EXHIBIT 10.8
LOAN AGREEMENT
THIS LOAN AGREEMENT ("AGREEMENT"), dated April 1, 2003, is made and
entered into on the terms and conditions hereinafter set forth, by and between
PETRA MEZZANINE FUND, L.P., a Delaware limited partnership ("LENDER"), and
FIND/SVP, INC., a New York corporation ("BORROWER").
RECITALS:
1. Borrower has requested that Lender make available to Borrower a term
loan in the original principal amount of Three Million and No/100ths Dollars
($3,000,000.00) (the "LOAN") on the terms and conditions hereinafter set forth,
and for the purpose(s) hereinafter set forth.
2. Lender, in reliance upon the representations and inducements of
Borrower set forth herein and in the other Loan Documents, has agreed to make
the Loan upon the terms and conditions hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan and the mutual covenants and agreements hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of all of
which are hereby acknowledged, Lender and Borrower hereby agree as follows:
ARTICLE 1
DEFINITIONS, ACCOUNTING TERMS
AND PRINCIPLES OF CONSTRUCTION
1.1 DEFINED TERMS. In addition to terms defined elsewhere herein, the
following terms, as used in this Agreement, shall have the respective meanings
set forth below (terms defined in the singular to have the same meaning when
used in the plural, and vice versa, unless otherwise expressly indicated):
"ACQUISITION AGREEMENT" means that certain Stock Purchase Agreement by and
among Xxx X. Xxxxxxxxx, Xxxxxx La Terra, Guideline and Borrower or one of its
wholly-owned subsidiaries, dated as of April 1, 2003.
"ASSIGNMENT OF LIFE INSURANCE" shall mean the Assignment of Life Insurance
Policy as Collateral substantially in the form of EXHIBIT A, executed by
Borrower in favor of Lender, covering a life insurance policy on the life of
Xxxxx Xxxxx, in an amount not less than $3,000,000.00.
"CAPITALIZED LEASE" shall mean, as to any Person, any lease of property by
such Person as lessee that, in accordance with GAAP, either would be required to
be classified and accounted for as a capital lease on a consolidated balance
sheet of such Person or otherwise be disclosed as such in a note to such balance
sheet.
"CAPITALIZED LEASE OBLIGATIONS" shall mean, as to any Person as of any
date, the amount of the obligation of the lessee under a Capitalized Lease that,
in accordance with GAAP, would appear on a consolidated balance sheet of such
Person in respect of such Capitalized Lease or otherwise be disclosed as such in
a note to such balance sheet.
"CASH INTEREST EXPENSE" shall mean, with respect to any fiscal period of
Borrower, the portion of Interest Expense for such period that was paid in cash.
"CHANGE IN CONTROL" shall mean an event or series of events shall occur by
which:
(a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), but excluding Xxxxxx Xxxxxxxx and/or Xxxxx Xxxxx shall become the
"beneficial owner" (within the meaning of Rule 13d-3 and/or Rule 13d-5
under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all shares that such Person has the right to
acquire without condition, other than the passage of time, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of twenty-five percent (25%) or more of the
combined voting power of all securities of the Borrower entitled to vote
in the election of directors, other than securities having such power only
by reason of the happening of a contingency (other than the passage of
time), or
(b) individuals who at the beginning of any period of two (2) consecutive
calendar years constituted the Board of Directors of the Borrower
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the Borrower's shareholders was
approved by a vote of at least two-thirds (2/3) of the members of such
Board of Directors then still in office who either were members of such
Board of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) shall cease for any
reason to constitute a majority of the members of the Board of Directors
of the Borrower then in office.
"CLOSING DATE" shall have the date on which the conditions set forth in
ARTICLE 6 have been satisfied and the proceeds of the Loan have been advanced to
Borrower by Lender.
-2-
"CLOSING FEE" shall have the meaning assigned to such term in SECTION 2.2.
"COLLATERAL" shall mean all property and interests in property, presently
owned or hereafter acquired or presently existing or hereafter created by
Borrower, including any and all proceeds thereof, in which a security interest
has been granted in favor of Lender, whether under this Agreement, the Security
Documents or any other Loan Document.
"COMMON STOCK" shall have the meaning assigned to such term in SECTION
3.2.
"COMMONLY CONTROLLED ENTITY" shall mean a Person that is under common
control with Borrower within the meaning of subsection 414(b), (c), (m), (n) or
(o) of the Internal Revenue Code.
"CONSIDERATION SHARES PUT" shall have the meaning assigned to such term in
Section 2.6 of the Acquisition Agreement.
"CONTINGENT OBLIGATIONS" shall mean, for any Person, any contingent
obligation calculated in accordance with GAAP, and in any event shall include
(without duplication) all indebtedness, obligations or other liabilities of such
Person guaranteeing or in effect guaranteeing the payment or performance of any
indebtedness, obligation or other liability, regardless of whether contingent
(collectively, the "PRIMARY OBLIGATIONS"), of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including any
indebtedness, obligation or other liability of such Person, (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 obligation 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 owner of such primary obligation
against loss with respect thereto.
"DEFERRED CONSIDERATION AMOUNTS" shall mean the One Year Deferred
Consideration Amount and Two Year Deferred Consideration Amount that may be
payable to the shareholders of Guideline pursuant to Sections 2.3 and 2.4,
respectively, of the Acquisition Agreement.
"DEFAULT" shall mean any of the events specified in SECTION 7.1,
regardless of whether any requirement for the giving of notice (and if
applicable, an opportunity to cure), the lapse of time or both has been
satisfied.
"EBITDA" shall mean, with respect to any fiscal period of Borrower, Net
Income for such period, PLUS, without duplication, and only to the extent
reflected as an expense in the statement of such Net Income for such period, the
SUM of (a) income tax expense (including, without limitation, the expenses of
any franchise or excise taxes imposed in lieu of income taxes), PLUS (b)
Interest Expense, PLUS (c) depreciation and amortization expense, PLUS (d)
-3-
amortization of intangibles (including, without limitation, goodwill) and
organization costs, PLUS (e) any other non-cash charges or expenses or non-cash
losses (including non-cash losses on sales of assets outside of the ordinary
course of business, and also including non-cash expenses relating to or arising
out of the issuance of common stock purchase warrants), PLUS (f) any
extraordinary, unusual or non-recurring losses (including losses on the sales of
assets outside the ordinary course of business), MINUS, without duplication, and
only to the extent included as an income item in the statement of such Net
Income for such period, the SUM of (i) any extraordinary, unusual or
non-recurring income or gains (including gains on the sales of assets outside of
the ordinary course of business), PLUS (ii) any other non-cash income, all as
determined on a consolidated basis and in accordance with GAAP.
"ENVIRONMENTAL LAWS" shall mean all applicable federal, state, regional,
county or local laws, statutes, rules, regulations or ordinances governing the
Borrower, its Subsidiaries and their real property, now or hereafter in effect,
relating to the generation, recycling, use, reuse, sale, storage, handling,
transport, treatment or disposal of Hazardous Materials, including the
Comprehensive Environmental Response Compensation Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
ss.9601 ET SEQ., the Resource Conservation and Recovery Act of 1976, as amended
by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901 ET SEQ.,
the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. ss.1801, ET SEQ., the Clean Air Act, 42
U.S.C. ss.7401 ET SEQ., the Clean Water Act of 1977, 33 U.S.C. ss.1251 ET SEQ.,
and any rules, regulations and guidance documents promulgated or published
thereunder, and any state, regional, county or local statute, law, rule,
regulation or ordinance now or hereafter in effect that relates to public
health, safety or the discharge, emission or disposal of Hazardous Materials in
or to air, water, land or groundwater, to the withdrawal or use of groundwater,
to the use, handling or disposal of asbestos, polychlorinated biphenyls,
petroleum, petroleum derivatives or by-products, other hydrocarbons or urea
formaldehyde, to the treatment, storage, disposal or management of Hazardous
Materials, to exposure to Hazardous Materials or to the transportation, storage,
disposal, management or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration, notice or demand issued
thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which, together with Borrower, is treated as a single employer
under Section 414(b), (c), (m), (n) or (o) of the Internal Revenue Code.
"EVENT OF DEFAULT" shall mean any of the events specified in SECTION 7.1,
PROVIDED that any requirement for the giving of notice (and if applicable, an
opportunity to cure), the lapse of time or both has been satisfied.
"FINANCING STATEMENT" shall mean any Uniform Commercial Code financing
statement authorized pursuant to the provisions of the Security Agreement or any
other Loan Document.
-4-
"FISCAL QUARTER" shall mean each of the accounting periods of
approximately three (3) months ending on March 31, June 30, September 30 and
December 31, respectively, of each year.
"FISCAL YEAR" shall mean the twelve (12) month period ending on December
31 of each year.
"FIXED CHARGE COVERAGE RATIO" shall mean, for Borrower and its
Subsidiaries on a consolidated basis, calculated as of June 30, 2003, for the
then-ending Fiscal Quarter, as of September 30, 2003, for the then-ending two
(2) consecutive Fiscal Quarters, as of December 31, 2003, for the then-ending
three (3) consecutive Fiscal Quarters and thereafter as of the end of any period
of four (4) consecutive Fiscal Quarters of Borrower, the ratio of EBITDA for
such period to Fixed Charges for such period.
"FIXED CHARGES" means, for any period, the sum of (a) Cash Interest
Expense for such period, plus (b) regularly scheduled payments of principal paid
or payable in respect of Funded Indebtedness during such period, plus (c) any
Deferred Consideration Amounts plus (d) any payment made to the shareholders of
Guideline in connection with the Consideration Shares Put (as defined in Section
2.6 of the Acquisition Agreement).
"FUNDED INDEBTEDNESS" shall mean, for Borrower and its Subsidiaries on a
consolidated basis, all Indebtedness that by its terms matures more than one (1)
year from the date of incurrence thereof or that is renewable or extendable at
the option of the obligor to a date beyond one year from such date, including
any and all current maturities of such Indebtedness.
