laws; and, after due inquiry and
investigation, any knowledge of any facts which could give rise to any of the
above.
"EQUIPMENT" shall mean all of each Designated Company's
machinery, equipment, fixtures and other tangible personal property, other than
Inventory,
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whether located on such Designated Company's premises or located elsewhere,
together with any and all accessions, parts and appurtenances thereto, whether
presently owned or hereafter acquired by such Designated Company.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" shall mean each trade or business,
including any Company, whether or not incorporated, which together with such
Company would be treated as a single employer under Section 4001 of ERISA.
"EVENT OF DEFAULT" shall mean an event which through the
passage of time or the service of notice or both would (assuming no action is
taken to cure the same) mature into a Default.
"EXCESS LOAN AVAILABILITY" shall mean, at any time, (a)
the lesser of (i) the Maximum Facility less any Reserves and less the aggregate
Letter of Credit Exposure and (ii) Loan Availability less any Reserves and less
the aggregate Letter of Credit Exposure, MINUS (b) the outstanding balance of
the Revolving Loans, but in no event shall Excess Loan Availability be less than
zero (0).
"FINANCIALS" shall have the meaning assigned to such term
in SECTION 6.4.
"FINANCING AGREEMENTS" shall mean this Agreement and all
other agreements, instruments and documents, including without limitation
security agreements, loan agreements, notes, guarantees, mortgages, deeds of
trust, subordination agreements, intercreditor agreements, pledges, powers of
attorney, consents, assignments, collateral assignments, reimbursement
agreements, contracts, leases, financing statements and all other written matter
whether heretofore, now, or hereafter executed by or on behalf of the Borrower,
any other Designated Company or any Guarantor in favor of and delivered to
either Agent or any Lender, together with all agreements and documents referred
to therein or contemplated thereby, as each may be amended, modified,
supplemented or extended from time to time.
"FLOATING INVENTORY CAP" shall mean an amount, determined
as of March 31, 1996 and as of the last day of each fiscal quarter thereafter,
for the fiscal quarter period ending on such date, which shall be an amount
equal to (i) the aggregate cost of goods sold for the applicable fiscal quarter,
multiplied by (ii) the result of four (4), divided by two and three quarters
(2.75), and multiplied by one-half (0.50), with the result rounded to the next
highest multiple of One Million Dollars ($1,000,000). The Floating Inventory Cap
shall be calculated for the Designated Companies on a consolidated basis in
accordance with GAAP and with reference to the financial statements of the
Designated Companies for the applicable period to be delivered to the Agents
pursuant to SECTION 7.1 and shall be prospectively effective upon receipt by the
Agents of such financial statements.
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"FRANCHISE INVENTORY" shall mean Inventory originally
purchased by the Borrower pursuant to a vendor, supplier or distributor
agreement that provides, unless otherwise agreed by the Collateral Agent in its
reasonable business judgment, the Borrower with either of the following rights:
stock rotation privileges or price protections substantially similar to those
found in the Borrower's agreements with its vendors, suppliers and distributors
in existence as of the Closing Date.
"GAAP" shall mean generally accepted accounting principles
as used by the Financial Accounting Standards Board, as in effect from time to
time, consistently applied.
"GENERAL INTANGIBLES" shall mean, with respect to each
Designated Company, all general intangibles, choses in action, causes of action
and all other intangible personal property of such Designated Company of every
kind and nature wherever located and whether presently owned or hereafter
acquired by such Designated Company (other than Accounts), including without
limitation corporate or other business records, inventions, designs, patents,
patent applications, service marks, service mark applications, trademarks,
trademark applications, tradenames, tradestyles, trade secrets, goodwill,
registrations, computer software, operational manuals, product formulas for
industrial processes, blueprints, drawings, copyrights, copyright applications,
licenses, license agreements, permits, operating rights and authorities to move
heavy equipment, franchises, customer lists, tax refunds, tax refund claims and
the like.
"GUARANTOR" shall mean any Person that has guaranteed all
or a portion of the Liabilities.
"HARRIS" shall have the meaning assigned to such term in
the Preamble.
"HAZARDOUS SUBSTANCES" shall mean hazardous substances,
hazardous wastes, hazardous waste constituents and reaction by-products,
hazardous materials, pesticides, oil and other petroleum products, and toxic
substances, including asbestos and PCBs, as those terms are defined pursuant to
Environmental Laws.
"INITIAL TERM" shall have the meaning assigned to such
term in SECTION 2.8.
"INTEREST PERIOD" shall mean, with respect to any LIBOR
Portion, the period commencing on, as the case may be, the creation,
continuation or conversion date with respect to such LIBOR Portion and ending
one (1), two (2), three (3) or six (6) months thereafter as selected by the
Borrower in its notice as provided herein; PROVIDED that all of the foregoing
provisions relating to Interest Periods are subject to the following:
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(a) if any Interest Period would otherwise end
on a day which is not a Business Day, the Interest Period shall be extended to
the next succeeding Business Day, unless in the case of an Interest Period for a
LIBOR Portion the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;
(b) no Interest Period may extend beyond the end
of the Initial Term or any renewal Term, if applicable;
(c) the interest rate applied to each Portion
for each Interest Period shall apply from and including the first day of such
Interest Period to, but excluding, the last day thereof; and
(d) no Interest Period may be selected if after
giving effect thereto the Borrower will be unable to make a principal payment
scheduled to be made during such Interest Period without paying part of a LIBOR
Portion on a date other than the last day of the Interest Period applicable
thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month; PROVIDED, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
"INVENTORY" shall mean any and all inventory and goods of
each Designated Company, including without limitation goods in transit,
wheresoever located, whether now owned or hereafter acquired by such Designated
Company, which are held for sale or lease, furnished under any contract of
service or held as raw materials, work-in-process or supplies, and all materials
used or consumed in such Designated Company's business, and shall include such
property the sale or other disposition of which has given rise to Accounts and
which has been returned to or repossessed or stopped in transit by such
Designated Company.
"INVENTORY TURNOVER" shall mean an amount, determined as
of March 31, 1996 and as of the last day of each fiscal quarter thereafter, for
the fiscal quarter period ending on such date, shall be an amount equal to (i)
the product of the aggregate cost of goods sold for the applicable fiscal
quarter, multiplied by four (4), divided by (ii) the result of the aggregate
gross book value of Inventory on the first day of each calendar month within
such fiscal quarter, divided by three (3). Inventory Turnover shall be
calculated for the Designated Companies on a consolidated basis in accordance
with GAAP and with reference to the financial statements of the Designated
Companies for such period to be delivered to the Agents pursuant to SECTION 7.1.
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"JUNIOR DEBT" shall mean all indebtedness of the Borrower
in respect of the certain $5,150,000 10-Year 9% Subordinated Debentures Due June
14, 2004 issued by the Borrower on June 14, 1994.
"LENDERS" shall mean, collectively, ANB, Harris and any
other Person that becomes a Lender under this Agreement, and each of their
respective successors and assigns as provided in this Agreement; and "LENDER"
shall mean any one of the Lenders.
"LETTER OF CREDIT EXPOSURE" shall mean the aggregate
undrawn face amount of then outstanding Letters of Credit.
"LETTER OF CREDIT LIMIT" shall mean Twenty Million Dollars
($20,000,000).
"LETTERS OF CREDIT" shall have the meaning assigned to
such term in SECTION 2.2.
"LIABILITIES" shall mean the aggregate amount of all of
the Borrower's liabilities, obligations and indebtedness to the Agents and the
Lenders of any and every kind and nature, whether heretofore, now or hereafter
owing, arising, due or payable and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct, contingent, fixed or
otherwise (including obligations of performance) and arising or existing under
or in connection with this Agreement and the other Financing Agreements and the
Borrower's reimbursement obligations with respect to any Letter of Credit.
"LIBOR" shall mean, for each Interest Period, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if
the LIBOR Index Rate cannot be determined, the arithmetic average of the rates
of interest per annum (rounded upward, if necessary, to the nearest 1/100th of
1%) at which deposits in U.S. Dollars in immediately available funds are offered
to the Bank at 11:00 a.m. (London, England time) two (2) Business Days before
the beginning of such Interest Period by three (3) or more major banks in the
interbank eurodollar market selected by the Bank for a period equal to such
Interest Period and in an amount equal or comparable to the applicable LIBOR
Portion scheduled to be outstanding from the Lenders during such Interest
Period. Each determination of LIBOR made by the Administrative Agent shall be
conclusive and binding absent manifest error.
"LIBOR INDEX RATE" means, for any Interest Period, the
rate per annum (rounded upwards, if necessary, to the next higher one
hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a
period equal to such Interest Period, which appears on the Telerate Page 3750 as
of 11:00 a.m. (London, England time) on the day two (2) Business Days before the
commencement of such Interest Period.
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"LIBOR PORTIONS" shall have the meaning assigned to such
term in SECTION 2.6.
"LOAN ACCOUNT" shall have the meaning assigned to such
term in SECTION 2.4.
"LOAN AVAILABILITY" shall have the meaning assigned to
such term in SECTION 2.1.
"LOANS" shall mean, collectively the Revolving Loans made
by the Lenders to the Borrower pursuant to SECTION 2.1, and any and all other
advances made by the Lenders to the Borrower pursuant to the terms of this
Agreement.
"MANAGE" or "MANAGEMENT" shall mean to generate, handle,
manufacture, process, treat, store, use, re-use, refine, recycle, reclaim, blend
or burn for energy recovery, incinerate, accumulate speculatively, transport,
transfer, dispose of, release, threaten to release or abandon Hazardous
Substances.
"MATERIAL ADVERSE CHANGE" shall mean (a) a material
adverse change in the financial condition, business, properties, operations or
performance of the Borrower, the other Designated Companies and any Guarantors,
taken as a group, (b) a material adverse change in the ability of the Borrower,
the other Designated Companies and any Guarantors, taken as a group, to fulfill
their obligations under this Agreement and the other Financing Agreements or (c)
the impairment of the Collateral Agent's lien on and security interest in any
material portion of the Collateral.
"MATERIAL ADVERSE EFFECT" shall mean (a) a material
adverse effect on the financial condition, business, properties, operations or
performance of the Borrower, the other Designated Companies and any Guarantors,
taken as a group, (b) a material adverse effect on the ability of the Borrower,
the other Designated Companies and any Guarantors, taken as a group, to fulfill
their obligations under this Agreement and the other Financing Agreements or (c)
the impairment of the Collateral Agent's lien on and security interest in any
material portion of the Collateral.
"MAXIMUM FACILITY" shall mean an amount equal to One
Hundred Million Dollars ($100,000,000).
"MAXIMUM LOAN AMOUNT" shall mean, with respect to any
Lender, the maximum amount of Loans which such Lender has agreed, pursuant to
the terms of this Agreement, to make available to the Borrower, as set forth on
the signature page hereto or in an Assignment and Acceptance Agreement executed
by such Lender.
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"MONTHLY REPORT" shall have the meaning assigned to such
term in SECTION 3.1.
"MULTIEMPLOYER PLAN" shall have the meaning assigned to
such term in SECTION 6.23.
"NET INCOME" shall mean net income, as defined pursuant to
GAAP.
"NEW SUBSIDIARY" shall mean a Subsidiary of the Borrower
formed in order to consummate any Permitted Acquisition.
"NON-FRANCHISE INVENTORY" shall mean Inventory other than
Franchise Inventory.
"NONFUNDING NOTICE" shall have the meaning assigned to
such term in SECTION 11.6(E).
"PBGC" shall have the meaning assigned to such term in
SECTION 6.22.
"PERMITTED ACQUISITION" shall mean any acquisition, by any
means, whether financed by the Lenders or by any other Person(s), of all or
substantially all of the stock or assets or properties of any Person that is a
going concern and that is in the same general line of business as the Borrower
and the other Designated Companies (i.e. predominantly the distribution of
electronic components and accessories), either (i) to which the Requisite
Lenders have consented, which consent shall not be unreasonably withheld or (ii)
that satisfies the following conditions:
(a) no Default or Event of Default is in
existence at the time of such acquisition or, after giving
pro forma effect to such acquisition, would be caused
thereby;
(b) total consideration for all such acquisitions
(including cash purchase price, liabilities assumed by the
Borrower or any other Designated Company, deferred
purchase price and related payments, including current and
future payments in respect of covenants not to compete,
consulting agreements and the like) (i) in any fiscal year
does not exceed Ten Million Dollars ($10,000,000) and (ii)
during the Initial Term does not exceed Twenty-Five
Million Dollars ($25,000,000);
(c) average Excess Loan Availability for the two (2)
month period immediately preceding the consummation of
such acquisition exceeds Ten Million Dollars ($10,000,000)
and the Agents are satisfied, in their reasonable business
judgment, that the Designated Companies have not
materially extended the average time of payment of their
trade payables; and actual Excess Loan Availability
immediately following the
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consummation of such acquisition, giving effect to such
acquisition, exceeds Ten Million Dollars ($10,000,000);
(d) each Agent has received at least ten (10)
Business Days' prior written notice of such acquisition
and, as soon as available, copies of all agreements
delivered in connection therewith; and
(e) if such acquisition is an acquisition of stock of
any Person (a "Target") (i) the Target (or any New
Subsidiary into which the Target is merged) retains a
separate corporate existence from that of the Borrower and
the other Designated Companies and (ii) neither the
Borrower nor any other Designated Company is liable (or
becomes liable), by way of direct obligation, guaranty or
otherwise for any or any debts, obligations or liabilities
(contingent or otherwise) of the Target in existence prior
to such acquisition, other than any liquidated obligations
specifically disclosed to the Agents and other than any
deferred portion of the purchase price for such
acquisition; and
(f) each Agent has received a certificate of the
Borrower's chief financial officer certifying that all of
the applicable conditions contained herein to treating
such acquisition as a Permitted Acquisition have been
satisfied.
If the Borrower wishes to obtain financing for any
Permitted Acquisition under SECTION 2.1 of this Agreement,
(A) any applicable New Subsidiary shall be deemed to be a
Designated Company for all purposes under this Agreement
and (B) the assets acquired in such Permitted Acquisition,
whether held by a New Subsidiary or by another Designated
Company, may, in the Collateral Agent's reasonable
business judgment, be included in determining Loan
Availability, after the Collateral Agent has satisfied
itself as to the value of such assets and after the
Borrower has demonstrated that it will be able to comply
with the terms of SECTION 7.16 with respect to such assets
or the Collateral Agent has satisfied itself, in its
reasonable business judgment, with the periodic reporting
that the Borrower is able to provide with respect to such
assets. In connection with the foregoing, the Collateral
Agent agrees, upon request therefor by the Borrower, to,
in the Collateral Agent's reasonable business judgment,
either (x) conduct a field audit of the assets to be
acquired in connection with any Permitted Acquisition, at
the Borrower's expense, and to report the results thereof
to the Borrower (including without limitation the
Collateral Agent's judgment on the suitability of such
assets for advance), as soon as reasonably possible and in
any event, within twenty-five (25) Business Days after
request therefor by the Borrower or (y) agree within such
twenty-five (25) Business Day period without conducting an
audit that such assets
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may be included in determining Loan Availability. The
Borrower shall also be permitted to obtain financing for
any Permitted Acquisition from Persons other than the
Agents or the Lenders, so long as (i) the Permitted
Acquisition is consummated by a New Subsidiary that
retains a separate corporate existence from that of the
Borrower and the other Designated Companies, (ii) the
assets of such New Subsidiary are not included in
determining Loan Availability, and (iii) the Borrower
remains in compliance with the other requirements set
forth above for Permitted Acquisitions.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party, or government (whether national,
federal, state, provincial, county, city, municipal or otherwise, including
without limitation any instrumentality, division, agency, body or department
thereof).
"PLAN" shall have the meaning assigned to such term in
SECTION 6.23.
"PORTION" shall have the meaning assigned to such term in
SECTION 2.6.
"PROHIBITED TRANSACTION" shall have the meaning assigned
to such term in SECTION 6.23.
"PROJECTIONS" shall mean, collectively, the consolidated
projected financial statements of the Designated Companies which are attached
hereto as SCHEDULE 6.4 hereto and are required to be delivered pursuant to
SECTION 6.4 and those required to be delivered to the Agents pursuant to SECTION
7.1. The initial set of Projections delivered pursuant to SECTION 6.4 shall
cover the five (5) year period immediately following January 1, 1996 and shall
be prepared on a quarterly basis for the first two years and on an annual basis
for the third, forth and fifth years. The Projections to be delivered for the
1997 fiscal year and subsequent fiscal years shall cover the three (3) fiscal
year period immediately following the date thereof, shall be prepared in a
manner consistent with the initial set of Projections delivered pursuant to
SECTION 6.4 and attached hereto as SCHEDULE 6.4, except that they shall be
prepared on a monthly basis for the first year and an annual basis for the
second and third years, and shall include: (a) projected balance sheets, (b)
projected cash flow statements, (c) projected profit and loss statements, (d)
projected capital expenditures detailed by anticipated major expenditures and
(e) appropriate supporting details and statements of underlying assumptions.
"PRO RATA SHARE" shall mean the percentage interest of
each Lender as indicated on the signature pages to this Agreement or in an
Assignment and Acceptance Agreement executed by such Lender.
"RATE DECREASE EVENT" shall mean the satisfaction, as of
the last day of any calendar quarter, commencing December 31, 1996, that the
Applicable Domestic
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Margin is equal to one-quarter of one percent (0.25%) and the Applicable LIBOR
Margin is equal to two and one-quarter percent (2.25%), of all of the following
conditions: (a) as of such date, no Default or Event of Default is in existence,
(b) Tangible Net Worth during the two successive calendar quarters ending on
such date is greater than or equal to Thirty Million Dollars ($30,000,000), (c)
the Debt Service Coverage Ratio for each of such two calendar quarters is
greater than or equal to 1.5:1.0 and (d) average Excess Loan Availability for
the sixty (60) day period ending on such date is greater than or equal to Ten
Million Dollars ($10,000,000); provided, that compliance with CLAUSES (B) AND
(C) above shall be determined pursuant to the consolidated monthly (or, for the
last month in any fiscal year, the annual audited) financial statements of the
Designated Companies for such period, all delivered pursuant to SECTION 7.1 and
shall prospectively take effect ten (10) Business Days after the date of
delivery of such financial statements to the Administrative Agent.
"RATE INCREASE EVENT" shall mean the occurrence, at any
time that the Applicable Domestic Margin is equal to zero percent (0.0%) and the
Applicable LIBOR Margin is equal to two percent (2.00%), of any of the following
events: (a) notice to the Borrower by the Administrative Agent of the occurrence
of a Default, (b) the expiration of a sixty (60) day period for which average
Excess Loan Availability is less than Five Million Dollars ($5,000,000), (c) as
of the last day of any calendar quarter, commencing December 31, 1996, Tangible
Net Worth is less than Twenty-Six Million Five Hundred Thousand Dollars
($26,500,000) or (d) as of the last day of any calendar quarter, commencing
December 31, 1996, the Debt Service Coverage Ratio for each of the two
successive calendar quarters ending on such date is less than 1.5:1.0; provided,
that compliance with CLAUSES (C) AND (D) above shall be determined pursuant to
the consolidated monthly (or, for the last month in any fiscal year, the annual
audited) financial statements of the Designated Companies for such period, all
delivered pursuant to SECTION 7.1 and shall prospectively take effect ten (10)
Business Days after the date of delivery of such financial statements to the
Administrative Agent.
"REFUSAL PERIOD" shall have the meaning assigned to such
term in SECTION 11.15(A).
"RELEASE" shall mean any actual or threatened spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of Hazardous Substances into the environment, as
"environment" is defined in CERCLA.
"REPORTABLE EVENT" shall have the meaning assigned to such
term in SECTION 6.23.
"REQUISITE LENDERS" shall mean Lenders having, in the
aggregate, Pro Rata Shares of at least sixty percent (60%), and shall include
both Agents; provided, that
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at any time that Agents between them have Pro Rata Shares that in the aggregate
equal or exceed sixty percent (60%); "Requisite Lenders" shall mean both Agents
and one other Lender.
"RESERVE PERCENTAGE" shall mean, for the purpose of
computing Adjusted LIBOR, the maximum rate of all reserve requirements
(including without limitation any marginal, emergency, supplemental or other
special reserves) imposed by the Board of Governors of the Federal Reserve
System (or any successor) under Regulation D (or any other applicable regulation
of the Federal Reserve Board) on Eurocurrency liabilities (as such term is
defined in Regulation D) for the applicable Interest Period as of the first day
of such Interest Period, but subject to any amendments to such reserve
requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such Interest Period.
For purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for prorations, exemptions or offsets under Regulation D. The Agents and the
Lenders acknowledge that as of the date hereof, the Reserve Percentage is equal
to zero percent (0.00%).
"RESERVES" shall mean reserves against Loan Availability
of the Borrower established by the Requisite Lenders from time to time pursuant
to SECTION 2.1(B).
"RESPOND" or "RESPONSE" shall mean any action taken
pursuant to Environmental Laws to correct, remove, remediate, cleanup, prevent,
mitigate, monitor, evaluate, investigate or assess the Release of a Hazardous
Substance.
"REVOLVING CREDIT NOTES" shall have the meaning assigned
to such term in SECTION 2.1.
"REVOLVING LOANS" shall have the meaning assigned to such
term in SECTION 2.1.
"SELLING LENDER" shall have the meaning assigned to such
term in SECTION 11.9(A).
"SCHEDULE OF INVENTORY" shall have the meaning assigned to
such term in SECTION 3.1.
"SPECIAL AMOUNT" shall mean an amount equal to the sum of
(a) if during 1996, the Borrower expenses, rather than amortizes, all or any
portion of the upfront fee paid to CIBC Inc. in connection with the $15,000,000
Senior Subordinated Promissory Note issued by the Borrower to CIBC Inc., the
lesser of (i) the actual amount of such upfront fee that is so expensed, on an
after-tax basis and (ii) Two Hundred Twenty-Five Thousand Dollars ($225,000) and
(b) if during 1996, American Assemblies & Design, Inc. closes its operations in
Lisle, Illinois, the lesser of (i) the actual amount of consolidated losses
incurred by the Borrower
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(on an after-tax basis) in connection with such closure and (ii) One Hundred
Sixty-Five Thousand Dollars ($165,000).
"STANDBY LETTER OF CREDIT LIMIT" shall mean Ten Million
Dollars ($10,000,000).
"SUBSIDIARY" shall mean any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned by the Borrower
or any partnership or joint venture of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by the Borrower.
"TANGIBLE NET WORTH" shall mean, with respect to the
Designated Companies, the sum of (a) the amount of stockholders equity of the
Designated Companies, minus (b) the amount shown on the balance sheet of the
Designated Companies for patents, trademarks, trade names, copyrights,
franchises and deferred charges (including without limitation unamortized debt
discount and expenses, organization costs, deferred research and development
expenses), non-competition payments, goodwill and such other assets as are
properly classified as "intangible assets" in accordance with GAAP, minus (c)
all loans to employees, if the aggregate outstanding amount of such loans
exceeds One Hundred Thousand Dollars ($100,000), plus (d) up to Five Million
Dollars ($5,000,000) in the aggregate of goodwill purchased by, and
non-competition assets of, or liabilities incurred by, the Designated Companies
in connection with any Permitted Acquisitions that are consummated after the
date hereof, plus (e) with respect only to calculations made on any testing date
on or prior to December 31, 1996, the Special Amount, all determined on a
consolidated basis in accordance with GAAP.
"TARGET" shall have the meaning assigned to such term in
the definition of the term "Permitted Acquisition."
"TAX CODE" shall have the meaning assigned to such term in
SECTION 6.23.
"TELERATE PAGE 3750" means the display designated as "Page
3750" on the Telerate Service (or such other page as may replace Page 3750 on
that service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
"TERM" shall have the meaning assigned to such term in
SECTION 2.8.
"TOTAL LIABILITIES" shall mean, with respect to any
Person, all liabilities, indebtedness and obligations of such Person of every
kind or nature, including
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without limitation all liabilities that would be reflected as such on a balance
sheet prepared in accordance with GAAP, all obligations in respect of any
guaranty, all obligations in respect of any capital lease, all obligations,
indebtedness and liabilities whether unsecured or secured by a lien or security
interest on any property or assets of such Person, and all redeemable preferred
stock of such Person valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, all determined on a
consolidated basis in accordance with GAAP.
"WEEKLY REPORT" shall have the meaning assigned to such
term in SECTION 3.1.
1.2. ACCOUNTING TERMS.
Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with GAAP.
1.3. OTHERS DEFINED IN CODE.
All terms contained in this Agreement (and which are not
otherwise specifically defined herein) shall have the meanings provided by the
Code to the extent the same are used or defined therein.
2. CREDIT.
2.1. REVOLVING LOANS.
(a) LOAN AVAILABILITY. Provided there does not
then exist a Default or an Event of Default, and subject to the provisions of
SECTION 4, each Lender will, from time to time, up to and including the day
before the last day of the Initial Term or, if extended pursuant to SECTION 2.8,
any subsequent Term, upon the Borrower's request made in the manner set forth in
SECTION 2.1(D) or upon the Borrower's deemed request made in the manner set
forth in SECTION 2.1(E), advance to the Borrower on a revolving credit basis
(the "Revolving Loans") such Lender's Pro Rata Share of an aggregate amount
equal to up to the lesser of (a) the Maximum Facility, less the aggregate Letter
of Credit Exposure and plus the portion of the Letter of Credit Exposure that is
cash collateralized to the Administrative Agent's satisfaction and (b) Loan
Availability, less one hundred percent (100%) of the aggregate Letter of Credit
Exposure with respect to commercial Letters of Credit (provided, that, in the
Collateral Agent's reasonable judgment, such percentage may be reduced to fifty
percent (50%) with respect to any portion of such Letter of Credit Exposure that
relates to the purchase of Franchise Inventory and eighty percent (80%) with
respect to any portion of such Letter of Credit Exposure that relates to the
purchase of Non-Franchise Inventory), less one hundred percent (100%) of the
aggregate Letter of Credit Exposure with respect to standby Letters of Credit
and plus the portion of the Letter of Credit Exposure that is cash
collateralized to the Administrative Agent's satisfaction. As used herein, "Loan
Availability" at any time shall mean the sum of the following:
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(i) eighty-five percent (85%) of the face amount (less
maximum discounts, credits and allowances which may be taken by or
granted to Account Debtors in connection therewith) then outstanding
under existing Eligible Accounts at such time; PLUS
(ii) the least of (a) the sum of (x) fifty percent (50%)
of the value of Eligible Inventory consisting of Franchise Inventory
and (y) twenty percent (20%) of the value of Eligible Inventory
consisting of Non-Franchise Inventory, (b) the applicable Floating
Inventory Cap and (c) Fifty Million Dollars ($50,000,000). For purposes
of this clause (ii), Inventory will be valued at the lower of average
cost or market value.
(b) RESERVES. The Requisite Lenders shall have
the right to establish such Reserves against the Loan Availability of the
Borrower as the Requisite Lenders deem proper and necessary from time to time in
their reasonable business judgment. By way of example and not by way of
limitation, the Requisite Lenders may establish Reserves with respect to matters
such as (i) amounts owing by any Designated Company to any Person to the extent
secured by a lien on, or trust over, property of such Designated Company, or
that would otherwise adversely affect Lenders' rights in the Collateral, (ii)
price adjustments, damages, unearned discounts, returned products or other
matters for which credit memoranda are issued in the ordinary course of
business, (iii) other matters adversely affecting Lenders' rights in or access
to the Collateral and (iv) other sums chargeable to the Loan Account as
Revolving Loans under this Agreement. Commencing on the date following the
Closing Date, Reserves will be taken in the aggregate amount by which the
obligations and indebtedness of any Designated Company (determined in the manner
set forth in the next to last sentence of SECTION 8.2), exceed One Hundred
Thousand Dollars ($100,000), including without limitation any amounts owing by
All American Added Value, Inc. ("Added Value"), All American A.V.E.D., Inc.
("A.V.E.D."), All American Semiconductor of Chicago, Inc. ("Chicago") or All
American Semiconductor of Philadelphia, Inc. ("Philadelphia"), in each case in
excess of One Hundred Thousand Dollars ($100,000).
