LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made on July 6, 2004, by and
between HEALTHCARE QUALITY SOLUTIONS, INC., a Florida corporation (the
"Borrower"), and STANFORD VENTURE CAPITAL HOLDINGS, INC., a Delaware corporation
(together with its successors and assigns, the "Lender"). Capitalized terms used
in this Agreement have the meanings assigned to them in Appendix A, General
Definitions.
R e c i t a l s:
Borrower has requested that Lender extend financing to Borrower in
accordance with the provisions of this Agreement.
Health Systems Solutions, Inc., a Nevada corporation ("the
"Guarantor"), owns all of the issued and outstanding capital stock of the
Borrower and is willing to unconditionally guarantee the obligations of the
Borrower to the Lender as set forth in a Guarantee of even date herewith as a
material inducement to the Lender to extend the financing contemplated hereby.
Lender is willing to make loans and other extensions of credit to
Borrower, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, receipt of which is acknowledged, the parties hereto, intending
to be legally bound hereby, agree as follows:
SECTION 1. FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Financing
Documents, Lender agrees, to the extent and in the manner hereinafter set forth,
to establish the Facility in an aggregate amount up to $1,600,000.00, as
follows:
1.1. Revolver Facility.
1.1.1. Revolver Loans. Lender agrees, upon the terms and
subject to the conditions set forth herein, to make Revolver Loans to Borrower
on any Business Day during the period from the date hereof through the day
before the last day of the Term, not to exceed the Gross Availability at such
time, and not in excess of the amount set forth in the Budget, which Revolver
Loans may be repaid and reborrowed in accordance with the provisions of this
Agreement; provided, however, that Lender shall have no obligation whatsoever to
make any Revolver Loan if at the time of the proposed funding thereof either (a)
the aggregate principal amount of all of the Revolver Loans and Pending Revolver
Loans then outstanding exceeds, or would exceed after the funding of such
Revolver Loan, the Gross Availability, or (b) the amount of consolidated EBITDA
to have been earned by the Guarantor as of the end of the month prior to the
date of borrowing or re-borrowing any Revolver Loan. The Revolver Loans shall
bear interest as set forth in Section 2.1 hereof.
1.1.2. Use of Proceeds. The proceeds of the Revolver Loans
shall be used by Borrower exclusively for one or more of the following purposes:
(i) to pay expenses of the financing provided for herein; (ii) to pay any of the
Obligations; (iii) for general working capital of the Borrower; (iv) to pay
property taxes with respect to any Collateral to the extent such property taxes
constitute a Lien senior to Lender's Liens; and (v) to pay up to $400,000 to
satisfy obligations to the Internal Revenue Service. Notwithstanding anything to
the contrary contained herein, in no event shall proceeds of Revolver Loans be
used to pay expenses incurred in connection with the assertion of or joinder in
any claim, counterclaim, action, contested matter, objection, defense or other
proceeding, the purpose of which is to seek or the result of which would be to
obtain any order, judgment, declaration, or similar relief (a) seeking damages
on account of any alleged cause of action arising on, before or after the
Effective Date; (b) invalidating, setting aside, avoiding or subordinating, in
whole or in part, any of the Obligations or Liens and security interests in any
Collateral granted to Lender under this Agreement; (c) declaring any of the
Financing Documents to be invalid, not binding or unenforceable in any respect;
(d) preventing, enjoining, hindering or otherwise delaying Lender's enforcement
of any of the Financing Documents or any realization upon any Collateral; (e)
declaring any Liens granted or purported to be granted under any of the
Financing Documents to have a priority other than the priority set forth
therein; (f) objecting to the amount or method of calculation by Lender of any
of the Obligations or any accounting rendered by Lender with respect to any of
those obligations; or (g) seeking to use the cash proceeds of any of the
Collateral without the prior written consent of Lender.
1.1.3. Revolver Note. The Revolver Loans made by Lender and
interest accruing thereon shall be evidenced by the records of Lender and by the
Revolver Note payable to Lender (or the assignee of Lender), which shall be
executed by Borrower, completed in conformity with this Agreement and delivered
to Lender on the Closing Date. All outstanding principal amounts and accrued
interest under the Revolver Note shall be due and payable as set forth in
Section 4.2 hereof.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
2.1.1. Rates of Interest. Borrower agrees to pay interest in
respect of all unpaid principal amounts of the Loans from the respective dates
such principal amounts are advanced until paid (whether at stated maturity, on
acceleration or otherwise) at a fixed rate per annum equal to 8%. Interest on
each Loan shall accrue from and including the date on which such Loan is made to
(but excluding) the date of any repayment thereof; provided, however, that, if a
Loan is repaid on the same day made, one day's interest shall be paid on such
Loan.
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2.1.2. Default Rate of Interest. From and after the occurrence
of any Event of Default, the principal amount of the Obligations (and, to the
extent permitted by Applicable Law, all past due interest) shall bear interest
at the Default Rate. To the fullest extent permitted by Applicable Law, the
Default Rate shall apply and accrue on any judgment entered with respect to any
of the Obligations. Borrower acknowledges that the cost and expense to Lender
attendant upon the occurrence of an Event of Default are difficult to ascertain
or estimate and that the Default Rate is a fair and reasonable estimate to
compensate Lender for such added cost and expense.
2.2. Fees.
2.2.1. Audit and Appraisal Fees. Borrower shall be obligated
to reimburse Lender for all reasonable costs and expenses incurred by Lender in
connection with all appraisals of any Collateral and audits of any Obligor's
books and records and such other matters pertaining to any Obligor or any
Collateral as Lender shall deem appropriate.
2.2.2 General Provisions. All fees shall be fully earned by
the identified recipient thereof pursuant to the foregoing provisions of this
Agreement on the due date thereof and, except as otherwise set forth herein or
required by Applicable Law, shall not be subject to rebate, refund or proration.
All fees provided for in this Section 2.2 are and shall be deemed to be
compensation for services and are not, and shall not be deemed to be, interest
or any other charge for the use, forbearance or detention of money.
2.3. Computation of Interest and Fees. Interest shall be calculated on
a daily basis, commencing on the date hereof, and shall be payable monthly, in
arrears, on the tenth day of each month. All interest, fees and other charges
provided for in this Agreement shall be calculated daily and shall be computed
on the actual number of days elapsed over a year of 360 days. Borrower
acknowledges that the calculation of interest on the basis of a 360-day year, as
opposed to a year of 365 days, results in a higher effective rate of interest
hereunder. For purposes of computing interest hereunder, all Payment Items
received by Lender shall be deemed applied by Lender on account of the
Obligations (subject to Full Payment of such items) one Business Day after
Lender receives such items in immediately available funds in the Payment
Account, and Lender shall be deemed to have received such Payment Item on the
date specified in Section 4.5 hereof.
2.4. Reimbursement Obligations.
2.4.1. Borrower shall reimburse Lender, for all reasonable
legal, accounting, appraisal and other fees and expenses incurred by Lender
(including fees and expenses of Lender Professionals) in connection with (i) the
negotiation and preparation of any of the Financing Documents, any amendment or
modification thereto, any waiver of any Default or Event of Default thereunder,
or any restructuring or forbearance with respect thereto; (ii) the
administration of the Financing Documents and the transactions contemplated
thereby, to the extent that such fees and expenses are expressly provided for in
this Agreement or any of the other Financing Documents; (iii) action taken to
perfect or maintain the perfection or priority of any of Lender's Liens with
respect to any of the Collateral; (iv) any inspection of or audits conducted
with respect to any of Borrower's books and records or any of the Collateral;
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(v) any effort to verify, protect, preserve, or restore any of the Collateral or
to collect, sell, liquidate or otherwise dispose of or realize upon any of the
Collateral; (vi) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by or against Lender, any Obligor or any other Person) in
any way arising out of or relating to any of the Collateral (or the validity,
perfection or priority of any of Lender's Liens thereon), any of the Financing
Documents or the validity, allowance or amount of any of the Obligations; (vii)
the protection or enforcement of any rights or remedies of Lender in any
Insolvency Proceeding; and (viii) any other action taken by Lender to enforce
any of the rights or remedies of Lender against any Obligor or any Account
Debtors to enforce collection of any of the Obligations or payments with respect
to any of the Collateral. All amounts chargeable to Borrower under this Section
2.4 shall constitute Obligations that are secured by all of the Collateral and
shall be payable on demand to Lender. Borrower shall also reimburse Lender for
reasonable expenses incurred by Lender in its administration of any of the
Collateral to the extent and in the manner provided in Section 7 hereof or in
any of the other Financing Documents. The foregoing shall be in addition to, and
shall not be construed to limit, any other provision of any of the Financing
Documents regarding the reimbursement by Borrower of costs, expenses or
liabilities suffered or incurred by Lender.
2.4.2. If at any time Lender shall agree to indemnify any
Person against losses or damages that such Person may suffer or incur in its
dealings or transactions with Borrower, or shall guarantee any liability or
obligation of Borrower to such Person, or otherwise shall provide assurances of
Borrower's payment or performance under any agreement with such Person, then
Borrower shall indemnify and defend Lender and shall hold them harmless from and
against any and all liability any of them may have under any such indemnity,
guaranty or assurance, and any amounts so paid by Lender shall be repaid to them
immediately by Borrower. Borrower's agreement to indemnify and defend Lender
shall constitute part of the Obligations that are secured by the Collateral and
Borrower shall repay, on demand, any amount so paid or any liability incurred by
Lender in connection with any such indemnity, guaranty or assurance. Nothing
herein shall be construed to impose upon Lender any obligation to provide any
such indemnity, guaranty or assurance. The foregoing agreement of Borrower shall
apply whether or not such indemnity, guaranty or assurance is in writing or oral
and regardless of Borrower's knowledge of the existence thereof, and shall be in
addition to any of the provision of the Financing Documents regarding
reimbursement by Borrower of costs, expenses or liabilities suffered or incurred
by Lender.
2.5. Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender pays to a bank or other similar institution
(including any fees paid by Lender to any Participant) arising out of or in
connection with (i) the forwarding to Borrower or any other Person on behalf of
Borrower by Lender of proceeds of Loans made by Lender to Borrower pursuant to
this Agreement and (ii) the depositing for collection by Lender of any Payment
Item received or delivered to Lender on account of the Obligations. Borrower
acknowledges and agrees that Lender may charge such costs, fees and expenses to
Borrower based upon Lender's good faith estimate of such costs, fees and
expenses as they are incurred by Lender.
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2.6. Maximum Interest. Regardless of any provision contained in this
Agreement or any of the other Financing Documents, in no contingency or event
whatsoever shall the aggregate of all amounts that are contracted for, charged
or received by Lender pursuant to the terms of this Agreement or any of the
other Financing Documents and that are deemed interest under Applicable Law
exceed the highest rate permissible under any Applicable Law. No agreements,
conditions, provisions or stipulations contained in this Agreement or any of the
other Financing Documents or the exercise by Lender of the right to accelerate
the payment or the maturity of all or any portion of the Obligations, or the
exercise of any option whatsoever contained in any of the Financing Documents,
or the prepayment by Borrower of any of the Obligations, or the occurrence of
any contingency whatsoever, shall entitle Lender to charge or receive in any
event, interest or any charges, amounts, premiums or fees deemed interest by
Applicable Law (such interest, charges, amounts, premiums and fees referred to
herein collectively as "Interest") in excess of the Maximum Rate and in no event
shall Borrower be obligated to pay Interest exceeding such Maximum Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay
Interest exceeding the Maximum Rate shall be without binding force or effect, at
law or in equity, to the extent only of the excess of Interest over such Maximum
Rate. If any Interest is charged or received in excess of the Maximum Rate
("Excess"), Borrower acknowledges and stipulates that any such charge or receipt
shall be the result of an accident and bona fide error, and such Excess, to the
extent received, shall be applied first to reduce the principal Obligations and
the balance, if any, returned to Borrower, it being the intent of the parties
hereto not to enter into a usurious or otherwise illegal relationship. The right
to accelerate the maturity of any of the Obligations does not include the right
to accelerate any interest that has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of any such acceleration. Borrower recognizes that, with fluctuations in
the rates of interest set forth in Section 2.1.1 of this Agreement, and the
Maximum Rate, such an unintentional result could inadvertently occur. All monies
paid to Lender hereunder or under any of the other Financing Documents, whether
at maturity or by prepayment, shall be subject to any rebate of unearned
interest as and to the extent required by Applicable Law. By the execution of
this Agreement, Borrower covenants that (i) the credit or return of any Excess
shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower
shall not seek or pursue any other remedy, legal or equitable, against Lender,
based in whole or in part upon contracting for, charging or receiving any
Interest in excess of the Maximum Rate. For the purpose of determining whether
or not any Excess has been contracted for, charged or received by Lender, all
interest at any time contracted for, charged or received from Borrower in
connection with any of the Financing Documents shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Obligations. Borrower and Lender shall, to the
maximum extent permitted under Applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as Interest and
(ii) exclude voluntary prepayments and the effects thereof. The provisions of
this Section 2.6 shall be deemed to be incorporated into every DIP Financing
Document (whether or not any provision of this Section is referred to therein).
All such Financing Documents and communications relating to any Interest owed by
Borrower, and all figures set forth therein shall, for the sole purpose of
computing the extent of Obligations, be automatically recomputed by Borrower,
and by any court considering the same, to give effect to the adjustments or
credits required by this Section 2.6.
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SECTION 3. LOAN ADMINISTRATION
3.1. Manner of Borrowing and Funding Revolver Loans. Borrowings under
the Revolver Commitment of the Facility established pursuant to Section 1 hereof
shall be made and funded as follows:
3.1.1. Notice of Borrowing.
(i) Whenever Borrower desires to make a Borrowing
under this Agreement, Borrower shall give Lender prior written notice
(or telephonic notice promptly confirmed in writing) of such Borrowing
request (a "Notice of Borrowing"), which shall be in the form of
Exhibit B annexed hereto and signed by an authorized officer of
Borrower. Such Notice of Borrowing shall be given by Borrower at the
office of Lender designated by Lender from time to time no later than
ten (10) Business Days prior to the requested funding date of such
Borrowing. Notices received after 11:00 a.m. shall be deemed received
on the next Business Day. Each Notice of Borrowing (or telephonic
notice thereof) shall be irrevocable and shall specify (a) the
principal amount of the Borrowing, and (b) the date of Borrowing (which
shall be a Business Day).