"FUNDED INDEBTEDNESS TO EBITDA RATIO" shall mean, for Borrower and its
Subsidiaries on a consolidated basis, calculated as of June 30, 2003, for the
then-ending Fiscal Quarter, as of September 30, 2003, for the then-ending two
(2) consecutive Fiscal Quarters, as of December 31, 2003, for the then-ending
three (3) consecutive Fiscal Quarters and thereafter as of the end of any period
of four (4) consecutive Fiscal Quarters of Borrower, the ratio of Funded
Indebtedness as of the last day of such period to EBITDA for such period (with
EBITDA calculated on an annualized basis for the covenant calculations made as
of June 30, 2003, September 30, 2003 and December 31, 2003).
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation, province, state or other
political subdivision thereof and any government or any natural person or entity
exercising executive, legislative, regulatory or administrative functions of or
pertaining to government.
"GUARANTOR SECURITY AGREEMENT" means that certain Security Agreement of
even date herewith executed by Guarantors in favor of Lender.
-5-
"GUARANTORS" means, collectively, Guideline, Tabline Data Services, Inc.,
Guideline/Chicago, Inc., Advanced Analytics, Inc. and Guideline Consulting Corp.
"GUARANTY" means that certain Guaranty Agreement of even date herewith
executed by Guarantors in favor of Lender.
"GUIDELINE" means Guideline Research Corporation, a New York corporation.
"HAZARDOUS MATERIAL" shall mean any material, substance, pollutant or
waste that is defined or designated as a hazardous material, hazardous
substance, hazardous waste, pollutant, contaminant or toxic substance under any
Environmental Law or otherwise is regulated under any Environmental Law,
including asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives
or by-products, other hydrocarbons, urea formaldehyde and medical and infectious
wastes.
"INDEBTEDNESS" shall mean, as to any Person, all items that in accordance
with GAAP would be shown on the balance sheet of such Person as a liability and
in any event shall include (without duplication) (a) indebtedness for borrowed
money or for notes, debentures or other debt securities, (b) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money, (c) reimbursement obligations in respect of
letters of credit issued for the account of such Person (including any such
obligations in respect of any drafts drawn thereunder), (d) liabilities for all
or any part of the deferred purchase price of property or services, including
any such liabilities in the form of deferred compensation payable to the sellers
thereof, (e) liabilities secured by any Lien on any property or asset owned or
held by such Person regardless of whether the indebtedness secured thereby shall
have been assumed by or is a primary liability of such Person, (f) Capitalized
Lease Obligations, and (g) Contingent Obligations; provided, however,
Indebtedness shall not include current liabilities incurred in the ordinary
course of business and not represented by any note, bond, debenture or other
instrument, and which do not remain unpaid more than thirty (30) days after the
date due or more than ninety (90) days after the date of the corresponding
invoice, whichever is longer, or if unpaid beyond that time, which are being
contested in good faith and by appropriate actions and for which adequate
reserves in accordance with GAAP have been established on the books of the
primary obligor with respect thereto.
"INTEREST EXPENSE" shall mean, with respect to any fiscal period of
Borrower, interest expense of Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, whether paid or accrued, including,
without duplication, amortization or write-off of original issue discount on any
Indebtedness and all deferred financing fees, costs and expenses associated with
the incurrence of such Indebtedness (to the extent customarily included in
interest expense), the interest portion of any deferred payment obligation and
the interest component of any Capitalized Lease Obligation.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986.
-6-
"INVESTMENT" shall mean the making of any loan, advance, extension of
credit or capital contribution to, or the acquisition of any stock, bonds,
notes, debentures or other obligations or securities of, or the acquisition of
any other interest in or the making of any other investment in, any Person.
"KNOWLEDGE", "KNOWN TO", or other similar terms, when used in this
Agreement to qualify any representation or warranty made by the Borrower or any
Subsidiary, mean that (at the time the applicable representation or warranty is
made or deemed made or repeated) any of the officers or directors of the
Borrower and its Subsidiaries has actual (and not imputed or constructive)
knowledge of certain specific facts or circumstances affecting such
representation or warranty, or is actually (and not imputedly or constructively)
aware of facts or circumstances which should have led a reasonable person with
similar business responsibilities to conduct a reasonably-detailed investigation
into such facts or circumstances and the legal consequences thereof, and such an
investigation would have resulted in the investigating party having actual (and
not imputed or constructive) knowledge of specific facts or circumstances
affecting such representation or warranty.
"LIEN" shall mean, as to any asset, (a) any lien, charge, claim, mortgage,
security interest, pledge, hypothecation or other encumbrance of any kind with
respect to such asset, (b) any interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease or other title retention agreement
relating to such asset, (c) any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
affecting such asset, or (d) any assignment, deposit, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Security
Documents and all other documents, instruments and agreements now or hereafter
executed or delivered pursuant hereto or in connection herewith.
"MATERIAL ADVERSE EFFECT" and "MATERIAL ADVERSE CHANGE" shall mean a
material adverse effect on, or a material adverse change in, (a) the properties,
business, operations, or financial condition of Borrower and its Subsidiaries,
taken as a whole, or (b) the ability of Borrower to perform its obligations
under this Agreement, the Note and the other Loan Documents to which it is a
party.
"MULTIEMPLOYER PLAN" shall mean a "MULTIEMPLOYER PLAN" as defined in
Section 4001(a)(3) of ERISA.
-7-
"NET INCOME" shall mean, for Borrower and its Subsidiaries on a
consolidated basis for any period, the net income (or loss) after taxes,
determined in accordance with GAAP, subject to customary exclusions with respect
to extraordinary and nonrecurring items.
"NOTE" shall mean the Promissory Note, substantially in the form of
EXHIBIT B, executed by Borrower in favor of Lender, evidencing the indebtedness
of Borrower to Lender in connection with the Loan.
"OPERATING LEASE" shall mean, as to any Person, any lease of property
(whether real, personal or mixed) by such Person as lessee that is not a
Capitalized Lease.
"OUTSTANDING SHARES" shall have the meaning assigned to such term in
SECTION 3.2.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to subtitle A of Title IV of ERISA.
"PERMITTED LIENS" shall mean Liens permitted pursuant to the provisions of
SECTION 4.15.
"PERSON" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, limited liability limited partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, Governmental
Authority or other form of entity not specifically listed herein.
"PLAN" shall mean an employee pension benefit plan covered by Title IV of
ERISA that is maintained by Borrower, any of its Subsidiaries or a Commonly
Controlled Entity.
"PURCHASE MONEY DEBT" shall mean (a) Indebtedness of Borrower or any of
its Subsidiaries that, within thirty (30) days of the purchase of real property,
equipment or other tangible personal property in which neither Borrower nor any
of its Subsidiaries at any time prior to such purchase had any interest, is
incurred to finance part or all of (but not more than) the purchase price of
such property, and that bears interest at a rate per annum that is commercially
reasonable at the time, and (b) Indebtedness that constitutes a renewal,
extension, refunding or refinancing of, but not an increase in the principal
amount of, Purchase Money Debt that is such by virtue of CLAUSE (a), is binding
only upon the obligor or obligors under the Purchase Money Debt being renewed,
extended or refunded and bears interest at a rate per annum that is commercially
reasonable at the time.
"REPORTABLE EVENT" shall mean any of the events set forth under Section
4043(b) of ERISA or the PBGC regulations thereunder.
"REQUIREMENT OF LAW" shall mean, as to any Person (a) the partnership
agreement, charter, certificate of incorporation, articles of incorporation,
bylaws, operating agreement or other organizational or governing documents of
such Person, (b) any federal, state or local law, treaty, ordinance, rule or
regulation, (c) any order, decree or determination of a court, arbitrator
-8-
or other Governmental Authority; in each case applicable to or binding upon such
Person or any of its property or to which such person or any of its property is
subject.
"RESPONSIBLE OFFICER" shall mean, as to any Person, either (a) its
president or chief executive officer, or (b) with respect to financial matters,
its president, chief executive officer, chief financial officer or any vice
president designated in writing by the chief executive officer to Lender.
"RESTRICTED PAYMENTS" shall mean, as to any Person for any period:
(a) dividends, other distributions and other payments or deliveries
of property on account of the capital stock of or other ownership interests in,
or any warrants, options or other rights in respect of any capital stock of or
other ownership interests in, such Person or its Subsidiaries, now or hereafter
outstanding, that are recorded by such Person and its Subsidiaries on a
consolidated basis (excluding any such dividends, distributions and other
payments made solely to such Person or a wholly-owned Subsidiary of such Person
by a Subsidiary of such Person),
(b) amounts paid to purchase, redeem, retire or otherwise acquire
for value any of the capital stock of or other ownership interests in, or any
warrants, options or other rights in respect of the capital stock of or other
ownership interests in, such Person or its Subsidiaries, now or hereafter
outstanding (excluding any such amounts paid solely to such Person or a
wholly-owned Subsidiary of such Person by a Subsidiary of such Person),
(c) any assets segregated or set apart (including any money or
property deposited with a trustee or other paying agent) by such Person or any
of its Subsidiaries for a sinking or analogous fund for the purchase, redemption
or retirement or other acquisition of any capital stock of or other ownership
interests in, or any warrants, options or other rights in respect of any capital
stock of or other ownership interests in, such Person or its Subsidiaries, now
or hereafter outstanding (excluding any assets so segregated or set apart with
respect to any stock, warrants, options or other rights held by a wholly-owned
Subsidiary of such Person),
(d) payments made or required to be made by such Person with respect
to any stock appreciation rights plan, equity incentive or achievement plan or
any similar plan and any assets segregated or set apart for such purposes
(including any money or property deposited with a trustee or other paying agent)
and
(e) any payment, purchase, redemption or acquisition of Indebtedness
subordinated to the Indebtedness evidenced by the Note and any assets segregated
or set apart for such purposes (including any money or property deposited with a
trustee or other paying agent), excluding, however, regularly scheduled payments
of interest made according to the stated terms of such subordinated
Indebtedness;
all as determined in accordance with GAAP.
