Document:

kl09013_ex10-2.htm

 

 

Exhibit 10.2

 

 

 

CORPORATE GUARANTY AND NEGATIVE PLEDGE AGREEMENT

 

Dated as of September 1, 2010

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce GE Government Finance, Inc., a Delaware corporation (herein, with its participants, successors and assigns, “Bondholder”), at its option, to provide financing to or for the account of the Development Authority of Jefferson, Georgia (“Issuer”) and SYX Distribution Inc. (“Lessee”) or to engage in any other transactions with Lessee and Issuer, the undersigned (“Guarantor”) hereby: (a) absolutely and unconditionally guarantees to Bondholder the full and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise in accordance with the terms of the Lease Agreement (as defined below), of any and all present and future debts, liabilities and obligations owed by Lessee or Issuer to Bondholder evidenced by or arising out of the Lease Agreement dated as of September 1, 2010 (the “Lease Agreement”) among Bondholder, Lessee and Issuer, and any and all extensions, renewals, modifications, supplements or amendments thereto or thereof and any related agreements (the “Indebtedness”), (b) absolutely and unconditionally guarantees to Bondholder the full and timely performance by Lessee of all of its obligations under the Lease Agreement and (c) so long as any Indebtedness shall remain outstanding, agrees and covenants not to sell, convey, transfer, assign, encumber, hypothecate or pledge any evidence of the controlling ownership interest in Lessee (whether direct or indirect) to any person or entity, except for the security interests granted pursuant to that certain Amended and Restated Credit Agreement dated as of October 27, 2005, among the Guarantor, the Borrowers (as defined therein), the Lenders (as defined therein) and the Administrative Agents (as defined therein), as amended.

 

1. No act or thing need occur to establish the liability of Guarantor hereunder, and no act or thing, except full payment and discharge of all Indebtedness, shall in any way exonerate Guarantor hereunder or modify, reduce, limit or release the liability of Guarantor hereunder. This is an absolute, unconditional and continuing guaranty of payment of the Indebtedness. The dissolution or adjudication of bankruptcy of Guarantor shall not revoke this Corporate Guaranty and Negative Pledge Agreement (this “Agreement”).

 

2. Guarantor represents and warrants to Bondholder that (a) Guarantor has a direct and substantial economic interest in Lessee and expects to derive substantial benefits therefrom and from any loans, credit transactions, financial accommodations, discounts, purchases of property and other transactions and events resulting in the creation of Indebtedness guaranteed hereby (this Agreement shall be effective and enforceable by Bondholder without regard to the receipt, nature or value of any such benefits); (b) Guarantor executed this Agreement without any intent to hinder, delay, or defraud any current or future creditor of Guarantor; (c) Guarantor is not insolvent and will not become insolvent as a result of the execution of this Agreement; (d) Guarantor is not engaged and is not about to engage in any business or transaction for which any property remaining with Guarantor has an unreasonably small capital or for which the remaining assets of Guarantor were unreasonably small in relation to the business of Guarantor or the transaction contemplated by this Agreement; (e) Guarantor does not intend to incur, and does not believe or reasonably should not believe that Guarantor will incur, debts beyond

 

 

  

  

  

Guarantor’s ability to pay such debts as they become due; (f) Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware (the “State”), has power to enter into this Agreement and by proper corporate action has duly authorized the execution and delivery of this Agreement; (g) Guarantor is in good standing and is duly licensed or qualified to transact business in the State and in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary; (h) Guarantor’s U.S. Federal Tax Identification Number is 11-3262067; (i) Guarantor has been fully authorized to execute and deliver this Agreement under the terms and provisions of the resolutions of its board of directors, or by other appropriate official approval, and further represents, covenants and warrants that all requirements have been met, and procedures have occurred in order to ensure the enforceability of this Agreement and this Agreement has been duly authorized, executed and delivered; (j) the officer of Guarantor executing this Agreement and any related documents has been duly authorized to execute and deliver this Agreement and such related documents under the terms and provisions of a resolution of Guarantor’s directors; (k) this Agreement constitutes a valid and legally binding obligation of Guarantor enforceable against Guarantor in accordance with its respective terms, except to the extent limited by bankruptcy, reorganization or other laws of general application relating to effecting the enforcement of creditors’ rights; and (l) the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of the terms and conditions hereof do not and will not violate any law, rule, regulation or order, conflict with or result in a breach of any of the terms or conditions of the articles of incorporation or bylaws of Guarantor or of any restriction or of any agreement or instrument to which Guarantor is now a party and does not and will not constitute a default under any of the foregoing or result in the creation or imposition of any liens, charges or encumbrances of any nature upon any of the property or assets of Guarantor contrary to the terms of any instrument or agreement to which Guarantor is a party or by which it is bound.

 

3. If Guarantor shall be or become bankrupt or insolvent (however defined), then Bondholder shall have the right to declare immediately due and payable, and Guarantor shall forthwith pay to Bondholder, the full amount of all Indebtedness whether due and payable or unmatured. If Guarantor voluntarily commences or there is commenced involuntarily against Guarantor a case under the United States Bankruptcy Code, the full amount of all Indebtedness, whether due and payable or unmatured, shall be immediately due and payable without demand or notice thereof.

 

4. Guarantor shall not exercise or enforce any right of contribution, reimbursement, recourse or subrogation available to Guarantor as to any Indebtedness, or against any person liable therefor, or as to any collateral security therefor.