(ii) Unless payment is otherwise timely made by
Borrower, the becoming due of any amount required to be paid under this
Agreement or any of the other Financing Documents with respect to the
Obligations (whether as principal, accrued interest, fees or other
charges) shall be deemed irrevocably to be a request for Revolver Loans
on the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges, and the proceeds of
such Revolver Loans may be disbursed by way of direct payment of the
relevant Obligation. Lender shall not have any obligation to Borrower
to honor any deemed request for a Revolver Loan after the Commitment
Termination Date, but may do so in its discretion and without regard to
the existence of, and without being deemed to have waived, any Default
or Event of Default.
(iii) Lender shall have no obligation to honor any
deemed request for a Revolver Loan after the Commitment Termination
Date or when any condition precedent in Section 10 hereof is not
satisfied, but may do so in its discretion and without regard to the
existence of, and without being deemed to have waived, any Default or
Event of Default and regardless of whether such Revolver Loan is funded
after the Commitment Termination Date.
(iv) As an accommodation to Borrower, Lender may
permit telephonic requests for Borrowings and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by
Borrower. Lender shall not have any liability to Borrower for any loss
or damage suffered by Borrower as a result of Lender's honoring of any
requests, execution of any instructions, authorizations or agreements
or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Lender by Borrower
and Lender shall not have any duty to verify the origin of any such
communication or the identity or authority of the Person sending it.
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3.1.2. Disbursement Authorization. Borrower hereby irrevocably
authorizes Lender to disburse the proceeds of each Revolver Loan requested by
Borrower, or deemed to be requested pursuant to Section 3.1.1, as follows: (i)
the proceeds of each Revolver Loan requested under Section 3.1.1(i) shall be
disbursed by Lender in accordance with the terms of the written disbursement
letter from Borrower in the case of the initial Borrowing, and, in the case of
each subsequent Borrowing, by wire transfer to such bank account as may be
agreed upon by Borrower and Lender from time to time in writing; and (ii) the
proceeds of each Revolver Loan requested under Section 3.1.1(ii) shall be
disbursed by Lender by way of direct payment of the relevant interest or other
Obligation. Any proceeds disbursed in payment of any of the Obligations shall be
deemed to have been received by Borrower.
3.2. All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of Borrower and shall be secured by Lender's Lien upon
all of the Collateral.
SECTION 4. PAYMENT
4.1. General Payment Provisions. All payments of principal of and
interest on the Loans and other Obligations that are payable to Lender shall be
made to Lender in Dollars without any offset or counterclaim and free and clear
of (and without deduction for) any present or future Taxes, and, with respect to
payments made other than by application of balances in the Payment Account, in
immediately available funds not later than 12:00 noon on the due date (and
payment made after such time on the due date to be deemed to have been made on
the next succeeding Business Day). All payments received by Lender shall be
distributed by Lender in accordance with Section 4.5 hereof.
4.2. Repayment of Revolver Loans.
4.2.1. Payment of Principal. The outstanding principal amounts
with respect to the Revolver Loans shall be due and payable by Borrower to
Lender immediately upon (a) each receipt by Lender or Borrower of any proceeds
of any of the Collateral, to the extent of such proceeds; and (b) the Commitment
Termination Date.
4.2.2. Payment of Interest. Interest accrued on each Revolver
Loan shall be due and payable on the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month. Accrued interest shall also be paid by Borrower on the
Commitment Termination Date.
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4.3. Payment of Other Obligations. The balance of the Obligations
requiring the payment of money, including the Extraordinary Expenses incurred by
Lender, shall be repaid by Borrower to Lender, as and when provided in the
Financing Documents, or, if no date of payment is otherwise specified in the
Financing Documents, on demand.
4.4. Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Obligor or against or in
payment of any or all of the Obligations. To the extent that Borrower makes a
payment or payments to Lender or Lender receives payment from the proceeds of
any Collateral or exercises its right of setoff, and such payment or payments or
the proceeds of Collateral or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred. The provisions of the immediately preceding sentence
of this Section 4.4 shall survive any termination of the Facility and Full
Payment of the Obligations.
4.5. Application of Payments and Collections. All Payment Items
received by Lender by 12:00 noon, Miami, Florida time, on any Business Day shall
be deemed received on that Business Day. All Payment Items received by Lender
after 12:00 noon, Miami, Florida time, on any Business Day shall be deemed
received on the following Business Day. Except to the extent that the manner of
application to the Obligations of payments or proceeds of Collateral is
expressly governed by other provisions of this Agreement, Borrower irrevocably
waives the right to direct the application of any and all payments and
Collateral proceeds at any time or times received by Lender from or on behalf of
Borrower, and Borrower does hereby irrevocably agree that Lender shall have the
continuing exclusive right to apply and reapply any and all such payments and
Collateral proceeds received at any time or times hereafter by Lender or its
agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. Without
limiting the generality of the foregoing, Borrower acknowledges and agrees that
Lender may apply all payments and Collateral proceeds to all of the Obligations
prior to application of the same to the Term Loan. If as the result of Lender's
collection of proceeds of Accounts and other Collateral as authorized by Section
7.2.5 a credit balance exists, such credit balance shall not accrue interest in
favor of Borrower, but shall be available to Borrower at any time or times for
so long as no Default or Event of Default exists. Lender may, at its option,
offset such credit balance against any of the Obligations upon and after the
occurrence of an Event of Default.
4.6. Loan Account. Lender shall establish an account on its books (the
"Loan Account") and shall enter all Loans as debits to the Loan Account and
shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
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4.7. Gross Up for Taxes. If Borrower shall be required by Applicable
Law to withhold or deduct any Taxes from or in respect of any sum payable under
this Agreement or any of the other Financing Documents, (a) the sum payable to
Lender shall be increased as may be necessary so that, after making all required
withholding or deductions, Lender receives an amount equal to the sum it would
have received had no such withholding or deductions been made, (b) Borrower
shall make such withholding or deductions, and (c) Borrower shall pay the full
amount withheld or deducted to the relevant taxation authority or other
authority in accordance with Applicable Law.
SECTION 5. TERM AND TERMINATION OF THE FACILITY
5.1. Term. Subject to Lender's right to cease making Loans to Borrower
when any Default or any Event of Default exists or upon the Commitment
Termination Date, the Facility shall be in effect for the Term. The Term may be
extended by written agreement between Borrower and Lender.
5.2. Termination of Facility.
5.2.1. Termination by Lender. Lender may terminate the
Facility at any time, without notice to Borrower, upon or after the occurrence
of an Event of Default.
5.2.2. Effect of Termination. On the Commitment Termination
Date, all of the Obligations (including Contingent Obligations owing to Lender)
shall be immediately due and payable, and Lender shall have no further
obligation to make any Loans. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Financing Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Financing Documents
notwithstanding such termination until Full Payment of the Obligations. With
respect to any Obligations that are Contingent Obligations on the Commitment
Termination Date, Borrower shall, on the Commitment Termination Date, either
deposit with Lender cash or procure and deliver to Lender a direct pay letter of
credit naming Lender as beneficiary (to be in form and substance, and from an
issuing bank, satisfactory to Lender), in each case in an amount not less than
105% of the aggregate amount of all such Contingent Obligations to Lender.
Notwithstanding Full Payment of the Obligations, Lender shall not be required to
terminate its security interests in any of the Collateral unless, with respect
to any loss or damage Lender may incur as a result of the dishonor or return of
any Payment Items applied to the Obligations, Lender shall have received either
(i) a written agreement, executed by Borrower and any Person whose loans or
other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such loss or damage; or (ii) such
monetary reserves and Liens on the Collateral for such period of time as Lender,
in its reasonable discretion, may deem necessary to protect Lender from any such
loss or damage. The provisions of Sections 2.4, 4.4, 4.7 and this Section 5.2.2
and all obligations of Borrower to indemnify Lender pursuant to this Agreement
shall in all events survive any termination of the Facility.
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SECTION 6. COLLATERAL SECURITY
6.1. Grant of Security Interest in Collateral. To secure the prompt and
Full Payment and performance of all of the Obligations, Borrower hereby grants
to Lender a continuing security interest in and Lien upon all of the assets of
Borrower, whether now owned or existing or hereafter created, acquired or
arising (irrespective of whether the same existed on or was created or acquired
after the Effective Date), including the following Property and interests in
Property of Borrower:
(i) all Accounts;
(ii) all Inventory;
(iii) all Equipment;
(iv) all General Intangibles;
(v) all Instruments;
(vi) all Chattel Paper;
(vii) all Documents;
(viii) all Investment Property;
(ix) all Supporting Obligations;
(x) all Letter-of-Credit Rights;
(xi) all Deposit Accounts;
(xii) all monies and other Property of any kind, now
or at any time or times hereafter in the possession or under the
control of Lender or a bailee or Affiliate of Lender, including any
Cash Collateral in the Cash Collateral Account;
(xiii) all cash and non-cash proceeds of (i) through
(xii) above, including proceeds of and unearned premiums with respect
to insurance policies insuring any of the Collateral; and
(xiv) all books and records (including customer lists,
files, correspondence tapes, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i)
through (xiii) above.
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6.2. Other Collateral. In addition to the items of Property referred to
in Section 6.1 above, the Obligations shall also be secured by the Cash
Collateral to the extent provided herein and all of the other items of Property
from time to time described in any of the Security Documents as security for any
of the Obligations.
6.3. Lien on Deposit Accounts. As additional security for the Full
Payment and performance of the Obligations, Borrower hereby grants to Lender a
continuing security interest in and Lien upon, and hereby collaterally assigns
to Lender, all of Borrower's right, title and interest in and to each Deposit
Account and all deposits or other sums at any time credited to each such Deposit
Account, including any sums in any blocked account or any special lockbox
account and in the accounts in which sums are deposited from such blocked
accounts and special lockbox accounts. In connection with the foregoing,
Borrower hereby authorizes and directs each such bank or other depository to pay
or deliver to Lender upon its written demand therefor made at any time upon the
occurrence and during the continuation of an Event of Default and without
further notice to Borrower (such notice being hereby expressly waived), all
balances in each Deposit Account maintained by Borrower with such depository for
application to the Obligations then outstanding, and the rights given Lender in
this Section shall be cumulative with and in addition to Lender's other rights
and remedies in regard to the foregoing Property as proceeds of Collateral.
Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact to
collect any and all such balances to the extent any such payment is not made to
Lender by such bank or other depository after demand thereon is made by Lender
pursuant hereto.
6.4. Lien Perfection; Further Assurances. Promptly after Lender's
request therefor, Borrower shall execute or cause to be executed and delivered
to Lender (and consent to Lender's filing without Borrower's signature where
permitted by Applicable Law) such instruments, assignments, title certificates
or other documents as are necessary under the UCC or other Applicable Law
(including any motor vehicle certificates of title act) to perfect (or continue
the perfection of) Lender's Lien upon the Collateral, and shall take such other
action as may be requested by Lender to give effect to or carry out the intent
and purposes of this Agreement. Unless prohibited by Applicable Law, Borrower
hereby authorizes Lender to execute and file any such financing statement on
Borrower's behalf. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof.
6.5. Lien Priority. The Liens and security interests granted to Lender
pursuant to the provisions of this Section 6 and pursuant to any of the
Financing Documents shall be first priority Liens and security interests in the
Collateral.
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SECTION 7. COLLATERAL ADMINISTRATION
7.1. General Provisions.
7.1.1. Locations of Collateral. All tangible items of
Collateral, other than Inventory in transit, shall at all times be kept by
Borrower at one or more of the business locations of Borrower previously
disclosed to Lender and shall not be moved therefrom, without the prior written
approval of Lender, except that prior to an Event of Default and acceleration of
the maturity of the Obligations in consequence thereof, Borrower may (i) make
sales or other dispositions of any Collateral to the extent such sales or other
dispositions are not prohibited by Section 9.2.4 hereof and (ii) may move
Inventory or any record relating to any Collateral to a location in the United
States other than those previously disclosed to Lender, so long as Borrower has
given Lender at least 30 days prior written notice of such new location and
prior to moving any Inventory to such location there shall have been filed all
UCC-1 financing statements and any other appropriate documentation necessary to
perfect or continue the perfection of Lender's Liens with respect to such
Inventory and all proceeds thereof.
7.1.2. Insurance of Collateral; Condemnation Proceeds.
Borrower shall maintain and pay for insurance upon all Collateral, wherever
located, covering casualty, hazard, public liability, theft, malicious mischief,
and such other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. All proceeds payable under each such policy
shall be payable to Lender for application to the Obligations. Borrower shall
deliver the originals or certified copies of such policies to Lender with
lender's loss payable endorsements reasonably satisfactory to Lender, naming
Lender as sole loss payee, assignee or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Lender shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrower fails to provide and pay for such insurance, Lender may, at its option,
but shall not be required to, procure the same and charge Borrower therefor.
Borrower agrees to deliver to Lender, promptly as rendered, true copies of all
reports made in any reporting forms to insurance companies. For so long as no
Event of Default exists, Borrower shall have the right to settle, adjust and
compromise any claim with respect to any insurance maintained by Borrower
provided that all proceeds thereof are applied in the manner specified in this
Agreement, and Lender agrees promptly to provide any necessary endorsement to
any checks or drafts issued in payment of any such claim. At any time that an
Event of Default exists, only Lender shall be authorized to settle, adjust and
compromise such claims. Lender shall have all rights and remedies with respect
to such policies of insurance as are provided for in this Agreement and the
other Financing Documents.
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7.1.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping any
Collateral, all Taxes imposed under any Applicable Law on any of the Collateral
or in respect of the sale thereof, and all other payments required to be made by
Lender to any Person to realize upon any Collateral shall be borne and paid by
Borrower. If Borrower fails to pay promptly any portion thereof when due, Lender
may, at its option, but shall not be required to, pay the same and charge
Borrower therefor. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever, but the same shall be at Borrower's sole risk.