-9-
"SECURITY AGREEMENT" shall mean the Security Agreement, substantially in
the form of EXHIBIT C, executed by Borrower in favor of Lender.
"SECURITY DOCUMENTS" shall mean the Security Agreement, the Financing
Statements, the Assignment of Life Insurance, the Guaranty and the Guarantor
Security Agreement together with all documents, instruments and agreements now
or hereafter executed or delivered pursuant thereto or in connection therewith.
"STOCK PURCHASE AGREEMENT" shall mean the Series A Preferred Stock
Purchase Agreement between Borrower and Lender, dated of even date herewith.
"SUBSIDIARY" shall mean, as to any Person (a) a corporation, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock having such power only
by reason of the occurrence of a contingency) to elect a majority of the board
of directors or other managers thereof are at the time owned, or the management
of which is otherwise controlled, directly or indirectly, through one or more
intermediaries, or both, by such Person, or (b) a partnership in which such
Person is a general partner or the management of which is otherwise controlled,
directly or indirectly, through one or more intermediaries or both, by such
Person. "Subsidiary" shall specifically include Guideline.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
New York or any other applicable jurisdiction, as the context may require.
"WARRANT" shall mean the Stock Purchase Warrant, substantially in the form
of EXHIBIT D, executed by Borrower in favor of Lender.
1.2 ACCOUNTING AND COMMERCIAL TERMS. As used in this Agreement, all
accounting terms used but not otherwise defined herein shall have the respective
meanings assigned to them by GAAP. All terms used but not otherwise defined
herein that are defined or used in Article 9 of the UCC shall have the
respective meanings assigned to them in such Article.
1.3 GENERAL CONSTRUCTION. As used in this Agreement, the masculine,
feminine and neuter genders and the plural and singular numbers shall be deemed
to include the others in all cases in which they would so apply. "Includes" and
"including" are not limiting, and shall be deemed to be followed by "without
limitation" regardless of whether such words or words of like import in fact
follow same. The word "or" is not intended and shall not be construed to be
exclusive.
1.4 HEADINGS. Article and section headings and captions in this Agreement
and the other Loan Documents are included in such Loan Documents for convenience
of reference and shall not constitute a part of the applicable Loan Documents
for any other purpose.
-10-
1.5 REFERENCES TO THIS AGREEMENT AND PARTS THEREOF. As used in this
Agreement, unless otherwise specified the words "hereof," "herein" and
"hereunder" and words of similar import shall refer to this Agreement including
all schedules and exhibits hereto, as a whole, and not to any particular
provision of this Agreement, and the words "Article", "Section", "Schedule" and
"Exhibit" refer to articles, sections, schedules and exhibits of or to this
Agreement.
1.6 DOCUMENTARY REFERENCES. Any reference herein to any instrument,
document or agreement, by whatever terminology used, shall be deemed to include
any and all amendments, modifications, supplements, extensions, renewals,
substitutions or replacements thereof as the context may require.
1.7 LEGAL REFERENCES. Any reference herein to any law shall be a reference
to such law as in effect from time to time and shall include any rules and
regulations promulgated or published thereunder and published interpretations
thereof.
ARTICLE 2
THE LOAN
2.1 THE LOAN; EVIDENCE OF LOAN INDEBTEDNESS; REPAYMENT. Subject to the
terms and conditions hereof, Lender agrees to make the Loan to Borrower. The
Loan shall be evidenced by, and payable in accordance with the provisions of,
the Note. Borrower may prepay the Loan, in whole or in part, at any time and
from time to time, without premium or penalty.
2.2 CLOSING FEE. In connection with the making of the Loan, Borrower shall
pay to Lender a closing fee in the amount of $75,000.00 (the "CLOSING FEE").
Lender hereby acknowledges that Borrower has prepaid a portion of the Closing
Fee in the form of an acceptance fee in the amount of $30,000.00. The balance of
the Closing Fee is due and payable on the Closing Date, and Borrower hereby
authorizes and directs Lender to deduct from the Loan proceeds and retain for
its account the sum of $45,000.00 as payment of the outstanding balance of the
Closing Fee.
2.3 PURPOSE. The purpose of the Loan shall be to finance the acquisition
by Borrower of one hundred percent (100%) of the stock of Guideline Research
Corporation including without limitation Deferred Consideration Amounts and
Consideration Shares Put. The proceeds of the Loan shall be used for no other
purposes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan, Borrower hereby represents and warrants
to Lender as follows:
-11-
3.1 CORPORATE STATUS. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. Borrower
has the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations under
this Agreement and the other Loan Documents to which it is a party. Borrower is
duly qualified to do business and in good standing in each jurisdiction in which
a failure to be so qualified would have a Material Adverse Effect.
3.2 CAPITALIZATION. The authorized capital stock of Borrower consists
solely of one hundred million (100,000,000) shares of common stock, $.0001 par
value per share ("COMMON STOCK"), 10,219,407 of which (the "OUTSTANDING SHARES")
are issued and outstanding, and 2,000,000 shares of preferred stock, $0.0001 par
value per share, of which 500,000 have been designated as Series A Preferred
Stock, none of which are outstanding. All of the Outstanding Shares are duly
authorized, validly issued and outstanding and fully paid and nonassessable and
free of preemptive rights. Except for the Outstanding Shares, there are no
shares of capital stock or other securities of Borrower outstanding. Except as
set forth on SCHEDULE 3.2, there are no outstanding options, warrants or rights
to purchase or acquire from Borrower any securities of Borrower, and there are
no contracts, commitments, agreements, understandings, arrangements or
restrictions as to which Borrower is a party or by which it is bound relating to
any shares of capital stock or other securities of Borrower (including the
Outstanding Shares), regardless of whether outstanding.
3.3 AUTHORIZATION. Borrower has full legal right, power and authority to
conduct its business and affairs as now conducted and as hereafter intended to
be conducted. Borrower has full legal right, power and authority to enter into
and perform its obligations hereunder, without the consent or approval of any
other person, firm, governmental agency or other legal entity. The execution and
delivery of this Agreement, the borrowing hereunder, the execution and delivery
of each Loan Document to which Borrower is a party and the performance by
Borrower of its obligations thereunder are within the corporate powers of
Borrower and have been duly authorized by all necessary corporate action
properly taken, have received all necessary governmental approvals, if any were
required, and do not and will not conflict with or result in a breach of any
provision of law, any applicable judgment, ordinance, regulation or order of any
court or Governmental Authority, the charter or bylaws of Borrower, or any
agreement binding upon Borrower or its properties. The officer(s) executing this
Agreement, the Note and all of the other Loan Documents to which Borrower is a
party are duly authorized to act on behalf of Borrower.
3.4 VALIDITY AND BINDING EFFECT. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of Borrower, enforceable
in accordance with their respective terms, subject to limitations imposed by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally or the application of general equitable principles.
3.5 NO CONFLICTS. The execution and delivery of this Agreement and the
other Loan Documents, consummation of the transactions contemplated by such Loan
Documents and the
-12-
performance of the obligations of Borrower under and by virtue of such Loan
Documents will not result in any breach of, or constitute a default under, any
mortgage, security deed or agreement, deed of trust, lease, bank loan or credit
agreement, corporate charter or bylaws, agreement or certificate of limited
partnership, partnership agreement, license, franchise or any other instrument
or agreement to which Borrower is a party or by which Borrower or its respective
properties may be bound or affected, unless and except to the extent that
Borrower has obtained an effective waiver.
3.6 INVESTMENTS. Borrower has no Investments other than cash on deposit
with banks and Investments (including Investments in Subsidiaries of Borrower)
set forth on SCHEDULE 3.6. With respect to each Subsidiary of Borrower, SCHEDULE
3.6 shows the jurisdiction of incorporation or other organization and the
percentage of the stock or other equity interests that is owned by Borrower and
each other Person having an interest therein. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified to transact business and is in good standing
in each jurisdiction in which a failure to be so qualified would have a Material
Adverse Effect. The outstanding capital stock of each Subsidiary that is a
corporation is validly issued, fully paid and nonassessable. Borrower and its
Subsidiaries have good and valid title to the equity interests in the
Subsidiaries of Borrower shown as owned by each of them on SCHEDULE 3.6, free
and clear of all Liens. Except where otherwise indicated herein or unless the
context otherwise requires, any reference to Borrower herein shall include
Borrower and all of its Subsidiaries.
3.7 TRADEMARKS, PATENTS, ETC. SCHEDULE 3.7 is an accurate and complete
list of all patents, trademarks, tradenames, trademark registrations, service
names, service marks, copyrights, licenses, formulas and applications therefor
owned by Borrower or used or required by Borrower in the operation of Borrower's
business as now presently conducted or contemplated to be conducted, title to
each of which is, except as set forth in SCHEDULE 3.7, held by Borrower free and
clear of all Liens. There is no infringement action, lawsuit, claim or formal
complaint that asserts that Borrower's operations violate or infringe the rights
or the trade names, trademarks, trademark registrations, service names, service
marks or copyrights of others with respect to any asset or operation of Borrower
or any adversely held trademark, trade name, trademark registration, service
name, service xxxx or copyright, and Borrower is not in any way making use of
any confidential information or trade secrets of any Person except with the
consent of such Person.
3.8 FINANCIAL STATEMENTS. The financial statements of Borrower dated
February 28, 2003, copies of which are attached hereto as SCHEDULE 3.8, are
true, correct and complete in all material respects, have been prepared in
accordance with GAAP consistently applied, and fairly present the financial
condition of Borrower as of the date(s) thereof. No Material Adverse Change has
occurred since the date(s) thereof, and no additional borrowings have been made
or material liabilities incurred by Borrower since the date(s) thereof other
than as set forth on SCHEDULE 3.8.
