EXHIBIT 10(L)
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS AGENT AND LENDER)
AND
COMPUTER HORIZONS CORP.
(AS BORROWER)
DATED: JULY 31, 2001
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................3
SECTION 2. CONDITIONS PRECEDENT...........................................16
SECTION 3. REVOLVING LOANS................................................20
SECTION 4. INTENTIONALLY OMITTED
SECTION 5. LETTERS OF CREDIT..............................................24
SECTION 6. COLLATERAL.....................................................27
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS......................32
SECTION 8. INTEREST, FEES AND EXPENSES....................................38
SECTION 9. POWERS.........................................................45
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................46
SECTION 11. TERMINATION....................................................49
SECTION 12. MISCELLANEOUS..................................................49
SECTION 13. AGREEMENT BETWEEN THE LENDERS..................................49
SECTION 14. AGENCY.........................................................49
EXHIBIT
Exhibit A - Form of Revolving Loan Promissory Note
Exhibit B - Form of Assignment and Transfer Agreement
SCHEDULES
Schedule 1 - Collateral Information
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THE CIT GROUP/BUSINESS CREDIT, INC., a
New York corporation, with offices
located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter
"CIT"), and CIT as agent for the lenders (the "Agent"), and any other party
which now or hereafter becomes a lender hereunder pursuant to Section 13 hereof
(individually a "Lender" and collectively the "Lenders") are pleased to confirm
the terms and conditions under which the Agent shall make revolving loans and
other financial accommodations to
COMPUTER HORIZONS CORP., a
New York
corporation with a principal place of business at 00 Xxx Xxxxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxx Xxxxxx, 00000 (herein the "Company").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Company's now existing and future: (a) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to the Agent), including, without
limitation, all accounts created by, or arising from, all of the Company's
renditions of services or sales, leases, or rentals of goods to its customers,
including but not limited to, those accounts arising under any of the Company's
trade names or styles, or through any of the Company's divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Company; and (j) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.
ADMINISTRATIVE MANAGEMENT FEE shall mean the sum of $30,000.00 which shall be
paid to the Agent in accordance with Section 8, paragraph 8.11 hereof to offset
the expenses and costs (excluding Out-of-Pocket Expenses and auditor fees) of
the Agent in connection with administration, record keeping, analyzing and
evaluating the Collateral.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the Closing
Date and the same date in every year thereafter.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and Transfer
Agreement in the form of Exhibit E hereto.
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AVAILABILITY shall mean at any time the amount by which: (a) the Borrowing Base
exceeds (b) the outstanding aggregate amount of all Obligations, including
without limitation, all Obligations with respect to Revolving Loans, but
excluding the Letters of Credit.
AVAILABILITY RESERVE shall mean the sum of: (a) three (3) months rental payments
or similar charges for any of the Company's leased premises or, if applicable,
Collateral locations for which the Company has not delivered to the Agent a
landlord's waiver in form and substance reasonably satisfactory to the Agent,
provided that the foregoing amounts shall be adjusted from time to time
hereafter upon (x) delivery to the Agent of any such acceptable waiver, (y) if
applicable, the opening or closing of a Collateral location and/or (z) any
change in the amount of rental, storage or similar payments or charges; (b) at
Agents discretion, reserves for (i) wages and payroll in States having wage
priority statutes or similar statutes which may have priority over Agent's liens
(as determined by the Agent), (ii) payroll taxes, (iii) volume rebate reserves,
(iv) customer deposits and (v) billing adjustments (based on the Company's
historical rate and time discrepancies, as determined by the Agent); (c) any
reserve which the Agent may reasonably require from time to time pursuant to
this
Financing Agreement, including without limitation, for Letters of Credit
pursuant to Paragraph 5.1 of Section 5 hereof; and (d) such other reserves as
the Agent deems necessary in its commercially reasonable judgment as a result of
(x) negative forecasts and/or trends in the Company's business, industry,
prospects, profits, operations or financial condition or (y) other issues,
circumstances or facts that could otherwise negatively impact the Company, its
business, prospects, profits, operations, industry, financial condition or
assets.
BORROWING BASE shall mean (a) eighty five percent (85 %) of the Company's
aggregate outstanding Eligible Accounts Receivable, less (b) without
duplication, the sum of (i) a dilution percentage, which as of the Closing Date
is in an amount not to exceed 5%, plus (ii) any applicable Availability
Reserves.
BUSINESS DAY shall mean any day on which the Agent and The Chase Manhattan Bank
are open for business.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate expenditures of
the Company during such period on account of, property, plant, equipment or
similar fixed assets that, in conformity with GAAP, are required to be reflected
in the balance sheet of the Company.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Company's business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Company.
CHASE BANK RATE shall mean the rate of interest per annum announced by The Chase
Manhattan Bank from time to time as its prime rate in effect at its principal
office in
New York City. (The
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prime rate is not intended to be the lowest rate of interest charged by The
Chase Manhattan Bank to its borrowers).
CHASE BANK RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon the
Chase Bank Rate.
CLOSING DATE shall mean the date that this
Financing Agreement has been duly
executed by the parties hereto and delivered to the Agent.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, Real Estate, pledged stock of the
Company's subsidiaries (subject to Section 2(j) hereof, except for the stock of
EB Networks and Princeton Softech, Inc.), and Other Collateral.
COLLECTION DAYS shall mean one (1) Business Day to provide for the deposit,
clearance and collection of checks or other instruments representing the
proceeds of Collateral, the amount of which has been credited to the Company's
Revolving Loan Account, and for which interest may be charged on the aggregate
amount of such deposits, at the rate provided for in Paragraph 8.1 of Section 8
of this
Financing Agreement.
COMMITMENT shall mean each Lender's commitment in accordance with this
Financing
Agreement to make Revolving Loans (the "Revolving Credit Commitment"), in the
amount of their respective pro rata share set forth in schedules prepared by the
Agent or the Assignment and Transfer Agreement executed by each such Lender.
COMMITMENT LETTER shall mean the Commitment Letter, dated June 7th, 2001, issued
by the Agent to, and accepted by, the Company.
CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as applicable,
balance sheet for the Company and its consolidated subsidiaries, eliminating all
inter-company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Company and its consolidated subsidiaries,
showing all eliminations of inter-company transactions, including a balance
sheet for the Company exclusively, all prepared in accordance with GAAP.
COPYRIGHTS shall mean all present and hereafter acquired copyrights, copyright
registrations, recordings, applications, designs, styles, licenses, marks,
prints and labels bearing any of the foregoing, goodwill, any and all general
intangibles, intellectual property and rights pertaining thereto, and all cash
and non-cash proceeds thereof.
CURRENT ASSETS shall mean those assets of the Company which, in accordance with
GAAP, are classified as current.
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CURRENT LIABILITIES shall mean those liabilities of the Company which, in
accordance with GAAP, are classified as "current", provided however, that,
notwithstanding GAAP, the Revolving Loans and the current portion of Permitted
Indebtedness shall be considered "current liabilities".
CURRENT RATIO shall mean the ratio determined by dividing Current Assets by
Current Liabilities.
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b) the
applicable increment over the Chase Bank Rate (as set forth in paragraph 8.1
hereof) plus the Chase Bank Rate, or the applicable increment over the LIBOR
Rate (as set forth in paragraph 8.14 hereof) plus the LIBOR Rate, which the
Agent shall be entitled to charge the Company on all Obligations due the Agent
on behalf of the Lenders by the Company, as further set forth in Paragraph 10.2
of Section 10 of this
Financing Agreement.
DEPOSITORY ACCOUNTS shall mean the collection accounts, which are subject to the
Agent's instructions, as specified in Paragraph 3.4 of Section 3 of this
Financing Agreement.
DOCUMENTATION FEE shall mean (a) the sum of $20,000.00 intended to compensate
the Agent for the use of the Agent's in-house Legal Department and facilities in
documenting, in whole or in part, the initial transaction solely on behalf of
the Agent, exclusive of Out-of-Pocket Expenses, and (b) subsequent to the
Closing Date, the Agent's standard fees relating to any and all modifications,
waivers, releases, amendments or additional collateral with respect to this
Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the UCC), and any and all warehouse receipts, bills of lading, shipping
documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and
non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Revolving Line of Credit which date is prior to an
Anniversary Date.
