Loan And Securtiy Agreement

LOAN AND SECURITY AGREEMENT


DATED AS OF JULY 31, 2002


AMONG


LASALLE BUSINESS CREDIT, INC.,


THE AGENT,


THE FINANCIAL INSTITUTIONS FROM TIME TO TIME
PARTY HERETO,


THE LENDERS,


AND


HEAT HOLDINGS CORP.
HEAT HOLDINGS II CORP.
AAVID THERMAL TECHNOLOGIES, INC.
AAVID THERMALLOY, LLC
FLUENT INC.
AAVID THERMALLOY LIMITED
FLUENT EUROPE LIMITED
AAVID THERMAL PRODUCTS, INC.
FLUENT HOLDINGS, INC.
THERMALLOY INVESTMENT CO., INC.,
THERMALLOY, INC.
ENDUCTIVE SOLUTIONS, INC.
AAVID THERMALLOY OF TEXAS, LLC
APPLIED THERMAL TECHNOLOGIES, LLC
AAVID AIR SYSTEMS, INC., AND
AAVID LABORATORIES, INC.


THE LOAN PARTIES


TABLE OF CONTENTS


PAGE
---- 1. DEFINITIONS............................................................................................. 1


2. LOANS...................................................................................................18


3. LETTERS OF CREDIT.......................................................................................23


4. INTEREST, FEES AND CHARGES..............................................................................25


5. COLLATERAL..............................................................................................30


6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.................................31


7. POSSESSION OF COLLATERAL AND RELATED MATTERS............................................................31


8. COLLECTIONS.............................................................................................32


9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES............................................36


10. TERMINATION; Automatic Renewal..........................................................................37


11. REPRESENTATIONS AND WARRANTIES..........................................................................38


12. AFFIRMATIVE COVENANTS...................................................................................42


13. NEGATIVE COVENANTS......................................................................................48


14. FINANCIAL COVENANTS.....................................................................................57


15. DEFAULT.................................................................................................58


16. REMEDIES UPON AN EVENT OF DEFAULT.......................................................................60


17. CONDITIONS PRECEDENT....................................................................................61


18. JOINT AND SEVERAL LIABILITY.............................................................................62


19. INDEMNIFICATION.........................................................................................64


20. NOTICE..................................................................................................64


21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION..................................................64


22. HEADINGS OF SUBDIVISIONS................................................................................65


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Page
---- 23. POWER OF ATTORNEY.......................................................................................65


24. CONFIDENTIALITY.........................................................................................65


25. COUNTERPARTS............................................................................................66


26. ELECTRONIC SUBMISSIONS..................................................................................66


27. AGENT...................................................................................................66


28. ASSIGNABILITY...........................................................................................72


29. INFORMATION.............................................................................................75


30. AMENDMENTS, ETC.........................................................................................75


31. NONLIABILITY OF AGENT AND Lender........................................................................77


32. SETTLEMENTS, DISTRIBUTIONS AND APPORTIONMENT OF PAYMENTS................................................77


33. WAIVER OF JURY TRIAL; OTHER WAIVERS.....................................................................78


34. TAXES...................................................................................................78


35. CROSS-GUARANTY..........................................................................................81


36. judgment currency.......................................................................................83


37. syndication.............................................................................................83