-13-
3.9 INDEBTEDNESS. SCHEDULE 3.9 is a complete and correct list of all
Indebtedness of Borrower and its Subsidiaries, and identifies all credit
agreements, indentures, purchase agreements, promissory notes and other
evidences of Indebtedness, guaranties, Capitalized Leases and other instruments,
agreements and arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of which Borrower or
any of the properties thereof is in any manner directly or contingently
obligated. The maximum principal or face amounts of the credit in question that
are outstanding and that can be outstanding are correctly stated on SCHEDULE
3.9, and all Liens of any nature given or agreed to be given as security for any
Indebtedness of Borrower are correctly described or indicated in such Schedule.
3.10 TITLE TO ASSETS. Borrower and its Subsidiaries have good and
marketable title (or good and marketable leasehold interests with respect to
leased property) to all their respective assets (including all assets
constituting a part of the Collateral and all assets reflected in the balance
sheet of Borrower as of February 28, 2003), subject to no Liens other than
Permitted Liens.
3.11 LABOR MATTERS. There are no disputes or controversies pending between
Borrower or its Subsidiaries and their respective employees, the outcome of
which reasonably may be expected to have a Material Adverse Effect.
3.12 LITIGATION. Except as set forth on SCHEDULE 3.12, there are no
actions, suits or proceedings pending, or, to the Knowledge of Borrower
threatened, against or affecting Borrower or any of its Subsidiaries or
involving the validity or enforceability of any of the Loan Documents, at law or
in equity, before any court or Governmental Authority. To Borrower's Knowledge,
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or Governmental Authority that can be reasonably expected
to have a Material Adverse Effect.
3.13 OTHER AGREEMENTS; NO DEFAULTS. Borrower is not a party to any
indenture, loan or credit agreement, lease or other instrument, document or
agreement or instrument, or subject to any charter or corporate restriction,
that could have a Material Adverse Effect. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party, including this Agreement and
the other Loan Documents, and no other default or event has occurred and is
continuing that with notice or the passage of time or both would constitute a
default or event of default under any of same.
3.14 COMPLIANCE WITH LAWS. Borrower and its Subsidiaries (a) have not
been, are not and will not be in violation of any applicable Requirement of Law,
including any building, zoning, occupational safety and health, fair employment,
equal opportunity, pension, environmental control or similar federal, state or
local law, ordinance or regulation, relating to the ownership or operation of
their respective businesses or assets, (b) have not failed to obtain any
license, permit, certificate or other governmental authorization necessary for
the conduct of
-14-
their businesses or the ownership and operation of their assets, (c) have not
received any notice from any Governmental Authority, and to their Knowledge no
such notice is pending or threatened, alleging that Borrower or any of its
Subsidiaries has violated, or has not complied with, any Requirement of Law,
condition or standard applicable with respect to any of the foregoing, and (d)
are not a party to any agreement or instrument, or subject to any judgment,
order, writ, rule, regulation, code or ordinance, except to the extent that any
violation, noncompliance, failure, agreement, judgment, etc. as described in
this SECTION 3.14 cannot reasonably be expected to have a Material Adverse
Effect.
3.15 GOVERNMENTAL AUTHORIZATIONS; PERMITS, LICENSES AND ACCREDITATION;
OTHER RIGHTS. Borrower and its Subsidiaries have all licenses, permits,
approvals, registrations, contracts, consents, franchises, qualifications,
accreditations and other authorizations necessary for the lawful conduct of
their respective businesses or operations wherever now conducted and as planned
to be conducted, pursuant to all applicable statutes, laws, ordinances, rules
and regulations of all Governmental Authorities having, asserting or claiming
jurisdiction over Borrower and its Subsidiaries or over any part of their
respective operations except to the extent the failure to obtain cannot
reasonably be expected to have a Material Adverse Effect. Copies of all such
licenses, permits, approvals, registrations, contracts, consents, franchises,
qualifications, accreditations and other authorizations shall be provided to
Lender upon request. Borrower and its Subsidiaries are not in default under any
of such licenses, permits, approvals, registrations, contracts, consents,
franchises, qualifications, accreditations or other authorizations, and no event
has occurred, and no condition exists, that with the giving of notice, the
passage of time or both would constitute a default thereunder or would result in
the suspension, revocation, impairment, forfeiture or non-renewal of any
thereof, except to the extent that the cumulative effect of all such defaults,
events, conditions, suspensions, revocations, impairments, forfeitures and
non-renewals cannot reasonably be expected to have a Material Adverse Effect.
The continuation, validity and effectiveness of all such licenses, permits,
approvals, registrations, contracts, consents, franchises, qualifications,
accreditations and other authorizations will not be adversely affected by the
transactions contemplated by this Agreement. To the Knowledge of Borrower, it
and its Subsidiaries know of no reason why they will not be able to maintain
after the date hereof all licenses, permits, approvals, registrations,
contracts, consents, franchises, qualifications, accreditations and other
authorizations necessary or appropriate to conduct the businesses of Borrower
and its Subsidiaries as now conducted and presently planned to be conducted
except to the extent such failure cannot reasonably be expected to have a
Material Adverse Effect.
3.16 TAXES. Borrower has filed or caused to be filed all tax returns that
to its Knowledge are required to be filed (except for returns that have been
appropriately extended), and has paid, or will pay when due, all taxes shown to
be due and payable on said returns and all other taxes, impositions,
assessments, fees or other charges imposed on them by any governmental
authority, agency or instrumentality, prior to any delinquency with respect
thereto (other than taxes, impositions, assessments, fees and charges currently
being contested in good faith by appropriate proceedings, for which appropriate
amounts have been reserved). No tax liens have been filed against Borrower or
any of the property thereof.
-15-
3.17 CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3.17, (a)
Borrower is not indebted, directly or indirectly, to any of its officers or
directors or to their respective spouses or children, in any amount whatsoever,
and (b) none of said officers or directors or any members of their immediate
families, are indebted to Borrower or have any direct or indirect ownership
interest in any firm or corporation with which Borrower has a business
relationship, or any firm or corporation which competes with Borrower, except
that officers or directors of Borrower may own no more than 5% of outstanding
stock of publicly traded companies that may compete with Borrower. Except as set
forth on SCHEDULE 3.17, no officer or director or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
Borrower, and each such contract has been fully disclosed to and approved by the
directors of Borrower and is on arm's length terms. Except as set forth on
SCHEDULE 3.17, Borrower is not a guarantor or indemnitor of any Indebtedness of
any other person, firm or corporation.
3.18 MARGIN REGULATIONS. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock. No
proceeds received pursuant to this Agreement will be used to purchase or carry
any equity security of a class registered pursuant to Section 12 of the Exchange
Act.
3.19 SIGNIFICANT CONTRACTS. SCHEDULE 3.19 is a complete and correct list
of all contracts, agreements and other documents pursuant to which Borrower
receives revenues in excess of $50,000. Each such contract, agreement and other
document is in full force and effect as of the date hereof and Borrower knows of
no reason why such contracts, agreements and other documents would not remain in
full force and effect pursuant to the terms thereof.
3.20 ERISA.
(a) PLANS. SCHEDULE 3.20 sets forth any and all Plans maintained by
or on behalf of Borrower or any of its Subsidiaries, including any defined
benefit pension plan, profit sharing plan, money purchase pension plan, savings
or thrift plan, stock bonus plan, employee stock ownership plan or Multiemployer
Plan and any plan, fund, program, arrangement or practice providing for medical
(including post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits. Neither Borrower nor any ERISA Affiliate
maintains or contributes to, or has maintained or contributed to, any defined
benefit pension plan or Multiemployer Plan.
(b) COMPLIANCE. Each Plan maintained by or on behalf of Borrower or any of
its Subsidiaries has at all times been maintained, by its terms and in
operation, in accordance in all material respects with ERISA and all other
applicable Requirements of Law.
(c) LIABILITIES. Except for liabilities and expenses that become payable
and are timely paid pursuant to the terms and usual operations of the Plans,
Borrower currently is not, and to its Knowledge will not become, subject to any
material liability (including withdrawal liability), tax or penalty whatsoever
to any Person whomsoever with respect to any Plan
-16-
including any material tax, penalty or liability arising under Title I or Title
IV of ERISA or Chapter 43 of the Internal Revenue Code.
(d) FUNDING. Each of Borrower and its ERISA Affiliates has made full
and timely payment of all amounts (1) required to be contributed under the terms
of each Plan and applicable law and (2) required to be paid as expenses of each
Plan. No Plan or Plans have an "amount of unfunded benefit liabilities" (as
defined in Section 4001(a)(18) of ERISA) that, in the aggregate, exceeds
$25,000.
3.21 ENVIRONMENTAL MATTERS.
(a) Neither Borrower nor any of its Subsidiaries, nor any of the
properties owned or, to the Borrower's Knowledge, leased thereby or operations
thereof, nor, to the Knowledge of Borrower, any current or prior owner, lessor
or operator (other than Borrower or any of its Subsidiaries) of any properties
owned or leased by Borrower or any of its Subsidiaries, is in violation of any
applicable Environmental Law or any restrictive covenant or deed restriction
relating to environmental matters (recorded or otherwise) or subject to any
existing, pending or threatened investigation, inquiry or proceeding by any
Governmental Authority or subject to any remedial obligations under any
Environmental Law, except to the extent that the cumulative effect of all such
violations, investigations, inquiries, proceedings and remedial obligations
cannot reasonably be expected to have a Material Adverse Effect.
(b) All permits, licenses, approvals and filings required of
Borrower or any of its Subsidiaries with respect to Hazardous Materials,
including past or present treatment, storage, disposal or release of any
Hazardous Materials into the environment, have been obtained or filed except to
the extent that the cumulative effect of the failure to obtain or file cannot
reasonably be expected to have a Material Adverse Effect.
(c) All Hazardous Materials generated by Borrower or any of its
Subsidiaries have in the past been, and will continue to be, transported,
treated and disposed of only by carriers maintaining valid permits under all
applicable Environmental Laws and only at treatment, storage and disposal
facilities maintaining valid permits under applicable Environmental Laws, which
carriers and facilities have been and are, to the Knowledge of Borrower,
operating in compliance with such permits.
