Document:

Exhibit 10.7

 

CAPITAL CALL AGREEMENT

 

CAPITAL CALL

AGREEMENT (this “Agreement”), dated as of June 26, 2002, made by and among J.F.

Lehman Equity Investors I, L.P. (“JFLEI”), and Ableco Finance LLC (“Ableco”) as

collateral agent and administrative agent for the benefit of the various

financial institutions (the “Lenders”) from time to time party to the Financing

Agreement referred to below.  Except as

otherwise defined herein, all capitalized terms used herein and defined in the

Financing Agreement are used herein as therein defined.

 

W I T N E S S E T H :

 

WHEREAS, Elgar

Holdings, Inc. (“Holdings”), Elgar Electronics Corporation (the “Borrower”),

the Lenders and Ableco shall enter into a Financing Agreement of even date

herewith (the “Financing Agreement”);

 

WHEREAS, on

the date hereof, JFLEI owns a substantial economic interest and voting interest

in Holdings’ capital stock, and Holdings owns 100% of the economic and voting

interest in the Borrower’s capital stock;

 

WHEREAS,

JFLEI, Holdings and the Borrower will obtain benefits as a result of the making

of Loans to the Borrower under the Financing Agreement and, accordingly, desire

to execute and deliver this Agreement in order to induce Ableco to enter into

the Financing Agreement.

 

NOW,

THEREFORE, it is agreed:

 

1.             CERTAIN DEFINED TERMS.  As used herein, the following terms shall

have the following meanings:

 

“Ableco” shall

have the meaning provided in the first paragraph of this Agreement.

 

“Agreement”

shall have the meaning provided in the first paragraph of this Agreement.

 

“Borrower”

shall have the meaning provided in the first recital of this Agreement.

 

“Capital Call

Amount” shall mean $3,000,000.

 

“Capital Call Event” shall mean solely the failure of Holdings to

achieve at least $4,000,000 of Consolidated EBITDA for the Initial Test Period

(defined below) (determination of such achievement to be based on financial

statements delivered pursuant to Section 7.01(a)(ii) of the Financing

Agreement).

 

“Financing

Agreement” shall have the meaning provided in the first recital of this

Agreement.

 

“Holdings”

shall have the meaning provided in the first recital of this Agreement.

 

 

“Initial Test

Period” shall mean the period of two consecutive fiscal quarters ending on

December 31, 2002.

 

“JFLEI” shall

have the meaning provided in the first paragraph of this Agreement.

 

“Lenders”

shall have the meaning provided in the first paragraph of this Agreement.

 

“Participation”

is defined in Section 2 of this Agreement.

 

“Test Period”

shall mean the period of four consecutive fiscal quarters ending on December

31, 2003.

 

2.             PURCHASE OF PARTICIPATION.  (a) JFLEI hereby absolutely, irrevocably and

unconditionally agrees that on the date the Capital Call Event shall have

occurred, JFLEI will, as soon as practicable, but in any event within 20 days

thereafter, in an amount equal to the Capital Call Amount, purchase from Ableco

a pari passu participation (the

“Participation”) in Ableco’s outstanding Term Loan, with such participation to

be evidenced by a pari passu

participation agreement (the “Participation Agreement”) in form and substance

as attached hereto as Annex I.  Upon

such purchase by JFLEI of the Participation, JFLEI’s interest in such

Participation shall be governed by Section 12.07(c) of the Financing Agreement

and the terms of the Participation Agreement. 

JFLEI shall be entitled to its pro rata portion of such fees, interest

and expense reimbursements with respect to its Participation as would be

payable to Ableco pursuant to the Loan Documents if Ableco had not sold such

Participation to JFLEI.

 

3.             TERMINATION OF PARTICIPATION.  In the event Holdings achieves at least

$8,500,000 of Consolidated EBITDA for the Test Period, (determination of such

achievement to be based on audited financial statements delivered pursuant to

Section 7.01(a)(ii) of the Financing Agreement), as soon as practicable, but in

any event within 20 days thereafter, Ableco shall purchase such Participation,

and pay to JFLEI its pro rata portion of such fees, interest and expense

reimbursements as are owed to it at the time of such purchase.

