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LOAN AND SECURITY AGREEMENT
BY AND AMONG
SCB COMPUTER TECHNOLOGY, INC.
AND
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
AS BORROWERS,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS ARRANGER AND ADMINISTRATIVE AGENT
DATED AS OF JULY 23, 2001
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION...................................................................... 1
1.1 Definitions................................................................................... 1
1.2 Accounting Terms.............................................................................. 24
1.3 Code.......................................................................................... 24
1.4 Construction.................................................................................. 24
1.5 Schedules and Exhibits........................................................................ 25
2. LOAN AND TERMS OF PAYMENT......................................................................... 25
2.1 Revolver Advances............................................................................. 25
2.2 Term Loan..................................................................................... 26
2.3 Borrowing Procedures and Settlements.......................................................... 27
2.4 Payments...................................................................................... 33
2.5 Overadvances.................................................................................. 36
2.6 Interest Rates: Rates, Payments, and Calculations............................................. 36
2.7 Cash Management............................................................................... 37
2.8 Crediting Payments; Float Charge.............................................................. 38
2.9 Designated Account............................................................................ 38
2.10 Maintenance of Loan Account; Statements of Obligations........................................ 38
2.11 Fees.......................................................................................... 39
2.12 Capital Requirements.......................................................................... 39
2.13 Joint and Several Liability of Borrowers...................................................... 40
3. CONDITIONS; TERM OF AGREEMENT..................................................................... 42
3.1 Conditions Precedent to the Initial Extension of Credit....................................... 42
3.2 Conditions Subsequent to the Initial Extension of Credit...................................... 46
3.3 Conditions Precedent to all Extensions of Credit.............................................. 46
3.4 Term.......................................................................................... 46
3.5 Effect of Termination......................................................................... 46
3.6 Early Termination by Borrowers................................................................ 47
4. CREATION OF SECURITY INTEREST..................................................................... 47
4.1 Grant of Security Interest.................................................................... 47
4.2 Negotiable Collateral......................................................................... 47
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral........................ 48
4.4 Delivery of Additional Documentation Required................................................. 48
4.5 Power of Attorney............................................................................. 48
4.6 Right to Inspect.............................................................................. 49
4.7 Control Agreements............................................................................ 49
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5. REPRESENTATIONS AND WARRANTIES.................................................................... 49
5.1 No Encumbrances............................................................................... 49
5.2 Eligible Accounts; Eligible Unbilled Accounts................................................. 49
5.3 Equipment..................................................................................... 51
5.4 Location of Inventory and Equipment........................................................... 51
5.5 Inventory Records............................................................................. 51
5.6 Location of Chief Executive Office; FEIN...................................................... 51
5.7 Due Organization and Qualification; Subsidiaries.............................................. 51
5.8 Due Authorization; No Conflict................................................................ 52
5.9 Litigation.................................................................................... 53
5.10 No Material Adverse Change.................................................................... 53
5.11 Fraudulent Transfer........................................................................... 53
5.12 Employee Benefits............................................................................. 54
5.13 Environmental Condition....................................................................... 54
5.14 Brokerage Fees................................................................................ 54
5.15 Intellectual Property......................................................................... 54
5.16 Leases........................................................................................ 54
5.17 DDAs.......................................................................................... 54
5.18 Complete Disclosure........................................................................... 55
5.19 Indebtedness.................................................................................. 55
5.20 Inactive Guarantors........................................................................... 55
6. AFFIRMATIVE COVENANTS............................................................................. 55
6.1 Accounting System............................................................................. 55
6.2 Collateral Reporting.......................................................................... 55
6.3 Financial Statements, Reports, Certificates................................................... 57
6.4 Guarantor Reports............................................................................. 59
6.5 Return........................................................................................ 59
6.6 Maintenance of Properties..................................................................... 59
6.7 Taxes......................................................................................... 59
6.8 Insurance..................................................................................... 60
6.9 Location of Inventory and Equipment........................................................... 60
6.10 Compliance with Laws.......................................................................... 61
6.11 Leases........................................................................................ 61
6.12 Brokerage Commissions......................................................................... 61
6.13 Existence..................................................................................... 61
6.14 Environmental................................................................................. 61
6.15 Disclosure Updates............................................................................ 61
7. NEGATIVE COVENANTS................................................................................ 62
7.1 Indebtedness.................................................................................. 62
7.2 Liens......................................................................................... 62
7.3 Restrictions on Fundamental Changes........................................................... 62
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7.4 Disposal of Assets............................................................................ 63
7.5 Change Name................................................................................... 63
7.6 Guarantee..................................................................................... 63
7.7 Nature of Business............................................................................ 63
7.8 Prepayments and Amendments.................................................................... 63
7.9 Change of Control............................................................................. 64
7.10 Consignments.................................................................................. 64
7.11 Distributions................................................................................. 64
7.12 Accounting Methods............................................................................ 64
7.13 Investments................................................................................... 64
7.14 Transactions with Affiliates.................................................................. 65
7.15 Suspension.................................................................................... 65
7.16 Reserved...................................................................................... 65
7.17 Use of Proceeds............................................................................... 65
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees............ 65
7.19 Securities Accounts........................................................................... 65
7.20 Financial Covenants........................................................................... 65
7.21 Inactive Guarantors........................................................................... 66
7.22 Partners Capital Group........................................................................ 67
8. EVENTS OF DEFAULT................................................................................. 67
9. THE LENDER GROUP'S RIGHTS AND REMEDIES............................................................ 69
9.1 Rights and Remedies........................................................................... 69
9.2 Remedies Cumulative........................................................................... 71
10. TAXES AND EXPENSES................................................................................ 71
11. WAIVERS; INDEMNIFICATION.......................................................................... 71
11.1 Demand; Protest; etc.......................................................................... 71
11.2 The Lender Group's Liability for Collateral................................................... 72
11.3 Indemnification............................................................................... 72
12. NOTICES........................................................................................... 72
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................................................ 73
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS........................................................ 74
14.1 Assignments and Participations................................................................ 74
14.2 Successors.................................................................................... 77
15. AMENDMENTS; WAIVERS............................................................................... 77
15.1 Amendments and Waivers........................................................................ 77
15.2 Replacement of Holdout Lender................................................................. 78
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15.3 No Waivers; Cumulative Remedies............................................................... 78
16. AGENT; THE LENDER GROUP........................................................................... 79
16.1 Appointment and Authorization of Agent........................................................ 79
16.2 Delegation of Duties.......................................................................... 79
16.3 Liability of Agent............................................................................ 80
16.4 Reliance by Agent............................................................................. 80
16.5 Notice of Default or Event of Default......................................................... 80
16.6 Credit Decision............................................................................... 81
16.7 Costs and Expenses; Indemnification........................................................... 81
16.8 Agent in Individual Capacity.................................................................. 82
16.9 Successor Agent............................................................................... 82
16.10 Lender in Individual Capacity................................................................. 83
16.11 Withholding Taxes............................................................................. 83
16.12 Collateral Matters............................................................................ 85
16.13 Restrictions on Actions by Lenders; Sharing of Payments....................................... 86
16.14 Agency for Perfection......................................................................... 86
16.15 Payments by Agent to the Lenders.............................................................. 86
16.16 Concerning the Collateral and Related Loan Documents.......................................... 87
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information................................................................. 87
16.18 Several Obligations; No Liability............................................................. 88
16.19 Legal Representation of Agent................................................................. 88
17. GENERAL PROVISIONS................................................................................ 89
17.1 Effectiveness................................................................................. 89
17.2 Section Headings.............................................................................. 89
17.3 Interpretation................................................................................ 89
17.4 Severability of Provisions.................................................................... 89
17.5 Amendments in Writing......................................................................... 89
17.6 Counterparts; Telefacsimile Execution......................................................... 89
17.7 Revival and Reinstatement of Obligations...................................................... 89
17.8 Integration................................................................................... 90
17.9 Parent as Agent for Borrowers................................................................. 90
18. ISSUANCE OF EQUITY INTERESTS TO FOOTHILL.......................................................... 90
18.1 Authorization and Issuance of Warrants........................................................ 90
18.2 Securities Act Matters........................................................................ 91
18.3 Certain Taxes................................................................................. 92
18.4 Cancellation and Issuance..................................................................... 92
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is
entered into as of July 23, 2001, between and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL
CORPORATION, a California corporation, as the arranger and administrative agent
for the Lenders ("Agent"), and, on the other hand, SCB COMPUTER TECHNOLOGY,
INC., a Tennessee corporation ("Parent"), and each of Parent's Subsidiaries
identified on the signature pages hereof (such Subsidiaries, together with
Parent, are referred to hereinafter each individually as a "Borrower", and
individually and collectively, jointly and severally, as the "Borrowers").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, chattel paper,
or a General Intangible.
"Accounts" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"Additional Documents" has the meaning set forth in Section
4.4.
"Administrative Borrower" has the meaning set forth in Section
17.9.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agent" means Foothill, solely in its capacity as agent for
the Lenders hereunder, and any successor thereto.
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"Agent's Account" means an account at a bank designated by
Agent from time to time as the account into which Borrowers shall make all
payments to Agent for the benefit of the Lender Group and into which the Lender
Group shall make all payments to Agent under this Agreement and the other Loan
Documents; unless and until Agent notifies Administrative Borrower and the
Lender Group to the contrary, Agent's Account shall be that certain deposit
account bearing account number 323-266193 and maintained by Agent with The Chase
Manhattan Bank, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA
#000000000.
"Agent Advances" has the meaning set forth in Section
2.3(e)(i).
"Agent's Liens" means the Liens granted by Borrowers to Agent
for the benefit of the Lender Group under this Agreement or the other Loan
Documents.
"Agent-Related Persons" means Agent together with its
Affiliates, officers, directors, employees, and agents.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of
termination under Section 3.6, an amount equal to (a) during the period of time
from and after the date of the execution and delivery of this Agreement up to
the date that is the first anniversary of the Closing Date, 5% times the sum of
(i) the Maximum Revolver Amount, plus (ii) the Term Loan Amount on the date
immediately prior to the date of termination, (b) during the period of time from
and including the date that is the first anniversary of the Closing Date up to
the date that is the second anniversary of the Closing Date, 4% times the sum of
(i) the Maximum Revolver Amount, plus (ii) the Term Loan Amount on the date
immediately prior to the date of termination, (c) during the period of time from
and including the date that is the second anniversary of the Closing Date up to
the date that is the third anniversary of the Closing Date, 3% times the sum of
(i) the Maximum Revolver Amount, plus (ii) the Term Loan Amount on the date
immediately prior to the date of termination, (d) during the period of time from
and including the date that is the third anniversary of the Closing Date up to
the date that is the fourth anniversary of the Closing Date, 2% times the sum of
(i) the Maximum Revolver Amount, plus (ii) the Term Loan Amount on the date
immediately prior to the date of termination, and (e) during the period of time
from and including the date that is the fourth anniversary of the Closing Date
up to the Maturity Date, 1% times the sum of (i) the Maximum Revolver Amount,
plus (ii) the Term Loan Amount on the date immediately prior to the date of
termination.
"Assignee" has the meaning set forth in Section 14.1.
"Assignment and Acceptance" means an Assignment and Acceptance
in the form of Exhibit A-1.
"Authorized Person" means any officer or other employee of
Administrative Borrower.
"Availability" means, as of any date of determination, if such
date is a Business Day, and as of the close of business on the immediately
preceding Business Day, if such date of
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determination is not a Business Day, the amount that Borrowers are entitled to
borrow as Advances under Section 2.1 (after giving effect to all then
outstanding Obligations and all sublimits and reserves applicable hereunder).
"Bankruptcy Code" means the United States Bankruptcy Code, as
in effect from time to time.
"Base Rate" means, the rate of interest announced within Xxxxx
Fargo at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Xxxxx Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Xxxxx Fargo may designate.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA
Affiliate of any Borrower has been an "employer" (as defined in Section 3(5) of
ERISA) within the past six years.
"Board of Directors" means the board of directors (or
comparable managers) of Parent or any committee thereof duly authorized to act
on behalf thereof.
"Books" means all of each Borrower's now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of its Records relating to its business operations or financial condition,
and all of its goods or General Intangibles related to such information).
"Borrower" and "Borrowers" have the respective meanings set
forth in the preamble to this Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances
(or term loans, in the case of the Term Loan) made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of an Agent Advance, in each case, to
Administrative Borrower.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Borrowing Base Certificate" means a certificate in the form
of Exhibit B-1.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"Capital Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness
represented by obligations under a Capital Lease.
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"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Xxxxx'x,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Xxxxx'x, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Xxxxx'x, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Bank" has the meaning set forth in Section
2.7(a).
"Cash Management Account" has the meaning set forth in Section
2.7(a).
"Cash Management Agreements" means those certain cash
management service agreements, in form and substance satisfactory to Agent, each
of which is among Administrative Borrower, Agent, and one of the Cash Management
Banks.
"Change of Control" means (a) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 10%, or more, of the Stock of
Parent having the right to vote for the election of members of the Board of
Directors, or (b) a majority of the members of the Board of Directors do not
constitute Continuing Directors, or (c) any Borrower ceases to directly own and
control 100% of the outstanding capital Stock of each of its Subsidiaries extant
as of the Closing Date.
"Closing Date" means the date of the making of the initial
Advance (or other extension of credit) hereunder.
"Closing Date Business Plan" means the set of Projections of
Borrowers for the 3 year period following the Closing Date (on a year by year
basis, and for the 1 year period following the Closing Date, on a month by month
basis), in form and substance (including as to scope and underlying assumptions)
satisfactory to Agent.
"Code" means the Uniform Commercial Code, as in effect from
time to time in the State of New York.
"Collateral" means all of each Borrower's now owned or
hereafter acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
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(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Honeywell Collateral,
(i) money or other assets of each such Borrower
that now or hereafter come into the possession, custody, or control of
any member of the Lender Group, and
(j) the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all Accounts, Books,
Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, Honeywell Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting
from the sale, exchange, collection, or other disposition of any of the
foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"Collateral Access Agreement" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds and tax refunds) of Borrowers.
"Commitment" means, with respect to each Lender, its Revolver
Commitment, its Term Loan Commitment, or its Total Commitment, as the context
requires, and, with respect to all Lenders, their Revolver Commitments, their
Term Loan Commitments, or their Total Commitments, as the context requires, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 14.1.
"Common Stock" means shares of the common capital stock of
Parent.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 delivered by the chief financial officer of Parent to
Agent.
"Continuing Director" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Parent on the Closing
Date, and (b) any individual who becomes a member of the Board of Directors
after the Closing Date if such individual was
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appointed or nominated for election to the Board of Directors by a majority of
the Continuing Directors, but excluding any such individual originally proposed
for election in opposition to the Board of Directors in office at the Closing
Date in an actual or threatened election contest relating to the election of the
directors (or comparable managers) of Parent (as such terms are used in Rule
14a-11 under the Exchange Act) and whose initial assumption of office resulted
from such contest or the settlement thereof.
"Contribution Agreement" means that certain Contribution
Agreement, dated as of the date hereof, among Borrowers and Guarantors, in form
and substance satisfactory to Agent.
"Control Agreement" means a control agreement, in form and
substance satisfactory to Agent, executed and delivered by the applicable
Borrower, Agent, and the applicable securities intermediary with respect to a
Securities Account or a bank with respect to a deposit account.
"Daily Balance" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account
maintained by any Borrower.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any
Advance (or other extension of credit) that it is required to make hereunder on
the date that it is required to do so hereunder.
"Defaulting Lender Rate" means (a) the Base Rate for the first
3 days from and after the date the relevant payment is due, and (b) thereafter,
at the interest rate then applicable to Advances (inclusive of the Revolver
Margin applicable thereto).
"Designated Account" means account number 102185074 of
Administrative Borrower maintained with the Designated Account Bank, or such
other deposit account of Administrative Borrower (located within the United
States) that has been designated as such, in writing, by Administrative Borrower
to Agent.
"Designated Account Bank" means First Tennessee Bank National
Association, whose office is located at 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx
00000, Attention: Metropolitan Division, and whose ABA number is 000000000.
"Dilution" means, as of any date of determination, a
percentage, based upon the experience of the immediately prior 90 days, that is
the result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrowers' Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).
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"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed
and delivered by Administrative Borrower to Agent regarding the extensions of
credit to be made on the Closing Date, the form and substance of which is
satisfactory to Agent.
"Dollars" or "$" means United States dollars.
"Due Diligence Letter" means the due diligence letter sent by
Agent's counsel to Administrative Borrower, together with Administrative
Borrower's completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.
"EBITDA" means, with respect to any fiscal period, Parent's
and its Subsidiaries (other than Partners Capital Group) consolidated net
earnings (or loss), minus extraordinary gains, plus interest expense, income
taxes, and depreciation and amortization for such period, as determined in
accordance with GAAP.
"Eligible Accounts" means those Accounts created by one of
Borrowers in the ordinary course of its business, that arise out of its sale of
goods or rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; provided, however, that such criteria may be fixed
and revised from time to time by Agent in Agent's Permitted Discretion to
address the results of any audit performed by Agent from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash remitted to Borrowers.
Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed
to pay within 90 days of original invoice date or Accounts with payment
terms of more than 30 days, provided, however, that Accounts for which
the Account Debtor is Xxxxxxx Chemical Company shall be included in
Eligible Accounts to the extent that such Accounts have payment terms
of not more than 45 days,
(b) Accounts owed by an Account Debtor (or its
Affiliates) where 50% or more of all Accounts owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a)
above,
(c) Accounts with respect to which the Account
Debtor is an employee, Affiliate, or agent of any Borrower,
(d) Accounts arising in a transaction wherein
goods are placed on consignment or are sold pursuant to a guaranteed
sale, a sale or return, a sale on approval, a xxxx and hold, or any
other terms by reason of which the payment by the Account Debtor may be
conditional,
(e) Accounts that are not payable in Dollars,
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(f) Accounts with respect to which the Account
Debtor either (i) does not maintain its chief executive office in the
United States, or (ii) is not organized under the laws of the United
States or any state thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency,
public corporation, or other instrumentality thereof, unless (y) the
Account is supported by an irrevocable letter of credit satisfactory to
Agent (as to form, substance, and issuer or domestic confirming bank)
that has been delivered to Agent and is directly drawable by Agent, or
(z) the Account is covered by credit insurance in form, substance, and
amount, and by an insurer, satisfactory to Agent,
(g) Accounts with respect to which the Account
Debtor is either (i) the United States or any department, agency, or
instrumentality of the United States (exclusive, however, of Accounts
with respect to which the applicable Borrower has complied, to the
reasonable satisfaction of Agent, with the Assignment of Claims Act, 31
USC ss. 3727), or (ii) any state of the United States (exclusive,
however, of (y) Accounts owed by any state that does not have a
statutory counterpart to the Assignment of Claims Act or (z) Accounts
owed by any state that does have a statutory counterpart to the
Assignment of Claims Act as to which the applicable Borrower has
complied to Agent's satisfaction),
(h) Accounts with respect to which the Account
Debtor is a creditor of any Borrower, has or has asserted a right of
setoff, has disputed its liability, or has made any claim with respect
to its obligation to pay the Account, to the extent of such claim,
right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor
whose total obligations owing to Borrowers exceed 10% of all Eligible
Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage, provided, however, that for (i) Accounts
with respect to which the Account Debtor is Federal Express Corporation
or Honeywell, Accounts of such Person shall not be included to the
extent that the total obligations owing by such Person to a Borrower
exceed 20% of all Eligible Accounts; and (ii) Accounts with respect to
which the Account Debtor is the State of Tennessee or the State of
Kentucky, Accounts of such Governmental Authority shall not be included
to the extent that the total obligations owing by such Governmental
Authority to a Borrower exceed 15% of all Eligible Accounts; provided
further, that, with respect to all Accounts of an Account Debtor
referred to in clauses (i) and (ii) of this subparagraph, Agent, in its
Permitted Discretion, remains satisfied with the credit quality of such
Account Debtor,
(j) Accounts with respect to which the Account
Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone
out of business, or as to which a Borrower has received notice of an
imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(k) Accounts with respect to which the Account
Debtor is located in the states of New Jersey, Minnesota, or West
Virginia (or any other state that requires a
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14
creditor to file a business activity report or similar document in
order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such
state), unless the applicable Borrower has qualified to do business in
New Jersey, Minnesota, West Virginia, or such other states, or has
filed a business activities report with the applicable division of
taxation, the department of revenue, or with such other state offices,
as appropriate, for the then-current year, or is exempt from such
filing requirement,
(l) Accounts, the collection of which, Agent, in
its Permitted Discretion, believes to be doubtful by reason of the
Account Debtor's financial condition,
(m) Accounts that are not subject to a valid and
perfected first priority Agent's Lien,
(n) Accounts with respect to which (i) the goods
giving rise to such Account have not been shipped or (ii) the services
giving rise to such Account have not been performed,
(o) Accounts that represent the right to receive
progress payments or other advance xxxxxxxx that are due prior to the
completion of performance by the applicable Borrower of the subject
contract for goods or services, or
(p) Accounts arising in a transaction in which a
Borrower must furnish a performance bond.