(d) Borrower and its Subsidiaries have taken all reasonable steps
necessary to determine, and have determined, that no Hazardous Materials have
been disposed of or otherwise released by them except in compliance with
Environmental Laws.
(e) Neither Borrower nor any of its Subsidiaries has a material
contingent liability in connection with any release of any Hazardous Materials
or solid waste into the environment.
-17-
3.22 STATEMENTS NOT FALSE OR MISLEADING. No representation or warranty
given as of the date hereof by Borrower contained in this Agreement or any
schedule attached hereto or any statement in any document, certificate or other
instrument furnished or to be furnished to Lender pursuant hereto, taken as a
whole, contains or will (as of the time so furnished) contain any untrue
statement of a material fact, or omits or will (as of the time so furnished)
omit to state any material fact which is necessary in order to make the
statements contained therein not misleading.
ARTICLE 4
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
4.1 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Borrower shall pay the
indebtedness evidenced by the Note according to the terms thereof, and shall
timely pay or perform, as the case may be, all of the other obligations of
Borrower to Lender, direct or contingent, however evidenced or denominated, and
however and whenever incurred, including indebtedness incurred pursuant to any
present or future commitment of Lender to Borrower, together with interest
thereon, and any extensions, modifications, consolidations or renewals thereof
and any notes given in payment thereof.
4.2 FINANCIAL STATEMENTS AND REPORTS. Borrower shall furnish to Lender:
(a) as soon as available and in any event within one hundred and
twenty (120) days after the end of each Fiscal Year of Borrower, a consolidated
balance sheet of Borrower and its Subsidiaries as of the end of such Fiscal Year
and the related consolidated statements of income, shareholders' equity and cash
flows of Borrower and its Subsidiaries for such Fiscal Year, audited and
reported upon, without qualification, by an accounting firm reasonably
acceptable to Lender, accompanied by an unaudited consolidating balance sheet of
Borrower and its Subsidiaries as of the end of such Fiscal Year and an unaudited
consolidating statement of income of Borrower and its Subsidiaries for such
Fiscal Year, certified by a Responsible Officer of Borrower, together with (1) a
certificate of a Responsible Officer of Borrower stating that no Default has
occurred and is continuing or, if in the opinion of such officer, if a Default
has occurred and is continuing, a statement as to the nature thereof and the
action that Borrower proposes to take with respect thereto, (2) a certificate of
a Responsible Officer of Borrower, in form satisfactory to Lender, setting forth
computations demonstrating compliance with all financial covenants contained
herein as of the end of such Fiscal Year, and (3) a written discussion and
analysis by the management of Borrower of the financial statements furnished in
respect of such Fiscal Year.
(b) as soon as available and in any event within thirty (30) days
after the end of each month, an unaudited consolidated and consolidating balance
sheet of Borrower and its Subsidiaries as of the end of such month, the related
consolidated and consolidating statement of
-18-
income of Borrower and its Subsidiaries for the period commencing at the
beginning of the current Fiscal Year and ending with the end of such month and
the related consolidated statements of shareholders' equity and cash flows of
Borrower and its Subsidiaries for such period, certified by a Responsible
Officer of Borrower, together with (1) a certificate of a Responsible Officer of
Borrower stating that no Default has occurred and is continuing or, if in the
opinion of such officer, a Default has occurred and is continuing, a statement
as to the nature thereof and the action that Borrower proposes to take with
respect thereto and (2) a certificate of a Responsible Officer of Borrower, in
form satisfactory to Lender, setting forth computations demonstrating compliance
with all financial covenants contained herein as of the end of such period.
(c) within thirty (30) days after to the beginning of each Fiscal
Year of Borrower, a budget of Borrower and its Subsidiaries for such Fiscal Year
setting forth, on a monthly basis and in reasonable detail, a balance sheet and
statements of income, shareholders' equity and cash flows for such Fiscal Year.
(d) with reasonable promptness, such other financial data as Lender
reasonably may request.
(e) Lender agrees to hold in confidence all of the information so
provided pursuant to this Section 4.2, except for any disclosure (i) made to any
of its officers, directors, employees, attorneys and other advisors, (ii) of any
information which is or has become public information other than as a result of
a disclosure by it or any of the persons described in the preceding clause (i),
(iii) as required by any applicable law, rule or regulation or judicial process
or requested by any governmental authority, in which event, to the extent
permitted by law, notice of any such disclosure shall be given as promptly as
practicable to you, (iv) to prospective assignees which agree for the Borrower's
benefit to be bound by confidentiality provisions substantially the same as
those contained in this sentence, (v) in connection with any adversarial legal
proceeding between Lender and Borrower, (vi) of any information which was
available to Lender on a non-confidential basis prior to its disclosure by
Borrower or its advisors, or (vii) of any information which becomes available to
Lender on a non-confidential basis from a source other than Borrower or any of
its advisors, provided that such source is not (1) known to Lender to be bound
by a confidentiality agreement with Borrower or any of its advisors or (2) known
to Lender to be otherwise prohibited from transmitting the information to Lender
by a contractual, legal or fiduciary obligation.
Borrower will take all actions necessary to cause all such financial
statements to be complete and correct in all material respects and to be
prepared in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein (except as may be approved by such
accountants or Responsible Officer, as the case may be, and specifically
disclosed therein).
-19-
4.3 MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. Borrower shall maintain
its books, accounts and records in accordance with GAAP consistently applied,
and permit Lender, its officers and employees and any professionals designated
by Lender in writing, at Lender's expense, to visit and inspect any of the
properties, corporate books and financial records of Borrower and its
Subsidiaries, and to discuss its accounts, affairs and finances with Borrower or
the principal officers of Borrower during reasonable business hours, all at such
times as Lender may reasonably request, provided that no such inspection shall
materially interfere with the conduct of Borrower's business.
4.4 INSURANCE. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall, and shall cause each of its Subsidiaries
to, maintain, in amounts customary for entities engaged in comparable business
activities, (a) "all risk" casualty insurance on its properties against such
hazards as are customarily insured against by entities engaged in comparable
business activities, (b) general liability insurance, and (c) to the extent
required by applicable law, worker's compensation insurance (or maintain a
legally sufficient amount of self insurance against worker's compensation
liabilities, with adequate reserves, under a plan approved by Lender, such
approval not to be unreasonably withheld). Lender shall be named as an
additional insured with respect to liability insurance and an additional loss
payee, as its interests appear, with respect to property insurance. Each such
insurance policy shall require the insurer to notify Lender in writing at least
thirty (30) days prior to any cancellation or material reduction or limitation
of such policy. At the request of Lender, Borrower will deliver to Lender
forthwith a certificate specifying the details of such insurance in effect.
4.5 TAXES AND ASSESSMENTS. Borrower shall, and shall cause each of its
Subsidiaries to, (a) file all tax returns and appropriate schedules thereto that
are required to be filed under applicable law, prior to the date of delinquency
except to the extent a valid extension has been received, (b) pay and discharge
all taxes, assessments and governmental charges or levies imposed upon Borrower
or such Subsidiary or upon its income and profits or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and (c)
pay all taxes, assessments and governmental charges or levies that, if unpaid,
might become a Lien upon any of its properties; PROVIDED, HOWEVER, that Borrower
or such Subsidiary in good faith may contest any such tax, assessment,
governmental charge or levy described in the foregoing clauses (b) and (c) so
long as appropriate reserves are maintained with respect thereto.
4.6 CORPORATE EXISTENCE; NAME. Borrower shall, and shall cause each of its
Subsidiaries to, maintain its corporate or other existence and good standing in
the state of its incorporation or organization, and its qualification and good
standing in each jurisdiction in which a failure to be so qualified would have a
Material Adverse Effect. Borrower shall not, and shall not permit any of its
Subsidiaries to, (a) change its name without giving Lender thirty (30) days
prior written notice or (b) modify or amend its articles of incorporation or
bylaws. Notwithstanding any provision herein to the contrary, Borrower shall be
permitted to cause itself or any of its Subsidiaries to reincorporate in the
State of Delaware, so long as Borrower gives Lender 30 days prior written
notice.
-20-
4.7 COMPLIANCE WITH LAW AND OTHER AGREEMENTS. Except where the failure to
do so would not have a Material Adverse Effect, Borrower shall, and shall cause
each of its Subsidiaries to, maintain its business operations and property owned
or used in connection therewith in compliance with (a) all applicable
Requirements of Law, and (b) all instruments, documents and agreements to which
Borrower or such Subsidiary is a party or by which Borrower or such Subsidiary
or any of its properties is bound. Without limiting the foregoing, Borrower
shall, and shall cause each of its Subsidiaries to, pay all of its Indebtedness
promptly in accordance with the terms thereof.
4.8 NOTICE OF DEFAULT. Borrower shall give written notice to Lender of the
occurrence of any Default promptly following the occurrence thereof.
4.9 NOTICE OF LITIGATION. Borrower shall give notice, in writing, to
Lender of (a) any actions, suits or proceedings wherein the amount at issue is
in excess of Fifty Thousand and No/100ths Dollars ($50,000) instituted by any
persons whomsoever against Borrower or any of its Subsidiaries or affecting any
of the assets of Borrower or any of its Subsidiaries, and (b) any dispute, not
resolved within sixty (60) days of the commencement thereof, between Borrower or
any of its Subsidiaries on the one hand and any governmental regulatory body on
the other hand, which dispute could have a Material Adverse Effect.
4.10 CONDUCT OF BUSINESS. Borrower shall, and shall cause each of its
Subsidiaries to, continue to engage in a business of the same general type and
manner as conducted by it on the date of this Agreement provided, however, that
this covenant shall not prohibit Borrower from entering into the Acquisition
Agreement and performing its obligations required thereunder and the
transactions contemplated thereby.