 

4.             ACTIONS RELATING TO OBLIGATIONS

UNDER FINANCING AGREEMENT.  Ableco or

the Lenders (or any of the Lenders) may (except as shall be required by

applicable statute and cannot be waived), at any time prior to the occurrence

of the Capital Call Event without the consent of, or notice to, JFLEI, without

incurring responsibility to JFLEI, without impairing or releasing the

obligations of JFLEI hereunder, upon or without any terms or conditions and in

whole or in part:

 

(a)           change the manner,

place or terms of payment of, and/or change or extend the time of payment of,

renew, alter or increase any of the Obligations, any security therefor, or any

liability incurred directly or indirectly in respect thereof;

 

(b)            take and hold

security for the payment of the Obligations and sell, exchange, release,

impair, surrender, realize upon or otherwise deal with in any manner in any

order any property by whomsoever at any time pledged or mortgaged to secure, or

howsoever securing, the Obligations or any liabilities (including any of those

hereunder) incurred directly or indirectly in respect thereof or hereof, and/or

any offset thereagainst;

 

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(c)            exercise or refrain

from exercising any rights against the Borrower, any other Loan Party or others

or otherwise act or refrain from acting;

 

(d)            settle or

compromise any of the Obligations, any security therefor or any liability

(including any of those hereunder) incurred directly or indirectly in respect

thereof or hereof, and may subordinate the payment of all or any part thereof

to the payment of any liability (whether due or not) of the Borrower to

creditors of the Borrower other than the Secured Party, (as defined in the

Security Agreement of even date herewith, by and among Borrower, Holdings and

Ableco, as collateral agent for the Lender Group);

 

(e)            except as otherwise

expressly provided herein, apply any sums by whomsoever paid or howsoever

realized to any liability or liabilities of the Borrower to Ableco or the

Lenders regardless of what liabilities of the Borrower remain unpaid;

 

(f)            release or substitute any one or

more endorsers, guarantors, Loan Parties or other obligors;

 

(g)            consent to or waive

any breach of, or any act, omission or default under, any of the Loan Documents

or any of the instruments or agreements referred to therein, or otherwise

amend, modify or supplement any of the Loan Documents or any of such other

instruments or agreements;

 

(h)            pursue its rights

and remedies under this Agreement and/or under any guaranty of all or any part

of the Obligations in whatever order, or collectively, and Ableco shall be

entitled to JFLEI’s performance hereunder, notwithstanding any action taken (or

not taken) by Ableco to enforce any of its rights or remedies against JFLEI or

any other Person, for all or any part of the Obligations or any payment

received under this Agreement or any other such guaranty; and/or

 

(i)             take any other

action which would, under otherwise applicable principles of common law, give

rise to a legal or equitable discharge of JFLEI from its liabilities under this

Agreement.

 

5.             OBLIGATION UNCONDITIONAL UPON

OCCURRENCE OF CAPITAL CALL EVENT. 

Without limiting the generality of the terms of Section 4 hereof, upon

the occurrence of the Capital Call Event, the obligation of JFLEI under Section

2 of this Agreement to purchase the Participation is absolute and unconditional

and shall not be affected by the occurrence of any of the following events that

may occur before or after December 31, 2002: (a) any default by Borrower in the

performance or observance of any of its agreements or covenants in the

Financing Agreement or any of the other Loan Documents, (b) any waivers granted

by the Lenders with respect to defaults under the Loan Documents or any

amendments or modifications of the Loan Documents agreed to by the Lenders and

Borrower, or (c) the filing of a case under the United States Bankruptcy Code

or any other insolvency proceeding by or against Borrower, Holdings or any

other Person.

 

6.             REPRESENTATIONS, WARRANTIES AND

AGREEMENTS.  In order to induce the

Lenders to enter into the Financing Agreement, JFLEI makes the following

representations, warranties and agreements:

 

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(i)             JFLEI is a duly

organized and validly existing limited partnership in good standing under the

laws of the State of Delaware and has the power and authority to own its

property and assets and to transact the business in which it is engaged and

presently proposes to engage.

 

(ii)            JFLEI has the

power and authority to execute, deliver and perform the terms and provisions of

this Agreement and has taken all necessary action to authorize the execution,

delivery and performance by it of this Agreement.  JFLEI has duly executed and delivered this Agreement, and this

Agreement constitutes its legal, valid and binding obligation enforceable

against it in accordance with its terms, except to the extent that the

enforceability hereof may be limited by applicable bankruptcy, insolvency,

reorganization, moratorium or other similar laws generally affecting creditors’

rights and by equitable principles (regardless of whether enforcement is sought

in equity or at law).

 

(iii)           Neither the

execution, delivery or performance by JFLEI of this Agreement, nor compliance

by it with the terms and provisions hereof, nor the consummation of the

transactions contemplated herein, (x) will contravene any provision of any

applicable law, statute, rule or regulation or any applicable order, writ,

injunction or decree of any court of governmental instrumentality, (y) will

conflict with or result in any breach of any of the terms, covenants,

conditions or provisions of, or constitute a default under, or result in the

creation or imposition of (or the obligation to create or impose) any Lien upon

any of the property or assets of JFLEI pursuant to the terms of any indenture,

mortgage, deed of trust, credit agreement, loan agreement or any other material

agreement, contract or instrument to which JFLEI is a party or by which it or

any of its property or assets is bound or to which it may be subject or (z)

will violate any provision of any of the organizational documents of JFLEI.