"Eligible Transferee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $3,000,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country and
which has total assets in excess of $3,000,000,000 provided that such bank is
acting through a branch or agency located in the United States, (c) a finance
company, insurance company, or other financial institution or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having (together with its Affiliates) total
assets in excess of $3,000,000,000 (d) any Affiliate (other than individuals) of
a Lender that was party hereto as of the Closing Date, (e) so long as no Event
of Default has occurred and is continuing, any other Person approved by Agent
and Administrative Borrower, and (f) during the continuation of an Event of
Default, any other Person approved by Agent.
"Eligible Unbilled Accounts" means those Unbilled Accounts
created by one of Borrowers in the ordinary course of its business, that arise
out of its sale of goods or rendition of services, that comply with each of the
representations and warranties respecting Eligible Unbilled Accounts made by
Borrowers under the Loan Documents, and that are not excluded as ineligible by
virtue of one or more of the criteria set forth below; provided, however, that
such criteria may be fixed and revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any audit performed by Agent from
time to time after the Closing Date. In determining the amount to be included,
Eligible Unbilled Accounts shall be calculated net of
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15
customer deposits and unapplied cash remitted to Borrowers. Eligible Unbilled
Accounts shall not include the following:
(a) Unbilled Accounts with respect to which more
than 15 days have elapsed from the end of the month in which the
services were performed,
(b) Unbilled Accounts owed by an Account Debtor
(or its Affiliates) where 50% or more of all Accounts owed by that
Account Debtor (or its Affiliates) are deemed ineligible under clause
(a) of the definition of Eligible Accounts,
(c) Unbilled Accounts with respect to which the
Account Debtor is an employee, Affiliate, or agent of any Borrower,
(d) Unbilled Accounts arising in a transaction
wherein goods are placed on consignment or are sold pursuant to a
guaranteed sale, a sale or return, a sale on approval, a xxxx and hold,
or any other terms by reason of which the payment by the Account Debtor
may be conditional,
(e) Unbilled Accounts that are not payable in
Dollars,
(f) Unbilled Accounts with respect to which the
Account Debtor either (i) does not maintain its chief executive office
in the United States, or (ii) is not organized under the laws of the
United States or any state thereof, or (iii) is the government of any
foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality
thereof, unless (y) the Unbilled Account is supported by an irrevocable
letter of credit satisfactory to Agent (as to form, substance, and
issuer or domestic confirming bank) that has been delivered to Agent
and is directly drawable by Agent, or (z) the Unbilled Account is
covered by credit insurance in form, substance, and amount, and by an
insurer, satisfactory to Agent,
(g) Unbilled Accounts with respect to which the
Account Debtor is either (i) the United States or any department,
agency, or instrumentality of the United States (exclusive, however, of
Unbilled Accounts with respect to which the applicable Borrower has
complied, to the reasonable satisfaction of Agent, with the Assignment
of Claims Act, 31 USC ss. 3727), or (ii) any state of the United States
(exclusive, however, of (y) Unbilled Accounts owed by any state that
does not have a statutory counterpart to the Assignment of Claims Act
or (z) Unbilled Accounts owed by any state that does have a statutory
counterpart to the Assignment of Claims Act as to which the applicable
Borrower has complied to Agent's satisfaction),
(h) Unbilled Accounts with respect to which the
Account Debtor is a creditor of any Borrower, has or has asserted a
right of setoff, has disputed its liability, or has made any claim with
respect to its obligation to pay the Unbilled Account, to the extent of
such claim, right of setoff, or dispute,
(i) Unbilled Accounts with respect to an Account
Debtor whose total obligations owing to Borrowers exceed 10% of all
Eligible Unbilled Accounts, to the
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16
extent of the obligations owing by such Account Debtor in excess of
such percentage, provided, however, that for (i) Unbilled Accounts with
respect to which the Account Debtor is Federal Express Corporation or
Honeywell, Unbilled Accounts of such Person shall not be included to
the extent that the total obligations owing by such Person to a
Borrower exceed 20% of all Eligible Unbilled Accounts; and (ii)
Unbilled Accounts with respect to which the Account Debtor is the State
of Tennessee or the State of Kentucky, Unbilled Accounts of such
Governmental Authority shall not be included to the extent that the
total obligations owing by such Governmental Authority to a Borrower
exceed 15% of all Eligible Unbilled Accounts; provided further, that,
with respect to all Unbilled Accounts of an Account Debtor referred to
in clauses (i) and (ii) of this subparagraph, Agent, in its Permitted
Discretion, remains satisfied with the credit quality of such Account
Debtor,
(j) Unbilled Accounts with respect to which the
Account Debtor is subject to an Insolvency Proceeding, is not Solvent,
has gone out of business, or as to which a Borrower has received notice
of an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(k) Unbilled Accounts with respect to which the
Account Debtor is located in the states of New Jersey, Minnesota, or
West Virginia (or any other state that requires a creditor to file a
business activity report or similar document in order to bring suit or
otherwise enforce its remedies against such Account Debtor in the
courts or through any judicial process of such state), unless the
applicable Borrower has qualified to do business in New Jersey,
Minnesota, West Virginia, or such other states, or has filed a business
activities report with the applicable division of taxation, the
department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement,
(l) Unbilled Accounts, the collection of which,
Agent, in its Permitted Discretion, believes to be doubtful by reason
of the Account Debtor's financial condition,
(m) Unbilled Accounts that are not subject to a
valid and perfected first priority Agent's Lien,
(n) Unbilled Accounts with respect to which (i)
the goods giving rise to such Unbilled Account have not been shipped or
(ii) the services giving rise to such Unbilled Account have not been
performed,
(o) Unbilled Accounts that represent the right
to receive progress payments or other advance xxxxxxxx that are due
prior to the completion of performance by the applicable Borrower of
the subject contract for goods or services, or
(p) Unbilled Accounts arising in a transaction
in which a Borrower must furnish a performance bond.
"Environmental Actions" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
judicial or administrative proceeding, judgment, letter, or other
communication from any Governmental Authority, or any third party
involving violations of Environmental Laws or releases of Hazardous
Materials from (a) any assets,
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17
properties, or businesses of any Borrower or any predecessor in interest, (b)
from adjoining properties or businesses, or (c) from or onto any facilities
which received Hazardous Materials generated by any Borrower or any predecessor
in interest.
"Environmental Law" means any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy or
rule of common law now or hereafter in effect and in each case as amended, or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on
Borrowers, relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33
USC ss. 1251 et seq.; the Toxic Substances Control Act, 15 USC, ss. 2601 et
seq.; the Clean Air Act, 42 USC ss. 7401 et seq.; the Safe Drinking Water Act,
42 USC. ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. ss. 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
USC. ss. 11001 et seq.; the Hazardous Material Transportation Act, 49 USC ss.
1801 et seq.; and the Occupational Safety and Health Act, 29 USC. ss. 651 et
seq. (to the extent it regulates occupational exposure to Hazardous Materials);
any state and local or foreign counterparts or equivalents, in each case as
amended from time to time.
"Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"Equipment" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, goods (other than consumer goods, farm products,
or Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
a Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with a Borrower and whose employees are aggregated with the employees of a
Borrower under IRC Section 414(o).
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18
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrowers aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of
their historical practices with respect thereto, in each case as determined by
Agent in its Permitted Discretion.
"Excess Cash Flow" means, with respect to the Parent and its
Subsidiaries for any period, (i) EBITDA of the Parent and its Subsidiaries for
such period, less (ii) the sum of (A) all scheduled and mandatory cash principal
payments on the Term Loan during such period and all scheduled cash principal
payments on other Indebtedness of the Parent or any of its Subsidiaries during
such period to the extent such other Indebtedness is permitted to be incurred,
and such payments are permitted to be made, under this Agreement, (B) all cash
interest payments on the Term Loan, the Advances and on other Indebtedness of
the Parent and its Subsidiaries during such period to the extent such other
Indebtedness is permitted to be incurred, and such payments are permitted to be
made, under this Agreement, (C) the cash portion of capital expenditures made by
the Parent and its Subsidiaries during such period to the extent such capital
expenditures are permitted to be made under this Agreement, and (D) the cash
taxes actually paid by the Parent and its Subsidiaries during such period.
"Exchange Act" means the Securities Exchange Act of 1934, as
in effect from time to time.
"Existing Lender" means Bank of America, N.A., a national
banking association.
"Federal Express Contract" means, collectively, that certain
Contract Technical Services Agreement, dated as of December 1, 1997, by and
between Federal Express Corporation and SCB Computer Technology, Inc., all Work
Orders executed in connection therewith, all amendments, modifications and
supplements and any exhibits or schedules to, and any agreements, instruments or
other documents executed in connection with, any of the foregoing.
"Fee Letter" means that certain fee letter, dated as of the
date hereof, between Borrowers and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"Foothill" means Foothill Capital Corporation, a California
corporation.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrowers' now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations,
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19
choses or things in action, goodwill, patents, trade names, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Investment Property, and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or
other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"Guarantor" means each of Partners Capital Group, a California
corporation, Delta Software Systems, Inc., a Tennessee corporation, and
Technology Management Resources, Inc., a Tennessee corporation.
"Guarantor Security Agreement" means that certain security
agreement executed and delivered by the Inactive Guarantors in favor of Agent,
for the benefit of the Lender Group, in form and substance satisfactory to
Agent.
"Guaranty" means that certain general continuing guaranty
executed and delivered by the Guarantors in favor of Agent, for the benefit of
the Lender Group, in form and substance satisfactory to Agent.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Honeywell" means Honeywell Inc., a Delaware corporation,
together with its successors and assigns.
"Honeywell Acknowledgment" means the acknowledgment and
consent, in form and substance satisfactory to Agent, duly executed and
delivered by Honeywell, with respect to, among other things, the Liens granted
hereunder by Partners Resources Inc. in favor of the Agent for the benefit of
the Agent and the Lenders.
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20
"Honeywell Collateral" means, collectively, the Honeywell
Contract, the Honeywell Equipment, the Honeywell Software, the Honeywell
Contract Payments, all insurance proceeds payable with respect to the Honeywell
Equipment, and all proceeds thereof.
"Honeywell Contract" means, collectively, that certain
Outsourcing Agreement, dated as of September 29, 1995, by and between Honeywell
and Partners Resources Inc., all Statements of Work executed in connection
therewith, all amendments, modifications and supplements and any exhibits or
schedules to, and any agreements, instruments or other documents executed in
connection with, any of the foregoing.
"Honeywell Contract Payments" means all amounts of money
payable, or which may become payable, by Honeywell under the Honeywell Contract,
including, without limitation, any and all service fees, additional service
fees, minimum payments, fixed charges, equipment charges, designated fees,
termination fees and other termination payments.
"Honeywell Equipment" means the "Business Assets" and
"Equipment Upgrades", as each such term is defined in the Honeywell Contract,
and all other equipment owned by a Borrower and used to perform the Honeywell
Contract, together with all accessories, accessions, features, enhancements,
augmentations, attachments and modifications thereto and all replacements and
substitutions thereof.
"Honeywell Software" means all "Supplier Software" and the
"Unisys License", as each such term is defined in the Honeywell Contract, and
all other software owned by a Borrower and used to perform the Honeywell
Contract, together with all enhancements and modifications thereto and all
replacements and substitutions thereof.
"Inactive Guarantor" means each of Delta Software Systems,
Inc., a Tennessee corporation, and Technology Management Resources, Inc., a
Tennessee corporation.
"Indebtedness" means (a) all obligations of a Borrower for
borrowed money, (b) all obligations of a Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Borrower in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of a
Borrower under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of a Borrower, irrespective of whether such
obligation or liability is assumed, (e) all obligations of a Borrower for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of a Borrower's business and repayable in accordance with
customary trade practices), and (f) any obligation of a Borrower guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to a Borrower) any obligation of any
other Person.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section
11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal
- 15 -
21
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Intercompany Subordination Agreement" means a subordination
agreement executed and delivered by Borrowers and Agent, the form and substance
of which is satisfactory to Agent.
"Intercreditor Agreement" means the Intercreditor and
Subordination Agreement, dated as of the date hereof, made by State Bank and the
Loan Parties in favor of the Agent, in form and substance satisfactory to Agent.
"Inventory" means all Borrowers' now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished under a contract of service, goods
that are leased by a Borrower as lessor, goods that are furnished by a Borrower
under a contract of service, and raw materials, work in process, or materials
used or consumed in a Borrower's business.
"Investment" means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means all of Borrowers' now owned or
hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect
from time to time.
"Lender" and "Lenders" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of Section 14.1.
"Lender Group" means, individually and collectively, each of
the Lenders and Agent.
"Lender Group Expenses" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by a Borrower
under any of the Loan Documents that are paid or incurred by the Lender Group,
(b) fees or charges paid or incurred by Agent in connection with the Lender
Group's transactions with Borrowers, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and
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22
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement, real estate
surveys, real estate title policies and endorsements, and environmental audits,
(c) costs and expenses incurred by Agent in the disbursement of funds to or for
the account of Borrowers (by wire transfer or otherwise), (d) charges paid or
incurred by Agent resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) audit fees and expenses of
Agent related to audit examinations of the Books to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group's relationship with any Borrower or any guarantor of the
Obligations, (h) Agent's and each Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Agent's and
each Lender's reasonable fees and expenses (including attorneys fees) incurred
in terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Borrower or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral.
"Lender-Related Person" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, and agents of such Lender.
"Lien" means any interest in an asset securing an obligation
owed to, or a claim by, any Person other than the owner of the asset, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Cash Management
Agreements, any Control Agreement, the Disbursement Letter, the Due Diligence
Letter, the Fee Letter, the Guaranty, the Contribution Agreement, the Officers'
Certificate, the Stock Pledge Agreement, the Trademark Security Agreement, the
Guarantor Security Agreement, the Intercompany Subordination Agreement, the
Warrants, the Registration Rights Agreement, the Intercreditor Agreement, any
note or notes executed by a Borrower in connection with this Agreement and
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23
payable to a member of the Lender Group, and any other agreement entered into,
now or in the future, by any Borrower and the Lender Group in connection with
this Agreement.
"Loan Parties" means, collectively, the Borrowers and the
Guarantors.
"Margin Test Date" means the date on which financial
statements are delivered pursuant to Section 6.3(b) with respect to the fiscal
year of the Parent and its Subsidiaries ending on April 30, 2002.
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrowers taken as a whole,
(b) a material impairment of a Borrower's ability to perform its obligations
under the Loan Documents to which it is a party or of the Lender Group's ability
to enforce the Obligations or realize upon the Collateral, or (c) a material
impairment of the enforceability or priority of the Agent's Liens with respect
to the Collateral as a result of an action or failure to act on the part of a
Borrower.
"Material Contract" means each of (a) the Honeywell Contract,
(b) the State of Tennessee Contract, (c) the State of Kentucky Contract, and (d)
the Federal Express Contract.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $17,500,000.
"Maximum Term Loan Amount" means $10,000,000.
"Negotiable Collateral" means all of Borrowers' now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
"Obligations" means all loans (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), premiums, liabilities
(including all amounts charged to Borrowers' Loan Account pursuant hereto),
obligations, fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrowers
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Group Expenses that
Borrowers are required to pay or reimburse by the Loan Documents, by law, or
otherwise. Any reference in this Agreement or in the Loan Documents to the
Obligations shall include all amendments, changes, extensions, modifications,
renewals replacements, substitutions, and supplements, thereto and thereof, as
applicable, both prior and subsequent to any Insolvency Proceeding.
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24
"Officers' Certificate" means the representations and
warranties of officers form submitted by Agent to Administrative Borrower,
together with Borrowers' completed responses to the inquiries set forth therein,
the form and substance of such responses to be satisfactory to Agent.
"Originating Lender" has the meaning set forth in Section
14.1(e).
"Overadvance" has the meaning set forth in Section 2.5.
"Parent" has the meaning set forth in the preamble to this
Agreement.
"Participant" has the meaning set forth in Section 14.1(e).
"Pay-Off Letter" means a letter, in form and substance
satisfactory to Agent, from Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of Borrowers owing to Existing
Lender and obtain a release of all of the Liens existing in favor of Existing
Lender in and to the assets of Borrowers.
"Permitted Discretion" means a determination made in good
faith and in the exercise of reasonable (from the perspective of a secured
asset-based lender) business judgment.
"Permitted Dispositions" means (a) sales or other dispositions
by Borrowers of Equipment that is substantially worn, damaged, or obsolete in
the ordinary course of the applicable Borrower's business, (b) sales by
Borrowers of Inventory to buyers in the ordinary course of business, (c) the use
or transfer of money or Cash Equivalents by Borrowers in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents, and (d)
the licensing by Borrowers, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of the
applicable Borrower's business.
"Permitted Holder" means each of Xxx X. Xxxxxx and T. Xxxxx
Xxxx.
"Permitted Investments" means (a) investments in Cash
Equivalents, (b) investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, and (d) investments by any Borrower in any other Borrower
provided that if any such investment is in the form of Indebtedness, such
Indebtedness investment shall be subject to the terms and conditions of the
Intercompany Subordination Agreement.
"Permitted Liens" means (a) Liens held by Agent for the
benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are
not yet delinquent, or (ii) do not constitute an Event of Default hereunder and
are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d)
the interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of Borrowers' business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted
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Protests, (g) Liens arising from deposits made in connection with obtaining
worker's compensation or other unemployment insurance, (h) Liens or deposits to
secure performance of bids, tenders, or leases incurred in the ordinary course
of Borrowers' business and not in connection with the borrowing of money, (i)
Liens granted as security for surety or appeal bonds in connection with
obtaining such bonds in the ordinary course of Borrowers' business, (j) Liens
resulting from any judgment or award that is not an Event of Default hereunder,
and (k) with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof by Borrowers.
"Permitted Protest" means the right of the applicable Borrower
to protest any Lien (other than any such Lien that secures the Obligations),
taxes (other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the Books in such amount as is required
under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by the applicable Borrower in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Agent's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date
of determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate amount outstanding at any one time not in excess of $1,000,000.
"Person" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than
Real Property.
"Projections" means Parent's forecasted (a) balance sheets,
(b) profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Pro Rata Share" means:
(a) with respect to a Lender's obligation to
make Advances and receive payments of principal, interest, fees, costs,
and expenses with respect thereto, (i) prior to the Revolver Commitment
being reduced to zero, the percentage obtained by dividing (y) such
Lender's Revolver Commitment, by (z) the aggregate Revolver Commitments
of all Lenders, and (ii) from and after the time that the Revolver
Commitment has been terminated or reduced to zero, the percentage
obtained by dividing (y) the aggregate principal amount of such
Lender's Advances by (z) the aggregate principal amount of all
Advances,
(b) with respect to a Lender's obligation to
make the Term Loan and receive payments of interest, fees, and
principal with respect thereto, (i) prior to the making of the Term
Loan, the percentage obtained by dividing (y) such Lender's Term
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Loan Commitment, by (z) the aggregate amount of all Lenders' Term Loan
Commitments, and (ii) from and after the making of the Term Loan, the
percentage obtained by dividing (y) the principal amount of such
Lender's portion of the Term Loan Amount by (z) the Term Loan Amount,
and
(c) with respect to all other matters as to a
particular Lender (including the indemnification obligations arising
under Section 16.7), the percentage obtained by dividing (i) such
Lender's Revolver Commitment plus the unpaid principal amount of such
Lender's portion of the Term Loan Amount, by (ii) the aggregate amount
of the Revolver Commitments of all Lenders plus the Term Loan Amount;
provided, however, that in the event the Revolver Commitments have been
terminated or reduced to zero, Pro Rata Share shall be the percentage
obtained by dividing (y) the principal amount of such Lender's Advances
plus the unpaid principal amount of such Lender's portion of the Term
Loan Amount by (z) the principal amount of all outstanding Advances
plus the Term Loan Amount.
"Purchase Money Indebtedness" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by any Borrower and the improvements
thereto.