EARLY TERMINATION FEE shall: (a) mean the fee the Agent on behalf of the Lenders
is entitled to charge the Company in the event the Company terminates the
Revolving Line of Credit or this Financing Agreement on a date prior to an
Anniversary Date; and (b) be determined by multiplying the Revolving Line of
Credit by (x) two percent (2%) if the Early Termination Date occurs on or before
one (1) year from the Closing Date, (y) one percent (1%) if the Early
Termination Date occurs after one (1) year from the Closing Date but on or
before two (2) years from the Closing Date; and (z) one half of one percent
(0.5%) if the Early Termination Date occurs after two (2) years from the Closing
Date but prior to an Anniversary Date, provided that in the event The Chase
Manhattan
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Bank refinances the Obligations hereunder and this Agreement is terminated in
accordance with its terms, the foregoing Early Termination Fee shall not be due
hereunder.
EBITDA shall mean, in any period, all earnings of the Company for said period
before all interest, tax obligations, depreciation and amortization of the
Company for said period, determined in accordance with GAAP on a consistent
basis with the latest audited financial statements of the Company, but excluding
the effect of extraordinary or non-reoccurring gains or losses for such period.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's Trade
Accounts Receivable that are subject to a valid, exclusive, first priority and
fully perfected security interest in favor of the Agent, on behalf of the
Lenders, which conform to the warranties contained herein and which, at all
times, continue to be acceptable to the Agent in the exercise of its reasonable
business judgment, LESS, without duplication and in the Agent's discretion, the
sum of: (a) any returns, discounts, claims, credits and allowances of any nature
(whether issued, owing, granted, claimed or outstanding), and (b) reserves for
any such Trade Accounts Receivable that arise from or are subject to or include:
(i) sales to the United States of America or to any State or other governmental
entity or to any agency, department or division thereof, except for any such
sales as to which the Company has complied with the Assignment of Claims Act of
1940 or any other applicable statute, rules or regulation, to the Agent's
satisfaction in the exercise of its reasonable business judgment; (ii) foreign
sales, other than sales which otherwise comply with all of the other criteria
for eligibility hereunder and are secured by letters of credit (in form and
substance satisfactory to the Agent) issued or confirmed by, and payable at,
banks having a place of business in the United States of America; (iii) Accounts
that remain unpaid more than ninety (90) days from invoice date; (iv) contra
accounts; (v) sales to any subsidiary, or to any company affiliated with the
Company in any way; (vi) xxxx and hold (deferred shipment) or consignment sales;
(vii) sales to any customer which is: (A) insolvent, (B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law, (C) negotiating, or has called a
meeting of its creditors for purposes of negotiating, a compromise of its debts,
or (D) financially unacceptable to the Agent or has a credit rating unacceptable
to the Agent; (viii) all sales to any customer if fifty percent (50%) or more of
the aggregate dollar amount of all outstanding invoices to such customer are
unpaid more than ninety (90) days from invoice date; (ix) pre-billed
receivables, deposits and receivables arising from progress billing; (x) an
amount representing, historically, returns, discounts, claims, credits,
allowances and applicable terms; (xi) sales not payable in United States
currency; and (xii) any other reasons deemed necessary by the Agent in its
reasonable judgment, including without limitation those which are customary
either in the commercial finance industry or in the lending practices of the
Agent and/or the Lenders.
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the UCC) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds thereof of
whatever sort.
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ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EUROCURRENCY RESERVE REQUIREMENTS for any day, as applied to a LIBOR Loan, shall
mean the aggregate (without duplication) of the maximum rates of reserve
requirements (expressed as a decimal fraction) in effect with respect to the
Agent and/or any present or future Lender or participant on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
Regulation D or any other applicable regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having jurisdiction
with respect thereto, as now and from time to time in effect, dealing with
reserve requirements prescribed for Eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by the
Agent and/or any such Lenders or participants (such rate to be adjusted to the
nearest one sixteenth of one percent (1/16 of 1%) or, if there is not a nearest
one sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of
one percent (1/16 of 1%)).
EVENT(s) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
EXECUTIVE OFFICERS shall mean the Chairman, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Executive Vice President,
Treasurer, Controller and Secretary of the Company.
FISCAL QUARTER shall mean, with respect to the Company, each three (3) month
period ending on March 31st, June 30th, September 30th and December 31st of each
Fiscal Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on January 1st
of each year and ending on the following December 31st.
FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the ratio
determined by dividing EBITDA by the sum of (a) all interest obligations paid or
due, (b) the amount of principal repaid or scheduled to be repaid on any fixed
debt or term loans, and all other Indebtedness of the Company and its
subsidiaries other than (i) the Revolving Loans, and (ii) reimbursement
Obligations in respect of Letters of Credit, (c) Capital Expenditures actually
incurred which were not financed or refinanced hereunder, (d) all redemptions of
stock, and any permitted dividends and other distributions of a similar nature
made in cash, and (e) all federal, state provincial and local income tax
expenses due and payable.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Company
modifies its accounting principles and procedures as applied as of the Closing
Date, the Company shall provide to the Agent and the Lenders such statements of
reconciliation as shall be in form and substance acceptable to the Agent.
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GENERAL INTANGIBLES shall mean all present and hereafter acquired general
intangibles (as defined in the UCC), and shall include, without limitation, all
present and future right, title and interest in and to: (a) all Trademarks,
tradenames, corporate names, business names, logos and any other designs or
sources of business identities, (b) Patents, together with any improvements on
said Patents, utility models, industrial models, and designs, (c) Copyrights,
(d) trade secrets, (e) licenses, permits and franchises, (f) all applications
with respect to the foregoing, (g) all right, title and interest in and to any
and all extensions and renewals, (h) goodwill with respect to any of the
foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Company and any licensee of any of the Company's General Intangibles.
GUARANTIES shall mean the guaranty documents executed and delivered by the
Guarantors guaranteeing the Obligations.
GUARANTORS shall mean each of the Company's subsidiaries, except as further set
forth herein, EB Networks and Chimes UK.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
INTEREST PERIOD shall mean:
(a) with respect to any initial request by the Company for a LIBOR Loan, a
one month, two month or three month period commencing on the borrowing or
conversion date with respect to a LIBOR Loan and ending one, two or three months
thereafter, as applicable; and
(b) thereafter with respect to any continuation of, or conversion to, a
LIBOR Loan, at the option of the Company, any one month, two month or three
month period commencing on the last day of the immediately preceding Interest
Period applicable to such LIBOR Loan and ending one, two or three months
thereafter, as applicable;
PROVIDED THAT, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Working Day, that Interest Period shall be extended to the next succeeding
Working Day, unless the result of
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such extension would extend such payment into another calendar month in
which event such Interest Period shall end on the immediately preceding
Working Day; (ii) any Interest Period that begins on the last Working Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month, at the end of such Interest
Period) shall end on the last Working Day of a calendar month; and
(iii) for purposes of determining the availability of Interest Periods,
such Interest Periods shall be deemed available if (x) Chase Manhattan Bank
quotes an applicable rate or the Agent determines LIBOR, as provided in the
definition of LIBOR, (y) the LIBOR determined by Chase Manhattan Bank or
the Agent will adequately and fairly reflect the cost of maintaining or
funding its loans bearing interest at LIBOR, for such Interest Period, and
(z) such Interest Period will end on or before the earlier of Anniversary
Date or the last day of the then current term of this Financing Agreement.
If a requested Interest Period shall be unavailable in accordance with the
foregoing sentence, the Company shall continue to pay interest on the
Obligations at the applicable per annum rate based upon the Chase Bank
Rate.
INVENTORY shall mean all of the Company's present and hereafter acquired
inventory (as defined in the UCC) and including, without limitation, all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods, and all proceeds thereof of whatever sort.
INVESTMENT PROPERTY shall mean all now owned and hereafter acquired investment
property (as defined in the UCC) and all proceeds thereof.
ISSUING BANK shall mean the bank issuing Letters of Credit for the Company.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
the Agent on behalf of the Lenders in accordance with Section 5 hereof by the
Issuing Bank for or on behalf of the Company.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by the Agent, on
behalf of the Lenders, to the Issuing Bank of the Company's reimbursement
obligations under the Issuing Bank's reimbursement agreement, application for
Letter of Credit or other like document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee the Agent, on behalf of the
Lenders, may charge the Company under Paragraph 8.3 of Section 8 of this
Financing Agreement for: (a) issuing a Letter of Credit Guaranty, and/or
(b) otherwise aiding the Company in obtaining Letters of Credit, all pursuant to
Section 5 hereof.
