Exhibit 10.2
December 31, 2002
Fleet National Bank
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. X'Xxxxx
Senior Workout Officer
Bank of America, N.A.
0000 Xxxxxxx Xxxxxxx
0xx Xxxxx
XX0-000-00-00
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Managing Director
RE: JUNIOR CREDIT PARTICIPATION AGREEMENT
Gentlemen:
Reference is made to the Second Amended and Restated Credit Agreement
between, on one hand, Nextera Enterprises, Inc., a Delaware corporation (the
"Company"), and on the other hand, Fleet National Bank, as agent ("Agent") for
itself and the other lenders party thereto (the "Lenders"), dated as of December
31, 2002 (the "Credit Agreement"), together with any other agreements,
supplements, documents and instruments relating thereto or executed in
connection therewith, all as from time to time amended and supplemented
(collectively, the "Credit Documents").
The undersigned, Knowledge Universe, Inc., a Delaware corporation with
an address at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000
("Junior Credit Participant"), has requested that Agent and Lenders sell to
Junior Credit Participant a Junior Credit Participation (as hereinafter defined)
in the advances, loans and other financial accommodations presently outstanding
and which may hereafter be extended by Agent and Lenders to Company, pursuant to
the Credit Documents and all other indebtedness now or hereafter owed by Company
to Agent and Lenders in connection therewith or otherwise, and Agent and Lenders
have agreed to do so, all on the terms and conditions hereinafter set forth.
In consideration of these premises, the mutual covenants herein
contained and for other valuable consideration, Junior Credit Participant hereby
agrees with Agent and Lenders as follows:
1. Certain Defined Terms.
(a) "Obligations" as used in this Agreement shall mean
and include, without limitation, the advances, loans
and other financial accommodations and all other
obligations and liabilities now or hereafter owed by
Company to Agent and Lenders under the Credit
Documents or otherwise, whether direct or indirect
and whether fixed or contingent, and shall also
include interest or charges accruing after the filing
of a bankruptcy petition or similar proceeding,
whether or not such interest or charges are
recoverable from the Company.
(b) "Paid in Full", "Payment in Full", "Repaid in Full",
or "Repayment in Full" or any similar terms when used
in connection with the Obligations shall mean the
final indefeasible payment in full of such
Obligations in cash or immediately available funds
and termination of all lending commitments or, in the
case of Obligations consisting of contingent
obligations in respect of letters of credit, bankers'
acceptances or other reimbursement or payment type
guaranties under the Credit Documents, the setting
apart of cash sufficient to discharge such portion of
the Obligations in an account for the exclusive
benefit of the holders thereof, in which such holders
shall be granted a first priority perfected security
interest which shall have been retained by Agent and
Lenders, in each case, for a period of time in excess
of all applicable preference or other similar periods
under the U.S. Bankruptcy Code and other applicable
insolvency laws, state or Federal.
(c) "Permitted Cash Payment Conditions" shall mean, as to
each particular Permitted Cash Payment, each of the
following:
(i) immediately before and after giving effect
to any Permitted Cash Payment there is no
Default or Event of Default which has
occurred and is continuing under any Credit
Document;
(ii) for any period, such Permitted Cash Payment
shall be payable no sooner than the day that
the subject funds are received by the Agent
in immediately available funds (or, if
later, the day that such funds become
immediately available) and shall be paid
promptly after the Lenders' receipt of any
and all payments of principal and interest
owing to them for the same period;
(iii) the Company shall have delivered to the
Lenders a written certificate (together with
independent written evidence) signed by the
Chief Financial Officer of the Company which
certifies that the Company is in compliance
with the Investment Banking Benchmarks set
forth in Section 5.3 of the Second Amended
and Restated Credit Agreement dated as of
December 31, 2002 and due to be completed on
or before the scheduled date of such
Permitted Cash Payment; and
(iv) the Company shall be in compliance with all
financial and other covenants and provisions
to be performed or observed by it under any
Credit Document immediately before and after
giving effect to any such Permitted Cash
Payment.