7.1.4. Defense of Title to Collateral. Borrower shall at all
times defend its title to the Collateral and Lender's Liens therein against all
Persons and all claims and demands whatsoever.
7.2. Administration of Accounts.
7.2.1. Records and Schedules of Accounts. Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Lender on a daily basis or such other periodic basis
as Lender shall request a sales and collections report for the preceding period,
in form satisfactory to Lender. On or before the 15th day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form acceptable to
Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of
proof of delivery and a copy of all documents, including repayment histories and
present status reports relating to the Accounts so scheduled and such other
matters and information relating to the status of then existing Accounts as
Lender shall reasonably request. At the request of Lender made at any time,
Borrower shall deliver to Lender copies of invoices or invoice registers related
to all of its Accounts.
7.2.2. Discounts, Disputes and Returns. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $10,000 are in dispute
between Borrower and any Account Debtor, or if any returns are made in excess of
$10,000 with respect to any Accounts owing from an Account Debtor, Borrower
shall provide Lender with written notice thereof at the time of submission of
the next Schedule of Accounts, explaining in detail the reason for the dispute
or return, all claims related thereto and the amount in controversy. Upon and
after the occurrence of an Event of Default, Lender shall have the right to
settle or adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of any Accounts comprising
a part of the Collateral upon such terms and conditions as Lender may deem
advisable, and to charge the deficiencies, costs and expenses thereof, including
attorneys' fees, to Borrower.
7.2.3. Taxes. If an Account of Borrower includes a charge for
any Taxes payable to any governmental taxing authority, Lender is authorized, in
its sole discretion, to pay the amount thereof to the proper taxing authority
for the account of Borrower and to charge Borrower therefor; provided, however,
that Lender shall not be liable for any Taxes that may be due by Borrower.
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7.2.4. Account Verification. Whether or not a Default or an
Event of Default exists, Lender shall have the right at any time, in the name of
Lender, any designee of Lender or Borrower to verify the validity, amount or any
other matter relating to any Accounts of Borrower by mail, telephone, telegraph
or otherwise. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
7.2.5. Collection of Accounts and Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of Borrower's Accounts for Lender. All Payment Items received by
Borrower in respect of its Accounts, together with the proceeds of any other
Collateral, shall be held by Borrower as trustee of an express trust for
Lender's benefit and Borrower shall immediately deposit same in kind in the
Dominion Account. Lender retains the right at all times after the occurrence of
a Default or an Event of Default to notify Account Debtors of Borrower that
Accounts have been assigned to Lender and to collect Accounts directly in its
own name and to charge to Borrower the collection costs and expenses, incurred
by Lender, including reasonable attorneys' fees.
7.3. Administration of Equipment.
7.3.1. Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
cost of its Equipment and all dispositions made in accordance with Section 7.3.2
hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Promptly after request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
7.3.2. Dispositions of Equipment. Borrower will not sell,
lease or otherwise dispose of or transfer any of the Equipment or any part
thereof without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate during
any consecutive 12-month period, has a fair market value or book value,
whichever is more, of $10,000 or less, provided that all Net Proceeds thereof
are remitted to Lender for application to the Obligations in such order of
application as Lender shall elect, or (ii) replacements of Equipment that is
substantially worn, damaged or obsolete with Equipment of like kind, function
and value, provided that the replacement Equipment shall be acquired prior to or
concurrently with any disposition of the Equipment that is to be replaced, the
replacement Equipment shall be free and clear of Liens other than Permitted
Liens that are not Purchase Money Liens, and Borrower shall have given Lender at
least 10 days prior written notice of such disposition. Nothing herein shall be
construed to authorize Borrower to sell any Equipment subject to a lease between
Lender and Borrower without Lender's prior written consent.
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7.3.3. Condition of Equipment. The Equipment is in good
operating condition and repair, and all necessary replacements of and repairs
thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved, reasonable wear and tear excepted.
Borrower will not permit any of the Equipment to become affixed to any real
Property leased to Borrower so that an interest arises therein under the real
estate laws of the applicable jurisdiction unless the landlord of such real
Property has executed a landlord waiver or leasehold mortgage in favor of and in
form acceptable to Lender, and Borrower will not permit any of the Equipment to
become an accession to any personal Property that is subject to a Lien unless
the Lien is a Permitted Lien.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. General Representations and Warranties. To induce Lender to enter
into this Agreement and to establish the Facility, Borrower warrants and
represents to Lender that:
8.1.1. Organization and Qualification. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization, has the power to own Properties and to
transact the business in which it is presently engaged or proposed to be engaged
and is duly qualified and in good standing in each jurisdiction in which it
presently is, or proposes to be, engaged in business.
8.1.2. Power and Authority. The execution, delivery and
performance by Borrower of the Financing Documents are within Borrower's
corporate power, has been duly authorized by all necessary or proper corporate
action and, on the date of initial funding of Loans hereunder; are not in
contravention of any provision of its own Organizational Documents; will not
violate any Applicable Law; will not conflict with any Material Contract of
Borrower; and does not require the consent or approval of any Governmental
Authority or any other Person.
8.1.3. Enforceable Agreements. Each of the Financing Documents
has been duly executed and delivered by Borrower and constitutes a legal, valid
and binding obligation of Borrower, enforceable against each Borrower in
accordance with its terms.
8.1.4. Priority of Liens. The security interests granted
pursuant to the Financing Documents constitute valid, enforceable, perfected and
first priority Liens on the Collateral.
8.1.5. Places of Business. Borrower has no office or place of
business, nor does Borrower store any Collateral, at any location other than
those previously disclosed to the Lender.
8.1.6. Compliance With Laws. All of Borrower's business,
operations and Properties are conducted, maintained and owned in accordance with
Applicable Law, including all Environmental Laws, except to the extent that any
such noncompliance could not reasonably be expected to have a Material Adverse
Effect and except as heretofore described by Borrower in filings with the SEC.
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8.1.7. Governmental Approvals. Borrower has obtained and holds
in full force and effect all Governmental Approvals necessary for the operation
of its business as presently and proposed to be constructed to the extent that
the failure to obtain same could not reasonably be expected to have a Material
Adverse Effect.
8.1.8. No Adverse Changes. Since the Effective Date, no event
has occurred that has or could reasonably be expected to have a Material Adverse
Effect.
8.1.9. Taxes. The FEIN of Borrower is _______________, and
Borrower has filed all federal, state and local tax returns and other reports
that it is required by Applicable Law to file and has paid, or made for
provision of the payment of, all Taxes upon it, its income and properties as and
when such Taxes are due and payable, except to the extent being Properly
Contested.
8.1.10. Brokers. There are no claims for brokerage
commissions, finders' fees or investment banking fees in connection with the
transactions contemplated by this Agreement or any of the other Financing
Documents.
8.1.11. No Default. No Default or Event of Default exists at
the time, or would result from the funding, of any Loan or other extension of
credit hereunder;
8.1.12. Accounts. Except as set forth on Schedule 8.1.12
hereto, with respect to each Account of Borrower, such Account is genuine and in
all respects what it purports to be and is not evidenced by a judgment; arises
out of a completed sale and delivery of goods or rendition of services by
Borrower in the Ordinary Course of Business and substantially in accordance with
the terms and conditions of all purchase orders, contracts or other documents
relating thereto and forming a part of the contract between Borrower and the
Account Debtor; is for a sum certain maturing, as stated in the duplicate
invoice covering such sale, a copy of which is available to Lender upon request;
such Account is absolutely owing to such Borrower and is not contingent in any
respect or for any reason, and the Account is not subject to any offset, Lien,
deduction, defense, dispute, counterclaim or any other adverse condition, except
for disputes resulting in returned goods where the amount in controversy is
deemed by Lender to be immaterial; the contract under which such Account arose
does not condition or restrict Borrower's right to assign to Lender the right to
payment thereunder; Borrower has not made any agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, other than deductions, discounts and
allowances that are granted in the Ordinary Course of Business for prompt
payment and are reflected in the calculation of the net amount of each
respective invoice related thereto and reflected in the Schedule of Accounts
submitted to Lender pursuant to this Agreement; and to the best of Borrower's
knowledge, there are no facts, events or occurrences that are reasonably likely
to impair the validity or enforceability of any such Accounts or reduce the
amount payable thereunder from the face amount of the invoice with respect
thereto.
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8.1.13. Intellectual Property. Borrower and its Subsidiaries
each owns or has the lawful right to use all Intellectual Property necessary for
the present and planned future conduct of its business without any conflict with
the rights of others; there is no objection to, or pending (or, to Borrower's
knowledge, threatened) Intellectual Property Claim with respect to, Borrower's
or any Subsidiary's right to use any such Intellectual Property and Borrower is
not aware of any grounds for challenge or objection thereto; and neither
Borrower nor any Subsidiary pays any royalty or other compensation to any Person
for the right to use any Intellectual Property. All such Intellectual Property
and other similar rights have been previously described to the Lender, to the
extent they are registered under any Applicable Law or are otherwise material to
Borrower's or any Subsidiary's business.
8.1.14. Burdensome Contracts. Neither Borrower nor any of the
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which has or could be reasonably expected to have a
Material Adverse Effect. Neither Borrower nor any of the Subsidiaries is a party
or subject to any Restrictive Agreements.
8.1.15. ERISA. Neither Borrower nor any of the Subsidiaries
has any Plan on the date hereof. Borrower and each of its Subsidiaries is in
full compliance with the requirements of ERISA and the regulations promulgated
thereunder with respect to each Plan. No fact or situation that is reasonably
likely to result in a material adverse change in the financial condition of
Borrower or any of the Subsidiaries exists in connection with any Plan. Neither
Borrower nor any of its Subsidiaries has any withdrawal liability in connection
with a Multiemployer Plan.
8.1.16. Labor Matters. Neither Borrower nor any of the
Subsidiaries is a party to any collective bargaining agreement on the date
hereof. On the date hereof, there are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any
Subsidiary's employees, or, to Borrower's knowledge, any threats of strikes,
work stoppages or any asserted pending demands for collective bargaining by any
union or organization.
8.1.17. Not a Regulated Entity. No Obligor is (i) an
"investment company" or a "person directly or indirectly controlled by or acting
on behalf of an investment company" within the meaning of the Investment Company
Act of 1940; (ii) a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935; or (iii) subject to regulation under the Federal Power Act, the
Interstate Commerce Act, any public utilities code or any other Applicable Law
regarding its authority to incur Debt.
8.1.18. Margin Stock. Neither Borrower nor any of the
Subsidiaries is engaged, principally or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
Margin Stock.
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8.1.19. Customer and Trade Relations. Except as set forth on
Schedule 8.1.19 hereto, there exists no actual or threatened termination,
cancellation or limitation of, or any materially adverse modification or change
in, the business relationship between Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of Borrower, or with any material supplier or group of suppliers, and
there exists no condition or state of facts or circumstances which is reasonably
likely to have a Material Adverse Effect or prevent Borrower from conducting
such business after the consummation of the transactions contemplated by this
Agreement in substantially the same manner in which it conducted its business on
the Effective Date.
8.1.20. Budget. Borrower has furnished to Lender a copy of the
Budget. The Budget has been prepared by Borrower in light of the past operations
of the business of Borrower and its Subsidiaries and represents as of the
respective dates thereof the good faith opinion of Borrower and its senior
management concerning the likely course of business of Borrower and its
Subsidiaries.
8.2. Reaffirmation of Representations and Warranties. All of the
foregoing representations and warranties made by Borrower in this Agreement or
in any of the other Financing Documents shall survive the execution and delivery
of this Agreement and such other Financing Documents, and shall be deemed to
have been remade and reaffirmed on each day that any Obligations are outstanding
or that Borrower requests or is deemed to have requested the funding of a Loan
under the Facility, except for changes that may occur after the date hereof in
the Ordinary Course of Business as long as Lender has consented to such changes
or such changes are not violative of any provision of this Agreement.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. Affirmative Covenants. During the Term and thereafter until Full
Payment of the Obligations, Borrower covenants that it shall and shall cause
each of its Subsidiaries to:
9.1.1. Business and Existence. Preserve and maintain its
separate corporate existence and all rights, privileges, and franchises in
connection therewith, and maintain its qualification and good standing in all
states in which such qualification is necessary to the ownership of its
Properties or the conduct of its businesses.
9.1.2. Business Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are made
in accordance with GAAP reflecting all of its financial transactions.
9.1.3. Visits and Inspections. Permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrower,
inspect and make extracts from Borrower's books and records, and discuss with
Borrower's officers, its employees and its independent accountants, Borrower's
business, assets, liabilities, financial condition, business prospects and
results of operations.
9.1.4. Further Assurances. At Lender's request, promptly
execute or cause to be executed and deliver to Lender any and all documents,
instruments and agreements deemed necessary by Lender to give effect to or carry
out the terms or intent of this Agreement or any of the other Financing
Documents.
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9.1.5. Financial Reporting. Cause to be prepared and to be
furnished to Lender the following (which, in the case of financial reporting,
shall be prepared in accordance with GAAP applied on a consistent basis, unless
Borrower's certified public accountants concur in any change therein, such
change is disclosed to Lender and is consistent with GAAP):
(i) as soon as available, and in any event within 90
days after the close of each Fiscal Year, consolidated balance sheets
of Guarantor as of the end of such Fiscal Year and related statements
of income, shareholders' equity and cash flow, and setting forth in
each case in comparative form the corresponding figures for the
preceding Fiscal Year;
(ii) as soon as available, and in any event within 45
days after the end of each calendar quarter hereafter (but within 90
days after the last calendar quarter in a Fiscal Year), reviewed
consolidated interim financial statements of Guarantor as of the end of
such quarter and the related reviewed consolidated statements of income
and cash flow for such quarter and for the portion of Guarantor's
Fiscal Year then elapsed, certified by the principal financial officer
of Guarantor as prepared in accordance with GAAP and fairly presenting
the consolidated financial position and consolidated results of
operations of Guarantor for such quarter and period subject only to
changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the filing thereof, copies of
any annual report to be filed in accordance with ERISA in connection
with each Plan;
(iv) such other data and information (financial or
otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or Borrower's financial
condition or results of operations; and
9.1.6. Notices. Notify Lender in writing, promptly after
Borrower's obtaining knowledge thereof, of the termination or breach of any
Material Contract; the occurrence of any Default or Event of Default; Borrower's
violation (or asserted violation) of any Applicable Law (including any
Environmental Law); any claim that Borrower may make under any policy of
insurance with respect to the Collateral; and any proposed sale of any of the
Collateral (including with such notice copies of drafts of all instruments and
agreements applicable to any such sale), which shall specify the identity of the
proposed purchaser, the terms of the proposed sale and the expected date of
closing.