 

(iv)           No order, consent,

approval, license, authorization or validation of, or filing, recording or

registration with, or exemption by, any governmental or public body or

authority, or any subdivision thereof, is required to authorize, or is required

in connection with, (x) the execution, delivery and performance of this

Agreement or (y) the legality, validity, binding effect or enforceability of

this Agreement.

 

(v)            There are no

actions, suits or proceedings pending or, to the knowledge of JFLEI, threatened

(x) with respect to this Agreement or (y) that could reasonably be expected to

(I) materially and adversely affect the business, operations, property, assets,

liabilities or condition (financial or otherwise) of JFLEI or (II) have a

material adverse effect on the rights or remedies of Ableco hereunder or on the

ability of JFLEI to perform its obligations to Ableco hereunder.

 

(vi)           JFLEI is in

compliance with all applicable statutes, regulations and orders of, and all

applicable restrictions imposed by, all governmental bodies, domestic or

foreign, in respect of the conduct of its business and the ownership of its

property.

 

(vii)          JFLEI or the

general partner thereof has available cash capital sufficient to fund in a

timely manner all obligations of JFLEI under this Agreement.

 

7.             MAINTAIN ABILITY TO FUND OBLIGATIONS.  Each of JFLEI and the general partner

thereof agrees to take all action as may be necessary so that, at all times

prior to

 

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the earlier to occur of (i) the

end of the Initial Test Period, if at the end of such period Holdings achieves

a Consolidated EBITDA of at least $4,000,000 for such period (such

determination to be based upon financial statements delivered pursuant to

Section 7.01(a)(ii) of the Financing Agreement), or (ii) such time as JFLEI

purchases the Participation in accordance with Section 2 hereof, JFLEI and/or

the general partner thereof shall have available cash capital sufficient to

fund in a timely manner all obligations of JFLEI under this Agreement.

 

8.             WAIVERS OF FAILURES; DELAYS,

ETC.  No failure or delay on the part of

Ableco or JFLEI in exercising any right, power or privilege hereunder and no

course of dealing between JFLEI and Ableco shall operate as a waiver thereof; nor shall any single

or partial exercise of any right, power or privilege hereunder preclude any

other or further exercise thereof or the exercise of any other right, power or

privilege.  The rights, powers and

remedies herein expressly provided are cumulative and not exclusive of any

rights, powers or remedies which Ableco would otherwise have.  No notice to or demand on JFLEI in any case

shall entitle JFLEI to any other further notice or demand in similar or other

circumstances or constitute a waiver of the rights of Ableco to any other or

further action in any circumstances without notice or demand.

 

9.             BENEFIT OF AGREEMENT.  This Agreement shall be binding upon JFLEI,

its successors and assigns (including, without limitation, any executors or

administrators) and shall inure to the benefit of Ableco its successors and

assigns.  JFLEI acknowledges and agrees

that this Agreement is made for the benefit of Ableco and that Ableco may

enforce all of the obligations of JFLEI hereunder directly against it.  JFLEI may not assign any of its rights or

obligations hereunder without the consent of Ableco.

 

10.           AMENDMENTS; WAIVERS.  Neither this Agreement nor any provision

hereof may be changed, modified, amended or waived except with the written

consent of JFLEI and Ableco.

 

11.           NOTICES.  All notices and other communication hereunder shall be made at

the addresses, in the manner and with the effect provided in Section 12.01

of the Financing Agreement, provided that, for this purpose, the address of

JFLEI shall be the address specified opposite its signature below.

 

12.           TERMINATION OF AGREEMENT.  This Agreement shall terminate and be of no

further force and effect upon the earlier of (i) the end of the Initial Test

Period, if at the end of such period Holdings achieves a Consolidated EBITDA of

at least $4,000,000 for such period (such determination to be based upon

financial statements pursuant to Section 7.01(a)(ii) of the Financing

Agreement), (ii) such time as Ableco purchases the Participation from JFLEI in

accordance with Section 3 hereof, or (iii) such time as the Term Loan

Obligations have been paid in full.

 

13.           GOVERNING LAW; SUBMISSION TO

JURISDICTION; VENUE; WAIVER OF JURY TRIAL. 