(c) GENERAL REVOLVING LOAN PROVISIONS. Each
Lender irrevocably agrees that it shall make its Pro Rata Share of each
Revolving Loan in accordance with the terms of this Agreement. Payments made by
the Administrative Agent to any Person on account of any Letter of Credit shall
constitute Revolving Loans hereunder, the proceeds of which shall be used to
reimburse the Administrative Agent for such payments. Each advance to the
Borrower under this SECTION 2.1 shall, on the day of such advance, be deposited,
in immediately available funds, in the Borrower's demand deposit account with
the Administrative Agent, subject to further instructions from the Borrower in
accordance with the Administrative Agent's normal procedures. The indebtedness
of the Borrower under this SECTION 2.1 shall be evidenced by revolving credit
notes issued by the Borrower to each Lender in the form attached hereto as
EXHIBIT A (the "Revolving Credit Notes"). The provisions of the Revolving Credit
Notes notwithstanding, the Liabilities evidenced by the Revolving Credit Notes
shall become immediately due and payable upon the earlier to occur of (A) the
last day of the Initial Term or, if extended pursuant to SECTION 2.8, any
subsequent Term and (B) the acceleration of the Liabilities. The Borrower agrees
that if at any time the sum of the outstanding principal amount of the Revolving
Loans PLUS the aggregate Letter
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of Credit Exposure shall exceed the lesser of the Maximum Facility and Loan
Availability, the Borrower shall promptly pay the Administrative Agent, for the
account of the Lenders, such amount as is necessary to eliminate such excess,
together with accrued interest thereon. The obligation of the Lenders to fund
the Revolving Loans will be several and not joint.
(d) REQUESTING ADVANCES AND LETTERS OF CREDIT.
The Borrower may request advances of the Revolving Loans to the demand deposit
account described in SECTION 2.1(C), and issuance of Letters of Credit from time
to time, by sending to the Administrative Agent (i) with respect to a request
for a Domestic Rate Portion, by no later than 12:00 p.m. (Chicago time) on the
date on which such Domestic Rate Portion is requested to be made hereunder, a
written or telephonic request from an officer of the Borrower (or any Person
authorized by the Borrower pursuant to a written list provided to the
Administrative Agent) for a Loan in a specific amount, (ii) with respect to a
request by the Borrower for a LIBOR Portion, by no later than 12:00 p.m.
(Chicago time) three (3) Business Days prior to the day on which such LIBOR
Portion is requested, a written or telephonic request from an officer of the
Borrower (or any Person authorized by the Borrower pursuant to a written list
provided to the Administrative Agent) and (iii) with respect to a request by the
Borrower for the issuance of a Letter of Credit, by no later than 12:00 p.m.
(Chicago time) three (3) Business Days prior to the date on which a Letter of
Credit is requested to be issued hereunder, an executed Application for such
Letter of Credit in form and substance reasonably acceptable to the
Administrative Agent. In addition, each request for a Loan or a Letter of Credit
shall be accompanied by all reports and documents required to be delivered to
either Agent or any Lender pursuant to this Agreement on any of the Financing
Agreements on or prior to the date of such request that have not previously been
delivered to such Agent or Lender. The Administrative Agent shall have no
liability to the Borrower or any other Person as a result of acting on any
written or telephonic request that the Administrative Agent believes in good
faith to have been made by any Person set forth on a written list provided by
the Borrower to the Administrative Agent from time to time.
(e) AUTHORIZED ADVANCES. The Borrower hereby
irrevocably authorizes the Agents and the Lenders to make disbursements of
Revolving Loans on the Borrower's behalf on each Business Day on and after such
time, if any, as the Borrower establishes controlled disbursement accounts with
the Administrative Agent, in each case in an amount equal to the lesser of (i)
the amount available to be borrowed by the Borrower on such Business Day under
SECTION 2.1(A) and (ii) the Borrower's cash needs on such Business Day based on
the aggregate face amount of checks clearing the Borrower's account on such
Business Day (the "Borrower's Cash Requirements"). Each Agent and each Lender
hereby agrees to make such Revolving Loans at such times, so long as all
applicable conditions to making such Revolving Loans contained in this Agreement
have been satisfied, including without limitation all of the conditions
contained in SECTION 4.2. All such Revolving Loans shall be disbursed by the
Administrative Agent, on behalf of the Lenders, to the Borrower's demand deposit
account described in SECTION 2.1(C). The Borrower, the Agents and the Lenders
agree that the foregoing authorization shall be deemed to be a continuing
request by the Borrower for the advance by the Administrative Agent, on behalf
of the Lenders, of Revolving Loans, that is remade on each Business Day on which
the amount of the Borrower's Cash Requirements is greater than zero. Thus, each
advance by the Administrative Agent, on behalf of the Lenders, under this
SECTION 2.1(E) shall be deemed to have been made in
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response to a request therefor by the Borrower. No telephonic or written request
for advances shall be required in order to authorize the Administrative Agent,
on behalf of the Lenders, to make the advances described in this SECTION 2.1(E).
Each Revolving Loan made under this SECTION 2.1(E) shall be deemed to be a
Domestic Rate Portion.
2.2. LETTERS OF CREDIT.
(a) GENERAL TERMS. Provided there does not then
exist a Default or an Event of Default, and subject to the provisions of SECTION
4, the Administrative Agent shall, from time to time, up to and including the
day before the last day of the Initial Term or, if extended pursuant to SECTION
2.9, any subsequent Term, issue upon the Borrower' request and for the
Borrower's account, irrevocable standby and documentary letters of credit
(collectively, the "Letters of Credit"). The Letter of Credit Exposure for
Standby Letters of Credit shall not at any time exceed the Standby Letter of
Credit Limit, the Letter of Credit Exposure for commercial Letters of Credit
shall not at any time exceed the Commercial Letter of Credit Limit, the
aggregate Letter of Credit Exposure shall not at any time exceed the Letter of
Credit Limit and the amount otherwise available for Revolving Loans to the
Borrower shall be reduced by one hundred percent (100%) of the amount of the
aggregate Letter of Credit Exposure for commercial Letters of Credit (provided,
that in the Collateral Agent's reasonable judgment, such percentage may be
reduced to fifty percent (50%) with respect to any portion of such Letter of
Credit Exposure that relates to the purchase of Franchise Inventory and eighty
percent (80%) with respect to any portion of such Letter of Credit Exposure that
relates to the purchase of Non-Franchise Inventory) and by one hundred percent
(100%) of the aggregate Letter of Credit Exposure with respect to standby
Letters of Credit and shall be increased by the portion of the aggregate Letter
of Credit Exposure that is cash collateralized to the Administrative Agent's
satisfaction. Payments made by the Administrative Agent to any Person on account
of any Letter of Credit shall constitute Revolving Loans hereunder, the proceeds
of which Revolving Loans shall be used to reimburse the Administrative Agent for
such payments.
(b) TERM. Each Letter of Credit issued shall
have an expiry date not later than the earlier of (i) twelve (12) months from
the date of issuance (or be cancelable not later than twelve (12) months from
the date of issuance and each renewal) or (ii) the last day of the Initial Term
or any renewal Term, if applicable.
(c) GENERAL CHARACTERISTICS. Each Letter of
Credit issued hereunder shall be payable in U.S. Dollars, conform to the general
requirements of the Administrative Agent for the issuance of standby or
commercial letters of credit, as the case may be, as to form and substance, and
be a letter of credit which the Administrative Agent may lawfully issue.
(d) APPLICATIONS. At the time the Borrower
requests a Letter of Credit to be issued (or prior to the first issuance of a
Letter of Credit in the case of a continuing application), the Borrower shall
execute and deliver to the Administrative Agent an application for such Letter
of Credit in the form then customarily prescribed by the Administrative Agent
(individually an "Application" and collectively the "Applications"). Subject to
the other provisions of this Section, the obligation of the Borrower to
reimburse the Administrative Agent for drawings under a Letter
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of Credit shall be governed by the Application for such Letter of Credit.
Anything contained in the Applications to the contrary notwithstanding, (i) in
the event the Administrative Agent is not reimbursed by the Borrower for the
amount the Administrative Agent pays on any draft drawn under a Letter of Credit
issued hereunder by 12:00 p.m. (Chicago time) on the date when such drawing is
paid, the obligation of the Borrower to reimburse the Administrative Agent for
the amount of such draft paid shall bear interest (which the Borrower hereby
promises to pay on demand) from and after the date the draft is paid until
payment in full thereof at the rate per annum determined by adding two percent
(2%) to the interest rate applicable to the Domestic Rate Portions as from time
to time in effect, (ii) the Borrower shall pay fees in connection with each
Letter of Credit as set forth in SECTION 2.6(C) hereof, (iii) prior to the
occurrence of a Default or an Event of Default, the Administrative Agent will
not call for additional collateral security or guaranties for the obligations of
the Borrower under the Applications other than the collateral security
contemplated by this Agreement and the other Financing Agreements and (iv) prior
to the occurrence of a Default or an Event of Default, the Administrative Agent
will not call for the funding of a Letter of Credit by the Borrower prior to
being presented with a draft drawn thereunder (or, in the event the draft is a
time draft, prior to its due date).
(e) LETTER OF CREDIT INDEMNITY. The Borrower
hereby agrees to protect, indemnify, pay and save the Administrative Agent
harmless from and against any and all claims, actions, causes of action,
judgments, suits, obligations, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees and disbursements)
which it may incur or be subject to as a consequence, direct or indirect, of the
issuance of the Letters of Credit, or any drawing or purported drawing
thereunder, other than as a result of the gross negligence or willful misconduct
of the Administrative Agent. Except for the Administrative Agent's gross
negligence or willful misconduct, the Borrower shall assume all risks of the
acts, omissions or misuse of the Letters of Credit by the beneficiaries thereof.
Except for the Administrative Agent's gross negligence or willful misconduct,
the Administrative Agent shall not be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of the Letters of
Credit, even if it should in fact prove to be in any or all aspects invalid,
insufficient, inaccurate, fraudulent or forged; (b) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign the Letters of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (c) for errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (d) for errors in interpretation of
technical terms; (e) for any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under the Letters of Credit or
of the proceeds thereof; and (f) for any consequences arising from causes beyond
the control of the Administrative Agent.
2.3. PRINCIPAL BALANCE OF LIABILITIES NOT TO EXCEED THE
FACILITY LIMITS AND SUBLIMITS.
The sum of the aggregate outstanding principal balance of
the Loans made under this Agreement and the aggregate Letter of Credit Exposure
shall not, at any given time, exceed the Maximum Facility. The Borrower agrees
that if at any time any such excess shall arise, the
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Borrower shall promptly pay to the Administrative Agent, for the account of the
Lenders, such amount as may be necessary to eliminate such excess, together with
accrued interest thereon. The Borrower further agrees that if at any time any of
the limits or ratios contained in SECTION 2.1 or 2.2 are exceeded, the Borrower
shall promptly pay to the Administrative Agent, for the account of the Lenders,
such amount as may be necessary to eliminate such excess, together with accrued
interest thereon.
2.4. BORROWER'S LOAN ACCOUNT.
The Administrative Agent shall maintain a loan account
(the "Loan Account") on its books in which shall be recorded (a) all Loans made
and Letters of Credit issued by the Lenders, or the Administrative Agent for the
account of the Lenders, pursuant to this Agreement, (b) all payments made on all
such Loans and Letters of Credit and (c) all other appropriate debits and
credits as provided in this Agreement or any of the other Financing Agreements,
including without limitation all fees, charges, expenses and interest. At its
request, the Borrower may have access to the information in the Loan Account by
direct computer link-up with the Administrative Agent. All entries in the Loan
Account shall be made in accordance with the Administrative Agent's customary
accounting practices as in effect from time to time. The Borrower promises to
pay the amount reflected as owing by it under its Loan Account and all of its
other obligations hereunder as such amounts become due or are demanded or
declared due pursuant to the terms of this Agreement, subject to the last
sentence of SECTION 2.5.
2.5. STATEMENTS.
All Loans to, and Letters of Credit issued for the benefit
of, the Borrower, and all other debits and credits provided for in this
Agreement or any of the other Financing Agreements, shall be evidenced by
entries made by the Administrative Agent in its internal data control systems
showing the date, amount and reason for each such debit or credit. Until such
time as the Administrative Agent shall have rendered to each Lender and the
Borrower written statements of account as provided herein, the balance in the
Loan Account, as set forth on the Administrative Agent's most recent computer
printout, shall be rebuttably presumptive evidence of the amounts due and owing
the Lenders by the Borrower. From time to time, the Administrative Agent shall
render to the Borrower a statement setting forth the balance of the Loan
Account, including principal, interest, expenses and fees. Each such statement
shall be subject to subsequent adjustment by the Administrative Agent but shall,
absent manifest or objectively verifiable errors or omissions, be presumed
correct and binding upon the Borrower and shall constitute an account stated
unless, within sixty (60) days after receipt of any statement from the
Administrative Agent, the Borrower or any Lender shall deliver to the
Administrative Agent written objection thereto specifying the error or errors,
if any, contained in such statement.
2.6. INTEREST.
The Borrower shall pay to the Administrative Agent, for
the account of the Lenders, interest on the outstanding principal balance of the
Loans outstanding to the Borrower, as follows:
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(a) Subject to all of the terms and conditions of this Agreement,
portions of the Revolving Loans (all of the Revolving Loans bearing interest at
the same rate for the same period of time being hereinafter referred to as a
"Portion") may, at the option of the Borrower, bear interest with reference to
the Domestic Rate (a "Domestic Rate Portion") or with reference to an Adjusted
LIBOR ("LIBOR Portions") and Portions may be converted from time to time from
one basis to the other. All of the Revolving Loans to the Borrower which are not
part of a LIBOR Portion shall constitute a single Domestic Rate Portion. All of
the Revolving Loans which bear interest with reference to a particular Adjusted
LIBOR for a particular Interest Period shall constitute a single LIBOR Portion.
There shall not be more than five (5) LIBOR Portions applicable to the Revolving
Loans outstanding to the Borrower at any one time. Anything contained herein to
the contrary notwithstanding, the obligation of Lenders to create, continue or
effect by conversion any LIBOR Portion shall be conditioned upon the fact that
at the time no Default or Event of Default shall have occurred and be
continuing. The Borrower hereby promises to pay interest on each Portion at the
rates and times specified in this SECTION 2.
(i) The Domestic Rate Portions shall bear
interest at the rate per annum determined by adding the Applicable Domestic
Margin to the Domestic Rate as in effect from time to time. Interest on the
Domestic Rate Portions shall be payable monthly on the first day of each month
in each year (commencing June 1, 1996) and at maturity of the Revolving Loans
and interest after maturity (whether by lapse of time, acceleration or
otherwise) shall be due and payable upon demand. Any change in the interest rate
on the Domestic Rate Portions resulting from a change in the Domestic Rate shall
be effective on the date of the relevant change in the Domestic Rate.
(ii) Each LIBOR Portion shall bear interest for
each Interest Period selected therefor at a rate per annum determined by adding
the Applicable LIBOR Margin to the Adjusted LIBOR for such Interest Period.
Interest on each LIBOR Portion shall be due and payable on the last day of each
Interest Period applicable thereto and interest after maturity (whether by lapse
of time, acceleration or otherwise) shall be due and payable upon demand. The
Borrower shall notify Administrative Agent on or before 12:00 p.m. (Chicago
time) on the third Business Day preceding the end of an Interest Period
applicable to a LIBOR Portion whether such LIBOR Portion is to continue as a
LIBOR Portion, in which event the Borrower shall notify the Administrative Agent
of the new Interest Period selected therefor, and in the event the Borrower
shall fail to notify Administrative Agent, such LIBOR Portion shall
automatically be converted into and added to the Domestic Rate Portion of the
Borrower as of and on the last day of such Interest Period.
(iii) Each LIBOR Portion shall be in a
minimum amount of One Million Dollars ($1,000,000) or such greater amount which
is an integral multiple of One Hundred Thousand Dollars ($100,000); and the
aggregate amount of all LIBOR Portions shall not at any time exceed the Maximum
Facility.
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(b) Upon the occurrence and during the
continuation of any Default hereunder, the Borrower hereby provides to pay
interest on the outstanding principal balance of the Loans owing by the Borrower
at a rate per annum of two percent (2%) PLUS the otherwise applicable rate of
interest specified above in SECTION 2.6 (A); the foregoing will be in addition
to any increase in the Applicable LIBOR Margin or the Applicable Domestic Margin
caused by the occurrence of such Default.
(c) All interest shall be computed on the basis
of a year of three hundred sixty (360) days for the actual number of days
elapsed.
2.7. FEES.
(a) The Borrower shall pay to the Administrative
Agent, for the account of the Lenders, an unused facility fee determined by (i)
subtracting from the Maximum Facility, the sum of the average daily outstanding
Revolving Loans during the immediately preceding calendar month and the average
daily Letter of Credit Exposure during the immediately preceding calendar month,
(ii) multiplying the portion of the result that is less than or equal to
Twenty-Five Million Dollars ($25,000,000) by one-eighth of one percent (0.125%)
per annum, (iii) multiplying the portion of the result that exceeds Twenty-Five
Million Dollars ($25,000,000), if any, by one-quarter of one percent (0.25%)
per annum and (iv) adding together the amounts described in clauses (ii) and
(iii). The unused facility fees shall be computed on the basis of a year of
three hundred sixty (360) days for the actual number of days elapsed and shall
be payable monthly in arrears on the first day of each calendar month commencing
June 1, 1996.
(b) The Borrower shall pay to the Administrative
Agent, for the account of the Lenders, a Letter of Credit fee equal to one-half
of one percent (0.50%) per annum of the average aggregate Letter of Credit
Exposure for Letters of Credit during the immediately preceding calendar month,
computed on the basis of a year of three hundred sixty (360) days for the actual
number of days elapsed. In addition, the Borrower will pay to the Administrative
Agent, for its own account, the Administrative Agent's customary issuance and
processing charges and fees for all Letters of Credit. All of the foregoing fees
and charges shall be payable monthly in arrears on the first day of each
calendar month commencing June 1, 1996. Following the occurrence and during the
continuance of a Default, the Letter of Credit fees shall be charged at the per
annum rate of two and one-half percent (2.50%) of the average aggregate Letter
of Credit Exposure for Letters of Credit during the immediately preceding
calendar month.
(c) The Borrower shall pay an audit fee which
shall be computed in accordance with the Collateral Agent's standard operating
procedures (which currently is computed at the rate of Five Hundred Dollars
($500) per auditor per day), which shall be payable by the Borrower as incurred.
The Collateral Agent shall conduct all audits, but the Administrative Agent
shall be entitled to send its auditors along with those of the Collateral Agent;
if the Administrative Agent's auditors are participating in any audit, as
opposed to merely observing the same, the Borrower will be required to pay the
audit fees with respect to non-duplicative work conducted by the Administrative
Agent's auditors, in addition to the audit fees with respect to the Collateral
Agent's auditors. The audit fees shall be paid to the Administrative Agent for
distribution to the Collateral
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Agent and the Administrative Agent, as appropriate. The Borrower shall pay to
the Administrative Agent all reasonable travel and other reasonable
out-of-pocket audit expenses incurred by the Collateral Agent and the
Administrative Agent, which shall be payable by the Borrower as incurred. The
Agents and the Lenders agree that unless a Default or an Event of Default is in
existence, the Borrower shall not be liable for audit fees, costs and expenses
for more than three (3) audits in any calendar year, plus the audit fees, costs
and expenses of any audits conducted pursuant to the last paragraph of the
definition of the term "Permitted Acquisitions."
(d) The Borrower shall pay to the Administrative
Agent, for the account of the Collateral Agent, an agency fee equal to
Seventy-Five Thousand Dollars ($75,000) per annum, payable quarterly in advance
in equal installments of Eighteen Thousand Seven Hundred Fifty Dollars
($18,750), commencing on the Closing Date and continuing on each quarterly
anniversary thereof.
(e) The Borrower shall pay to the Administrative
Agent, for the account of the Agents, an arrangement fee in the amount of Two
Hundred Fifty Thousand Dollars ($250,000). The arrangement fee shall be fully
earned and payable on the Closing Date.
2.8. TERM OF THIS AGREEMENT.
This Agreement shall be effective until May 3, 2001 (the
"Initial Term"), and may be renewed for successive periods ("Terms") of one year
upon the prior written agreement of the Borrower and each Lender, unless
terminated as provided in this SECTION 2.8 or following prepayment under SECTION
2.9. Each party hereto shall have the right to terminate this Agreement at the
end of the Initial Term or at the end of any subsequent Term by giving the other
parties ninety (90) days prior written notice as set forth below; PROVIDED,
HOWEVER, that (a) all of each Agent's and each Lender's rights and remedies
under this Agreement and (b) the security interests created under SECTION 5.1
and under any of the other Financing Agreements, shall survive such termination
until all of the Liabilities under this Agreement and the other Financing
Agreements (including without limitation contingent reimbursement obligations
with respect to Letters of Credit) have been paid in full. In addition, the
Lenders may demand repayment of the Liabilities and the Liabilities may be
accelerated, each as set forth in SECTION 9.1. Upon the effective date of
termination, all of the Liabilities shall become immediately due and payable
without notice or demand. Notwithstanding any termination, until all of the
Liabilities hereunder shall have been fully paid and satisfied, the Collateral
Agent shall be entitled to retain its security interests, for the benefit of the
Lenders, in and to all existing and future Collateral and the Designated
Companies shall continue to remit collections of Accounts and proceeds as
provided herein.
2.9. OPTIONAL PREPAYMENTS.
The Borrower may, at its option, prepay at any time during
the Initial Term or any renewal Term all or any portion of the Liabilities.
Prepayments of a portion of the Liabilities may be made by the Borrower without
incurring a premium or prepayment fee; PROVIDED, that the Collateral Agent shall
not be required to release its security interests, for the benefit of the
Lenders, in any of the Collateral in connection with any such partial
prepayment. If the Borrower prepays all of the Liabilities in full prior to the
end of the Initial Term or any renewal Term and terminates
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this Agreement, the Borrower shall pay the Administrative Agent, for the benefit
of the Lenders, as liquidated damages and compensation for the costs of the
Lenders' being prepared to make funds available to the Borrower under this
Agreement, a prepayment fee equal to (a) three percent (3%) of the Maximum
Facility if such prepayment and termination occurs on or prior to the first
anniversary of the date hereof, (b) two percent (2%) of the Maximum Facility if
such prepayment and termination occurs after the first anniversary of the date
hereof and on or prior to the second anniversary of the date hereof, or (c) one
percent (1%) of the Maximum Facility if such prepayment and termination occurs
after the second anniversary of the date hereof, but on or prior to the third
anniversary of the date hereof or during any renewal Term, as applicable.
2.10. LIMITATION ON CHARGES.
It being the intent of the parties that the rate of
interest and all other charges to the Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges otherwise required to be
paid under this Agreement would exceed the limit which the Lenders may lawfully
charge the Borrower, then the obligation to pay interest or other charges shall
automatically be reduced to such limit and, if any amounts in excess of such
limit shall have been paid, then such amounts shall be refunded to the Borrower,
on a pro rata basis among the Lenders, so that under no circumstances shall the
interest or other charges required to be paid by the Borrower hereunder exceed
the maximum rate allowed by law.
2.11. METHOD FOR MAKING PAYMENTS.
(a) All payments that the Borrower is required
to make to either Agent or any Lender under this Agreement or under any of the
other Financing Agreements shall be made in immediately available funds not
later than 1:00 p.m. (Chicago time) on the date of payment at the Administrative
Agent's office at 111 West Monroe Street, Chicago, Illinois 60603, or at such
other place as the Administrative Agent directs from time to time, or, in the
Administrative Agent's sole discretion, by appropriate debits to the Loan
Account. Payments made after 1:00 p.m. (Chicago time) shall be deemed to have
been made on the next succeeding Business Day.
(b) The Borrower, the Collateral Agent and the
Lenders hereby authorize the Administrative Agent, and the Administrative Agent
may, in its sole discretion, charge to the Borrower at any time when due, all or
any portion of any of the Liabilities, including without limitation principal,
interest, fees, costs and expenses for which the Borrower is liable under the
terms of this Agreement or any other Financing Agreement, by charging any bank
account of the Borrower with the Administrative Agent or by advancing the amount
thereof as a Revolving Loan, in each case, on behalf of the Lenders; PROVIDED,
that the provisions of this SECTION 2.11(B) shall have no effect on the
Borrower's obligation to pay when due all amounts payable by the Borrower under
this Agreement or any other Financing Agreement. The Administrative Agent agrees
to provide notice to the Borrower of each charge or advance made by it under
this SECTION 2.11(B) as soon thereafter as is reasonably practicable.
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2.12. METHOD OF SELECTING RATE OPTIONS; ADDITIONAL PROVISIONS
REGARDING LIBOR PORTIONS.
(a) The Borrower shall notify the Administrative
Agent by 12:00 p.m. (Chicago time) at least three (3) Business Days prior to the
date upon which the Borrower requests that any LIBOR Portion be created or that
any part of its Domestic Rate Portion be converted into a LIBOR Portion. If any
request is made to convert a LIBOR Portion into a Domestic Rate Portion
available hereunder, such conversion shall only be made so as to become
effective as of the last day of the Interest Period applicable thereto. All
requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or oral and the
Administrative Agent is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person the
Administrative Agent in good faith believes to be an authorized representative
of the Borrower without the need of independent investigation, the Borrower
hereby indemnifying the Administrative Agent from any liability or loss ensuing
from so acting.
(b) Notwithstanding any other provision of this
Agreement, if at any time any Lender shall determine in good faith that any
change in applicable laws, treaties or regulations or in the interpretation
thereof makes it unlawful for such Lender to create or continue to maintain any
LIBOR Portion, it shall promptly so notify the Borrower and the Administrative
Agent and the obligation of the Lenders to create, continue or maintain any such
LIBOR Portion under this Agreement shall terminate until it is no longer
unlawful for such Lender to create, continue or maintain such LIBOR Portion. The
Borrower, on demand, shall, if the continued maintenance of any such LIBOR
Portion is unlawful, thereupon, prepay the outstanding principal amount of the
affected LIBOR Portion, together with all interest accrued thereon and all other
amounts payable to the Lenders with respect thereto under this Agreement;
PROVIDED, HOWEVER, that the Borrower may elect to convert the principal amount
of the affected Portion into another type of Portion available hereunder,
subject to the terms and conditions of this Agreement.
(c) Notwithstanding any other provision of this
Agreement, if prior to the commencement of any Interest Period, any Lender shall
determine in good faith that deposits in the amount of any LIBOR Portion
scheduled to be outstanding during such Interest Period are not readily
available to such Lender in the relevant market or, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining Adjusted LIBOR, then such Lender shall promptly give notice thereof
to the Borrower and the Administrative Agent and the obligations of the Lenders
to create, continue or effect by conversion any such LIBOR Portion in such
amount and for such Interest Period, shall terminate until deposits in such
amount and for the Interest Period selected by the Borrower shall again be
readily available in the relevant market and adequate and reasonable means exist
for ascertaining Adjusted LIBOR.
(d) In the event any Lender shall incur any
loss, cost or expense (including without limitation any loss (excluding loss of
profit), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired or contracted to be acquired by such Lender
to fund or maintain any LIBOR Portion or the relending or reinvesting of such
deposits or other funds or amounts paid or prepaid to such Lender) as a result
of:
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(i) any payment of a LIBOR Portion on a date
other than the last day of the then applicable Interest Period for any reason,
whether before or after Default, and whether or not such payment is required by
any provisions of this Agreement; or
(ii) any failure by the Borrower to create,
borrow, continue or effect by conversion a LIBOR Portion on the date specified
in a notice given pursuant to this Agreement;
then upon the demand of such Lender, the Borrower shall pay to such Lender such
amount as will reimburse such Lender for such loss, cost or expense. If a Lender
requests such a reimbursement, it shall provide to the Borrower and the
Administrative Agent a certificate setting forth the computation of the loss,
cost or expense giving rise to the request for reimbursement in a reasonable
detail and such certificate shall be conclusive if reasonably determined.
(e) Any Lender may, at its option, elect to
make, fund or maintain Portions of the Loans hereunder at such of its branches
or offices as such Lender may from time to time elect.
(f) Notwithstanding any provision of this
Agreement to the contrary, each Lender shall be entitled to fund and maintain
its funding of all or any part of the Loans in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all determinations
hereunder shall be made as if such Lender had actually funded and maintained
each LIBOR Portion during each Interest Period applicable thereto through the
purchase of deposits in the relevant market in the amount of such LIBOR Portion,
having a maturity corresponding to such Interest Period, and bearing an interest
rate equal to the LIBOR for such Interest Period.