(d) Other Terms. Capitalized terms not otherwise defined
herein shall have the respective meanings assigned to
them in the Credit Documents.
2. Sale and Purchase of Junior Credit Participation. Junior Credit
Participant hereby agrees to purchase, and does hereby purchase, from Agent and
Lenders and Agent and Lenders hereby agree to sell, and do hereby sell, to
Junior Credit Participant an undivided Junior Credit Participation of Five
Million Dollars ($5,000,000) Dollars (the "Junior Credit Participation") in the
Obligations and in the property, security interests and/or guarantees received
by Agent and Lenders as security for the Obligations (the "Collateral"), and in
all moneys received by Agent and Lenders on account of the Obligations and/or as
proceeds of the Collateral (the "Collections"), except as hereinafter provided.
Receipt of the purchase price of the Junior Credit Participation is acknowledged
by Agent and Lenders. Agent and Lenders have provided to Junior Credit
Participant a Participation Certificate in the form attached hereto as Exhibit
A.
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3. Application of Proceeds. Agent and Lenders may apply all or any part
of the proceeds of the Collateral, payments received from Company and credits
for Company's account to all or any part of the Obligations and in such order as
Agent and Lenders may elect in Agent's and Lenders' sole and absolute
discretion, except that unless an Event of Default has occurred under the Credit
Agreement or any Credit Document, Agent and Lenders shall not amend Section 5.3
of the Credit Agreement (dealing with distributions upon the occurrence of one
or more Transactions (as defined in the Credit Agreement)) without the prior
written consent of the Junior Credit Participant. Specifically, and without
limitation of the foregoing, Junior Credit Participant acknowledges that Agent
and Lenders may, and intend to, apply the proceeds of the Collateral, in the
event of a liquidation or other disposition of the Collateral after the
occurrence of an Event of Default under the Credit Agreement or any Credit
Document, first to the portion of the Loans not sold to Junior Credit
Participant; accordingly, the effect of this Agreement is to subordinate Junior
Credit Participant's interests in the Obligations to Agent's and Lenders'
interests in all of the Obligations upon the occurrence of an Event of Default,
and Junior Credit Participant acknowledges and agrees to the same.
4. Freedom of Dealing. It is understood and agreed by Junior Credit
Participant that, in Agent's and Lenders' sole and absolute discretion, Agent
and Lenders may continue to extend additional advances, loans and other
financial accommodations to Company, including, without limitation, after
default and/or commencement and during the continuation of any case under the
U.S. Bankruptcy Code with respect to Company ("Post-Petition Advances") and the
Junior Credit Participation shall be subject and subordinate to such
Post-Petition Advances and in the security therefor on the same terms and
conditions as are set forth herein.
5. Reservation of Rights. Agent and Lenders shall have the sole right
to manage, perform, modify, restructure, extend, supplement and enforce the
Credit Documents, Obligations and the Collateral, and to waive, discharge,
exercise and enforce all privileges, rights and remedies exercisable or
enforceable by Agent and Lenders thereunder, for the joint benefit of Agent and
Lenders and Junior Credit Participant, in accordance with Agent's and Lenders'
sole and absolute discretion and the exercise of Agent's and Lenders' business
judgment, and without charge to Junior Credit Participant for any costs or
expenses incurred by Agent and Lenders in connection therewith; provided,
however, that Junior Credit Participant shall pay its pro rata share of any
out-of-pocket expenses (including, without limitation, the fees and expenses of
Agent's and Lenders' counsel) of recovery, defense and enforcement of the
Obligations and the Collateral which exceeds the amount recovered from Company
or from the Collateral or otherwise for Company's account ONLY if as to such
expenses any of the following conditions apply: (A) such expenses may be
satisfied out of Collateral liquidations, payments or other recoveries later