LETTER OF CREDIT SUB-LINE shall mean the commitment of the Lenders to assist the
Company in obtaining Letters of Credit, pursuant to Section 5 hereof, in an
aggregate amount of $2,500,000.
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LIBOR shall mean, at any time of determination, and subject to availability, for
each applicable Interest Period, a variable rate of interest equal to: (a) at
the Agent's election (i) the applicable LIBOR quoted to the Agent by The Chase
Manhattan Bank (or any successor thereof), or (ii) the rate of interest
determined by the Agent at which deposits in U.S. dollars are offered for the
relevant Interest Period based on information presented on Telerate Systems at
Page 3750 as of 11:00 A.M. (London time) on the day which is two (2) Business
Days prior to the first day of such Interest Period, PROVIDED THAT, if at least
two such offered rates appear on the Telerate System at Page 3750 in respect of
such Interest Period, the arithmetic mean of all such rates (as determined by
the Agent) will be the rate used; divided by (b) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of Eurocurrency Reserve Requirements in effect on the day which is two
(2) Business Days prior to the beginning of such Interest Period.
LIBOR LENDING OFFICE with respect to the Agent, shall mean the office of The
Chase Manhattan Bank, or any successor thereof, maintained at 000 Xxxx Xxxxxx,
Xxx Xxxx, XX 00000.
LIBOR LOAN shall mean any loans made pursuant to this Financing Agreement which
are made or maintained at a rate of interest based upon LIBOR, provided that
(i) no Default or Event of Default has occurred hereunder, which has not been
waived in writing by the Required Lenders, and (ii) no LIBOR Loan shall be made
with an Interest Period that ends subsequent to an Anniversary Date or any
applicable Early Termination Date.
LINE OF CREDIT shall mean the aggregate commitment of the Lenders to (a) make
Revolving Loans pursuant to Section 3 of this Financing Agreement and (b) assist
the Company in opening Letters of Credit pursuant to Section 5 of this Financing
Agreement, in the aggregate amount equal to $40,000,000; provided that nothing
herein shall be deemed to increase any Lender's commitment hereunder, and which
commitment shall be set forth in the applicable schedules maintained by the
Agent or the Assignment and Transfer Agreements executed by such Lender.
LINE OF CREDIT FEE shall: (a) mean the fee due the Agent at the end of each
month for the Line of Credit, and (b) be determined by multiplying the
difference between (i) the Revolving Line of Credit, and (ii) the sum, for said
month, of (x) the average daily balance of Revolving Loans plus (y) the average
daily balance of Letters of Credit outstanding for said month, by 0.375% per
annum for the number of days in said month.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory Notes, the
other closing documents and any other ancillary loan and security agreements
executed from time to time in connection with this Financing Agreement, all as
may be renewed, amended, extended, increased or supplemented from time to time.
LOAN FACILITY FEE shall mean the fee payable to the Agent and the Lenders (as
applicable) in accordance with, and pursuant to, the provisions of Paragraph 8.7
of Section 8 of this Financing Agreement.
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NET WORTH shall mean, at any date of determination, an amount equal to (a) Total
Assets minus (b) Total Liabilities, and shall be determined in accordance with
GAAP, on a consistent basis with the latest audited financial statements of the
Company.
OBLIGATIONS shall mean all loans, advances and extensions of credit made or to
be made by the Agent and/or the Lenders to the Company or to others for the
Company's account (including, without limitation, all Revolving Loans, Letter of
Credit Guaranties); any and all indebtedness and obligations which may at any
time be owing by the Company to the Agent and/or the Lenders howsoever arising,
whether now in existence or incurred by the Company from time to time hereafter;
whether principal, interest, fees, costs, expenses or otherwise; whether secured
by pledge, lien upon or security interest in any of the Company's Collateral,
assets or property or the assets or property of any other person, firm, entity
or corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Company is
liable to the Agent and/or the Lenders for such indebtedness as principal,
surety, endorser, guarantor or otherwise. Obligations shall also include
indebtedness owing to the Agent and/or the Lenders by the Company under any Loan
Document or under any other agreement or arrangement now or hereafter entered
into between the Company and the Agent and/or Lenders; the Company's liability
to the Agent and/or the Lenders as maker or endorser of any promissory note or
other instrument for the payment of money; the Company's liability to the Agent
and/or the Lenders under any instrument of guaranty or indemnity, or arising
under any guaranty, endorsement or undertaking which the Agent and/or the
Lenders may make or issue to others for the Company's account, including any
Letter of Credit Guaranty or other accommodation extended by CIT with respect to
applications for Letters of Credit, the Agent's and/or Lenders' acceptance of
drafts or the Agent's and/or Lenders' endorsement of notes or other instruments
for the Company's account and benefit.
OPERATING CASH FLOW shall mean EBITDA less Capital Expenditures, determined in
accordance with GAAP consistently applied.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired lockbox,
blocked account and any other deposit accounts maintained with any bank or
financial institutions into which the proceeds of Collateral are or may be
deposited; all other deposit accounts (as defined in the UCC); Investment
Property; all cash and other monies and property in the possession or control of
the Agent and/or any of the Lenders; all books, records, ledger cards, disks and
related data processing software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon; and all
cash and non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's (and the Lenders upon the
occurrence of an Event of Default which is not waived by the Required Lenders)
present and future expenses incurred relative to this Financing Agreement or any
other Loan Documents, whether incurred heretofore or
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hereafter, which expenses shall include, without being limited to: the cost of
record searches, all costs and expenses incurred by the Agent in opening bank
accounts, depositing checks, receiving and transferring funds, and wire transfer
charges, any charges imposed on the Agent due to returned items and
"insufficient funds" of deposited checks and the Agent's standard fees relating
thereto, any amounts paid by, incurred by or charged to, the Agent and/or the
Lenders by the Issuing Bank under a Letter of Credit Guaranty or the Company's
reimbursement agreement, application for Letters of Credit or other like
document which pertain either directly or indirectly to such Letters of Credit,
and the Agent's standard fees relating to the Letters of Credit and any drafts
thereunder, travel, lodging and similar expenses of the Agent's personnel in
connection with inspecting and monitoring the Collateral from time to time
hereunder, any applicable counsel fees and disbursements, fees and taxes
relative to the filing of financing statements, all expenses, costs and fees set
forth in Paragraph 10.3 of Section 10 of this Financing Agreement.
OVERADVANCE RATE shall mean a rate equal to one-half of one percent (1/2%) per
annum in excess of the applicable contract rate of interest determined in
accordance with Section 8, Paragraph 8.1(a) of this Financing Agreement.
OVERADVANCES shall mean the amount by which (a) the sum of all outstanding
Revolving Loans, Letters of Credit and advances made hereunder exceed (b) the
Borrowing Base.
PATENTS shall mean all of the Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens existing on the date hereof on
specific items of Equipment and other liens expressly permitted, or consented to
in writing by the Agent and/or the Required Lenders; (b) Purchase Money Liens;
(c) liens of local or state authorities for franchise or other like Taxes,
provided that the aggregate amounts of such liens shall not exceed $100,000.00
in the aggregate at any one time; (d) statutory liens of landlords and liens of
carriers, warehousemen, bailees, mechanics, materialmen and other like liens
imposed by law, created in the ordinary course of business and for amounts not
yet due (or which are being contested in good faith, by appropriate proceedings
or other appropriate actions which are sufficient to prevent imminent
foreclosure of such liens) and with respect to which adequate reserves or other
appropriate provisions are being maintained by the Company in accordance with
GAAP; (e) deposits made (and the liens thereon) in the ordinary course of
business of the Company (including, without limitation, security deposits for
leases, indemnity bonds, surety bonds and appeal bonds) in connection with
workers' compensation, unemployment insurance and other types of social security
benefits or to secure the performance of tenders, bids, contracts (other than
for the repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; (f) easements (including, without
limitation, reciprocal easement agreements and utility agreements),
encroachments, minor defects or irregularities in title, variation and other
restrictions, charges or encumbrances (whether or not recorded) affecting the
13
Real Estate, if applicable, and which in the aggregate (A) do not materially
interfere with the occupation, use or enjoyment by the Company of its business
or property so encumbered and (B) in the reasonable business judgment of the
Agent do not materially and adversely affect the value of such Real Estate; and
(g) liens granted the Agent by the Company; (h) liens of judgment creditors
provided such liens do not exceed, in the aggregate, at any time, $50,000.00
(other than liens bonded or insured to the reasonable satisfaction of the
Agent); and (i) tax liens which are not yet due and payable or which are being
diligently contested in good faith by the Company by appropriate proceedings,
and which liens are not (x) filed on any public records, (y) other than with
respect to Real Estate, senior to the liens of the Agent or (z) for Taxes due
the United States of America or any state thereof having similar priority
statutes, as further set forth in paragraph 7.6 hereof.
PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes or labor; (b) the Indebtedness secured by
Purchase Money Liens; (c) Subordinated Debt; (d) Indebtedness arising under the
Letters of Credit and this Financing Agreement; (e) deferred Taxes and other
expenses incurred in the ordinary course of business; and (f) other Indebtedness
existing on the date of execution of this Financing Agreement and listed in the
most recent financial statement delivered to the Agent and the Lenders or
otherwise disclosed to the Agent and the Lenders in writing prior to the Closing
Date.
PERMITTED INVESTMENTS shall mean any of the following investments:
a. U.S. Treasuries/Agencies
b. Repurchase agreements collateralized by "(a)" above
c. Corporate Debt, eligible issuers must have, at time of purchase,
ratings of at least A-1 by S & P or P-1 by Moody's for short terms
securities, or at least A by S & P or A by Moody's for long term
securities
d. Certificates of Deposit/Banker's Acceptances issued by
domestic/foreign financial institutions rate A-2/A by S & P and P-2/A
by Moody's
e. Municipals issued with rating at least MIG-1 or AA
f. Money Market Mutual Funds including, but not limited to, those managed
by XX Xxxxxx Xxxxx and its affiliates which invest in investments
described in Items "(a)" through "(e)" above.
No more than 10% of the Account's total assets may be invested, at time of
purchase, in the securities of a single issuer, except for all U.S. Government
securities and repurchase agreements backed by U.S. Governments securities as
well as money market mutual funds, to which there are no limitations.
The maximum maturity of any Permitted Investment or issue hereunder will not
exceed 90 days at time of purchase. Average maturity of portfolio should be 45
days or less.
14
PROMISSORY NOTE shall mean the note, in the form of Exhibit A attached hereto,
delivered by the Company to the Agent to evidence the Revolving Loans pursuant
to, and repayable in accordance with, the provisions of Section 3 of this
Financing Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to the Agent, and (c) the debt incurred in connection
with such acquisitions shall not exceed, in the aggregate, $50,000.00 in any
Fiscal Year.
REAL ESTATE shall mean the Company's fee and/or leasehold interests in the real
property.
REQUIRED LENDERS shall mean the Lenders holding aggregate commitments under this
Financing Agreement in an amount of 51% or more.
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of the Lenders to
make loans and advances pursuant to Section 3 of this Financing Agreement and
issue Letters of Credit Guaranties pursuant to Section 5 hereof to the Company,
in the aggregate amount of $40,000,000.
REVOLVING LOAN ACCOUNT shall mean the account on the Agent's books, in the
Company's name, in which the Company will be charged with all Obligations under
this Financing Agreement.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by the Agent, on behalf of the Lenders, pursuant
to Section 3 of this Financing Agreement.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shall settle amongst themselves so that (a) the Agent shall not have, as
the Agent, any money at risk and (b) on such Settlement Date the Lenders shall
have a pro rata amount of all outstanding Revolving Loans and Letters of Credit,
provided that each Settlement Date for a Lender shall be a Business Day on which
such Lender and its bank are open for business.
SUBORDINATED DEBT shall mean, if applicable, any debt due a Subordinating
Creditor (and the note(s) evidencing such) which has been subordinated, by a
Subordination Agreement, to the prior payment and satisfaction of the
Obligations of the Company to the Agent and the Lenders (in form and substance
satisfactory to the Agent and/or the Required Lenders).
SUBORDINATING CREDITOR shall mean, if applicable, the Person due any
Subordinated Debt and any other party hereafter executing a Subordination
Agreement.
SUBORDINATION AGREEMENT shall mean the agreement (in form and substance
satisfactory to the Agent) among the Company, a Subordinating Creditor and the
Agent, pursuant to which
15
Subordinated Debt is subordinated to the prior payment and satisfaction of the
Company's Obligations to the Agent and the Lenders (in form and substance
satisfactory to the Agent).
TAXES shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Company
with respect to its business, operations, Collateral or otherwise.
TOTAL ASSETS shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited financial statements of the Company.
TOTAL LIABILITIES shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of the
Company.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of the Company's Accounts
which arises from the sale of Inventory or the rendition of services in the
ordinary course of the Company's business.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, tradenames, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of
New York.
U.S. TREASURIES shall mean marketable direct obligations issued by, or
unconditionally guaranteed by, or insured by the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
WORKING DAY shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.
SECTION 2. CONDITIONS PRECEDENT
The obligation of the Agent and the Lenders to make the initial loans
hereunder is subject to the satisfaction of, extension of or waiver of in
writing, on or prior to, the Closing Date, the following conditions precedent:
(a) LIEN SEARCHES - The Agent shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to the Agent for all locations presently
occupied or used by the Company.
16
(b) CASUALTY INSURANCE - The Company shall have delivered, within 30 days
of the Closing Date, to the Agent evidence satisfactory to the Agent that
casualty insurance policies listing the Agent as additional insured, loss payee
or mortgagee, as the case may be, are in full force and effect, all as set forth
in Paragraph 7.5 of Section 7 of this Financing Agreement.
(c) UCC FILINGS - Any financing statements required to be filed in order to
create, in favor of the Agent, on behalf of the Lenders, a first perfected
security interest in the Collateral, subject only to the Permitted Encumbrances,
shall have been properly filed in each office in each jurisdiction required in
order to create in favor of the Agent for the benefit of the Lenders a perfected
lien on the Collateral. The Agent shall have received acknowledgment copies of
all such filings (or, in lieu thereof, the Agent shall have received other
evidence satisfactory to the Agent that all such filings have been made) and the
Agent shall have received evidence that all necessary filing fees and all taxes
or other expenses related to such filings have been paid in full.
(d) BOARD RESOLUTION - The Agent shall have received a copy of the
resolutions of the Board of Directors of each of the Company and the Guarantors
(as the case may be) authorizing the execution, delivery and performance of
(i) this Financing Agreement, (ii) the Guaranties, and (iii) any related
agreements, in each case certified by the Secretary or Assistant Secretary of
the Company and the Guarantors (as the case may be) as of the date hereof,
together with a certificate of the Secretary or Assistant Secretary of the
Company and the Guarantors (as the case may be) as to the incumbency and
signature of the officers of the Company and/or the Guarantors executing such
Loan Documents and any certificate or other documents to be delivered by them
pursuant hereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary, provided that with respect to the Guarantors, such
documents shall be provided within 30 days from the Closing Date.
(e) CORPORATE ORGANIZATION - The Agent shall have received (i) a copy of
the Certificate of Incorporation of the Company and the Guarantors certified by
the Secretary of State of the state of its incorporation, and (ii) a copy of the
By-Laws of the Company certified by the Secretary or Assistant Secretary
thereof, all as amended through the date hereof, provided that with respect to
the Guarantors, such documents shall be provided within 30 days from the Closing
Date.
(f) OFFICER'S CERTIFICATE - The Agent shall have received an executed
Officer's Certificate of the Company, satisfactory in form and substance to the
Agent, certifying that (i) the representations and warranties contained herein
are true and correct in all material respects on and as of the Closing Date;
(ii) the Company is in compliance with all of the terms and provisions set forth
herein; and (iii) no Default or Event of Default has occurred
(g) OPINIONS - Counsel for the Company and the Guarantors shall have
delivered to the Agent on behalf of the Lenders opinions satisfactory to the
Agent opining, inter alia, that, subject to the (i) filing, priority and
remedies provisions of the Uniform Commercial Code, (ii) the provisions of the
Bankruptcy Code, insolvency statutes or other like laws, (iii) the equity powers
of a court of law and (iv) such other matters as may be agreed upon with the
Agent: (x) this Financing Agreement, the Guaranty and all other Loan Documents
of the Company and the Guarantors are (A) valid, binding and enforceable
according to their terms, (B) are duly authorized, executed and delivered, and
(C) do not violate any terms, provisions, representations or covenants in the
charter or by-laws of the Company or the Guarantors or, to the best knowledge of
such counsel, of any loan agreement, mortgage, deed of trust, note, security or
pledge agreement, indenture or other contract to which the Company or the
Guarantors are signatories or by which the Company or the Guarantors or their
17
assets are bound. In addition, counsel to the Subordinating Creditor(s) shall
have delivered an opinion satisfactory to the Agent that the Subordination
Agreement(s) have been duly authorized, executed and delivered and constitute
valid and binding agreements enforceable against such Subordinating Creditor(s)
in accordance with the terms thereof.