"Record" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Registration Rights Agreement" means the registration rights
agreement between Parent and Foothill, dated as of the date hereof, in the form
of Exhibit R-1 hereto, as the same may be amended or otherwise modified from
time to time.
"Remedial Action" means all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Report" has the meaning set forth in Section 16.17.
"Required Availability" means Excess Availability and
unrestricted cash and Cash Equivalents in an amount of not less than $2,000,000.
"Required Lenders" means, at any time, Lenders whose Pro Rata
Shares aggregate 51% of the Total Commitments, or if the Commitments have been
terminated irrevocably, 51% of the Obligations then outstanding.
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27
"Reserve Percentage" means, on any day, for any Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"Revolver Commitment" means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.
"Revolver Margin" means, for any day, 1.25%; provided,
however, that if (a) EBITDA for the fiscal year of the Parent and its
Subsidiaries ending on April 30, 2002 (as reported in the financial statements
of the Parent and its Subsidiaries delivered to the Agent pursuant to Section
6.3(b)) is greater than or equal to $15,000,000 and (b) the Term Loan Amount as
of April 30, 2002 is less than or equal to $6,500,000, then on and after the
Margin Test Date, the Revolver Margin shall mean:
(i) 1.00%, if as of April 30, 2002 the Term Loan Amount
is less than or equal to $6,500,000 but greater than $5,000,000; or
(ii) 0.75%, if as of April 30, 2002 the Term Loan Amount
is less than or equal to $5,000,000.
"Revolver Usage" means, as of any date of determination, the
then extant amount of outstanding Advances.
"SEC" means the United States Securities and Exchange
Commission and any successor thereto.
"Securities Account" means a "securities account" as that term
is defined in the Code.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
"Settlement" has the meaning set forth in Section 2.3(f)(i).
"Settlement Date" has the meaning set forth in Section
2.3(f)(i).
"State Bank" means The State Bank and Trust Company, a state
bank chartered under the laws of Ohio.
"Solvent" means, with respect to any Person on a particular
date, that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).
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"State of Kentucky Contract" means that certain Master
Agreement No. C-99002049 awarded by the Commonwealth of Kentucky to SCB Computer
Technology, Inc., as such agreement may be amended, modified, supplemented,
renewed or extended from time to time.
"State of Tennessee Contract" means that certain Contract
between the State of Tennessee, Department of Finance and Administration and SCB
Computer Technology, Inc. for the provision of Information Technology
Professional Services, as such Contract may be amended, modified, supplemented,
renewed or extended from time to time.
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreement" means a stock pledge agreement, in
form and substance satisfactory to Agent, executed and delivered by each
Borrower that owns Stock of a Subsidiary of Parent.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.
"Swing Lender" means Foothill or any other Lender that, at the
request of Administrative Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become the Swing Lender hereunder.
"Swing Loan" has the meaning set forth in Section 2.3(d)(i).
"Taxes" has the meaning set forth in Section 2.2.
"Term Loan" has the meaning set forth in Section 2.2.
"Term Loan Amount" means, as of any date of determination, the
outstanding principal amount of the Term Loan.
"Term Loan Commitment" means, with respect to each Lender, its
Term Loan Commitment, and, with respect to all Lenders, their Term Loan
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.
"Term Loan Margin" means, for any day, 2.75%; provided,
however, that if (a) EBITDA for the fiscal year of the Parent and its
Subsidiaries ending on April 30, 2002 (as reported in the financial statements
of the Parent and its Subsidiaries delivered to the Agent
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pursuant to Section 6.3(b)) is greater than or equal to $15,000,000 and (b) the
Term Loan Amount as of April 30, 2002 is less than or equal to $6,500,000, then
on and after the Margin Test Date, the Term Loan Margin shall mean:
(i) 2.25%, if as of April 30, 2002 the Term Loan Amount
is less than or equal to $6,500,000 but greater than $5,000,000; or
(ii) 1.75%, if as of April 30, 2002 the Term Loan Amount
is less than or equal to $5,000,000.
"Total Commitment" means, with respect to each Lender, its
Total Commitment, and, with respect to all Lenders, their Total Commitments, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 attached hereto or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 14.1.
"Trademark Security Agreement" means a trademark security
agreement executed and delivered by each Borrower and Agent, the form and
substance of which is satisfactory to Agent.
"Unbilled Account" means an Account for which an invoice has
not been rendered to the applicable Account Debtor.
"Voidable Transfer" has the meaning set forth in Section 17.7.
"Warrants" has the meaning set forth in Section 18.1.
"Warrant Shares" means the shares of Common Stock issued by
Parent upon exercise of the Warrants.
"Xxxxx Fargo" means Xxxxx Fargo Bank, National Association, a
national banking association.
1.2 ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term "Borrowers" or the term "Parent" is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Parent and its Subsidiaries on a consolidated basis unless the context
clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or
any other Loan Document clearly requires otherwise, references to the plural
include the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan
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Document refer to this Agreement or such other Loan Document, as the case may
be, as a whole and not to any particular provision of this Agreement or such
other Loan Document, as the case may be. Section, subsection, clause, schedule,
and exhibit references herein are to this Agreement unless otherwise specified.
Any reference in this Agreement or in the other Loan Documents to any agreement,
instrument, or document shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein). Any
reference herein to any Person shall be construed to include such Person's
successors and assigns. Any requirement of a writing contained herein or in the
other Loan Documents shall be satisfied by the transmission of a Record and any
Record transmitted shall constitute a representation and warranty as to the
accuracy and completeness of the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, each Lender with a Revolver
Commitment agrees (severally, not jointly or jointly and severally) to make
advances ("Advances") to Borrowers in an amount at any one time outstanding not
to exceed such Lender's Pro Rata Share of an amount equal to the lesser of (i)
the Maximum Revolver Amount or (ii) the Borrowing Base. For purposes of this
Agreement, "Borrowing Base," as of any date of determination, shall mean the
result of:
(x) the lesser of
(i) 85% of the amount of Eligible
Accounts, less the amount, if any, of the
Dilution Reserve, and
(ii) an amount equal to 50% of the
amount of Borrowers' Collections with
respect to Accounts for the immediately
preceding 90 day period, plus
(y) the lesser of
(i) 70% of the amount of Eligible
Unbilled Accounts, less the amount, if any,
of unpaid payroll and payroll taxes
associated with Eligible Unbilled Accounts,
and
(ii) $8,000,000, minus
(z) the aggregate amount of reserves,
if any, established by Agent under Section 2.1(b).
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(b) Anything to the contrary in this Section 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that Borrowers are required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrowers to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral (other than any existing Permitted Lien set forth on Schedule
P-1 which is specifically identified thereon as entitled to have priority over
the Agent's Liens), which Lien or trust, in the Permitted Discretion of Agent
likely would have a priority superior to the Agent's Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral.
(c) The Lenders with Revolver Commitments shall
have no obligation to make additional Advances hereunder to the extent such
additional Advances would cause the Revolver Usage to exceed the Maximum
Revolver Amount.
(d) Amounts borrowed pursuant to this Section
may be repaid without penalty or premium (except as otherwise provided in
Section 3.6) and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.
2.2 TERM LOAN.
(a) Subject to the terms and conditions of this
Agreement, on the Closing Date each Lender with a Term Loan Commitment agrees
(severally, not jointly or jointly and severally) to make term loans
(collectively, the "Term Loan") to Borrowers in an amount equal to such Lender's
Pro Rata Share of the Maximum Term Loan Amount.
(b) The Term Loan shall be repaid in equal
monthly installments of $350,000, payable on the first day of each month,
commencing on August 1, 2001, until the Term Loan is repaid in full; provided,
however, that, so long as no Default shall have occurred and be continuing,
commencing on the first day of the first month after which (x) the Honeywell
Contract is renewed upon terms acceptable to the Agent and (y) the Term Loan
Amount is less than or equal to $5,000,000, the amount of each remaining
installment due in respect of the Term Loan shall be automatically reduced from
$350,000 to $275,000. The Borrowers may, at any time and from time to time,
prepay all or a portion of the Term Loan without penalty or premium, except as
otherwise provided in Section 3.6. Each prepayment shall be accompanied by the
payment of accrued interest to the date of such prepayment on the amount
prepaid, shall be in an amount that is in an integral multiple of $100,000 and
shall be applied against the remaining installments of principal due on the Term
Loan in the inverse order of maturity. Notwithstanding the foregoing, the
outstanding principal of and all accrued and unpaid interest on the Term Loan
shall be due and payable on the earliest to occur of (i) the date of termination
of this Agreement, whether by its terms, by prepayment, or by acceleration, (ii)
the date of termination or expiration of the Honeywell Contract, and (iii) the
Maturity Date. All amounts
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outstanding under the Term Loan shall constitute Obligations. Any principal
amount of the Term Loan which is repaid or prepaid by Borrowers may not be
reborrowed.
(c) Within ten (10) days of delivery to the
Agent of each set of unaudited quarterly financial statements pursuant to
Section 6.3(a), commencing with the delivery to the Agent of the financial
statements for the fiscal quarter of the Parent ended July 31, 2001 or, if such
financial statements are not delivered to the Agent on the date such statements
are required to be delivered pursuant to Section 6.3(a), ten (10) days after the
date such statements are required to be delivered to the Agent pursuant to
Section 6.3(a), the Borrowers shall prepay the outstanding principal of the Term
Loan in an amount equal to 50% of the Excess Cash Flow of the Borrowers for such
fiscal quarter. Each such prepayment of the Term Loan shall be accompanied by
the payment of accrued interest to the date of such prepayment on the amount
prepaid and shall be applied against the remaining installments of principal of
the Term Loan in the inverse order of maturity.
(d) If any audit by the Parent's independent
accountants or any other subsequent event or events shall demonstrate that the
Excess Cash Flow set forth in any quarterly financial statements was inaccurate
and that as a result the Borrowers did not prepay the Term Loan by the
appropriate amount, the Borrowers will pay to the Agent immediately on demand
the excess of (i) the amount of principal that should have been prepaid with
respect to such fiscal quarter, over (ii) the amount of principal that was
prepaid with respect to such fiscal quarter.
(e) Within three Business Days after the
Parent's receipt of a tax refund of approximately $1,500,000 from the United
States Treasury, the Borrowers shall prepay the outstanding principal of the
Term Loan in an amount equal to $1,000,000. Such prepayment of the Term Loan
shall be accompanied by the payment of accrued interest to the date of such
prepayment on the amount prepaid and shall be applied against the remaining
installments of principal of the Term Loan in the inverse order of maturity.
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing
shall be made by an irrevocable written request by an Authorized Person
delivered to Agent (which notice must be received by Agent no later than 10:00
a.m. (California time) on the Business Day prior to the date that is the
requested Funding Date in the case of a request for an Advance or the Term Loan
specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day; provided, however, that in the case of a
request for Swing Loan in an amount of $5,000,000 or less, such notice will be
timely received if it is received by Agent no later than 10:00 a.m. (California
time) on the Business Day that is the requested Funding Date) specifying (i) the
amount of such Borrowing, and (ii) the requested Funding Date, which shall be a
Business Day. At Agent's election, in lieu of delivering the above-described
written request, any Authorized Person may give Agent telephonic notice of such
request by the required time, with such telephonic notice to be confirmed in
writing within 24 hours of the giving of such notice.
(b) AGENT'S ELECTION. Promptly after receipt of
a request for a Borrowing pursuant to Section 2.3(a), Agent shall elect, in its
discretion, (i) to have the terms of Section 2.3(c) apply to such requested
Borrowing, or (ii) if the Borrowing is for an Advance, to request
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Swing Lender to make a Swing Loan pursuant to the terms of Section 2.3(d) in the
amount of the requested Borrowing; provided, however, that if Swing Lender
declines in its sole discretion to make a Swing Loan pursuant to Section 2.3(d),
Agent shall elect to have the terms of Section 2.3(c) apply to such requested
Borrowing.
(c) MAKING OF ADVANCES.
(i) In the event that Agent shall elect
to have the terms of this Section 2.3(c) apply to a requested
Borrowing as described in Section 2.3(b), then promptly after
receipt of a request for a Borrowing pursuant to Section
2.3(a), Agent shall notify the Lenders, not later than 1:00
p.m. (California time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telecopy,
telephone, or other similar form of transmission, of the
requested Borrowing. Each Lender shall make the amount of such
Lender's Pro Rata Share of the requested Borrowing available
to Agent in immediately available funds, to Agent's Account,
not later than 10:00 a.m. (California time) on the Funding
Date applicable thereto. After Agent's receipt of the proceeds
of such Advances (or the Term Loan, as applicable), upon
satisfaction of the applicable conditions precedent set forth
in Section 3 hereof, Agent shall make the proceeds thereof
available to Administrative Borrower on the applicable Funding
Date by transferring immediately available funds equal to such
proceeds received by Agent to Administrative Borrower's
Designated Account; provided, however, that, subject to the
provisions of Section 2.3(i), Agent shall not request any
Lender to make, and no Lender shall have the obligation to
make, any Advance (or its portion of the Term Loan) if Agent
shall have actual knowledge that (1) one or more of the
applicable conditions precedent set forth in Section 3 will
not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been waived, or
(2) the requested Borrowing would exceed the Availability on
such Funding Date.
(ii) Unless Agent receives notice from a
Lender on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least 1 Business Day
prior to the date of such Borrowing, that such Lender will not
make available as and when required hereunder to Agent for the
account of Borrowers the amount of that Lender's Pro Rata
Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may
(but shall not be so required), in reliance upon such
assumption, make available to Borrowers on such date a
corresponding amount. If and to the extent any Lender shall
not have made its full amount available to Agent in
immediately available funds and Agent in such circumstances
has made available to Borrowers such amount, that Lender shall
on the Business Day following such Funding Date make such
amount available to Agent, together with interest at the
Defaulting Lender Rate for each day during such period. A
notice submitted by Agent to any Lender with respect to
amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is so made available,
such payment to Agent shall constitute such Lender's Advance
on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to Agent on the Business
Day following the Funding Date, Agent will notify
Administrative Borrower of such failure to fund and, upon
demand by Agent, Borrowers shall pay such amount to Agent for
Agent's account, together with
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interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Advances composing such
Borrowing. The failure of any Lender to make any Advance on
any Funding Date shall not relieve any other Lender of any
obligation hereunder to make an Advance on such Funding Date,
but no Lender shall be responsible for the failure of any
other Lender to make the Advance to be made by such other
Lender on any Funding Date.
(iii) Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Borrowers
to Agent for the Defaulting Lender's benefit, and, in the
absence of such transfer to the Defaulting Lender, Agent shall
transfer any such payments to each other non-Defaulting Lender
member of the Lender Group ratably in accordance with their
Commitments (but only to the extent that such Defaulting
Lender's Advance was funded by the other members of the Lender
Group) or, if so directed by Administrative Borrower and if no
Default or Event of Default had occurred and is continuing
(and to the extent such Defaulting Lender's Advance was not
funded by the Lender Group), retain same to be re-advanced to
Borrowers as if such Defaulting Lender had made Advances to
Borrowers. Subject to the foregoing, Agent may hold and, in
its Permitted Discretion, re-lend to Borrowers for the account
of such Defaulting Lender the amount of all such payments
received and retained by it for the account of such Defaulting
Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a "Lender" and such Lender's
Commitment shall be deemed to be zero. This Section shall
remain effective with respect to such Lender until (x) the
Obligations under this Agreement shall have been declared or
shall have become immediately due and payable, (y) the
non-Defaulting Lenders, Agent, and Administrative Borrower
shall have waived such Defaulting Lender's default in writing,
or (z) the Defaulting Lender makes its Pro Rata Share of the
applicable Advance and pays to Agent all amounts owing by
Defaulting Lender in respect thereof. The operation of this
Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, to relieve or excuse the
performance by such Defaulting Lender or any other Lender of
its duties and obligations hereunder, or to relieve or excuse
the performance by Borrowers of their duties and obligations
hereunder to Agent or to the Lenders other than such
Defaulting Lender. Any such failure to fund by any Defaulting
Lender shall constitute a material breach by such Defaulting
Lender of this Agreement and shall entitle Administrative
Borrower at its option, upon written notice to Agent, to
arrange for a substitute Lender to assume the Commitment of
such Defaulting Lender, such substitute Lender to be
acceptable to Agent. In connection with the arrangement of
such a substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to
execute and deliver a completed form of Assignment and
Acceptance Agreement in favor of the substitute Lender (and
agrees that it shall be deemed to have executed and delivered
such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations without any
premium or penalty of any kind whatsoever; provided further,
however, that any such assumption of the Commitment of such
Defaulting Lender shall not be deemed to constitute a waiver
of any of the Lender Groups' or Borrowers' rights or remedies
against any such Defaulting Lender arising out of or in
relation to such failure to fund.
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(d) MAKING OF SWING LOANS.
(i) In the event Agent shall elect,
with the consent of Swing Lender, as a Lender, to have the
terms of this Section 2.3(d) apply to a requested Borrowing as
described in Section 2.3(b), Swing Lender as a Lender shall
make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to
this Section 2.3(d) being referred to as a "Swing Loan" and
such Advances being referred to collectively as "Swing Loans")
available to Borrowers on the Funding Date applicable thereto
by transferring immediately available funds to Administrative
Borrower's Designated Account. Each Swing Loan is an Advance
hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that all payments on any
Swing Loan shall be payable to Swing Lender as a Lender solely
for its own account (and for the account of the holder of any
participation interest with respect to such Swing Loan).
Subject to the provisions of Section 2.3(i), Agent shall not
request Swing Lender as a Lender to make, and Swing Lender as
a Lender shall not make, any Swing Loan if Agent has actual
knowledge that (i) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (ii) the requested
Borrowing would exceed the Availability on such Funding Date.
Swing Lender as a Lender shall not otherwise be required to
determine whether the applicable conditions precedent set
forth in Section 3 have been satisfied on the Funding Date
applicable thereto prior to making, in its sole discretion,
any Swing Loan.
(ii) The Swing Loans shall be secured by
the Agent's Liens, shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate applicable from
time to time to Advances.
(e) AGENT ADVANCES.
(i) Agent hereby is authorized by
Borrowers and the Lenders, from time to time in Agent's sole
discretion, (1) after the occurrence and during the
continuance of a Default or an Event of Default, or (2) at any
time that any of the other applicable conditions precedent set
forth in Section 3 have not been satisfied, to make Advances
to Borrowers on behalf of the Lenders that Agent, in its
Permitted Discretion deems necessary or desirable (A) to
preserve or protect the Collateral, or any portion thereof,
(B) to enhance the likelihood of repayment of the Obligations,
or (C) to pay any other amount chargeable to Borrowers
pursuant to the terms of this Agreement, including Lender
Group Expenses and the costs, fees, and expenses described in
Section 10 (any of the Advances described in this Section
2.3(e) shall be referred to as "Agent Advances"). Each Agent
Advance is an Advance hereunder and shall be subject to all
the terms and conditions applicable to other Advances, except
that all payments thereon shall be payable to Agent solely for
its own account (and for the account of the holder of any
participation interest with respect to such Agent Advance).
(ii) The Agent Advances shall be
repayable on demand and secured by the Agent's Liens granted
to Agent under the Loan Documents, shall
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constitute Advances and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Advances.
(f) SETTLEMENT. It is agreed that each Lender's
funded portion of the Advances is intended by the Lenders to equal, at all
times, such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrowers) that in
order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Advances, the Swing Loans, and the
Agent Advances shall take place on a periodic basis in accordance with the
following provisions:
(i) Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a
more frequent basis if so determined by Agent, (1) on behalf
of Swing Lender, with respect to each outstanding Swing Loan,
(2) for itself, with respect to each Agent Advance, and (3)
with respect to Collections received, as to each by notifying
the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00
p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such
requested Settlement being the "Settlement Date"). Such notice
of a Settlement Date shall include a summary statement of the
amount of outstanding Advances, Swing Loans, and Agent
Advances for the period since the prior Settlement Date.