received (or reserved for such purpose) on the Obligations in accordance with
Section 3 above, or (B) such expenses were incurred at Junior Credit
Participant's request, or (C) such expenses were incurred on account of any
action or threat of action, or breach of any obligation to the Agent or the
Lenders with respect to the Obligations or the Credit Documents, by Junior
Credit Participant or any affiliate or representative thereof. Agent and Lenders
will use normal prudence and business judgment in handling the collection and
enforcement of the Obligations and realization upon the Collateral, but shall
not be liable to Junior Credit Participant for any action taken or omitted to be
taken in good faith or on the written advice of counsel. With respect to any
actions or inaction taken by Agent and Lenders in good faith or on the written
advice of counsel, Junior Credit Participant expressly releases Agent and
Lenders from any and all liability and responsibility (express or implied), for
any loss, depreciation of or delay in collecting or failing to realize on any
Collateral, the Obligations or any guaranties therefor and for any mistake,
omission or error in judgment in passing upon or accepting any Collateral or in
making examinations or audits or for granting indulgences or extensions to
Company, any account debtor or any guarantor. Junior Credit Participant hereby
pledges, assigns and grants to Agent and Lenders any right it may have to seek
recovery on account of the Junior Credit Participation, including, without
limitation, any right to commence litigation, vote to accept or reject a Chapter
11 plan or to otherwise vote on or direct any part of any bankruptcy case or any
similar proceeding affecting the Obligations.
6. No Representations or Warranties. Agent and Lenders make no
representation or warranty (express or implied) and shall have no
responsibility, as to the validity, value, enforceability or
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collectibility of the Obligations or the Credit Documents, or as to the title
to, validity, priority, value, perfection or sufficiency of the Collateral, or
any other guarantees or collateral of any kind, or as to the financial condition
of Company or any account debtors. Junior Credit Participant is thoroughly
familiar with and has complete and current information concerning the financial
condition and creditworthiness of Company.
7. Independent Credit Decision. Junior Credit Participant acknowledges
that it has received and reviewed copies of all of the Credit Documents. Agent
and Lenders may, from time to time, in Agent's and Lenders' discretion and
without notice to or consent of Junior Credit Participant, amend, modify, renew
and/or release in whole or in part the Obligations, the Credit Documents, the
Collateral and any guaranties therefor, as well as extend advances, loans and
other financial accommodations to Company in excess of any formulas under the
Credit Documents, without notice to or the consent of Junior Credit Participant.
Agent and Lenders shall, from time to time, furnish Junior Credit Participant
with copies of such other papers and documents relating to the Obligations and
the Collateral and with statements describing the status of the Obligations and
the Collateral, as Junior Credit Participant may reasonably request, but it is
expressly agreed that Junior Credit Participant shall have no access and no
right to review, examine, or audit Agent's and Lenders' books, records, and
accounts relating to the Obligations or the Company, except for copies of the
Credit Documents as the Junior Credit Participant may request.
8. Distributions. Interest shall accrue from the date hereof on the
outstanding principal on the Junior Credit Participation at a rate equal to ten
percent (10%) per annum, compounded monthly, based on the calendar year, but in
no case shall the interest rate exceed the maximum rate allowed by law. The
Company may make and the Junior Credit Participant may receive and retain on a
current cash basis payments of accrued interest and principal repayment on the
Junior Credit Participation (the "Permitted Cash Payments") in accordance with
the terms and conditions of this Junior Credit Participation Agreement, so long
as the Permitted Cash Payment Conditions are and shall continue to be satisfied.