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EXHIBITS AND SCHEDULES


EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS


EXHIBIT B - COMPLIANCE CERTIFICATE


EXHIBIT C - COMMERCIAL TORT CLAIMS


EXHIBIT D - FORM OF ASSIGNMENT AND ACCEPTANCE


EXHIBIT E-1 - FORM OF US INTERCOMPANY NOTE


EXHIBIT E-2 - FORM OF UK INTERCOMPANY NOTE


EXHIBIT E-3 - FORM OF FOREIGN SUBSIDIARY INTERCOMPANY NOTE


EXHIBIT F - NOTICE INFORMATION


SCHEDULE A - COMMITMENTS


SCHEDULE 11(e) - PERMITTED LIENS


SCHEDULE 11(i) - AFFILIATE TRANSACTIONS


SCHEDULE 11(j) - NAMES & TRADE NAMES


SCHEDULE 11(n) - INDEBTEDNESS


SCHEDULE 11(p) - PARENT, SUBSIDIARIES AND AFFILIATES


SCHEDULE 11(w) - SENIOR INDEBTEDNESS CALCULATION


SCHEDULE 13(a) - GUARANTEES


SCHEDULE 17(a) - CLOSING DOCUMENTS CHECKLIST


LOAN AND SECURITY AGREEMENT


THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this "AGREEMENT") made this 31st day of July, 2002 by and among Heat Holdings Corp., a Delaware corporation, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("HEAT"), Heat Holdings II Corp., a Delaware corporation, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("HEAT HOLDINGS II"), Aavid Thermal Technologies, Inc., a Delaware corporation, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("AAVID"), Aavid Thermalloy, LLC, a Delaware limited liability company, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("AAVID THERMALLOY"), Fluent Inc., a New Hampshire corporation, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("FLUENT"), Aavid Thermalloy Limited, a company registered in England and Wales (company number 00919820), having its principal place of business at Cheney Manor, Swindon, Wiltshire, England SN2 2QN ("AAVID-UK"), Fluent Europe Limited, a company registered in England and Wales (company number 02099730), having its principal place of business at Sheffield Airport Business Park, Europa Link, Sheffield, England S9 1XU ("FLUENT-UK"), Aavid Thermal Products, Inc., a Delaware corporation, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("ATPI"), Fluent Holdings, Inc., a Delaware corporation, having its principal place of business at One Eagle Square, Suite 509, Concord, NH 03301 ("FLUENT HOLDINGS") (Aavid, Aavid Thermalloy, Fluent, Aavid-UK, Fluent-UK, ATPI and Fluent Holdings are each a "BORROWER" and collectively referred to as "BORROWERS"), the other Loan Parties signatory hereto, LaSalle Business Credit, Inc. (in its individual capacity, "LASALLE"), a Delaware corporation, 135 South LaSalle Street, Chicago, Illinois 60603-4105, for itself, as a Lender (as hereinafter defined), and as Agent (as hereinafter defined) for the Lenders, and all other Lenders that are now or hereafter parties to this Agreement.


WITNESSETH:


WHEREAS, Borrowers may, from time to time, request Loans and other financial accommodations from Agent and the Lenders, and the parties wish to provide for the terms and conditions upon which such Loans or other financial accommodations shall be made;


NOW, THEREFORE, in consideration of each Loan and other financial accommodation (including any Loan or financial accommodation by renewal or extension) hereafter made to a Borrower by Agent or any Lender, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Borrower, the parties agree as follows:


1. DEFINITIONS.


"AAVID" shall have the meaning set forth in the preamble hereto.


"AAVID THERMALLOY" shall have the meaning set forth in the preamble hereto.


"AAVID-UK" shall have the meaning set forth in the preamble hereto.


"ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT CLAIMS", "DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER", "EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS", "INVENTORY", "INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" and "TANGIBLE CHATTEL PAPER" shall have the respective meanings assigned to such terms in the Illinois Uniform Commercial Code, as the same may be in effect from time to time.


"ACQUISITION" shall mean any transaction resulting in the acquisition by a Loan Party or a Subsidiary of a Loan Party of (a) substantially all the assets of a Person or of any business or division of a Person or (b) more than fifty percent (50%) of the Capital Stock of a Person.


"AFFILIATE" shall mean any Person (i) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, a Borrower (provided that any Person controlled by WSP, other than any Person controlled by Heat and Heat Holdings II, shall not be considered an Affiliate for purposes of this definition), (ii) which beneficially owns or holds five percent (5%) or more of the voting control or equity interests of a Borrower, or (iii) five percent (5%) or more of the voting control or equity interests of which is beneficially owned or held by a Borrower.


"AGENT" shall mean LaSalle or its successor appointed pursuant to SUBSECTION 27(i), acting in its capacity as agent for, and on behalf of, all Lenders.