 

5. Guarantor shall pay or reimburse Bondholder for all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by Bondholder in connection with the protection, defense or enforcement of this Agreement in any litigation or bankruptcy or insolvency proceedings.

 

6. Bondholder shall not be obligated by reason of its acceptance of this Agreement to engage in any transactions with or for Lessee or Issuer. Whether or not any existing relationship between Guarantor and Lessee has been changed or ended, Bondholder may enter into

 

 

  

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transactions resulting in the creation or continuance of Indebtedness and may otherwise agree, consent to, or suffer the creation or continuance of any Indebtedness, without any consent or approval by Guarantor and without any prior or subsequent notice to Guarantor. The liability of Guarantor shall not be affected or impaired by any of the following acts or things (which Bondholder is expressly authorized to do, omit or suffer from time to time, both before and after revocation of this Agreement, without consent or approval by or notice to Guarantor): (a) any acceptance of collateral security, guarantors, accommodation parties or sureties for any or all Indebtedness; (b) one or more extensions or renewals of Indebtedness (whether or not for longer than the original period) or any modification of the interest rates, maturities or other contractual terms applicable to any Indebtedness; (c) any waiver or indulgence granted to Lessee or Issuer, any delay or lack of diligence in the enforcement of Indebtedness, or any failure to institute proceedings, file a claim, give any required notices or otherwise protect any Indebtedness; (d) any full or partial release of, compromise or settlement with, or agreement not to sue, Lessee, Issuer or any other guarantor or other person liable in respect of any Indebtedness; (e) any release, surrender, cancellation or other discharge of any evidence of Indebtedness or the acceptance of any instrument in renewal or substitution therefor; (f) any failure to obtain collateral security (including rights of setoff) for Indebtedness, or to see to the proper or sufficient creation and perfection thereof, or to establish the priority thereof, or to preserve, protect, insure, care for, exercise or enforce any collateral security; or any modification, alteration, substitution, exchange, surrender, cancellation, termination, release or other change, impairment, limitation, loss or discharge of any collateral security; (g) any collection, sale, lease or disposition of, or any other foreclosure or enforcement of or realization on, any collateral security; (h) any assignment, pledge or other transfer of any Indebtedness or any evidence thereof; (i) any manner, order or method of application of any payments or credits upon Indebtedness; (j) any election by Bondholder under Section 1111(b) of the United States Bankruptcy Code. Guarantor waives any and all defenses and discharges available to a surety, guarantor, or accommodation co-obligor.

 

7. Guarantor waives any and all defenses, claims, setoffs, and discharges of Lessee or Issuer, or any other obligor, pertaining to Indebtedness, except the defense of discharge by payment in full. Without limiting the generality of the foregoing, Guarantor shall not assert, plead or enforce against Bondholder any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to Lessee or Issuer or any other person liable in respect of any Indebtedness, or any setoff available against Bondholder to Lessee or Issuer or any other such person, whether or not on account of a related transaction. Guarantor expressly agrees that Guarantor shall be and remain liable for any deficiency remaining after foreclosure of any mortgage or security interest securing Indebtedness, whether or not the liability of Lessee or Issuer or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. The liability of Guarantor shall not be affected or impaired by any voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar event or proceeding affecting Lessee or Issuer or any of their respective assets. Guarantor shall not assert, plead or enforce against Bondholder any claim, defense or setoff available to Guarantor against Lessee or Issuer.

 

 

  

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8. Guarantor waives presentment, demand for payment, notice of dishonor or nonpayment, and protest of any instrument evidencing Indebtedness. Bondholder shall not be required first to resort for payment of the Indebtedness to Lessee or Issuer or other persons, or their properties, or first to enforce, realize upon or exhaust any collateral security for Indebtedness, before enforcing this Agreement.

 

9. If any payment applied by Bondholder to Indebtedness is thereafter set aside, recovered, rescinded or required to be returned for any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Lessee or Issuer or any other obligor), the Indebtedness to which such payment was applied shall for the purpose of this Agreement be deemed to have continued in existence, notwithstanding such application, and this Agreement shall be enforceable as to such Indebtedness as fully as if such application had never been made.

 

10. The liability of Guarantor under this Agreement is in addition to and shall be cumulative with all other liabilities of Guarantor to Bondholder as guarantor, surety, endorser, accommodation co-obligor or otherwise of any Indebtedness or obligation of Lessee or Issuer, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

 

11. Guarantor will deliver, or cause to be delivered, to Bondholder each of the following, which shall be in form and detail acceptable to Bondholder:

 

(a) as soon as available, and in any event within 120 days after the end of each fiscal year of Guarantor, audited consolidated financial statements of Guarantor with the unqualified opinion of independent certified public accountants selected by Guarantor and acceptable to Bondholder, which annual financial statements shall include the consolidated balance sheet of Guarantor as at the end of such fiscal year and the related consolidated statements of income, retained earnings and cash flows of Guarantor for the fiscal year then ended, all in reasonable detail and prepared in accordance with GAAP, together with (i) a report signed by such accountants stating that in making the investigations necessary for said opinion they obtained no knowledge, except as specifically stated, of any Default or Event of Default under the Lease Agreement; and (ii) a certificate of the chief financial officer of Guarantor in the form of Exhibit G to the Lease Agreement stating that such financial statements have been prepared in accordance with GAAP and whether or not such officer has knowledge of the occurrence of any Default or Event of Default under the Lease Agreement and, if so, stating in reasonable detail the facts with respect thereto;