(a)  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF JFLEI

AND ABLECO HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE

LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

 

5

 

(b)           ANY LEGAL ACTION OR

PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE

STATE OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF

ABLECO JFLEI HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE

JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR

PROCEEDING.  EACH OF ABLECO JFLEI HEREBY

FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION

OVER SUCH PERSON, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR

PROCEEDING WITH RESPECT TO THIS AGREEMENT BROUGHT IN ANY OF THE AFORESAID

COURTS, THAT ANY SUCH COURT LACKS JURISDICTION OVER SUCH PERSON.  EACH OF ABLECO AND JFLEI IRREVOCABLY

CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE

MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO

SUCH PERSON, AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 12.01 OF THE FINANCING AGREEMENT OR AS SET FORTH

OPPOSITE ITS SIGNATURE BELOW, AS

THE CASE MAY BE, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH

MAILING.  EACH OF ABLECO AND JFLEI

HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER

IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING

COMMENCED HEREUNDER THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR

INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF EITHER JFLEI OR ABLECO TO

SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ABLECO

OR JFLEI, AS APPLICABLE, IN ANY OTHER JURISDICTION.

 

(c)           EACH OF ABLECO AND JFLEI HEREBY IRREVOCABLY WAIVES ANY

OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE

AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS

AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (B) ABOVE AND HEREBY

FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT

THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT

IN AN INCONVENIENT FORUM.  EACH OF

ABLECO AND JFLEI FURTHER IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY

JURY IN ANY COURT OR JURISDICTION, INCLUDING, WITHOUT LIMITATION, THOSE

REFERRED TO IN CLAUSE (B) ABOVE, IN RESPECT OF ANY MATTER ARISING OUT OF OR

RELATING TO THIS AGREEMENT.

 

14.           COSTS OF ENFORCEMENT; INDEMNITY.  (a)  JFLEI hereby agrees to pay

all out-of-pocket costs and expenses of Ableco in connection with the

enforcement of this Agreement and JFLEI agrees to pay all out-of-pocket costs

and expenses of Ableco in connection with any amendment, waiver or consent

relating hereto (including, without limitation, in each case, the reasonable

fees and disbursements of counsel employed by Ableco).

 

(b)           JFLEI hereby agrees to indemnify and

hold Ableco free and harmless from and against all loss, cost, damage, and

expense, by reason of the inaccuracy costs, which it

 

6

 

shall at any time have actually

sustained by reason of the inaccuracy or breach of any of the foregoing

representations, warranties and covenants.

 

15.           COUNTERPARTS. This Agreement may be

executed in any number of counterparts and by the different parties hereto on

separate counterparts, each of which when so executed and delivered shall be an

original, but all of which shall together constitute one and the same

instrument.  A set of counterparts

executed by all the parties hereto shall be lodged with JFLEI and Ableco.

 

16.           HEADINGS DESCRIPTIVE.  The headings of the several sections and

subsections of this Agreement are inserted for convenience only and shall not

in any way affect the meaning or construction of any provision of this

Agreement.

 

7

 

IN WITNESS

WHEREOF, each of the parties hereto has caused this Agreement to be executed

and delivered as of the date first above written.

 

	

  Addresses:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  450 Park

  Avenue

  	

   

  	

  J.F. LEHMAN

  EQUITY INVESTORS I, L.P.

  
	

  Sixth Floor

  	

   

  	

   

  
	

  New York,

  New York 10022

  	

   

  	

  By:

  	

  J.F.L.

  Investors, L.L.C., its general partner

  
	

  Telephone:  (212) 634 - 0100

  	

   

  	

   

  	

   

  
	

  Telecopier:  (212) 634 - 1155

  	

   

  	

   

  	

   

  
	

  Attention:

  Donald Glickman

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

  /s/ Donald

  Glickman

  	

   

  
	

   

  	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  	

   

  
						

 

Accepted and Agreed to:

 

ABLECO FINANCE

LLC,

 

	

  By: 

  	

  /s/ Kevin

  Genda

  	

   

  
	

  Title:

  Senior Vice President

  

 

8Exhibit 10.1

                    WAIVER ADDENDUM TO TERMINATION AGREEMENT

         Anthony E. Mohr hereby agrees to allow ADVA International Inc.
("Company" or "ADVA") to defer payments as described in the Termination
Agreement (as described in 8-K May 8, 2002) and hereby waives any defaults in
connection therewith. This period of deferment and waiver is effective August 1,
2002 and shall continue until the earlier of (1) the Company's repayment of such
obligation or (2) September 1, 2002. Accordingly, said Termination Agreement
shall be deemed amended as provided herein, with all other provisions thereof
remaining unchanged. This Addendum shall be deemed effective as of August 1st,
2002.

         By: /s/  Anthony E. Mohr
              --------------------

         Name:    Anthony E. Mohr
              --------------------

         Title:   Consultant

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