2.13. YIELD PROTECTION.
If in the reasonable interpretation of either Agent or any
Lender the adoption of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) after the date hereof, or any change therein after the date hereof, or any
change in the interpretation or administration thereof after the date hereof, or
the compliance of such Agent or Lender therewith after the date hereof,
(a) subjects such Agent or Lender to any tax,
duty, charge, fee, deduction or withholding on or from payments due from the
Borrower (excluding taxation of the overall net income of such Agent or Lender
or taxation measured by the capital or assets of such Agent or Lender), or
changes the basis of taxation of payments to such Agent or Lender in respect of
the Financing Agreements or other amounts due it hereunder, or
(b) imposes or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
such Agent or Lender, or
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(c) imposes or increases or renders applicable
any special deposit, assessment, insurance charge, reserve or liquidity or other
similar requirement (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by such Agent or Lender, or
(d) imposes any other condition the result of
which is to increase the cost to such Agent or Lender of making, funding or
maintaining advances or reduces any amount receivable by such Agent or Lender in
connection with advances, or requires such Agent or Lender to make any payment
calculated by reference to the amount of advances held or interest received by
it, by an amount deemed material by such Agent or Lender, or
(e) affects the amount of capital required or
expected to be maintained by such Agent or Lender or any corporation controlling
such Agent or Lender and such Agent or Lender determines the amount of capital
required is increased by or based upon the existence of this Agreement or its
obligation to make loans hereunder or of commitments of this type,
then, within fifteen (15) days of demand by such Agent or Lender, the Borrower
shall pay such Agent or Lender that portion of such increased expense incurred
(including, in the case of CLAUSE (E), any reduction in the rate of return on
capital to an amount below that which it could have achieved but for such law,
rule, regulation, policy, guideline or directive and after taking into account
such Agent's or Lender's policies as to capital adequacy) or reduction in an
amount received which such Agent or Lender determines is attributable to making,
funding and maintaining the Financing Agreements.
3. REPORTING AND ELIGIBILITY REQUIREMENTS/COLLATERAL.
3.1. MONTHLY REPORTS AND WEEKLY REPORTS.
The Borrower shall submit to the Collateral Agent, not
later than the twentieth (20th) day of each month, a report (the "Monthly
Report"), accompanied by a certificate in the form attached hereto as EXHIBIT B,
which shall be signed by the chief financial officer of the Borrower. Each
Monthly Report shall include, as of the last business day of the preceding
month, on a consolidated basis: (a) an aged trial balance of each Designated
Company's Accounts (the "Accounts Trial Balance") indicating which Accounts
remain unpaid thirty (30), sixty (60) and ninety (90) days past the invoice date
thereof and, in each case, listing the names of all applicable Account Debtors;
(b) a reconciliation of Inventory and Accounts of each Designated Company in the
forms attached hereto as EXHIBIT C; (c) an aging with respect to accounts
payable (including book overdrafts) of each Designated Company; (d) the
outstanding principal balance of the Liabilities owing by the Borrower (which
representation regarding the balance of the Liabilities will not, in any event,
be binding on the Lenders); and (e) if requested by the Collateral Agent, a
listing of all outstanding guarantees of the Borrower and its Subsidiaries, if
any.
In addition, with respect to Inventory, each Monthly
Report shall include, (i) at all times, (A) a schedule of Inventory valued at
average cost of the Designated Companies (the "Initial Schedules of Inventory")
and separately listing (x) the total value of all Franchise Inventory, (y) the
total value of all Non-Franchise Inventory, (z) the total value of all Inventory
owned by each
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Designated Company by location or in the possession of any public warehouseman,
processor, assembler, consignee or other bailee; and (B) a sales backlog report
and (ii) at all times on and after November 1, 1996, an additional schedule of
Inventory valued at average cost of the Designated Companies (the "Additional
Schedules of Inventory") and separately listing (v) the total value of all
Franchise Inventory purchased from each individual vendor or distributor, (w)
the total value of all Franchise Inventory of each product type or group, (x)
the Franchise Inventory turnover rate of each product type or group for the
prior month, which shall be equal to (I) the product of the aggregate cost of
goods sold for such product type or group for the applicable month, divided by
(II) the aggregate gross book value of such product type or group on the first
day of such month, (y) the total value of all Inventory line items that have an
average cost of less than Two Hundred Dollars ($200) and (z) the total value of
Franchise Inventory that cannot be returned to the vendor or distributor
thereof. The Borrower and the Agents agree to meet on or about August 1, 1996 to
discuss the information that will required to be reported in the Additional
Schedules of Inventory with respect to Non-Franchise Inventory. The Initial
Schedules of Inventory and the Additional Schedules of Inventory are hereinafter
collectively referred to as the "Schedules of Inventory."
In addition, not less than once each week the Borrower shall provide
the Collateral Agent a written report in the form of EXHIBIT D hereto (the
"Weekly Report") signed by the chief financial officer of the Borrower (or any
Person authorized by the Borrower pursuant to a written list provided to the
Administrative Agent), describing, in a form and with such specificity as is
satisfactory to the Collateral Agent, all Eligible Accounts created or acquired
by any Designated Company subsequent to the immediately preceding Weekly Report.
The Borrower shall furnish copies of any other reports or information, in a form
and with such specificity as is reasonably satisfactory to the Collateral Agent,
concerning Accounts included, described or referred to in the Weekly Reports and
any other documents in connection therewith requested by the Collateral Agent in
its reasonable discretion, including without limitation, but only if
specifically requested, copies of all invoices prepared in connection with such
Accounts. The Weekly Reports shall also include, in a form and with such
specificity as is reasonably satisfactory to the Collateral Agent, information
on all amounts collected by any Designated Company on Accounts subsequent to the
immediately preceding Weekly Report. The Weekly Reports shall contain such
additional information as the Collateral Agent shall reasonably require.
The Collateral Agent hereby agrees to provide each Lender with such
information delivered to the Collateral Agent under this SECTION 3.1 as such
Lender shall request from time to time.
3.2. ELIGIBLE ACCOUNTS.
The Collateral Agent shall have the right, in its
reasonable business judgment, to determine which Accounts of the Designated
Companies are eligible ("Eligible Accounts"). In addition, without limiting the
Collateral Agent's reasonable business judgment, unless otherwise agreed by the
Collateral Agent in writing, or unless otherwise determined from time to time by
the Requisite Lenders in their reasonable business judgment, the following
Accounts are not Eligible Accounts: (a) undated Accounts which remain unpaid
more than ninety (90) days from the
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original invoice date; (b) dated Accounts which remain unpaid more than ninety
(90) days from the original invoice date; (c) all Accounts owing by a single
Account Debtor, including currently scheduled Accounts, if fifty percent (50%)
or more of the balance owing by such Account Debtor to the applicable Designated
Company is ineligible for any reason; (d) Accounts with respect to which the
Account Debtor is a director, officer or employee of any Company or any
Affiliate of any Company; (e) Accounts with respect to which the Account Debtor
is the United States of America or any department, agency or instrumentality
thereof, unless the applicable Designated Company assigns its right to payment
of such Accounts to the Collateral Agent, for the benefit of the Lenders,
pursuant to, and in full compliance with, the Assignment of Claims Act of 1940,
as amended; (f) Accounts with respect to which the Account Debtor is not a
resident of the continental United States or Canada (other than the province of
Quebec), unless (i) the sale is on letter of credit, guaranty or acceptance
terms, in each case reasonably acceptable to the Collateral Agent in the
exercise of its discretion and such letter of credit, guaranty or acceptance has
been assigned to the Collateral Agent in a manner reasonably satisfactory to the
Collateral Agent, (ii) the sale is supported by credit insurance reasonably
acceptable to the Collateral Agent and the proceeds of such credit insurance
have been assigned to the Collateral Agent in a manner reasonably satisfactory
to the Collateral Agent or (iii) the Account Debtor maintains a place of
business in the United States, has agreed in writing that such Account will be
serviced and paid out of such place of business and the Collateral Agent is
satisfied, in its reasonable business judgment, with the financial condition and
assets of such place of business of such Account Debtor; provided, that the
Collateral Agent agrees to consider on a case-by-case basis, in its reasonable
business judgment, treating as Eligible Accounts, Accounts owing from Account
Debtors that are multinational corporations operating in industrialized
countries outside of the United States or the Canadian provinces other than
Quebec; (g) Accounts in dispute or with respect to which the Account Debtor has
asserted in writing, or if the Borrower or any Lender has reason to believe the
Account Debtor is entitled to assert, a counterclaim or has asserted in writing,
or if the Borrower or any Lender has good reason to believe the Account Debtor
is entitled to assert, a right of setoff, including without limitation any
potential offset for advertising rebates, in any case, to the extent of such
dispute, counterclaim or setoff; (h) Accounts with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired, as
determined by the Collateral Agent in the exercise of its reasonable business
judgment; (i) Accounts with respect to which the Collateral Agent does not have
a first and valid fully perfected security interest for the benefit of the
Lenders; (j) Accounts with respect to which the Account Debtor is the subject of
bankruptcy or a similar insolvency proceeding or has made an assignment for the
benefit of creditors or whose assets have been conveyed to a receiver or
trustee; (k) Accounts with respect to which the Account Debtor's obligation to
pay the Account is conditional upon the Account Debtor's approval or is
otherwise subject to any repurchase obligation or return right, as with sales
made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval or
consignment basis, but exclusive of return obligations in respect of breaches of
customary warranties made in the ordinary course of a Designated Company's
business; (l) Accounts to the extent that the Account Debtor's indebtedness to
the applicable Designated Company exceeds a credit limit determined by the
Collateral Agent in the Collateral Agent's reasonable business judgment; (m)
Accounts which arise out of sales not made in the ordinary course of the
applicable Designated Company's business; (n) Accounts with respect to which the
Account Debtor has returned to the applicable Designated Company all or any
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portion of the Inventory the sale of which gave rise to such Accounts, to the
extent of such returns; and (o) Accounts with respect to which any document or
agreement executed or delivered in connection therewith, or any procedure used
in connection with any such document or agreement, fails in any material respect
to comply with the requirements of applicable law, or with respect to which any
representation or warranty contained in this Agreement is untrue in any material
respect. If the Borrower determines that previously scheduled Eligible Accounts
with an aggregate value in excess of One Hundred Thousand Dollars ($100,000)
have ceased to be Eligible Accounts under any of the above described criteria,
the Borrower shall promptly notify the Collateral Agent thereof. Notwithstanding
anything to the contrary contained in this Agreement, (i) at all times from the
Closing Date through May 31, 1996, All American Semiconductor of Canada, Inc.
("Canada") shall be deemed to be a Designated Company and Accounts of Canada
that are otherwise Eligible Accounts shall be deemed to be Eligible Accounts, in
each case even though the requirements of SECTION 7.15 have not been fully
satisfied with respect to Canada and (ii) regardless of whether there has been
compliance with the provisions of SECTION 7.15 with respect thereto, the
Accounts of Programming Plus Incorporated ("Plus") shall not be deemed to be
Eligible Accounts until such time as the Collateral Agent has completed an audit
or, in the Collateral Agent's reasonable discretion, other investigation of the
assets of Plus, with results satisfactory to the Collateral Agent, and has
notified the Borrower thereof in writing, which notice shall include the
Collateral Agent's determination with respect to the eligibility of and advance
rates applicable to such Accounts.
3.3. ACCOUNT WARRANTIES.
With respect to Accounts scheduled, listed or referred to
on the initial Accounts Trial Balance, on any subsequent Accounts Trial Balance
or on any Weekly Report or Monthly Report, the Borrower warrants and represents
to Lenders that: (a) a Designated Company is the lawful owner of such Accounts
and has the right to subject such Accounts to a security interest in favor of
the Collateral Agent, for the benefit of the Lenders; (b) they are genuine, are
in all material respects what they purport to be, and are not evidenced by a
judgment; (c) they represent undisputed, bona fide transactions completed
substantially in accordance with the material terms and provisions contained in
the documents delivered to the Collateral Agent with respect thereto; (d) the
amounts shown on the respective Accounts Trial Balance, the respective Weekly
Report or Monthly Report, the books and records of the Designated Companies, and
all invoices and statements which may be delivered to the Collateral Agent with
respect thereto, are actually and absolutely owing to the applicable Designated
Company and are not in any way contingent; (e) no payments have been or shall be
made thereon except payments promptly delivered to the Administrative Agent
pursuant to this Agreement; (f) except as indicated on such Accounts Trial
Balance, Weekly Report or Monthly Report, there are no setoffs, counterclaims or
disputes asserted, or, to the best of the Borrower's knowledge, existing
(including without limitation any potential offsets for advertising rebates),
with respect thereto and no Designated Company has made any agreement with any
Account Debtor for any deduction therefrom except a discount or allowance
allowed by such Designated Company in the ordinary course of its business for
prompt payment; (g) there are no facts, events or occurrences of which the
Borrower has knowledge which in any way impair the validity or enforcement
thereof or reduce the amount payable thereunder as shown on the respective
Accounts Trial Balance, the respective Weekly Report
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or Monthly Report, the books and records of the Designated Companies, and all
invoices and statements delivered to the Collateral Agent with respect thereto;
(h) to the best of the Borrower's knowledge, all Account Debtors have the
capacity to contract and are solvent; (i) the services furnished and/or goods
sold giving rise thereto were not, at the time of sale by the applicable
Designated Company to any Account Debtor, subject to any lien, claim,
encumbrance or security interest except that of the Collateral Agent, for the
benefit of the Lenders, and except as specifically permitted below; (j) it has
no knowledge of any fact or circumstance which would impair the validity or
collectibility thereof; (k) to the best of the Borrower's knowledge, there are
no proceedings or actions which are threatened or pending against any Account
Debtor which might result in any material adverse change in such Account
Debtor's financial condition; and (l) such Accounts satisfy the objective
criteria for inclusion as Eligible Accounts set forth in SECTION 3.2.
3.4. VERIFICATION OF ACCOUNTS.
The Collateral Agent shall have the right, at any time or
times hereafter, in the Collateral Agent's name or in the name of a nominee of
the Collateral Agent or in the name of the Borrower or any Designated Company,
to verify, in accordance with the Collateral Agent's normal lending practices,
the validity, amount or any other matter relating to any Accounts, by mail,
telephone, telegraph or otherwise (other than in person).
3.5. ACCOUNT COVENANTS.
The Borrower shall promptly upon the Borrower's learning
thereof: (a) inform the Collateral Agent in writing of any material delay in the
performance by the applicable Designated Company of any of its obligations to
any Account Debtor or of any assertion of any claims, offsets or counterclaims
by any Account Debtor, in either case in excess of Two Hundred Thousand Dollars
($200,000); and (b) furnish to and inform the Collateral Agent of all material
adverse information relating to the financial condition of any Account Debtor
that has Accounts outstanding that in the aggregate exceed Two Hundred Thousand
Dollars ($200,000).
3.6. COLLECTION AND APPLICATION OF ACCOUNTS AND PAYMENTS.
(a) The Borrower shall establish accounts (the
"Blocked Accounts") in the Borrower's name at any location of Bank or one or
more financial institutions acceptable to the Agents, to which the Borrower will
deposit, and cause each other Designated Company to deposit, within one (1)
Business Day of receipt thereof, all payments made with respect to Accounts or
for Inventory or services provided by the Borrower or such other Designated
Company, in the identical form in which such payment was made, whether by cash
or check. The Borrower, and each institution with which a Blocked Account is
established, shall acknowledge and agree, in a manner satisfactory to the
Administrative Agent, that the amounts on deposit in such Blocked Accounts are
the sole and exclusive property of the Administrative Agent, for the account of
the Lenders, for purposes of providing collateral security for the Liabilities,
that such financial institution has no right to set off against the Blocked
Account, and that such financial institution will wire or otherwise transfer in
immediately available funds in a manner satisfactory to the Administrative
Agent, funds deposited in the Blocked Account on a daily basis, as such funds
are
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collected, to an account designated by the Administrative Agent. Notwithstanding
the foregoing, the Borrower shall direct, and cause each other Designated
Company to direct, all of the Borrower's and such other Designated Company's
Account Debtors to direct payments of Accounts to post office boxes maintained
by the Bank or such other financial institution(s). The Borrower will agree that
all payments made to such post office boxes shall be deposited to the Blocked
Accounts in a manner satisfactory to the Administrative Agent. The Borrower will
also agree that the amounts deposited in the post office boxes are the sole and
exclusive property of the Administrative Agent, for the benefit of the Lenders,
for purposes of providing collateral security for the Liabilities. The Borrower
and any Designated Companies, Affiliates, shareholders, directors, officers,
employees, agents or those Persons acting for or in concert with the Borrower
shall, acting as trustee for the Administrative Agent, receive any monies,
checks, notes, drafts or any other payment relating to and/or proceeds of
Accounts, Inventory or other Collateral which come into the possession or under
the control of the Borrower or any such Designated Companies, Affiliates,
shareholders, directors, officers, employees, agents or those Persons acting for
or in concert with the Borrower, and, within one (1) Business Day of receipt
thereof, shall remit the same or cause the same to be remitted, in kind, to the
Blocked Accounts. The Borrower agrees to pay to the Administrative Agent and the
Bank any and all reasonable fees, costs and expenses which the Administrative
Agent or the Bank incurs in connection with opening and maintaining the post
office boxes and the Blocked Accounts and depositing for collection by the
Administrative Agent any check or item of payment received and/or delivered to
the Administrative Agent on account of the Liabilities.
(b) The Borrower agrees that all payments
received by the Administrative Agent, whether in respect of the Accounts or as
proceeds of other Collateral or otherwise, (x) for purposes of determining Loan
Availability, will be applied on account of the Liabilities on the Business Day
received or deemed received pursuant to SECTION 2.11(A) and (y) for purposes of
calculating interest on the Loans, will be applied on account of the Liabilities
on the second Business Day after receipt of funds in respect thereof, in either
case, with any balance of such proceeds not applied to the Liabilities to be
held by the Administrative Agent as security for the Liabilities. The
Administrative Agent, for its own account, shall be entitled to the benefit of
any funds so received by it in respect of the Accounts or as proceeds of other
Collateral before they are applied to the Liabilities or held as security as
provided herein. Prior to the occurrence of a Default or Event of Default, all
payments made by the Borrower and all proceeds of Collateral shall be applied by
the Administrative Agent against the outstanding Liabilities as follows:
(i) first, to any outstanding fees, charges and
expenses then due to either Agent or any Lender;
(ii) second, to outstanding interest charges then
due in respect of the Liabilities;
(iii) third, to the outstanding principal
balance of the Revolving Loans and reimbursement obligations in
respect of drafts drawn under Letters of Credit; and
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(iv) finally, to be applied to, or held as
security for, any remaining unpaid or unsatisfied Liabilities.
Notwithstanding CLAUSE (III) above, prior to the occurrence of a Default or an
Event of Default, and after any payments required under CLAUSES (I) and (II)
above have been made, to the extent any LIBOR Portions are outstanding and there
is no Domestic Rate Portion outstanding to the Borrower, the Borrower may direct
that such proceeds be held in a cash collateral account maintained by the
Administrative Agent and not applied to the Liabilities consisting of LIBOR
Portions until the earlier of (i) the last day of the Interest Period applicable
to such LIBOR Portions and (ii) the occurrence of a Default or an Event of
Default; PROVIDED further, that unless a Default or an Event of Default is in
existence, the funds held in such cash collateral account, at the Borrower's
direction, (x) shall be invested at the Bank as directed by the Borrower (to the
extent such investments are available at the Bank), with interest thereon
accruing for the Borrower's account or (y) shall be disbursed, at the Borrower's
direction, so long as after giving effect to such disbursement, the Borrower is
in compliance with the applicable limit and ratios contained in SECTIONS 2.1 and
2.2 of this Agreement. Except as otherwise specifically provided for herein, the
Borrower hereby irrevocably waives the right to direct the application of
payments and collections at any time received by the Administrative Agent, the
Collateral Agent or any Lender from or on behalf of the Borrower, and the
Borrower hereby irrevocably agrees that the Administrative Agent shall have the
continuing exclusive right to apply and reapply any and all such payments and
collections received at any time by the Administrative Agent, the Collateral
Agent or such Lender against the Liabilities in such manner as the
Administrative Agent may deem advisable.
3.7. APPOINTMENT OF THE COLLATERAL AGENT AS THE BORROWER'S
ATTORNEY-IN-FACT
The Borrower hereby irrevocably designates, makes,
constitutes and appoints each of the Collateral Agent and the Administrative
Agent (and all Persons designated by each of them) as the Borrower's true and
lawful attorney-in-fact, and authorizes such attorney-in-fact, in the Borrower's
or such attorney-in-fact's name, to do the following at any time: (i) endorse
the Borrower's name upon any items of payment or proceeds of any Account of the
Borrower and deposit the same in the Administrative Agent's account on account
of the Liabilities; (ii) endorse the Borrower's name upon any chattel paper,
document, instrument, invoice, or similar document or agreement relating to any
Account of the Borrower or any goods pertaining thereto, on account of the
Liabilities; (iii) with respect to the Collateral Agent only, sign the
Borrower's name on any verification of Accounts of the Borrower and notices
thereof to Account Debtors, as provided in SECTION 3.4; (iv) take control in any
manner of any item of payment on or proceeds of any Account of the Borrower and
apply such item of payment or proceeds to the Liabilities; and (v) have access
to any lock box into which the Borrower's mail is deposited, and open all mail
addressed to the Borrower, process items of payment contained therein by
endorsing and depositing the same as provided in this Agreement and use
reasonable efforts to forward to the Borrower all other mail opened by the
Collateral Agent.
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3.8. CHATTEL PAPER AND INSTRUMENTS; EXPORT LETTERS OF CREDIT.
(a) Promptly upon any Designated Company's
receipt thereof, the Borrower shall deliver or cause to be delivered to the
Collateral Agent, with appropriate endorsement and assignment to vest title,
with full recourse to the applicable Designated Company, and possession in the
Collateral Agent, for the benefit of the Lenders, all chattel paper and
instruments which such Designated Company now owns or may at any time or times
hereafter acquire.
(b) Upon the direction of the Agents, the
Borrower will take all steps necessary to perfect or cause to be perfected the
Collateral Agent's security interest, for the benefit of the Lenders, in the
proceeds of any letters of credit of which any Designated Company is the
beneficiary, in connection with the sale of Inventory of such Designated
Company. Such steps shall include, without limitation (i) executing assignments
of the proceeds of such letters of credit, (ii) directing in writing the issuing
banks thereof to pay all proceeds of such letters of credit to a post office box
at the Bank, (iii) delivering the original letters of credit to the Collateral
Agent and (iv) delivering to the Collateral Agent such other agreements,
instruments and documents as are necessary to effect a draw under such letters
of credit and cooperating with the Collateral Agent in making any such draw.
3.9. NOTICE TO ACCOUNT DEBTORS.
The Collateral Agent may, in its sole discretion, at any
time or times that a Default is in existence, and without prior notice to the
Borrower, pursuant to a notice substantially in the form of EXHIBIT H attached
hereto, notify any or all Account Debtors that the Accounts have been assigned
to the Collateral Agent, for the benefit of the Lenders, that the Collateral
Agent, for the benefit of the Lenders, has a security interest therein, and that
all payments upon the Accounts be made directly to the Administrative Agent or
any account designated by the Administrative Agent. The Collateral Agent hereby
agrees to promptly provide subsequent notice to the Borrower that the Collateral
Agent has so notified any Account Debtor.
3.10. ELIGIBLE INVENTORY.
The Collateral Agent shall have the sole right, in its
reasonable business judgment, to determine which Inventory of each Designated
Company is eligible ("Eligible Inventory"). Without limiting the Collateral
Agent's reasonable business judgment, unless otherwise agreed by the Collateral
Agent in writing, or unless otherwise determined from time to time by the
Requisite Lenders in their reasonable business judgment, the following Inventory
is not Eligible Inventory: (a) Inventory which is in transit; (b) Inventory
which is not either currently usable or currently salable in the ordinary course
of a Designated Company's business; (c) Inventory which is obsolete or
slow-moving; (d) Inventory which the Collateral Agent determines, in the
exercise of its reasonable business judgment, to be unacceptable due to age,
type, category and/or quantity; (e) Inventory with respect to which the
Collateral Agent does not have a first and valid fully perfected security
interest, for the benefit of the Lenders; (f) Inventory which is stored with a
bailee, processor, assembler, warehouseman or similar third party, unless (i)
the Borrower has furnished or caused to be furnished to the Collateral Agent
such agreements, instruments and documents as the Collateral Agent has
reasonably specified with respect to such stored Inventory, including
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without limitation any negotiable warehouse receipts or other documents of title
and warehouseman's, processor's or similar agreements and (ii) the Collateral
Agent has received satisfactory Uniform Commercial Code searches of the
applicable Designated Company's name at such location; (g) Inventory which is
stored with a consignee; (h) Inventory for which a Designated Company has billed
an Account Debtor or as to which such Designated Company has received payment,
in each case regardless of whether such Inventory has been shipped to the
applicable Account Debtor; and (i) Inventory as to which any representation or
warranty contained in this Agreement is untrue in any material respect. If the
Borrower determines that previously scheduled Inventory with an aggregate value
in excess of One Hundred Thousand Dollars ($100,000) ceases to be Eligible
Inventory under any of the above described criteria, the Borrower shall promptly
notify the Collateral Agent thereof.
3.11. INVENTORY WARRANTIES.
With respect to Inventory scheduled, listed or referred to
in any Monthly Report or Weekly Report, the Borrower warrants that, except to
the extent that the Borrower has otherwise notified the Collateral Agent in
writing (a) a Designated Company is the lawful owner of such Inventory and has
the right to subject such Inventory to a security interest in favor of the
Collateral Agent, for the benefit of the Lenders; (b) it is located on one of
the premises listed on SCHEDULE 3.11 and is not in transit; (c) it is not
subject to any lien or security interest whatsoever except for the security
interests granted to the Collateral Agent, for the benefit of the Lenders and
except as specifically permitted below; (d) it is of good and merchantable
quality, free from any defects which would materially affect the market value of
such Inventory; and (e) it satisfies the objective criteria for inclusion as
Eligible Inventory set forth in SECTION 3.10. The Borrower further warrants
that, except to the extent that the Borrower has otherwise notified the
Collateral Agent in writing, any location at which five percent (5%) or more of
the aggregate Inventory of the Designated Companies is located is separately
identified as such on SCHEDULE 3.11.
3.12. INVENTORY RECORDS.
The Borrower shall maintain a perpetual inventory system
which accurately tracks all of the Inventory of the Designated Companies and
correctly and accurately itemizes and describes the kind, type, quantity and
value of Inventory, the average cost therefor and daily withdrawals therefrom
and additions thereto, all of which records shall be available during usual
business hours at the reasonable request of any Lender's officers, employees or
agents. In addition, the Borrower shall conduct cycle counting or physical
counts of the Inventory of the Designated Companies at any location at which
more than One Million Five Hundred Thousand Dollars ($1,500,000) of Inventory is
located, in accordance with the Borrower's normal and customary practices, and
shall supply the Collateral Agent with reports thereon on a quarterly basis, in
form, and with such specificity, as may be reasonably satisfactory to the
Collateral Agent; PROVIDED that at no time will Inventory with an aggregate
value in excess of six and one-half percent (6.5%) of total Inventory be
uncounted on at least an annual basis.
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3.13. SAFEKEEPING OF INVENTORY AND INVENTORY COVENANTS.
Neither either Agent nor any Lender shall be responsible for: (a) the
safekeeping of the Inventory of any Designated Company; (b) any loss or damage
to the Inventory of any Designated Company; (c) any diminution in the value of
the Inventory of any Designated Company; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency or any other Person. All risk
of loss, damage, destruction or diminution in value of the Inventory of any
Designated Company shall be borne by such Designated Company. No Inventory of
any Designated Company shall be stored with a bailee, warehouseman, processor,
assembler, consignee or similar third party unless the Borrower first (i)
obtains the Collateral Agent's written consent, which will not be unreasonably
withheld, and (ii) furnishes or to causes to be furnished to the Collateral
Agent such agreements, instruments and documents as the Collateral Agent shall
reasonably specify with respect to such stored Inventory, including without
limitation any negotiable warehouse receipts or other documents of title and
warehouseman's, processor's or similar agreements; provided, that
notwithstanding the foregoing, the Designated Companies may keep up to an
aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) of Inventory
located at such third party locations (other than consignees) without being
required to comply with such requirements, although such Inventory shall not be
deemed Eligible Inventory unless the requirements of CLAUSE (II) above have been
complied with in respect of such locations. The Collateral Agent hereby
consents, under CLAUSE (I) above, to the storing by the Borrower of Inventory
with Computer Resources Corporation and DOD Electronics Corp. in excess of Two
Hundred Fifty Thousand Dollars ($250,000). No Designated Company shall sell any
Inventory to any customer on consignment, on approval, on a bill-and-hold basis,
or on any other basis which entitles the customer to return or may obligate such
Designated Company to repurchase such Inventory, except that the Designated
Companies may have out on a consignment basis up to an aggregate of Two Hundred
Fifty Thousand Dollars ($250,000) of Inventory at any time. The Borrower shall
notify the Collateral Agent if any Designated Company has on its premises for
processing or otherwise, inventory or other goods owned by other Persons and the
Borrower agrees to keep or cause to be kept all such inventory and goods
segregated from the applicable Designated Company's own Inventory. The Borrower
agrees that if the Borrower (A) has not, on or before the Closing Date, provided
the Collateral Agent with a Landlord's Agreement duly executed by the owner of
each leased premise of a Designated Company at which One Million Dollars
($1,000,000) or more of Inventory is at any time located, the Inventory located
at such locations shall not be included in Eligible Inventory or (B) has not,
within thirty (30) days after the Closing Date, provided the Collateral Agent
with a Landlord's Agreement duly executed by the owner of each leased premise of
a Designated Company at which One Hundred Fifty Thousand Dollars ($150,000) or
more of Inventory is at any time located, the Inventory located at such
locations shall not be included in Eligible Inventory.