 

(b) as soon as available and in any event within 90 days after the end of each fiscal quarter of Guarantor, an unaudited/internal balance sheet and statements of income and retained earnings of Guarantor as at the end of and for such quarter and for the year to date period then ended, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in the previous year, all prepared in accordance

 

 

  

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with GAAP and certified by the chief financial officer of Guarantor, subject to year-end audit adjustments; and accompanied by a certificate of that officer in the form of Exhibit G to the Lease Agreement stating (i) that such financial statements have been prepared in accordance with GAAP, and (ii) whether or not such officer has knowledge of the occurrence of any Default or Event of Default under the Lease Agreement not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto;

 

(c) promptly upon their distribution, copies of all financial statements, reports and proxy statements that Guarantor shall have sent to its shareholders or members, as applicable;

 

(d) promptly upon knowledge thereof, notice of any violation by Lessee or Guarantor of any law, rule or regulation; and

 

(e) promptly upon knowledge thereof, notice of any material adverse change in the financial or operating condition of Lessee or Guarantor.

 

12.So long as any of the Indebtedness remains outstanding, Guarantor shall not:

 

(a) consolidate with or merge into any person, or permit any other person to merge into it or acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all or substantially all of the assets of any other person;

 

(b) permit or consent to any material change in accounting principles (other than as required by generally accepted accounting principles applied on a consistent basis) or adopt, permit or consent to any change in its fiscal year; or

 

(c) sell, lease, assign, transfer or otherwise dispose of all or a substantial part of its assets or any interest therein (whether in one transaction or in a series of transactions); provided, however, a sale, lease, assignment, transfer or other disposition of a substantial part of Guarantor’s assets (a “Transfer”) shall be permitted if each of the following conditions is satisfied:

 

(i) no event of default under the Lease Agreement has occurred and is continuing or would result from such Transfer;

 

(ii) after giving effect to such Transfer, Guarantor’s ratio of Debt (as defined below) to Tangible Net Worth (as defined below) will be not greater than 2.50 to 1.00. “Debt” shall mean (A) all items of indebtedness or liability which in accordance with generally accepted accounting principles or federal tax law would be included in determining total liabilities as shown on the liabilities side of a balance sheet, (B) indebtedness secured by any mortgage, pledge, lien or security interest existing on property owned by Guarantor, whether or not the indebtedness secured thereby shall have been assumed, and (C) guaranties and endorsements (other than for purposes of collection in the ordinary course of business) by Guarantor and other contingent obligations of Guarantor in respect of, or to

 

 

  

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purchase or otherwise acquire, indebtedness of others. “Tangible Net Worth” means the excess of:

 

(I) the tangible assets of Guarantor, which, in accordance with generally accepted accounting principles, are tangible assets, after deducting adequate reserves in each case where, in accordance with generally accepted accounting principles, a reserve is proper over

 

(II) all Debt of Guarantor;

 

provided, however, that (v) inventory shall be taken into account on the basis of the cost (determined on a first-in, first-out basis) or current market value, whichever is lower, (x) in no event shall there be included as such tangible assets patents, trademarks, trade names, copyrights, licenses, good will, advances or loans to, or receivables from, directors, officers, employees or affiliates, prepaid or intangible assets, amounts relating to covenants not to compete, pensions assets, deferred charges or treasury stock or any securities or Debt of Guarantor or any other securities unless the same are readily marketable in the United States of America or entitled to be used as a credit against federal income tax liabilities, (y) securities included as such tangible assets shall be taken into account at their current market price or cost, whichever is lower, and (z) any write-up in the book value of any assets shall not be taken into account;

 

(iii) after giving effect to such Transfer, Guarantor’s [pro forma] Fixed Charge Coverage Ratio (as defined below) will be not less than 1.25 to 1.00. “Fixed Charge Coverage Ratio” means the ratio of (A) Guarantor’s earnings before interest, taxes, depreciation and amortization less dividends, distributions, cash capital expenditures to (B) Guarantor’s current maturities of long term debt plus interest expense; and

 

(iv) after giving effect to such Transfer, Guarantor’s Tangible Net Worth will be not less than $200,000,000.

 

13.This Agreement shall be effective upon delivery to Bondholder, without further act, condition or acceptance by Bondholder, shall be binding upon Guarantor and the successors and assigns of Guarantor and shall inure to the benefit of Bondholder and its participants, successors and assigns. Any invalidity or unenforceability of any provision or application of this Agreement shall not affect other lawful provisions and application hereof, and to this end the provisions of this Agreement are declared to be severable. This Agreement may not be waived, modified, amended, terminated, released or otherwise changed except by a writing signed by Guarantor and Bondholder. This Agreement shall be governed by the laws of the State of Georgia. Guarantor waives notice of Bondholder’s acceptance hereof and waives the right to trial by jury in any action based on or pertaining to this Agreement.

 

 

  

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IN WITNESS WHEREOF, this Corporate Guaranty and Negative Pledge Agreement has been executed by Guarantor as of the day and year first above written.

 

SYSTEMAX INC.

 

 

 

/s/ Lawrence P. Reinhold

Lawrence P. Reinhold 

Executive Vice President

 

STATE OF NEW YORK

 

COUNTY OF NASSAU

The foregoing instrument was acknowledged before me this 17th day of September, 2010, by Lawrence P. Reinhold, as Executive Vice President of Systemax Inc.