Such Permitted Cash Payments shall be in an amount equal to the accrued,
scheduled, mandatory cash payments of principal and interest on the Junior
Credit Participation in accordance with the terms and conditions of this Junior
Credit Participation Agreement, including, without limitation, subordination
terms; provided, however, that Permitted Cash Payments on account of (i)
principal, shall not exceed $73,529 per month at any time; and (ii) interest,
for any period, shall not exceed interest at an annual rate in excess of the
rate of interest actually paid to the Lenders for the same period (without
respect to the rate of interest charged after the occurrence of a Default or
Event of Default under the Credit Documents); and provided, further, that
interest at a greater rate may PIK for later payment in cash after all of the
Loans owing to the Agent and Lenders have been Repaid in Full in cash. The
Company shall not be entitled to make-up payments that are disallowed as a
result of this Section 8; rather, any such disallowed payment shall be paid
directly to the Lenders as a permanent additional prepayment of the
then-outstanding Loans in such manner and order as Agent and Lenders deem
appropriate in their sole and absolute discretion. Notwithstanding the
foregoing, after termination of the Credit Documents and Payment in Full to
Agent and Lenders of Agent's and Lenders' share and the shares of Agent's and
Lenders' other senior participants in all principal and interest on the
Obligations and the other items chargeable to Company's account and due to Agent
and Lenders (including, without limitation, attorneys' fees and legal expenses),
Agent and Lenders remit to Junior Credit Participant any monies or other payment
actually received by them that remain following such Payment in Full on the
Obligations.
9. Subordinated Status.
(a) Junior Credit Participant's Junior Credit
Participation in the Obligations, the Collateral and
the Collections is in all respects junior and
subordinate to Agent's and Lenders' interests and
those of Agent's and Lenders' other senior
participants (if any) therein, and accordingly Agent
and Lenders and such other senior participants shall
first be Repaid in Full all of Agent's and Lenders'
respective shares in the Obligations (including,
without limitation, indebtedness of Company to Agent
and Lenders, Post-Petition Advances and all charges,
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commissions, interest, costs, expenses and attorney's
fees chargeable to Company in connection with the
Obligations or the Collateral) prior to any repayment
of all or any part of the Junior Credit Participation
(except only for Permitted Cash Payments on Junior
Credit Participant's interest in the Obligations, as
provided above).
(b) All Collections received shall be applied first to
the payment of all costs and expenses incurred in
effecting such Collections (including, without
limitation, any costs, expenses, attorneys' fees and
charges relating to the Obligations, Collateral and
Collections), then to the unpaid balance of all
Obligations, in such amount and/or order as Agent and
Lenders elect in Agent's and Lenders' sole and
absolute discretion, such Collections to be first
retained and applied by Agent and Lenders until
Repayment in Full of the principal of and interest on
Agent's and Lenders' share and the shares of Agent's
and Lenders' other senior participants in all such
Obligations (except only for Permitted Cash Payments
on Junior Credit Participant's interest in the
Obligations, as provided above) and, except to the
extent any order of any court provides otherwise,
after termination of the Credit Documents, any
surplus to be remitted to Junior Credit Participant.
(c) The Obligations, the Collateral and the Collections
thereon shall be held by Agent and Lenders in Agent's
and Lenders' own name, but, to the extent of Junior
Credit Participant's junior interest therein, as
agent and trustee for Junior Credit Participant and
subject to Junior Credit Participant's rights with
respect thereto as herein set forth. Agent and
Lenders do not assume, have made no warranties and
shall not have (except only for the contractual
obligations specifically set forth herein) any
fiduciary obligations or duties or other liability to
Junior Credit Participant for the repayment of the
Junior Credit Participation or any interest
equivalent thereon.
(d) The Junior Credit Participation may not be re-sold,
sub-participated, assigned, pledged or otherwise
disposed of by Junior Credit Participant. Junior
Credit Participant hereby represents and warrants
that no portion of the proceeds of the Obligations
has been advanced to or for the account of Junior
Credit Participant by Company, that no portion of
Junior Credit Participant's payment to Agent and
Lenders for the Junior Credit Participation
represents, directly or indirectly, any proceeds of
the Obligations and that this Agreement is valid,
binding and enforceable with respect to Junior Credit
Participant.
10. Assigned Interests. Upon Payment in Full of principal, interest and
charges with respect to Agent's and Lenders' interest and of Agent's and
Lenders' other senior participants in the Obligations and termination of the
Credit Documents, Agent and Lenders agree to assign to Junior Credit Participant
all Collateral for the Obligations and Agent's and Lenders' rights with respect
thereto without representations, warranties or recourse of any kind or nature
whatsoever.