3.14. EQUIPMENT WARRANTIES.
With respect to the Equipment of the Designated Companies,
the Borrower warrants that, (a) except as disclosed on SCHEDULE 3.14, or by
written notice from the Borrower to the Collateral Agent, it is owned by a
Designated Company and is located on one of the premises listed on SCHEDULE
3.11, (b) it is not subject to any lien or security interest whatsoever except
for
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the liens and security interests specifically permitted below, and (c) it is in
working condition and repair and is currently used or usable in such Designated
Company's business.
3.15. SAFEKEEPING OF EQUIPMENT.
Neither either Agent nor any Lender shall be responsible
for: (a) the safekeeping of the Equipment of any Designated Company; (b) any
loss or damage to the Equipment of any Designated Company; (c) any diminution in
the value of the Equipment of any Designated Company; or (d) any act or default
of any repairman, bailee or any other Person with respect to the Equipment of
any Designated Company. All risk of loss, damage, destruction or diminution in
value of the Equipment of each Designated Company shall be borne by such
Designated Company.
3.16. REAL PROPERTY.
The Borrower represents and warrants that, except as
otherwise disclosed to the Collateral Agent by the Borrower from time to time in
writing, no Designated Company owns any real property and that all of the real
property leased to each Designated Company is disclosed on SCHEDULE 3.16.
3.17. MAINTENANCE OF PROPERTIES.
Each Designated Company shall maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all of the material assets and properties now or hereafter owned,
leased or otherwise possessed by it and shall make or cause to be made all
needful and proper repairs, renewals, replacements and improvements thereto.
3.18. COMMUNICATIONS WITH THE AGENTS AND THE LENDERS.
(a) Either Agent, in order to exercise its other
rights under this Agreement, may communicate directly with any service bureau,
warehousing service, freight forwarder, trade creditor, consignee, bailee,
processor, assembler, customer or other similar service or Person employed at
any time by any Designated Company. The applicable Agent will provide subsequent
notice to the Borrower of each such communication.
(b) The Borrower hereby authorizes each Agent
and each Lender to communicate directly with the independent certified public
accountants of the Designated Companies and authorizes such accountants to (i)
communicate directly with the Agents and the Lenders and (ii) disclose to the
Agents and the Lenders any and all financial statements any other information of
any kind that they may have with respect to the Designated Companies and their
respective business, financial and other affairs; provided, that no Lender shall
have any direct communication with the Borrower's accountants unless an Agent is
also a party to such communication. The Borrower further agrees that such
communications shall be without liability to each Agent, each Lender and such
accountants. The Borrower shall deliver a letter addressed to and acknowledged
by such accountants instructing them to comply with the provisions of this
Section. If the Designated Companies change accountants at any time while the
Liabilities are
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outstanding, the Borrower shall deliver to the Administrative Agent a new letter
that complies with the requirements of the immediately preceding sentence.
4. CONDITIONS OF ADVANCES.
4.1. CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTERS OF
CREDIT.
The obligation of each Lender that is a party to this
Agreement on the date hereof to make the initial Loans, and the Administrative
Agent to issue the initial Letters of Credit, is subject to satisfaction of the
following conditions precedent, all of which shall be deemed to be satisfied or
waived by virtue of the execution of this Agreement by the Lenders and the
Agents, in addition to those additional conditions provided in SECTION 4.2:
(a) Agents' counsel shall have completed its
legal due diligence relating to each Company, the results of which shall provide
each Agent and each Lender with results and information which, in such Agent's
and such Lender's sole determination, are satisfactory to permit such Agent and
Lenders to enter into the transactions described in this Agreement and the other
Financing Agreements.
(b) The liens on the Collateral granted under
this Agreement and the other Financing Agreements, and all other liens granted
to the Collateral Agent, for the benefit of Lenders, to secure the Liabilities,
shall be senior, perfected liens, except as disclosed in SECTION 6.5, and all
financing statements and other documents relating to the Collateral shall have
been filed or recorded, as appropriate.
(c) Each Agent and each Lender shall be
satisfied that each Designated Company shall have assets (excluding goodwill and
other intangible assets not capable of valuation) having a value, both at
present fair salable value and at fair valuation, greater than the amount of
such Designated Company's liabilities. Each Agent and each Lender shall be
satisfied that all of the assets supporting the Loans and Letters of Credit
under this Agreement shall be sufficient in value to provide the Borrower with
sufficient cash flow and working capital to enable it to thereafter profitably
operate its business and to meet its obligations as they become due. Each Agent
and each Lender shall be satisfied that each Designated Company has adequate
capital for the business in which it is about to engage.
(d) No law or regulation affecting either
Agent's or any Lender's entering into the secured financing transaction
contemplated by this Agreement shall impose upon such Agent or such Lender any
material obligation, fee, liability, loss, penalty, cost, expense or damage.
(e) All Exhibits and Schedules to this Agreement
shall have been completed and submitted to each Agent and each Lender, shall be
in form and substance satisfactory to such Agent and such Lender and shall
contain no facts or information which such Agent or such Lender, in its sole
judgment, determines to be unacceptable.
(f) All licenses, permits, consents, judicial
and regulatory approvals and corporate action necessary to consummate the making
of the initial Loans and the issuance of the
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initial Letters of Credit shall have been obtained on terms acceptable to each
Agent and each Lender.
(g) The Administrative Agent shall have received
the initial payment of the agency fee referred to in SECTION 2.7(D) and the
arrangement fee referred to in SECTION 2.7(E) and any other fees due and payable
by the Borrower or any other Person on the funding of the initial Loans and the
issuance of the initial Letters of Credit.
(h) In addition to this Agreement, each Agent
and each Lender shall have received all of the following, each duly executed
where appropriate and dated as of the date of the initial Loan (or such other
date as shall be satisfactory to the Agents), in form, and containing terms and
provisions, acceptable to such Agent and such Lender:
(i) A copy, duly certified by the secretary or
an assistant secretary of the Borrower of (A) resolutions of the Board of
Directors of the Borrower authorizing the borrowings by the Borrower hereunder,
the execution, delivery and performance by the Borrower of this Agreement and
each other Financing Agreement to which the Borrower is a party or by which it
is bound, and certain officers or employees of the Borrower to request
borrowings by telephone and to execute Weekly Reports and Monthly Reports, and
if necessary, the consent of the shareholders of the Borrower thereto, (B) all
documents evidencing any other necessary corporate action with respect to this
Agreement and the other Financing Agreements, (C) all approvals or consents, if
any, with respect to this Agreement and the other Financing Agreements, (D) a
list of the names of all officers and directors of the Borrower, together with
the true signatures of such officers and directors, and specifying those
authorized to sign this Agreement and the other Financing Agreements, (E) the
by-laws of the Borrower and (F) the Certificate of Incorporation of the
Borrower; and similar certificates executed by the secretary or assistant
secretary of each Guarantor;
(ii) The certificate of the President, Chairman
of the Board or chief financial officer of the Borrower certifying to the
fulfillment of all conditions precedent to closing and funding the transactions
contemplated by this Agreement, to the truth and accuracy, as of such date, of
the representations and warranties of the Borrower contained in this Agreement
and each other Financing Agreement to which the Borrower is a party or by which
it is bound and to the absence of any defaults under any such agreements;
(iii) A letter from Lazar Levine & Co., LLP in
the form of EXHIBIT G hereto;
(iv) A copy, duly certified by the Secretary of
State of the Borrower's state of incorporation, of the Borrower's Certificate of
Incorporation; and a copy, duly certified by the Secretary of State of the
applicable state, of each Guarantor's Articles or Certificate of Incorporation,
as applicable;
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(v) A copy, duly certified by the applicable
Secretary of State of (A) a certificate of good standing issued by the Secretary
of the State of each state where the Borrower and each Guarantor is qualified to
do business or where, because of the nature of its business or properties,
qualification to do business is required and (B) in any state in which the
Borrower or each Guarantor is doing business under an assumed name, a
certificate or other document issued by the Secretary of State of each such
state evidencing the Borrower's or each Guarantor's authority to use such name;
(vi) Legal opinion from Rubin Baum Levin
Constant Friedman & Bilzin, P.A., counsel for each Designated Company;
(vii) Evidence satisfactory to the Collateral
Agent of the existence of insurance on the Collateral, and business of each
Designated Company, in amounts and with insurers acceptable to the Collateral
Agent, together with evidence establishing that the Collateral Agent, for the
benefit of Lenders, is named as a loss payee with respect to property and
casualty insurance, collateral assignee with respect to business interruption
insurance and an additional insured with respect to liability insurance;
(viii) Written authorization and instructions
from the Borrower, for disbursement of the proceeds of the initial Loans and
issuance and delivery of the initial Letters of Credit;
(ix) A Landlord's Agreement, duly executed by
the owner of the facilities of the Designated Companies located at Miami,
Florida; Fremont, California; Wheat Ridge, Colorado; and Tustin, California; and
each other leased premise at which One Million Dollars ($1,000,000) or more of
Inventory is presently located or contemplated to be located;
(x) Warehouseman's Agreements duly executed by
each warehouseman used by any Designated Company to store its Inventory;
(xi) Processor's Agreements duly executed by
each processor or assembler used by any Designated Company to process its
Inventory;
(xii) A corporate guaranty executed by each
Company designated by Agents as a Guarantor, including without limitation each
of the Designated Companies;
(xiii) Revolving Credit Notes in the
aggregate amount of $100,000,000, each executed by the Borrower; a Solvency
Certificate executed by the Borrower; a Patent, Trademark and License Mortgage
executed by the Borrower; a Security Agreement executed by each Guarantor; and a
Pledge Agreement executed by the Borrower, together with original stock
certificates for the stock of each Subsidiary and stock powers executed in
blank; and
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(xiv) Such other documents as Agents and Lenders
shall reasonably determine to be necessary or desirable.
(i) As of the Closing Date, after giving effect
to (i) all Loans to be made and Letters of Credit to be issued on the Closing
Date, (ii) the consummation of the other transactions to be completed on or
before the Closing Date and (iii) the payment of all fees and expenses to be
paid on the Closing Date in connection with the foregoing, aggregate Excess Loan
Availability shall be at least Seven Million Dollars ($7,000,000).
(j) The Borrower shall have satisfied all
closing conditions described in the certain proposal letter dated March 5, 1996
executed by the Agents and agreed to by the Borrower, as modified by the certain
clarification letter dated March 15, 1996 executed by the Agents.
4.2. CONDITIONS TO ALL ADVANCES.
Notwithstanding any other provisions contained in this
Agreement, the making of any Loan or the issuance of any Letter of Credit
provided for in this Agreement, including any Loan to be made under SECTION
2.1(E), shall be conditioned upon the following:
(a) Compliance with the provisions of SECTION
2.1(D) or 2.1(E), as applicable.
(b) Neither a Default nor an Event of Default
shall have occurred and be continuing.
(c) The Agents and the Lenders shall have
received, in form and substance reasonably satisfactory to the Agents and the
Lenders, all certificates, orders, authorities, consents, affidavits, schedules,
instruments, security agreements, financing statements, mortgages and other
documents which are provided for hereunder, or which either Agent or any Lender
may at any time reasonably request.
(d) All of the representations and warranties
contained in this Agreement or any of the other Financing Agreements, including
without limitation those set forth in SECTION 6, but excluding those made only
as of a specific date, shall be true and correct in all material respects as of
the date the request for a Loan or Letter of Credit is made, as though made on
and as of such date.
5. COLLATERAL.
5.1. SECURITY INTEREST.
To secure payment and performance in full of the
Liabilities, the Borrower hereby grants to the Collateral Agent, for the benefit
of the Lenders, a right of setoff against and a continuing security interest in
and to the following property and interests in property, whether now owned or
hereafter owned or acquired by the Borrower and wheresoever located: (a)
Accounts, contract rights, General Intangibles, chattel paper, instruments,
investment property (including without limitation securities, whether
certificated or uncertificated, securities entitlements and securities
accounts), notes, letters of credit, warehouse receipts, shipping documents,
documents
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and documents of title; (b) Inventory; (c) Equipment; (d) deposit accounts
(general or special) with, and credits and other claims against, the Collateral
Agent, the Administrative Agent or any Lender, or any other financial
institution with which the Borrower maintains deposits; (e) monies, and any and
all other property and interests in property of the Borrower now or hereafter
coming into the actual possession, custody or control of the Collateral Agent,
the Administrative Agent or any Lender or any agent or affiliate of the
Collateral Agent, the Administrative Agent or any Lender in any way or for any
purpose (whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise); (f) interests in leases of real or personal property,
whether as lessor or lessee (including any option to purchase thereunder); (g)
all insurance proceeds of or relating to any of the foregoing; (h) books and
records relating to any of the foregoing and to the Borrower's business; and (i)
all accessions and additions to, substitutions for, and replacements, products
and proceeds of any of the foregoing.
5.2. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.
The Borrower shall execute and deliver to the Collateral Agent,
concurrently with the execution of this Agreement, and at any time or times
hereafter at the reasonable request of the Collateral Agent, all Uniform
Commercial Code financing statements or other documents (and pay the cost of
filing or recording the same in all public offices deemed necessary by the
Collateral Agent) as the Collateral Agent may reasonably request, in a form
reasonably satisfactory to the Collateral Agent, to perfect and keep perfected
the security interests in the Collateral granted by the Borrower to the
Collateral Agent, for the benefit of the Lenders, herein and in the other
Financing Agreements or to otherwise protect and preserve the Collateral and the
Collateral Agent's security interests therein, for the benefit of the Lenders.
Should the Borrower fail to do so, the Collateral Agent is authorized to sign
any such financing statements as the Borrower's agent. The Borrower further
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement;
provided, that the Agents and the Lenders agree that so long as such event would
cause a documentary stamp tax to be owing under the laws of the State of
Florida, the Collateral Agent shall not file a copy of this Agreement as a
financing statement in the State of Florida. At any time or times hereafter at
the request of the Collateral Agent, the Borrower shall execute and deliver to
the Collateral Agent such instruments and documents as the Collateral Agent, in
its reasonable discretion, requests in order to protect and preserve the
Collateral and perfect and enforce the Collateral Agent's security interests
therein, for the benefit of the Lenders. The Borrower shall pay all costs of
filing or recording such instruments and documents in all public offices deemed
necessary by the Collateral Agent.
5.3. LOSS OF VALUE OF COLLATERAL.
The Borrower shall immediately notify the Collateral Agent
of any loss or depreciation of at least Five Hundred Thousand Dollars ($500,000)
in the value of the Collateral, other than loss or depreciation occurring in the
ordinary course of a Designated Company's business.
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5.4. CASH COLLATERAL.
In the event that the Administrative Agent has issued any
Letters of Credit, the Administrative Agent may, at any time after (a) the
occurrence of a Default or an Event of Default, (b) demand for payment of the
Liabilities as provided in SECTION 9.1 hereof, (c) this Agreement shall
terminate for any reason pursuant to SECTION 2.8 above or (d) the sum of (i) the
outstanding principal balance of the Revolving Loans PLUS (ii) the aggregate
Letter of Credit Exposure, shall exceed the sum of (A) Loan Availability PLUS
(B) one hundred percent (100%) of the aggregate Letter of Credit Exposure for
commercial Letters of Credit (provided, that, in the Collateral Agent's
reasonable judgment, such percentage may be reduced to fifty percent (50%) with
respect to any portion of such Letter of Credit Exposure that relates to the
purchase of Franchise Inventory and eighty percent (80%) with respect to any
portion of such Letter of Credit Exposure that relates to the purchase of
Non-Franchise Inventory) and PLUS one hundred percent (100%) of the aggregate
Letter of Credit Exposure for standby Letters of Credit, request of the
Borrower, and the Borrower shall thereupon deliver to the Administrative Agent,
cash collateral for any Letter of Credit. If the Borrower fails to deliver such
cash to the Administrative Agent promptly upon the Agent's request therefor, the
Administrative Agent may, without limiting the Administrative Agent's rights or
remedies arising from such failure to deliver cash, retain, as cash collateral,
cash proceeds of the Collateral in an amount equal to the aggregate Letter of
Credit Exposure at such time. To the extent that the Administrative Agent
retains proceeds in accordance with the immediately preceding sentence at any
time any Liabilities are outstanding, the Administrative Agent shall apply such
cash and cash collateral to the payment of such Liabilities, including without
limitation to the payment of any or all of the Borrower's reimbursement
obligations with respect to any Letter of Credit. To the extent that no
Liabilities are outstanding at such time, the Administrative Agent may (but
shall not be obligated to) (y) invest the same in a savings account, under which
deposits are available for immediate withdrawal, with the Administrative Agent
or such other bank as the Administrative Agent may, in its sole discretion
select, or (z) hold the same as a credit balance in an account with the
Administrative Agent in the Borrower's name. Interest payable on any such
savings account described in the foregoing sentence shall be collected by the
Administrative Agent and shall be paid to the Borrower as it is received by the
Administrative Agent, less any fees owing by the Borrower to the Administrative
Agent with respect to any Letters of Credit and less any amounts necessary to
pay any of the Liabilities which may be due and payable at such time. The
Administrative Agent shall have no obligation to pay interest on any credit
balances in any account opened for the Borrower pursuant to this Agreement.
5.5. COLLATERAL AGENT NOT OBLIGATED OR LIABLE.
The Collateral Agent shall have no obligation whatsoever
to the other Lenders or to any other Person to assure that the Collateral exists
or is owned by the Designated Companies or is cared for, protected or insured or
that the liens or security interests granted to the Collateral Agent, for the
benefit of the Lenders, herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or continue exercising, any
of the rights, authorities and powers granted or available to the Collateral
Agent in this Agreement, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Collateral Agent
may act in any manner it may
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deem appropriate, in its sole discretion, given the Collateral Agent's own
interest in the Collateral as one of the Lenders.
6. WARRANTIES.
The Borrower represents and warrants to each of the Agents and the
Lenders that as of the date of this Agreement, and continuing as long as any
Liabilities remain outstanding, and (even if there shall be no Liabilities
outstanding) as long as this Agreement remains in effect:
6.1. CORPORATE EXISTENCE.
Each Designated Company is a corporation duly organized
and in good standing under the laws of the state of its incorporation and is
duly qualified as a foreign corporation and in good standing under the laws of
all other states where the nature and extent of the business transacted by it or
the ownership of its assets makes such qualification necessary, except those
states in which the failure to qualify would not be reasonably likely to have a
Material Adverse Effect. The state of incorporation of each Designated Company
and all states in which such Designated Company is qualified to do business as
of the date hereof, are listed on SCHEDULE 6.1 attached hereto.
6.2. CORPORATE AUTHORITY.
The execution and delivery by each Designated Company of
this Agreement and all of the other Financing Agreements and the performance of
such Designated Company of its obligations hereunder and thereunder: (a) are
within such Designated Company's corporate powers; (b) are duly authorized by
such Designated Company's Board of Directors and, if necessary, such Designated
Company's shareholders; (c) are not in contravention of the terms of such
Designated Company's Certificate or Articles of Incorporation, as applicable, or
By-Laws, or of any indenture, agreement or undertaking to which such Designated
Company is a party or by which such Designated Company or any of its property is
bound; (d) do not, as of the execution hereof, require any governmental consent,
registration or approval; (e) do not contravene any contractual or governmental
restriction binding upon such Designated Company; and (f) will not, except as
contemplated herein, result in the imposition of any lien, charge, security
interest or encumbrance upon any property of such Designated Company under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which such Designated Company is a party or
by which it or any of its property may be bound or affected.
6.3. BINDING EFFECT.
This Agreement and all of the other Financing Agreements
are the legal, valid and binding obligations of each Designated Company party
thereto, if any, and are enforceable against such Designated Company in
accordance with their terms.
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6.4. FINANCIAL DATA.
The Borrower has furnished to each Agent (a) its audited
consolidated financial statements dated December 31, 1995 (b) its unaudited
interim preliminary consolidated financial statements dated March 31, 1996,
together with a certificate of the Borrower's chief financial officer in the
form of EXHIBIT E hereto, and (c) quarterly Projections dated March 20, 1996,
covering the two-year period January 1, 1996 to and including December 31, 1997
and annual Projections dated March 20, 1996, covering the three-year period
January 1, 1998 through and including December 31, 2000 (collectively referred
to as the "Financials"), copies of all of which are attached hereto as SCHEDULE
6.4. All of the Financials (other than the Projections) have been, and all
financial statements to be furnished after the date hereof in accordance with
SECTION 7.1 (other than the Projections) will be, prepared in accordance with
the books and records of the Designated Companies, and either fairly present or
will fairly present, as applicable, the consolidated financial condition of the
Designated Companies at the dates thereof and the results of their respective
operations for the periods indicated (subject, in the case of unaudited
financial statements, to normal year-end adjustments). All of the Financials
(other than the Projections) have been, and all financial statements to be
provided after the date hereof will be, prepared in conformity with GAAP. The
Projections furnished on the date hereof have been, and the Projections to be
furnished in accordance with SECTION 7.1 will be, prepared by the Borrower and
its financial personnel in light of the past business of the Designated
Companies and represent or will represent, as applicable, as of the date
thereof, the good faith belief of the Borrower and such personnel as to the most
probable course of the business of the Designated Companies, subject to the
assumptions and qualifications stated therein. All information, reports and
other papers and data furnished or to be furnished to either Agent or any Lender
have been and will be, at the time the same are so furnished to such Agent or
Lender, accurate and correct in all material respects and complete insofar as
necessary to give each such Agent or Lender a true and accurate knowledge of the
subject matter thereof. Since the date of the Financials, there has been no
Material Adverse Change.
6.5. LIENS AND ENCUMBRANCES; LOCATIONS.
Except (a) as disclosed on SCHEDULE 6.5 attached hereto,
(b) as contemplated in SECTION 8.1 or (c) as otherwise contemplated herein, all
of the Collateral of each Designated Company is and will continue to be owned by
such Designated Company, has been fully paid for and is free and clear of all
security interests, liens, claims, and encumbrances. As of the date hereof, all
Collateral is and shall be kept only at the locations specified on SCHEDULE
3.11. The Borrower shall promptly notify the Collateral Agent in writing of any
changes in the locations of the Collateral.
6.6. SOLVENCY.
Each Designated Company is solvent, is able to pay its
debts as they become due and has capital sufficient to carry on its business and
all businesses in which it is about to engage, and now owns property having a
value both at fair valuation, and at present fair saleable value, greater than
the amount required to pay its debts, including without limitation the
Liabilities. The
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Eligible Inventory and the Eligible Accounts supporting the Revolving Loans to
the Borrower are sufficient in value to provide the Borrower and the other
Designated Companies with sufficient working capital and Excess Loan
Availability to enable them to profitably operate their businesses, meet all
debt amortization requirements and perform their obligations under the Financing
Agreements and the other agreements evidencing indebtedness of the Designated
Companies. No Designated Company will be rendered insolvent by the execution and
delivery of any of the Financing Agreements or by completion of the transactions
contemplated hereunder or thereunder.
6.7. PRINCIPAL PLACE OF BUSINESS.
As of the date hereof, the principal place of business and
chief executive office of each Designated Company is located at the address set
forth in SCHEDULE 3.11 attached hereto. If any change in such locations occur,
the Borrower shall promptly notify the Collateral Agent in writing thereof. As
of the date hereof, a substantial portion of the books and records of each
Designated Company and a substantial portion of the records of account of such
Designated Company are located at the principal place of business and chief
executive office of the Borrower and the balance of such books and records are
located at the principal place of business and chief executive office of such
Designated Company. If any change in such location occurs, the Borrower shall
promptly notify the Collateral Agent thereof.
6.8. OTHER CORPORATE NAMES.
Except as disclosed on SCHEDULE 6.8 attached hereto or as
disclosed by the Borrower from time to time by written notice to the Collateral
Agent, no Designated Company has used any corporate or fictitious name
(including any tradename, tradestyle, assumed name, division name or any similar
name), other than the corporate name shown on such Designated Company's
Certificate or Articles of Incorporation, as applicable.
6.9. TAX LIABILITIES.
Each Designated Company has filed all federal, state and
local tax reports and returns required by any law or regulation to be filed by
it, except for extensions duly obtained, and has either duly paid all taxes,
duties and charges indicated due on the basis of such returns and reports, or
made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is not
reasonably expected.
6.10. LOANS.
As of the date hereof, except as disclosed on SCHEDULE
6.10 attached hereto, and except for trade payables and normal accruals arising
in the ordinary course of each Designated Company's business since the date of
the latest financial statements delivered to the Lenders pursuant to SECTION
7.1, no Designated Company is obligated on any loan or other indebtedness for
borrowed money.
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6.11. MARGIN SECURITIES.
No Designated Company owns any margin securities and none
of the Loans advanced hereunder will be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System. If requested by any Lender, the Borrower will
furnish such Lender with a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in said Regulation. The Borrower also
warrants that no part of the proceeds of the Loans to be made hereunder will be
used by it or any of its Affiliates for any purpose which violates, or which is
inconsistent with, the provisions of Regulation X of said Board of Governors.
6.12. SUBSIDIARIES; JOINT VENTURES; PARTNERSHIPS.
As of the date hereof, no Designated Company has any
Subsidiaries except as set forth on SCHEDULE 6.12 attached hereto. No Designated
Company is engaged in any joint venture or partnership with any other Person,
except as set forth on SCHEDULE 6.12 attached hereto.
6.13. LITIGATION AND PROCEEDINGS.
As of the date hereof, except as disclosed on SCHEDULE
6.13 attached hereto, no judgments are outstanding against any Designated
Company, nor is there now pending or, to the best of the Borrower's knowledge,
threatened, any litigation, contested claim, or federal, state or municipal
governmental proceeding by or against any Designated Company, except judgments
and pending or threatened litigation, contested claims and governmental
proceedings which would not reasonably be likely to have a Material Adverse
Effect.
6.14. OTHER AGREEMENTS.
Except as disclosed on SCHEDULE 6.13 attached hereto, no
Designated Company is in default under any agreement, contract, lease, or
commitment to which it is a party or by which it is bound, which default would
be reasonably likely to have a Material Adverse Effect. There is no dispute
regarding any agreement, contract, lease, or commitment, which dispute would be
reasonably like to have a Material Adverse Effect.
6.15. EMPLOYEE CONTROVERSIES.
Except as disclosed on SCHEDULE 6.15 attached hereto, (a)
there are no controversies pending or, to the best of the Borrower's knowledge,
threatened, between any Designated Company and any of its respective employees,
other than employee grievances arising in the ordinary course of business which
would not, in the aggregate, be reasonably likely to have a Material Adverse
Effect, (b) each Designated Company is in material compliance with all federal
and state laws respecting employment and employment terms, conditions and
practices, except for such noncompliance as would not be reasonably likely to
have a Material Adverse Effect and (c) as of the date hereof, no Designated
Company has any union representation questions, grievances, discrimination or
unfair labor practice complaints pending or threatened against it.
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6.16. COMPLIANCE WITH LAWS AND REGULATIONS.
The execution and delivery by each Designated Company of
this Agreement and all of the other Financing Agreements and the performance of
its obligations hereunder and thereunder are not in contravention of any law or
laws, except for such noncompliance as would not be reasonably likely to have a
Material Adverse Effect. Each Designated Company has obtained all licenses,
authorizations, approvals and permits necessary in connection with the operation
of its business. Each Designated Company is in compliance with all laws, orders,
regulations and ordinances of all federal, foreign, state and local governmental
authorities relating to its business operations and assets, except for such
noncompliance as would not be reasonably likely to have a Material Adverse
Effect.
6.17. PATENTS, TRADEMARKS, LICENSES.
Each Designated Company possesses adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles, tradenames and similar assets to continue to conduct
its business as heretofore conducted by it, all of which are described on
SCHEDULE 6.17 attached hereto.