(h) ABSENCE OF DEFAULT - No Default or Event of Default shall have occurred
and no material adverse change shall have occurred in the financial condition,
business, prospects, profits, operations or assets of the COMPANY, the
Guarantors or the Company's subsidiaries.
(i) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there shall be
no: (x) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against the Company or the Guarantors or their assets, by
any agency, division or department of any county, city, state or federal
government arising out of this Financing Agreement; (y) injunction, writ or
restraining order restraining or prohibiting the financing arrangements
contemplated under this Financing Agreement; or (z) suit, action, investigation
or proceeding (judicial or administrative) pending against the Company or the
Guarantors or their assets, which, in the opinion of the Agent, if adversely
determined, could have a material adverse effect on the business, operation,
assets, financial condition or Collateral of the Company and/or the Guarantors.
(j) GUARANTIES AND SECURITY AGREEMENTS - The Guarantors shall have executed
and delivered to the Agent guaranties and security agreements providing for a
first priority lien on all of their personal assets (excluding real estate),
including financing statement with respect there to, all in form and substance
acceptable to the Agent, guaranteeing and securing all present and future
Obligations of the Company, PROVIDED THAT, guaranties and security agreements
shall not be required from the Company's subsidiary, EB Networks, provided
further that, absent the sale of such subsidiary or substantially all of its
assets on or before sixty days from the Closing Date, the Company shall cause
such subsidiary to enter into guaranty and security agreements with the Agent,
as may be required by the Agent in its sole discretion, and in form and
substance satisfactory to the Agent.
(k) RESERVE/INTERCREDITOR AGREEMENT - In addition to any other requirements
hereunder, the Agent shall establish an Availability Reserve equal to the dollar
for dollar the amount due from the Company's affiliate, Chimes, Inc. (and/or
Chimes Servicing Corp.), to Volt Management unless within 45 days from the
Closing Date, (i) the Agent receives an Intercreditor Agreement from Volt
Management, in form and substance satisfactory to the Agent, or (ii) the Company
and the Agent otherwise reach a mutually satisfactory agreement relating
thereto. The foregoing is based on CIT's understanding, based on the Company's
representations, that Volt Management has no security interest in any of the
Company's Collateral or assets, and that its security interest is limited solely
to the assets of Chimes, Inc.
(l) CASH BUDGET PROJECTIONS - The Agent shall have received, reviewed and
been satisfied with a twelve (12) month cash budget projection prepared by the
Company on the form provided by the Agent.
(m) PLEDGE AGREEMENT - The Company shall (i) execute and deliver to the
Agent, on behalf of the Lenders, a pledge and security agreement pledging to the
Agent, on behalf of the Lenders, as additional collateral for the Obligations of
the Company not less than (x) 100% of the issued and outstanding stock of all
domestic subsidiaries of the Company, and (y) 66 2/3% of the issued and
outstanding stock of all foreign subsidiaries of the Company and, (ii) within 10
business
18
days of the Closing Date, deliver to the Agent, on behalf of the Lenders, the
stock certificates evidencing such stock together with duly executed stock
powers (undated and in-blank) with respect thereto, all in form and substance
satisfactory to CIT, PROVIDED THAT, the Company shall not be required to pledge
the stock of EB Networks and CHIMES UK, provided further that absent the sale of
such EB Networks or substantially all of its assets within sixty days of the
Closing Date, the Company shall pledge such subsidiary's stock to the Agent, as
may be required by the Agent in its sole discretion, and in form and substance
satisfactory to the Agent.
(n) ADDITIONAL DOCUMENTS - The Company shall have executed and delivered to
the Agent all Loan Documents necessary to consummate the lending arrangement
contemplated between the Company, the Agent and the Lenders, provided that
Landlord Waivers shall be provided within 30 days of the Closing Date.
(o) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to the
Agent all information necessary for the Agent and the Lenders to issue wire
transfer instructions on behalf of the Company for the initial and subsequent
loans and/or advances to be made under this Financing Agreement including, but
not limited to, disbursement authorizations in form acceptable to the Agent.
(p) EXAMINATION & VERIFICATION - The Agent and each of the Lenders shall
have completed, to their respective satisfaction, an examination and
verification of the Accounts, Inventory, financial statements, books and records
of the Company which examination shall indicate that, after giving effect to all
Revolving Loans, advances and extensions of credit to be made at closing, the
Company shall have an opening additional Availability of at least $15,000,000,
as evidenced by a Borrowing Base certificate delivered by the Company to the
Agent as of the Closing Date, all as more fully required by the Agent Commitment
Letter. It is understood that such requirement contemplates that all debts and
obligations are current, and that all payables are being handled in the normal
course of the Company's business and consistent with its past practice.
(q) DEPOSITORY ACCOUNTS - Within 30 days of the Closing Date, the Company
shall have established a system of lockbox and bank accounts with respect to the
collection of Accounts and the deposit of proceeds of Collateral as shall be
acceptable to the Agent in all respects. Such accounts shall be subject to three
party agreements (between the Company, the Agent and the depository bank), which
shall be in form and substance satisfactory to the Agent.
(r) EXISTING REVOLVING CREDIT AGREEMENT - The Company's and its
subsidiaries' existing credit agreement with The Chase Manhattan Bank and any
other secured lenders (herein collectively the "Existing Lender") shall be:
(i) terminated; (ii) all loans and obligations of the Company and/or the
Guarantors thereunder shall be paid or satisfied in full, including through
utilization of the proceeds of the initial Revolving Loans to be made under this
Financing Agreement; and (iii) all liens or security interests in favor of the
Existing Lender on the Collateral and otherwise in connection therewith shall be
terminated and/or released upon such payment.
(s) SCHEDULES The Company or its counsel shall provide the Agent with
schedules of: (a) any of the Company's and its subsidiaries (i) Trademarks,
(ii) Patents, and (iii) Copyrights, as applicable and all in such detail as to
provide appropriate recording information with respect thereto, (b) any
tradenames, (c) monthly rental payments for any leased premises or any other
premises where any Collateral may be stored or processed, (d) Investment
Property and the financial institutions
19
holding the same, and (e) Permitted Liens, all of the foregoing in form and
substance satisfactory to the Agent.
(t) THE AGENT COMMITMENT LETTER - The Company shall have fully complied, to
the reasonable satisfaction of the Agent, with all of the terms and conditions
of the Agent Commitment Letter.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as otherwise set forth hereinabove or as the Company and the
Agent shall otherwise agree in writing.
2.2 CONDITIONS TO EACH EXTENSION OF CREDIT
Subject to the terms of this Financing Agreement, including, without
limitation, the Agent's rights pursuant to paragraph 10.2 of Section 10 hereof,
the agreement of the Agent on behalf of the Lenders to make any extension of
credit requested to be made by it to the Company on any date (including without
limitation, the initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES - Each of the representations and
warranties made by the Company in or pursuant to this Financing Agreement shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
(b) NO DEFAULT - No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) BORROWING BASE - Except as may be otherwise agreed to from time to time
by the Agent and the Company in writing, after giving effect to the extension of
credit requested to be made by the Company on such date, the aggregate
outstanding balance of the Revolving Loans and outstanding Letters of Credit
owing by the Company will not exceed the lesser of (i) the Revolving Line of
Credit or (ii) the Borrowing Base.
Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company as of the date of such loan or advance that each of the
representations, warranties and covenants contained in the Financing Agreement
have been satisfied and are true and correct, except as the Company and the
Agent and/or the Required Lenders shall otherwise agree herein or in a separate
writing.
SECTION 3. REVOLVING LOANS
3.1 (a) The Agent and the Lenders agree, subject to the terms and
conditions of this Financing Agreement, from time to time (but subject to the
Agent's and the Lenders' right to make "Overadvances"), to make loans and
advances to the Company on a revolving basis (i.e. subject to the limitations
set forth herein, the Company may borrow, repay and re-borrow Revolving Loans).