Subject to the terms and conditions contained herein
(including Section 2.3(c)(iii)): (y) if a Lender's balance of
the Advances, Swing Loans, and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, then Agent shall, by
no later than 12:00 p.m. (California time) on the Settlement
Date, transfer in immediately available funds to the account
of such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount, have
as of the Settlement Date, its Pro Rata Share of the Advances,
Swing Loans, and Agent Advances, and (z) if a Lender's balance
of the Advances, Swing Loans, and Agent Advances is less than
such Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, such Lender shall no
later than 12:00 p.m. (California time) on the Settlement Date
transfer in immediately available funds to the Agent's
Account, an amount such that each such Lender shall, upon
transfer of such amount, have as of the Settlement Date, its
Pro Rata Share of the Advances, Swing Loans, and Agent
Advances. Such amounts made available to Agent under clause
(z) of the immediately preceding sentence shall be applied
against the amounts of the applicable Swing Loan or Agent
Advance and, together with the portion of such Swing Loan or
Agent Advance representing Swing Lender's Pro Rata Share
thereof, shall constitute Advances of such Lenders. If any
such amount is not made available to Agent by any Lender on
the Settlement Date applicable thereto to the extent required
by the terms hereof, Agent shall be entitled to recover for
its account such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's
balance of the Advances, Swing Loans, and Agent Advances is
less than, equal to, or greater than such Lender's Pro Rata
Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the
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portion of payments actually received in good funds by Agent
with respect to principal, interest, fees payable by Borrowers
and allocable to the Lenders hereunder, and proceeds of
Collateral. To the extent that a net amount is owed to any
such Lender after such application, such net amount shall be
distributed by Agent to that Lender as part of such next
Settlement.
(iii) Between Settlement Dates, Agent, to
the extent no Agent Advances or Swing Loans are outstanding,
may pay over to Swing Lender any payments received by Agent,
that in accordance with the terms of this Agreement would be
applied to the reduction of the Advances, for application to
Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then
immediately preceding Settlement Date have been applied to
Swing Lender's Pro Rata Share of the Advances other than to
Swing Loans, as provided for in the previous sentence, Swing
Lender shall pay to Agent for the accounts of the Lenders, and
Agent shall pay to the Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each
Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During
the period between Settlement Dates, Swing Lender with respect
to Swing Loans, Agent with respect to Agent Advances, and each
Lender (subject to the effect of letter agreements between
Agent and individual Lenders) with respect to the Advances
other than Swing Loans and Agent Advances, shall be entitled
to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing
Lender, Agent, or the Lenders, as applicable.
(g) NOTATION. Agent shall record on its books
the principal amount of the Advances owing to each Lender, including the Swing
Loans owing to Swing Lender, and Agent Advances owing to Agent, and the
interests therein of each Lender, from time to time. In addition, each Lender is
authorized, at such Lender's option, to note the date and amount of each payment
or prepayment of principal of such Lender's Advances in its books and records,
including computer records, such books and records constituting conclusive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(h) LENDERS' FAILURE TO PERFORM. All Advances
(other than Swing Loans and Agent Advances) shall be made by the Lenders
contemporaneously and in accordance with their Pro Rata Shares. It is understood
that (i) no Lender shall be responsible for any failure by any other Lender to
perform its obligation to make any Advance (or other extension of credit)
hereunder, nor shall any Commitment of any Lender be increased or decreased as a
result of any failure by any other Lender to perform its obligations hereunder,
and (ii) no failure by any Lender to perform its obligations hereunder shall
excuse any other Lender from its obligations hereunder.
(i) OPTIONAL OVERADVANCES. Any contrary
provision of this Agreement notwithstanding, the Lenders hereby authorize Agent
or Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may,
but is not obligated to, knowingly and intentionally, continue to make Advances
(including Swing Loans) to Borrowers notwithstanding that an Overadvance exists
or thereby would be created, so long as (i) after giving effect to such Advances
(including a Swing Loan), the Revolver Usage does not exceed the Borrowing Base
by more than $5,000,000, (ii) after giving effect to such Advances (including a
Swing Loan) the
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outstanding Revolver Usage (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) does not exceed the
Maximum Revolver Amount, and (iii) at the time of the making of any such Advance
(including a Swing Loan), Agent does not believe, in good faith, that the
Overadvance created by such Advance will be outstanding for more than 90 days.
The foregoing provisions are for the exclusive benefit of Agent, Swing Lender,
and the Lenders and are not intended to benefit Borrowers in any way. The
Advances and Swing Loans, as applicable, that are made pursuant to this Section
2.3(i) shall be subject to the same terms and conditions as any other Advance or
Swing Loan, as applicable, except that the rate of interest applicable thereto
shall be the rate applicable to Advances under Section 2.6(c) hereof without
regard to the presence or absence of a Default or Event of Default.
(i) In the event Agent obtains actual
knowledge that the Revolver Usage exceeds the amounts
permitted by the preceding paragraph, regardless of the amount
of, or reason for, such excess, Agent shall notify Lenders as
soon as practicable (and prior to making any (or any
additional) intentional Overadvances (except for and excluding
amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) unless Agent determines that prior
notice would result in imminent harm to the Collateral or its
value), and the Lenders with Revolver Commitments thereupon
shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrowers and
intended to reduce, within a reasonable time, the outstanding
principal amount of the Advances to Borrowers to an amount
permitted by the preceding paragraph. In the event Agent or
any Lender disagrees over the terms of reduction or repayment
of any Overadvance, the terms of reduction or repayment
thereof shall be implemented according to the determination of
the Required Lenders.
(ii) Each Lender with a Revolver
Commitment shall be obligated to settle with Agent as provided
in Section 2.3(f) for the amount of such Lender's Pro Rata
Share of any unintentional Overadvances by Agent reported to
such Lender, any intentional Overadvances made as permitted
under this Section 2.3(i), and any Overadvances resulting from
the charging to the Loan Account of interest, fees, or Lender
Group Expenses.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWERS.
(i) Except as otherwise expressly
provided herein, all payments by Borrowers shall be made to
Agent's Account for the account of the Lender Group and shall
be made in immediately available funds, no later than 11:00
a.m. (California time) on the date specified herein. Any
payment received by Agent later than 11:00 a.m. (California
time), shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue
to accrue until such following Business Day.
(ii) Unless Agent receives notice from
Administrative Borrower prior to the date on which any payment
is due to the Lenders that Borrowers will not make such
payment in full as and when required, Agent may assume that
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Borrowers have made (or will make) such payment in full to
Agent on such date in immediately available funds and Agent
may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the
extent Borrowers do not make such payment in full to Agent on
the date when due, each Lender severally shall repay to Agent
on demand such amount distributed to such Lender, together
with interest thereon at the Defaulting Lender Rate for each
day from the date such amount is distributed to such Lender
until the date repaid.
(b) APPORTIONMENT AND APPLICATION.
(i) Except as otherwise provided with
respect to Defaulting Lenders and except as otherwise provided
in the Loan Documents (including letter agreements between
Agent and individual Lenders), aggregate principal and
interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the
Obligations to which such payments relate held by each Lender)
and payments of fees and expenses (other than fees or expenses
that are for Agent's separate account, after giving effect to
any letter agreements between Agent and individual Lenders)
shall be apportioned ratably among the Lenders having a Pro
Rata Share of the type of Commitment or Obligation to which a
particular fee relates. All payments shall be remitted to
Agent and all such payments (other than payments received
while no Default or Event of Default has occurred and is
continuing and which relate to the payment of principal or
interest of specific Obligations or which relate to the
payment of specific fees), and all proceeds of Accounts or
other Collateral received by Agent, shall be applied as
follows:
A. first, to pay any Lender
Group Expenses then due to Agent under the Loan
Documents, until paid in full,
B. second, to pay any Lender
Group Expenses then due to the Lenders under the Loan
Documents, on a ratable basis, until paid in full,
C. third, to pay any fees
then due to Agent (for its separate accounts, after
giving effect to any letter agreements between Agent
and the individual Lenders) under the Loan Documents
until paid in full,
D. fourth, to pay any fees
then due to any or all of the Lenders (after giving
effect to any letter agreements between Agent and
individual Lenders) under the Loan Documents, on a
ratable basis, until paid in full,
E. fifth, to pay interest due
in respect of all Agent Advances, until paid in full,
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F. sixth, ratably to pay
interest due in respect of the Advances (other than
Agent Advances), the Swing Loans, and the Term Loan
until paid in full,
G. seventh, to pay the
principal of all Agent Advances until paid in full,
H. eighth, ratably to pay all
principal amounts then due and payable (other than as
a result of an acceleration thereof) with respect to
the Term Loan until paid in full,
I. ninth, to pay the
principal of all Swing Loans until paid in full,
J. tenth, to pay the
principal of all Advances until paid in full,
K. eleventh, if an Event of
Default has occurred and is continuing, to pay the
outstanding principal balance of the Term Loan (in
the inverse order of the maturity of the installments
due thereunder) until the Term Loan is paid in full,
L. twelfth, to pay any other
Obligations until paid in full, and
M. thirteenth, to Borrowers
(to be wired to the Designated Account) or such other
Person entitled thereto under applicable law.
(ii) Agent promptly shall distribute to
each Lender, pursuant to the applicable wire instructions
received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided
in Section 2.3(h).
(iii) In each instance, so long as no
Default or Event of Default has occurred and is continuing,
Section 2.4(b) shall not be deemed to apply to any payment by
Borrowers specified by Borrowers to be for the payment of
specific Obligations then due and payable (or prepayable)
under any provision of this Agreement.
(iv) For purposes of the foregoing,
"paid in full" means payment of all amounts owing under the
Loan Documents according to the terms thereof, including loan
fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement
of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not the same
would be or is allowed or disallowed in whole or in part in
any Insolvency Proceeding.
(v) In the event of a direct conflict
between the priority provisions of this Section 2.4 and other
provisions contained in any other Loan Document, it is the
intention of the parties hereto that such priority provisions
in such
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documents shall be read together and construed, to the fullest
extent possible, to be in concert with each other. In the
event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of this
Section 2.4 shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to the Lender Group pursuant to Section
2.1 is greater than either the Dollar or percentage limitations set forth in
Section 2.1 (an "Overadvance"), Borrowers immediately shall pay to Agent, in
cash, the amount of such excess, which amount shall be used by Agent to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to the Lender
Group as and when due and payable under the terms of this Agreement and the
other Loan Documents.
2.6 INTEREST RATES: RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause
(c) below, all Obligations that have been charged to the Loan Account pursuant
to the terms hereof shall bear interest on the Daily Balance thereof as follows
(i) if the relevant Obligation is the Term Loan, at a per annum rate equal to
the Base Rate plus the Term Loan Margin, and (ii) otherwise, at a per annum rate
equal to the Base Rate plus the Revolver Margin.
(b) DEFAULT RATE. Upon the occurrence and during
the continuation of an Event of Default (and at the election of Agent or the
Required Lenders), all Obligations that have been charged to the Loan Account
pursuant to the terms hereof shall bear interest on the Daily Balance thereof at
a per annum rate equal to 4 percentage points above the sum of the Base Rate
plus the Term Loan Margin.
(c) PAYMENT. Interest and all fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
at any time that Obligations or Commitments are outstanding. Borrowers hereby
authorize Agent, from time to time, without prior notice to Borrowers, to charge
such interest and fees, all Lender Group Expenses (as and when incurred), the
charges, commissions, fees, the fees and costs provided for in Section 2.11 (as
and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including the installments due and payable with
respect to the Term Loan) to Borrowers' Loan Account, which amounts thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrowers' Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder.
(d) COMPUTATION. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a 360 day
year for the actual number of days elapsed. In the event the Base Rate is
changed from time to time hereafter, the rates of interest hereunder based upon
the Base Rate automatically and immediately shall be increased or decreased by
an amount equal to such change in the Base Rate.
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(e) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL
RATE. In no event shall the interest rate or rates payable under this Agreement,
plus any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. Borrowers and the Lender Group, in
executing and delivering this Agreement, intend legally to agree upon the rate
or rates of interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto, as of the date of this Agreement, Borrowers
are and shall be liable only for the payment of such maximum as allowed by law,
and payment received from Borrowers in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations to
the extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrowers shall (i) establish and maintain
cash management services of a type and on terms satisfactory to Agent at one or
more of the banks set forth on Schedule 2.7(a) (each a "Cash Management Bank"),
and shall request in writing and otherwise take such reasonable steps to ensure
that all of its Account Debtors forward payment of the amounts owed by them
directly to such Cash Management Bank, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the date
of receipt thereof, all Collections (including those sent directly by Account
Debtors to a Cash Management Bank) into a bank account in Agent's name (a "Cash
Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish
and maintain Cash Management Agreements with Agent and Borrowers, in form and
substance acceptable to Agent. Each such Cash Management Agreement shall
provide, among other things, that (i) all items of payment deposited in such
Cash Management Account and proceeds thereof are held by such Cash Management
Bank agent or bailee-in-possession for Agent, (ii) the Cash Management Bank has
no rights of setoff or recoupment or any other claim against the applicable Cash
Management Account, other than for payment of its service fees and other charges
directly related to the administration of such Cash Management Account and for
returned checks or other items of payment, and (iii) it immediately will forward
by daily sweep all amounts in the applicable Cash Management Account to the
Agent's Account.
(c) So long as no Default or Event of Default
has occurred and is continuing, Administrative Borrower may amend Schedule
2.7(a) or (b) to add or replace a Cash Management Account Bank or Cash
Management Account; provided, however, that (i) such prospective Cash Management
Bank shall be satisfactory to Agent and Agent shall have consented in writing in
advance to the opening of such Cash Management Account with the prospective Cash
Management Bank, and (ii) prior to the time of the opening of such Cash
Management Account, Borrowers and such prospective Cash Management Bank shall
have executed and delivered to Agent a Cash Management Agreement. Borrowers
shall close any of their Cash Management Accounts (and establish replacement
cash management accounts in accordance with the foregoing sentence) promptly and
in any event within 30 days of notice from Agent that the creditworthiness of
any Cash Management Bank is no longer acceptable in Agent's reasonable judgment,
or as promptly as practicable and in any event within 60 days of
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notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent's liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent's
reasonable judgment.
(d) The Cash Management Accounts shall be cash
collateral accounts, with all cash, checks and similar items of payment in such
accounts securing payment of the Obligations, and in which Borrowers are hereby
deemed to have granted a Lien to Agent.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any
payment item by Agent (whether from transfers to Agent by the Cash Management
Banks pursuant to the Cash Management Agreements or otherwise) shall not be
considered a payment on account unless such payment item is a wire transfer of
immediately available federal funds made to the Agent's Account or unless and
until such payment item is honored when presented for payment. Should any
payment item not be honored when presented for payment, then Borrowers shall be
deemed not to have made such payment and interest shall be calculated
accordingly. Anything to the contrary contained herein notwithstanding, any
payment item shall be deemed received by Agent only if it is received into the
Agent's Account on a Business Day on or before 11:00 a.m. (California time). If
any payment item is received into the Agent's Account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have
been received by Agent as of the opening of business on the immediately
following Business Day. From and after the Closing Date, Agent shall be entitled
to charge Borrowers for 1 Business Day of `clearance' or `float' at the rate
applicable to Advances under Section 2.6 on all Collections that are received by
Borrowers (regardless of whether forwarded by the Cash Management Banks to
Agent). This across-the-board 1 Business Day clearance or float charge on all
Collections is acknowledged by the parties to constitute an integral aspect of
the pricing of the financing of Borrowers and shall apply irrespective of
whether or not there are any outstanding monetary Obligations; the effect of
such clearance or float charge being the equivalent of charging 1 Business Day
of interest on such Collections. The parties acknowledge and agree that the
economic benefit of the foregoing provisions of this Section 2.8 shall be for
the exclusive benefit of Agent.
2.9 DESIGNATED ACCOUNT. Agent is authorized to make the
Advances and the Term Loan under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.6(d). Administrative Borrower
agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances requested
by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed
by Agent and Administrative Borrower, any Advance, Agent Advance, or Swing Loan
requested by Borrowers and made by Agent or the Lenders hereunder shall be made
to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF
OBLIGATIONS. Agent shall maintain an account on its books in the name of
Borrowers (the "Loan Account") on which Borrowers will be charged with the Term
Loan, all Advances (including Agent Advances and Swing Loans) made by Agent,
Swing Lender, or the Lenders to Borrowers or for Borrowers' account, and with
all other payment Obligations hereunder or under the other Loan Documents,
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including, accrued interest, fees and expenses, and Lender Group Expenses. In
accordance with Section 2.8, the Loan Account will be credited with all payments
received by Agent from Borrowers or for Borrowers' account, including all
amounts received in the Agent's Account from any Cash Management Bank. Agent
shall render statements regarding the Loan Account to Administrative Borrower,
including principal, interest, fees, and including an itemization of all charges
and expenses constituting Lender Group Expenses owing, and such statements shall
be conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and the Lender Group unless, within 30 days after
receipt thereof by Administrative Borrower, Administrative Borrower shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.
2.11 FEES. Borrowers shall pay to Agent the following fees
and charges, which fees and charges shall be non-refundable when paid
(irrespective of whether this Agreement is terminated thereafter) and shall be
apportioned among the Lenders in accordance with the terms of letter agreements
between Agent and individual Lenders:
(a) UNUSED LINE FEE. On the first day of each
month during the term of this Agreement, an unused line fee in the amount equal
to 0.50% per annum times the result of (a) the Maximum Revolver Amount, less (b)
the average Daily Balance of Advances that were outstanding during the
immediately preceding month,
(b) FEE LETTER FEES. As and when due and payable
under the terms of the Fee Letter, Borrowers shall pay to Agent the fees set
forth in the Fee Letter, and
(c) AUDIT, APPRAISAL, AND VALUATION CHARGES. For
the separate account of Agent, audit, appraisal, and valuation fees and charges
as follows, (i) a fee of $750 pay day, per auditor, plus out-of-pocket expenses,
for each financial audit of a Borrower performed by personnel employed by Agent,
(ii) on the Closing Date, a one time charge of $3,000 plus out-of-pocket
expenses for expenses for the establishment of electronic collateral reporting
systems, (iii) the actual costs and out-of-pocket expenses paid or incurred by
Agent for each appraisal of the Collateral performed by personnel employed by
Agent, and (iv) the actual charges paid or incurred by Agent if it elects to
employ the services of one or more third Persons to perform financial audits of
Borrowers, to appraise the Collateral, or any portion thereof, or to assess a
Borrower's business valuation.
2.12 CAPITAL REQUIREMENTS. If, after the date hereof, any
Lender determines that (i) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or (ii)
compliance by such Lender or its parent bank holding company with any guideline,
request or directive of any such entity regarding capital adequacy (whether or
not having the force of law), the effect of reducing the return on such Lender's
or such holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative
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Borrower and Agent thereof. Following receipt of such notice, Borrowers agree to
pay such Lender on demand the amount of such reduction of return of capital as
and when such reduction is determined, payable within 90 days after presentation
by such Lender of a statement in the amount and setting forth in reasonable
detail such Lender's calculation thereof and the assumptions upon which such
calculation was based (which statement shall be deemed true and correct absent
manifest error). In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
2.13 JOINT AND SEVERAL LIABILITY OF BORROWERS.
(a) Each of Borrowers is accepting joint and
several liability hereunder and under the other Loan Documents in consideration
of the financial accommodations to be provided by the Agent and the Lenders
under this Agreement, for the mutual benefit, directly and indirectly, of each
of Borrowers and in consideration of the undertakings of the other Borrowers to
accept joint and several liability for the Obligations.
(b) Each of Borrowers, jointly and severally,
hereby irrevocably and unconditionally accepts, not merely as a surety but also
as a co-debtor, joint and several liability with the other Borrowers, with
respect to the payment and performance of all of the Obligations (including,
without limitation, any Obligations arising under this Section 2.13), it being
the intention of the parties hereto that all the Obligations shall be the joint
and several obligations of each Person composing Borrowers without preferences
or distinction among them.
(c) If and to the extent that any of Borrowers
shall fail to make any payment with respect to any of the Obligations as and
when due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event the other Persons composing Borrowers will make
such payment with respect to, or perform, such Obligation.
(d) The Obligations of each Person composing
Borrowers under the provisions of this Section 2.13 constitute the absolute and
unconditional, full recourse Obligations of each Person composing Borrowers
enforceable against each such Borrower to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in
this Agreement, each Person composing Borrowers hereby waives notice of
acceptance of its joint and several liability, notice of any Advances pursuant
to this Agreement, notice of the occurrence of any Default, Event of Default, or
of any demand for any payment under this Agreement, notice of any action at any
time taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Person composing Borrowers hereby assents to,
and waives notice of, any extension or postponement of the time for the payment
of any of the Obligations, the acceptance of any payment of any of the
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by Agent or Lenders at any time or times in
respect of any default by any Person composing Borrowers in the performance or
satisfaction of any term, covenant, condition or
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provision of this Agreement, any and all other indulgences whatsoever by Agent
or Lenders in respect of any of the Obligations, and the taking, addition,
substitution or release, in whole or in part, at any time or times, of any
security for any of the Obligations or the addition, substitution or release, in
whole or in part, of any Person composing Borrowers. Without limiting the
generality of the foregoing, each of Borrowers assents to any other action or
delay in acting or failure to act on the part of any Agent or Lender with
respect to the failure by any Person composing Borrowers to comply with any of
its respective Obligations, including, without limitation, any failure strictly
or diligently to assert any right or to pursue any remedy or to comply fully
with applicable laws or regulations thereunder, which might, but for the
provisions of this Section 2.13 afford grounds for terminating, discharging or
relieving any Person composing Borrowers, in whole or in part, from any of its
Obligations under this Section 2.13, it being the intention of each Person
composing Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Person composing Borrowers under this
Section 2.13 shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Person composing Borrowers
under this Section 2.13 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Person composing Borrowers or any Agent or
Lender. The joint and several liability of the Persons composing Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
constitution or place of formation of any of the Persons composing Borrowers or
any Agent or Lender.