6.18. ENVIRONMENTAL MATTERS.
Except as disclosed on SCHEDULE 6.18 attached hereto, (a)
no Designated Company has Managed Hazardous Substances on or off its property
other than in compliance with Environmental Laws; (b) each Designated Company
has complied in all material respects with Environmental Laws regarding
transfer, construction on and operation of its business and property, including
but not limited to notifying authorities, observing restrictions on use,
transferring, modifying or obtaining permits, licenses, approvals and
registrations, making required notices, certifications and submissions,
complying with financial liability requirements, Managing Hazardous Substances
and Responding to the presence or Release of Hazardous Substances connected with
operation of the business or property; (c) the noncompliance by each Designated
Company with Environmental Laws would not be reasonably likely to have a
Material Adverse Effect; (d) no Designated Company has any material contingent
liability with respect to the Management of any Hazardous Substance; (e) no
Designated Company shall permit others to Manage, whether on or off its
respective property, Hazardous Substances connected with the operation of its
business or property, except in full compliance with Environmental Laws; (f)
each Designated Company shall take prompt action in compliance with
Environmental Laws to Respond to the on-site or off-site Release of Hazardous
Substances connected with the operation of its business or property; and (g) no
Designated Company has received any Environmental Notice.
6.19. FEES TO THIRD PARTIES.
As of the date hereof, except as set forth on SCHEDULE
6.19 attached hereto, no Company is in any way obligated to any Person in
respect of any finder's or broker's fee or similar commission in connection with
the closing of the transactions evidenced by the Financing Agreements. The
Borrower agrees to indemnify each Agent and each Lender and hold each
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Agent and each Lender harmless from any claims for any finder's or broker's fees
or similar commissions from any Persons.
6.20. SECURITIES MATTERS.
The making of the Loans and the issuance of the Letters of
Credit hereunder, the application of the proceeds and repayment thereof by the
Borrower, and the consummation of the transactions contemplated by the Financing
Agreements, have not violated and will not violate any provision of any federal
or state securities statutes, rules or regulations, or any order issued by the
Securities and Exchange Commission applicable to the Companies (collectively,
"Securities Laws"). The Borrower agrees to indemnify each Agent and each Lender
and hold each Agent and each Lender harmless from the claims of any Persons in
connection with such Securities Laws.
6.21. DISCLOSURE.
Except as corrected prior to the date hereof in writing,
no information provided or statements made by the Borrower or any of its
representatives to either Agent or any Lender contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading.
6.22. PENSION RELATED MATTERS.
Each employee pension or benefit plan (other than a
multiemployer plan within the meaning of Section 3(37) of ERISA and to which any
Designated Company or any ERISA Affiliate has or had any obligation to
contribute (a "Multiemployer Plan")) to which Section 4021(a) of ERISA applies
and (a) which is maintained for employees of such Designated Company or any
ERISA Affiliates or (b) to which such Designated Company or any ERISA Affiliates
made, or was required to make, contributions at any time within the preceding
five (5) years (a "Plan"), maintained by such Designated Company or any ERISA
Affiliate and each Multiemployer Plan complies, and has been administered in all
material respects in accordance with its term and all material applicable
requirements of ERISA and of the Internal Revenue Code of 1986, as amended (the
"Tax Code") and with all material applicable rulings and regulations issued
under the provisions of ERISA and the Tax Code setting forth those requirements.
No "Reportable Event," "Prohibited Transaction" (as each is defined below) or
withdrawal from a Multiemployer Plan has occurred and no funding deficiency
described in Section 302 of ERISA exists with respect to any Plan or
Multiemployer Plan which could have a Material Adverse Effect or a material
adverse effect on the financial condition, results of operation or business of
any ERISA Affiliate. Each Designated Company and each ERISA Affiliate has
satisfied all of the funding standards applicable to such Plans and
Multiemployer Plans under Section 302 of ERISA and Section 412 of the Tax Code
and the Pension Benefit Guaranty Corporation ("PBGC") has not instituted any
proceedings, and there exists no event or condition which would constitute
grounds for the institution of proceedings by PBGC, to terminate any Plan or
Multiemployer Plan under Section 4042 or ERISA which could have a Material
Adverse Effect or a material adverse effect on the financial condition, results
of operation or business of any ERISA Affiliate. No Designated Company or any
ERISA Affiliate has taken any steps to terminate any Plan, which termination
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could have a Material Adverse Effect or a material adverse effect on the
financial condition, results of operation or business of any ERISA Affiliate. No
Designated Company or any ERISA Affiliate has taken any steps to terminate its
participation in any Multiemployer Plan or withdraw from any Multiemployer Plan,
which termination or withdrawal could have a Material Adverse Effect or a
material adverse effect on the financial condition, results of operations or
business of such ERISA Affiliate. Each Designated Company and each ERISA
Affiliate has made all contributions to each Plan and each Multiemployer Plan to
which it has become obligated to contribute as to which the failure to make
contributions could have a Material Adverse Effect or a material adverse effect
on the financial condition, results of operation or business of such ERISA
Affiliate. No Designated Company is aware of any assessments or assertions of
withdrawal liability against it or any ERISA Affiliate with respect to any Plan
or Multiemployer Plan. The aggregate potential withdrawal liability under all
Multiemployer Plans to which each Designated Company and each ERISA Affiliate is
obligated to contribute is less than an amount which, if all such liabilities
were incurred, could have a Material Adverse Effect or a material adverse effect
on the financial condition, results of operation or business of such ERISA
Affiliate. For purposes hereof, (i) a "Prohibited Transaction" shall mean, with
respect to any Plan, any transaction described in Section 406 of ERISA which is
not exempt by reason of Section 408 of ERISA or the transitional rules set forth
in Section 414(c) of ERISA and any transaction described in Section 4975(c)(1)
of the Tax Code which is not exempt by reason of Section 4975(c)(2) or Section
4975(d) of the Tax Code, or the transitional rules of Section 2003(c) of ERISA
and (ii) a "Reportable Event" shall mean (x) a reportable event described in
Section 4043 of ERISA and regulations thereunder, (y) a withdrawal by a
substantial employer from a single-employer plan which is a Plan and which has
two or more contributing sponsors at least two of which are not under common
control, as referred to in Section 4063(b) of ERISA, or (z) a cessation of
operations at a facility causing more than twenty percent (20%) of plan
participants to be separated from employment, as referred to in ERISA.
6.23. AFFILIATE TRANSACTIONS.
Except as set forth in SECTION 8.14, no Designated Company
is a party to any contracts or agreements with any of its Affiliates that have
terms or conditions that are less favorable to such Designated Company than
would be usual and customary in similar contracts or agreements entered into at
arms length in the ordinary course of business between Persons not affiliated
with each other.
6.24. INVESTMENT COMPANY; PUBLIC UTILITY HOLDING COMPANY.
No Designated Company is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "public utility holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended. No Designated Company is subject to regulation under any federal,
state or foreign statute or regulation that limits its ability to incur
indebtedness or issue guaranties.
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7. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, as long as any Liabilities
remain outstanding, and (even if there shall be no Liabilities outstanding) as
long as this Agreement remains in effect, unless otherwise agreed in writing by
Requisite Lenders:
7.1. FINANCIAL STATEMENTS.
Except as otherwise expressly provided for herein, the
Borrower shall keep proper books of record and account in which full and true
entries will be made of all dealings or transactions of or in relation to the
business and affairs of each Designated Company, in accordance with GAAP, and
the Borrower shall cause to be furnished to the Administrative Agent (with
sufficient copies for each Lender): (a) as soon as practicable and in any event
within thirty (30) days after the end of each month, commencing no later than
ninety (90) days after the date hereof (i) statements of income and cash flow of
the Designated Companies for such month and for the period from the beginning of
the then current fiscal year to the end of such month and a balance sheet of the
Designated Companies as of the end of such month, accompanied by, in comparative
form, income statement and cash flow figures for the corresponding periods in
the immediately preceding fiscal year, all in reasonable detail and certified as
accurate by the chief financial officer of the Borrower, subject to changes
resulting from normal year-end adjustments (such certification to be in the form
of EXHIBIT E attached hereto); (ii) copies of such operating statements for such
month prepared by the Designated Companies for their internal use, including
without limitation statements of cash flow, purchases and sales of Inventory and
other similar data as either Agent may reasonably request, and (iii) a
comparison of actual cash flow, income statements and balance sheets with
amounts budgeted for such quarter (in the first year after the Closing Date) or
month (in subsequent years); (b) as soon as practicable and in any event within
thirty (30) days after the end of each fiscal quarter, trial balance sheets of
the Designated Companies for such quarter and from the period from the beginning
of the then current fiscal year to the end of such quarter, prepared on a
consolidating basis, all in reasonable detail and certified as accurate by the
chief financial officer of the Borrower, subject to changes resulting from
normal year-end adjustments (such certification to be in the form of EXHIBIT E
attached hereto; (c) as soon as practicable and in any event within ninety (90)
days after the end of each fiscal year, statements of income and cash flow of
the Designated Companies for such year, and a balance sheet of the Designated
Companies as of the end of such year, setting forth in each case, in comparative
form, corresponding figures for the period covered by the preceding annual audit
and as of the end of the preceding fiscal year, all in reasonable detail and
satisfactory in scope to the Lenders and prepared by an independent certified
public accountant selected by the Borrower and reasonably satisfactory to the
Requisite Lenders, whose opinion shall be unqualified and otherwise in scope and
substance reasonably satisfactory to the Lenders, together with trial balance
sheets of the Designated Companies for such fiscal year, prepared on a
consolidating basis, in reasonable detail and certified as accurate by the chief
financial officer of the Borrower (such certification to be in the form of
EXHIBIT E attached hereto); (d) as soon as practicable and in any event within
thirty (30) days after the end of each fiscal year of the Designated Companies,
Projections for the succeeding fiscal year; (e) as soon as practicable and in
any event within ten (10) Business Days of delivery to any Designated Company, a
copy of any letter issued by such Designated Company's independent
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certified public accountants or other management consultants with respect to the
financial or accounting systems or controls of such Designated Company; (f) as
soon as practicable (but in any event not more than five (5) days after the
chief financial officer of the Borrower obtains knowledge of the occurrence of
an event or the existence of a circumstance giving rise to a Default or an Event
of Default), notice of any and all Defaults and Events of Default hereunder; (g)
within five (5) Business Days of the filing thereof, copies of any filings made
by the Borrower with the Securities and Exchange Commission, other than Forms 3
and 4; and (h) and with reasonable promptness, such other business or financial
data in the Borrower's possession, that the Borrower normally prepares or that
the Borrower can prepare with reasonable efforts, as either Agent may reasonably
request.
All financial statements delivered to the Administrative Agent pursuant
to the requirements of this SECTION 7.1 (except where otherwise expressly
indicated) shall be prepared in accordance with GAAP and all such financial
statements (other than those specifically described as being prepared on a
consolidating basis) will be prepared for the Designated Companies on a
consolidated basis. Together with each delivery of financial statements required
by SECTIONS 7.1(A)(I), 7.1(B), 7.1(C) and 7.1(D) above, the Borrower shall
deliver to the Administrative Agent an officer's compliance certificate stating
that there exists no Default or Event of Default (such certification to be in
the form of EXHIBIT E attached hereto), or, if any Default or Event of Default
exists, specifying the nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto. Together with each
delivery of financial statements required by SECTION 7.1(C) above, the Borrower
shall deliver to the Administrative Agent a certificate of the accountants who
performed the audit in connection with such statements stating that in making
the audit necessary to the issuance of a report on such financial statements,
they have obtained no knowledge of any Default or Event of Default, or, if such
accountants have obtained knowledge of a Default or Event of Default, specifying
the nature and period of existence thereof. Such accountants shall not be liable
by reason of any failure to obtain knowledge of any Default or Event of Default
which would not be disclosed in the ordinary course of an audit. Such
certificate shall also contain an acknowledgment by such accountants that the
Agents and the Lenders are relying on such financial statements in making their
decisions with respect to the Loans. Each Agent and Lender shall exercise
reasonable efforts to keep such information, and all information acquired as a
result of any inspection conducted in accordance with SECTION 7.2, confidential,
PROVIDED, that each Agent and Lender may communicate such information to (w) any
other Person in accordance with the customary practices of commercial banks
relating to routine trade inquiries, (x) any regulatory authority having
jurisdiction over such Agent or Lender, (y) any other Person in connection with
any such Lender's sale of any assignments of, or any participations in, the
Liabilities, or (z) any other Person in connection with the exercise of either
Agent's or any Lender's rights hereunder or under any of the other Financing
Agreements.
7.2. INSPECTION.
Either Agent or any Person designated by either Agent in
writing, shall have the right, from time to time hereafter, to call at the
Borrower's or any other Designated Company's place or places of business (or any
other place where the Collateral or any information relating thereto is kept or
located) upon reasonable notice (which in the case of the sales offices of the
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Designated Companies shall be at least twenty four (24) hours in advance) during
ordinary business hours, and, without hindrance or undue delay, (a) to inspect,
audit, check and make copies of and extracts from the Borrower's or such
Designated Company's books, records, journals, orders, receipts and any
correspondence and other data relating to its business or to any transactions
between the parties hereto, (b) to make such verification concerning the
Collateral as such Agent may consider reasonable under the circumstances and (c)
to discuss the affairs, finances and business of the Borrower's or such
Designated Company with any officers, employees or directors of the Borrower or
such Designated Company. Notwithstanding the foregoing, unless an Event of
Default or Default is in existence, each Agent agrees not to visit any sales
office of any Designated Company without being accompanied by an employee of the
Borrower, unless the Borrower does not supply such employee within a reasonable
period after request therefor by such Agent. The Agents agree to make reasonable
efforts to ensure that all inspections and visits under this SECTION 7.2 do not
unduly interfere with the business being conducted at such place or places of
business. The Borrower shall pay on demand all reasonable photocopying expenses
incurred by either Agent under this SECTION 7.2.
7.3. CONDUCT OF BUSINESS.
Each Designated Company shall maintain its corporate
existence, maintain in full force and effect all licenses, permits,
authorizations, bonds, franchises, leases, patents, trademarks, contracts and
other rights necessary or desirable to the profitable conduct of its business,
continue in, and limit its operations to, the same general line of business as
that presently conducted and comply with all applicable laws, orders,
regulations and ordinances of all federal, foreign, state and local governmental
authorities, except for such laws, orders, regulations and ordinances the
violation of which would not, in the aggregate, be reasonably likely to have a
Material Adverse Effect.
7.4. CLAIMS AND TAXES.
The Borrower agrees to indemnify and hold each Agent and
each Lender and their respective affiliates, officers, directors, employees,
attorneys and agents harmless from and against any and all claims, demands,
liabilities, losses, damages, penalties, costs and expenses (including
reasonable attorneys' and paralegals' fees) relating to or in any way arising
out of the possession, use, operation or control of any Designated Company's
assets. The Borrower shall pay or cause to be paid all license fees, bonding
premiums and related taxes and charges applicable to any Designated Company and
shall pay or cause to be paid all of such Designated Company's real and personal
property taxes, assessments and charges and all of such Designated Company's
franchise, income, unemployment, use, excise, old age benefit, withholding,
sales and other taxes and other governmental charges assessed against such
Designated Company or payable by such Designated Company at such times and in
such manner as to prevent any penalty from accruing or any lien or charge from
attaching to its property; PROVIDED, that such Designated Company shall have the
right to contest in good faith, by an appropriate proceeding promptly initiated
and diligently conducted, the validity, amount or imposition of any such tax,
assessment or charge, and upon such good faith contest to delay or refuse
payment thereof, if (a) such Designated Company establishes adequate
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reserves to cover such contested taxes, assessments or charges and (b) such
contest would not be reasonably likely to have a Material Adverse Effect.
7.5. COSTS AND EXPENSES AS ADDITIONAL LIABILITIES.
The Borrower shall reimburse each Agent and, solely during
the continuance of a Default, each Lender, for all actual expenses and
reasonable actual fees paid or incurred in connection with (a) the
documentation, negotiation and closing of the Loans, the Letters of Credit and
the other transactions described in this Agreement and in the other Financing
Agreements, (b) any amendment, waiver or consent executed in connection with
this Agreement or any of the other Financing Agreements, (c) the enforcement or
preservation of each Agent's and each Lender's rights under this Agreement and
the other Financing Agreements, including without limitation stamp, document,
transfer, filing and recording fees and the expenses and reasonable fees of the
each Agent's and each Lender's auditors, attorneys and paralegals, and (d)
periodic searches of the public records for Code financing statements, tax
liens, judgments and suits, which shall be conducted by the Collateral Agent at
least once per year. All such actual costs and expenses incurred by either Agent
or, during the continuance of a Default, any Lender with respect to the
documentation, negotiation, enforcement, collection and protection of the
Collateral Agent's interests in the Collateral, for the benefit of the Lenders,
including without limitation the cost of such appraisals and environmental
update inspections as may hereafter be reasonably required by either Agent or
any Lender, shall be additional Liabilities of the Borrower, payable on demand,
and secured by the Collateral and shall, if not paid by the Borrower when due or
demanded, bear interest at the rate applicable to the Domestic Rate Portions.
Upon request therefor by the Borrower, each Agent agrees to provide to the
Borrower copies of any invoices for such fees and expenses.
7.6. LIABILITY INSURANCE.
Each Designated Company shall maintain, at its expense,
such public liability and third party property damage insurance in such amounts
and with such deductibles as is ordinarily maintained by other Persons engaged
in similar businesses and the Borrower shall deliver to the Collateral Agent the
original (or a certified) copy of each policy of insurance and evidence of the
payment of all premiums therefor. Such policies of insurance shall contain an
endorsement showing the Collateral Agent, for the benefit of the Lenders, as
additional insured thereunder and providing that the insurance company will give
the Collateral Agent at least ten (10) days prior written notice before any such
policy or policies of insurance shall be altered or cancelled.
7.7. PROPERTY INSURANCE.
Each Designated Company shall keep and maintain, at its
expense, its assets insured against loss or damage by fire, theft, explosion,
spoilage and all other hazards and risks ordinarily insured against by other
owners or users of such properties in similar businesses in an amount at least
equal to the full insurable value of all such property. Each Designated Company
shall maintain, at its expense, business interruption insurance in amounts
reasonably satisfactory to the Lenders. All such policies of insurance shall be
in form and substance satisfactory to the Lenders. The Lenders acknowledge that
the insurance of the Designated Companies in existence
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as of the date hereof is in form and substance satisfactory to the Lenders. The
Borrower shall deliver to the Collateral Agent the original (or a certified)
copy of each policy of insurance and evidence of payment of all premiums
therefor. Such policies of insurance shall contain an endorsement, in form and
substance satisfactory to the Collateral Agent, showing all loss payable to the
Collateral Agent, as its interests may appear, as provided below in this SECTION
7.7. Such endorsement, or an independent instrument furnished to the Collateral
Agent, shall provide that such insurance company will give the Collateral Agent
at least ten (10) days prior written notice before any such policy or policies
of insurance shall be altered or cancelled and that no act or default of any
Designated Company or any other Person shall affect the right of the Collateral
Agent to recover under such policy or policies of insurance in case of loss or
damage. The Borrower hereby directs all insurers under such policies of
insurance to pay all proceeds of insurance policies directly to the Collateral
Agent and the Collateral Agent shall turn over such amounts to the
Administrative Agent, for application, in the sole discretion of the Requisite
Lenders, either against the Liabilities (in such order as the Requisite Lenders,
in their sole discretion, may determine) or to permit the Borrower to use such
proceeds to restore or rebuild the damaged property. The Borrower irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent), as the Borrower's true
and lawful attorney-in-fact for the purpose of (a) making, settling and
adjusting claims under all such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance;
provided, that if no Event of Default or Default is in existence, the Borrower
shall be permitted to take such actions with respect to each claim of less than
Two Million Five Hundred Thousand Dollars ($2,500,000); and (b) endorsing the
name of the Borrower on any check, draft, instrument or other item of payment
received by the Borrower or the Collateral Agent pursuant to any such policies
of insurance. If any Designated Company at any time or times hereafter, shall
fail to obtain or maintain any of the policies of insurance required above or to
pay any premium in whole or in part relating thereto, then the Collateral Agent,
without waiving or releasing any obligation or default by the Borrower
hereunder, may at any time or times thereafter (but shall be under no obligation
to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which the Collateral Agent deems
advisable, and the amount so expended shall be part of the Liabilities, payable
on demand and secured by the Collateral and shall, if not paid by the Borrower
when due or demanded, bear interest at the rate applicable to the Domestic Rate
Portions.
7.8. PENSION PLANS.
Each Designated Company shall and shall cause each ERISA
Affiliate to (a) make contributions to all of the Plans and Multiemployer Plans
in a timely manner and in a sufficient amount to comply with the requirements of
ERISA; (b) comply with all material requirements of ERISA and the Tax Code which
relate to Plans and Multiemployer Plans, the failure to comply with which could
have a Material Adverse Effect or a material adverse effect on the financial
condition, results of operation or business of such ERISA Affiliate; (c) notify
the Administrative Agent promptly upon receipt by such Designated Company of any
notice of the institution of any proceeding or other action which may result in
the termination of any Plans or Multiemployer Plans; and (d) immediately notify
the Administrative Agent of the occurrence of a "Termination Event" (as defined
below). For purposes hereof, a "Termination Event" shall mean (i) the
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occurrence of a reportable event or a prohibited transaction, (ii) the complete
or partial withdrawal (as defined in SECTIONS 4203 AND 4205 of ERISA) by any
Designated Company or any ERISA Affiliate from a Multiemployer Plan, or the
receipt by such Designated Company or any ERISA Affiliate of a demand from any
Multiemployer Plan for withdrawal liability, (iii) the filing of a notice of
intent to terminate any Plan or the treatment of a plan amendment as a
termination of any such Plan under SECTION 4041 of ERISA, (iv) any action
causing termination under SECTION 4041A of ERISA of any Multiemployer Plan, (v)
the institution of proceedings to terminate any Plan or Multiemployer Plan by
the PBGC under SECTION 4042 of ERISA, or (vi) the occurrence of any other event
or condition which might constitute grounds under SECTIONS 4041A OR 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.
7.9. NOTICE OF SUIT OR ADVERSE CHANGE IN BUSINESS. The Borrower shall,
as soon as possible, and in any event within five (5) days after the Borrower
learns of the following, give written notice to the Administrative Agent of (a)
any proceeding(s) being instituted or threatened to be instituted by or against
any Designated Company in any federal, state, local or foreign court or before
any commission or other regulatory body (federal, state, local or foreign),
which proceeding, if unfavorably determined, would be reasonably likely to have
a Material Adverse Effect and (b) any Material Adverse Change.
7.10. SUPERVENING ILLEGALITY.
If, at any time or times hereafter, there shall become
effective any amendment to, deletion from or revision, modification or other
change in any provision of any statute, or any rule, regulation or
interpretation thereunder or any similar law or regulation, that either prevents
or adversely affects any Lender's ability to extend credit as described in this
Agreement and/or to sell assignments thereof, or participations therein, the
Borrower shall, at such Lender's option, either (a) pay to such Lender the then
outstanding balance of such Lender's Pro Rata Share of the Liabilities, (b)
indemnify and hold such Lender harmless from and against any and all
obligations, fees, liabilities, losses, penalties, costs, expenses and damages,
of every kind and nature, imposed upon or incurred by the Borrower by reason of
such Lender's failure or inability to comply with the terms of this Agreement or
any of the other Financing Agreements or (c) indemnify and hold such Lender
harmless from and against any and all obligations, fees, liabilities, losses,
penalties, costs, expenses and damages, of every kind and nature, imposed upon
or incurred by such Lender by reason of such amendment, deletion, revision,
modification, or other change. In the event that any such amendment to, deletion
from or revision, modification or other change does not materially adversely
affect a Lender's extension of credit described in this Agreement or the selling
of assignments thereof or participations therein, such Lender shall not elect
the provisions of CLAUSE (A) above.
7.11. ENVIRONMENTAL MATTERS.
The Borrower shall promptly notify and furnish the
Administrative Agent with a copy of any and all Environmental Notices which are
received by it or any of the Designated Companies. Each Designated Company shall
take prompt and appropriate action in response to
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any and all such Environmental Notices and the Borrower shall promptly furnish
the Administrative Agent with a description of the applicable Designated
Company's response thereto.
7.12. USE OF PROCEEDS.
The Borrower shall use the proceeds of the disbursements
of the Loans and the Letters of Credit solely for working capital and other
proper corporate purposes permitted under this Agreement. The proceeds of the
initial disbursements of the Loans and the initial issuance of the Letters of
Credit shall be used to repay certain obligations of the Borrower to CIBC Inc.
and SunTrust Bank/Miami, National Association and to pay closing costs and
expenses.
7.13. NOTICE OF BUSINESS INTERRUPTION.
The Borrower shall give the Administrative Agent prompt
notice if any Designated Company is enjoined, restrained, or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business affairs.
7.14. VENDOR CREDIT TERMS.
The Borrower agrees to provide the Agents with prompt
notice of any material adverse change in the payment terms or credit limits made
available to any Designated Company by any of the top twenty-five (25) vendors,
suppliers and distributors to the Designated Companies.
7.15. DESIGNATED COMPANIES.
Promptly upon request therefor by either Agent, the
Borrower shall (a) execute and deliver to the Collateral Agent a stock pledge
agreement with respect to the stock of any Designated Company not previously
pledged to the Collateral Agent, for the benefit of the Lenders and (b) cause
each Designated Company that has not previously done so, to execute and deliver
to the Collateral Agent a guaranty of the Liabilities, one or more security
agreements whereby such Designated Company grants to the Collateral Agent, for
the benefit of Lenders, a lien on substantially all of its assets, including
without limitation its Accounts, Inventory, Equipment, real estate and General
Intangibles and such additional agreements, instruments and documents (including
without limitation UCC financing statements and evidence of corporate authority)
as the Collateral Agent reasonably requests in connection therewith.
7.16. INVENTORY REPORTING.
On or before November 1, 1996, the Borrower shall have
implemented, to each Agent's satisfaction sufficient, internal systems to
provide the Additional Schedules of Inventory described in SECTION 3.1; and on
or before the Monthly Report due on December 20, 1996, the Borrower shall have
commenced to include an Additional Schedule of Inventory satisfactory to each
Agent with each Monthly Report; provided, that Inventory reporting with respect
to any business acquired by the Borrower in connection with any Permitted
Acquisition need not comply with this SECTION 7.16 until ninety (90) days after
the consummation of such Permitted Acquisition (but such Inventory shall not be
deemed to be Eligible Inventory unless the Borrower has either
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demonstrated that it will be able to comply with the terms of this SECTION 7.16
with respect to such Inventory or the Collateral Agent has satisfied itself, in
its reasonable business judgment, with the periodic reporting that the Borrower
is able to provide with respect to such Inventory.
8. NEGATIVE COVENANTS.
The Borrower covenants and agrees that as long as any Liabilities
remain outstanding, and (even if there shall be no Liabilities outstanding) as
long as this Agreement remains in effect, unless otherwise agreed in writing by
the Requisite Lenders:
8.1. ENCUMBRANCES.
Except as set forth on SCHEDULE 6.5 hereto, no Designated
Company will create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien or other encumbrance of any nature whatsoever on any of
its assets, other than: (a) liens securing the payment of taxes, either not yet
due or the validity of which is being contested in good faith by appropriate
proceedings, and as to which such Designated Company shall, if appropriate under
GAAP, have set aside on its books and records adequate reserves; PROVIDED,
HOWEVER, that such contest would not be reasonably likely to have a Material
Adverse Effect; (b) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course of
business; (c) other liens arising in the ordinary course of business of such
Designated Company that secure amounts that are not yet due and payable and
which could not be reasonably expected to have a Material Adverse Effect; (d)
purchase money security interests in Equipment or real estate purchased as
permitted by this Agreement; (e) liens and security interests in Equipment and
real property acquired in connection with a Permitted Acquisition, but securing
indebtedness not in excess of Two Million Five Hundred Thousand Dollars
($2,500,000) in the aggregate for all of the Designated Companies at any time
outstanding; and (f) liens and security interests in favor of the Collateral
Agent, for the benefit of the Lenders.