 

 

/s/ Donna E. Gehnrich

Donna E Gehnrich

Notary Public, State of New York

No. 020E6060086

Qualified in Nassau County

Commission Expires 6/11/11

 

 

 

 

 

 

7kl09013_ex10-3.htm

 

Exhibit 10.3

 

 

 

 

 

 

 

 

ESCROW AGREEMENT

 

Among

 

GE GOVERNMENT FINANCE, INC.,

as Bondholder,

 

 

DEVELOPMENT AUTHORITY OF JEFFERSON, GEORGIA,

as Issuer,

 

 

SYX DISTRIBUTION INC.,

as Lessee,

 

and

 

MARSHALL & ILSLEY TRUST COMPANY, N.A.,

as Escrow Agent

 

 

 

Dated as of September 1, 2010

 

 

 

 

 

  

  

  

	
 

 

 

ESCROW AGREEMENT

THIS ESCROW AGREEMENT is made and entered into as of September 1, 2010, by and among MARSHALL & ILSLEY TRUST COMPANY, N.A., a national banking association (“Escrow Agent”), GE GOVERNMENT FINANCE, INC., a corporation duly organized and existing under the laws of the State of Delaware (“Bondholder”),the DEVELOPMENT AUTHORITY OF JEFFERSON, GEORGIA, a public body corporate and politic duly organized and validly existing under the laws of the State of Georgia (“Issuer”), and SYX DISTRIBUTION INC., a corporation duly organized and existing under the laws of the State of Delaware (“Lessee”).

 

In the joint and mutual exercise of their powers, and in consideration of the mutual covenants herein contained, the parties hereto recite and agree as follows:

 

ARTICLE 1

 

RECITALS

 

Section 1.01. Bondholder, Issuer and Lessee have entered into a Lease Agreement dated as of September 1, 2010 (the “Lease Agreement”), a duplicate original of which has been furnished to Escrow Agent. The terms capitalized in this Agreement but not defined herein shall have the meanings given to them in the Lease Agreement. Pursuant to the Lease Agreement, Bondholder and Issuer have agreed to finance for Lessee the Project Costs, and Lessee has agreed to make Lease Payments to Bondholder, as assignee of Issuer, in the manner and on the terms set forth therein. This Agreement is not intended to alter or change the rights and obligations of Bondholder, Issuer and Lessee under the Lease Agreement, but is entirely supplemental thereto.

 

Section 1.02. Under the Lease Agreement, upon the satisfaction of certain conditions precedent, Bondholder is required to deposit or cause to be deposited with Escrow Agent the sum of $15,000,000, to be credited to the Escrow Fund established in Article 2 hereof and used to pay the Project Costs including certain issuance costs, and, to the extent not needed for this purpose, to pay or prepay the Lease Payments coming due under the Lease Agreement, all as hereinafter provided.

 

Section 1.03. The Project Costs shall be paid from the amount deposited with Escrow Agent as described in Sections 1.02 and 3.04 hereof, in accordance with this Agreement.

 

Section 1.04. Bondholder, Issuer and Lessee agree to employ Escrow Agent to receive, hold, invest and disburse the moneys paid to Escrow Agent by Bondholder as described in Section 1.02, all as hereinafter provided; however, Escrow Agent shall not be obligated to assume or perform any obligation of Bondholder, Issuer or Lessee or any Vendor with respect thereto or under the Lease Agreement by reason of anything contained in this Agreement.

 

 

 

  

  

  

 

Section 1.05. Each of the parties has authority to enter into this Agreement, and has taken all actions necessary to authorize the execution of this Agreement by the officers whose signatures are affixed hereto.

 

ARTICLE 2

 

ESCROW FUND

 

Section 2.01. Escrow Agent shall establish a special escrow fund designated as the “GE Government Finance, Inc. Escrow Fund” (the “Escrow Fund”), shall keep such Escrow Fund separate and apart from all other funds and moneys held by it and shall administer such Escrow Fund as provided in this Agreement.

 

Section 2.02. All moneys paid to Escrow Agent by Bondholder pursuant to Section 1.02 of this Agreement shall be credited to the Escrow Fund. Escrow Agent shall use the moneys in the Escrow Fund to pay the Project Costs, upon receipt with respect thereto of a Payment Request Form attached hereto as Exhibit A, executed by Bondholder and Lessee, fully completed and with all supporting documents described therein attached thereto. Upon receipt of a Payment Request Form, Escrow Agent shall disburse proceeds from the Escrow Fund in such amounts and to such parties as directed therein. Lessee shall submit Payment Request Forms only for portions of the Project that are functionally complete and operationally independent.

 

Section 2.03. On March 1, 2012, or on such earlier date established by Lessee in a written notice to the other parties that all Project Costs have been fully paid (whether the Costs of the Project were less than estimated or because Lessee has determined not to complete the Project), Escrow Agent shall liquidate all investments held in the Escrow Fund and transfer the proceeds thereof and all other moneys held in the Escrow Fund to Bondholder, which amount shall be used to the extent thereof to prepay the Bond in part (such balance to be applied to principal, to any prepayment premium determined pursuant to the terms of the Lease Agreement on the prepaid principal, and accrued interest on the prepaid principal, all as determined by Bondholder) and such payment shall treated by the Bondholder as a Lease Payment. Upon any payment as described in the preceding sentence, Bondholder shall prepare a revised Exhibit A to the Lease Agreement to re-amortize the remaining principal balance of the Bonds(which shall be effective without the consent of Lessee or Issuer) to reflect the effect of such prepayment.