Such requests for loans and advances shall be in amounts not to exceed the
lesser of (a) the Availability or (b) the Revolving Line of Credit. All requests
for loans and advances must be
20
received by an officer of the Agent no later than (i) 1:00 p.m.,
New York time,
of the Business Day on which any such Chase Bank Rate Loans and advances are
required or (ii) three Business Days prior to any requested LIBOR Loan. Should
the Agent for any reason honor requests for Overadvances, any such Overadvances
shall be made in the Agent's sole discretion and subject to any additional terms
the Agent and/or the Required Lenders deem necessary.
(b)(i) Whenever the Company requests the Agent, on behalf of the Lenders,
to make a Revolving Loan pursuant to this Section 3, it shall give the Agent
notice in writing or irrevocable telephonic notice confirmed promptly in
writing, specifying (A) the amount to be borrowed, and (B) the requested
borrowing date (which shall be a business day and shall be prior to: the
Anniversary Date, and if applicable, any Early Termination Date, or prior to any
effective termination date of this Financing Agreement, all as further set forth
herein), and (C) specify whether the requested Revolving Loan shall bear
interest at the Chase Bank Rate or at LIBOR, as further set forth herein. All
requests for loans and advances must be received by an officer of the Agent no
later than 1:00 P.M. eastern time on any borrowing date. The procedure for
Revolving Loans to be made on a requested borrowing date may be such other
procedure as is mutually satisfactory to the Company, the Agent and/or the
Lenders.
(ii) Subject to paragraph 14.10 hereof, should the Agent, on behalf of the
Lenders, for any reason honor requests for Overadvances, such Overadvance shall
be made in the Agent's sole discretion, subject to any additional terms the
Agent and/or the Required Lenders deem necessary. Requests for loans and
advances shall be made solely by the Company and shall be directed solely to the
Agent.
(c) The Agent shall on any Settlement Date, and upon notice given by the
Agent no later than 2:00 P.M.
New York time, request each Lender to make, and
each Lender hereby agrees to make, a Revolving Loan in an amount equal to such
Lender's Revolving Credit Commitment percentage (calculated with respect to the
aggregate Revolving Credit Commitments then outstanding) of the aggregate amount
of the Revolving Loans made by the Agent from the preceding Settlement Date to
the date of such notice. Each Lender's obligation to make the Revolving Loans
referred to in subsection (a) and to make the settlements pursuant to this
subsection (c) shall be absolute and unconditional and shall not be affected by
any circumstance, including without limitation (i) any set-off, counterclaim,
recoupment, defense or other right which any such Lender or the Company may have
against the Agent, the Company, any other Lender or any other person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or an Event
of Default; (iii) any adverse change in the condition (financial or otherwise)
of the Company; (iv) any breach of this Financing Agreement or any other loan
document by the Company or any other Lender; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
Without limiting the liability and obligation of each Lender to make such
advances, the Company authorizes the Agent to charge the Company's Revolving
Loan Account with the Agent to the extent amounts received from the Lenders are
not sufficient to repay in full the amount of any such deficiency.
21
(d) The Company's Revolving Loan Obligations hereunder shall be evidenced
by the Promissory Note in the form of Exhibit A attached hereto.
3.2 In furtherance of the continuing assignment and security interest in
the Company's Accounts and Inventory, the Company will, upon the creation of
Accounts and purchase or acquisition of Inventory, execute and deliver to the
Agent in such form and manner as the Agent may reasonably require, solely for
the Agent's convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts and Inventory as the Agent may reasonably request,
including, without limitation, weekly schedules of Accounts and monthly
schedules of Inventory, all in form and substance satisfactory to the Agent, and
such other appropriate reports designating, identifying and describing the
Accounts and Inventory as the Agent may reasonably request, and provided further
that the Agent may request any such information more frequently, from time to
time, upon its reasonable prior request. In addition, upon the Agent's request,
the Company shall provide the Agent with copies of agreements with, or purchase
orders from, the Company's customers, and copies of invoices to customers, proof
of performance of services, shipment or delivery, access to its computers,
electronic media and software programs associated therewith (including any
electronic records, contracts and signatures) and such other documentation and
information relating to said Accounts and other Collateral as the Agent may
reasonably require. Failure to provide the Agent with any of the foregoing shall
in no way affect, diminish, modify or otherwise limit the security interests
granted herein. The Company hereby authorizes the Agent to regard the Company's
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of the Company's authorized officers
or agents.
3.3 The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or
rendition of services to its customers, made by the Company in the ordinary
course of its business; the Inventory being sold, and the Trade Accounts
Receivable created, are the exclusive property of the Company and are not and
shall not be subject to any lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the
name of the Company; and the customers of the Company have accepted the
Inventory or services, owe and are obligated to pay the full amounts stated in
the invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes and other matters arising in the
ordinary course of business with respect to which the Company has complied with
the notification requirements of Paragraph 3.5 of this Section 3. The Company
confirms to the Agent that any and all Taxes or fees relating to its business,
its sales, the Accounts or Inventory relating thereto, are its sole
responsibility and that same will be paid by the Company when due, subject to
Paragraph 7.6 of Section 7 of this Financing Agreement, and that none of said
Taxes or fees represent a lien on or claim against the Accounts. The Company
hereby further represents and warrants that it shall not acquire any Inventory
on a consignment basis, nor co-mingle its Inventory with any of its customers or
any other person, including pursuant to any xxxx and hold sale or otherwise, and
that its Inventory is marketable to its customers in the ordinary course of
business of the Company, except as it may otherwise report in writing to the
Agent
22
pursuant to Paragraph 3.5 hereof from time to time. The Company also warrants
and represents that it is a duly and validly existing corporation and is
qualified in all states where the failure to so qualify would have an adverse
effect on the business of the Company or the ability of the Company to enforce
collection of Accounts due from customers residing in that state. The Company
agrees to maintain such books and records regarding Accounts and Inventory as
the Agent may reasonably require and agrees that the books and records of the
Company will reflect the Agent's interest in the Accounts and Inventory. All of
the books and records of the Company will, in the ordinary course of business,
be available to the Agent upon reasonable prior notice at normal business hours,
including any records handled or maintained for the Company by any other company
or entity, provided that, in the Agent's reasonable business judgment, such
books and records shall be available absent notice and at such times as the
Agent may request.
3.4 Until the Agent has advised the Company to the contrary after the
occurrence of an Event of Default, the Company, at its expense, will enforce,
collect and receive all amounts owing on the Accounts in the ordinary course of
its business and any proceeds it so receives shall be subject to the terms
hereof, and held on behalf of and in trust for the Agent on behalf of the
Lenders. Such privilege shall terminate at the election of the Agent, upon the
occurrence of an Event of Default, until such Event of Default is waived in
writing by the Required Lenders or cured to the Agent's and/or the Required
Lender's satisfaction. Any checks, cash, credit card sales and receipts, notes
or other instruments or property received by the Company with respect to any
Collateral, including Accounts, shall be held by the Company in trust for the
Agent, on behalf of the Lenders, separate from the Company's own property and
funds, and promptly turned over to the Agent with proper assignments or
endorsements by deposit to the Depository Accounts. The Company shall:
(i) indicate on all of its invoices that funds should be delivered to and
deposited in a Depository Account; (ii) direct all of its account debtors to
deposit any and all proceeds of Collateral into the Depository Accounts;
(iii) irrevocably authorize and direct any banks which maintain the Company's
initial receipt of cash, checks and other items to promptly wire transfer all
available funds to a Depository Account; and (iv) advise all such banks of the
Agent's security interest in such funds. The Company shall provide the Agent
with prior written notice of any and all deposit accounts opened or to be opened
subsequent to the Closing Date. Subject to Collection Days, all amounts received
by the Agent in payment of Accounts will be credited to the Revolving Loan
Account when the Agent is advised by its bank of its receipt of "collected
funds" at the Agent's bank account in
New York,
New York on the Business Day of
such advise if advised no later than 1:00 p.m. EST or on the next succeeding
Business Day if so advised after 1:00 PM EST. No checks, drafts or other
instrument received by the Agent shall constitute final payment to the Agent
and/or the Lenders unless and until such instruments have actually been
collected.