8.2. INDEBTEDNESS.
Except as set forth on SCHEDULE 6.10 attached hereto or as
permitted under SECTION 8.8 or 8.12 hereof, no Designated Company shall incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, any obligations or indebtedness, except, without duplication, (a) the
Liabilities, (b) trade payables, normal accruals and other normal obligations in
the ordinary course of business not more than thirty (30) days' past due and
payable, or with respect to which such Designated Company is contesting in good
faith the amount or validity thereof by appropriate proceedings, and then only
to the extent that such Designated Company has set aside on its books adequate
reserves therefor, in accordance with GAAP, (c) the Junior Debt; (d) purchase
money indebtedness relating to purchases of Equipment and real property not in
excess of Two Million Five Hundred Thousand Dollars ($2,500,000) in the
aggregate for all of the Designated Companies at any time outstanding, plus any
amounts listed on SCHEDULE 6.10 attached
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hereto and designated therein as purchase money indebtedness; (e) unsecured
indebtedness owing to the Borrower by any other Designated Company; (f)
indebtedness permitted under SECTION 8.1(D); (g) unsecured subordinated
indebtedness that has terms and is evidenced by documents satisfactory to the
Agents and that is subordinated to the Liabilities pursuant to a subordination
agreement in form and substance satisfactory to the Agents; (h) other unsecured
indebtedness incurred in connection with the consummation of any Permitted
Acquisition which in the aggregate for all of the Designated Companies does not
exceed Two Million Five Hundred Thousand Dollars ($2,500,000) at any time
outstanding and (i) other unsecured indebtedness which in the aggregate for all
of the Designated Companies does not exceed One Hundred Thousand Dollars
($100,000) at any time outstanding. Notwithstanding the foregoing, no individual
Designated Company other than the Borrower shall incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness (including without limitation trade payables and accounts),
including all types of obligations and indebtedness otherwise permitted under
this SECTION 8.2, which in the aggregate exceed One Hundred Thousand Dollars
($100,000) at any time outstanding, but exclusive of indebtedness incurred under
SECTION 8.2(E) (which will not be so limited), except that prior to November 30,
1996, Added Value may have such obligations and indebtedness not in excess of
One Million Three Hundred Fifty Thousand Dollars ($1,350,000), A.V.E.D. may have
such obligations and indebtedness not in excess of Two Hundred Twenty-Five
Thousand Dollars ($225,000), Philadelphia may have such obligations and
indebtedness not in excess of Four Hundred Twenty-Five Thousand Dollars
($425,000) and Chicago may have such obligations and indebtedness not in excess
of One Hundred Seventy-Five Thousand Dollars ($175,000). After the date hereof,
no Designated Company shall incur any indebtedness to any Company other than the
Borrower.
8.3. CONSOLIDATIONS, MERGERS OR ACQUISITIONS.
Without the prior written consent of the Requisite
Lenders, no Designated Company shall consolidate with, merge with, or otherwise
or in any manner acquire all or substantially all of the assets, stock or
properties of any other Person, other than another Designated Company, except
that the Borrower may consummate any Permitted Acquisition, including through
the formation of a New Subsidiary; provided that, except for the acquisition of
Programming Plus, no Permitted Acquisition may be consummated until after the
Borrower is in compliance with the terms of the portion of SECTION 7.16 that
must be completed on or before November 1, 1996. No Person, other than another
Designated Company, shall acquire all or substantially all of the stock or
assets of any Designated Company. Except for newly formed Subsidiaries of the
Borrower created pursuant to, or in connection with, a Permitted Acquisition, or
in connection with the opening of any new sales office, no Designated Company
shall create any additional Subsidiaries not in existence on the date hereof.
8.4. INVESTMENTS OR LOANS.
Except as set forth on SCHEDULE 8.4, no Designated Company
shall make or permit to exist investments or loans in or to any other Person,
except (a) investments in its Subsidiaries existing on the date hereof; (b)
investments in short-term direct obligations of the United States Government;
(c) investments in negotiable certificates of deposit issued by any Lender or by
any
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other bank satisfactory to the Administrative Agent, payable to the order of
such Designated Company or to bearer; (d) investments in commercial paper rated
A1 or P1; (e) loans made by the Borrower to another Designated Company; and (f)
Investments by the Borrower in any New Subsidiary in connection with the
consummation of any Permitted Acquisition. After the date hereof, no Designated
Company shall make any loan to or investment in any Company that is not a
Designated Company.
8.5. GUARANTEES.
Except as set forth in SCHEDULE 8.5, or in the definition
of the term "Permitted Acquisitions," no Designated Company shall guarantee,
endorse or otherwise in any way become or be responsible for obligations of any
other Person, whether by agreement to purchase the indebtedness of any other
Person or through the purchase of goods, supplies or services, or maintenance of
working capital or other balance sheet covenants or conditions, or by way of
stock purchase, capital contribution, advance or loan for the purpose of paying
or discharging any indebtedness or obligation of such other Person or otherwise,
except endorsements of negotiable instruments for collection in the ordinary
course of business and guaranties by the Borrower of the obligations (including
real estate leases) of another Designated Company.
8.6. SUBORDINATED INDEBTEDNESS.
No Designated Company shall make any payment in respect of
any indebtedness that is by its terms subordinated to the Liabilities, including
without limitation the Junior Debt, except pursuant to the terms of any
subordination or intercreditor agreement executed in connection therewith or any
subordination provisions applicable thereto, as the same exist as the date
hereof; provided that, notwithstanding the foregoing, the Borrower may at any
time after the Borrower is in compliance with the terms of SECTION 7.16, prepay
the Junior Debt, so long as (a) no Event of Default or Default is then in
existence or would be caused thereby and (b) average Excess Loan Availability
for the three (3) month period immediately preceding the consummation of such
prepayment is equal to at least Fifteen Million Dollars ($15,000,000) and Excess
Loan Availability immediately after such prepayment is equal to at least Ten
Million Dollars ($10,000,000). No Designated Company will agree to any amendment
or modification of any agreement evidencing or relating to any such subordinated
indebtedness, including without limitation the Junior Debt.
8.7. DISPOSAL OF PROPERTY.
No Designated Company shall sell, lease, transfer or
otherwise dispose of any of its properties, assets and rights to any Person
except (a) sales of Inventory in the ordinary course of business, (b) sales of
Equipment being replaced in the ordinary course of business with other Equipment
with a fair market value equal to or greater than the Equipment being replaced,
so long as such replacement is completed within ninety (90) days of such sale,
and (c) sales in any fiscal year of other Equipment with an aggregate appraised
market value not in excess of Five Hundred Thousand Dollars ($500,000) for all
of the Designated Companies taken as a group. In the event any of the Equipment
or other assets of any Designated Company is sold, transferred or otherwise
disposed of as herein provided, and such sale, transfer or disposition is
effected without
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replacement of the property so sold, transferred or disposed of or such property
is replaced by property leased by such Designated Company, the applicable
Designated Company shall deliver all of the cash proceeds of any such sale,
transfer or disposition to the Administrative Agent, subject to the prior rights
of the Persons listed on SCHEDULE 6.5 attached hereto, if any, which proceeds
shall be applied to the repayment of the Liabilities as provided in this
Agreement. If any of the Equipment is sold, transferred or otherwise disposed of
as herein provided and such sale, transfer or disposition is made in connection
with the purchase by the applicable Designated Company of replacement Equipment,
such Designated Company shall use the proceeds of such sale, transfer or
disposition to finance the purchase by such Designated Company of replacement
Equipment and shall deliver to the Administrative Agent written evidence of the
use of the proceeds for such purchase. All such replacement Equipment purchased
by any Designated Company shall be free and clear of all liens, claims and
encumbrances, except as expressly allowed elsewhere in this Agreement or as
provided on SCHEDULE 6.5 attached hereto. Upon the consummation of any sale
permitted by this SECTION 8.7, the Administrative Agent and the Lenders hereby
authorize the Collateral Agent, and the Collateral Agent agrees, to execute and
deliver to the Borrower such releases of the Collateral Agent's lien on and
security interest in the Collateral being sold as the Borrower reasonably
requests.
8.8. CAPITAL EXPENDITURE LIMITATIONS.
No Designated Company shall purchase, invest in or
otherwise acquire, or enter into commitments to purchase, invest in or otherwise
acquire, additional real estate, machinery equipment, vehicles or other fixed
assets, which, in the aggregate, cost the Designated Companies, taken as a
group, more than (a) Three Million Five Hundred Thousand Dollars ($3,500,000)
during the 1996 fiscal year or (b) Two Million Five Hundred Thousand Dollars
($2,500,000) during each fiscal year thereafter, plus, in each case, (i) any
capital assets acquired in connection with a Permitted Acquisition and (ii) any
capital assets acquired with the proceeds of insurance which replaces lost or
damaged capital assets, to the extent of such proceeds.
8.9. LOANS TO OFFICERS; CONSULTING AND MANAGEMENT FEES.
Except as provided in SECTION 8.4 and except for advances
for travel and expenses to officers, directors or employees in the ordinary
course of business, the Designated Companies shall not make loans to officers,
directors, employees or stockholders of any Designated Company, except that the
Borrower may make loans to such Persons not in excess of Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate at any time outstanding; and except
as described in SCHEDULE 8.9 attached hereto, the Designated Companies shall not
pay any consulting, management or similar fees to any officer, director,
employee, stockholder or Affiliate of any Company, whether for services rendered
to such Designated Company, or otherwise, except that the Borrower may pay such
fees not in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate in any fiscal year, inclusive of any amounts described on SCHEDULE
8.9.
8.10. DIVIDENDS AND STOCK REDEMPTIONS.
Unless otherwise approved by the Requisite Lenders, which
approval will not be unreasonably withheld, no Designated Company shall directly
or indirectly, (a) apply any of its
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funds, property or assets to, or set apart any funds, property or assets for,
the purchase, redemption or retirement of, or make any distribution, by
reduction of capital or otherwise in respect of any of its shares of capital
stock or other securities, whether now or hereafter outstanding, or (b) except
for dividends by any Subsidiary of a Designated Company to such Designated
Company, declare or pay, or set apart any funds for the payment of, any
dividends in any fiscal year on any class or classes of stock.
8.11. AMENDMENT OF CERTIFICATE OF INCORPORATION OR
By-Laws.
No Designated Company shall amend its Certificate or
Articles of Incorporation, as applicable, or By-Laws, in any case in any manner
that would be reasonably likely to have a Material Adverse Effect. The Borrower
agrees to provide each Agent with a copy of any amendment of any Designated
Company's Certificate or Articles of Incorporation or By-Laws on or before its
effective date.
8.12. OPERATING LEASE LIMITATIONS.
The annual aggregate financial obligations of the
Designated Companies taken as a group for any fiscal year, whether for rental
payments, principal payments, interest payments, service charges or otherwise,
under all leases, lease acquisition agreements, capitalized lease arrangements,
conditional sales contracts, purchase money security arrangements and other
similar agreements, other than any of the foregoing that (a) are recorded or are
required, under GAAP, to be recorded on a balance sheet or (b) relate to real
estate leases for new sales offices opened after the date hereof, will not
exceed Three Million Two Hundred Thousand Dollars ($3,200,000) for any fiscal
year.
8.13. FISCAL YEAR END.
Unless otherwise approved by the Requisite Lenders, which
approval will not be unreasonably withheld, no Designated Company shall change
the end of its fiscal year from December 31st of each year.
8.14. TRANSACTIONS WITH AFFILIATES.
Except (a) as provided in SECTIONS 8.2 and 8.4, (b) in
connection with the consummation of any Permitted Acquisition or (c) the
transfer from the Borrower to each Designated Company at cost of Inventory at
the time of shipment thereof to a customer of such Designated Company, no
Designated Company will transfer any cash or property to any Affiliate or enter
into any transaction, including without limitation the purchase, lease, sale or
exchange of property or the rendering of any service to any Affiliate; PROVIDED,
that any Designated Company may enter into transactions with Affiliates for fair
value in the ordinary course of business pursuant to terms that are no less
favorable to the applicable Designated Company than the terms upon which such
transfers or transactions would have been made had such transfers or
transactions been made to or with a Person that is not an Affiliate.
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8.15. TERMINATION EVENTS.
No Designated Company shall permit to occur or suffer to
exist any Termination Event, if such Termination Event could have a Material
Adverse Effect or a material adverse effect on the financial condition, results
of operation or business of any ERISA Affiliate.
8.16. EXECUTIVE COMPENSATION/BONUSES.
No Designated Company shall pay aggregate annual
compensation, including salary, benefits and bonuses, to its chief executive
officer, chief financial officer and chief operating officer in excess of
amounts that are consistent with general industry practices, in light of the
current and projected financial condition of such Designated Company.
8.17. MINIMUM TANGIBLE NET WORTH.
Tangible Net Worth of the Designated Companies, on a
consolidated basis, shall not at any time during any period set forth below be
less than the amount set forth below opposite such period:
PERIOD AMOUNT
------ ------
Closing Date through and $23,500,000
including June 29, 1996
June 30, 1996 through and $24,300,000
including September 29, 1996
September 30, 1996 through $25,000,000
and including December 30, 1996
December 31, 1996 through $26,500,000
and including March 30, 1997
Each three month period The actual Tangible Net
thereafter, commencing on Worth of the Designated
a March 31 and ending on Companies as of the
the next succeeding June 29 prior September 30
(exclusive of the
Special Amount, if
any), plus $1,500,000
Each three month period The actual Tangible Net
thereafter commencing on a Worth of the Designated
June 30 and ending on the Companies as of the
next succeeding September 29 prior December 31, plus
$1,500,000
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Each three month period The actual Tangible Net
thereafter commencing on a Worth of the Designated
September 30 and ending on Companies as of the
the next succeeding prior March 31, plus
December 30 $1,500,000
Each three month period The actual Tangible Net
thereafter commencing on a Worth of the Designated
December 31 and ending on Companies as of the
the next succeeding March 30 prior June 30, plus
$1,500,000
8.18. MINIMUM DEBT SERVICE COVERAGE RATIO.
The Debt Service Coverage Ratio of the Designated
Companies, on a consolidated basis, shall not on the last day of any calendar
quarter set forth below, for the period ending on such date, be less than the
ratio set forth below opposite such date:
DATE RATIO
---- -----
Six month period ending June 30, 1996 1.00:1.00
Nine month period ending September 30, 1996 1.10:1.00
Twelve month period ending December 31, 1996 1.20:1.00
Twelve month period ending March 31, 1997 1.25:1.00
and each twelve month period ending on the
last day of a calendar quarter thereafter
8.19. MINIMUM INVENTORY TURNOVER.
Inventory Turnover shall not on the last day of any calendar
quarter hereafter, for the calendar quarter ending on such date, be less than
2.4.
8.20. INVENTORY PURCHASES.
No Designated Company (exclusive of the Borrower) shall at any
time purchase or otherwise acquire any Inventory from any Person other than the
Borrower.
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8.21. ADDED VALUE PURCHASE.
Without the consent of the Requisite Lenders, (a) the
Designated Companies shall not pay in cash more than one-half (1/2) of the
aggregate amount of "additional consideration" that may be due on or after June
30, 1998 to the former shareholders of Added Value Electronics Distribution,
Inc. ("AVED") in connection with the acquisition by the Borrower of AVED and
A.V.E.D. Rocky Mountain, Inc., but shall pay such portion of the additional
consideration in capital stock of the Borrower and (b) the Designated Companies
shall not pay any portion of such additional consideration in cash (i) if a
Default is then in existence or to the extent that a Default would be caused
thereby, (ii) if average Excess Loan Availability for the two (2) month period
immediately preceding such payment is not at least Five Million Dollars
($5,000,000) or (iii) to the extent that, immediately after making such payment,
Excess Loan Availability is not at least Five Million Dollars ($5,000,000).
9. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.
9.1. ACCELERATION.
Upon the occurrence of a Default described in CLAUSE (G) of
the definition of "Default," all of the Liabilities shall immediately and
automatically, without notice of any kind, be immediately due and payable; and
upon the occurrence of any other Default, any or all of the Liabilities may, at
the option of the Requisite Lenders and without presentment, demand, protest or
notice of any kind (all of which are hereby expressly waived), be declared, and
thereupon shall become, immediately due and payable. Upon the occurrence of any
Default, the Requisite Lenders may, at its or their option, terminate the
obligations of all of the Lenders to make additional Loans and issue additional
Letters of Credit; however, except as provided in SECTION 11.9(C), no Lender
shall be obligated to make additional Loans or issue additional Letters of
Credit after the occurrence of any Default, unless such Default has been waived
by the Requisite Lenders.
9.2. RIGHTS AND REMEDIES GENERALLY.
Upon the occurrence of a Default, the Lenders and the Agents,
shall have, in addition to any other rights and remedies contained in this
Agreement or in any of the other Financing Agreements, all of the rights and
remedies of a secured party under the Code or other applicable laws, all of
which rights and remedies shall be cumulative, and non-exclusive, to the extent
permitted by law. In addition to all such rights and remedies, the sale, lease
or other disposition of the Collateral, or any part thereof, by the Collateral
Agent after Default may be for cash, credit or any combination thereof, and the
Collateral Agent, on behalf of the Lenders, may purchase all or any part of the
Collateral at public or, if permitted by law, private sale, and in lieu of
actual payment of such purchase price, may set-off the amount of such purchase
price against the Liabilities then owing. Any sales of the Collateral may be
adjourned from time to time with or without notice. The Collateral Agent may, in
its sole discretion, cause the Collateral to remain on any Designated Company's
premises, at the Borrower's expense, pending sale or other disposition of the
Collateral. The Collateral Agent shall have the right to conduct such sales on
any Designated Company's premises, at the Borrower's expense, or elsewhere, on
such occasion or occasions as the Collateral Agent may see fit.
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9.3. ENTRY UPON PREMISES AND ACCESS TO INFORMATION.
Upon the occurrence of a Default, the Collateral Agent shall
have the right to enter upon any premises of the Borrower where the Collateral
is located (or is believed to be located) without any obligation to pay rent to
any Designated Company, or any other place or places where the Collateral is
believed to be located and kept, and remove the Collateral therefrom to the
premises of the Collateral Agent or any agent of the Collateral Agent, for such
time as the Collateral Agent may desire, in order effectively to collect or
liquidate the Collateral, and/or the Collateral Agent may require the Borrower
to assemble the Collateral and make it available to the Collateral Agent at a
place or places to be designated by the Collateral Agent. Upon the occurrence of
a Default, the Collateral Agent shall have the right to obtain access to the
data processing equipment, computer hardware and software of the Designated
Companies relating to the Collateral and to use all of the foregoing and the
information contained therein in any manner the Collateral Agent deems
appropriate; and the Collateral Agent shall have the right to notify post office
authorities to change the address for delivery of the Borrower's mail to an
address designated by the Collateral Agent and to receive, open and process all
mail addressed to the Borrower. The Collateral Agent agrees to provide the
Borrower with notice that the Collateral Agent has so notified the post office
authorities.
9.4. SALE OR OTHER DISPOSITION OF COLLATERAL BY THE
COLLATERAL AGENT.
Any notice required to be given by the Collateral Agent of a
sale, lease or other disposition or other intended action by the Collateral
Agent with respect to any of the Collateral which is deposited in the United
States mails, postage prepaid and duly addressed to the Borrower at the address
specified in SECTION 10.13, at least ten (10) Business Days prior to such
proposed action shall constitute fair and reasonable notice to the Borrower of
any such action. The net proceeds realized by the Collateral Agent upon any such
sale or other disposition, after deduction for the expense of retaking, holding,
preparing for sale, selling or the like and the reasonable attorneys' and
paralegals' fees and legal expenses incurred by the Collateral Agent in
connection therewith, shall be applied as provided herein toward satisfaction of
the Liabilities including without limitation the Liabilities described in
SECTIONS 7.5 and 10.2. The Collateral Agent shall account to the Borrower for
any surplus realized upon such sale or other disposition, and the Borrower shall
remain liable for any deficiency. The commencement of any action, legal or
equitable, or the rendering of any judgment or decree for any deficiency shall
not affect the Collateral Agent's security interest in the Collateral, for the
benefit of the Lenders, until the Liabilities are fully paid. The Borrower
agrees that neither either Agent nor any Lender has any obligation to preserve
rights to the Collateral against any other parties. The Collateral Agent is
hereby granted a license or other right to use, without charge, the Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, tradestyles, trademarks, service marks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral and the
Borrower's rights under all licenses and all franchise agreements shall inure to
the Collateral Agent's benefit until the Liabilities are paid.
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9.5. WAIVER OF DEMAND.
Demand, presentment, protest and notice of nonpayment are
hereby waived by the Borrower. The Borrower also waives the benefit of all
valuation, appraisal and exemption laws.
9.6. WAIVER OF NOTICE.
UPON THE OCCURRENCE OF A DEFAULT, THE BORROWER HEREBY WAIVES
ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY EITHER
AGENT OR ANY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL
PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE
OR HEARING.
9.7. ADVICE OF COUNSEL.
The Borrower acknowledges that it has been advised by its
counsel with respect to this transaction and this Agreement, including without
limitation any waivers contained herein.
10. MISCELLANEOUS.
10.1. WAIVER.
The failure of the Agents or the Lenders, at any time or times
hereafter, to require strict performance by the Borrower of any provision of
this Agreement shall not waive, affect or diminish any right of the Agents and
the Lenders thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by the Agents or the Lenders of a Default under this
Agreement or a default under any of the other Financing Agreements shall not
suspend, waive or affect any other Default under this Agreement or any other
default under any of the other Financing Agreements, whether the same is prior
or subsequent thereto and whether of the same or of a different kind or
character. None of the undertakings, agreements, warranties, covenants and
representations contained in this Agreement or any of the other Financing
Agreements and no Default under this Agreement or default under any of the other
Financing Agreements shall be deemed to have been suspended or waived by either
Agent or any Lender unless such suspension or waiver is in writing signed by an
officer of such Person, and directed to the Borrower, specifying such suspension
or waiver.
10.2. COSTS AND ATTORNEYS' FEES.
Without limiting the provisions of SECTION 7.5, if at any time
or times after the occurrence of a Default, either Agent or any Lender employs
counsel in connection with protecting or perfecting the Collateral Agent's
security interest in the Collateral, for the benefit of the Lenders, or in
connection with any matters contemplated by or arising out of this Agreement or
any of the other Financing Agreements, including without limitation (a) to
commence, defend, or intervene in any litigation or to file a petition,
complaint, answer, motion or other pleadings, (b) to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise), (c) to consult
with officers of such Agent or Lender to advise such Agent or Lender, (d) to
protect, collect, lease,
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sell, take possession of, or liquidate any of the Collateral, (e) to attempt to
enforce or to enforce any security interest in any of the Collateral, or (f) to
attempt to enforce or to enforce any rights of either Agent or any Lender
hereunder, including without limitation the right to collect any of the
Liabilities, then in any of such events, all of the reasonable attorneys' fees
arising from such services, and any expenses, costs and charges relating
thereto, including without limitation all reasonable fees of the paralegals and
other staff employed by such attorneys, shall be part of the Liabilities,
payable on demand and secured by the Collateral and shall, if not paid by the
Borrower when due or demanded, bear interest at the rate applicable to the
Domestic Rate Portions.
10.3. EXPENDITURES BY THE LENDERS.
In the event the Borrower shall fail to pay taxes, insurance,
assessments, costs or expenses which the Borrower is, under any of the terms
hereof or of any of the other Financing Agreements, required to pay, or fails to
keep the Collateral free from other security interests, liens or encumbrances,
except as permitted herein, the Lenders may, in their sole discretion, make
expenditures for any or all of such purposes, and the amount so expended, shall
be part of the Liabilities, payable on demand and secured by the Collateral and
shall, if not paid by the Borrower when due or demanded, bear interest at the
rate applicable to the Domestic Rate Portions.
10.4. CUSTODY AND PRESERVATION OF COLLATERAL.
Each Agent and each Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as the Borrower shall
request in writing, but failure by such Agent or Lender to comply with any such
request shall not of itself be deemed a failure to exercise reasonable care, and
no failure by such Agent or Lender to preserve or protect any right with respect
to such Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by the Borrower, shall of
itself be deemed a failure to exercise reasonable care in the custody or
preservation of such Collateral.
10.5. RELIANCE BY THE AGENTS AND LENDERS.
The Borrower acknowledges that each Agent and Lender, in
entering into this Agreement and agreeing, in its discretion, to make Loans and
otherwise extend credit to the Borrower hereunder, has relied upon the accuracy
of the covenants, agreements, representations and warranties made herein by the
Borrower and the information delivered by the Borrower to such Agent or Lender
in connection herewith (including without limitation the Financials).
10.6. SUCCESSORS AND ASSIGNS OF THE BORROWER.
This Agreement may not be assigned by the Borrower without the
prior written consent of each of the Agents and all of the Lenders. Whenever in
this Agreement there is reference made to any of the parties hereto, such
reference shall be deemed to include, wherever applicable, a reference to the
successors and assigns of such party.
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10.7. APPLICABLE LAW; SEVERABILITY
THIS AGREEMENT SHALL BE CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS AND DECISIONS, AND NOT THE
CONFLICT OF LAW PROVISIONS, OF THE STATE OF ILLINOIS. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
10.8. SUBMISSION TO JURISDICTION; WAIVER OF BOND AND TRIAL
BY JURY.
THE BORROWER, EACH AGENT AND EACH LENDER HEREBY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED
WITHIN COOK COUNTY, ILLINOIS AND WAIVES ANY OBJECTION BASED ON IMPROPER VENUE OR
FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND THE
BORROWER CONSENTS THAT ALL SERVICE OF PROCESS UPON THE BORROWER MAY BE MADE BY
REGISTERED MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS SET FORTH IN SECTION
10.13 AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER
OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO THE
BORROWER'S ADDRESS BY THE BORROWER'S AGENT AS SET FORTH BELOW. THE BORROWER
HEREBY APPOINTS CT CORPORATION, 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS
60604, AS ITS AGENT FOR THE PURPOSE OF ACCEPTING THE SERVICE OF ANY PROCESS
WITHIN THE STATE OF ILLINOIS. EACH AGENT, EACH LENDER AND THE BORROWER WAIVES,
TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND THE BORROWER WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF EITHER AGENT OR ANY LENDER. NOTHING CONTAINED IN THIS SECTION 10.8
SHALL AFFECT THE RIGHT OF EITHER AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF EITHER AGENT OR ANY
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION.
10.9. APPLICATION OF PAYMENTS.
Notwithstanding any contrary provision contained in this
Agreement or in any of the other Financing Agreements, the Borrower irrevocably
waives the right to direct the application of any and all payments at any time
or times hereafter received by either Agent or any Lender, from the Borrower or
with respect to any of the Collateral, and the Borrower does hereby irrevocably
agree that the Agents and the Lenders shall have the continuing exclusive right
to apply and reapply any and all payments received at any time or times
hereafter, whether with respect to the Collateral or otherwise, against the
Liabilities in such manner as the Agents and the Lenders
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may deem advisable, notwithstanding any entry by either Agent or any Lender upon
any of its books and records.
10.10. MARSHALLING; PAYMENTS SET ASIDE.
Neither either Agent nor any Lender shall be under any
obligation to marshall any assets in favor of the Borrower or any other party or
against or in payment of any or all of the Liabilities. To the extent that the
Borrower makes a payment or payments to either Agent or any Lender or Collateral
Agent enforces its security interest in the Collateral, for the benefit of the
Lenders, or either Agent or any Lender exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
10.11. SECTION TITLES.
The section and subsection titles contained in this Agreement
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties.
10.12. CONTINUING EFFECT.
This Agreement, the Collateral Agent's security interests in
the Collateral, for the benefit of the Lenders, and all of the other Financing
Agreements shall continue in full force and effect so long as any Liabilities
shall be owed to either Agent or any Lender, and (even if there shall be no
Liabilities outstanding) so long as this Agreement has not been terminated as
provided in SECTION 2.8.
10.13. NOTICES.
Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
upon the earlier of (a) personal delivery to the address set forth below, (b) in
the case of mailed notice, three (3) days after deposit in the United States
mails, with proper postage for certified mail, return receipt requested,
prepaid, (c) in the case of notice by Federal Express or other reputable
overnight courier service, one (1) Business Day after delivery to such courier
service, or (d) in the case of telecopy or other similar facsimile transaction,
when sent, after receipt of confirmation or answerback, in each case addressed
to the party to be notified as follows:
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(i) If to the Administrative Agent at:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Mr. Kevin Delaplane
Vice President
(ii) If to the Collateral Agent at:
American National Bank and
Trust Company of Chicago
33 North LaSalle Street
Chicago, Illinois 60690
Attention: Mr. Dennis Harrison
Senior Vice President
(iii) If to any Lender, to it address indicated on the signature pages
hereof or on an Assignment and Acceptance Agreement.
(iv) If to the Borrower at:
All American Semiconductor, Inc.
16115 N.W. 52nd Avenue
Miami, Florida 33014
Attention: Chief Financial Officer
with a copy to:
Rubin Baum Levin Constant Friedman & Bilzin
2500 First Union Financial Center
Miami, Florida 33131
Attention: Marc J. Stone, Esq.
or to such other address as each party designates to the others in the manner
herein prescribed.
10.14. EQUITABLE RELIEF.
The Borrower recognizes that, in the event the Borrower fails
to perform, observe or discharge any of its obligations or liabilities under
this Agreement, any remedy at law may prove to be inadequate relief to the
Agents and the Lenders; therefore, the Borrower agrees that the Agents and the
Lenders, if the Agents and the Lenders so request, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
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10.15. ENTIRE AGREEMENT.
This Agreement, together with the Financing Agreements
executed in connection herewith, constitutes the entire Agreement among the
parties with respect to the subject matter hereof, and supersedes all prior
written or oral understandings with respect thereto.