4.11 ERISA. If Borrower now has in effect or hereafter institutes any
Plan, Borrower shall:
(a) Within five (5) business days after Borrower has Knowledge of
such event, notify Lender of (1) any fact that might constitute grounds for the
involuntary termination of any Plan, or for the appointment by the appropriate
United States District Court of a trustee to administer the Plan, (2) any
Reportable Event with respect to any Plan, (3) the institution of proceedings or
the taking or expected taking of any other action by the PBGC, Borrower, any of
its Subsidiaries or any Commonly Controlled Entity to terminate, withdraw or
partially withdraw from any Plan, and (4) with respect to any Multi-Employer
Plan, the reorganization or insolvency of such Plan.
(b) cause contributions under each such Plan to meet the minimum
funding standards required by ERISA.
4.12 RESTRICTED PAYMENTS; PREEMPTIVE RIGHTS. Borrower shall not, and shall
not permit any of its Subsidiaries to, declare, pay or make, any Restricted
Payments or grant any preemptive rights with respect to its capital stock of
Borrower, except:
-21-
(a) Borrower may declare and deliver dividends and make
distributions payable solely in common stock of Borrower, and may distribute
cash in lieu of fractional shares otherwise distributable pursuant to this
clause (a).
(b) Borrower may purchase or otherwise acquire shares of its capital
stock by exchange for or out of the proceeds received from a substantially
concurrent issue of new shares of its capital stock.
(c) Borrower may make payments of the Deferred Consideration
Amounts, the Consideration Shares Put and certain payments to shareholders of
Guideline expressly contemplated by, and pursuant to, the Acquisition Agreement
and the transactions contemplated thereby so long as a Default or Event of
Default does not exist hereunder, and would not result from any such payment.
(d) Borrower may make Restricted Payments to Lender in connection
with the Series A Preferred Stock purchased by Lender pursuant to the Stock
Purchase Agreement.
4.13 INVESTMENTS. Borrower shall not make, commit to make or suffer to
exist, or permit any of its Subsidiaries to make, commit to make or suffer to
exist, any Investment except:
(a) cash on hand and in deposit in banks;
(b) Investments existing on the date hereof and set forth in
SCHEDULE 3.6;
(c) accounts receivable representing trade credit extended in the
ordinary course of business;
(d) unsecured loans or advances to Borrower by any Subsidiary of
Borrower;
(e) advances in reasonable amounts made by Borrower and its
Subsidiaries to their respective employees for reimbursable expenses incurred or
to be incurred by such employees in the ordinary course performance of their
duties; and
(f) purchases of up to an aggregate amount of $100,000 per year of
Borrower's Common Stock on the open market.
(g) purchases of Borrower's Common Stock pursuant to the
Consideration Shares Put so long as a Default or Event of Default does not exist
hereunder, and would not result from any such payment.
4.14 INDEBTEDNESS. Borrower shall not create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Indebtedness, except:
-22-
(a) Indebtedness of Borrower under or pursuant to this Agreement and
the other Loan Documents;
(b) Indebtedness existing, or arising pursuant to commitments
existing, on the date hereof, all as set forth in SCHEDULE 3.9, and any
extensions, renewals, refundings or refinancings thereof on substantially the
same terms or other terms satisfactory to Lender; PROVIDED, HOWEVER, that
neither the principal amount thereof nor the interest rate (including the manner
of calculating a variable rate of interest) thereon shall be increased, nor
shall the amortization schedule thereof be shortened;
(c) Contingent Obligations consisting of (1) the indorsement by
Borrower or any of its Subsidiaries of negotiable instruments payable to such
Person for deposit or collection in the ordinary course of business, and (2)
guarantees executed by Borrower or any of its Subsidiaries with respect to
Indebtedness of Borrower and its Subsidiaries otherwise permitted by this
Agreement;
(d) Contingent Obligations consisting of the indemnification by
Borrower or any of its Subsidiaries of (1) the officers, directors, employees
and agents of Borrower or such Subsidiary, to the extent permissible under the
corporation law of the jurisdiction in which Borrower or such Subsidiary is
organized, (2) commercial banks, investment bankers and other independent
consultants or professional advisors pursuant to agreements relating to the
underwriting of Borrower's or such Subsidiary's securities or the rendering of
banking or professional services to Borrower or such Subsidiary and (3)
landlords, licensors, licensees and other parties pursuant to agreements entered
into in the ordinary course of business by Borrower or such Subsidiary;
(e) Indebtedness with respect to financed insurance premiums not
past due;
(f) Indebtedness of Borrower that is owed to a Subsidiary of
Borrower and that is described in clause (d) of SECTION 4.13; and
(g) Purchase Money Debt and Capitalized Lease Obligations in an
aggregate amount not to exceed $250,000 outstanding at any one time.
4.15 LIENS. Borrower shall not create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien upon any real or personal property, fixtures, revenues or other assets
whatsoever (including the Collateral), whether now owned or hereafter acquired,
of Borrower or any of its Subsidiaries, except:
(a) Liens securing the indebtedness and other obligations of
Borrower pursuant to this Agreement, the Note and the other Loan Documents;
(b) Liens described on SCHEDULE 3.9;
-23-
(c) Liens for taxes not delinquent or that are being contested in
good faith and by appropriate actions and for which adequate reserves in
accordance with GAAP have been established on the books of Borrower or such
Subsidiary;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business that
are not overdue for a period of more than thirty (30) days, or if overdue for
more than thirty (30) days, (1) which are being contested in good faith and by
appropriate proceedings, (2) for which adequate reserves in accordance with GAAP
have been established on the books of Borrower or such Subsidiary; and (3) with
respect to which the obligations secured thereby are not material;
(e) pledges or deposits in connection with workers' compensation
insurance, unemployment insurance and like matters;
(f) Liens securing Purchase Money Debt or Indebtedness arising under
Capitalized Leases; PROVIDED, HOWEVER, that in each case any such Lien attaches
only to the specific item(s) of property or asset(s) acquired or financed with
the proceeds of the corresponding Indebtedness;
(g) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(h) easements, reservations, exceptions, rights-of-way, covenants,
conditions, restrictions and other similar encumbrances incurred in the ordinary
course of business that, in the aggregate, are not substantial in amount, and
that do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of business by Borrower
or such Subsidiary;
(i) Liens of lessors under or in connection with Operating Leases;
and
(j) Other non-consensual Liens not securing Indebtedness, the
existence of which in the aggregate cannot reasonably be expected to have a
Material Adverse Effect, PROVIDED that any Lien permitted by this clause (j) is
permitted only for so long as is reasonably necessary for Borrower or the
affected Subsidiary, using its best efforts, to remove or eliminate such Lien.
4.16 SALE OR TRANSFER OF ASSETS. Borrower shall not, and shall not permit
any of its Subsidiaries to, sell, lease, assign, transfer or otherwise dispose
of, any of its assets (including the stock of Subsidiaries) except:
(a) sales of inventory and other personal property assets in the
ordinary course of business of Borrower and its Subsidiaries;
-24-
(b) the disposition of obsolete or worn-out equipment or other
property no longer required by or useful to Borrower or any of its Subsidiaries
in connection with the operation of their businesses, provided that such
equipment or other property is replaced with equipment or other property having
substantially equivalent utility and equal or greater value; and
(c) the sale or transfer to Borrower of any asset owned by any of
its Subsidiaries.
4.17 MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SALES. Other than the
Acquisition Agreement and the transactions contemplated thereby, Borrower shall
not (a) be a party to any merger, consolidation or corporate reorganization, nor
(b) purchase or otherwise acquire all or substantially all of the assets or
stock of, or any partnership or joint venture interest in, any other person,
firm or entity, nor (c) create any Subsidiaries nor convey any of its assets to
any Subsidiary; provided, that Borrower shall be permitted to acquire all or
substantially all of the assets or stock of, or any partnership on joint venture
interest in, any other person, firm or entity if the consideration thereof is
less than $250,000, and Borrower gives Lender 30 days prior written notice
thereof.
4.18 TRANSACTIONS WITH AFFILIATES. Borrower shall not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to Borrower than
Borrower would obtain in a comparable arm's length transaction with a person not
an affiliate. For the purposes of this SECTION 4.18, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with Borrower.
4.19 ENVIRONMENTAL MATTERS. In addition to, and not in derogation of, the
requirements of SECTION 4.7, Borrower will, and will cause its Subsidiaries to,
(a) comply with all applicable Environmental Laws (unless the validity or
applicability of such laws, standards or regulations are being contested in good
faith by appropriate proceedings and adequate reserves therefor have been
established in accordance with GAAP), (b) promptly notify Lender of its receipt
of any notice of a violation of any such Environmental Law, and (c) indemnify
Lender against and hold Lender harmless from all loss, cost, damage, liability,
claim and expense incurred by or imposed upon Lender on account of Borrower's
failure to perform its obligations under this SECTION 4.19.
4.20 BOARD RIGHTS AND COMPOSITION. Borrower's Board of Directors (the
"Board of Directors") shall be comprised of not less than five (5) members, at
least fifty percent (50%) of whom shall be independent directors. As used
herein, the term "independent director" means any member of the Board of
Directors that (a) is not, directly or indirectly, a holder of record or
beneficial owner of five percent (5%) or more of the outstanding shares of any
class of capital stock of Borrower or any of its Subsidiaries, (b) is not a
parent, child, spouse or sibling of any person described in clause (a) above,
and (c) is not an officer or employee of Borrower or any of its Subsidiaries or
of any entity that is controlled, directly or indirectly, by any person
described
-25-
in clause (a) above; PROVIDED, HOWEVER, that for purposes of this definition,
Lender shall not be deemed to hold of record or own beneficially any class of
capital stock of Borrower or any of its Subsidiaries, regardless of whether the
Warrant or any portion thereof has been exercised. Borrower shall reimburse
Lender for all reasonable expenses incurred by one member of the Board of
Directors appointed by Lender, and shall provide customary indemnity for such
member (including directors and officers liability coverage in form and amount
reasonably satisfactory to Lender). The Board of Directors shall meet at least
four times annually. For so long as the Loan remains outstanding, the Lender
shall receive notice of and be entitled to attend or may send a representative
to attend all meetings of the Board of Directors in a non-voting observation
capacity and shall receive a copy of all correspondence and information
delivered to the Board of Directors; provided, however, that the Lender, or its
representative, shall agree to hold in confidence all information so provided,
except for any disclosure (a) made to any of its officers, directors, employees,
attorneys and other advisors, (b) of any information which is or has become
public information other than as a result of a disclosure by it or any of the
persons described in the preceding clause (a), (c) as required by any applicable
law, rule or regulation or judicial process or requested by any governmental
authority, in which event, to the extent permitted by law, notice of any such
disclosure shall be given as promptly as practicable to you, (d) to prospective
assignees which agree for the Borrower's benefit to be bound by confidentiality
provisions substantially the same as those contained in this sentence, (e) in
connection with any adversarial legal proceeding between Lender and Borrower,
(f) of any information which was available to Lender on a non-confidential basis
prior to its disclosure by Borrower or its advisors, or (g) of any information
which becomes available to Lender on a non-confidential basis from a source
other than Borrower or any of its advisors, provided that such source is not (1)
known to Lender to be bound by a confidentiality agreement with Borrower or any
of its advisors or (2) known to Lender to be otherwise prohibited from
transmitting the information to Lender by a contractual, legal or fiduciary
obligation.