9.1.7. Insurance. In addition to the insurance required herein
with respect to the Collateral, maintain with financially sound and reputable
insurers, insurance with respect to its Properties and business against such
casualties and contingencies of such type (including product liability, business
interruption, larceny, embezzlement or other criminal misappropriation
insurance) and in such amounts as is customary in the business of Borrower.
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9.1.8. Compliance With Laws. Comply with all Applicable Law,
including ERISA, FLSA, OSHA, all Environmental Laws, the Bankruptcy Code and all
laws, statutes, regulations and ordinances regarding the collection, payment and
deposit of Taxes, and obtain and keep in force any and all Governmental
Approvals necessary to the ownership of its Properties or to the conduct of its
business, to the extent that any such failure to comply, obtain or keep in force
could be reasonably expected to have a Material Adverse Effect. Without limiting
the generality of the foregoing, if any Environmental Release shall occur at or
on any of the Properties of Borrower or any Subsidiary, Borrower shall, or shall
cause the applicable Subsidiary to, act immediately to investigate and report to
Lender and all appropriate Governmental Authorities the extent of, and to make
appropriate remedial action to eliminate, such Environmental Release, whether or
not ordered or otherwise directed to do so by any Governmental Authority.
9.1.9. Taxes. Pay and discharge all Taxes (other than Taxes
that accrued or arose prior to the Petition and that are not secured by a Lien
senior to the Liens in favor of Lender) prior to the date on which such Taxes
become delinquent or penalties attach thereto, except and to the extent only
that such Taxes are being Properly Contested.
9.1.10. Turn Over of Collateral Proceeds. Promptly turn over
to Lender all proceeds received from any sale or other disposition of any
Collateral (such proceeds to be applied to the Obligations). After Full Payment
of all of the Obligations that are not Contingent Obligations, Lender shall be
authorized to retain and apply any remaining proceeds for the purposes set forth
in Section 5.2.2.
9.2 Negative Covenants. During the Term and thereafter until
Full Payment of the Obligations, Borrower covenants that it shall not and
shall not permit any Subsidiary to:
9.2.1. Fundamental Changes. Merge, reorganize, consolidate or
amalgamate with any Person, or liquidate, wind up its affairs or dissolve
itself, except for mergers or consolidations of any Subsidiary with another
Subsidiary; change Borrower's name or conduct business under any new fictitious
name; or change Borrower's FEIN.
9.2.2. Loans. Make any loans or other advances of money (other
than for salary, travel advances, advances against commissions and other similar
advances in the Ordinary Course of Business) to any Person.
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9.2.3. Limitation on Liens. Create or suffer to exist any Lien
upon any of its Property, income or profits, whether now owned or hereafter
acquired, except: (i) Liens at any time granted in favor of Lender and other
Liens in existence on the Effective Date; (ii) post-Effective Date Liens for
Taxes (excluding any Lien imposed pursuant to any of the provisions of ERISA)
not yet due or being Properly Contested; (iii) post-Effective Date statutory
Liens (excluding Liens imposed pursuant to any of the provisions of ERISA)
securing the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons for labor, materials, supplies or
rentals incurred in the Ordinary Course of Business, but only if the payment
thereof is not at the time required or the Debt secured by such Lien is being
Properly Contested; (iv) post-Effective Date Liens resulting from deposits made
in the Ordinary Course of Business in connection with workmen's compensation,
unemployment insurance, social security and other like laws; (v) reservations,
exceptions, easements, rights-of-way, and other similar encumbrances affecting
real Property of Borrower that were in existence on the Effective Date; (vi)
Purchase Money Liens securing Permitted Purchase Money Debt; and (vii) such
other Liens as Lender may consent to in writing from time to time, in its sole
and absolute discretion.
9.2.4. Disposition of Assets. Sell, lease or otherwise dispose
of any of the Collateral, including any disposition of the Collateral as part of
a sale and leaseback transaction, to or in favor of any Person, except (i) sales
of Inventory in the Ordinary Course of Business for so long as no Event of
Default exists hereunder, (ii) dispositions of Equipment as authorized by
Section 7.3 hereof, (iii) dispositions of Property that is not Collateral or
that is consented to in writing by Lender, (iv) dispositions in connection with
which Full Payment is made of all of the Obligations (and all Contingent
Obligations of Borrower as provided for in Section 5.2.2 hereof), and (v) other
sales, leases or dispositions that are consented to by Lender.
9.2.5. Compromise of Accounts. Compromise or settle, or extend
the time of payment of, any Account without Lender's prior written consent.
9.2.6. Payment of Claims. Other than any Claims assumed by the
Borrower, with the prior written consent of the Lender, make any payment of
principal or interest on account of any Claim against Borrower that arose prior
to the Effective Date, other than Claims for property taxes assessed against any
of the Collateral and Claims that may be paid from the proceeds of Loans
pursuant to Section 1.1.2.
9.2.7. Restricted Investments. Make or have any Restricted
Investment.
9.2.8. Distributions. Make any Distribution.
9.2.9. Permitted Debt. Incur or suffer to exist any Debt other
than Claims in existence on the Effective Date; the Obligations; Capitalized
Lease Obligations and Permitted Purchase Money Debt to the extent expenditures
in connection therewith are not in violation of Section 9.3 hereof; Debt (other
than Debt for Money Borrowed, Capitalized Lease Obligations and Permitted
Purchase Money Debt) incurred in the Ordinary Course of Business of Borrower, so
long as such Debts are not past due and payable and are not secured by any Lien
that is not a Permitted Lien; and Permitted Contingent Obligations.
9.2.10. Conduct of Business. Engage in any business other than
the business engaged in by it on the Effective Date and any business or
activities that are substantially similar, related or incidental thereto.
9.2.11. Use of Proceeds. Use any proceeds of Loans for a
purpose that is not expressly permitted by Section 1.1.2.
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9.2.12. Tax Consolidation. File or consent to the filing of
any consolidated income tax return with any Person other than a Subsidiary.
9.2.13. Accounting Changes. Make any significant change in
accounting treatment or reporting practices, except as may be required by GAAP,
or establish a fiscal year different from the Fiscal Year.
9.2.14. Organization Documents. Amend, modify or otherwise
change any of the terms or provisions in any of its Organization Documents as in
effect on the date hereof, except for changes that do not affect in any way
Borrower's or such Subsidiary's rights and obligations to enter into and perform
the Financing Documents to which it is a party and to pay all of the Obligations
and that do not otherwise have a Material Adverse Effect.
9.2.15. Restrictive Agreements. Enter into or become party to
any Restrictive Agreement.
9.3 Financial Covenants. During the Term and thereafter until Full
Payment of the Obligations, Borrower covenants that, unless otherwise consented
to by Lender in writing, it shall not make or commit or agree to make, or permit
any of its Subsidiaries to make or commit or agree to make, any Capital
Expenditures in excess of $150,000.
SECTION 10. CONDITIONS PRECEDENT
10.1. Conditions Precedent to Initial Credit Extensions.
Notwithstanding any other provision of this Agreement or any of the other
Financing Documents, and without affecting in any manner the rights of Lender
under other sections of this Agreement, Lender shall not be required to fund any
Loan requested by Borrower, unless each of the following conditions has been and
continues thereafter to be satisfied:
10.1.1. All of the Financing Documents shall have been
executed in form and substance satisfactory to Lender by each of the signatories
thereto and accepted by Lender, and each Obligor shall be in compliance with all
of the terms thereof, and all representations and warranties contained therein
shall be true and correct in all material respects.
10.1.2. No Default or Event of Default shall exist at the time
of, and would not result from the funding of, any requested Loan, and no event
shall have occurred and no condition shall exist since the Effective Date that
has had or could reasonably be expected to have a Material Adverse Effect.
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10.1.3. All fees and expenses required to be paid by Borrower
hereunder on the Closing Date shall have been paid in full.
10.1.4. Lender shall have received satisfactory proof of
insurance by Borrower, in accordance with the terms of this Agreement, together
with loss payable endorsements on Lender's standard form of loss payable
endorsement, naming Lender as loss payee with respect to each policy and
certified copies of Borrower's liability insurance policies, together with
endorsements naming Lender as an additional insured.
10.1.5. Lender shall have received, reviewed and found
satisfactory a copy of the Budget.
10.2. Conditions Precedent to All Credit Extensions. Notwithstanding
any other provision of this Agreement or any of the other Financing Documents,
and without affecting in any manner the rights of Lender under other sections of
this Agreement, Lender shall not be required to fund any Loans, unless and until
each of the following conditions has been and continues to be satisfied:
10.2.1. No Default or Event of Default exists at the time, or
would result from the funding, of any Loan or other extension of credit.
10.2.2. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court
or Governmental Authority to enjoin, restrain or prohibit, or to obtain damages
in respect of, or which is related to or arises out of, any of the Financing
Documents or the consummation of any of the transactions contemplated thereby.
10.2.3. No event shall have occurred and no condition shall
exist that could reasonably be expected to have a Material Adverse Effect.
10.3. Limited Waiver of Conditions Precedent. If Lender shall make any
Loan or otherwise extend any credit to Borrower under this Agreement at a time
when any of the foregoing conditions precedent are not satisfied (regardless of
whether the failure of satisfaction of any of such conditions precedent is known
or unknown to Lender), the funding of such Loans shall not operate as a waiver
of the right of Lender to insist upon the satisfaction of all conditions
precedent with respect to each subsequent Borrowing requested by Borrower or a
waiver of any Default or Event of Default as a consequence of the failure of any
such conditions to be satisfied.
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SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
11.1.1. Payment of Obligations. Borrower shall fail to pay (a)
the principal of or accrued interest with respect to any Loan Outstanding on the
due date thereof (whether due at stated maturity, on demand, upon acceleration
or otherwise) or (b) any of the other Obligations on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise).
11.1.2. Misrepresentations. Any warranty, representation, or
other statement made or furnished to Lender by or on behalf of Borrower or
Guarantor or in any instrument, certificate or financial statement furnished in
compliance with or in reference to this Agreement or any of the Financing
Documents proves to have been false or misleading in any material respect when
made or furnished.
11.1.3. Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 1.1.2,
6.4, 7.1.1, 7.1.2, 7.2, 7.3.2., 9.1.1, 9.1.3, 9.1.4, 9.1.5, 9.1.6, 9.1.7, 9.1.8,
9.1.9, 9.1.10, 9.2 or 9.3 hereof on the date that Borrower is required to
perform, keep or observe such covenant.
11.1.4. Breach of Other Covenants. Borrower or Guarantor shall
fail or neglect to perform, keep or observe any covenant contained in this
Agreement (other than a covenant which is dealt with specifically elsewhere in
this Section 11.1) or the Guarantee and the breach of such other covenant is not
cured to Lender's satisfaction within 10 days after the sooner to occur of any
Senior Officer's receipt of notice of such breach from Lender or the date on
which such failure or neglect first becomes known to any Senior Officer;
provided, however, that such notice and opportunity to cure shall not apply in
the case of any failure to perform, keep or observe any covenant which is not
capable of being cured at all or within such 10-day period or which is a willful
and knowing breach by Borrower or Guarantor or which was the subject of a breach
during the prior 60-day period.
11.1.5. Default Under Other Financing Documents. Any event of
default shall occur under, or Borrower or Guarantor shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the other Financing Documents and such default shall
continue beyond any applicable period of grace.
11.1.6. Cross-Defaults. There shall occur any default or event
of default on the part of Borrower or Guarantor under any agreement, document or
instrument, which is entered into after the Effective Date and which relates to
any Debt for Money Borrowed, if, as a consequence of such default or event of
default, the holder of such Debt shall be authorized to accelerate the maturity
or demand payment thereof.
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11.1.7. Uninsured Losses; Unauthorized Dispositions. There
shall occur any material loss, theft, damage or destruction not fully covered by
insurance (as required by this Agreement and subject to such deductibles as
Lender shall have agreed to in writing), or any sale, lease or encumbrance of
any of the Collateral or the making of any levy, seizure, or attachment thereof
or thereon, except as may be specifically permitted by other provisions of this
Agreement.
11.8. Change of Control. Any of the following shall have
occurred: (i) any Person or group of Persons shall acquire for the first time
direct or indirect ownership or the power to vote more than 50% of the issued
and outstanding capital stock of Borrower or Guarantor; (ii) a change in the
composition of the board of directors of Borrower or Guarantor, the result of
which is fewer than a majority of the directors are directors of the Borrower or
Guarantor as of the date hereof; or (iii) a change in the management of the
Borrower or Guarantor, the result of which is the principal executive officers
of the Borrower or Guarantor as of the date hereof resign or are otherwise
removed from such positions.
11.9. Judgments. One or more judgments or orders for the
payment of money in an amount that exceeds, individually or in the aggregate,
$25,000 shall be rendered against Borrower or Guarantor and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there should be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
11.10. Failure of Financing Documents. Any covenant, agreement
or obligation of Borrower or Guarantor contained in or evidenced by any of the
Financing Documents shall cease to be enforceable or shall be determined to be
unenforceable in accordance with its terms; Borrower or Guarantor shall deny or
disaffirm its obligations under any of the Financing Documents or Liens granted
in connection therewith; or the Liens granted in any of the Collateral shall be
determined to be voidable, invalid or subordinated or shall be determined, with
respect to any material part of the Collateral, to be unperfected or not to have
the priority contemplated by this Agreement.
11.11. Material Adverse Effect. Any event shall occur or any
condition shall exist that could reasonably be expected to have a Material
Adverse Effect.
11.12. Criminal Forfeiture. Any Obligor shall be convicted
under any criminal law that could lead to a forfeiture of any Property of such
Obligor.