"APPLICABLE BASE RATE MARGIN" shall mean, as of any date of determination, (i) 0.25% with respect to the Revolving Loans advanced to any Borrower pursuant to any of SUBSECTIONS 2(a)(i), 2(a)(ii) AND 2(a)(iii), (ii) 0.50% with respect to the Revolving Loans advanced to any Borrower pursuant to SUBSECTION 2(a)(iv) AND (iii) 0.50% with respect to the Term Loans advanced pursuant to SUBSECTION 2(b).


"APPLICABLE LIBOR RATE MARGIN" shall mean, as of any date of determination, (i) 2.50% with respect to the Revolving Loans advanced to any Borrower pursuant to any of SUBSECTIONS 2(a)(i), 2(a)(ii) AND 2(a)(iii), (ii) 2.85% with respect to the Revolving Loans advanced to any Borrower pursuant to SUBSECTION 2(a)(iv) and (iii) 2.85% with respect to the Term Loans advanced pursuant to SUBSECTION 2(b).


"ASSIGNMENT AND ACCEPTANCE" shall have the meaning specified in SUBSECTION 28(c) hereof.


"BANKRUPTCY CODE" shall have the meaning specified in SUBSECTION 18(b) hereof.


"ATPI" shall have the meaning set forth in the preamble hereto.


"BORROWERS" shall have the meaning specified in the preamble to this Agreement.


"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or (i) with respect to all matters, determinations, fundings and payments in connection with LIBOR Rate Loans, any day on which banks in London, England or Chicago, Illinois are required or permitted to close, and (ii) with respect to all other matters, any day that banks in Chicago, Illinois are required or permitted to close.


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"CAPITAL EXPENDITURES" shall mean with respect to any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including expenditures for capitalized lease obligations) by Borrowers and their Subsidiaries during such period that are required by generally accepted accounting principles, consistently applied, to be included in or reflected by the property, plant and equipment or similar fixed asset accounts (or intangible accounts subject to amortization) on the balance sheet of Borrowers and their Subsidiaries.


"CAPITAL STOCK" shall mean any and all shares, share capital, ordinary shares, quota, company shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.


"CHANGE OF CONTROL" shall mean the occurrence of any of the following:


(i) with respect to Heat and Heat Holdings II, the
failure of WSP to own directly or indirectly, free and clear of all
liens, at least 51% of the Fully Diluted Outstanding Voting Securities
of each of Heat and Heat Holdings II;


(ii) with respect to Aavid, the failure of Heat, at
all times, to own directly or indirectly, through one or more
wholly-owned Subsidiaries, free and clear of all liens (other than
liens in favor of the Agent, for the benefit of the Lenders), at least
51% of the Fully Diluted Outstanding Voting Securities of Aavid;


(iii) with respect to each Subsidiary of Aavid and
Heat Holdings II, the failure of Aavid and Heat Holdings II, at all
times, to own directly or indirectly, through one or more wholly-owned
Subsidiaries, free and clear of all liens (other than liens in favor of
the Agent, for the benefit of the Lenders), at least 51% of the Fully
Diluted Outstanding Voting Securities of each such Subsidiary
(excluding Thermalloy Malaysia), except as may be permitted pursuant to
SUBSECTION 13(d) hereof with respect to any Persons other than the
Borrowers;


(iv) with respect to the issued and outstanding
Capital Stock of Aavid and each Subsidiary of Aavid and Heat Holdings
II, the failure of at least 100% of such issued and outstanding Capital
Stock to be either (x) pledged to Agent, for the benefit of the
Lenders, pursuant to an agreement reasonably satisfactory to the Agent
or (y) subject to a Drag Along Agreement; or


(v) Heat, Heat II or any Borrower shall be liquidated
or dissolved.


"CIBC" shall mean Canadian Imperial Bank of Commerce.


"CIBC LOAN FACILITY" shall mean the loan facility provided to Aavid and certain of its Subsidiaries and Affiliates under that certain Amended and Restated Credit Agreement dated as of February 2, 2000 by and among such Persons, CIBC, as issuer and administrative


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agent, and the other lenders party thereto from time to time (as amended, restated or otherwise modified from time to time).