ARTICLE 5
FINANCIAL COVENANTS
Borrower covenants and agrees that during the term of this Agreement,
Borrower shall not:
5.1 FIXED CHARGE COVERAGE. Permit the Fixed Charge Coverage Ratio as of
the end of any Fiscal Quarter ending on or after June 30, 2003 to be less than
1.25 to 1.00.
5.2 FUNDED INDEBTEDNESS TO EBITDA. Permit the Funded Indebtedness to
EBITDA Ratio as of the end of any Fiscal Quarter ending on or after June 30,
2003 to be greater than 3.0 to 1.00.
-26-
ARTICLE 6
CONDITIONS PRECEDENT
6.1 DELIVERIES TO LENDER. The obligation of Lender to make the Loan is
subject to Lender's receipt of each of the following, all of which shall be in
form and substance satisfactory to Lender:
(a) AGREEMENT. A counterpart original of this Agreement, duly and
validly executed and delivered by or on behalf of the parties thereto;
(b) NOTE. The Note, duly and validly executed and delivered on
behalf of Borrower;
(c) SECURITY DOCUMENTS. The Security Agreement, the Assignment of
Life Insurance, the Guaranty, the Guarantor Security Agreement and all of the
other Security Documents, each duly and validly executed and delivered by or on
behalf of all the appropriate parties thereto, together with (1) acknowledgment
copies of financing statements duly filed under the UCC of all jurisdictions
necessary or, in the opinion of Lender, desirable to perfect the security
interests created by such Security Documents, (2) evidence of the public
recordation or filing of such of the Security Documents as Lender deems it
necessary or desirable to record or file publicly, in such offices as Lender
shall require, and (3) the original life insurance policy assigned to Lender
pursuant to the Assignment of Life Insurance;
(d) PERFECTED SECURITY INTEREST. Evidence of Lien searches, through
a date satisfactory to Lender, showing no Liens affecting the Collateral other
than Permitted Liens;
(e) WARRANT AND STOCK PURCHASE AGREEMENT. The Warrant and Stock
Purchase Agreement, duly and validly executed by Borrower;
(f) SBA DOCUMENTATION. Small Business Administration Forms 480, 652
and 1031 (Part A), all duly and validly completed, executed and delivered by
Borrower;
(g) ORGANIZATIONAL DOCUMENTS. Copies of the charters, articles of
incorporation, certificates of incorporation or other organizational documents
of Borrower and each of its Subsidiaries, certified by the Secretary of State or
other appropriate public official in each jurisdiction of organization, all in
form and substance satisfactory to Lender;
(h) BYLAWS. Copies of the bylaws, and all amendments thereto, of
Borrower and each of its Subsidiaries, together with certificates of the
Secretaries or Assistant Secretaries of Borrower, dated the date hereof, stating
that such copy is complete and correct;
(i) GOOD STANDING AND AUTHORITY. Certificates of the appropriate
governmental officials of each jurisdiction as Lender reasonably may request,
dated within thirty
-27-
(30) days prior to the date hereof, stating that Borrower and each of its
Subsidiaries exists, is in good standing with respect to the payment of
franchise and similar taxes and is duly qualified to transact business therein;
(j) INCUMBENCY. A certificate of the Secretary or Assistant
Secretary of Borrower, dated the date hereof, as to the incumbency and signature
of all officers of Borrower authorized to execute or attest to this Agreement,
the Note and the other Loan Documents to which Borrower is a party, together
with evidence of the incumbency of each such Secretary or Assistant Secretary;
(k) AUTHORIZING ACTIONS. Copies of the resolutions of the board of
directors or other managers of Borrower authorizing, approving and ratifying
this Agreement, the Note, the Security Documents and the other Loan Documents
and the transactions contemplated herein and therein, duly adopted by the board
of directors or other managers of Borrower, together with a certificate of the
Secretary or an Assistant Secretary of Borrower, dated the date hereof, stating
that each such copy is a true and correct copy of resolutions duly adopted at a
meeting, or by action taken on written consent, of the board of directors or
other managers of Borrower and that such resolutions have not been modified,
amended, rescinded or revoked in any respect and are in full force and effect as
of the date hereof;
(l) LEGAL OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
from Xxxx Xxxxxxx, P.C., counsel to the Borrower, an opinion dated the Closing
Date substantially in the form of Exhibit E hereto;
(m) FINANCIAL STATEMENTS.
(i) The consolidated balance sheet of Borrower and its
Subsidiaries as of December 31, 2002, and the related consolidated statements of
income, shareholders' equity and cash flows for the Fiscal Year ended on such
date, audited and reported upon, without qualification, by Deloitte & Touche
LLP, together with an unaudited consolidating balance sheet of Borrower and its
Subsidiaries as of the end of such Fiscal Year and an unaudited consolidating
statement of income for Fiscal Year, certified by a Responsible Officer of
Borrower;
(ii) The unaudited consolidated and consolidating balance
sheet of Borrower and its Subsidiaries as of February 28, 2003, and the related
consolidated and consolidating statement of income and the related consolidated
statements of shareholders' equity and cash flows for the period commencing at
the beginning of the current Fiscal Year and ending on such date, certified by a
Responsible Officer of Borrower;
(n) CONSENTS. Evidence that Borrower has obtained all requisite
consents and approvals required to be obtained from any Person to permit the
transactions contemplated by this Agreement, the Note and the other Loan
Documents to be consummated in accordance with their respective terms and
conditions; and
-28-
(o) OTHER MATTERS. All other documents, instruments, agreements,
opinions, certificates, insurance policies, consents and evidences of other
legal matters, in form and substance satisfactory to Lender and its counsel, as
Lender reasonably may request.
6.2 ADDITIONAL CONDITIONS TO LENDER'S OBLIGATION TO MAKE THE LOAN. The
obligation of the Lender to make the Loan is subject to the satisfaction of each
of the additional conditions precedent set forth in this SECTION 6.2:
(a) PERFORMANCE OF BORROWER OBLIGATIONS. Borrower shall have
performed and complied in all material respects with all of the covenants,
agreements, obligations and conditions required by this Agreement;
(b) NO DEFAULT. No Default shall have occurred and be continuing;
(c) COMPLIANCE WITH LAWS. Borrower and its Subsidiaries shall not be
in violation of, and shall not have received notice of any violation of, any
applicable Requirement of Law, including any building, zoning, occupational
safety and health, fair employment, equal opportunity, pension, environmental
control, health care, certificate of need, health care facility licensing or
similar federal, state or local law, ordinance or regulation, relating to the
ownership or operation of its business or assets, if such violation or
non-compliance could have a Material Adverse Effect, and, if requested by
Lender, Borrower shall have furnished to Lender copies of all required approvals
(including required operating licenses and permits) of any Governmental
Authority;
(d) NO MATERIAL ADVERSE CHANGE. Since December 31, 2002, no Material
Adverse Change, as reasonably determined by Lender in good faith, shall have
occurred;
(e) NO MATERIAL MISREPRESENTATION. The representations and
warranties of Borrower set forth in this Agreement, the Note and the other Loan
Documents and in any certificate, opinion or other statement provided at any
time by or on behalf of Borrower in connection herewith shall be true and
correct on and as of the date of the making of the Loan as if made on and as of
such date, except to the extent that a representation or warranty is made as of
a specific date, in which event such representation or warranty shall remain
true and correct as of such earlier date, and except to the extent that a
representation or warranty is no longer correct by virtue of changes permitted
by the terms of this Agreement; and
(f) LEGAL PROCEEDINGS. No action, suit, proceeding or investigation
shall be pending before or, to the Borrower's Knowledge, threatened by any court
or Governmental Authority with respect to the transactions contemplated hereby
or that may have a Material Adverse Effect (as determined by Lender).