(f) Each Person composing Borrowers represents
and warrants to Agent and Lenders that such Borrower is currently informed of
the financial condition of Borrowers and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Person composing Borrowers further represents and warrants to
Agent and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Person composing Borrowers hereby
covenants that such Borrower will continue to keep informed of Borrowers'
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.
(g) The provisions of this Section 2.13 are made
for the benefit of the Agent, the Lenders and their respective successors and
assigns, and may be enforced by it or them from time to time against any or all
of the Persons composing Borrowers as often as occasion therefor may arise and
without requirement on the part of any such Agent, Lender, successor or assign
first to marshal any of its or their claims or to exercise any of its or their
rights against any of the other Persons composing Borrowers or to exhaust any
remedies available to it or them against any of the other Persons composing
Borrowers or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy. The provisions of
this Section 2.13 shall remain in effect until all of the Obligations shall have
been paid in full or otherwise fully satisfied. If at any time, any payment, or
any part thereof, made in respect of any of the Obligations, is rescinded or
must otherwise be restored or returned by any Agent or Lender upon the
insolvency, bankruptcy or reorganization of any of the Persons composing
Borrowers, or otherwise, the provisions of this Section 2.13 will forthwith be
reinstated in effect, as though such payment had not been made.
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(h) Each of the Persons composing Borrowers
hereby agrees that it will not enforce any of its rights of contribution or
subrogation against the other Persons composing Borrowers with respect to any
liability incurred by it hereunder or under any of the other Loan Documents, any
payments made by it to the Agent or the Lenders with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to any Agent or
Lender hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.
(i) Each of the Persons composing Borrowers
hereby agrees that, after the occurrence and during the continuance of any
Default or Event of Default, the payment of any amounts due with respect to the
indebtedness owing by any Borrower to any other Borrower is hereby subordinated
to the prior payment in full in cash of the Obligations. Each Borrower hereby
agrees that after the occurrence and during the continuance of any Default or
Event of Default, such Borrower will not demand, xxx for or otherwise attempt to
collect any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such Borrower as trustee for the Agent, and the Agent shall deliver
any such amounts to the Administrative Agent for application to the Obligations
in accordance with Section 2.4(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF
CREDIT. The obligation of the Lender Group (or any member thereof) to make the
initial Advance (or otherwise to extend any credit provided for hereunder), is
subject to the fulfillment, to the satisfaction of Agent, of each of the
conditions precedent set forth below:
(a) the Closing Date shall occur on or before
July 31, 2001;
(b) Agent shall have received all financing
statements required by Agent, duly executed by the applicable Borrowers, and
Agent shall have received searches reflecting the filing of all such financing
statements;
(c) Agent shall have received each of the
following documents, in form and substance satisfactory to Agent, duly executed,
and each such document shall be in full force and effect:
(i) the Contribution Agreement,
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(xx) xxx Xxxxxxxxxxxx Xxxxxx,
(xxx) the Due Diligence Letter,
(iv) the Fee Letter,
(v) the Guaranty,
(vi) the Cash Management Agreements,
(vii) the Officers' Certificate,
(viii) the Stock Pledge Agreement,
together with all certificates representing the shares of Stock pledged
thereunder, as well as Stock powers with respect thereto endorsed in
blank,
(ix) the Trademark Security Agreement,
(x) the Guarantor Security Agreement,
(xi) the Intercompany Subordination
Agreement,
(xii) the Warrants,
(xiii) the Registration Rights Agreement,
(xiv) the Intercreditor Agreement,
(xv) the Honeywell Acknowledgment, and
(xvi) the Pay-Off Letter, together with
UCC termination statements and other documentation evidencing the
termination by Existing Lender of its Liens in and to the properties
and assets of Borrowers;
(d) Agent shall have received a certificate from
the Secretary of each Borrower attesting to the resolutions of such Borrower's
Board of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which such Borrower is a party and
authorizing specific officers of such Borrower to execute the same;
(e) Agent shall have received copies of each
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Borrower;
(f) Agent shall have received a certificate of
status with respect to each Borrower, dated within 10 days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
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(g) Agent shall have received certificates of
status with respect to each Borrower, each dated within 45 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Borrower) in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Borrower is in good
standing in such jurisdictions;
(h) Agent shall have received a certificate from
the Secretary of each Guarantor attesting to the resolutions of such Guarantor's
Board of Directors authorizing its execution, delivery, and performance of the
Loan Documents to which such Guarantor is a party and authorizing specific
officers of such Guarantor to execute the same;
(i) Agent shall have received copies of each
Guarantor's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Guarantor;
(j) Agent shall have received a certificate of
status with respect to each Guarantor, dated within 45 days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Guarantor, which certificate shall indicate that such
Guarantor is in good standing in such jurisdiction;
(k) Agent shall have received certificates of
status with respect to each Guarantor, each dated within 45 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Guarantor) in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Guarantor is in good
standing in such jurisdictions;
(l) Agent shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.8, in form and substance satisfactory to Agent;
(m) Agent shall have received Collateral Access
Agreements with respect to the following locations: (i) 0000 Xxxxxx Xxxx-Xxxxx
Xxxx, Xxxxx 000, Xxxxxxx, XX 00000, and (ii) 0000 Xxxxx 00xx Xxxxxx, Xxxxxxx, XX
00000;
(n) Agent shall have received a forbearance
agreement, in form and substance satisfactory to Agent, with respect to the
Indebtedness owing to State Bank;
(o) Agent shall have received evidence, in form
and substance satisfactory to Agent, that (i) the Parent has consummated the
sale of the business of its Enterprise Resource Planning Subsidiary for minimum
net cash proceeds of not less than $8,500,000, and (ii) such proceeds have been
applied to the Indebtedness owing to the Existing Lender;
(p) Agent shall have received opinions of
Borrowers' counsel, in form and substance satisfactory to Agent, as to such
matters as Agent may reasonably request, including, without limitation, with
respect to that certain class-action lawsuit filed on behalf of the Parent's
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shareholders against the Parent, certain of its former and current directors and
officers, and Ernst & Young LLP;
(q) Agent shall have received satisfactory
evidence (including a certificate of the chief financial officer of Parent) that
all tax returns required to be filed by Borrowers have been timely filed and all
taxes upon Borrowers or their properties, assets, income, and franchises
(including Real Property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(r) Borrowers shall have the Required
Availability after giving effect to the initial extensions of credit hereunder
and reserves required by Agent for unpaid liabilities of Borrowers that are not
current, as evidenced by the delivery of a pro forma Borrowing Base Certificate
dated as of the Closing Date;
(s) Agent shall have completed its business,
legal, and collateral due diligence, including (i) a collateral audit and review
of Borrowers' books and records and verification of Borrowers' representations
and warranties to the Lender Group, the results of which shall be satisfactory
to Agent and (ii) a review of the Borrowers' credit memoranda, the results of
which shall be satisfactory to Agent;
(t) Agent shall have received completed
reference checks with respect to Borrowers' senior management, including,
without limitation, T. Xxxxx Xxxx, Xxxxxxx X. Xxxx and Xxxxxxx X. Xxxxxx, the
results of which are satisfactory to Agent in its sole discretion;
(u) Agent shall have received Borrowers' Closing
Date Business Plan;
(v) Borrowers shall have paid all Lender Group
Expenses incurred in connection with the transactions evidenced by this
Agreement;
(w) Agent shall have received copies of each of
the Material Contracts, in form and substance satisfactory to Agent, together
with a certificate of the Secretary of the applicable Borrower certifying each
such document as being a true, correct, and complete copy thereof;
(x) Agent shall have received credit references,
in form and substance satisfactory to Agent, from (i) Honeywell, with respect to
the Honeywell Contract, and (ii) Federal Express Corporation, with respect to
the Federal Express Contract, or the State of Tennessee, with respect to the
State of Tennessee Contract;
(y) Borrowers shall have received all licenses,
approvals or evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by Borrowers of this Agreement or any
other Loan Document or with the consummation of the transactions contemplated
hereby and thereby; and
(z) all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance satisfactory
to Agent.
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3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF
CREDIT. The obligation of the Lender Group (or any member thereof) to continue
to make Advances (or otherwise extend credit hereunder) is subject to the
fulfillment, on or before the date applicable thereto, of each of the conditions
subsequent set forth below (the failure by Borrowers to so perform or cause to
be performed constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver
to Agent certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.8, in form and substance
satisfactory to Agent and its counsel; and
(b) within 30 days of the Closing Date, deliver
to Agent a certified copy of the amendment to the promissory note evidencing the
Indebtedness owing to State Bank, in form and substance satisfactory to Agent.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make all Advances (or
to extend any other credit hereunder) shall be subject to the following
conditions precedent:
(a) the representations and warranties contained
in this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such extension of credit, as though
made on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof;
(c) no injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the extending of
such credit shall have been issued and remain in force by any Governmental
Authority against any Borrower, Agent, any Lender, or any of their Affiliates;
and
(d) no Material Adverse Change shall have
occurred.
3.4 TERM. This Agreement shall become effective upon the
execution and delivery hereof by Borrowers, Agent, and the Lenders and shall
continue in full force and effect for a term ending on July 23, 2006 (the
"Maturity Date"). The foregoing notwithstanding, the Lender Group, upon the
election of the Required Lenders, shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of
this Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrowers of their duties, Obligations, or covenants hereunder and the
Agent's Liens in the Collateral shall remain in effect until all Obligations
have been fully and finally discharged and the Lender Group's obligations to
provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been fully and finally
discharged and the Lender Group's obligations to provide additional credit under
the Loan Documents have been terminated
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irrevocably, Agent will, at Borrowers' sole expense, execute and deliver any UCC
termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, the Agent's Liens and all notices of
security interests and liens previously filed by Agent with respect to the
Obligations.
3.6 EARLY TERMINATION BY BORROWERS. Borrowers have the
option, at any time upon 90 days prior written notice by Administrative Borrower
to Agent, to terminate this Agreement by paying to Agent, for the benefit of the
Lender Group, in cash, the Obligations, in full, together with the Applicable
Prepayment Premium (to be allocated based upon letter agreements between Agent
and individual Lenders). If Administrative Borrower has sent a notice of
termination pursuant to the provisions of this Section, then the Commitments
shall terminate and Borrowers shall be obligated to repay the Obligations, in
full, together with the Applicable Prepayment Premium, on the date set forth as
the date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (iv) restructure, reorganization or compromise
of the Obligations by the confirmation of a plan of reorganization, or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender Group
as a result of such early termination, and by mutual agreement of the parties as
to a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby
grants to Agent, for the benefit of the Lender Group, a continuing security
interest in all of its right, title, and interest in all currently existing and
hereafter acquired or arising Personal Property Collateral in order to secure
prompt repayment of any and all of the Obligations in accordance with the terms
and conditions of the Loan Documents and in order to secure prompt performance
by Borrowers of each of their covenants and duties under the Loan Documents. The
Agent's Liens in and to the Personal Property Collateral shall attach to all
Personal Property Collateral without further act on the part of Agent or
Borrowers. Anything contained in this Agreement or any other Loan Document to
the contrary notwithstanding, except for Permitted Dispositions, Borrowers have
no authority, express or implied, to dispose of any item or portion of the
Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, and if and to the extent that perfection or priority of Agent's
security interest is dependent on or enhanced by possession, the applicable
Borrower, immediately upon the request of Agent, shall endorse and deliver
physical possession of such Negotiable Collateral to Agent.
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4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time after the occurrence and during the
continuation of an Event of Default, Agent or Agent's designee may (a) notify
Account Debtors of Borrowers that the Accounts, chattel paper, or General
Intangibles have been assigned to Agent or that Agent has a security interest
therein, or (b) collect the Accounts, chattel paper, or General Intangibles
directly and charge the collection costs and expenses to the Loan Account. Each
Borrower agrees that it will hold in trust for the Lender Group, as the Lender
Group's trustee, any Collections that it receives and immediately will deliver
said Collections to Agent or a Cash Management Bank in their original form as
received by the applicable Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any
time upon the request of Agent, Borrowers shall execute and deliver to Agent,
any and all financing statements, initial financing statements in lieu of
continuation statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, and all other documents (the
"Additional Documents") that Agent may request in its Permitted Discretion, in
form and substance satisfactory to Agent, to perfect and continue perfected or
better perfect the Agent's Liens in the Collateral (whether now owned or
hereafter arising or acquired), to create and perfect Liens in favor of Agent in
any Real Property acquired after the Closing Date, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents. To the maximum extent permitted by applicable law, each Borrower
authorizes Agent to execute any such Additional Documents in the applicable
Borrower's name and authorize Agent to file such executed Additional Documents
in any appropriate filing office. In addition, on such periodic basis as Agent
shall require, Borrowers shall (a) provide Agent with a report of all new
patentable, copyrightable, or trademarkable materials acquired or generated by
Borrowers during the prior period, (b) cause all patents, copyrights, and
trademarks acquired or generated by Borrowers that are not already the subject
of a registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrowers' ownership thereof,
and (c) cause to be prepared, executed, and delivered to Agent supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably
makes, constitutes, and appoints Agent (and any of Agent's officers, employees,
or agents designated by Agent) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of such Borrower on
any of the documents described in Section 4.4, (b) at any time that an Event of
Default has occurred and is continuing, sign such Borrower's name on any invoice
or xxxx of lading relating to the Collateral, drafts against Account Debtors, or
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse such Borrower's name on any Collection item that may come into the
Lender Group's possession, (e) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under such Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (f) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases
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that Agent determines to be necessary. The appointment of Agent as each
Borrower's attorney, and each and every one of its rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and the Lender Group's obligations to
extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Agent and each Lender (through any
of their respective officers, employees, or agents) shall have the right, from
time to time hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify Borrowers' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Each Borrower agrees that it will
not transfer assets out of any Securities Accounts other than as permitted under
Section 7.19 and, if to another securities intermediary, unless each of the
applicable Borrower, Agent, and the substitute securities intermediary have
entered into a Control Agreement. No arrangement contemplated hereby or by any
Control Agreement in respect of any Securities Accounts or other Investment
Property shall be modified by Borrowers without the prior written consent of
Agent. Upon the occurrence and during the continuance of a Default or Event of
Default, Agent may notify any securities intermediary to liquidate the
applicable Securities Account or any related Investment Property maintained or
held thereby and remit the proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this
Agreement, each Borrower makes the following representations and warranties to
the Lender Group which shall be true, correct, and complete, in all material
respects, as of the date hereof, and shall be true, correct, and complete, in
all material respects, as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as though
made on and as of the date of such Advance (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and
indefeasible title to its Collateral and Real Property, free and clear of Liens
except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS; ELIGIBLE UNBILLED ACCOUNTS.
(a) The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Borrowers' business, owed to Borrowers without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. As to each Eligible
Account, such Account is not:
(i) owed by an employee, Affiliate, or
agent of a Borrower,
(ii) on account of a transaction wherein
goods were placed on consignment or were sold pursuant to a guaranteed
sale, a sale or return, a sale on
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approval, a xxxx and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(iii) payable in a currency other than
Dollars,
(iv) owed by an Account Debtor that has
or has asserted a right of setoff, has disputed its liability, or has
made any claim with respect to its obligation to pay the Account,
(v) owed by an Account Debtor that is
subject to any Insolvency Proceeding or is not Solvent or as to which a
Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(vi) on account of a transaction as to
which the goods giving rise to such Account have not been shipped or
the services giving rise to such Account have not been performed,
(vii) a right to receive progress
payments or other advance xxxxxxxx that are due prior to the completion
of performance by the applicable Borrower of the subject contract for
goods or services, and
(viii) an Account that has not been billed
to the customer.
(b) The Eligible Unbilled Accounts are bona fide
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Borrowers' business, owed to Borrowers without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. As to each Eligible
Unbilled Account, such Unbilled Account is not:
(i) owed by an employee, Affiliate, or
agent of a Borrower,
(ii) on account of a transaction wherein
goods were placed on consignment or were sold pursuant to a guaranteed
sale, a sale or return, a sale on approval, a xxxx and hold, or on any
other terms by reason of which the payment by the Account Debtor may be
conditional,
(iii) payable in a currency other than
Dollars,
(iv) owed by an Account Debtor that has
or has asserted a right of setoff, has disputed its liability, or has
made any claim with respect to its obligation to pay the Unbilled
Account,
(v) owed by an Account Debtor that is
subject to any Insolvency Proceeding or is not Solvent or as to which a
Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
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(vi) on account of a transaction as to
which the goods giving rise to such Unbilled Account have not been
shipped or the services giving rise to such Unbilled Account have not
been performed, and
(vii) a right to receive progress
payments or other advance xxxxxxxx that are due prior to the completion
of performance by the applicable Borrower of the subject contract for
goods or services.
5.3 EQUIPMENT. All of the Equipment is used or held for
use in Borrowers' business and is fit for such purposes.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory
and Equipment are not stored with a bailee, warehouseman, or similar party and
are located only at the locations identified on Schedule 5.4.
5.5 INVENTORY RECORDS. Each Borrower that owns Inventory
with an aggregate book value in excess of $100,000 keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of each Borrower is located at the address indicated in
Schedule 5.6 and each Borrower's FEIN is identified in Schedule 5.6.
5.7 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing and
in good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.7(b), is a complete and
accurate description of the authorized capital Stock of each Borrower, by class,
and, as of the Closing Date, a description of the number of shares of each such
class that are issued and outstanding. Except as described in Schedule 5.7(b),
no shares of capital stock of any Borrower are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
such Borrower. Except as set forth in Schedule 5.7(b) or the Warrants, and
except as contemplated by the Warrants, as of the date hereof, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of any of the Borrowers, or
contracts, commitments, understandings or arrangements by which any Borrower is
or may become bound to issue additional shares of capital stock of such Borrower
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of any Borrower, and (ii) there are no agreements or
arrangements under which any Borrower is obligated to register the sale of any
of its securities under the Securities Act. There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Warrants or, upon exercise of the Warrants, the
issuance of the Warrant Shares.
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(c) Set forth on Schedule 5.7(c), is a complete and
accurate list of each Borrower's direct and indirect Subsidiaries, showing: (i)
the jurisdiction of their organization; (ii) the number of shares of each class
of common and preferred Stock authorized for each of such Subsidiaries; and
(iii) the number and the percentage of the outstanding shares of each such class
owned directly or indirectly by the applicable Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) There are no subscriptions, options, warrants, or
calls relating to any shares of any Borrower's Subsidiaries' capital Stock,
including any right of conversion or exchange under any outstanding security or
other instrument. No Borrower or any of its respective Subsidiaries is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of any Borrower's Subsidiaries' capital Stock or any
security convertible into or exchangeable for any such capital Stock.
5.8 DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents to which
it is a party have been duly authorized by all necessary action (corporate or
otherwise) on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents
(including, without limitation, the issuance of the Warrant Shares by the
Parent) to which it is a party do not and will not (i) violate any provision of
federal, state, or local law or regulation applicable to any Borrower, the
Governing Documents of any Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on any Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation of any Borrower, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of Borrower, other than Permitted
Liens, or (iv) require any approval of any Borrower's interestholders or any
approval or consent of any Person under any material contractual obligation of
any Borrower.
(c) Other than the filing of financing statements,
the execution, delivery, and performance by each Borrower of this Agreement and
the Loan Documents to which such Borrower is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority or other Person.
(d) As to each Borrower, this Agreement and the other
Loan Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.
(e) The Agent's Liens are validly created, perfected,
and first priority Liens, subject only to Permitted Liens
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(f) The execution, delivery, and performance by each
Guarantor of the Loan Documents to which it is a party have been duly authorized
by all necessary action on the part of such Guarantor.