10.16. INDEMNITY.
Without limiting any other indemnity provisions contained in
this Agreement or any of the other Financing Agreements, the Borrower agrees to
defend, protect, indemnify and hold harmless each Agent and each Lender and each
and all of their respective affiliates, officers, directors, employees,
attorneys and agents ("Indemnified Parties") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for the Indemnified Parties in connection with any investigative, administrative
or judicial proceeding, whether or not the Indemnified Parties shall be
designated as a party thereto), which may be imposed on, incurred by, or
asserted against any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal or state laws or other statutory
regulations, including without limitation securities, environmental and
commercial laws and regulations, under common law or at equitable cause, or on
contract or otherwise) in any manner relating to or arising out of this
Agreement or the other Financing Agreements, or any act, event or transaction
related or attendant thereto, the making and the management of the Loans and the
issuance of the Letters of Credit hereunder (including without limitation any
liability under federal, state or local environmental laws or regulations) or
the use or intended use of the proceeds of the Loans and the Letters of Credit
hereunder; PROVIDED, that the Borrower shall not have any obligation to any
Indemnified Party hereunder with respect to matters caused by or resulting from
the willful misconduct or gross negligence of such Indemnified Party. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all matters incurred by the Indemnified Parties. Any liability,
obligation, loss, damage, penalty, cost or expense incurred by the Indemnified
Parties shall be paid to the Indemnified Parties on demand, together with
interest thereon at the rate prescribed for the Domestic Rate Portions, from the
date incurred by the Indemnified Parties until paid by the Borrower, and shall
be added to the Liabilities, and be secured by the Collateral. The provisions of
and undertakings and indemnifications set out in this SECTION 10.16 shall
survive the satisfaction and payment of the Liabilities and the termination of
this Agreement.
10.17. REPRESENTATIONS AND WARRANTIES; CONDITIONS TO LOANS
AND LETTERS OF CREDIT.
Notwithstandinganything to the contrary contained herein, (a)
each representation or warranty contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and the other Financing Agreements and the making of the Loans and the issuance
of the Letters of Credit and (b) each representation and warranty contained in
this Agreement and each other Financing Agreement that is not made only as of a
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specific date or time, shall be remade on the date of each Loan made or Letter
of Credit issued hereunder, including without limitation any Loan made by the
Administrative Agent pursuant to SECTION 2.1(e). In addition, each request for a
Loan or Letter of Credit (including any request for a Loan deemed to be made by
the Borrower under SECTION 2.1(E)), shall constitute a representation and
warranty by the Borrower that no Event of Default or Default then exists or
would result therefrom and that all conditions to such Loan or Letter of Credit
contained in this Agreement have been satisfied.
10.18. APPROVAL OF THE REQUISITE LENDERS OR THE LENDERS.
The Lenders and Agents hereby acknowledge and agree that in
each case where, pursuant to this Agreement, the Borrower must seek the approval
or consent of the Requisite Lenders or all of the Lenders, the Borrower shall be
permitted to make the appropriate request of the Administrative Agent only and
that the Administrative Agent, with reasonable diligence, shall contact the
Lenders and the Collateral Agent with respect thereto and process the Borrower's
request. The Borrower agrees to make itself reasonably available to the Agents
and the Lenders to respond to questions regarding any such request.
11. AGENCY PROVISIONS.
11.1. APPOINTMENT AND POWERS.
Each Lender hereby irrevocably appoints and authorizes (a)
Harris to act as its Administrative Agent under this Agreement and the Financing
Agreements and (b) ANB to act as its Collateral Agent under this Agreement and
the Financing Agreements. Each of the Agents shall have and may exercise such
powers under this Agreement and the Financing Agreements as are specifically
delegated to such Agent by the terms thereof, together with such powers as are
reasonably incidental thereto. Each action of an Agent undertaken under this
Agreement and the Financing Agreements shall be deemed to have been taken by the
applicable Agent, for the benefit of such Agent both in its capacity as an Agent
hereunder, and also in its capacity as a Lender hereunder, and also for the
benefit of each other Lender. Neither Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and the
applicable Financing Agreements. The duties of each Agent shall be mechanical
and administrative in nature; and neither Agent, by reason of this Agreement or
any of the Financing Agreements, shall be deemed to have assumed a fiduciary or
trust relationship with any Lender, nor shall either Agent be deemed to have
assumed any obligation toward or relationship of trust or agency with or for any
Company.
11.2. AGENTS IN THEIR CAPACITIES AS LENDERS.
With respect to Loans made by it, each Agent shall have the same rights
and powers under this Agreement and the Financing Agreements as any Lender and
may exercise the same as though it were not an Agent, and the terms "Lender" or
"Lenders", unless the context otherwise indicates, shall include each Agent in
its capacity as a Lender hereunder. Each Agent, and each Lender and their
respective affiliates, may accept deposits from, lend money to, and generally
engage in any kind of banking or trust business with the Borrower, or any other
Company, as if it were not an Agent or as if it were not a Lender and without
any duty to account
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therefor to the other parties to this Agreement. Each Agent and each Lender
hereby agrees that the obligations of the Borrower to it in respect of any of
the matters described in the immediately preceding sentence shall not be
"Liabilities" hereunder nor shall such obligations be secured by the Collateral
or otherwise entitled to the benefits of this Agreement or the other Financing
Agreements.
11.3. INDEPENDENT CREDIT ANALYSIS.
Each Lender agrees that it has, independently and without reliance upon
either Agent, any other Lender, or the directors, officers, agents, attorneys or
employees of any of such Persons, and instead in reliance upon information
supplied to it by or on behalf of the Companies, and upon such other information
as it has deemed appropriate, made its own independent credit analysis and
decision to enter into this Agreement, and that, independently and without
reliance upon either Agent, any other Lender, or the directors, officers,
agents, attorneys or employees of any of such Persons, it shall continue to make
its own independent credit analysis and decisions in acting or not acting under
this Agreement and the Financing Agreements. Neither Agent shall have any duty
or responsibility to provide the other Agent or any Lender with any credit or
other information concerning the affairs, financial condition, litigation,
liabilities, or business of any Company which may at any time come into the
possession of such Agent (or any of its affiliates), other than as specifically
provided otherwise in this Agreement, and other than such other reports and
notices as any Lender may reasonably request from time to time, all of which the
applicable Agent agrees to provide to each Lender on a prompt basis. In the
event such information is furnished to any Lender by either Agent, such Agent
shall have no duty to confirm or verify its accuracy or completeness and shall
have no liability whatsoever with respect thereto.
11.4. GENERAL IMMUNITY.
Neither Agent nor any of its directors, officers, agents,
attorneys or employees shall be liable to the other Agent or any Lender for any
action taken or omitted to be taken by it or them under this Agreement or any of
the Financing Agreements or in connection therewith except for its or their own
willful misconduct or gross negligence. Without limiting the generality of the
foregoing but subject to the last sentence of this SECTION 11.4, neither Agent
shall: (a) be responsible to the other Agent or any Lender for any recitals,
statements, warranties or representations under this Agreement or any of the
Financing Agreements or any agreement or document relative thereto or for the
financial condition of any Company, (b) be responsible for the authenticity,
accuracy, completeness, value, validity, effectiveness, due execution, legality,
genuineness, enforceability or sufficiency of this Agreement or any of the
Financing Agreements or any other agreements or any assignments, certificates,
requests, financial statements, projections, notices, schedules or opinions of
counsel executed and delivered pursuant hereto or thereto, (c) be bound to
ascertain or inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or any of the Financing Agreements on
the part of any Company or of any of the terms of any such agreement by any
party thereto or shall have any duty to inspect the property (including the
books and records) of any Company, or (d) incur any liability under or in
respect of this Agreement or any of the Financing Agreements or any other
document or collateral by acting upon any notice, consent, certificate or other
instrument or writing (which may be by
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telegram or telecopy) believed by such Agent to be genuine and signed or sent by
the proper party. Each Agent may consult with legal counsel (including counsel
for the Companies), independent public accountants and other experts selected by
such Agent and shall not be liable for any action taken or omitted to be taken
in good faith in accordance with the advice of such counsel, accountants or
experts. Each Agent agrees to use the same degree of care, with respect to the
performance of its duties hereunder, as it uses with respect to credit
facilities in which it alone is interested.
11.5. RIGHT TO INDEMNITY.
Each Agent shall be fully justified in failing or refusing to
take any action under this Agreement and each of the Financing Agreements or in
relation thereto unless it first shall be indemnified (upon requesting such
indemnification) to its satisfaction by each Lender against any and all
liability and expense which it may incur by reason of taking or continuing to
take any action otherwise required or permitted to be taken by such Agent under
this Agreement or any of the Financing Agreements. Each Lender further agrees to
indemnify each Agent ratably in accordance with its Pro Rata Share for any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of this Agreement or any of the Financing Agreements
or the transactions contemplated hereby or thereby, or the enforcement of any of
the terms hereof or thereof or of any other documents, PROVIDED, no such
liability, obligation, loss, damage, penalty, action, judgment, suit, cost,
expense or disbursement results from such Agent's gross negligence or willful
misconduct. Each Lender agrees to reimburse each Agent in the amount of its Pro
Rata Share for any out-of-pocket expenses of which such Agent is entitled to
receive, but has not received, reimbursement pursuant to this Agreement or any
of the Financing Agreements.
11.6. ACTION BY AGENTS.
(a) Each Agent may assume that no Event of Default or Default
has occurred and is continuing, unless such Agent has actual knowledge of the
Event of Default or Default, has received notice from the Borrower or any of
their independent certified public accountants stating the nature of the Event
of Default or Default, or has received notice from a Lender stating the nature
of the Event of Default or Default and that such Lender considers the Event of
Default or Default to have occurred and to be continuing. Each Agent hereby
agrees to notify the other Agent and the Lenders promptly upon obtaining notice
of the existence of an Event of Default or Default, which notice (a "Default
Notice") shall describe, in reasonable detail, the nature of such Event of
Default or Default.
(b) Each Agent has only those obligations under this Agreement
and the Financing Agreements that are expressly set forth herein and therein as
obligations. No duty to act, or refrain from acting, and no other obligation
whatsoever, shall be implied on the basis of or imputed in respect of any right,
power or authority granted to such Agent or shall become effective in the event
of any temporary or partial exercise of such rights, power or authority.
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(c) Each Agent shall have the right to request instructions
from the Requisite Lenders by notice to each Lender. If an Agent shall request
instructions from the Requisite Lenders with respect to any act or action
(including the failure to act) in connection with this Agreement or any other
Financing Agreement, such Agent shall be entitled to refrain from such act or
taking such action unless and until such Agent shall have received instructions
from the Requisite Lenders, and such Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against either Agent as a result of
such Agent acting or refraining from acting hereunder or under any other
Financing Agreement in accordance with the instructions of the Requisite
Lenders. Except for any obligation expressly set forth in this Agreement or any
of the Financing Agreements, each Agent may, but shall not be required to,
exercise its discretion to act or not act, including, without limitation, the
exercise of any remedies under this Agreement or under any of the other
Financing Agreements, except that each Agent shall be required to act or not act
(i) upon the instructions of the Requisite Lenders (unless all Lenders are
required to provide such instructions under this Agreement) and (ii) as
described more fully in SECTION 11.6(D); PROVIDED, that such Agent shall not be
required to act or not act if to do so would expose such Agent to liability, or
would be contrary to this Agreement, any of the Financing Agreements or to
applicable law.
(d) After receipt by the Lenders and the other Agent of a
Default Notice, no action permitted under this Agreement or any of the other
Financing Agreements may be taken by either Agent with respect to the Defaults
or Events of Default unless both Agents consent to any such action.
Notwithstanding the foregoing, if either Agent (the "Proposing Agent") proposes
in writing (an "Action Notice") to the other Agent (the "Receiving Agent") to
take any action with respect to a Default or Event of Default and within ten
(10) Business Days after the receipt by the Receiving Agent of such Action
Notice (the "Waiting Period"), the Proposing Agent has not received from the
Receiving Agent a written objection to such action being taken (an "Objection
Notice"), the Receiving Agent shall be deemed to have given its consent to such
action and the Proposing Agent may proceed to take such action. If, on the other
hand, within the Waiting Period, the Proposing Agent receives an Objection
Notice, such proposed action may not be taken. When any action is taken pursuant
to this SECTION 11.6(D), the applicable Agent shall undertake such action in
accordance with, but subject to the provisions of, the terms of this Agreement
and the Financing Agreements and (b) no Lender that has not consented to any
action to be taken authorized by the applicable Requisite Lenders pursuant to
this SECTION 11.6(D) shall take any action to interfere with such actions,
including without limitation the filing of any suit or request for injunctive
relief.
(e) After receipt of a Default Notice, any Lender may notify
the Administrative Agent in writing that such Lender will not, after the date of
receipt of such notice (a "Nonfunding Notice") by the Administrative Agent,
provide any advances to or on behalf of the Borrower, except to settle what has
already been advanced by the Administrative Agent as of the date of its receipt
of such Nonfunding Notice and except for advances made pursuant to SECTION
11.9(C); provided, that such Nonfunding Notice shall have no further effect if
the Default that was the subject of the applicable Default Notice is waived by
the Requisite Lenders.
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(f) Each Agent shall, upon request therefor, deliver to the
other Agent and each other Lender copies of all reports and other information or
documentation received by such Agent from any Designated Company.
11.7. PROPORTIONATE INTEREST OF LENDERS UNDER THE
FINANCING AGREEMENTS.
In the event any remedy is exercised with respect to the
Financing Agreements or the Collateral, the applicable Agent shall pursue
remedies designated by the Requisite Lenders. Each Lender agrees that no Lender
shall have any right individually to realize upon the security created by the
Financing Agreements or otherwise enforce any provision thereof, or make demand
thereunder, it being understood and agreed that such rights and remedies may be
exercised by the applicable Agent for the benefit of the Lenders, under the
terms of this Agreement and the Financing Agreements. Nothing set forth in the
previous sentence shall confer any rights or benefit on the Borrower or on any
other Person except the Lenders.
11.8. RESIGNATION OF EITHER AGENT.
Either Agent may resign at any time by giving at least thirty
(30) days' prior written notice of its intention to do so to the other Agent,
each Lender and the Borrower, and upon any such notice, the remaining Agent
shall have the right to succeed the resigning Agent in such capacity. If the
remaining Agent does not notify the Borrower, the resigning Agent and the other
Lenders in writing of its acceptance of such position within twenty (20) days
after the applicable Agent's giving of such notice of resignation, then the
Lenders holding a majority of the Pro Rata Shares of all Lenders (with the
concurrence of the remaining Agent) may appoint a successor Agent. Neither
Agent's resignation shall be effective until a successor Agent has been selected
pursuant to this SECTION 11.8. After any resigning Agent's resignation hereunder
as an Agent, it shall be discharged from its duties and obligations under this
Agreement and the Financing Agreements but the provisions of this Agreement and
the Financing Agreements shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was an Agent hereunder and
thereunder. Upon appointment of a successor Agent, the term "Agent" shall for
all purposes of this Agreement thereafter mean such successor.
11.9. DISBURSEMENT OF PROCEEDS OF LOANS AND OTHER ADVANCES;
ISSUANCE OF LETTERS OF CREDIT.
(a) If the Borrower makes a request for a Loan as provided
herein, or if the Administrative Agent makes a loan pursuant to any other
provision of this Agreement that permits or obligates the Administrative Agent
to advance loans to the Borrower (including without limitation SECTION 2.1(E)),
the Administrative Agent shall do either of the following:
(i) advance the amount of the proposed loan to the
Borrower disproportionately (a "Disproportionate Advance") out of the
Administrative Agent's own funds on behalf Lenders and request
settlement in accordance with SECTION 11.9(B), such that upon such
settlement, each Lender's share of the outstanding Loans (including
without limitation the amount of any
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Disproportionate Advance) equals its Pro Rata Share and such
Disproportionate Advance shall be deemed to be repaid; or
(ii) if so directed by the Requisite Lenders, notify
each Lender and the Borrower by telecopy or other teletransmission of
the proposed advance on the same day that the Administrative Agent is
notified by the Borrower of the Borrower's request or the same day that
the Administrative Agency desires to make such Loan on behalf of the
Borrower, in which case, each Lender shall, not later than 12:00 p.m.
(Chicago time) on such date make available to the Administrative Agent,
in lawful money of the United States of America and in same day funds,
an amount equal to such Lender's Pro Rata Share of the Loans to be made
to the Borrower; PROVIDED that such Lender shall have received notice
of such Loan before 10:00 a.m. (Chicago time) (A) on the borrowing date
thereof, with respect to Loans which are included in the Domestic Rate
Portions and (B) three (3) Business Days prior to the borrowing date
thereof, with respect to Loans which are to be included in a LIBOR
Portion. The Administrative Agent shall make such funds available to
the Borrower, in same day funds, in accordance with the provisions of
this Agreement.
The proceeds of Loans requested by the Borrower pursuant to this Agreement, or
otherwise disbursed pursuant to the terms of this Agreement, shall be disbursed
by the Administrative Agent on behalf of each Lender.
(b) The Administrative Agent shall, once every seven (7) days,
or sooner, if so elected by the Administrative Agent, distribute to each Lender,
at its primary address set forth on the signature pages to this Agreement or in
an Assignment and Acceptance Agreement, with a statement (the "Agent's Report")
disclosing as of the preceding Business Day, the aggregate principal balance of
the Revolving Loans outstanding as of such date, the aggregate Letter of Credit
Exposure as of such date, repayments and prepayments of principal received from
the Borrower with respect to the Revolving Loans since the immediately preceding
Agent's Report, additional Revolving Loans made to the Borrower, or Letters of
Credit issued on the Application of the Borrower, since the date of the
immediately preceding Agent's Report, interest and fees received from the
Borrower since the date of the immediately preceding Agent's Report, the amount
of Loan Availability as of the Administrative Agent's most recent determination,
the amount of any expenses of either Agent paid by either Agent since the
immediately preceding Agent's Report, for which the applicable Agent has not
been reimbursed by the Borrower and the amount received by the applicable Agent
from the Borrower since the immediately preceding Agent's Report in payment of
outstanding expenses of such Agent. Such Agent's Reports also shall disclose the
net amount due to or due from the Lenders. If the Agent's Report discloses a net
amount due from either Agent to any Lender, the applicable Agent, concurrently
with the delivery of the Agent's Report to the Lenders, shall transfer, by wire
or otherwise, such amount to such Lender in funds immediately available to such
Lender in accordance with such Lender's instructions. If such report discloses a
net amount due to either Agent from any Lender, then such Lender shall transfer,
by wire or otherwise, such amount, in funds immediately available to the
applicable Agent as instructed by such Agent. Such net amount due from a Lender
to such Agent
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shall be due on the same day such Lender receives such Agent's Report, if such
Agent's Report is received before 12:00 p.m. (Chicago time) and such net amount
shall be due on the Business Day following receipt of such Agent's Report, if
such Agent's Report is received after 12:00 p.m. (Chicago time). Notwithstanding
the foregoing, payments actually received by the Administrative Agent with
respect to the following items shall be distributed by the Administrative Agent
to each Lender as follows:
(i) As soon as possible, but in any case within one
(1) Business Day of receipt thereof by the Administrative Agent,
payments to be applied to interest on the Loans shall be paid to each
Lender in proportion to its Pro Rata Share, subject to any adjustments
for any Disproportionate Advances so that the Administrative Agent
shall receive interest on the Disproportionate Advances and each Lender
shall only receive interest on the amount of funds actually advanced by
such Lender; and
(ii) As soon as possible, but in any case within one
(1) Business Day of receipt thereof by the Administrative Agent,
payments to be applied to the fees set forth in SECTION 2.7 and
expenses payable under this Agreement, shall each be paid to each
Lender as set forth in the applicable Section hereof.
Notwithstanding the foregoing, if a Lender has failed to remit its Pro Rata
Share of any Loans required to be made or has failed to make a settlement
payment to the Administrative Agent pursuant to this SECTION 11.9(B), no payment
shall be made to such Lender by the Administrative Agent at any time such
Lender's share of the outstanding Loans is less than such Lender's Pro Rata
Share. If the Administrative Agent or any Lender fails to pay the other any
payment due under this Agreement on its due date, the party to whom such payment
is due shall be entitled to recover interest from the party obligated to make
such payment at a rate per annum equal to the overnight federal funds rate.
(c) Either Agent may, but shall have no duty (and is hereby
irrevocably authorized by the Lenders), to make such other disbursements and
advances on behalf of the Lenders (but in no event may either Agent make any
such disbursements or advances in excess of the aggregate amount of Two Million
Dollars ($2,000,000) without the prior written consent of all Lenders),
including without limitation the making of Loans to the Borrower subsequent to
the occurrence of a Default, which such Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral, or any portion
thereof, or to enhance the likelihood of, or maximize the amount of, repayment
by the Borrower of the Liabilities; provided that if a Default is not then in
existence, such excess advances shall not be outstanding for more than sixty
(60) consecutive days.
(d) Either Agent's use of its own checks upon its funds or
such Agent's transfer of its own funds, by wire or otherwise, to an account of
the Borrower shall be deemed to be disbursements made by each Lender under this
Agreement and pursuant to the Financing Agreements.
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(e) Immediately upon the issuance of a Letter of Credit in
accordance with this Agreement, each Lender shall be deemed to have irrevocably
and unconditionally purchased and received from the Administrative Agent,
without recourse or warranty, an undivided interest and participation therein to
the extent of such Lender's Pro Rata Share (including without limitation all
obligations of Borrower with respect thereto). The Borrower hereby indemnifies
each of the Collateral Agent and each Lender against any and all liability and
expense it may incur in connection with any Letter of Credit and agrees to
reimburse each of the Collateral Agent and each Lender for any payment made by
the Collateral Agent or such Lender to the Administrative Agent in respect
thereof, except for any liability incurred or payment made as a result of the
Collateral Agent's or such Lender's gross negligence or willful misconduct.
11.10. APPORTIONMENT OF PAYMENTS.
From and after the Closing Date, until either Lender shall
assign a portion of its interest in the Liabilities, payments of fees and
principal (including any prepayments thereof) shall be apportioned fifty percent
(50%) to Harris and fifty percent (50%) to ANB. Interest shall be apportioned as
described in the respective Notes held by each Lender. All amounts received by
any Lender shall be applied first to pay any fees, expenses or indemnities then
due such Lender, second to pay the Liabilities in accordance with the applicable
provisions of this Agreement and third to any other Person entitled thereto. If
sufficient funds are not available to pay all such Liabilities, any such amounts
shall be allocated to the Lenders in proportion to the respective Pro Rata Share
of each Lender.
11.11. RELEASE OF COLLATERAL.
Each Lender hereby irrevocably authorizes the Collateral
Agent, at its option and in its discretion, to release any and all Guaranties
and any lien or security interest granted to or held by the Collateral Agent
upon any Collateral (i) upon termination of the Lenders' obligations to make
Loans and issue Letters of Credit and payment and satisfaction of all Loans, the
aggregate Letter of Credit Exposure and all other Liabilities; (ii) constituting
Collateral being sold or disposed of if the Borrower certifies to the Collateral
Agent that the sale or disposition is made in compliance with the terms of this
Agreement (and, absent any actual knowledge of the Collateral Agent to the
contrary, the Collateral Agent may rely conclusively on any such certificate,
without further inquiry); (iii) constituting property in which a Designated
Company owned no interest at the time the lien or security interest was granted
and at all times thereafter; or (iv) if approved, authorized or ratified in
writing by all of the Lenders. Upon request by the Collateral Agent at any time,
each Lender will confirm in writing the Collateral Agent's authority to release
particular types or items of Collateral pursuant to this SECTION 11.11.
11.12. AGREEMENT TO COOPERATE.
Each Lender agrees to cooperate to the end that the terms and
provisions of this Agreement may be promptly and fully carried out. Each Lender
also agrees, from time to time, at the request of either Agent, to execute and
deliver any and all other agreements, documents or instruments and to take such
other actions, all as may be reasonably necessary or desirable to effectuate the
terms, provisions and intent of this Agreement.
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11.13. LENDERS TO ACT AS AGENTS.
If any Collateral or proceeds thereof at any time comes into
the possession or under the control of any Lender, such Lender shall hold such
Collateral or proceeds thereof as agent for the benefit of the Lenders, and
will, upon receipt therefor, deliver such Collateral to the Collateral Agent or
proceeds thereof to the Administrative Agent.
11.14. AMENDMENTS.
No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or any other Financing Agreement
shall in any event be effective unless the same shall be in writing and signed
and delivered by the Requisite Lenders. Notwithstanding the foregoing, any
amendment, modification, termination, waiver or consent with respect to any of
the following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender affected thereby: (a) increase in the amount of
the Maximum Loan Amount or Pro Rata Share of such Lender or of the Maximum
Facility, (b) reduction of the principal of, rate or amount of interest on any
Loans or any fees or charges (including, without limitation, any Letter of
Credit fees or charges) payable to such Lender (other than by the payment or
prepayment thereof), (c) increase in the advance rates set forth in the
definition of the term "Loan Availability," (d) postponement of the date fixed
for any payment of principal of, or interest on, the Loans or any fees or
charges) (including, without limitation, any Letter of Credit charges) or other
amounts payable to such Lender, (e) change in the aggregate Pro Rata Share of
the Lenders which shall be required for the Lenders or any of them to take
action hereunder or amend the definition of "REQUISITE LENDERS," or (f)
amendment of this SECTION 11.14. The Administrative Agent may, but shall have no
obligation to, with the written concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver of any
provision of this Agreement, and any consent to any departure by the Borrower
from the terms of any provision of this Agreement, shall be effective only in
the specific instance and for the specific purpose for which given.
11.15. ASSIGNMENTS AND PARTICIPATIONS BY THE LENDERS;
INFORMATION.
(a) The Borrower and each Lender hereby agree that on or after
the date hereof, but subject to the remaining provisions of this SECTION
11.15(A), each Lender (a "Selling Lender") may, in its discretion, without the
Borrower's, either Agent's or any other Lender's consent, sell one or more
assignments of portions of its interest in the Maximum Facility. Notwithstanding
the foregoing:
(i) if ANB or Harris wishes to sell a portion of its
interest, the Selling Lender agrees to provide the other with sixty
(60) days' prior written notice of such assignment (including the terms
thereof) (the "Agent Refusal Period") and a right of first refusal to
purchase such portion of the Selling Lender's interest in the Maximum
Facility on the same terms disclosed in such notice prior to the
expiration of the Refusal Period. The foregoing right of first refusal
shall not apply to any sale of a portion of a Selling Lender's interest
in the Maximum Facility to (x) any Person in connection with the sale
of all or a
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substantial portion of the loan portfolio of the Selling Lender, so
long as the transferee thereof is a creditworthy financial institution
with comparable funding capabilities to those of the Selling Lender or
(y) an affiliate of such Selling Lender. Notwithstanding the foregoing,
neither Harris or ANB may, without the consent of all of the Lenders,
sell portions of its interest such that such Maximum Loan Amount is
less than Ten Million Dollars ($10,000,000), other than in connection
with a sale to an affiliate of such Lender or a sale of all or
substantially all of the portfolio of such Lender.
(ii) if any Lender other than ANB or Harris wishes to
sell a portion of its interest, such Lender agrees to provide each
other Lender with thirty (30) days' prior written notice of such
assignment (including the terms thereof) (the "First Lender Refusal
Period") and each of ANB and Harris shall have a right of first refusal
to purchase such portion of the Selling Lender's interest in the
Maximum Facility on the same terms disclosed in such notice (except
that ANB and Harris shall not be required to pay in excess of par value
for such interest), which purchase shall be consummated on the
expiration date of the First Lender Refusal Period. In order to
exercise such right, ANB and/or Harris shall notify the Selling Lender
and the other Lenders thereof in writing prior to the expiration of the
First Lender Refusal Period. If both ANB and Harris exercise such
right, the purchase shall be made by them on a pro rata basis. If
neither ANB or Harris exercises such right, then each other Lender
shall have an additional ten (10) day period (the "Second Lender
Refusal Period") during which it shall have a right to purchase such
portion of the Selling Lender's interest in the Maximum Facility on the
same terms disclosed in the original notice, which purchase shall be
consummated on the expiration date of the Second Lender Refusal Period.
In order to exercise such right, such Lender shall notify the Selling
Lender and other Lenders thereof in writing prior to the expiration of
the Second Lender Refusal Period. If more than one Lender exercises
such right, the purchase shall be made by them on a pro rata basis.
Each sale described in SECTION 11.15(A) shall be to a creditworthy financial
institution satisfactory to the Selling Lender in its discretion, and on such
terms and conditions as the Selling Lender may determine.