11.13. Event of Bankruptcy. In addition, the Borrower
covenants and agrees that in the event the Borrower or Guarantor shall: (i) file
any petition with any Bankruptcy Court or be the subject of any petition under
the Bankruptcy Code; (ii) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency or other relief for the Borrower or
Guarantor; (iii) have sought or consented to or acquiesce in the appointment of
25
any Trustee, Receiver, Conservator or Liquidator; or, (iv) be the subject of any
order, judgment or decree entered by any court of competent jurisdiction
approving a petition filed against such party for any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency or relief for the Borrower or Guarantor, the Lender shall
thereupon be entitled, and the Borrower irrevocably consents, to the entry of an
order by a bankruptcy court granting to the Lender, relief from any automatic
stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against
the exercise of the rights and remedies otherwise available to the Lender the
Financing Documents or as otherwise provided by law or in equity, and the
Borrower or Guarantor irrevocably waives its right to object to, attempt to
enjoin or otherwise interfere with such relief and the exercise and enforcement
by the Lender of its rights and remedies following entry of such order. Without
limiting the generality of the immediately preceding sentence, the Borrower
agrees that the Lender will be entitled to immediate relief from the automatic
stay imposed by the Bankruptcy Code to allow the Lender to take any and all
actions necessary, desirable or appropriate to enforce any rights the Lender may
have under the Financing Documents, including but not limited to, the right to
possession of the Collateral, the right to prohibit the use of proceeds from the
sale of Collateral and/or the commencement or continuation of an action to
foreclose liens granted hereunder. The Borrower further agrees that the filing
of any petition for relief under the Bankruptcy Code which postpones, prevents,
delays or otherwise hinders the Lender's efforts to collect the amounts due
under the Financing Documents or to liquidate any of the Collateral shall be
deemed to have been filed in bad faith and, therefore, shall be subject to
prompt dismissal or conversion to a liquidation case under the Bankruptcy Code
upon motion therefore by the Lender. Further, the Borrower agrees it will not
seek, apply for or cause the entry of any order enjoining, staying or otherwise
prohibiting or interfering with the Lender's obtaining an order granting relief
from the automatic stay and enforcement of any rights which the Lender may have
under the Financing Documents, including but not limited to, the Lender's right
to possession of the Collateral.
11.2 Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with this Agreement, upon or at any time after the
occurrence of an Event of Default as above provided, Lender may, in its
discretion (i) declare the principal of and any accrued interest on the Loans
and all other Obligations owing under any of the Financing Documents to be,
whereupon the same shall become, without further notice or demand (all of which
notice and demand Borrower expressly waives), forthwith due and payable and
Borrower shall forthwith pay to Lender the entire principal of and accrued and
unpaid interest on the Loans and other Obligations plus reasonable attorneys'
fees and expenses if such principal and interest are collected by or through an
attorney-at-law; and (ii) terminate the Facility.
11.3 Remedies. Upon or at any time after the occurrence of an Event of
Default, Lender may, in its discretion, exercise from time to time all rights
and remedies available to Lender including, without limitation, the following
rights and remedies to enforce collection of the Obligations:
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11.3.1. All of the rights and remedies of a secured party
under the UCC or under other Applicable Law, and all other legal and equitable
rights to which Lender may be entitled under any of the Financing Documents, all
of which rights and remedies shall be cumulative and shall be in addition to any
other rights and remedies contained in this Agreement or any of the other
Financing Documents, and none of which shall be exclusive.
11.3.2. The right to collect Accounts, Chattel Paper,
Instruments and General Intangibles and all other rights of Borrower to the
payment of money from any Person obligated therefor.
11.3.3. The right to take immediate possession of all tangible
items of the Collateral and (i) to require Borrower to assemble such Collateral,
at Borrower's expense, and make it available to Lender at a place designated by
Lender that is reasonably convenient to both parties and (ii) to enter any of
the premises of Borrower or wherever any of the Collateral shall be located, and
to keep and store the same on said premises until sold (and if said premises be
the Property of Borrower, Borrower agrees not to charge Lender for storage
thereof).
11.3.4. The right to sell or otherwise dispose of all or any
Inventory in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable; Borrower agrees that 10 days written
notice to Borrower of any public or private sale or other disposition of such
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Lender shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with Applicable Law;
Lender may sell, lease or otherwise dispose of such Collateral, or any part
thereof, for cash, credit or any combination thereof, and Lender may purchase
all or any part of such Collateral at public or, if permitted by Applicable Law,
private sale and, in lieu of actual payment of such purchase price, may set off
the amount of such price against the Obligations.
Lender is hereby irrevocably granted a license or other right to use throughout
the world, without royalty, fee or other charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, tradenames, trademarks and
advertising matter, or any Property of a similar nature, as it pertains to the
Collateral, in advertising for sale and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Lender's
benefit. Any proceeds realized from the sale or other disposition of any
Collateral may be applied to the Obligations, after allowing 2 Business Days for
collection, to principal, interest, fees and expenses (including Extraordinary
Expenses) in such order and manner as Lender, in its sole discretion, may
determine.
11.4. Setoff. In addition to any Liens granted under any of the
Financing Documents and any rights now or hereafter available under Applicable
Law, Lender (and each of its Affiliates) is hereby authorized by Borrower at any
time that an Event of Default exists, without notice to Borrower or any other
Person (any such notice being hereby expressly waived) to set off and to
appropriate and to apply any and all deposits, general or special (including
Debt evidenced by certificates of deposit whether matured or unmatured (but not
27
including trust accounts)) and any other Debt at any time held or owing by
Lender or any of its Affiliates to or for the credit or the account of Borrower
against and on account of the Obligations of Borrower arising under the
Financing Documents to Lender or any of its Affiliates, including all Loans
Outstanding and all claims of any nature or description arising out of or in
connection with this Agreement, irrespective of whether or not (i) Lender shall
have made any demand hereunder, (ii) Lender shall have declared the principal of
and interest on the Loans and other amounts due hereunder to be due and payable
as permitted by this Agreement and even though such Obligations may be
contingent or unmatured or (iii) the Collateral for the Obligations is adequate.
11.5 Remedies Cumulative; No Waiver.
11.5.1. All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of Borrower contained in this
Agreement and the other Financing Documents, or in any document referred to
herein or contained in any agreement supplementary hereto or in any schedule or
in any Guaranty given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained. The
rights and remedies of Lender under this Agreement and the other Loan Documents
shall be cumulative and not exclusive of any rights or remedies that Lender
would otherwise have.
11.5.2. The failure or delay of Lender to require strict
performance by Borrower or Guarantor of any provision of any of the Financing
Documents or to exercise or enforce any rights, Liens, powers or remedies under
any of the Financing Documents or with respect to any Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies, but
all such requirements, Liens, rights, powers, and remedies shall continue in
full force and effect until all Loans and all other Obligations owing or to
become owing from Borrower to Lender shall have been fully satisfied. None of
the undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other Loan Documents and no
Event of Default by Borrower under this Agreement or any other Financing
Documents shall be deemed to have been suspended or waived by Lender, unless
such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrower.
11.5.3. If Lender shall accept performance by Borrower, in
whole or in part, of any obligation that Borrower is required by any of the
Financing Documents to perform only when a Default or Event of Default exists,
or if Lender shall exercise any right or remedy under any of the Financing
Documents that may not be exercised other than when a Default or Event of
Default exists, Lender's acceptance of such performance by Borrower or Lender's
exercise of any such right or remedy shall not operate to waive any such Event
of Default or to preclude the exercise by Lender of any other right or remedy,
unless otherwise expressly agreed in writing by Lender, as the case may be.
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SECTION 12. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
12.1. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns, except that Borrower shall not have the right to assign its rights or
delegate performance of any of its obligations under any of the Financing
Documents. Borrower hereby consents to Lender's participation, sale, assignment,
transfer or other disposition, at any time or times hereafter, of all of any
part of the Obligations, this Agreement and any of the other Financing
Documents, or of any portion hereof or thereof, including Lender's rights,
title, interests, remedies, powers, and duties hereunder or thereunder. In the
case of an assignment, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were
"Lender" hereunder, and Lender shall be relieved of all obligations hereunder
upon any such assignment. Borrower further agrees that Lender may disclose
credit information regarding Borrower to any potential participant or assignee.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Lender may, in the
ordinary course of its business and in accordance with Applicable Law, at any
time sell to one or more banks or other financial institutions (each a
"Participant") a participating interest in any of the Obligations owing to
Lender or any other interest of Lender under any of the Financing Documents. In
the event of any such sale by Lender of participating interests to a
Participant, Lender's obligations under the Loan Documents shall remain
unchanged, Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, Lender shall remain the holder of any
Note for all purposes under the Financing Documents, all amounts payable by
Borrower under this Agreement and any of the Notes shall be determined as if
Lender had not sold such participating interests, and Borrower shall continue to
deal solely and directly with Lender in connection with Lender's rights and
obligations under the Financing Documents. If Lender sells a participation to a
Person other than an Affiliate of Lender, then Lender shall give prompt written
notice thereof to Borrower.
12.2.2. Voting Rights. Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Financing Documents other than in the case of any
Participant, an amendment, modification or waiver with respect to any Loans in
which such Participant has an interest which forgives principal, interest or
fees or reduces the stated interest rate or the stated rates at which fees are
payable with respect to any such Loan, postpones the Commitment Termination
Date, or any date fixed for any regularly scheduled payment of interest or fees
on such Loan, or releases from liability Borrower or releases any substantial
portion of any of the Collateral.
12.2.3. Benefit of Set-Off. Borrower agrees that each
Participant shall be deemed to have the right of set-off provided in Section
11.4 hereof in respect of its participating interest in amounts owing under the
Financing Documents to the same extent and subject to the same requirements
under this Agreement as if the amount of its participating interest were owing
directly to it as a Lender under the Financing Documents, provided that Lender
shall retain the right of set-off provided in Section 11.4 hereof with respect
to the amount of participating interests sold to each Participant. Lender agrees
to share with each Participant, and each Participant by exercising the right of
set-off provided in Section 11.4 agrees to share with Lender, any amount
received pursuant to the exercise of its right of set-off.
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12.2.4. Notices. Lender shall be solely responsible for
notifying its Participants of any matters relating to the Financing Documents to
the extent that any such notice may be required.
SECTION 13. MISCELLANEOUS
13.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
designee, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
13.1.1. At such time or times as Lender or said designee, in
its sole discretion, may determine, endorse Borrower's name on any Payment Item
or proceeds of the Collateral which come into the possession of Lender or under
Lender's control.
13.1.2. At any time that an Event of Default exists: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of Lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any Chattel
Paper, Document, Instrument, invoice, freight xxxx, xxxx of lading or similar
document or agreement relating to any Accounts or Inventory of any Obligor and
any other Collateral; (ix) use Borrower's stationery and sign the name of
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts, Inventory
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement.
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13.2. General Indemnity. Borrower hereby agrees to indemnify and defend
the Lender Indemnitees and to hold the Lender Indemnitees harmless from and
against any Claim ever suffered or incurred by any of the Lender Indemnitees
arising out of or related to this Agreement or any of the other Financing
Documents, the performance by Lender of its duties or the exercise of any of its
rights or remedies hereunder, or the result of Borrower's failure to observe,
perform or discharge any of Borrower's duties hereunder. Borrower shall also
indemnify and defend the Lender Indemnitees against and save the Lender
Indemnitees harmless from all Claims of any Person arising out of, related to,
or with respect to any transactions entered into pursuant to this Agreement or
Lender's Lien upon the Collateral. Without limiting the generality of the
foregoing, these indemnities shall extend to any Claims asserted against any of
the Lender Indemnitees by any Person under any Environmental Laws or similar
laws by reason of Borrower's or any other Person's failure to comply with laws
applicable to solid or hazardous waste materials or other toxic substances.
Additionally, if any Taxes (excluding Taxes imposed upon or measured solely by
the net income of Lender, but including, any intangibles tax, stamp tax,
recording tax or franchise tax) shall be payable by Lender or any Obligor on
account of the execution or delivery of this Agreement, or the execution,
delivery, issuance or recording of any of the other Financing Documents, or the
creation or repayment of any of the Obligations hereunder, by reason of any
Applicable Law now or hereafter in effect, Borrower shall pay (or will promptly
reimburse Lender for the payment of) all such Taxes, including any interest and
penalties thereon, and will indemnify and hold Lender Indemnitees harmless from
and against liability in connection therewith. The foregoing indemnities shall
not apply to protect any of the Lender Indemnitees for the consequences of their
own gross negligence or willful misconduct.
13.3. Survival of All Indemnities. Notwithstanding anything to the
contrary in this Agreement or any of the other Financing Documents, the
obligations of Borrower and Lender with respect to each indemnity given by it in
this Agreement, whether given by Borrower to Lender Indemnitees, shall survive
the Full Payment of the Obligations and the termination of the Facility.
13.4. Indulgences Not Waivers. Lender's failure at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith.
13.5. Modification of Agreement. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
Lender.
13.6. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
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13.7. Cumulative Effect; Conflict of Terms. To the fullest extent
permitted by Applicable Law, the provisions of the Other Agreements and the
Security Documents are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in any of the other Financing Documents
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Financing Documents, the
provision contained in this Agreement shall govern and control.
13.8. Execution in Counterparts. This Agreement and any amendments
hereto may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which counterparts taken together
shall constitute but one and the same instrument.
13.9. Lender's Consent. Whenever Lender's consent is required to be
obtained under this Agreement or any of the other Financing Documents as a
condition to any action, inaction, condition or event, Lender shall be
authorized to give or withhold its consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral security
for the Obligations, the payment of money or any other matter.
13.10. Notices. All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, personal delivery against receipt or by telecopier or
other facsimile transmission and shall be deemed to have been validly served,
given or delivered when delivered against receipt or 3 Business Days after
deposit in the U.S. mail, certified mail postage prepaid, or, in the case of
facsimile transmission, when received (if on a Business Day and, if not received
on a Business Day, then on the next Business Day after receipt) at the office
where the noticed party's telecopier is located, in each case addressed to the
noticed party at the address shown for such party on the signature page hereof.