 

Section 2.04. Upon receipt of written notice from Bondholder or Lessee that an Event of Default has occurred under the Lease Agreement or that Lessee has determined not to complete the Project, Escrow Agent shall liquidate all investments held in the Escrow Fund and transfer the proceeds thereof and all other moneys held in the Escrow Fund to Bondholder to be applied to any prepayment premium determined pursuant to the terms of the Lease Agreement, the Lease Payments and any other amounts due under the Lease Agreement, all as determined by Bondholder.

 

Section 2.05. Escrow Agent shall only be responsible for the safekeeping and investment of the moneys held in the Escrow Fund, and the disbursement thereof in accordance with this Article, and shall not be responsible for the authenticity or accuracy of such certifications or

 

 

  

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documents, the application of amounts paid pursuant to such certifications by the persons or entities to which they are paid, or the sufficiency of the moneys credited to the Escrow Fund to make the payments herein required.

 

ARTICLE 3

 

MONEYS IN ESCROW FUND; INVESTMENT

 

Section 3.01. The moneys and investments held by Escrow Agent under this Agreement are irrevocably held in trust for the benefit of Lessee, Issuer and Bondholder, and such moneys, together with any income or interest earned thereon, shall be expended only as provided in this Agreement and in accordance with the Lease Agreement, and shall not be subject to levy or attachment or lien by or for the benefit of any creditor of Lessee, Issuer or Bondholder. Bondholder, Issuer, Lessee and Escrow Agent intend that the Escrow Fund constitute an escrow account in which Lessee has no legal or equitable right, title or interest until satisfaction in full of all conditions contained herein and in the Lease Agreement for the disbursement of funds by Escrow Agent therefrom. However, if the parties’ intention that Lessee shall have no legal or equitable right, title or interest until all conditions for disbursement are satisfied in full is not respected in any legal proceeding, the parties hereto intend that Bondholder have a security interest in the Escrow Fund, and such security interest is hereby granted to Bondholder by Lessee, to secure payment of all sums due to Bondholder, in its own capacity and assignee of Issuer, under the Lease Agreement. Escrow Agent shall hold the Escrow Fund and the securities and monies therein for the purpose of perfecting Bondholder’s security interest therein and shall dispose of the Escrow Fund only in accordance with the terms and conditions of this Escrow Agreement. Escrow Agent hereby accepts appointment as agent and agrees to establish and maintain the Escrow Fund and the monies and securities therein as a financial intermediary or securities intermediary, as the case may be, for Bondholder, as entitlement holder. Escrow Agent confirms that (i) the Escrow Fund is a “securities account” as such term is defined in §8-501 of the applicable UCC; (ii) Escrow Agent shall, subject to the terms of this Escrow Agreement, treat Bondholder as entitled to exercise the rights that comprise any financial asset credited to the Escrow Fund; (iii) all property delivered to Escrow Agent for deposit into the Escrow Fund will be promptly credited to the Escrow Fund; and (iv) all securities and other property underlying any financial assets credited to the Escrow Fund shall be registered in the name of Escrow Agent, indorsed to Escrow Agent or in blank or credited to another securities account maintained in the name of Escrow Agent, and in no case will any financial asset credited to the Escrow Fund be registered in the name of Lessee, payable to the order of Lessee or specially indorsed to Lessee. Escrow Agent agrees that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Escrow Fund shall be treated as a “financial asset” within the meaning of § 8-1 02(a)(9) of the UCC. If at any time Escrow Agent shall receive an “entitlement order” (within the meaning of §8-102(a)(8) of the UCC) issued by Bondholder and relating to the Escrow Fund, Escrow Agent shall comply with such entitlement order without further consent by Lessee or any other person.

 

Section 3.02. Moneys held by Escrow Agent hereunder shall be invested and reinvested by Escrow Agent upon order of Lessee only in Qualified Investments, as defined in Section 3.05. Such investments shall be registered in the name of Escrow Agent and held by Escrow Agent for

 

 

  

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the benefit of Bondholder, Issuer and Lessee. With the approval of Lessee, Escrow Agent may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Article. Such investments and reinvestments shall be made giving full consideration for the time at which funds are required to be available. All purchases and sales of Qualified Investments shall be at market.

 

Section 3.03. Escrow Agent shall, without further direction from Lessee, sell such investments as and when required to make any payment from the Escrow Fund. Any income received on such investments shall be credited to the Escrow Fund.

 

Section 3.04. Escrow Agent shall furnish to Lessee and Bondholder reports accounting for all investments and interest and income therefrom. Such accounting shall be furnished no less frequently than every three months and upon request of Bondholder or Lessee. None of Bondholder, Issuer or Escrow Agent shall be responsible or liable for any loss suffered in connection with any investment of moneys made by Escrow Agent in accordance with this Article (other than Escrow Agent in its capacity as obligor under any Qualified Investment). In the event funds in the Escrow Fund are insufficient to pay the Project Costs, Lessee shall deposit additional funds in the Escrow Fund to be disbursed in accordance with the provisions hereof, and such additional funds deposited by Lessee shall be disbursed from the Escrow Fund before any other funds held in the Escrow Fund.