11. Administrative Charges. Notwithstanding anything to the contrary
contained in this Agreement, Junior Credit Participant shall not share in and
Agent and Lenders shall retain as Agent's and Lenders' sole property and for
Agent's and Lenders' exclusive benefit all interest charges, commissions and
fees and administrative, handling and service charges with respect to the
Obligations and the Collateral (except only for Permitted Cash Payments on
Junior Credit Participant's interest in the Obligations, as provided above).
12. Waiver of Jury Trial. JUNIOR CREDIT PARTICIPANT, AGENT AND LENDERS
EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
IN CONNECTION WITH THIS JUNIOR CREDIT PARTICIPATION AGREEMENT AND FURTHER HEREBY
WAIVES ANY RIGHT OF OFFSET OR RIGHT TO INTERPOSE ANY COUNTERCLAIM IN ANY SUCH
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ACTION. EACH OF THE PARTIES HERETO EXPRESSLY SUBMITS IN ADVANCE TO THE
NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF SUFFOLK COUNTY IN THE
COMMONWEALTH OF MASSACHUSETTS AND THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MASSACHUSETTS IN ANY ACTION OR PROCEEDING RELATING TO ANY CLAIM,
DISPUTE OR OTHER MATTER PERTAINING DIRECTLY OR INDIRECTLY TO THIS JUNIOR CREDIT
PARTICIPATION AGREEMENT.
13. Notices. All notices hereunder by Agent and Lenders to Junior
Credit Participant shall be deemed given if addressed to Junior Credit
Participant, at its address set forth above and sent by registered or certified
mail, return receipt requested, or sent by telex or telecopy. All notices
hereunder by Junior Credit Participant to Agent and Lenders shall be deemed
given if addressed to Agent and Lenders at Agent's and Lenders' address set
forth above and directed to the attention of Xxxxxxx X. X'Xxxxx, Senior Workout
Officer, and delivered by certified or registered mail, return receipt
requested, or by telex or telecopy.
14. Headings. The Section headings in this Junior Credit Participation
Agreement are for convenience of reference only and shall not be deemed to alter
or affect the meaning or interpretation of any of the provisions hereof.
15. Severability. If any provision of this Junior Credit Participation
Agreement shall for any reason be held to be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this Junior Credit Participation Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
16. Effective Date. This Junior Credit Participation Agreement shall be
effective upon the receipt by Agent of a counterpart hereof execution by or on
behalf of Lenders, Junior Credit Participant and Company.
17. Amendments. This Junior Credit Participation Agreement (a) may not
be amended, modified or terminated orally or by any course of dealing, except an
agreement in writing signed by Agent and Lenders and Junior Credit Participant,
(b) shall remain in full force and effect until all Obligations and
Post-Petition Advances are Paid in Full and the Credit Documents are terminated,
unless, prior thereto, Agent and Lenders, in Agent's and Lenders' discretion,
determine to repurchase the Junior Credit Participation, (c) shall be binding
upon and inure to the benefit of the respective legal representatives,
executors, heirs, administrators, successors and assigns of the parties hereto
and shall be governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, and (d) may be executed in counterparts, all of
which shall constitute a complete agreement.
IN WITNESS WHEREOF, Junior Credit Participant has executed this
instrument under seal as of this 31st day of December, 2002.
KNOWLEDGE UNIVERSE, INC.,
as Junior Credit Participant
By: /s/ XXXXXXX X. XXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Secretary
ACCEPTED AND AGREED TO:
FLEET NATIONAL BANK
By: /s/ X. X. X'XXXXX
---------------------------------
Name:
Title:
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BANK OF AMERICA, N.A.
By: /s/ XXXXXXX X. XXXXXXX
---------------------------------
Name:
Title:
CONSENTED TO:
NEXTERA ENTERPRISES, INC.
By: /s/ XXXXXXX X. XXXXXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: CFO
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