Notwithstanding the foregoing, no notice to or upon Lender pursuant to Sections
3.1 or 5.2.2 shall be effective until after actually received by the individual
to whose attention at Lender such notice is required to be sent. Any written
notice or demand that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice is actually received by
the noticed party.
13.11. Performance of Borrower's Obligations. If Borrower shall fail to
discharge any covenant, duty or obligation hereunder or under any of the other
Financing Documents, Lender may, in its sole discretion at any time or from time
to time, for Borrower's account and at Borrower's expense, pay any amount or do
any act required of Borrower hereunder or under any of the Financing Documents
or otherwise lawfully requested by Lender to enforce any of the Financing
Documents or Obligations, preserve, protect, insure or maintain any of the
Collateral, or preserve, defend, protect or maintain the validity or priority of
Lender's Liens in any of the Collateral, including the payment of any judgment
against Borrower, any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord claim, any other Lien upon or with respect to
any of the Collateral. All payments that Lender may make under this Section and
all out-of-pocket costs and expenses (including Extraordinary Expenses) that
Lender pays or incurs in connection with any action taken by it hereunder shall
be reimbursed to Lender by Borrower on demand with interest from the date such
payment is made or such costs or expenses are incurred to the date of payment
thereof at the Default Rate. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert, and
without waiver of, an Event of Default hereunder and to proceed thereafter as
provided herein or in any of the other Loan Documents.
32
13.12. Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
13.13. Entire Agreement; Appendix A and Exhibits. This Agreement and
the other Financing Documents, together with all other instruments, agreements
and certificates executed by the parties in connection therewith or with
reference thereto, embody the entire understanding and agreement between the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supersede all prior agreements, understandings and inducements, whether
express or implied, oral or written. Appendix A and each of the Exhibits
attached hereto are incorporated into this Agreement and by this reference made
a part hereof.
13.14. Interpretation. No provision of this Agreement or any of the
other Financing Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having, or being deemed to have, structured,
drafted or dictated such provision.
13.15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
13.16. Waivers by Borrower. To the fullest extent permitted by
Applicable Law, Borrower waives (i) the right to trial by jury (which Lender
hereby also waives) in any action, suit, proceeding or counterclaim of any kind
arising out of or related to any of the Financing Documents, the Obligations or
the Collateral; (ii) presentment, demand and protest and notice of presentment,
protest, default, non payment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Lender
on which Borrower may in any way be liable and hereby ratifies and confirms
whatever Lender may do in this regard; (iii) notice prior to taking possession
or control of the Collateral or any bond or security which might be required by
any court prior to allowing Lender to exercise any of Lender's remedies; (iv)
the benefit of all valuation, appraisement and exemption laws; and (v) notice of
acceptance hereof. Borrower acknowledges that the foregoing waivers are a
material inducement to Lender's entering into this Agreement and that Lender is
relying upon the foregoing waivers in its future dealings with Borrower.
Borrower warrants and represents that it has reviewed the foregoing waivers with
its legal counsel and has knowingly and voluntarily waived its jury trial rights
following consultation with legal counsel. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court in which
such litigation is brought.
[SIGNATURES ON FOLLOWING PAGE]
33
IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year specified at the beginning of this Agreement.
BORROWER:
HEALTHCARE QUALITY SOLUTIONS, INC.
By:
----------------------------
X.X. Xxxxxxx, President
000 Xxxxx Xxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
LENDER:
STANFORD VENTURE CAPITAL
HOLDINGS, INC.
By:
----------------------------
Xxxxx X. Xxxxx, President
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx
Attention: Xxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
34
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated July 6, 2004 (as at
any time amended, the "Agreement"), by and between HEALTHCARE QUALITY SOLUTIONS,
INC., a Florida corporation (collectively, the "Borrower"), and STANFORD VENTURE
CAPITAL HOLDINGS, INC., a Delaware corporation, (together with its successors
and assigns, the "Lender"), the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account - shall have the meaning ascribed to "account" in the
UCC and shall include a right to payment for goods sold or leased or
for services rendered that is not evidenced by an Instrument or Chattel
Paper, whether or not any such right to payment has been earned by
performance.
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, another Person; (ii)
which beneficially owns or holds 10% or more of any class of the Equity
Interests of another Person; or (iii) 10% or more of the Equity
Interests of which is beneficially owned or held by another Person or a
Subsidiary of another Person.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits thereto and this
Appendix A.
Applicable Law - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Financing Documents in
question, including all applicable common law and equitable principles;
all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; and
orders, judgments and decrees of all courts and arbitrators.
Availability - on any date, an amount equal to the difference
derived when the sum of the principal amount of Revolver Loans then
outstanding (including any amounts that Lender may have paid for the
account of Borrower pursuant to any of the Financing Documents and that
have not been reimbursed by Borrower) is subtracted from the Gross
Availability on such date; provided that in no event shall the
Availability be deemed to exceed the following amounts on the following
dates, in each case in addition to up to $400,000 as and when needed to
satisfy an up to $400,000 payment to the Internal Revenue Service
assumed in connection with the purchase of assets from the Assignee of
Provider Solutions corporation:
35
July 6, 2004 $300,000
July 31, 2004 $550,000
August 15, 2004 $850,000
October 15, 2004 $1,050,000
November 15, 2004 $1,200,000
Provided, further that the increase of the Availability on
August 15, 2004 and October 15, 2004 is subject to the timely filing by
the Guarantor of a Form 10-QSB for the quarter ended June 30, 2004 that
sets forth a consolidated EBITDA of ($50,000) or better; and provided
further the increase of the Availability on November 15, 2004 is
subject to the timely filing by the Guarantor of a Form 10-QSB for the
quarter ended September 30, 2004 that sets forth a consolidated EBITDA
of $50,000 or better. If the amount outstanding is equal to or greater
than the Gross Availability, Availability is 0.
Availability Reserve - on any date of determination thereof,
an amount equal to the sum of the following (without duplication): (i)
a reserve for general Inventory shrinkage that is determined by Lender
from time to time in its reasonable credit judgment based upon
Borrower's historical losses due to such shrinkage; (ii) any amount
that Borrower is obligated to pay pursuant to the provisions of any of
the Financing Documents that Lender elects to pay for the account of
Borrower in accordance with authority contained in any of the Financing
Documents; (iii) all amounts of rent or other charges that accrue after
the Effective Date and are past due and payable and owing at such time
by Borrower to any landlord of any premises where any of the Collateral
is located plus, commencing on the 30th day prior to the date on which
Borrower shall be obligated to assume or reject any lease of a premises
where any of the Collateral is located, the amount of any rent or other
charges that accrued prior to the Effective Date and that remain unpaid
under such lease; (iv) such additional reserves as Lender may, in its
sole credit judgment, determine to be appropriate from time to time to
protect Lender against any changes in the composition, amount, quality,
nature or value of any Collateral or the priority of Lender's Liens
upon the Collateral.
Bankruptcy Code - title 11 of the United States Code.
Board of Governors - the Board of Governors of the Federal
Reserve Board.
Borrowing - a borrowing consisting of Loans made on the same
day by Lender.
Business Day - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Florida or is a
day on which banking institutions located in such state are closed.
Capital Expenditures - expenditures made for the acquisition
of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year,
including the total principal portion of Capitalized Lease Obligations.
36
Capitalized Lease Obligation - any Debt represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
Cash Collateral - cash or Cash Equivalents, and any interest
earned thereon, that is deposited with Lender in accordance with the
Agreement as security for the Obligations to the extent provided in the
Agreement.
Cash Collateral Account - a demand deposit, money market or
other account established by Lender at such financial institution as
Lender may select in its discretion, which account shall be in Lender's
name and subject to Lender's Liens.
Cash Equivalents - (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed
by the full faith and credit of the United States government having
maturities of not more than 12 months from the date of acquisition;
(ii) domestic certificates of deposit and time deposits having
maturities of not more than 12 months from the date of acquisition,
bankers' acceptances having maturities of not more than 12 months from
the date of acquisition and overnight bank deposits, in each case
issued by any commercial bank organized under the laws of the United
States, any state thereof or the District of Columbia, which at the
time of acquisition are rated A-1 (or better) by S&P or P-1 (or better)
by Xxxxx'x, and (unless issued by Lender) not subject to offset rights
in favor of such bank arising from any banking relationship with such
bank; (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clauses (i) and
(ii) entered into with any financial institution meeting the
qualifications specified in clause (ii) above; and (iv) commercial
paper having at the time of investment therein or a contractual
commitment to invest therein a rating of A-1 (or better) by S&P or P-1
(or better) by Xxxxx'x, and having a maturity within 9 months after the
date of acquisition thereof.
CERCLA - the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. ss. 9601 et seq. and its implementing
regulations.
Chattel Paper - shall have the meaning ascribed to the term
"chattel paper" in the UCC.
Claims - any and all claims, demands, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
awards, remedial response costs, expenses or disbursements of any kind
or nature whatsoever (including reasonable attorneys', accountants',
consultants' or paralegals' fees and expenses), whether arising under
or in connection with the Financing Documents, any Applicable Law
(including any Environmental Laws) or otherwise, that may be suffered
or incurred by a Person prior to, on or after the Effective Date and
whether suffered or incurred in or as a result of any investigation,
litigation, arbitration or other judicial or non-judicial proceeding or
any appeals related thereto.
37
Closing Date - the date on which all of the conditions
precedent in Section 10.1 of the Agreement are satisfied and the
initial Loans are made under the Agreement.
Collateral - all of the Property and interests in Property of
Borrower that are described in Section 6 of the Agreement, and all
other Property and interests in Property that now or hereafter secure
the payment and performance of any of the Obligations, whether or not
such Property or interest in Property was in existence on or acquired
by Borrower after the Effective Date.
Commercial Tort Claim - shall have the meaning ascribed to
"commercial tort claim" in the UCC.
Commitment Termination Date - the date that is the soonest to
occur of: (i) the last day of the Term, (ii) the effective date of any
sale of all or a substantial part of the Collateral, or (iii) the date
on which Lender terminates the Facility pursuant to Section 5.2.1 of
the Agreement.
Compliance Certificate - a Compliance Certificate to be
provided by Borrower to Lender in accordance with, and in the form
annexed as Exhibit C to, the Agreement, and the supporting schedules to
be annexed thereto.
Contingent Obligation - with respect to any Person, any
obligation of such Person arising from any guaranty, indemnity, or
other assurance of payment or performance of any Debt, lease, dividend
or other obligation ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including (i) the direct or indirect guaranty endorsement (other than
for collection or deposit in the Ordinary Course of Business),
co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (ii) the obligation to
make take-or-pay or similar payments, if required, regardless of
non-performance by any other party or parties to an agreement, (iii)
any obligation of such Person, whether or not contingent, (A) to
purchase any such primary obligation or any Property constituting
direct or indirect security therefor, (B) to advance or supply funds
(1) for the purchase or payment of any such primary obligations or (2)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor,
(C) to purchase Property, Securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (D) otherwise to assure or hold harmless the holder of
such primary obligation against loss in respect thereof; provided,
however, that the term "Contingent Obligation" shall not include any
product warranties extended in the Ordinary Course of Business. The
amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation
with respect to which such Contingent Obligation is made (or, if less,
the maximum amount of such primary obligation for which such Person may
be liable pursuant to the terms of the instrument evidencing such
Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability with respect thereto (assuming such
Person is required to perform thereunder), as determined by such Person
in good faith.
38
Current Assets - at any date, the amount at which all of the
current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date, in accordance with GAAP,
except that amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom.
Debt - as applied to a Person means, without duplication: (i)
all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person on the date as of which Debt is to be
determined, including Capitalized Lease Obligations; (ii) all
obligations of other Persons which such Person has guaranteed; (iii)
all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person; and
(iv) in the case of Borrower (without duplication), the Obligations.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an
Event of Default.
Default Rate - on any date, a rate per annum that is equal to
15%.
Deposit Account - shall have the meaning ascribed to "deposit
account" in the UCC and shall include any demand, time, savings,
passbook, money market or other depository account, or a certificate of
deposit, maintained by Borrower with any bank, savings and loan
association, credit union or other depository institution.
Disbursements - the total of "advance requests" as shown on
the Budget.
Distribution - in respect of any entity, (i) any payment of
any dividends or other distributions on Equity Interests of the entity
(except distributions in such Equity Interests) and (ii) any purchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the entity or any Affiliate of the entity unless made
contemporaneously from the net proceeds of the sale of Equity
Interests.
Document - shall have the meaning ascribed to the term
"document" in the UCC.
Dollars and the sign $ - lawful money of the United States of
America.
39
Dominion Account - a special account of Lender established by
Borrower at a bank selected by Borrower, but acceptable to Lender in
its discretion, and over which Lender shall have sole and exclusive
access and control for withdrawal purposes.
EBITDA - shall mean consolidated earnings of the Guarantor
before interest, taxes, depreciation and amortization, all in
accordance with GAAP.
Effective Date - July 6, 2004.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance documents
promulgated by regulatory agencies, orders and consent decrees relating
to human health and safety or the protection or pollution of the
environment, including CERCLA.
Environmental Release - a release as defined in CERCLA or
under any applicable Environmental Laws.
Equipment - shall have the meaning ascribed to the term
"equipment" in the UCC.
Equity Interest - the interest of a shareholder in a
corporation, a partner (whether general or limited) in a partnership
(whether general, limited or limited liability), a member in a limited
liability company, or any other Person having any other form of equity
security.
ERISA - the Employee Retirement Income Security Act of 1974
and all rules and regulations from time to time promulgated thereunder.
Event of Default - as defined in Section 11 of the Agreement.