 

Section 3.05. As used in this Agreement, the term “Qualified Investments” means any of the following classes of securities, to the extent to which investment in such securities is permitted under Georgia law: (a) securities which are general obligations of or are guaranteed as to the payment of principal and interest by the United States of America; (b) obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Federal Home Lease Bank System, Government National Mortgage Association, Farmers Home Administration, Federal Home Lease Mortgage Corporation or Federal Housing Administration; (c) commercial paper issued by corporations organized under the laws of a state of the United States which is rated in the highest rating category by Standard & Poor’s Ratings Services, a division of the McGraw Hill Companies, Inc., or Moody’s Investors Service, Inc.; or (d) certificates of deposit issued by or other forms of deposit in any national or state bank to extent that such deposits are fully insured by the Federal Deposit Insurance Corporation or any successor agency which is backed by the full faith and credit of the United States. By execution of this Agreement, Lessee also consents to the investment and reinvestment by the Escrow Agent of any moneys held as part of the Escrow Fund in shares of a money market fund (including a money market fund for which Escrow Agent and its affiliates provide advisory, custodial, administrative or similar services and receives fees), provided: (x) the money market fund is registered under the Investment Company Act of 1940; (y) the money market fund has been rated by a nationally recognized statistical rating organization in one of that organization’s three highest mutual fund rating categories; and (z) the money market fund’s investments are limited to those Qualified Investments listed in (a), (b) or (c) above. Derivative products are not “Qualified Investments.”

 

 

  

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ARTICLE 4

 

ESCROW AGENT’S AUTHORITY; INDEMNIFICATION

 

Section 4.01. Escrow Agent may act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine, may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instructions in connection with the provisions hereof has been duly authorized to do so. Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner and execution, or validity of any instrument deposited with it, nor as to the identity, authority or right of any person executing the same; and its duties hereunder shall be limited to those specifically provided herein.

 

Section 4.02. Unless Escrow Agent is guilty of negligence or misconduct with regard to its duties hereunder, Lessee hereby agrees to indemnify Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits or proceedings at law or in equity, or any other expense, fees or charges of any character or nature, which it may incur or with which it may be threatened by reason of its acting as Escrow Agent under this Agreement; and in connection therewith, to indemnify Escrow Agent against any and all expenses, including reasonable attorneys’ fees and the cost of defending any action, suit or proceeding or resisting any claim. Escrow Agent shall be vested with a lien on all property deposited hereunder for indemnification, for reasonable attorneys’ fees, court costs, for any suit, interpleader or otherwise, or any other expenses, fees or charges of any character or nature, which may be incurred by Escrow Agent by reason of disputes arising among Lessee, Issuer and Bondholder as to the correct interpretation of the Lease Agreement or this Agreement and instructions given to Escrow Agent hereunder, or otherwise, with the right of Escrow Agent, regardless of the instructions aforesaid, to hold the said property until and unless said additional expenses, fees and charges shall be fully paid.

 

Section 4.03. If Lessee, Issuer or Bondholder shall be in disagreement about the interpretation of the Lease Agreement or this Agreement, or about the rights and obligations, or the propriety of any action contemplated by Escrow Agent hereunder, Escrow Agent may, but shall not be required to, file an appropriate civil action to resolve the disagreement. Escrow Agent shall be indemnified by Lessee for all costs, including reasonable attorneys’ fees, in connection with such civil action, and shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment in such action is received.

 

Section 4.04. Escrow Agent may consult with counsel of its own choice and shall have full and complete authorization and protection with the opinion of such counsel. Escrow Agent shall otherwise not be liable for any mistakes of facts or errors of judgment, or for any acts or omissions of any kind unless caused by its negligence or misconduct.

 

ARTICLE 5

 

ESCROW AGENT’S COMPENSATION

 

Escrow Agent’s compensation for the services to be rendered hereunder is set forth in Exhibit B hereto. Lessee hereby agrees to pay the initial annual administration fee upon execution of this Agreement. Lessee hereby agrees to pay and/or reimburse Escrow Agent upon request for all expenses, disbursements and advances, ongoing annual administration fees,

 

 

 

  

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investment fees or other charges, including reasonable attorneys’ fees, incurred or made by it in connection with carrying out its duties hereunder and such fees and charges may be deducted from investment earnings on the Escrow Fund.

 

ARTICLE 6

 

CHANGE OF ESCROW AGENT

 

Section 6.01. A national banking association located in the United States or a state bank or trust company organized under the laws of a state of the United States, qualified as a depository of public funds, may be substituted to act as Escrow Agent under this Agreement upon agreement of Issuer, Lessee and Bondholder. Such substitution shall not be deemed to affect the rights or obligations of the parties. Upon any such substitution, Escrow Agent agrees to assign to such substitute Escrow Agent its rights under this Agreement.

 

Section 6.02. Escrow Agent or any successor may at any time resign by giving mailed notice to Lessee and Bondholder of its intention to resign and of the proposed date of resignation, which shall be a date not less than 30 days after such notice is deposited in the United States mail with postage fully prepaid, unless an earlier resignation date and the appointment of a successor Escrow Agent shall have been or are approved by Lessee, Issuer and Bondholder.

 

Section 6.03. Escrow Agent may appoint an agent to exercise any of the powers, rights or remedies granted to Escrow Agent under this Agreement, and to hold title to property or to take any other action which may be desirable or necessary.

 

ARTICLE 7

 

ADMINISTRATIVE PROVISIONS

 

Section 7.01. Escrow Agent shall keep complete and accurate records of all moneys received and disbursed under this Agreement, which shall be available for inspection by Lessee, Issuer or Bondholder, or the agent of any of them, at any time during regular business hours.