(b) Each assignment of an interest hereunder shall be subject
to the following conditions: (i) each assignment shall be of a constant, and not
a varying, ratable percentage of all of the Selling Lender's rights and
obligations under this Agreement, and the Maximum Loan Amount assigned shall be
in a minimum amount of Five Million Dollars ($5,000,000) and after giving effect
to such assignment no Lender's Maximum Loan Amount shall be less than Five
Million Dollars ($5,000,000) (unless the Selling Lender sells all of its
interest in the Maximum Facility), and (ii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording, an Assignment and Acceptance Agreement, with a copy to the Borrower.
Upon such execution, delivery, acceptance and
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recording, from and after the effective date specified in each Assignment and
Acceptance Agreement and agreed to by the Administrative Agent, (x) the assignee
thereunder shall, in addition to any rights and obligations hereunder held by it
immediately prior to such effective date, if any, have the rights and
obligations hereunder that have been assigned to it pursuant to such Assignment
and Acceptance Agreement and shall, to the fullest extent permitted by law, have
the same rights and benefits hereunder as if it were an original Lender
hereunder and (y) the Selling Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance Agreement, relinquish its rights and be released from its obligations
under this Agreement, other than its liability for actions occurring prior to
the effective date of such assignment (and, in the case of an Assignment and
Acceptance Agreement covering all or the remaining portion of such Selling
Lender's rights and obligations under this Agreement, the Selling Lender shall
cease to be a party hereto).
(c) The Administrative Agent shall maintain a copy of each
Assignment and Acceptance Agreement delivered to and accepted by it. The entries
in the Administrative Agent's records shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agents and the Lenders
may treat each Person whose name is recorded in the Administrative Agent's
records as a Lender hereunder for all purposes of this Agreement. Such records
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance Agreement
executed by the Selling Lender and the assignee and a processing and recordation
fee of Two Thousand Five Hundred Dollars ($2,500) (payable by the Selling Lender
or the assignee, as shall be agreed between them), Administrative Agent shall,
if such Assignment and Acceptance Agreement has been completed and is in
compliance with this Agreement and the Administrative Agent has consented to the
assignment evidenced thereby, (i) accept such Assignment and Acceptance
Agreement, (ii) record the information contained therein in its records and
(iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more other
financial institutions in or to all or a portion of its rights and obligations
under and in respect of any and all facilities under this Agreement; PROVIDED,
HOWEVER, that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Borrower, the Agents
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (iv) such participant's rights to agree or to restrict such
Lender's ability to agree to the modification, waiver or release of any of the
terms of this Agreement or the other Financing Agreements or to the release of
any Collateral covered by this Agreement or the other Financing Agreements to
consent to any action or failure to act by any party to this Agreement or any of
the other Financing Agreements, or to exercise or refrain from exercising any
powers or rights which any Lender may have under or in respect of this Agreement
or the other Financing Agreements or any Collateral, shall be limited to the
right to consent to (A) an increase in the Maximum Loan Amount of the Lender
from whom such participant purchased a participation, (B) reduction of the
principal of, or rate or amount of interest on the Loans subject to
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such participation (other than by the payment or prepayment thereof) or (C)
postponement of any date fixed for any payment of principal of, or interest on,
the Loans subject to such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this SECTION
11.15, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Companies furnished to such Lender
by or on behalf of the Companies; PROVIDED that, prior to any such disclosure,
such assignee or participant, or proposed assignee or participant, shall agree
to preserve the confidentiality of any confidential information described
therein and such Lender shall notify the Borrower of the assignee or
participant, or proposed assignee or participant.
(g) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
(h) The Borrower agrees to use its best efforts to assist the
Lenders in their efforts to sell assignments and participations hereunder. In
addition, the Borrower agrees to execute new Revolving Credit Notes in favor of
each of the selling and purchasing Lender, upon each sale of an assignment
hereunder, provided, that the existing Revolving Credit Notes in favor of the
selling Lender are simultaneously therewith returned to the Borrower.
11.16. RATABLE SHARING.
Each Lender agrees that if it shall, through the exercise of
any right of counterclaim, set-off, banker's lien or otherwise, receive payment
of a proportion of the Liabilities which is greater than the proportion received
by any other Lender, that Lender receiving such proportionately greater payment
shall purchase participations (which it shall be deemed to have done
simultaneously upon the receipt of such payment) in the claims of each of the
other Lenders under this Agreement so that all such recoveries with respect to
the Liabilities shall be proportionate to their respective Pro Rata Shares;
PROVIDED, that if all or part of such proportionately greater payment received
by such purchasing Lender is thereafter recovered from such Lender, those
purchases shall be rescinded and the purchase prices paid for such participation
shall be returned to that Lender to the extent of such recovery, but without
interest.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
ALL AMERICAN SEMICONDUCTOR, INC. as the Borrower
By /s/ HOWARD FLANDERS
--------------------------------
Its VP & CFO
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<PAGE>
Pro Rata Share: 50% HARRIS TRUST AND SAVINGS BANK,
as a Lender and as the Administrative Agent
Maximum Loan Amount: $50,000,000 for the Lenders
By /s/ [ILLEGIBLE]
-------------------------------------------
Its V.P.
Address: 111 West Monroe Street
Chicago, Illinois 60603
Attn: Mr. Keven Delaplane
Vice President
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<PAGE>
Pro Rata Share: 50% AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, as a
Lender and as the Collateral Agent for the
Maximum Loan Amount: $50,000,000 Lenders
By /s/ CHRISTOFER FOWLER
-------------------------------------------
Its V.P.
Address: 33 North LaSalle Street
Chicago, Illinois 60690
Attn: Mr. Dennis Harrison
Senior Vice President
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<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Credit Notes
Exhibit B Form of Certificate to Accompany Reports
Exhibit C Forms of Reconciliation of Accounts and
Inventory
Exhibit D Form of Weekly Report
Exhibit E Form of Certification of Financial
Statements
Exhibit F Form of Assignment and Acceptance Agreement
Exhibit G Form of Accountants' Letter
Exhibit H Form of Notice to Account Debtors
Schedule 2.1 Designated Companies
Schedule 3.11 Locations
Schedule 3.14 Leased Equipment
Schedule 3.16 Leased Real Property
Schedule 6.1 States of Incorporation and Qualification
Schedule 6.4 Financials
Schedule 6.5 Liens and Encumbrances
Schedule 6.8 Other Corporate Names
Schedule 6.10 Indebtedness
Schedule 6.12 Subsidiaries
Schedule 6.13 Litigation and Proceedings; Defaults under
Other Agreements
Schedule 6.15 Employee Controversies
Schedule 6.17 Patents, Trademarks, Licenses
Schedule 6.18 Environmental Matters
Schedule 6.19 Broker's Fees
Schedule 8.4 Permitted Investments
Schedule 8.5 Permitted Guarantees
Schedule 8.9 Permitted Consulting and Management Fees
<PAGE>
REVOLVING CREDIT NOTE
$30,000,000.00 Chicago, Illinois
May 10, 1996
FOR VALUE RECEIVED, the undersigned, All American Semiconductor, Inc.,
a Delaware corporation ("BORROWER"), hereby unconditionally promises to pay to
the order of Harris Trust and Savings Bank ("BANK") at its office at 111 West
Monroe Street, Chicago, Illinois 60603 or at such other place as the holder of
this Revolving Credit Note may from time to time designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Thirty Million and 00/100 Dollars ($30,000,000.00) plus the
aggregate unpaid principal amount of all advances made by Bank to Borrower
pursuant to Section 2.1 of the Loan Agreement (hereinafter defined) in excess of
Thirty Million and 00/100 Dollars ($30,000,000.00) or, if less, the aggregate
unpaid principal amount of all advances made by Bank to Borrower pursuant to
Section 2.1 of the Loan Agreement. This Revolving Credit Note is referred to in,
and was executed and delivered pursuant to, that certain Loan and Security
Agreement of even date herewith among Borrower, Bank, as Administrative Agent
for the Lenders thereunder (the "LENDERS") and as a Lender, American National
Bank and Trust Company of Chicago, as Collateral Agent for the Lenders and as a
Lender and the other Lenders party thereto (the "LOAN AGREEMENT") and, in
particular, Section 2.1 thereof, to which reference is hereby made for a
statement of the terms and conditions under which the loans evidenced hereby
were made and are to be repaid. All terms which are capitalized and used herein
(which are not otherwise specifically defined herein) and which are defined in
the Loan Agreement shall be used in this Revolving Credit Note as defined in the
Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THIS REVOLVING CREDIT NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIER TO OCCUR OF (i) THE
LAST DAY OF THE INITIAL TERM OR, IF EXTENDED PURSUANT TO SECTION 2.8 OF
THE LOAN AGREEMENT, ANY SUBSEQUENT TERM, AND (ii) THE ACCELERATION OF
THE LIABILITIES IN ACCORDANCE WITH SECTION 9.1 OF THE LOAN AGREEMENT.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof, at
the rates described in Section 2.6 of the Loan Agreement. Interest shall be
payable as provided in the Loan Agreement and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
If payment hereunder becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges required to be paid
hereunder would exceed the limit which Bank may lawfully charge Borrower, then
the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amounts in excess of such limit shall have been paid,
then such amounts shall be refunded to Borrower so that under no circumstances
shall the interest or other charges required to be paid by Borrower hereunder
exceed the maximum rate allowed by law.
<PAGE>
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided that if Borrower prepays all
of the Liabilities in full prior to the last day of the Initial Term or, if the
term is extended pursuant to Section 2.8 of the Loan Agreement, of any
subsequent Term, Borrower shall pay to Bank, as liquidated damages and
compensation for the costs of Bank's being prepared to make funds available to
Borrower, a prepayment fee as provided in Section 2.9 of the Loan Agreement.
Presentment, protest and notice of nonpayment and protest are hereby
waived by Borrower.
THIS REVOLVING CREDIT NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) OF THE STATE
OF ILLINOIS.
Whenever possible each provision of this Revolving Credit Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Credit Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Revolving Credit Note. Whenever in
this Revolving Credit Note reference is made to Bank or Borrower, such reference
shall be deemed to include, as applicable, a reference to their respective
successors and assigns. The provisions of this Revolving Credit Note shall be
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Bank and its successors and assigns.
ALL AMERICAN SEMICONDUCTOR, INC.
By /s/ HOWARD FLANDERS
------------------------------------
Its VP & CFO
<PAGE>
REVOLVING CREDIT NOTE
$30,000,000.00 Chicago, Illinois
May 10, 1996
FOR VALUE RECEIVED, the undersigned, All American Semiconductor, Inc.,
a Delaware corporation ("BORROWER"), hereby unconditionally promises to pay to
the order of American National Bank and Trust Company of Chicago ("BANK") at its
office at 33 North LaSalle Street, Chicago, Illinois 60690 or at such other
place as the holder of this Revolving Credit Note may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of Thirty Million and 00/100
Dollars ($30,000,000.00) plus the aggregate unpaid principal amount of all
advances made by Bank to Borrower pursuant to Section 2.1 of the Loan Agreement
(hereinafter defined) in excess of Thirty Million and 00/100 Dollars
($30,000,000.00) or, if less, the aggregate unpaid principal amount of all
advances made by Bank to Borrower pursuant to Section 2.1 of the Loan Agreement.
This Revolving Credit Note is referred to in, and was executed and delivered
pursuant to, that certain Loan and Security Agreement of even date herewith
among Borrower, Harris Trust and Savings Bank, as Administrative Agent for the
Lenders thereunder (the "LENDERS") and as a Lender, Bank, as Collateral Agent
for the Lenders and as a Lender and the other Lenders party thereto (the "LOAN
AGREEMENT") and, in particular, Section 2.1 thereof, to which reference is
hereby made for a statement of the terms and conditions under which the loans
evidenced hereby were made and are to be repaid. All terms which are capitalized
and used herein (which are not otherwise specifically defined herein) and which
are defined in the Loan Agreement shall be used in this Revolving Credit Note as
defined in the Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THIS REVOLVING CREDIT NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIER TO OCCUR OF (i) THE
LAST DAY OF THE INITIAL TERM OR, IF EXTENDED PURSUANT TO SECTION 2.8 OF
THE LOAN AGREEMENT, ANY SUBSEQUENT TERM, AND (ii) THE ACCELERATION OF
THE LIABILITIES IN ACCORDANCE WITH SECTION 9.1 OF THE LOAN AGREEMENT.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof, at
the rates described in Section 2.6 of the Loan Agreement. Interest shall be
payable as provided in the Loan Agreement and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
If payment hereunder becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges required to be paid
hereunder would exceed the limit which Bank may lawfully charge Borrower, then
the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amounts in excess of such limit shall have been paid,
then such amounts shall be refunded to Borrower so that under no
<PAGE>
circumstances shall the interest or other charges required to be paid by
Borrower hereunder exceed the maximum rate allowed by law.
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided that if Borrower prepays all
of the Liabilities in full prior to the last day of the Initial Term or, if the
term is extended pursuant to Section 2.8 of the Loan Agreement, of any
subsequent Term, Borrower shall pay to Bank, as liquidated damages and
compensation for the costs of Bank's being prepared to make funds available to
Borrower, a prepayment fee as provided in Section 2.9 of the Loan Agreement.
Presentment, protest and notice of nonpayment and protest are hereby
waived by Borrower.
THIS REVOLVING CREDIT NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) OF THE STATE
OF ILLINOIS.
Whenever possible each provision of this Revolving Credit Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Credit Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Revolving Credit Note. Whenever in
this Revolving Credit Note reference is made to Bank or Borrower, such reference
shall be deemed to include, as applicable, a reference to their respective
successors and assigns. The provisions of this Revolving Credit Note shall be
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Bank and its successors and assigns.
ALL AMERICAN SEMICONDUCTOR, INC.
By /s/ HOWARD FLANDERS
------------------------------------
Its VP & CFO
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000.00 Chicago, Illinois
May 10, 1996
FOR VALUE RECEIVED, the undersigned, All American Semiconductor, Inc.,
a Delaware corporation ("BORROWER"), hereby unconditionally promises to pay to
the order of The Bank of New York Commercial Corporation ("BANK") at its office
at 1290 Avenue of the Americas, 3rd Floor, New York, New York 10104 or at such
other place as the holder of this Revolving Credit Note may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of Ten Million and 00/100 Dollars
($10,000,000.00) plus the aggregate unpaid principal amount of all advances made
by Bank to Borrower pursuant to Section 2.1 of the Loan Agreement (hereinafter
defined) in excess of Ten Million and 00/100 Dollars ($10,000,000.00) or, if
less, the aggregate unpaid principal amount of all advances made by Bank to
Borrower pursuant to Section 2.1 of the Loan Agreement. This Revolving Credit
Note is referred to in, and was executed and delivered pursuant to, that certain
Loan and Security Agreement of even date herewith among Borrower, Harris Trust
and Savings Bank, as Administrative Agent for the Lenders thereunder (the
"LENDERS") and as a Lender, American National Bank and Trust Company of Chicago,
as Collateral Agent for the Lenders and as a Lender, Bank and the other Lenders
party thereto (the "LOAN AGREEMENT") and, in particular, Section 2.1 thereof, to
which reference is hereby made for a statement of the terms and conditions under
which the loans evidenced hereby were made and are to be repaid. All terms which
are capitalized and used herein (which are not otherwise specifically defined
herein) and which are defined in the Loan Agreement shall be used in this
Revolving Credit Note as defined in the Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THIS REVOLVING CREDIT NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIER TO OCCUR OF (i) THE
LAST DAY OF THE INITIAL TERM OR, IF EXTENDED PURSUANT TO SECTION 2.8 OF
THE LOAN AGREEMENT, ANY SUBSEQUENT TERM, AND (ii) THE ACCELERATION OF
THE LIABILITIES IN ACCORDANCE WITH SECTION 9.1 OF THE LOAN AGREEMENT.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof, at
the rates described in Section 2.6 of the Loan Agreement. Interest shall be
payable as provided in the Loan Agreement and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
If payment hereunder becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges required to be paid
hereunder would exceed the limit which Bank may lawfully charge Borrower, then
the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amounts in excess of such limit
<PAGE>
shall have been paid, then such amounts shall be refunded to Borrower so that
under no circumstances shall the interest or other charges required to be paid
by Borrower hereunder exceed the maximum rate allowed by law.
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided that if Borrower prepays all
of the Liabilities in full prior to the last day of the Initial Term or, if the
term is extended pursuant to Section 2.8 of the Loan Agreement, of any
subsequent Term, Borrower shall pay to Bank, as liquidated damages and
compensation for the costs of Bank's being prepared to make funds available to
Borrower, a prepayment fee as provided in Section 2.9 of the Loan Agreement.
Presentment, protest and notice of nonpayment and protest are hereby
waived by Borrower.
THIS REVOLVING CREDIT NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) OF THE STATE
OF ILLINOIS.
Whenever possible each provision of this Revolving Credit Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Credit Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Revolving Credit Note. Whenever in
this Revolving Credit Note reference is made to Bank or Borrower, such reference
shall be deemed to include, as applicable, a reference to their respective
successors and assigns. The provisions of this Revolving Credit Note shall be
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Bank and its successors and assigns.
ALL AMERICAN SEMICONDUCTOR, INC.
By /s/ HOWARD FLANDERS
------------------------------------
Its VP & CFO
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000.00 Chicago, Illinois
May 10, 1996
FOR VALUE RECEIVED, the undersigned, All American Semiconductor, Inc.,
a Delaware corporation ("BORROWER"), hereby unconditionally promises to pay to
the order of Sanwa Business Credit Corporation ("BANK") at its office at One
South Wacker Drive, Chicago, Illinois 60606 or at such other place as the holder
of this Revolving Credit Note may from time to time designate in writing, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Ten Million and 00/100 Dollars ($10,000,000.00) plus the
aggregate unpaid principal amount of all advances made by Bank to Borrower
pursuant to Section 2.1 of the Loan Agreement (hereinafter defined) in excess of
Ten Million and 00/100 Dollars ($10,000,000.00) or, if less, the aggregate
unpaid principal amount of all advances made by Bank to Borrower pursuant to
Section 2.1 of the Loan Agreement. This Revolving Credit Note is referred to in,
and was executed and delivered pursuant to, that certain Loan and Security
Agreement of even date herewith among Borrower, Harris Trust and Savings Bank,
as Administrative Agent for the Lenders thereunder (the "LENDERS") and as a
Lender, American National Bank and Trust Company of Chicago, as Collateral Agent
for the Lenders and as a Lender, Bank and the other Lenders party thereto (the
"LOAN AGREEMENT") and, in particular, Section 2.1 thereof, to which reference is
hereby made for a statement of the terms and conditions under which the loans
evidenced hereby were made and are to be repaid. All terms which are capitalized
and used herein (which are not otherwise specifically defined herein) and which
are defined in the Loan Agreement shall be used in this Revolving Credit Note as
defined in the Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THIS REVOLVING CREDIT NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIER TO OCCUR OF (i) THE
LAST DAY OF THE INITIAL TERM OR, IF EXTENDED PURSUANT TO SECTION 2.8 OF
THE LOAN AGREEMENT, ANY SUBSEQUENT TERM, AND (ii) THE ACCELERATION OF
THE LIABILITIES IN ACCORDANCE WITH SECTION 9.1 OF THE LOAN AGREEMENT.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof, at
the rates described in Section 2.6 of the Loan Agreement. Interest shall be
payable as provided in the Loan Agreement and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
If payment hereunder becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges required to be paid
hereunder would exceed the limit which Bank may lawfully charge Borrower, then
the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amounts in excess of such limit
<PAGE>
shall have been paid, then such amounts shall be refunded to Borrower so that
under no circumstances shall the interest or other charges required to be paid
by Borrower hereunder exceed the maximum rate allowed by law.
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided that if Borrower prepays all
of the Liabilities in full prior to the last day of the Initial Term or, if the
term is extended pursuant to Section 2.8 of the Loan Agreement, of any
subsequent Term, Borrower shall pay to Bank, as liquidated damages and
compensation for the costs of Bank's being prepared to make funds available to
Borrower, a prepayment fee as provided in Section 2.9 of the Loan Agreement.
Presentment, protest and notice of nonpayment and protest are hereby
waived by Borrower.
THIS REVOLVING CREDIT NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) OF THE STATE
OF ILLINOIS.
Whenever possible each provision of this Revolving Credit Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Credit Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Revolving Credit Note. Whenever in
this Revolving Credit Note reference is made to Bank or Borrower, such reference
shall be deemed to include, as applicable, a reference to their respective
successors and assigns. The provisions of this Revolving Credit Note shall be
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Bank and its successors and assigns.
ALL AMERICAN SEMICONDUCTOR, INC.
By /s/ HOWARD FLANDERS
------------------------------------
Its VP & CFO
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000.00 Chicago, Illinois
May 10, 1996
FOR VALUE RECEIVED, the undersigned, All American Semiconductor, Inc.,
a Delaware corporation ("BORROWER"), hereby unconditionally promises to pay to
the order of Mercantile Business Credit, Inc. ("BANK") at its office at 100
South Brentwood Boulevard, Number 500, St. Louis, Missouri 63105 or at such
other place as the holder of this Revolving Credit Note may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of Ten Million and 00/100 Dollars
($10,000,000.00) plus the aggregate unpaid principal amount of all advances made
by Bank to Borrower pursuant to Section 2.1 of the Loan Agreement (hereinafter
defined) in excess of Ten Million and 00/100 Dollars ($10,000,000.00) or, if
less, the aggregate unpaid principal amount of all advances made by Bank to
Borrower pursuant to Section 2.1 of the Loan Agreement. This Revolving Credit
Note is referred to in, and was executed and delivered pursuant to, that certain
Loan and Security Agreement of even date herewith among Borrower, Harris Trust
and Savings Bank, as Administrative Agent for the Lenders thereunder (the
"LENDERS") and as a Lender, American National Bank and Trust Company of Chicago,
as Collateral Agent for the Lenders and as a Lender, Bank and the other Lenders
party thereto (the "LOAN AGREEMENT") and, in particular, Section 2.1 thereof, to
which reference is hereby made for a statement of the terms and conditions under
which the loans evidenced hereby were made and are to be repaid. All terms which
are capitalized and used herein (which are not otherwise specifically defined
herein) and which are defined in the Loan Agreement shall be used in this
Revolving Credit Note as defined in the Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THIS REVOLVING CREDIT NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIER TO OCCUR OF (i) THE
LAST DAY OF THE INITIAL TERM OR, IF EXTENDED PURSUANT TO SECTION 2.8 OF
THE LOAN AGREEMENT, ANY SUBSEQUENT TERM, AND (ii) THE ACCELERATION OF
THE LIABILITIES IN ACCORDANCE WITH SECTION 9.1 OF THE LOAN AGREEMENT.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof, at
the rates described in Section 2.6 of the Loan Agreement. Interest shall be
payable as provided in the Loan Agreement and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
If payment hereunder becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges required to be paid
hereunder would exceed the limit which Bank may lawfully charge Borrower, then
the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amounts in excess of such limit
<PAGE>
shall have been paid, then such amounts shall be refunded to Borrower so that
under no circumstances shall the interest or other charges required to be paid
by Borrower hereunder exceed the maximum rate allowed by law.
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided that if Borrower prepays all
of the Liabilities in full prior to the last day of the Initial Term or, if the
term is extended pursuant to Section 2.8 of the Loan Agreement, of any
subsequent Term, Borrower shall pay to Bank, as liquidated damages and
compensation for the costs of Bank's being prepared to make funds available to
Borrower, a prepayment fee as provided in Section 2.9 of the Loan Agreement.
Presentment, protest and notice of nonpayment and protest are hereby
waived by Borrower.
THIS REVOLVING CREDIT NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) OF THE STATE
OF ILLINOIS.
Whenever possible each provision of this Revolving Credit Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Credit Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Revolving Credit Note. Whenever in
this Revolving Credit Note reference is made to Bank or Borrower, such reference
shall be deemed to include, as applicable, a reference to their respective
successors and assigns. The provisions of this Revolving Credit Note shall be
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Bank and its successors and assigns.
ALL AMERICAN SEMICONDUCTOR, INC.
By /s/ HOWARD FLANDERS
------------------------------------
Its VP & CFO
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000.00 Chicago, Illinois
May 10, 1996
FOR VALUE RECEIVED, the undersigned, All American Semiconductor, Inc.,
a Delaware corporation ("BORROWER"), hereby unconditionally promises to pay to
the order of NationsBank of Texas, N.A. ("BANK") at its office at 901 Main
Street, 6th Floor, Dallas, Texas 75283 or at such other place as the holder of
this Revolving Credit Note may from time to time designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Ten Million and 00/100 Dollars ($10,000,000.00) plus the
aggregate unpaid principal amount of all advances made by Bank to Borrower
pursuant to Section 2.1 of the Loan Agreement (hereinafter defined) in excess of
Ten Million and 00/100 Dollars ($10,000,000.00) or, if less, the aggregate
unpaid principal amount of all advances made by Bank to Borrower pursuant to
Section 2.1 of the Loan Agreement. This Revolving Credit Note is referred to in,
and was executed and delivered pursuant to, that certain Loan and Security
Agreement of even date herewith among Borrower, Harris Trust and Savings Bank,
as Administrative Agent for the Lenders thereunder (the "LENDERS") and as a
Lender, American National Bank and Trust Company of Chicago, as Collateral Agent
for the Lenders and as a Lender, Bank and the other Lenders party thereto (the
"LOAN AGREEMENT") and, in particular, Section 2.1 thereof, to which reference is
hereby made for a statement of the terms and conditions under which the loans
evidenced hereby were made and are to be repaid. All terms which are capitalized
and used herein (which are not otherwise specifically defined herein) and which
are defined in the Loan Agreement shall be used in this Revolving Credit Note as
defined in the Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THIS REVOLVING CREDIT NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE UPON THE EARLIER TO OCCUR OF (i) THE
LAST DAY OF THE INITIAL TERM OR, IF EXTENDED PURSUANT TO SECTION 2.8 OF
THE LOAN AGREEMENT, ANY SUBSEQUENT TERM, AND (ii) THE ACCELERATION OF
THE LIABILITIES IN ACCORDANCE WITH SECTION 9.1 OF THE LOAN AGREEMENT.
Borrower further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof, at
the rates described in Section 2.6 of the Loan Agreement. Interest shall be
payable as provided in the Loan Agreement and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
If payment hereunder becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of the interest or other charges required to be paid
hereunder would exceed the limit which Bank may lawfully charge Borrower, then
the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amounts in excess of such limit
<PAGE>
shall have been paid, then such amounts shall be refunded to Borrower so that
under no circumstances shall the interest or other charges required to be paid
by Borrower hereunder exceed the maximum rate allowed by law.
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided that if Borrower prepays all
of the Liabilities in full prior to the last day of the Initial Term or, if the
term is extended pursuant to Section 2.8 of the Loan Agreement, of any
subsequent Term, Borrower shall pay to Bank, as liquidated damages and
compensation for the costs of Bank's being prepared to make funds available to
Borrower, a prepayment fee as provided in Section 2.9 of the Loan Agreement.
Presentment, protest and notice of nonpayment and protest are hereby
waived by Borrower.
THIS REVOLVING CREDIT NOTE SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) OF THE STATE
OF ILLINOIS.
Whenever possible each provision of this Revolving Credit Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Revolving Credit Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Revolving Credit Note. Whenever in
this Revolving Credit Note reference is made to Bank or Borrower, such reference
shall be deemed to include, as applicable, a reference to their respective
successors and assigns. The provisions of this Revolving Credit Note shall be
binding upon Borrower and its successors and assigns, and shall inure to the
benefit of Bank and its successors and assigns.
ALL AMERICAN SEMICONDUCTOR, INC.
By /s/ HOWARD FLANDERS
------------------------------------
Its VP & CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information from the Registrant's
consolidated condensed financial statements as of and for the three months ended
March 31, 1996, and is qualified in its entirety by reference to such
consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 374
<SECURITIES> 0
<RECEIVABLES> 41,418
<ALLOWANCES> 1,075
<INVENTORY> 74,596
<CURRENT-ASSETS> 117,918
<PP&E> 7,613
<DEPRECIATION> 3,012
<TOTAL-ASSETS> 128,611
<CURRENT-LIABILITIES> 37,330
<BONDS> 58,703
0
0
<COMMON> 199
<OTHER-SE> 32,379
<TOTAL-LIABILITY-AND-EQUITY> 128,611
<SALES> 67,197
<TOTAL-REVENUES> 67,197
<CGS> 52,541
<TOTAL-COSTS> 52,541
<OTHER-EXPENSES> 12,856
<LOSS-PROVISION> 146
<INTEREST-EXPENSE> 997
<INCOME-PRETAX> 657
<INCOME-TAX> 282
<INCOME-CONTINUING> 375
<DISCONTINUED> 0
<EXTRAORDINARY> 214
<CHANGES> 0
<NET-INCOME> 161
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