Extraordinary Expenses - all reasonable costs, expenses, fees
(including fees incurred to Lender Professionals) or advances that
Lender may suffer or incur, whether prior to or after the occurrence of
an Event of Default, on account of or in connection with (i) the audit,
inspection, repossession, storage, repair, appraisal, insuring,
completion of the manufacture of, preparing for sale, advertising for
sale, selling, collecting or otherwise preserving or realizing upon any
Collateral; (ii) the defense of Lender's Lien upon any Collateral or
the priority thereof or any adverse claim with respect to the Loans,
the Financing Documents or the Collateral asserted by any Obligor, any
receiver or trustee for any Obligor or any creditor or representative
of creditors of any Obligor; (iii) the settlement or satisfaction of
any Liens upon any Collateral (whether or not such Liens are Permitted
Liens); (iv) the collection or enforcement of any of the Obligations;
(v) the negotiation, documentation, and closing of any restructuring or
forbearance agreement with respect to the Financing Documents or
Obligations; (vi) amounts advanced by Lender pursuant to Section 7.1.3
of the Agreement; (vii) the enforcement of any of the provisions of any
of the Financing Documents; or (viii) any payment under indemnity or
other payment agreement provided by Lender to any financial institution
in connection with any Dominion Account or any lockbox arrangement.
Such costs, expenses and advances may include transfer fees, taxes,
storage fees, insurance costs, permit fees, utility reservation and
standby fees, legal fees, appraisal fees, brokers' fees and
commissions, auctioneers' fees and commissions, consultants' fees,
accountants' fees, environmental study fees, wages and salaries paid to
40
employees of Borrower or independent contractors in liquidating any
Collateral, travel expenses, all other fees and expenses payable or
reimbursable by Borrower or any other Obligor under any of the
Financing Documents, and all other fees and expenses associated with
the enforcement of rights or remedies under any of the Financing
Documents, but excluding compensation paid to employees (including
inside legal counsel who are employees) of Lender.
FEIN - with respect to any Person, the Federal Employer
Identification Number of such Person.
Facility - the $1,600,000.00 credit facility established by
Lender in favor of Borrower under Section 1 of the Agreement consisting
of the Revolver Commitment.
Financing Documents - the Agreement, the Other Agreements and
the Security Documents and any and all other agreements, instruments
and documents now or hereafter executed by Borrower in favor of Lender
with respect to any of the transactions contemplated by the Agreement.
Fiscal Year - the fiscal year of Borrower and its Subsidiaries
for accounting and tax purposes, which ends on the last Friday of each
year.
FLSA - the Fair Labor Standards Act of 1938.
Full Payment - with respect to any Debt (including the
Obligations), full, final and indefeasible payment of such Debt in cash
or immediately available funds and, in the case of any Contingent
Obligations, Lender's receipt of either cash or a direct pay letter of
credit naming Lender as beneficiary and in form and substance, and from
an issuing bank, acceptable to Lender, in each case in an amount not
less than 105% of the aggregate amount of all such contingent Debt.
GAAP - generally accepted accounting principles in the United
States of America in effect from time to time.
General Intangible - shall have the meaning ascribed to the
term "general intangible" in the UCC and shall include all interests in
Intellectual Property.
Governmental Approvals - all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with,
and reports to, all Governmental Authorities.
41
Governmental Authority - any federal, state, municipal,
national or other governmental department, commission, board, bureau,
court, agency or instrumentality or political subdivision thereof or
any entity or officer exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to any
government or any court, in each case whether associated with a state
of the United States, the District of Columbia or a foreign entity or
government.
Gross Availability - The amount set forth in the Budget as the
maximum amount to be drawn hereunder as of the end of the month
immediately prior to the date in question, up to the amount of the
Facility.
Guarantor - Health Systems Solutions, Inc., a Nevada corporation.
Indemnified Amount - the amount of any loss, cost, expenses or
damages suffered or incurred by Lender Indemnitees and against which
Lender and/or Borrower have agreed to indemnify such Lender Indemnitees
pursuant to the terms of the Agreement or any of the other Financing
Documents.
Insolvency Proceeding - any action, case or proceeding
commenced by or against a Person, or any agreement of such Person, for
(a) the entry of an order for relief under any chapter of the
Bankruptcy Code or other insolvency or debt adjustment law (whether
state, federal or foreign), (b) the appointment of a receiver, trustee,
liquidator or other custodian for such Person or any part of its
Property, (c) an assignment or trust mortgage for the benefit of
creditors of such Person, or (d) the liquidation, dissolution or
winding up of the affairs of such Person.
Instrument - shall have the meaning ascribed to the term
"instrument" in the UCC.
Intellectual Property - Property constituting under any
Applicable Law a patent, patent application, copyright, trademark,
service xxxx, tradename, mask work, trade secret or license or other
right to use any of the foregoing.
Intellectual Property Claim - the assertion by any Person of a
claim (whether asserted in writing, by action, suit or proceeding or
otherwise) that Borrower's ownership, use, marketing, sale or
distribution of any Inventory, Equipment, Intellectual Property or
other Property is violative of any ownership of or right to use any
Intellectual Property of such Person.
Inventory - shall have the meaning ascribed to "inventory" in
the UCC and shall include, in the case of Borrower, all goods intended
for sale or lease by Borrower, or for display or demonstration; all
work in process; all raw materials and other materials and supplies of
every nature and description used or which might be used in connection
with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or
consumed in Borrower's business; and all Documents evidencing and
General Intangibles relating to any of the foregoing, whether now owned
or hereafter acquired by Borrower.
42
Investment Property - shall have the meaning ascribed to
"investment property" in the UCC.
Lender Indemnities - Lender and all of its present and future
officers, directors and agents.
Lender Professionals - attorneys, accountants, appraisers,
business valuation experts, environmental engineers or consultants,
turnaround consultants and other professionals or experts retained by
Lender.
Letter-of-Credit Right - shall have the meaning ascribed to
the term "letter-of-credit right" in the UCC.
Lien - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on common law, statute or contract. The
term "Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For the
purpose of the Agreement, Borrower shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
Loan - a Revolver Loan.
Loan Account - the loan account established by Lender on its
books pursuant to Section 4.6 of the Agreement.
Material Adverse Effect - the effect of any event, condition,
act, omission or circumstance, which, alone or when taken together with
other events, conditions, acts, omissions or circumstances occurring or
existing concurrently therewith, (i) has a material adverse effect upon
the business, operations, Properties or condition (financial or
otherwise) of any Obligor; (ii) has or may be reasonably expected to
have any material adverse effect whatsoever upon the validity or
enforceability of the Agreement or any of the other Financing
Documents; (iii) has any material adverse effect upon the value of the
whole or any material part of the Collateral, the Liens of Lender with
respect to the Collateral or the priority of any such Liens; (iv)
materially impairs the ability of any Obligor to perform its
obligations under the Agreement or any of the other Financing
Documents, including repayment of any of the Obligations when due; or
(v) materially impairs the ability of Lender to enforce or collect the
Obligations or realize upon any of the Collateral in accordance with
the Financing Documents and Applicable Law.
43
Material Contract - any agreement between Borrower and one or
more other Persons, the termination of which could reasonably be
expected to have a Material Adverse Effect.
Maximum Rate - the maximum non-usurious rate of interest
permitted by Applicable Law that at any time, or from time to time, may
be contracted for, taken, reserved, charged or received on the Debt in
question or, to the extent that at any time Applicable Law may
thereafter permit a higher maximum non-usurious rate of interest, then
such higher rate. Notwithstanding any other provision hereof, the
Maximum Rate shall be calculated on a daily basis (computed on the
actual number of days elapsed over a year of 365 or 366 days, as the
case may be).
Money Borrowed - as applied to any Person, (i) Debt arising
from the lending of money by any other Person to such Person; (ii)
Debt, whether or not in any such case arising from the lending of money
by another Person to such Person, (A) which is represented by notes
payable or drafts accepted that evidence extensions of credit, (B)
which constitutes obligations evidenced by bonds, debentures, notes or
similar instruments, or (C) upon which interest charges are customarily
paid (other than accounts payable) or that was issued or assumed as
full or partial payment for Property; (iii) Debt that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and (v)
Debt of such Person under any guaranty of obligations that would
constitute Debt for Money Borrowed under clauses (i) through (iii)
hereof, if owed directly by such Person.
Xxxxx'x - Xxxxx'x Investors Services, Inc.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Net Proceeds - proceeds (including cash receivable (when
received) by way of deferred payment) received by Borrower from the
sale, lease, transfer or other disposition of any Property, including
insurance proceeds and awards of compensation received with respect to
the destruction or condemnation of all or part of such Property, net
of: (i) the reasonable and customary costs of such sale, lease,
transfer or other disposition; and (ii) amounts applied to repayment of
Debt (other than the Obligations) that is secured by a Permitted Lien
on the Property disposed of that is senior to Lender's Liens.
Notes - the Revolver Note and any other promissory note
hereafter executed by Borrower at Lender's request to evidence any of
the Obligations.
Notice of Borrowing - as defined in Section 3.1.1(i) of the
Agreement.
44
Obligations - in each case, whether now in existence or
hereafter arising, (i) the principal of, and interest and premium, if
any, on, the Loans; and (ii) all other Debts, covenants, duties and
obligations (including Contingent Obligations) now or at any time or
times hereafter owing by any Obligor to Lender under or pursuant to the
Agreement or any of the other DIP Financing Documents, whether
evidenced by any note or other writing, whether arising from any
extension of credit, opening of a letter of credit, acceptance, loan,
guaranty, indemnification or otherwise and whether direct or indirect,
absolute or contingent, due or to become due, primary or secondary, or
joint or several, including all interest, charges, expenses, fees or
other sums (including Extraordinary Expenses) chargeable to any or all
Obligors hereunder or under any of the other Financing Documents.
Obligor - Borrower and any other Person that is at any time
liable for the payment of the whole or any part of the Obligations or
that has granted in favor of Lender a Lien upon any of any of such
Person's assets to secure payment of any of the Obligations.
Ordinary Course of Business - with respect to any Person, the
ordinary course of such Person's business, as conducted by such Person
in accordance with past practices and undertaken by such Person in good
faith and not for the purpose of evading any covenant or restriction in
any Loan Document.
Organization Documents - with respect to any Person, its
charter, certificate or articles of incorporation, bylaws, articles of
organization, operating agreement, members agreement, partnership
agreement, voting trust, or similar agreement or instrument governing
the formation or operation of such Person.
OSHA - the Occupational Safety and Hazard Act of 1970.
Other Agreements - the Notes and any and all agreements,
instruments and documents (other than the Agreement and the Security
Documents), heretofore, now or hereafter executed by Borrower, any
Obligor or any other Person and delivered to Lender in respect of the
transactions contemplated by the Agreement.
Participant - as defined in Section 12.2.1 of the Agreement.
Payment Account - an account maintained by Lender (currently
at Bank) to which all monies from time to time deposited to a Dominion
Account shall be transferred and all other payments shall be sent in
immediately available federal funds.
Payment Intangible - shall have the meaning ascribed to the
term "payment intangible" in the UCC.
Payment Items - all checks, drafts, or other items of payment
payable to Borrower, including proceeds of any of the Collateral.
Pending Revolver Loans - at any date, the aggregate principal
amount of all Revolver Loans which have been requested in any Notice of
Borrowing received by Lender but which have not theretofore been
advanced by Lender.
45
Permitted Contingent Obligations - Contingent Obligations
arising from endorsements for collection or deposit in the Ordinary
Course of Business; Contingent Obligations arising from entered into in
the Ordinary Course of Business pursuant to the Agreement or with
Lender's prior written consent; Contingent Obligations of Borrower and
its Subsidiaries existing as of the Closing Date, including extensions
and renewals thereof that do not increase the amount of such Contingent
Obligations as of the date of such extension or renewal; Contingent
Obligations incurred in the Ordinary Course of Business with respect to
surety bonds, appeal bonds, performance bonds and other similar
obligations; and other Contingent Obligations not to exceed $25,000 in
the aggregate at any time.
Permitted Liens - any Lien of a kind specified in Section
9.2.3 of the Agreement.
Permitted Purchase Money Debt - Purchase Money Debt of
Borrower and its Subsidiaries which is incurred after the date of the
Agreement and which is secured by no Lien or only by a Purchase Money
Lien, provided that the aggregate amount of Purchase Money Debt
outstanding at any time does not exceed $25,000 and the incurrence of
such Purchase Money Debt does not violate any limitation in the
Financing Documents regarding Capital Expenditures. For the purposes of
this definition, the principal amount of any Purchase Money Debt
consisting of capitalized leases shall be computed as a Capitalized
Lease Obligation.
Person - an individual, partnership, corporation, limited
liability company, limited liability partnership, joint stock company,
land trust, business trust, or unincorporated organization, or a
Governmental Authority.
Plan - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of
ERISA.
Properly Contested - in the case of any Debt of an Obligor
(including any Taxes) that is not paid as and when due or payable by
reason of such Obligor's bona fide dispute concerning its liability to
pay same or concerning the amount thereof, (i) such Debt is being
properly contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; (ii) such Obligor has established
appropriate reserves as shall be required in conformity with GAAP;
(iii) the non-payment of such Debt will not have a Material Adverse
Effect and will not result in a forfeiture of any assets of such
Obligor; (iv) no Lien is imposed upon any of such Obligor's assets with
respect to such Debt unless such Lien is at all times junior and
subordinate in priority to the Liens in favor of Lender (except only
with respect to property taxes that have priority as a matter of
applicable state law) and enforcement of such Lien is stayed during the
period prior to the final resolution or disposition of such dispute;
(v) if the Debt results from, or is determined by the entry, rendition
or issuance against an Obligor or any of its assets of a judgment,
writ, order or decree, enforcement of such judgment, writ, order or
decree is stayed pending a timely appeal or other judicial review; and
(vi) if such contest is abandoned, settled or determined adversely (in
whole or in part) to such Obligor, such Obligor forthwith pays such
Debt and all penalties, interest and other amounts due in connection
therewith.
46
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Purchase Money Debt - means and includes (i) Debt (other than
the Obligations) for the payment of all or any part of the purchase
price of any fixed assets, (ii) any Debt (other than the Obligations)
incurred at the time of or within 10 days prior to or after the
acquisition of any fixed assets for the purpose of financing all or any
part of the purchase price thereof, and (iii) any renewals, extensions
or refinancings thereof, but not any increases in the principal amounts
thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Debt, but only if such Lien shall at all times be
confined solely to the fixed assets acquired through the incurrence of
the Purchase Money Debt secured by such Lien and such Lien constitutes
a purchase money security interest under the UCC.