 

Section 7.02. All notices, certificates, requests, demands and other communications provided for hereunder shall be in writing and shall be (a) personally delivered, (b) sent by first class United States mail, (c) sent by overnight courier of national reputation, or (d) transmitted by telecopy, in each case addressed to Bondholder, Lessee and Issuer at their

 

 

  

6

  

 

respective address set forth in the Lease Agreement and to Escrow Agent at its address as set forth below and, if telecopied, transmitted to Bondholder, Lessee and Issuer at their respective telecopier number and to Escrow Agent at its telecopier number set forth below or, as to each party, at such other address or telecopier number as may hereafter be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communications shall be deemed to have been given on (a) the date received if personally delivered, (b) when deposited in the mail if delivered by mail, (c) the date sent if sent by overnight courier, or (d) the date of transmission if delivered by telecopy.

 

	                   Escrow Agent: 	Marshall & Ilsley Trust Company, N.A.
	 	651 Nicollet Mall – Suite 301 
	 	Minneapolis, MN 55402 
	 	Telephone: (612) 904-8320 
	 	Telecopier: (612) 904-8008
	 	 

 

Section 7.03. This Agreement shall be construed and governed in accordance with the laws of the State of Georgia.

 

Section 7.04. Any provisions of this Agreement found to be prohibited by law shall be ineffective only to the extent of such prohibition, and shall not invalidate the remainder of this Agreement or the Lease Agreement.

 

Section 7.05. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Specifically, as used herein the term “Bondholder” means any person or entity to whom Bondholder has assigned its right to receive payments under the Lease Agreement and any payments due to Bondholder hereunder from after the date when a duplicate original of such assignment is filed with Escrow Agent.

 

Section 7.06. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same Agreement.

 

Section 7.07. This Agreement shall terminate upon disbursement by Escrow Agent of all moneys held by it hereunder.

 

Section 7.08. This Agreement (and, with respect to Bondholder, Issuer and Lessee, together with the Lease Agreement) constitutes the entire agreement of the parties relating to the subject matter hereof.

 

Section 7.09. To the extent permitted by law, the terms of this Agreement shall not be waived altered, modified, supplemented or amended in any manner whatsoever except by written instrument signed by the parties hereto, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

 

Lessee and Bondholder may agree to amend the date specified in Section 2.03 to a date no more than three years after the closing. Such amendment shall be effected by written

 

 

  

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agreement signed by Lessee and Bondholder in the form of Exhibit C hereto. Issuer’s and Escrow Agent’s consent to the amendment referred to in this paragraph shall not be required.

 

Section 7.10. LENDER, ISSUER, BORROWER AND ESCROW AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT OR ANY OF THE RELATED DOCUMENTS, ANY DEALINGS AMONG LENDER, ISSUER, BORROWER AND ESCROW AGENT RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG LENDER, ISSUER, BORROWER AND ESCROW AGENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY RELATED TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

[SIGNATURES BEGIN ON FOLLOWING PAGE]

 

 

 

 

  

8

  

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.

 

Escrow Agent:

 

 

/s/David Preiner

 

 

By: MARSHALL & ILSLEY TRUST COMPANY, N.A.

 

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

 

 

  

9

  

 

Bondholder:

 

GE GOVERNMENT FINANCE, Inc.

 

 

By: /s/ Phil Long                     

 

 

Vice President

 

 

 

 

 

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

 

 

 

 

 

  

10

  

Issuer:

 

DEVELOPMENT 

AUTHORITY OF 

JEFFERSON, GEORGIA

 

By: /s/ Ronald S. Bond

    Chairman

 

 

 

 [SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

 

 

 

  

11

  

 

 

Lessee:

 

SYX DISTRIBUTION INC.

 

 

By: /s/ Lawrence P. Reinhold

   Vice President and Treasurer

 

 

 

 

 

12

 

 

  

  

  

Exhibit A to Escrow Agreement 

 

FORM OF PAYMENT REQUEST FORM

 

 

Payment Request Form No. _____

 

SYX Distribution Inc., as borrower (“Lessee”) under that certain Lease Agreement dated as of September 1, 2010 (the “Lease Agreement”), by and among the Development Authority of Jefferson, Georgia (“Issuer”), GE Government Finance, Inc. (“Bondholder”) and Lessee, hereby requests Marshall & Ilsley Trust Company, N.A., as escrow agent (“Escrow Agent”) under the Escrow Agreement dated as of September 1, 2010 (the “Escrow Agreement”) among Escrow Agent, Bondholder, Issuer and Lessee, to make payment from the Escrow Fund (as defined in the Escrow Agreement) to the following party or parties, at the addresses set forth below:

 

	Payee	Address	
Amount To 

Be Paid

	
Cost of Issuance

or Project

Description

	 	 	 	 

 

In connection therewith, the undersigned officer of Lessee hereby certifies as follows:

 

1. All of the provisions of the Lease Agreement are incorporated herein by reference and capitalized terms used herein and not defined shall have the meanings assigned to them in the Lease Agreement.

 

2. Either (check one or more)

 

_____ This Payment Request Form relates to costs of issuance of the Bond in the amount of $

 

_____ This Payment Request Form relates to funds to be use to pay costs of additional equipment that comprises a portion of the Project described in the Lease Agreement; such equipment has been delivered to the site of the Project, tested and inspected by, and accepted by Lessee.