(g) The execution, delivery, and performance by each
Guarantor of the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation applicable
to such Guarantor, the Governing Documents of such Guarantor, or any order,
judgment, or decree of any court or other Governmental Authority binding on such
Guarantor, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of such Guarantor, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Guarantor, other than Permitted Liens, or (iv) require any approval of such
Guarantor's interestholders or any approval or consent of any Person under any
material contractual obligation of such Guarantor.
(h) The execution, delivery, and performance by each
Guarantor of the Loan Documents to which such Guarantor is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority or other Person.
(i) The Loan Documents to which each Guarantor is a
party, and all other documents contemplated hereby and thereby, when executed
and delivered by such Guarantor will be legally valid and binding obligations of
such Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
5.9 LITIGATION. Other than those matters disclosed on
Schedule 5.9, there are no actions, suits, or proceedings pending or, to the
best knowledge of Borrowers, threatened against Borrowers, or any of their
Subsidiaries, as applicable, except for (a) matters that are fully covered by
insurance (subject to customary deductibles), and (b) matters arising after the
Closing Date that, if decided adversely to Borrowers, or any of their
Subsidiaries, as applicable, reasonably could not be expected to result in a
Material Adverse Change.
5.10 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Borrowers or Guarantors that have been delivered by Borrowers or
Guarantors to the Lender Group have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly in
all material respects, Borrowers' (or Guarantors', as applicable) financial
condition as of the date thereof and results of operations for the period then
ended. There has not been a Material Adverse Change with respect to Borrowers
(or Guarantors, as applicable) since the date of the latest financial statements
submitted to the Lender Group on or before the Closing Date.
5.11 FRAUDULENT TRANSFER.
(a) each Borrower is Solvent.
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(b) No transfer of property is being made by any
Borrower and no obligation is being incurred by any Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
Borrowers.
5.12 EMPLOYEE BENEFITS. None of Borrowers, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan.
5.13 ENVIRONMENTAL CONDITION. Except as set forth on
Schedule 5.13, (a) to Borrowers' knowledge, none of Borrowers' properties or
assets has ever been used by Borrowers or by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, where such production, storage, handling, treatment,
release or transport was in violation, in any material respect, of applicable
Environmental Law, (b) to Borrowers' knowledge, none of Borrowers' properties or
assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, (c)
none of Borrowers have received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned or
operated by Borrowers, and (d) none of Borrowers have received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
any Borrower resulting in the releasing or disposing of Hazardous Materials into
the environment.
5.14 BROKERAGE FEES. Except as set forth on Schedule 5.14,
Borrowers have not utilized the services of any broker or finder in connection
with Borrowers' obtaining financing from the Lender Group under this Agreement
and no other brokerage commission or finders fee is payable by Borrowers in
connection herewith.
5.15 INTELLECTUAL PROPERTY. Each Borrower owns, or holds
licenses in, all trademarks, trade names, copyrights, patents, patent rights,
and licenses that are necessary to the conduct of its business as currently
conducted. Attached hereto as Schedule 5.15 is a true, correct, and complete
listing of all material patents, patent applications, trademarks, trademark
applications, copyrights, and copyright registrations as to which each Borrower
is the owner or is an exclusive licensee. No Borrower has any copyright (other
than immaterial copyrights of a de minimis value) from which it is deriving
revenues other than those that have been registered with the United States
Copyright Office and that are the subject of a copyright security agreement in
favor of the Agent that has been filed with the United States Copyright Office.
5.16 LEASES. Borrowers enjoy peaceful and undisturbed
possession under all leases material to the business of Borrowers and to which
Borrowers are a party or under which Borrowers are operating. All of such leases
are valid and subsisting and no material default by Borrowers exists under any
of them.
5.17 DDAS. Set forth on Schedule 5.17 are all of the DDAs
of each Borrower, including, with respect to each depository (i) the name and
address of that depository, and (ii) the account numbers of the accounts
maintained with such depository.
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5.18 COMPLETE DISCLOSURE. All factual information (taken
as a whole) furnished by or on behalf of Borrowers in writing to Agent or any
Lender (including all information contained in the Schedules hereto or in the
other Loan Documents) for purposes of or in connection with this Agreement, the
other Loan Documents or any transaction contemplated herein or therein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of Borrowers in writing to the Agent or any Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided. On the Closing Date, the Closing Date Projections represent, and as of
the date on which any other Projections are delivered to Agent, such additional
Projections represent Borrowers' good faith best estimate of its future
performance for the periods covered thereby.
5.19 INDEBTEDNESS. Set forth on Schedule 5.19 is a true
and complete list of all Indebtedness of each Borrower outstanding immediately
prior to the Closing Date that is to remain outstanding after the Closing Date
and such Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.
5.20 INACTIVE GUARANTORS. Except as set forth on Schedule
5.20, each Inactive Guarantor conducts no business and has no assets or
liabilities.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall and shall cause each of their respective
Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting
that enables Borrowers to produce financial statements in accordance with GAAP
and maintain records pertaining to the Collateral that contain information as
from time to time reasonably may be requested by Agent. Each Borrower that owns
Inventory with an aggregate book value in excess of $100,000 shall also keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to its Inventory.
6.2 COLLATERAL REPORTING. Provide Agent (and if so
requested by Agent, with copies for each Lender) with the following documents at
the following times in form satisfactory to Agent:
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Weekly (a) a sales journal, collection journal, credit register
and the Borrowers' "57.5 report", in each case since
the last such schedule and a calculation of the
Borrowing Base as of such date,
(b) notice of all disputes or claims,
(c) an estimated Unbilled Accounts report (including an
estimate of fixed price outsourcing contracts) as
derived from the Borrowers' "57.5 report", in the
form delivered to the Agent prior to the Closing
Date, and
(d) a calculation of estimated payroll for each full week
(or any portion thereof) based on the weekly average
of the prior month's payroll.
--------------------------------------------------------------------------------
Semi-Monthly (e) an ADP payroll report specifying each Borrower's
paid payroll and associated paid payroll taxes, and
(f) within 10 days of the end of the pay period,
additional detail showing each employee's total hours
worked (as set forth in the Borrowers' EMPTIME
system).
--------------------------------------------------------------------------------
Monthly (not (g) a detailed calculation of the Borrowing Base as of
later than the the end of the prior month (including detail
15th day of each regarding those Accounts that are not Eligible
month) Accounts or Eligible Unbilled Accounts)
(h) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of
the Borrowing Base previously provided to Agent,
(i) a summary aging, by vendor, of Borrowers' accounts
payable and any book overdraft, and
(j) a calculation of Dilution for the prior month.
--------------------------------------------------------------------------------
Quarterly (k) a detailed list of each Borrower's customers,
(l) a report regarding each Borrower's accrued, but
unpaid, ad valorem taxes,
--------------------------------------------------------------------------------
Upon request by (m) copies of invoices in connection with the Accounts,
Agent credit memos, remittance advices, deposit slips,
shipping and delivery documents in connection with
the Accounts and, for Inventory and Equipment
acquired by Borrowers, purchase orders and invoices,
and
(n) such other reports as to the Collateral, or the
financial condition of Borrowers as Agent may
request.
--------------------------------------------------------------------------------
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In addition, each Borrower agrees to cooperate fully with
Agent to facilitate and implement a system of electronic collateral reporting in
order to provide electronic reporting of each of the items set forth above.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver
to Agent, with copies to each Lender:
(a) as soon as available, but in any event within 30
days (45 days in the case of a month that is the end of one of the first 3
fiscal quarters in a fiscal year) after the end of each month during each of
Parent's fiscal years,
(i) a company prepared consolidated
balance sheet, income statement, and statement of cash flow covering
Parent's and its Subsidiaries' operations during such period,
(ii) a certificate signed by the chief
financial officer of Parent to the effect that:
A. the financial statements
delivered hereunder have been prepared in accordance
with GAAP (except for the lack of footnotes and being
subject to year-end audit adjustments) and fairly
present in all material respects the financial
condition of Parent and its Subsidiaries,
B. the representations and
warranties of Borrowers contained in this Agreement
and the other Loan Documents are true and correct in
all material respects on and as of the date of such
certificate, as though made on and as of such date
(except to the extent that such representations and
warranties relate solely to an earlier date),
C. there does not exist any
condition or event that constitutes a Default or
Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to
which he or she may have knowledge and what action
Borrowers have taken, are taking, or propose to take
with respect thereto), and
D. there has not been any
amendment, modification, alteration, increase or
change in any of the terms or conditions of any
Material Contract, and
(iii) for each month that is the date on
which a financial covenant in Section 7.20 is to be tested, a
Compliance Certificate demonstrating, in reasonable detail, compliance
at the end of such period with the applicable financial covenants
contained in Section 7.20, and
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(b) as soon as available, but in any event within 90
days after the end of each of Parent's fiscal years,
(i) financial statements of Parent and
its Subsidiaries for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Agent and
certified, without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, and statement of cash flow
and, if prepared, such accountants' letter to management),
(ii) a certificate of such accountants
addressed to Agent and the Lenders stating that such accountants do not
have knowledge of the existence of any Default or Event of Default
under Section 7.20,
(c) as soon as available, but in any event within 30
days prior to the start of each of Parent's fiscal years,
(i) copies of Borrowers' Projections,
in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent, in its sole discretion, for the
forthcoming 3 years, year by year, and for the forthcoming fiscal year,
month by month, certified by the chief financial officer of Parent as
being such officer's good faith best estimate of the financial
performance of Parent and its Subsidiaries during the period covered
thereby,
(d) if and when filed by any Borrower,
(i) 10-Q quarterly reports, Form 10-K
annual reports, and Form 8-K current reports,
(ii) any other filings made by any
Borrower with the SEC,
(iii) copies of Borrowers' federal income
tax returns, and any amendments thereto, filed with the Internal
Revenue Service, and
(iv) any other information that is
provided by Parent to its shareholders generally,
(e) if and when filed by any Borrower and as
requested by Agent, satisfactory evidence of payment of applicable excise taxes
in each jurisdictions in which (i) any Borrower conducts business or is required
to pay any such excise tax, (ii) where any Borrower's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of any
Borrower, or (iii) where any Borrower's failure to pay any such applicable
excise tax reasonably could be expected to result in a Material Adverse Change,
(f) as soon as a Borrower has knowledge of any event
or condition that constitutes a Default or an Event of Default, notice thereof
and a statement of the curative action that Borrowers propose to take with
respect thereto, and
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(g) upon the request of Agent, any other report
reasonably requested relating to the financial condition of Borrowers.
In addition to the financial statements referred to above,
Borrowers agree to deliver financial statements prepared on both a consolidated
and consolidating basis and that no Borrower, or any Subsidiary of a Borrower,
will have a fiscal year different from that of Parent. Borrowers agree that
their independent certified public accountants are authorized to communicate
with Agent and to release to Agent whatever financial information concerning
Borrowers that Agent reasonably may request. Each Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
or service bureau in connection with any information requested by Agent pursuant
to or in accordance with this Agreement, and agree that Agent may contact
directly any such accounting firm or service bureau in order to obtain such
information.
6.4 GUARANTOR REPORTS. Cause each Guarantor to deliver
its annual financial statements at the time when Parent provides its audited
financial statements to Agent and copies of all federal income tax returns as
soon as the same are available and in any event no later than 30 days after the
same are required to be filed by law.
6.5 RETURN. Cause returns and allowances as between
Borrowers and their Account Debtors, to be on the same basis and in accordance
with the usual customary practices of the applicable Borrower, as they exist at
the time of the execution and delivery of this Agreement. If, at a time when no
Event of Default has occurred and is continuing, any Account Debtor returns any
Inventory with an aggregate book value in excess of $100,000 to any Borrower,
the applicable Borrower promptly shall determine the reason for such return and,
if the applicable Borrower accepts such return, issue a credit memorandum (with
a copy to be sent to Agent) in the appropriate amount to such Account Debtor.
If, at a time when an Event of Default has occurred and is continuing, any
Account Debtor returns any Inventory with an aggregate book value in excess of
$100,000 to any Borrower, the applicable Borrower promptly shall determine the
reason for such return and, if Agent consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Agent) in the appropriate amount to such Account Debtor.
6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all
of its properties which are necessary or useful in the proper conduct to its
business in good working order and condition, ordinary wear and tear excepted,
and comply at all times with the provisions of all leases to which it is a party
as lessee, so as to prevent any loss or forfeiture thereof or thereunder.
6.7 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrowers or any of their assets to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrowers will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory to
Agent indicating that the applicable Borrower has made such payments or
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deposits. Borrowers shall deliver satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which any Borrower is required to pay any
such excise tax.
6.8 INSURANCE.
(a) At Borrowers' expense, maintain insurance
respecting its property and assets wherever located, covering loss or damage by
fire, theft, explosion, and all other hazards and risks as ordinarily are
insured against by other Persons engaged in the same or similar businesses.
Borrowers also shall maintain business interruption, public liability, and
product liability insurance, as well as insurance against larceny, embezzlement,
and criminal misappropriation. All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Agent. Borrowers shall deliver copies of all such policies to Agent with a
satisfactory lender's loss payable endorsement naming Agent as sole loss payee
or additional insured, as appropriate. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever.
(b) Administrative Borrower shall give Agent prompt
notice of any loss covered by such insurance. Agent shall have the exclusive
right to adjust any losses payable under any such insurance policies in excess
of $50,000, without any liability to Borrowers whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy mentioned above (other than liability insurance policies) or as payment
of any award or compensation for condemnation or taking by eminent domain, shall
be paid over to Agent to be applied at the option of the Required Lenders either
to the prepayment of the Obligations or shall be disbursed to Administrative
Borrower under staged payment terms reasonably satisfactory to the Required
Lenders for application to the cost of repairs, replacements, or restorations.
Any such repairs, replacements, or restorations shall be effected with
reasonable promptness and shall be of a value at least equal to the value of the
items or property destroyed prior to such damage or destruction.
(c) Borrowers shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.8, unless Agent is included thereon as named
insured with the loss payable to Agent under a lender's loss payable endorsement
or its equivalent. Administrative Borrower immediately shall notify Agent
whenever such separate insurance is taken out, specifying the insurer thereunder
and full particulars as to the policies evidencing the same, and copies of such
policies promptly shall be provided to Agent.
6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep the
Inventory and Equipment only at the locations identified on Schedule 5.4;
provided, however, that Administrative Borrower may amend Schedule 5.4 so long
as such amendment occurs by written notice to Agent not less than 30 days prior
to the date on which the Inventory or Equipment is moved to such new location,
so long as such new location is within the continental United States, and so
long as, at the time of such written notification, the applicable Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens on such assets and also provides to Agent a
Collateral Access Agreement.
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6.10 COMPLIANCE WITH LAWS. Comply with the requirements of
all applicable laws, rules, regulations, and orders of any Governmental
Authority, including the Fair Labor Standards Act and the Americans With
Disabilities Act, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, would not result in
and reasonably could not be expected to result in a Material Adverse Change.
6.11 LEASES. Pay when due all rents and other amounts
payable under any leases to which any Borrower is a party or by which any
Borrower's properties and assets are bound, unless such payments are the subject
of a Permitted Protest.
6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage
commission or finders fees incurred in connection with or as a result of
Borrowers' obtaining financing from the Lender Group under this Agreement.
Borrowers agree and acknowledge that payment of all such brokerage commissions
or finders fees shall be the sole responsibility of Borrowers, and each Borrower
agrees to indemnify, defend, and hold Agent and the Lender Group harmless from
and against any claim of any broker or finder arising out of Borrowers'
obtaining financing from the Lender Group under this Agreement.
6.13 EXISTENCE. Except as otherwise permitted in Section
7.3, at all times preserve and keep in full force and effect each Borrower's
valid existence and good standing and any rights and franchises material to
Borrowers' businesses.
6.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by any
Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Borrower and take any Remedial Actions required to xxxxx said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Agent with written notice within 10 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of any Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.15 DISCLOSURE UPDATES. Promptly and in no event later
than 5 Business Days after obtaining knowledge thereof, (a) notify Agent if any
written information, exhibit, or report furnished to the Lender Group contained
any untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
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7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not and will not permit any of their respective
Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit,
guarantee, or otherwise become or remain, directly or indirectly, liable with
respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the
other Loan Documents;
(b) Indebtedness set forth on Schedule 5.19;
(c) Permitted Purchase Money Indebtedness;
(d) Refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not, in Agent's judgment, materially impair the prospects of repayment of the
Obligations by Borrowers or materially impair Borrowers' creditworthiness, (ii)
such refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to the applicable Borrower, and (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must be include subordination terms and conditions that
are at least as favorable to the Lender Group as those that were applicable to
the refinanced, renewed, or extended Indebtedness;
(e) Indebtedness composing Permitted Investments; and
(f) Guaranties permitted under Section 7.6.
7.2 LIENS. Create, incur, assume, or permit to exist,
directly or indirectly, any Lien on or with respect to any of its assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced,
renewed, or extended under Section 7.1(d) and so long as the replacement Liens
only encumber those assets that secured the refinanced, renewed, or extended
Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock, provided that (i)
any Borrower (other than the Parent) may be merged into or consolidated with
another Borrower and (ii) any Inactive Guarantor may
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be merged into or consolidated with a Borrower or another Inactive Guarantor, so
long as with respect to each merger or consolidation referred to in clauses (i)
and (ii) above, (A) no other provision of this Loan Agreement would be violated
thereby, (B) the Parent gives the Agent at least 30 days' prior written notice
of such merger or consolidation, (C) no Default or Event of Default shall have
occurred and be continuing either before or after giving effect to such
transaction, (D) the Agent's rights in any Collateral, including, without
limitation, the existence, perfection and priority of any Lien thereon, are not
adversely affected by such merger or consolidation and (E) the surviving Person
is a Borrower party to this Agreement (or, in the case of a merger or
consolidation among Inactive Guarantors, an Inactive Guarantor party to a
Guaranty and a Security Agreement) and the capital Stock of which Person is the
subject of a Pledge Agreement, in each case, which is in full force and effect
on the date of and immediately after giving effect to such merger or
consolidation.
(b) Liquidate, wind up, or dissolve itself (or suffer
any liquidation or dissolution).
(c) Convey, sell, lease, license, assign, transfer,
or otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its assets.
7.4 DISPOSAL OF ASSETS. Other than Permitted
Dispositions, convey, sell, lease, license, assign, transfer, or otherwise
dispose of any of the assets of any Borrower.
7.5 CHANGE NAME. Change any Borrower's name, FEIN,
corporate structure or identity, jurisdiction of incorporation, or add any new
fictitious name; provided, however, that a Borrower may change its name or
jurisdiction of incorporation upon at least 30 days prior written notice by
Administrative Borrower to Agent of such change and so long as, at the time of
such written notification, such Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Agent's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except (i) by
endorsement of instruments or items of payment for deposit to the account of
Borrowers or which are transmitted or turned over to Agent and (ii) for
guarantees of Indebtedness permitted by Section 7.1 (other than guarantees of
Indebtedness owing by Partners Capital Group).
7.7 NATURE OF BUSINESS. Make any change in the principal
nature of Borrowers' business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted
by Section 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower, other than the Obligations in accordance with this
Agreement, provided that, so long as no Event of Default shall have occurred and
be continuing or result from the prepayment thereof, the Borrowers may from time
to time prepay the Indebtedness owing to State Bank in accordance with the
express terms of the Intercreditor Agreement,
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(b) Except in connection with a refinancing permitted
by Section 7.1(d), directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b) or (c), and
(c) Directly or indirectly, amend, modify, alter,
increase or change any of the terms or conditions of any Material Contract.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly
or indirectly, any Change of Control.
7.10 CONSIGNMENTS. Except with respect to Inventory with
an aggregate value not exceeding $100,000 at any time, consign any Inventory or
sell any Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or
pay any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of any Borrower's Stock, of any class,
whether now or hereafter outstanding, other than (a) distributions or
declaration and payment of dividends by a Borrower to another Borrower, (b) the
issuance of shares of Parent's Common Stock upon the exercise of Parent's
warrants outstanding as of the Closing Date (including the Warrants) and (c) the
repurchase by the Parent of shares of its Common Stock during the fiscal years
of the Parent ending April 30, 2002 and April 30, 2003, so long as (i) the
aggregate amount paid to repurchase such shares of Stock shall not exceed (A)
$1,000,000 during the fiscal year of the Parent ending April 30, 2002 and (B)
$2,000,000 during the fiscal year of the Parent ending April 30, 2003, (ii) the
aggregate amount paid to repurchase such shares of Stock during any fiscal
quarter shall not exceed 50% of the Excess Cash Flow of the Parent and its
Subsidiaries for the immediately preceeding fiscal quarter, (iii) no Event of
Default has occurred and is continuing or would result from the repurchase of
shares of such Stock, (iv) both before and immediately after such repurchase
Excess Availability shall exceed $5,000,000, and (v) Administrative Borrower
delivers to Agent, on or prior to the date of each such repurchase, a
certificate of the chief executive officer or chief financial officer of
Administrative Borrower (A) certifying that the conditions set forth in clauses
(i), (ii), (iii) and (iv) above have been satisfied and (B) containing a
calculation of Availability.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting (other than as may be required to conform to GAAP) or enter into,
modify, or terminate any agreement currently existing, or at any time hereafter
entered into with any third party accounting firm or service bureau for the
preparation or storage of Borrowers' accounting records without said accounting
firm or service bureau agreeing to provide Agent information regarding the
Collateral or Borrowers' financial condition.