Receipts - the total "collections" as shown on the Budget.
Rentals - rent owing by Borrower in respect of a lease of
Property that is owned by the lessor.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
Restricted Investment - any acquisition of Property by
Borrower or any of its Subsidiaries in exchange for cash or other
Property, whether in the form of an acquisition of Equity Interests or
indebtedness or obligations, or the purchase or acquisition by Borrower
or any of its Subsidiaries of any other Property, or a loan, advance,
capital contribution or subscription, except acquisitions of the
following: (a) fixed assets to be used in the business of Borrower or
any of its Subsidiaries so long as the acquisition costs thereof
constitute Capital Expenditures permitted hereunder; (b) goods held for
sale or lease or to be used in the manufacture of goods or the
provision of services by Borrower or any of its Subsidiaries in the
ordinary course of business; (c) Current Assets arising from the sale
or lease of goods or the rendition of services in the ordinary course
of business of Borrower or any of its Subsidiaries; (d) investments in
Subsidiaries of Borrower to the extent existing on the Closing Date;
and (e) Cash Equivalents.
47
Restrictive Agreement - an agreement (other than any of the
Financing Documents) that, if and for so long as an Obligor or any
Subsidiary of such Obligor is a party thereto, would prohibit,
condition or restrict such Obligor's or Subsidiary's right to incur or
repay Debt for Money Borrowed (including any of the Obligations); grant
Liens upon any of such Obligor's or Subsidiary's assets (including
Liens granted in favor of Lender pursuant to the Financing Documents);
declare or make Distributions; amend, modify, extend or renew any
agreement evidencing Debt for Money Borrowed (including any of the
Financing Documents); or repay any Debt owed to any Obligor.
Revenue - the total of "sales" as shown on the Budget.
Revolver Commitment - the obligation of Lender to make
Revolver Loans pursuant to the terms and conditions of the Agreement,
which shall not exceed on any date $1,600,000.00.
Revolver Loan - a Loan made by Lender as provided in Section
1.1 of the Agreement.
Revolver Note - a Revolver Note to be executed by Borrower in
favor of Lender in the form of Exhibit A attached hereto, which shall
be in the face amount of the Facility and which shall evidence all
Revolver Loans made by Lender to Borrower pursuant to the Agreement.
S&P - Standard & Poor's Ratings Group, a division of
XxXxxx-Xxxx, Inc.
Schedule of Accounts - as defined in Section 7.2.1 of the
Agreement.
SEC - the Securities Exchange Commission.
Security - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933.
Security Documents - any and all other instruments and
agreements now or at any time hereafter securing the whole or any part
of the Obligations.
Senior Officer - the chairman of the board of directors, the
president or the chief financial officer of, or in-house legal counsel
to, such Person.
Solvent - as to any Person, such Person (i) owns Property
whose fair saleable value is greater than the amount required to pay
all of such Person's Debts (including Contingent Obligations), (ii) is
able to pay all of its Debts as such Debts mature, (iii) has capital
sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage; and (iv) is not
"insolvent" within the meaning of Section 101(32) of the Bankruptcy
Code.
48
Subsidiary - any Person a majority of the Equity Interests of
which is at the time owned, directly or indirectly, by another Person
or by one or more other Subsidiaries or by such other Person and one or
more other Subsidiaries.
Supporting Obligation - shall have the meaning ascribed to the
term "supporting obligation" in the UCC.
Taxes - any present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other charges of
whatever nature, including income, receipts, excise, property, sales,
use, transfer, license, payroll, withholding, social security and
franchise taxes now or hereafter imposed or levied by the United
States, or any state, local or foreign government or by any department,
agency or other political subdivision or taxing authority thereof or
therein and all interest, penalties, additions to tax and similar
liabilities with respect thereto, but excluding, in the case of Lender,
taxes imposed on or measured by the net income or overall gross
receipts of Lender.
Term - a period commencing on the Effective Date and ending 36
months later.
UCC - the Uniform Commercial Code (or any successor statute)
as adopted and in force in the State of Florida from time to time or,
when the laws of any other state govern the method or manner of the
creation or perfection of any security interest in any of the
Collateral, the Uniform Commercial Code (or any successor statute) of
such state.
Value - with reference to the value of Inventory, value
determined on the basis of the lower of cost or market of such
Inventory, with the cost thereof calculated on a first-in, first-out
basis.
Accounting Terms. Unless otherwise specified herein, all terms
of an accounting character used in the Agreement shall be interpreted, all
accounting determinations under the Agreement shall be made, and all financial
statements required to be delivered under the Agreement shall be prepared in
accordance with GAAP, applied on a basis consistent with the most recent audited
consolidated financial statement of Borrower and its Subsidiaries heretofore
delivered to Lender and using the same method for inventory valuation as used in
such audited financial statements, except for any change in which Borrower's
independent public accountants concur or as required by GAAP unless (i) Borrower
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) Lender shall so object in writing
within 30 days after the delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made. In the event of any change in GAAP that
occurs after the date of the Agreement and that is material to Borrower, Lender
shall have the right to require either that conforming adjustments be made to
any financial covenants set forth in the Agreement, or the components thereof,
that are affected by such change or that Borrower reports its financial
condition based on GAAP as in effect immediately prior to the occurrence of such
change.
49
Other Terms. All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the UCC to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein," "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. In the computation of periods of time
from a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes (including the UCC) and related regulations shall include
any amendments of same after the date hereof and any successor statutes and
regulations; to any of the Financing Documents shall include any and all
amendments or modifications thereto and any and all restatements, extensions or
renewals thereof; to any Person shall mean and include the successors and
permitted assigns of such Person; to "including" and "include" shall be
understood to mean "including, without limitation" and "include, without
limitation;" to the time of day shall mean the time of day on the day in
question in Miami, Florida, unless otherwise expressly provided in the
Agreement; and to any Property of Borrower shall mean and include all Property
of the Estate. A Default or an Event of Default shall be deemed to exist at all
times during the period commencing on the date that such Default or Event of
Default occurs to the date on which such Default or Event of Default is waived
in writing pursuant to this Agreement or, in the case of a Default, is cured
within any period of cure expressly provided in this Agreement; and an Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by Lender. Whenever the phrase "to the best of Borrower's
knowledge" or words of similar import relating to the knowledge or the awareness
of Borrower are used herein, such phrase shall mean and refer to (i) the actual
knowledge of a Senior Officer of Borrower or (ii) the knowledge that a Senior
Officer would have obtained if they had engaged in good faith and the diligent
performance of their duties, including the making of such reasonable specific
inquiries as may be necessary of the officers, employees or agents of Borrower
and a good faith attempt to ascertain the existence or accuracy of the matter to
which such phrase relates.
IN WITNESS WHEREOF, this Appendix has been duly executed on July 6,
2004.
BORROWER:
HEALTHCARE QUALITY SOLUTIONS, INC.
By:
------------------------
X.X. Xxxxxxx, President
50
LENDER:
STANFORD VENTURE CAPITAL
HOLDINGS, INC.
By:
-------------------------
Xxxxx X. Xxxxx, President
51
EXHIBIT A
FORM OF REVOLVER NOTE
U.S. $1,600,000.00
July 6, 2004
FOR VALUE RECEIVED, the undersigned, HEALTHCARE QUALITY SOLUTIONS, INC.
a Florida corporation (the "Borrower"), promises to pay to the order of STANFORD
VENTURE CAPITAL HOLDINGS, INC. (herein, together with any subsequent holder
hereof, called the "Lender") the principal sum of ONE MILLION SIX HUNDRED
THOUSAND AND 00/100 DOLLARS ($1,600,000.00) or such lesser sum as may be the
outstanding principal amount of all Revolver Loans pursuant to the terms of the
Loan Agreement referred to below on the date on which such outstanding principal
amounts become due and payable pursuant to Section 4.2 of the Loan Agreement (as
defined below), in strict accordance with the terms thereof. Borrower, each
jointly and severally, likewise unconditionally promises to pay to Lender
interest from and after the date hereof on the outstanding principal amount of
Revolver Loans at the interest rate, payable at such times, and computed in such
manner as is specified in Section 2.1 of the Loan Agreement, in strict
accordance with the terms thereof.
This Revolver Note ("Note") is issued pursuant to, and is the "Revolver
Note" referred to in, the Loan and Security Agreement dated July 6, 2004 (as the
same may be amended from time to time, the "Loan Agreement"), between Borrower
and Lender, and Lender is and shall be entitled to all benefits thereof and of
all Financing Documents executed and delivered in connection therewith. The
provisions of the Loan Agreement are incorporated herein by this reference. All
capitalized terms used herein, unless otherwise defined herein, shall have the
meanings ascribed to such terms in the Loan Agreement.
The repayment of the principal balance of this Note is subject to the
provisions of Section 4.2 of the Loan Agreement. The entire unpaid principal
balance and all accrued interest on this Note shall be due and payable on the
Commitment Termination Date.
All payments of principal and interest shall be made in Dollars in
immediately available funds as specified in the Loan Agreement.
Upon or after the occurrence of an Event of Default and for so long as
such Event of Default exists, the principal balance and all accrued interest of
this Note may be declared due and payable in the manner and with the effect
provided in the Loan Agreement, and the unpaid principal balance hereof shall
bear interest at the Default Rate as and when provided in Section 2.1.2 of the
Loan Agreement. Borrower agrees to pay, and save Lender harmless against, any
liability for the payment of, all costs and expenses, including, but not limited
to, reasonable attorneys' fees, arising in connection with the enforcement by
Lender of any of its rights under this Note, the Loan Agreement or any of the
other Financing Documents.
All principal amounts of Revolver Loans made by Lender to Borrower
pursuant to the Loan Agreement, and all accrued and unpaid interest thereon,
shall be deemed outstanding under this Note and shall continue to be owing by
Borrower in accordance with the terms of this Note and the Loan Agreement.
In no contingency or event whatsoever, whether by reason of advancement
of the proceeds hereof or otherwise, shall the amount paid or agreed to be paid
to Lender for the use, forbearance or detention of money advanced hereunder
exceed the highest lawful rate permissible under any law which a court of
competent jurisdiction may deem applicable hereto; and, in the event of any such
payment inadvertently paid by Borrower or inadvertently received by Lender, such
excess sum shall be, at Borrower's option, returned to Borrower forthwith or
credited as a payment of principal, but shall not be applied to the payment of
interest. It is the intent hereof that Borrower not pay or contract to pay, and
that Lender not receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by Borrower
under Applicable Law.
Time is of the essence of this Note. To the fullest extent permitted by
Applicable Law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
Wherever possible each provision of this Note shall be interpreted in
such a manner as to be effective and valid under Applicable Law, but if any
provision of this Note shall be prohibited or invalid under Applicable Law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by Lender
of any right or remedy preclude any other right or remedy. Lender, at its
option, may enforce its rights against any Collateral securing this Note without
enforcing its rights against Borrower, any guarantor of the indebtedness
evidenced hereby or any other property or indebtedness due or to become due to
Borrower. Borrower agrees that, without releasing or impairing Borrower's
liability hereunder, Lender may at any time release, surrender, substitute or
exchange any Collateral securing this Note and may at any time release any party
primarily or secondarily liable for the indebtedness evidenced by this Note.
The rights and obligations of Lender and Borrower hereunder shall be
construed in accordance with and governed by the laws (without giving effect to
the conflict of law principles thereof) of the State of Florida. This Note is
intended to take effect as an instrument under seal under Florida law.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered by its duly authorized officer on the date first above written.
HEALTHCARE QUALITY SOLUTIONS INC.
By:
------------------------
X.X. Xxxxxxx, President
EXHIBIT B
Form of Notice of Borrowing
Date ______________, 20___
Stanford Venture Capital Holdings, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx
Re: Loan and Security Agreement dated April ____, 2004, by and between
healthcare Quality Solutions Inc. and Stanford Venture Capital
Holdings, Inc. (as at any time amended, the "Loan Agreement")
Ladies and Gentlemen:
This Notice of Borrowing is delivered to you pursuant to Section
3.1.1 of the Loan Agreement. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings attributable thereto in the Loan
Agreement. Borrower hereby requests a Revolver Loan in the aggregate principal
amount of $______________ to be made on _____________, 20___.
Borrower hereby ratifies and reaffirms all of its liabilities and
obligations under the Financing Documents and hereby certifies that no Default
or Event of Default exists on the date hereof. In addition, Borrower confirms
that it is in compliance with the Availability requirements set forth in the
Loan Agreement.
Borrower has caused this Notice of Borrowing to be executed and
delivered by its duly authorized representative, this ______ day of
_____________, 20___.
BORROWER:
HEALTHCARE QUALITY SOLUTIONS INC.
By:
------------------------------
X.X. Xxxxxxx, President
EXHIBIT C
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
__________________, 20__
Stanford Venture Capital Holdings, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx
The undersigned, the chief financial officer of Healthcare
Quality Solutions Inc., a Florida corporation ("Borrower"), gives this
certificate to Stanford Venture Capital Holdings, Inc. ("Lender") in accordance
with the requirements of Section 9.1.5 of that certain Loan and Security
Agreement dated July 6, 2004, between Borrower and Lender ("Loan Agreement").
Capitalized terms used in this Certificate, unless otherwise defined herein,
shall have the meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the balance sheets and
statements of income of Borrower and its
Subsidiaries for the [Fiscal Year] [quarterly period] ending __________________,
20__, copies of which are attached hereto, I hereby certify that:
(a) Consolidated EBITDA of the Guarantor for the fiscal quarter ended
__________________ as set forth in the Guarantor's Form 10-QSB for such period
duly and timely filed with the Securities & Exchange Commission was
$----------------.
2. No Default exists on the date hereof, other than:
_________________________________________ [if none, so state]; and
3. No Event of Default exists on the date hereof, other
than _____________________________________________ [if none, so state].
4. As of the date hereof, Borrower is current in its
payment of all accrued rent and other charges to
Persons who own or lease any premises where any of the Collateral is located,
and there are no pending disputes or claims regarding Borrower's failure to pay
or delay in payment of any such rent or other charges.
Very truly yours,
---------------------------
Chief Financial Officer