3.5 The Company agrees to notify the Agent: (a) of any matters affecting
the value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any adverse effect in the
value of its Inventory, in its weekly and monthly collateral reports (as
applicable) provided to the Agent hereunder, in such detail and format as the
Agent may reasonably require from time to time and (b) promptly of any such
matters which are material, as a whole, to the
23
Accounts and/or the Inventory. The Company shall deliver a report relating to
its Accounts to the Agent no less frequently than bi-monthly. The Company agrees
to issue credit memoranda promptly (with duplicates to the Agent upon request
after the occurrence of an Event of Default) upon accepting returns or granting
allowances. Upon the occurrence of an Event of Default (which is not waived in
writing by the Required Lenders) and on notice from the Agent, the Company
agrees that all returned, reclaimed or repossessed merchandise or goods shall be
set aside by the Company, marked with the Agent's name (as secured party) and
held by the Company for the Agent's account.
3.6 The Agent shall maintain a Revolving Loan Account on its books in which
the Company will be charged with all loans and advances made by the Agent to it
or for its account, and with any other Obligations, including any and all costs,
expenses and reasonable attorney's fees which the Agent may incur in connection
with the exercise by or for the Agent of any of the rights or powers herein
conferred upon the Agent, or in the prosecution or defense of any action or
proceeding to enforce or protect any rights of the Agent in connection with this
Financing Agreement, the other Loan Documents or the Collateral assigned
hereunder, or any Obligations owing by the Company. The Company will be credited
with all amounts received by the Agent and/or the Lenders from the Company or
from others for the Company's account, including, as above set forth, all
amounts received by the Agent in payment of Accounts, and such amounts will be
applied to payment of the Obligations as set forth herein. In no event shall
prior recourse to any Accounts or other security granted to or by the Company be
a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that the Agent and/or the Lenders shall have no
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
3.7 After the end of each month, the Agent shall promptly send the Company
a statement showing the accounting for the charges, loans, advances and other
transactions occurring between the Agent and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and the Agent unless the
Agent receives a written statement of the exceptions within thirty (30) days of
the date of the monthly statement.
3.8 In the event that any requested advance exceeds Availability or that
(a) the sum of (i) the outstanding balance of Revolving Loans and
(ii) outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing Base
or (y) the Revolving Line of Credit, any such nonconsensual Overadvance shall be
due and payable to the Agent on behalf of the Lenders immediately upon the
Agent's demand therefor.
SECTION 4. INTENTIONALLY OMMITTED
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SECTION 5. LETTERS OF CREDIT
In order to assist the Company in establishing or opening Letters of Credit
with an Issuing Bank, the Company has requested the Agent, on behalf of the
Lenders, to join in the applications for such Letters of Credit, and/or
guarantee payment or performance of such Letters of Credit and any drafts or
acceptances thereunder through the issuance of the Letters of Credit Guaranty,
thereby lending the Agent's credit to the Company and the Agent has agreed to do
so. These arrangements shall be handled by the Agent subject to the terms and
conditions set forth below.
5.1 Within the Revolving Line of Credit and Availability, the Agent on
behalf of the Lenders shall assist the Company in obtaining Letter(s) of Credit
in an amount not to exceed the outstanding amount of the Letter of Credit
Sub-Line. the Agent's assistance for amounts in excess of the limitation set
forth herein shall at all times and in all respects be in the Agent's sole
discretion. It is understood that the term, form and purpose of each Letter of
Credit and all documentation in connection therewith, and any amendments,
modifications or extensions thereof, must be mutually acceptable to the Agent,
the Issuing Bank and the Company, provided that Letters of Credit shall not be
used for the purchase of domestic Inventory or to secure present or future debt
of domestic Inventory suppliers. Any and all outstanding Letters of Credit shall
be reserved dollar for dollar from Availability as an Availability Reserve.
5.2 The Agent shall have the right, without notice to the Company, to
charge the Company's Revolving Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind incurred by the Agent and/or
the Lenders under the Letters of Credit Guaranty at the earlier of (a) payment
by the Agent under the Letters of Credit Guaranty; or (b) the occurrence of an
Event of Default which has not been waived in writing by the Required Lenders.
Any amount charged to Company's Revolving Loan Account shall be deemed a
Revolving Loan hereunder and shall incur interest at the rate provided in
Paragraph 8.1 of Section 8 of this Financing Agreement.
5.3 The Company unconditionally indemnifies the Agent and the Lenders and
holds the Agent and the Lenders harmless from any and all loss, claim or
liability incurred by the Agent arising from any transactions or occurrences
relating to Letters of Credit established or opened for the Company's account,
the collateral relating thereto and any drafts or acceptances thereunder, and
all Obligations thereunder, including any such loss or claim due to any errors,
omissions, negligence, misconduct or action taken by any Issuing Bank, other
than for any such loss, claim or liability arising out of the gross negligence
or willful misconduct by the Agent and/or the Lenders under the Letters of
Credit Guaranty, provided that the foregoing shall not be deemed to limit the
Company's rights with respect to the Issuing Bank. This indemnity shall survive
termination of this Financing Agreement. The Company agrees that any charges
incurred by the Agent and/or the Lenders for the Company account by the Issuing
Bank shall be conclusive on the Agent and may be charged to the Company's
Revolving Loan Account.
5.4 The Agent shall not be responsible for: (a) the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; (b) any difference or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; (c) the validity, sufficiency or
genuineness of any
25
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
(d) the time, place, manner or order in which shipment is made; (e) partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; (f) any deviation from
instructions; (g) delay, default, or fraud by the shipper and/or anyone else in
connection with the goods or the shipping thereof; or (h) any breach of contract
between the shipper or vendors and the Company.
5.5 The Company agrees that any action taken by the Agent and/or the
Lenders, if taken in good faith, or any action taken by any Issuing Bank, under
or in connection with the Letters of Credit, the Letter of Credit Guarantees,
the drafts or acceptances, or the Collateral, shall be binding on the Company
and shall not result in any liability whatsoever of the Agent to the Company. In
furtherance thereof, the Agent shall have the full right and authority to:
(a) clear and resolve any questions of non-compliance of documents; (b) give any
instructions as to acceptance or rejection of any documents or goods;
(c) execute any and all steamship or airways guaranties (and applications
therefore), indemnities or delivery orders; (d) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and (e) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
all in the Agent's sole name. The Issuing Bank shall be entitled to comply with
and honor any and all such documents or instruments executed by or received
solely from the Agent, all without any notice to or any consent from the
Company. Notwithstanding any prior course of conduct or dealing with respect to
the foregoing including amendments and non-compliance with documents and/or the
Company's instructions with respect thereto, the Agent may exercise its rights
hereunder in its sole and reasonable judgment. In addition, without the Agent's
express consent and endorsement in writing, the Company agrees: (a) not to
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances or documents; or to
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; and (b) after the occurrence of an
Event of Default which is not cured within any applicable grace period, if any,
or waived by the Agent, not to (i) clear and resolve any questions of
non-compliance of documents, or (ii) give any instructions as to acceptances or
rejection of any documents or goods.
5.6 The Company agrees that: (a) any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; (b) all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and fully complied with; and (c) any
certificates in that regard that the Agent may at any time request will be
promptly furnished. In connection herewith, the Company warrants and represents
that all shipments made under any such Letters of Credit are in accordance with
the laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. The Company
assumes all risk, liability and responsibility for, and agrees to pay and
discharge, all present and future local, state, federal or foreign Taxes,
duties, or levies. Any embargo, restriction,
26
laws, customs or regulations of any country, state, city, or other political
subdivision, where the Collateral is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall
be solely the Company's risk, liability and responsibility.
5.7 Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, the Agent on behalf of the Lenders shall acquire by subrogation, any
rights, remedies, duties or obligations granted or undertaken by the Company to
the Issuing Bank in any application for Letters of Credit, any standing
agreement relating to Letters of Credit or otherwise, all of which shall be
deemed to have been granted to the Agent on behalf of the Lenders and apply in
all respects to the Agent and shall be in addition to any rights, remedies,
duties or obligations contained herein.
SECTION 6. COLLATERAL
6.1 As security for the prompt payment in full of all Obligations, the
Company hereby pledges and grants to the Agent, on behalf of the Lenders, a
continuing general lien upon, and security interest in, all of its:
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral;
(f) Equipment; and
(g) Real Estate.