"CLOSING DATE" shall mean July 31, 2002.


"COLLATERAL" shall mean all of the property of each Borrower described in SECTION 5 hereof, together with all other real or personal property of any Obligor or any other Person now or hereafter pledged to Agent, for the benefit of Agent and Lenders, to secure, either directly or indirectly, repayment of any of the Liabilities.


"COMMITMENTS" shall mean (a) as to any Lender, the aggregate commitment of such Lender to make Loans and incur Letter of Credit Obligations, as set forth on SCHEDULE A hereto or in the most recent Assignment and Acceptance executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders' Commitments.


"DEBENTURES" shall mean collectively, (a) the debenture dated as of the date hereof between the Security Trustee and the UK Borrowers and (b) the debenture dated as of the date hereof between the Security Trustee, Aavid Thermalloy UK Holdings Limited and Fluent UK Holdings Limited, and all documents, agreements and instruments executed in connection therewith, in each case as amended, restated or otherwise modified from time to time.


"DEFAULTING LENDER" shall have the meaning specified in SUBSECTION 2(f) hereof.


"DISPROPORTIONATE ADVANCES" shall have the meaning specified in SUBSECTION 2(a) hereof.


"DOMESTIC SUBSIDIARY" shall mean any Subsidiary other than a Foreign Subsidiary.


"DRAG ALONG AGREEMENT" shall mean, with respect to any holder of Capital Stock of Aavid or of Capital Stock of any Subsidiary of Aavid and Heat Holdings II, an agreement entered into by such holder pursuant to which such holder shall agree for the benefit of the other holders of Capital Stock of such issuer and the Agent, on behalf of the Lenders, that in the event of a sale of the Capital Stock of such issuer to a third party conducted by, or on behalf of, Agent or the majority holder of such issuer's Capital Stock, such holder shall sell its Capital Stock in such issuer to such third party (provided that all holders of the same class of Capital Stock receive the same form and amount of consideration per share) and which agreement shall not contain any other provisions which materially affect the foregoing rights of the Agent unless such provisions are reasonably satisfactory to Agent.


"EBITDA" shall mean, with respect to any period, Borrowers' and their Subsidiaries' net income after taxes for such period (excluding any after-tax gains or losses on the sale of assets (other than the sale of Inventory in the ordinary course of business and the licensing of General Intangibles) and excluding other after-tax extraordinary gains or losses) PLUS interest expense, income tax expense, depreciation and amortization for such period, PLUS or MINUS any other non-cash charges, restructuring charges or gains which have been subtracted or added in calculating net income after taxes for such period, PLUS, for such period, the amount of


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deferred revenues at the end of such period and MINUS, for such period, the amount of deferred revenues at the beginning of such period, all on a consolidated basis, in each case as determined in accordance with generally accepted accounting principles.


"ELIGIBLE ACCOUNT" shall mean an Account owing to a Borrower which is acceptable to Agent in its sole discretion determined in good faith on a basis consistent with its credit procedures for lending purposes (provided that Agent shall give Borrowers written notice of any eligibility criteria established by Agent and not set forth herein). Agent shall obtain the consent of Required Lenders prior to revising any eligibility criteria set forth below if the effect thereof would be to make the eligibility criteria less restrictive than the criteria existing on the Closing Date. Without limiting Agent's discretion, Agent shall, in general, consider an Account to be an Eligible Account if it meets, and so long as it continues to meet, the following requirements:


(i) it is genuine and in all respects what it
purports to be;


(ii) it is owned by such Borrower; such Borrower has
the right to subject it to a security interest in favor of Agent or
assign it to Agent; and it is subject to a first priority perfected
security interest in favor of Agent and to no other claim, lien,
security interest or encumbrance whatsoever, other than Permitted
Liens;