 

3. The payments to be made to the payees set forth above are for either the costs of issuance or the Project Costs described above, or reimbursement to Lessee therefor, and the payments have not been the basis for a prior request which has been paid, and the amount remaining in the Escrow Fund is sufficient to pay the remaining Project Costs.

 

 

  

  

  

 

4. All of Lessee’s representations, covenants and warranties contained in the Lease Agreement and Lessee’s Tax Compliance Certificate (which is attached to Issuer’s Tax Compliance Certificate) were true and accurate in all material respects as of the date made, and remain true and accurate in all material respects as of the date of this Payment Request Form, and Lessee has fully and satisfactorily performed all of its covenants and obligations to date required under the Lease Agreement and the Tax Compliance Certificate. No Default or Event of Default has occurred under the Lease Agreement. All of the conditions contained in Article III of the Lease Agreement have been satisfied.

 

5. Lessee understands that Bondholder is relying on the certifications herein with regard to and in connection with approving the disbursement requested hereby.

 

6. Please indicate if this Payment Request Form relates to the final disbursement from the Escrow Fund: ____ Yes ___ No.

 

If this Payment Request Form relates to the final disbursement from the Escrow Fund, Lessee and Bondholder hereby instruct Escrow Agent to disburse to Bondholder the remaining moneys held in the Escrow Fund to be applied to prepay the Lease as set forth in Section 2.07 of the Lease Agreement.

 

7. Please indicate if this Payment Request Form reimburses Lessee for any payment orpayments previously made by Lessee: __Yes __No.

 

If this Payment Request Form requests such a reimbursement, the payment or payments for any obligations originally paid by Lessee, for federal income tax purposes, was after __, ____.

 

8. Lessee attaches hereto the following items:

 

(a) invoices and/or bills of sale relating to the Project and, if such invoices have been paid by Issuer or Lessee, evidence of payment thereof. As provided in Section 12.07 of the Lease Agreement, upon execution of this Payment Request Form by Lessee and Bondholder, Exhibit A to Lease Agreement shall be amended to include the specific equipment listings and descriptions contained in the invoices and/or bills of sale attached hereto. If this request for payment relates to any vehicle subject to certificate of title laws, attached hereto is the manufacturer’s statement of origin (MSO) and the title application naming GE Government Finance, Inc. as first lienholder;

 

(b) the list of the Project attached to the Lease Agreement, upon which Lessee has indicated those particular portions of the Project that relate to this Payment Request Form; and

 

 

A-2

 

 

  

  

  

 

(c) an insurance certificate in the form required by the Lease Agreement if such insurance certificate has not been previously provided by Lessee to Bondholder.

 

LESSEE:

 

SYX DISTRIBUTION, INC.

 

 

By:___________________________

 

Title:__________________________

 

Date:__________________________

 

 

 

APPROVED BY LENDER:

 

GE GOVERNMENT FINANCE, INC.

 

 

By:____________________________

 

Title:___________________________

 

Date:___________________________

 

 

 

 

Attachments: 

1. Invoices 

2. Marked List of Project

3. Insurance Certificate (if not previously provided)

 

 

A-3

 

 

  

  

  

Exhibit B to Escrow Agreement 

 

 

SCHEDULE OF ESCROW AGENT’S FEES

 

 

 

 

 

  

  

  

Exhibit C to Escrow Agreement

 

FORM OF AMENDMENT

 

This Amendment to Escrow Agreement is dated as of  __, 20__ (this “Amendment”) by and between ,as assignee of GE Government Finance, Inc. (“Bondholder”), and SYX Distribution Inc. “Lessee”).

 

RECITALS

 

A. GE Government Finance, Inc. (“GEGF”), Lessee, the Development Authority of

 

Jefferson, Georgia (“Issuer”) and Marshall & Ilsley Trust Company, N.A. (“Escrow Agent”) have entered into an Escrow Agreement dated as of September 1, 2010 (the “Agreement”). GEGF assigned its rights under the Agreement to Bondholder, and Bondholder appointed GEGF as its servicer.

 

B. Pursuant to Section 7.09 of the Agreement, Bondholder and Lessee may, without the consent of Issuer or Escrow Agent, amend the date specified in Section 2.03 of the Agreement to a date no more than three years after the date of closing.

 

C. Bondholder and Lessee desire to amend the date specified in Section 2.03 of the Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, it is hereby agreed as follows:

 

1. Bondholder and Lessee amend Section 2.03 of the Agreement by replacing the “________, ____” as it appears in the second sentence thereof with the date“ _____ ___, _____.”

 

2. In consideration for the administrative work incurred in connection with the extension granted hereby, Lessee agrees to pay GEGF an administrative fee in the sum of $250. By delivery of a copy of this Amendment to Escrow Agent, Escrow Agent is instructed to disburse $250 to GEGF from the investment earnings in the Escrow Fund.

 

3. This Amendment shall become effective only upon execution hereof by duly authorized officers or representatives of Bondholder and Lessee.

 

4. All other terms and conditions of the Agreement not specifically amended by this Amendment shall remain in full force and effect and are hereby ratified and confirmed by Bondholder and Lessee.

 

5. This Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

 

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment in their respective corporate names by their duly authorized officers, all as of the date first written above.

 

Bondholder:

 

[GE GOVERNMENT FINANCE, INC.]

 

 

 

By:_________________________________

 

Title:________________________________

 

 

 

 

Lessee:

 

SYX DISTRIBUTION INC.

 

 

By:_________________________________

 

Title:________________________________

 

 

 

 

 

 

 

 

 

C-2

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