-29-
ARTICLE 7
DEFAULT AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Borrower shall fail to pay the principal of or interest on the
indebtedness evidenced by the Note in accordance with the terms of the Note;
(b) Any misrepresentation by Borrower as to any material matter
hereunder or under any of the other Loan Documents, or delivery by Borrower of
any schedule, statement, resolution, report, certificate, notice or writing to
Lender that is untrue in any material respect on the date as of which the facts
set forth therein are stated or certified;
(c) Borrower shall fail to perform any of its obligations, covenants
or agreements under SECTIONS 4.2, 4.3, 4.6, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17
or 4.18 or ARTICLE 5, and with respect to SECTION 4.2 and 4.3 only, such failure
shall continue for more than five (5) days;
(d) Borrower shall fail to perform or observe any of its other
obligations, covenants or agreements set forth in this Agreement (other than
those described in SUBSECTIONS 7.1(a), (b), (c) and (m) to the extent one of
those subsections is applicable) or the other Loan Documents, and such failure
shall continue for more than thirty (30) days after the earlier of (a) written
notice from Lender to Borrower of the existence of such Default or (b) the date
any Responsible Officer of Borrower first obtains Knowledge of such failure;
(e) Borrower or any of its Subsidiaries (1) shall generally not pay
or shall be unable to pay its debts as such debts become due; or (2) shall make
an assignment for the benefit of creditors or petition or apply to any tribunal
for the appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (3) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or (4)
shall have had any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or an adjudication
or appointment is made; or (5) shall indicate, by any act or intentional and
purposeful omission, its consent to, approval of or acquiescence in any such
petition, application, proceeding or order for relief or the appointment of a
custodian, receiver or trustee for it or a substantial part of its assets; or
(6) shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more;
(f) Borrower or any of its Subsidiaries shall be liquidated,
dissolved, partitioned or terminated, or the charter thereof shall expire or be
revoked;
-30-
(g) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of default
shall not be cured within the applicable cure period or otherwise expressly
waived by Lender in writing;
(h) Borrower or any of its Subsidiaries shall default in the timely
payment or performance of any obligation now or hereafter owed to Lender in
connection with any other Indebtedness of Borrower now or hereafter owed to
Lender, subject to applicable notice and cure periods, if any;
(i) Borrower shall (1) fail to pay any Indebtedness for borrowed
money (other than the Indebtedness evidenced by the Note), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), or (2) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Indebtedness, when required to be
performed or observed, if the effect of such failure to perform or observe is to
accelerate the maturity of such Indebtedness, regardless of whether such failure
to perform or observe shall be waived by the holder of such Indebtedness; or any
such Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
(j) Xxxxx Xxxxx shall cease to be active in the day to day
management of Borrower and Borrower shall fail to replace him with a chief
executive officer approved by Lender (which approval shall not be unreasonably
withheld);
(k) A Change in Control of Borrower shall occur;
(l) Borrower shall fail to cause the life insurance policy covered
by the Assignment of Life Insurance to remain in full force and effect, with a
minimum face amount of $3,000,000.00, and subject to no other liens or
assignments; or
(m) Borrower shall fail to file its Annual Report with the
Securities and Exchange Commission on Form 10-K for the year ended December 31,
2002 on or prior to April 15, 2003 in compliance with Rule 12b-25 of the
Exchange Act.
7.2 ACCELERATION OF MATURITY; REMEDIES. Upon the occurrence of any Event
of Default described in SUBSECTION 7.1(e), the indebtedness evidenced by the
Note as well as any and all other indebtedness of Borrower to Lender shall be
immediately due and payable in full; and upon the occurrence of any other Event
of Default described above, Lender at any time thereafter may at its option
accelerate the maturity of the indebtedness evidenced by the Note as well as any
and all other indebtedness of Borrower to Lender; all without notice of any
kind. Upon the occurrence of any such Event of Default and the acceleration of
the maturity of the indebtedness evidenced by the Note:
-31-
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the Note and
all of the other Loan Documents; and
(b) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
7.3 REMEDIES CUMULATIVE; NO WAIVER. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed expedient by Lender.
7.4 PROCEEDS OF REMEDIES. Any or all proceeds resulting from the exercise
of any or all of the foregoing remedies shall be applied as set forth in the
Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
FIRST, to the costs and expenses, including reasonable attorney's
fees, incurred by Lender in connection with the exercise of its remedies;
SECOND, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default that
has occurred;
THIRD, to the payment of the indebtedness and other obligations of
Borrower under this Agreement, the Note and the Loan Documents, including the
payment of the principal of and interest on the indebtedness evidenced by the
Note, in such order of priority as Lender shall determine in its sole
discretion; and
FOURTH, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE 8
TERMINATION
This Agreement shall remain in full force and effect until such time as
all indebtedness and other obligations of Borrower to Lender have been fully and
irreversibly satisfied, and
-32-
within ten (10) business days thereafter Lender shall cancel the Note and
deliver it to Borrower and take such actions as are necessary to release its
Liens on the Collateral.
ARTICLE 9
MISCELLANEOUS
9.1 PERFORMANCE BY LENDER. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith (including reasonable
attorney's fees), with interest thereon at the highest default rate provided in
the Note (if none, then at the maximum rate from time to time allowed by
applicable law), shall be immediately repaid to Lender by Borrower and shall
constitute a part of the indebtedness and other obligations secured by the
Security Documents. Lender shall be the sole judge of the necessity for any such
actions and of the amounts to be paid.
9.2 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in this Agreement
one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to
the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
9.3 COSTS AND EXPENSES. Borrower agrees to pay all reasonable costs and
expenses incurred by Lender in connection with the making of the Loan, including
filing fees, recording taxes and reasonable attorneys' fees, (provided, however,
that Borrower shall not be obligated to reimburse Lender for Lender's attorneys'
fees and expenses and out-of-pocket expenses incurred in connection with the
initial closing of the Loan to the extent the amount of such fees and expenses
exceeds $50,000.00), and agrees to pay all reasonable out-of-pocket expenses of
Lender's designee incurred in attending meetings of Borrower's board of
directors promptly upon demand of Lender. Borrower further agrees to pay all
premiums for insurance required to be maintained by Borrower pursuant to the
terms of the Loan Documents and all of the out-of-pocket costs and expenses
incurred by Lender in connection with the collection of the Loan, amendment of
the Loan Documents or prepayment of the Loan, including reasonable attorneys'
fees, promptly upon demand of Lender.
9.4 ASSIGNMENT. The Note, this Agreement and the other Loan Documents may
be endorsed, assigned or transferred in whole or in part by Lender, and any such
holder or assignee of the same shall succeed to and be possessed of the rights
and powers of Lender under all of the same to the extent transferred and
assigned. Lender may grant participations in all or any portion of its interest
in the indebtedness evidenced by the Note, and in such event Borrower shall
continue to make payments due under the Loan Documents to Lender and Lender
shall have the sole responsibility of allocating and forwarding such payments in
the appropriate manner and
-33-
amounts. Borrower shall not assign any of its rights nor delegate any of its
duties hereunder or under any of the other Loan Documents without the prior
express written consent of Lender.
9.5 TIME OF THE ESSENCE. Time is of the essence with respect to each and
every covenant, agreement and obligation of Borrower hereunder and under all of
the other Loan Documents.
9.6 SEVERABILITY. If any provision(s) of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
9.7 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then IPSO FACTO, the obligation to pay such interest or loan charges shall be
reduced to the maximum amounts collectible under applicable laws in effect from
time to time, and any amounts collected by Lender that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Note or refunded to Borrower so that at no time
shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
9.8 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, telexed or sent by certified mail or by nationally recognized
overnight courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery, telecopy or telex, or two (2) business days after the date of mailing,
or the next business day after delivery to such courier service, as the case may
be, shall be the date of such notice, election or demand. For the purposes of
this Agreement:
The address of Lender is: Petra Mezzanine Fund, L.P.
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. X'Xxxxx III
-34-
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
Xxxxxx X. Xxxxx III
The address of Borrower is: FIND/SVP, Inc.
625 Avenue of the Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx
with a copy to:
Xxxx Xxxxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
9.9 ENTIRE AGREEMENT. This Agreement and the other written agreements
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; PROVIDED, HOWEVER, that if there is a conflict
between this Agreement and any other document executed contemporaneously
herewith with respect to or in connection with the Loan, the provision of this
Agreement shall control. The execution and delivery of this Agreement and the
other Loan Documents by Borrower were not based upon any fact or material
provided by Lender, nor was Borrower induced or influenced to enter into this
Agreement or the other Loan Documents by any representation, statement, analysis
or promise by Lender.
9.10 GOVERNING LAW. This Agreement shall be construed and enforced under
the internal laws of the State of Tennessee, without reference to the conflict
of laws principles thereof.
9.11 AMENDMENTS; INCORPORATION. No amendment or modification hereof shall
be effective except in a writing executed by each of the parties hereto. All
schedules, exhibits, riders and other documents and instruments referenced
herein shall be deemed to be incorporated herein and made a part hereof.
-35-
9.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made by or furnished on behalf of Borrower in
connection herewith shall expire upon the termination of this Agreement in
accordance with Article 8 hereof.
9.13 JURISDICTION AND VENUE. Borrower hereby consents to the jurisdiction
of the courts of the State of Tennessee and the United States District Court for
the Middle District of Tennessee, as well as to the jurisdiction of all courts
from which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations arising under
this Agreement or any other Loan Documents or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
9.14 WAIVER OF JURY TRIAL. LENDER AND BORROWER EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW)
ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER, RELATING TO OR
CONNECTED WITH THIS AGREEMENT, THE COLLATERAL OR ANY OTHER AGREEMENT, INSTRUMENT
OR DOCUMENT CONTEMPLATED HEREBY OR DELIVERED IN CONNECTION HEREWITH AND AGREE
THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS AGREEMENT.
9.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
9.16 CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that Borrower, Lender and their respective agents have participated in the
preparation hereof.
-36-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers or
other representatives, as of the date first above written.
LENDER:
PETRA MEZZANINE FUND, L.P.
By: Petra Partners, LLC, its general partner
By: /s/ Xxxxxx X. X'Xxxxx, III
------------------------------------
Xxxxxx X. X'Xxxxx, III,
Managing Member
BORROWER:
FIND/SVP, INC.
By: /s/ Xxxxx Xxxxx
----------------------------------------
Title: Chief Executive Officer
-37-
INDEX OF EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment of Life Insurance
Exhibit B Form of Note
Exhibit C Form of Security Agreement
Exhibit D Form of Stock Purchase Warrant
Exhibit E Form of Opinion
Schedule 3.2 Capitalization
Schedule 3.6 Investments (including Investments in Subsidiaries)
Schedule 3.7 Trademarks and Patents
Schedule 3.8 Additional Borrowings
Schedule 3.9 Indebtedness and Liens
Schedule 3.12 Litigation
Schedule 3.17 Related Party Transactions
Schedule 3.19 Significant Contracts
Schedule 3.20 Employee Benefit Plans
-38-