(iii) it arises from (A) the performance of services
by such Borrower in the ordinary course of such Borrower's business,
and such services have been fully performed and acknowledged and
accepted by the Account Debtor thereunder; or (B) the sale or lease of
Goods by such Borrower in the ordinary course of such Borrower's
business, and (x) such Goods have been completed in accordance with the
Account Debtor's specifications (if any) and delivered to the Account
Debtor, (y) such Account Debtor has not refused to accept, and has not
returned, any of the Goods which are the subject of such Account, and
(z) such Borrower has possession of, or such Borrower has delivered to
Agent (at Agent's request) copies of shipping and delivery receipts
evidencing delivery of such Goods;


(iv) it is evidenced by an invoice rendered to the
Account Debtor thereunder which is due and payable within ninety (90)
days after the date of the invoice and does not remain unpaid for
ninety (90) days past the invoice date thereof; provided, however, that
if more than twenty-five percent (25%) of the aggregate dollar amount
of such invoices owing by a particular Account Debtor remain unpaid
ninety (90) days after the respective invoice dates thereof, then all
Accounts owing by that Account Debtor shall be deemed ineligible except
as may otherwise be permitted by Agent in writing to Borrowers;


(v) it is a valid, legally enforceable and
unconditional obligation of the Account Debtor thereunder, and is not
subject to setoff, counterclaim or adjustment by such Account Debtor,
or to any claim by such Account Debtor denying liability thereunder in
whole or in part;


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(vi) it does not arise out of a contract or order
which fails in any material respect to comply with the requirements
of applicable law;


(vii) the Account Debtor thereunder is not a
director, officer, employee or agent of such Borrower, or a Subsidiary,
Parent or Affiliate of such Borrower;


(viii) it is not an Account with respect to which the
Account Debtor is the United States of America or any state, local or
foreign government, or any department, agency or instrumentality
thereof, unless, (A) in the case where the Account Debtor is the United
States of America, such Borrower assigns its right to payment of such
Account to Agent pursuant to, and in full compliance with, the
Assignment of Claims Act of 1940, as amended, and (B) in any other
case, such Borrower complies to Agent's reasonable satisfaction with
any comparable foreign, state or local law, as applicable;


(ix) it is not an Account with respect to which the
Account Debtor is located in a jurisdiction which requires such
Borrower, as a precondition to commencing or maintaining an action in
the courts of that jurisdiction, either to (A) receive a certificate of
authority to do business and be in good standing in such jurisdiction;
or (B) file a notice of business activities report or similar report
with such jurisdiction's taxing authority, unless (x) such Borrower has
taken one of the actions described in clauses (A) or (B); (y) the
failure to take one of the actions described in either clause (A) or
(B) may be cured retroactively by such Borrower at its election; or (z)
such Borrower has proven, to Agent's reasonable satisfaction, that it
is exempt from any such requirements under any such jurisdiction's
laws;


(x) the Account Debtor is located within (A) the
United States of America or Canada with respect to the US Borrowers;
PROVIDED that such Account Debtor may be located outside the United
States or Canada so long as (1) such Account Debtor is a "Fortune 1000"
company as determined by Agent in its sole discretion and (2) such US
Borrower has provided on the invoice (or by separate written notice
within five (5) Business Days after the date of such invoice) to the
Account Debtor that the law of the Account is the law of a state in the
United States and payment in respect of the Account is to be made in
the United States in US dollars and (B) the United Kingdom with respect
to UK Borrower; PROVIDED that such Account Debtor may be located
outside the United Kingdom so long as (1) such Account Debtor is a
"Fortune 1000" company as determined by the Security Trustee in its
sole discretion and (2) UK Borrower has provided on the invoice (or by
separate written notice within five (5) Business Days after the date of
such invoice) to the Account Debtor that the law of the Account is
English law and payment in respect of the Account is to be made in
England in pound sterling; PROVIDED, further, that under no
circumstances shall any Accounts assigned to any Borrower by any third
party including, without limitation, by any Foreign Subsidiary of any
Borrower, be deemed eligible for inclusion as an Eligible Account;


(xi) it is not an Account with respect to which the
Account Debtor's obligation to pay is subject to any rep ...