7.13 INVESTMENTS. Except for Permitted Investments,
directly or indirectly, make or acquire any Investment, or incur any liabilities
(including contingent obligations) for or in connection with any Investment;
provided, however, that Borrowers shall not have Permitted Investments (other
than in the Cash Management Accounts) in excess of $75,000 outstanding at any
one time unless the applicable Borrower and the applicable securities
intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted
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Investments, as Agent shall determine in its Permitted Discretion, to perfect
(and further establish) the Agent's Liens in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any transaction with any Affiliate of any Borrower
except for transactions that are in the ordinary course of Borrowers' business,
upon fair and reasonable terms, that are fully disclosed to Agent, and that are
no less favorable to Borrowers than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial
portion of its business.
7.16 RESERVED.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances and
the Term Loan for any purpose other than (a) on the Closing Date, (i) to repay
in full the outstanding principal, accrued interest, and accrued fees and
expenses owing to Existing Lender, (ii) to repay the Indebtedness owing to State
Bank in an amount not in excess of $1,000,000 and (iii) to pay transactional
fees, costs, and expenses incurred in connection with this Agreement, the other
Loan Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT WITH BAILEES. Relocate (a) its chief executive office to
a new location or (b) any Inventory and/or Equipment from a location for which a
Collateral Access Agreement has been provided to a location for which a
Collateral Access Agreement has not been provided, in each case, without
Administrative Borrower providing 30 days prior written notification thereof to
Agent and so long as, at the time of such written notification, the applicable
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected the Agent's Liens and also provides to Agent a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Agent's prior written consent.
7.19 SECURITIES ACCOUNTS. Establish or maintain any
Securities Account unless Agent shall have received a Control Agreement in
respect of such Securities Account. Borrowers agree to not transfer assets out
of any Securities Account; provided, however, that, so long as no Event of
Default has occurred and is continuing or would result therefrom, Borrowers may
use such assets (and the proceeds thereof) to the extent not prohibited by this
Agreement.
7.20 FINANCIAL COVENANTS.
(a) Minimum EBITDA. Fail to maintain EBITDA, measured
on a fiscal quarter-end basis, of not less than the required amount set forth in
the following table for the applicable period set forth opposite thereto:
Applicable Amount Applicable Period
----------------- -----------------
$1,769,000 For the 3 month period ending July 31, 2001
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Applicable Amount Applicable Period
----------------- -----------------
$4,155,000 For the 6 month period ending October 31, 2001
$6,097,000 For the 9 month period ending January 31, 2002
$8,800,000 For the 12 month period ending April 30, 2002
Minimum EBITDA for the 12 month period ending each fiscal quarter of the Parent
and its Subsidiaries after April 30, 2002 shall not be less than 80% of
Borrowers' projected EBITDA for each such 12 month period as set forth in the
Projections delivered to Agent in accordance with Section 6.3(c), which
Projections shall be in form and substance acceptable to Agent; provided, that
if Agent and Administrative Borrower cannot agree on such Projections, for
purposes of this Section 7.20(a), minimum EBITDA for each such 12 month period
shall not be less than $10,000,000.
(b) Capital Expenditures. Make capital expenditures
in excess of the amount set forth in the following table for the applicable
period set forth opposite thereto:
Applicable Amount Applicable Period
----------------- -----------------
$ 300,000 For the 3 month period ending July 31, 2001
$ 600,000 For the 6 month period ending October 31, 2001
$ 900,000 For the 9 month period ending January 31, 2002
$1,200,000 For the 12 month period ending April 30, 2002
The maximum amount of capital expenditures that Borrowers may make during each
fiscal quarter of the Parent and its Subsidiaries ending after April 30, 2002
shall not exceed 120% of Borrowers' projected amount of capital expenditures for
each such fiscal quarter as set forth in the Projections delivered to Agent in
accordance with Section 6.3(c), which Projections shall be in form and substance
acceptable to Agent; provided, that if Agent and Administrative Borrower cannot
agree on such Projections, for purposes of this Section 7.20(b), the amount of
Borrowers' capital expenditures for each such fiscal quarter shall not exceed
$300,000.
7.21 INACTIVE GUARANTORS. Permit any Inactive Guarantor to
(i) conduct, transact or otherwise engage in, or commit to conduct, transact or
otherwise engage in, any transaction, business or operation, (ii) incur, create,
assume or suffer to exist any Indebtedness or other liabilities or obligations,
(iii) create or suffer to exist any Lien or security interest upon or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign any right to receive income, except for any Lien or security interest in
favor of the Agent, (iv) liquidate, dissolve, merge or consolidate with, or
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions), any of its assets (whether now owned or hereafter
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acquired) to any Person, except (A) in accordance with Section 7.3(a), or (B)
with the prior written consent of the Agent, (v) own, lease, manage or otherwise
operate any properties or assets (other than as set forth on Schedule 5.20),
(vi) make, incur, assume or suffer to exist any loan or advance to or investment
in any Person or purchase or otherwise acquire any capital stock, properties,
assets or obligations of, or any interest in, any Person, or (vii) make any
payment (including, without limitation, a payment, distribution or dividend on,
or any payment on account of the purchase, redemption, defeasance or retirement
of, or any other distribution on, any share of any class of stock or other
ownership interest in or capital stock of any Person) other than in accordance
with the express provisions of this Agreement.
7.22 PARTNERS CAPITAL GROUP. Without the prior written
consent of Agent, permit Partners Capital Group to (i) incur, create, assume or
suffer to exist any Indebtedness or other liabilities or obligations, except for
Indebtedness existing on the Closing Date or (ii) create or suffer to exist any
Lien or security interest upon or with respect to any of its properties, whether
now owned or hereafter acquired, or assign any right to receive income, except
for Liens existing on the Closing Date.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If any Borrower fails to pay when due and payable or
when declared due and payable, all or any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due the
Lender Group, reimbursement of Lender Group Expenses, or other amounts
constituting Obligations);
8.2 If any Borrower (a) fails to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Section 6.1, 6.5, 6.6, 6.7 or 6.11 of this Agreement, or any comparable
provision of any other Loan Document, and such failure or neglect continues for
a period of ten (10) days after the date on which such failure or neglect first
occurs, (b) fails to perform, keep, or observe any term, provision, condition,
covenant, or agreement contained in Section 6.2 (only if (i) such failure or
neglect has been caused solely and directly by the failure of a third Person
that is not an officer or Affiliate of any Borrower to provide information
required to complete a document required by Section 6.2 and (ii) such failure or
neglect has occurred less than three times during the immediately preceding
12-month period), 6.3 or 6.4 of this Agreement, or any comparable provision of
any other Loan Document, and such failure or neglect continues for a period of
five (5) days after the date on which such failure or neglect first occurs, or
(c) fails to perform, keep, or observe any other term, provision, condition,
covenant, or agreement contained in this Agreement or in any other Loan Document
when required;
8.3 If any material portion of any Borrower's or any of
its Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
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8.4 If an Insolvency Proceeding is commenced by any
Borrower or any of its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against any
Borrower, or any of its Subsidiaries, and any of the following events occur: (a)
the applicable Borrower or the Subsidiary consents to the institution of the
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Agent (including any successor agent) and each other member of the Lender Group
shall be relieved of their obligation to extend credit hereunder, (d) an interim
trustee is appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, any Borrower or any of its Subsidiaries, or (e) an order for relief
shall have been entered therein;
8.6 If any Borrower or any of its Subsidiaries is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of
record with respect to any Borrower's or any of its Subsidiaries' assets by the
United States, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether xxxxxx or otherwise, upon any Borrower's or any of its Subsidiaries'
assets and the same is not paid on the payment date thereof;
8.8 If a judgment or other claim becomes a Lien or
encumbrance upon any material portion of any Borrower's or any of its
Subsidiaries' properties or assets;
8.9 If there is a default in any material agreement to
which any Borrower or any of its Subsidiaries is a party and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by the other party thereto, irrespective of whether exercised, to
accelerate the maturity of the applicable Borrower's or its Subsidiaries'
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
8.10 If any Borrower or any of its Subsidiaries makes any
payment on account of Indebtedness that has been contractually subordinated in
right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness;
8.11 If any misstatement or misrepresentation exists now
or hereafter in any warranty, representation, statement, or Record made to the
Lender Group by any Borrower, its Subsidiaries, or any officer, employee, agent,
or director of any Borrower or any of its Subsidiaries;
8.12 If the obligation of any Guarantor under its Guaranty
is limited or terminated by operation of law or by such Guarantor thereunder;
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8.13 If this Agreement or any other Loan Document that
purports to create a Lien, shall, for any reason, fail or cease to create a
valid and perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien on or security interest in the Collateral covered
hereby or thereby;
8.14 Any provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Borrower, or a proceeding shall
be commenced by any Borrower, or by any Governmental Authority having
jurisdiction over any Borrower, seeking to establish the invalidity or
unenforceability thereof, or any Borrower shall deny that any Borrower has any
liability or obligation purported to be created under any Loan Document.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during
the continuation, of an Event of Default, the Required Lenders (at their
election but without notice of their election and without demand) may authorize
and instruct Agent to do any one or more of the following on behalf of the
Lender Group (and Agent, acting upon the instructions of the Required Lenders,
shall do the same on behalf of the Lender Group), all of which are authorized by
Borrowers:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to or
for the benefit of Borrowers under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of the Lender Group, but
without affecting any of the Agent's Liens in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Agent considers advisable,
and in such cases, Agent will credit the Loan Account with only the net amounts
received by Agent in payment of such disputed Accounts after deducting all
Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
assets of Borrowers or in Borrowers' possession and conspicuously label said
returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon any Borrower or
Guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Each Borrower
agrees to assemble the Personal Property Collateral if Agent so requires, and to
make the Personal Property Collateral available to Agent at a place that Agent
may designate which is reasonably convenient to both parties. Each Borrower
authorizes Agent to enter the premises where the Personal Property Collateral is
located, to take and maintain possession of the Personal Property Collateral, or
any part of it, and to pay, purchase,
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contest, or compromise any Lien that in Agent's determination appears to
conflict with the Agent's Liens and to pay all expenses incurred in connection
therewith and to charge Borrowers' Loan Account therefor. With respect to any of
Borrowers' owned or leased premises, each Borrower hereby grants Agent a license
to enter into possession of such premises and to occupy the same, without
charge, in order to exercise any of the Lender Group's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of any Borrower
held by the Lender Group (including any amounts received in the Cash Management
Accounts), or (ii) Indebtedness at any time owing to or for the credit or the
account of any Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances
and deposits of any Borrower held by the Lender Group, and any amounts received
in the Cash Management Accounts, to secure the full and final repayment of all
of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Each Borrower hereby grants to
Agent a license or other right to use, without charge, such Borrower's labels,
patents, copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and such Borrower's rights under
all licenses and all franchise agreements shall inure to the Lender Group's
benefit;
(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrowers' premises) as Agent determines is commercially reasonable. It is not
necessary that the Personal Property Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Agent shall give Administrative
Borrower (for the benefit of the applicable Borrower) a notice in
writing of the time and place of public sale, or, if the sale is a
private sale or some other disposition other than a public sale is to
be made of the Personal Property Collateral, the time on or after which
the private sale or other disposition is to be made; and
(ii) The notice shall be personally
delivered or mailed, postage prepaid, to Administrative Borrower as
provided in Section 12, at least 10 days before the earliest time of
disposition set forth in the notice; no notice needs to be given prior
to the disposition of any portion of the Personal Property Collateral
that is perishable or threatens to decline speedily in value or that is
of a type customarily sold on a recognized market;
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(l) Agent, on behalf of the Lender Group may
credit bid and purchase at any public sale;
(m) Agent may seek the appointment of a receiver
or keeper to take possession of all or any portion of the Collateral or to
operate same and, to the maximum extent permitted by law, may seek the
appointment of such a receiver without the requirement of prior notice or a
hearing;
(n) The Lender Group shall have all other rights
and remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(o) Any deficiency that exists after disposition
of the Personal Property Collateral as provided above will be paid immediately
by Borrowers. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Administrative Borrower (for the benefit of
the applicable Borrower).
9.2 REMEDIES CUMULATIVE. The rights and remedies of the
Lender Group under this Agreement, the other Loan Documents, and all other
agreements shall be cumulative. The Lender Group shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by the Lender Group of one right or remedy shall be deemed
an election, and no waiver by the Lender Group of any Event of Default shall be
deemed a continuing waiver. No delay by the Lender Group shall constitute a
waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves in
Borrowers' Loan Account as Agent deems necessary to protect the Lender Group
from the exposure created by such failure, or (c) in the case of the failure to
comply with Section 6.8 hereof, obtain and maintain insurance policies of the
type described in Section 6.8 and take any action with respect to such policies
as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender
Group Expenses and any such payments shall not constitute an agreement by the
Lender Group to make similar payments in the future or a waiver by the Lender
Group of any Event of Default under this Agreement. Agent need not inquire as
to, or contest the validity of, any such expense, tax, or Lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of documents, instruments,
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chattel paper, and guarantees at any time held by the Lender Group on which any
such Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each
Borrower hereby agrees that: (a) so long as the Lender Group complies with its
obligations, if any, under the Code, Agent shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof, or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all
risk of loss, damage, or destruction of the Collateral shall be borne by
Borrowers.
11.3 INDEMNIFICATION. Each Borrower shall pay, indemnify,
defend, and hold the Agent-Related Persons, the Lender-Related Persons with
respect to each Lender, each Participant, and each of their respective officers,
directors, employees, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them (a) in connection with or as a
result of or related to the execution, delivery, enforcement, performance, or
administration of this Agreement, any of the other Loan Documents, or the
transactions contemplated hereby or thereby, and (b) with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). The foregoing to the
contrary notwithstanding, Borrowers shall have no obligation to any Indemnified
Person under this Section 11.3 with respect to any Indemnified Liability that a
court of competent jurisdiction finally determines to have resulted from the
gross negligence or willful misconduct of such Indemnified Person. This
provision shall survive the termination of this Agreement and the repayment of
the Obligations. If any Indemnified Person makes any payment to any other
Indemnified Person with respect to an Indemnified Liability as to which
Borrowers were required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrowers with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE
OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by Borrowers or Agent to the other relating to this Agreement or any
other Loan Document shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail
(postage prepaid, return receipt requested), overnight courier, electronic mail
(at such email addresses as Administrative Borrower or Agent, as applicable, may
designate to each
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other in accordance herewith), or telefacsimile to Borrowers in care of
Administrative Borrower or to Agent, as the case may be, at its address set
forth below:
If to Administrative
Borrower: SCB COMPUTER TECHNOLOGY, INC.
0000 Xxxxxx Xxxx-Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Chief Financial Officer
Fax No. 000.000.0000
with copies to: BAKER, DONELSON, BEARMAN & XXXXXXXX
Twentieth Floor - First Tennessee Building
000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax No. 000.000.0000
If to Agent: FOOTHILL CAPITAL CORPORATION
XXX XXXXXX XXXXX
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
with copies to: XXXXXXX XXXX & XXXXX LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxx, Esq.
Fax No. 000.000.0000
Agent and Borrowers may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner given
to the other party. All notices or demands sent in accordance with this Section
12, other than notices by Agent in connection with enforcement rights against
the Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
the Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT
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79
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND
THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13(B).
BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWERS AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of
Agent and, so long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower (provided that no written consent of Agent
or Administrative Borrower shall be required in connection with any assignment
and delegation by a Lender to an Eligible Transferee), assign and delegate to
one or more assignees (each an "Assignee") all, or any ratable part of all, of
the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that Borrowers and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, have been given to Administrative Borrower and Agent by such Lender
and the Assignee, (ii) such Lender and its
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Assignee have delivered to Administrative Borrower and Agent an Assignment and
Acceptance in form and substance satisfactory to Agent, and (iii) the assignor
Lender or Assignee has paid to Agent for Agent's separate account a processing
fee in the amount of $5,000. Anything contained herein to the contrary
notwithstanding, the consent of Agent or Administrative Borrower shall not be
required (and payment of any fees shall not be required) if such assignment is
in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender.
(b) From and after the date that Agent notifies
the assignor Lender (with a copy to Administrative Borrower) that it has
received a duly executed Assignment and Acceptance complying with the
requirements of Section 14.1(a) and payment of the above-referenced processing
fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(except with respect to Section 11.3 hereof) and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto).
(c) By executing and delivering an Assignment
and Acceptance, the assigning Lender thereunder and the Assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(1) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document furnished pursuant hereto, (2) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrowers or the performance or observance by Borrowers
of any of their obligations under this Agreement or any other Loan Document
furnished pursuant hereto, (3) such Assignee confirms that it has received a
copy of this Agreement, together with such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance, (4) such Assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (5) such Assignee appoints and authorizes Agent to take
such actions and to exercise such powers under this Agreement as are delegated
to Agent, by the terms hereof, together with such powers as are reasonably
incidental thereto, and (6) such Assignee agrees that it will perform all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting
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adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written
consent of Agent, sell to one or more commercial banks, financial institutions,
or other Persons not Affiliates of such Lender (a "Participant") participating
interests in its Obligations, the Commitment, and the other rights and interests
of that Lender (the "Originating Lender") hereunder and under the other Loan
Documents (provided that no written consent of Agent shall be required in
connection with any sale of any such participating interests by a Lender to an
Eligible Transferee); provided, however, that (i) the Originating Lender shall
remain a "Lender" for all purposes of this Agreement and the other Loan
Documents and the Participant receiving the participating interest in the
Obligations, the Commitments, and the other rights and interests of the
Originating Lender hereunder shall not constitute a "Lender" hereunder or under
the other Loan Documents and the Originating Lender's obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrowers,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender, or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; and (v) all amounts payable by Borrowers hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders, Agent,
Borrowers, the Collections, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in the
making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or
participation or proposed assignment or participation, a Lender may disclose all
documents and information which it now or hereafter may have relating to
Borrowers or Borrowers' business.
(g) Any other provision in this Agreement
notwithstanding, any Lender may at any time create a security interest in, or
pledge, all or any portion of its rights under and
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interest in this Agreement in favor of any Federal Reserve Bank in accordance
with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR
ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release any Borrower from its Obligations. A Lender may assign
this Agreement and the other Loan Documents and its rights and duties hereunder
and thereunder pursuant to Section 14.1 hereof and, except as expressly required
pursuant to Section 14.1 hereof, no consent or approval by any Borrower is
required in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrowers therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Administrative Borrower (on behalf
of all Borrowers) and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders affected thereby and Administrative Borrower (on
behalf of all Borrowers) and acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any
Lender,
(b) postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees, or other amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of
interest on, any loan or other extension of credit hereunder, or reduce any fees
or other amounts payable hereunder or under any other Loan Document,
(d) change the percentage of the Commitments
that is required to take any action hereunder,
(e) amend this Section or any provision of the
Agreement providing for consent or other action by all Lenders,
(f) release Collateral other than as permitted
by Section 16.12,
(g) change the definition of "Required Lenders",
(h) contractually subordinate any of the Agent's
Liens,
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(i) release any Borrower from any obligation for
the payment of money, or
(j) change the definition of Borrowing Base or
the definitions of Eligible Accounts, Maximum Revolver Amount, Maximum Term Loan
Amount, or change Section 2.1(b); or
(k) amend any of the provisions of Section 16.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrowers, shall not require
consent by or the agreement of Borrowers.
15.2 REPLACEMENT OF HOLDOUT LENDER. If any action to be
taken by the Lender Group or Agent hereunder requires the unanimous consent,
authorization, or agreement of all Lenders, and a Lender ("Holdout Lender")
fails to give its consent, authorization, or agreement, then Agent, upon at
least 5 Business Days prior irrevocable notice to the Holdout Lender, may
permanently replace the Holdout Lender with one or more substitute Lenders
(each, a "Replacement Lender"), and the Holdout Lender shall have not right to
refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall
specify an effective date for such replacement, which date shall not be later
than 15 Business Days after the date such notice is given.
Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances.
15.3 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent
or any Lender to exercise any right, remedy, or option under this Agreement or,
any other Loan Document, or delay by Agent or any Lender in exercising the same,
will operate as a waiver thereof. No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Agent or any Lender on any occasion shall affect or
diminish Agent's and each Lender's rights thereafter to require strict
performance by Borrowers of any provision of this Agreement. Agent's and each
Lender's rights under this Agreement and
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the other Loan Documents will be cumulative and not exclusive of any other right
or remedy that Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender
hereby designates and appoints Foothill as its representative under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
or any other Loan Document, together with such powers as are reasonably
incidental thereto. Agent agrees to act as such on the express conditions
contained in this Section 16. The provisions of this Section 16 are solely for
the benefit of Agent, and the Lenders, and Borrowers shall have no rights as a
third party beneficiary of any of the provisions contained herein. Any provision
to the contrary contained elsewhere in this Agreement or in any other Loan
Document notwithstanding, Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall Agent have or be deemed to
have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against Agent;
it being expressly understood and agreed that the use of the word "Agent" is for
convenience only, that Foothill is merely the representative of the Lenders, and
only has the contractual duties set forth herein. Except as expressly otherwise
provided in this Agreement, Agent shall have and may use its sole discretion
with respect to exercising or refraining from exercising any discretionary
rights or taking or refraining from taking any actions that Agent expressly is
entitled to take or assert under or pursuant to this Agreement and the other
Loan Documents. Without limiting the generality of the foregoing, or of any
other provision of the Loan Documents that provides rights or powers to Agent,
Lenders agree that Agent shall have the right to exercise the following powers
as long as this Agreement remains in effect: (a) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Obligations, the Collateral, the Collections, and related matters, (b)
execute or file any and all financing or similar statements or notices,
amendments, renewals, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to the Loan Documents, (c)
make Advances, for itself or on behalf of Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents, (e) open and maintain such bank accounts and
cash management accounts as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrowers, the
Obligations, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents, and (g) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.
16.2 DELEGATION OF DUTIES. Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent
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shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made without
gross negligence or willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by any Borrower or any
Subsidiary or Affiliate of any Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the Books or properties of Borrowers or the
books or records or properties of any of Borrowers' Subsidiaries or Affiliates.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrowers or counsel to any Lender), independent accountants and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless Agent
shall first receive such advice or concurrence of the Lenders as it deems
appropriate and until such instructions are received, Agent shall act, or
refrain from acting, as it deems advisable. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Lenders and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to Agent for the account of the
Lenders, except with respect to Events of Default of which Agent has actual
knowledge, unless Agent shall have received written notice from a Lender or
Administrative Borrower referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default." Agent
promptly will notify the Lenders of its receipt of any such notice or of any
Event of Default of which Agent has actual knowledge. If any Lender obtains
actual knowledge of any Event of Default, such Lender promptly shall notify the
other Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Section 16.4,
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Agent shall take such action with respect to such Default or Event of Default as
may be requested by the Required Lenders in accordance with Section 9; provided,
however, that unless and until Agent has received any such request, Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable.
16.6 CREDIT DECISION. Each Lender acknowledges that none
of the Agent-Related Persons has made any representation or warranty to it, and
that no act by Agent hereinafter taken, including any review of the affairs of
Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur
and pay Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies
and auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrowers are obligated to reimburse
Agent or Lenders for such expenses pursuant to the Loan Agreement or otherwise.
Agent is authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders. In the event
Agent is not reimbursed for such costs and expenses from Collections received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrowers and without limiting the obligation of Borrowers to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
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Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrowers. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in, and generally engage in any kind of
banking, trust, financial advisory, underwriting, or other business with
Borrowers and their Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though Foothill were not Agent
hereunder, and, in each case, without notice to or consent of the other members
of the Lender Group. The other members of the Lender Group acknowledge that,
pursuant to such activities, Foothill or its Affiliates may receive information
regarding Borrowers or their Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Foothill in its individual capacity.
16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45
days notice to the Lenders. If Agent resigns under this Agreement, the Required
Lenders shall appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers, and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers, and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 16 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is 45 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
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16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its
respective Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in and generally engage in
any kind of banking, trust, financial advisory, underwriting or other business
with Borrowers and their Subsidiaries and Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents as though such Lender were
not a Lender hereunder without notice to or consent of the other members of the
Lender Group. The other members of the Lender Group acknowledge that, pursuant
to such activities, such Lender and its respective Affiliates may receive
information regarding Borrowers or their Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrowers or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver such Lender will use its reasonable
best efforts to obtain), such Lender not shall be under any obligation to
provide such information to them. With respect to the Swing Loans and Agent
Advances, Swing Lender shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the sub-agent of the Agent.
16.11 WITHHOLDING TAXES.
(a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the IRC and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the IRC, such Lender agrees with and in favor of Agent and Borrowers, to
deliver to Agent and Administrative Borrower:
(i) if such Lender claims an exemption
from withholding tax pursuant to its portfolio interest exception, (a)
a statement of the Lender, signed under penalty of perjury, that it is
not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC,
(II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of
the IRC), or (III) a controlled foreign corporation described in
Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form
W-8BEN, before the first payment of any interest under this Agreement
and at any other time reasonably requested by Agent or Administrative
Borrower;
(ii) if such Lender claims an exemption
from, or a reduction of, withholding tax under a United States tax
treaty, properly completed IRS Form W-8BEN before the first payment of
any interest under this Agreement and at any other time reasonably
requested by Agent or Administrative Borrower;
(iii) if such Lender claims that interest
paid under this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States trade or
business of such Lender, two properly completed and executed copies of
IRS Form W-8ECI before the first payment of any interest is due under
this Agreement and at any other time reasonably requested by Agent or
Administrative Borrower;
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(iv) such other form or forms as may be
required under the IRC or other laws of the United States as a
condition to exemption from, or reduction of, United States withholding
tax.
Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or
reduction of, withholding tax under a United States tax treaty by providing IRS
Form W-8BEN and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrowers to such Lender,
such Lender agrees to notify Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrowers to such Lender. To the
extent of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN
as no longer valid.
(c) If any Lender is entitled to a reduction in
the applicable withholding tax, Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Agent under this Section, together
with all costs and expenses (including attorneys fees and expenses). The
obligation of the Lenders under this subsection shall survive the payment of all
Obligations and the resignation or replacement of Agent.
(e) All payments made by Borrowers hereunder or
under any note or other Loan Document will be made without setoff, counterclaim,
or other defense, except as required by applicable law other than for Taxes (as
defined below). All such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction (other than the United States) or by any political
subdivision or taxing authority thereof or therein (other than of the United
States) with respect to such payments (but excluding, any tax imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein (i) measured by or based on the net income or net profits of a Lender,
or (ii) to the extent that such tax results from a change in the circumstances
of the Lender, including a change in the residence, place of organization, or
principal place of business of the Lender, or a change in the branch or lending
office of the Lender participating in the transactions set forth herein) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as
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"Taxes"). If any Taxes are so levied or imposed, each Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.11(e) after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that Borrowers shall not be required to
increase any such amounts payable to Agent or any Lender (i) that is not
organized under the laws of the United States, if such Person fails to comply
with the other requirements of this Section 16.11, or (ii) if the increase in
such amount payable results from Agent's or such Lender's own willful misconduct
or gross negligence. Borrowers will furnish to Agent as promptly as possible
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by Borrowers.
16.12 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize
Agent, at its option and in its sole discretion, to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Obligations, (ii) constituting property
being sold or disposed of if a release is required or desirable in connection
therewith and if Administrative Borrower certifies to Agent that the sale or
disposition is permitted under Section 7.4 of this Agreement or the other Loan
Documents (and Agent may rely conclusively on any such certificate, without
further inquiry), (iii) constituting property in which no Borrower owned any
interest at the time the security interest was granted or at any time
thereafter, or (iv) constituting property leased to a Borrower under a lease
that has expired or is terminated in a transaction permitted under this
Agreement. Except as provided above, Agent will not execute and deliver a
release of any Lien on any Collateral without the prior written authorization of
(y) if the release is of all or substantially all of the Collateral, all of the
Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or
Administrative Borrower at any time, the Lenders will confirm in writing Agent's
authority to release any such Liens on particular types or items of Collateral
pursuant to this Section 16.12; provided, however, that (1) Agent shall not be
required to execute any document necessary to evidence such release on terms
that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrowers in respect of)
all interests retained by Borrowers, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is owned by Borrowers
or is cared for, protected, or insured or has been encumbered, or that the
Agent's Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other
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duty or liability whatsoever to any Lender as to any of the foregoing, except as
otherwise provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF
PAYMENTS.
(a) Each of the Lenders agrees that it shall
not, without the express consent of Agent, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to Borrowers or any deposit
accounts of Borrowers now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
by Agent, take or cause to be taken any action, including, the commencement of
any legal or equitable proceedings, to foreclose any Lien on, or otherwise
enforce any security interest in, any of the Collateral the purpose of which is,
or could be, to give such Lender any preference or priority against the other
Lenders with respect to the Collateral.
(b) If, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms of
this Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent, in kind, and with such endorsements as may be required
to negotiate the same to Agent, or in immediately available funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their Pro Rata Shares; provided, however, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent hereby appoints each
other Lender as its agent (and each Lender hereby accepts such appointment) for
the purpose of perfecting the Agent's Liens in assets which, in accordance with
Article 9 of the UCC can be perfected only by possession. Should any Lender
obtain possession of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent's request therefor shall deliver such
Collateral to Agent or in accordance with Agent's instructions.
16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds pursuant to such wire transfer
instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment
(or any portion thereof) represents principal, premium, or interest of the
Obligations.
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16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
16.17 FIELD AUDITS AND EXAMINATION REPORTS;
CONFIDENTIALITY; DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By
becoming a party to this Agreement, each Lender:
(a) is deemed to have requested that Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit or examination report (each a "Report" and collectively, "Reports")
prepared by Agent, and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent
does not (i) make any representation or warranty as to the accuracy of any
Report, and (ii) shall not be liable for any information contained in any
Report,
(c) expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Borrowers and will rely significantly upon the Books, as well as on
representations of Borrowers' personnel,
(d) agrees to keep all Reports and other
material, non-public information regarding Borrowers and their Subsidiaries and
their operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrowers that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona
fide potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Administrative Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof, and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other
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credit accommodations that the indemnifying Lender has made or may make to
Borrowers, or the indemnifying Lender's participation in, or the indemnifying
Lender's purchase of, a loan or loans of Borrowers; and (ii) to pay and protect,
and indemnify, defend and hold Agent, and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including, attorneys fees and costs)
incurred by Agent and any such other Lender preparing a Report as the direct or
indirect result of any third parties who might obtain all or part of any Report
through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrowers, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Administrative
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly
shall provide a copy of same to such Lender, and (z) any time that Agent renders
to Administrative Borrower a statement regarding the Loan Account, Agent shall
send a copy of such statement to each Lender.
16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding
that certain of the Loan Documents now or hereafter may have been or will be
executed only by or in favor of Agent in its capacity as such, and not by or in
favor of the Lenders, any and all obligations on the part of Agent (if any) to
make any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 16.7, no member of the Lender Group shall
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to any Borrower or any other Person for any failure
by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
16.19 LEGAL REPRESENTATION OF AGENT. In connection with the
negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of remedies,
Xxxxxxx Xxxx & Xxxxx LLP ("SR&Z") only has represented and only shall represent
Foothill in its capacity as Agent and as a Lender. Each other Lender hereby
acknowledges that SR&Z does not represent it in connection with any such
matters.
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17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by Borrowers, Agent, and each Lender whose
signature is provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each Section applies equally to this entire
Agreement.
17.3 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Borrowers, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to accomplish fairly the purposes and intentions of all parties hereto.
17.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. This Agreement only can be
amended by a writing in accordance with Section 15.1.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Loan
Document mutatis mutandis.
17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by any Borrower or Guarantor or the
transfer to the Lender Group of any property should for any reason subsequently
be declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
the Lender Group is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Lender
Group is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrowers or Guarantors automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
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17.8 INTEGRATION. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.
17.9 PARENT AS AGENT FOR BORROWERS. Each Borrower hereby
irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all
Borrowers (the "Administrative Borrower") which appointment shall remain in full
force and effect unless and until Agent shall have received prior written notice
signed by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Agent with all notices with respect to Advances obtained for the benefit of any
Borrower and all other notices and instructions under this Agreement and (ii) to
take such action as the Administrative Borrower deems appropriate on its behalf
to obtain Advances and to exercise such other powers as are reasonably
incidental thereto to carry out the purposes of this Agreement. It is understood
that the handling of the Loan Account and Collateral of Borrowers in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
Borrowers in order to utilize the collective borrowing powers of Borrowers in
the most efficient and economical manner and at their request, and that Lender
Group shall not incur liability to any Borrower as a result hereof. Each
Borrower expects to derive benefit, directly or indirectly, from the handling of
the Loan Account and the Collateral in a combined fashion since the successful
operation of each Borrower is dependent on the continued successful performance
of the integrated group. To induce the Lender Group to do so, and in
consideration thereof, each Borrower hereby jointly and severally agrees to
indemnify each member of the Lender Group and hold each member of the Lender
Group harmless against any and all liability, expense, loss or claim of damage
or injury, made against the Lender Group by any Borrower or by any third party
whosoever, arising from or incurred by reason of (a) the handling of the Loan
Account and Collateral of Borrowers as herein provided, (b) the Lender Group's
relying on any instructions of the Administrative Borrower, or (c) any other
action taken by the Lender Group hereunder or under the other Loan Documents,
except that Borrowers will have no liability to the relevant Agent-Related
Person or Lender-Related Person under this Section 17.9 with respect to any
liability that has been finally determined by a court of competent jurisdiction
to have resulted solely from the gross negligence or willful misconduct of such
Agent-Related Person or Lender-Related Person, as the case may be.
18. ISSUANCE OF EQUITY INTERESTS TO FOOTHILL
18.1 AUTHORIZATION AND ISSUANCE OF WARRANTS. Parent has
authorized (a) the issuance of a common stock purchase warrant in the form of
Exhibit W-1 hereto (such warrant, together with the rights to purchase Common
Stock provided thereby and all warrants covering such stock issued upon
transfer, division or combination of, or in substitution for, any thereof, being
herein called the "Warrants") for issuance to Foothill pursuant to this
Agreement, and (b) the issuance of such number of shares of Common Stock as
shall be necessary to permit Parent to comply with its obligations to issue the
shares of Common Stock issuable pursuant to the Warrants, which shall initially
be an amount equal to 80,000 shares of the issued and outstanding shares of
Common Stock. It is understood and agreed that the Warrants contain provisions
affecting the number of shares of Common Stock that may be acquired, which
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96
provisions are set forth in the Warrants. Such Warrants will have an initial
exercise price equal to an amount not greater than (i) $1.00 per share, and will
cease to be exercisable on a date that is the third anniversary of the Closing
Date. Parent has the requisite corporate power and authority to enter into and
perform its obligations under the Warrants and the Registration Rights Agreement
and to issue the Warrant Shares, in accordance with their terms. The Warrant
Shares have been duly authorized and reserved for issuance upon exercise of the
Warrants, and upon such exercise, will be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of Parent.
18.2 SECURITIES ACT MATTERS.
(a) Foothill warrants to Parent that:
(i) Foothill is acquiring the Warrants
hereunder and will acquire the Common Stock into which the Warrants are
exercisable, for investment purposes, for its own account, without a
view to the distribution thereof, all without prejudice, however, to
the right of Foothill at any time, in accordance with this Agreement,
lawfully to sell or otherwise to dispose of all or any part of the
Warrants or Warrant Shares held by it.
(ii) Foothill is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(b) Parent represents and warrants to Foothill
that:
(i) Assuming the truth and accuracy of
Foothill's representations and warranties contained in the preceding
paragraph, the issuance of the Warrants to Foothill hereunder and the
issuance of shares of Common Stock to Foothill pursuant to the Warrants
are exempt from the registration and prospectus delivery requirements
of the Securities Act.
(ii) All stock and securities of Parent
heretofore issued and sold by Parent were, and all securities of Parent
issued and sold by Parent on and after the date hereof are or will be
issued and sold in accordance with, or are or will be exempt from, the
registration and prospectus delivery requirements of the Securities
Act.
(iii) Parent agrees that neither it nor
any Person acting on its behalf has offered or will offer the Warrants
or Warrant Shares or any part thereof or any similar securities for
issue or sale to, or has solicited or will solicit any offer to acquire
any of the same from, any Person so as to bring the issuance and sale
of the Warrants or Warrant Shares hereunder within the provisions of
the registration and prospectus delivery requirements of the Securities
Act.
(iv) Parent is not and, upon issuance of
the Warrant or the Warrant Shares, will not be an "investment company,"
a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal
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97
underwriter" for, an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
18.3 CERTAIN TAXES. Parent shall pay all taxes (other than
Federal, state or local income taxes) which may be payable in connection with
the execution and delivery of this Agreement or the issuance of the Warrants or
Warrant Shares hereunder or in connection with any modification of this
Agreement or the Warrants and shall hold Foothill harmless without limitation as
to time against any and all liabilities with respect to all such taxes. The
obligations of Borrower under this Section 18.3 shall survive any redemption,
repurchase or acquisition of Warrants or Warrant Shares by Parent, any
termination of this Agreement, and any cancellation or termination of the
Warrants.
18.4 CANCELLATION AND ISSUANCE. If Foothill assigns or
otherwise transfers all or any of its interests in the Advances (including by
selling participations therein) to any Person, Foothill may request (upon 10
days' prior notice to Parent) that (a) a number of Warrants held by Foothill be
canceled on the date of such assignment and transfer and (b) a like number of
Warrants be issued by Parent to the Person to whom such interests in the
Advances are being assigned or otherwise transferred. Upon the date specified in
such request:
(i) Parent shall issue, and Foothill
shall surrender (or cause to be surrendered) for cancellation, such
number of Warrants as aforesaid, provided that such issuance shall not
violate the Securities Act or any applicable state securities laws;
(ii) Parent will deliver to each Person
that receives a certificate for Warrants a favorable legal opinion from
counsel to Parent acceptable to such Person, covering the matters set
forth in the opinion of counsel to Parent delivered to Foothill on the
Closing Date (to the extent relating to the Warrants);
(iii) each Person that receives a
certificate for Warrants will deliver a certificate to Parent affirming
the representations and warranties contained in Section 18.2 hereof as
of such date; and
(iv) Parent will deliver a certificate
to each Person that receives a certificate for Warrants affirming the
representations and warranties contained in Section 18.2 hereof as of
such date.
[Signature page to follow.]
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98
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
BORROWERS:
SCB COMPUTER TECHNOLOGY, INC.
a Tennessee corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------------
Title: Executive Vice President
SCB COMPUTER TECHNOLOGY OF ALABAMA, INC.
an Alabama corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------------
Title: Executive Vice President
PARTNERS RESOURCES INC.
an Arizona corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------------
Title: Executive Vice President
AGENT AND LENDER:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and as a Lender
By: /s/ Xxxxx Xxxx
-------------------------------------------------
Title: Vice President
99
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit R-1 Form of Registration Rights Agreement
Exhibit W-1 Form of Common Stock Purchase Warrant
Schedule C-1 Commitments
Schedule P-1 Permitted Liens
Schedule 2.8(a) Cash Management Banks
Schedule 5.4 Locations of Inventory and Equipment
Schedule 5.6 Chief Executive Office; FEIN
Schedule 5.7(b) Capitalization of Borrowers
Schedule 5.7(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.9 Litigation
Schedule 5.13 Environmental Matters
Schedule 5.14 Brokerage Fees
Schedule 5.15 Intellectual Property
Schedule 5.17 Demand Deposit Accounts
Schedule 5.19 Permitted Indebtedness
Schedule 5.20 Inactive Guarantor Assets and Liabilities
100
SCHEDULE C-1
COMMITMENTS
REVOLVER TERM LOAN TOTAL
LENDER COMMITMENT COMMITMENT COMMITMENT
---------------------------------------------------------------------------
Foothill Capital Corporation $17,500,000 $10,000,000 $27,500,000
----------- ----------- -----------
All Lenders $17,500,000 $10,000,000 $27,500,000
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