6.2 The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is owned by the Company or in which the Company
has any interest, whether held by the Company or others for its account, and, if
any Collateral is Equipment, whether the Company's interest in such Equipment is
as owner, finance lessee or conditional vendee;
(b) All Equipment, whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with, or attached to, the Equipment; and
27
(c) All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either the Agent or the Company from the Company's
customers, as well as to all supplies, goods, incidentals, packaging materials,
labels and any other items which contribute to the finished goods or products
manufactured or processed by the Company, or to the sale, promotion or shipment
thereof.
6.3 The Company agrees to safeguard, protect and hold all Inventory for the
Agent's account and make no disposition thereof except in the ordinary course of
its business of the Company, as herein provided. The Company represents and
warrants that Inventory will be sold and shipped by the Company to its customers
only in the ordinary course of the Company's business, and then only on open
account and on terms currently being extended by the Company to its customers,
provided that, absent the prior written consent of the Agent, the Company shall
not sell Inventory on a consignment basis nor retain any lien or security
interest in any sold Inventory. Upon the sale, exchange, or other disposition of
Inventory, as herein provided, the security interest in the Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Trade Accounts Receivable, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition, the
Agent shall have all of the rights of an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation. The Company hereby agrees to
immediately forward any and all proceeds of Collateral to the Depository
Account, and to hold any such proceeds (including any notes and instruments), in
trust for the Agent, on behalf of the Lenders, pending delivery to the Agent.
Irrespective of the Agent's perfection status in any and all of the General
Intangibles, including, without limitations, any Patents, Trademarks, Copyrights
or licenses with respect thereto, the Company hereby irrevocably grants the
Agent a royalty free license to sell, or otherwise dispose or transfer, in
accordance with Paragraph 10.3 of Section 10 of this Financing Agreement, and
the applicable terms hereof, of any of the Inventory upon the occurrence of an
Event of Default which has not been waived in writing by the Agent.
6.4 The Company agrees at its own cost and expense to keep the Equipment in
as good and substantial repair and condition as the same is now or at the time
the lien and security interest granted herein shall attach thereto, reasonable
wear and tear excepted, making any and all repairs and replacements when and
where necessary. The Company also agrees to safeguard, protect and hold all
Equipment in accordance with the terms hereof and subject to the Agent's
security interest. Absent the Agent's prior written consent, any sale, exchange
or other disposition of any Equipment shall be made by the Company in the
ordinary course of business and as set forth herein. The Company may, in the
ordinary course of its business, sell, exchange or otherwise dispose of obsolete
or surplus Equipment provided, however, that: (a) the then value of the
Equipment so disposed of in any Fiscal Year does not exceed $100,000 in the
aggregate; and (b) the proceeds of any such sales or dispositions shall be held
in trust by the Company for the Agent and shall be immediately delivered to the
Agent by deposit to the Depository Account, except that the Company may retain
and use such proceeds to purchase forthwith replacement Equipment which the
Company determines in its reasonable judgment to have a collateral value at
least equal to the Equipment so disposed of or sold;
28
provided, however, that the aforesaid right shall automatically cease upon the
occurrence of a Default or an Event of Default which is not waived in writing by
the Agent. Upon the sale, exchange, or other disposition of the Equipment, as
herein provided, the security interest provided for herein shall, without break
in continuity and without further formality or act, continue in, and attach to,
all proceeds, including any instruments for the payment of money, Accounts,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchange or disposition. As to any such sale,
exchange or other disposition, the Agent and the Lenders shall have all of the
rights of an unpaid seller, including stoppage in transit, replevin, rescission
and reclamation.
6.5 The rights and security interests granted to the Agent and the Lenders
hereunder are to continue in full force and effect, notwithstanding the
termination of this Financing Agreement or the fact that the Revolving Loan
Account may from time to time be temporarily in a credit position, until the
final payment in full to the Agent of all Obligations and the termination of
this Financing Agreement. Any delay, or omission by the Agent to exercise any
right hereunder shall not be deemed a waiver thereof, or be deemed a waiver of
any other right, unless such waiver shall be in writing and signed by the Agent.
A waiver on any one occasion shall not be construed as a bar to, or waiver of,
any right or remedy on any future occasion.
6.6 Notwithstanding the Agent's security interest in the Collateral and to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, the Agent shall have the right in its sole
discretion to determine which rights, liens, security interests or remedies the
Agent shall at any time pursue, foreclose upon, relinquish, subordinate, modify
or take any other action with respect to, without in any way modifying or
affecting any of them, or any of the Agent's and/or the Lenders' rights
hereunder.
6.7 Any balances to the credit of the Company and any other property or
assets of the Company in the possession or control of the Agent and/or the
Lenders may be held by the Agent as security for any Obligations and applied in
whole or partial satisfaction of such Obligations when due. The liens and
security interests granted herein, and any other lien or security interest the
Agent and/or the Lenders may have in any other assets of the Company, shall
secure payment and performance of all now existing and future Obligations. The
Agent may, in its discretion, charge any or all of the Obligations to the
Revolving Loan Account when due. The agent may in its discretion request in
writing that the Company to enter into applicable three party security
agreements (in form and substance satisfactory to the Agent) granting the Agent
a first priority security interest in the Company's Permitted Investments, and
the Company shall comply therewith within a reasonable time therefrom.
6.8 The Company possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date and the
Company shall maintain its rights in, and the value of, the foregoing in the
ordinary course of its business, including, without limitation, by making timely
payment with respect to any applicable licensed rights. The Company shall
deliver to
29
the Agent, and/or shall cause the appropriate party to deliver to the Agent,
from time to time such pledge or security agreements with respect to General
Intangibles (now or hereafter acquired) of the Company and its subsidiaries as
the Agent shall require to obtain valid first liens thereon. In furtherance of
the foregoing, the Company shall provide timely notice to the Agent of any
additional Patents, Trademarks, tradenames, service marks, Copyrights, brand
names, trade names, logos and other trade designations acquired or applied for
subsequent to the Closing Date and the Company shall execute such documentation
as the Agent may reasonably require to obtain and perfect its lien thereon. The
Company hereby confirms that it shall deliver, or cause to be delivered, any
pledged stock issued subsequent to the Closing Date to the Agent in accordance
with the applicable terms of the Pledge Agreement and prior to such delivery,
shall hold any such stock in trust for the Agent. The Company hereby irrevocably
grants to the Agent a royalty-free, non-exclusive license in the General
Intangibles, including tradenames, Trademarks, Copyrights, Patents, licenses,
and any other proprietary and intellectual property rights and any and all
right, title and interest in any of the foregoing, for the sole purpose, upon
the occurrence of an Event of Default, of the right to: (i) advertise for sale
and sell or transfer any Inventory bearing any of the General Intangibles, and
(ii) make, assemble, prepare for sale or complete, or cause others to do so, any
applicable raw materials or Inventory bearing any of the General Intangibles,
including use of the Equipment and Real Estate for the purpose of completing the
manufacture of unfinished goods, raw materials or work-in-process comprising
Inventory, and apply the proceeds thereof to the Obligations hereunder, all as
further set forth in this Financing Agreement and irrespective of the Agent's
lien and perfection in any General Intangibles.
6.9 The Company agrees that, if applicable, any chattel paper created by
the Company will be marked: "This chattel paper has been assigned to The CIT
Group/Business Credit, Inc. Further assignment of this chattel paper violates
the rights of The CIT Group/Business Credit, Inc."
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 The Company hereby warrants, represents and covenants that: (a) the
fair value of the Total Assets exceeds the book value of the Total Liabilities;
(b) the Company is generally able to pay its debts as they become due and
payable; and (c) the Company does not have unreasonably small capital to carry
on its business as it is currently conducted absent extraordinary and unforeseen
circumstances. The Company further warrants and represents that: (i) Schedule 1
hereto correctly and completely sets forth the Company's (A) chief executive
office, (B) Collateral locations, (C) tradenames, and (D) all the other
information listed on said Schedule; (ii) except for the Permitted Encumbrances,
after filing of financing statements in the applicable filing clerks office at
the locations set forth in Schedule 1, this Financing Agreement creates a valid,
perfected and first priority security interest in the Collateral and the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral; (iii) except for the Permitted
Encumbrances, the Company is, or will be, at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer and create a security interest therein, free and clear
of any and all claims or liens in favor of others; (iv) the Company will, at its
expense, forever warrant and, at the Agent's request, defend the same from any
and all claims
30
and demands of any other person other than a holder of a Permitted Encumbrance;
(v) the Company will not grant, create or permit to exist, any lien upon, or
security interest in, the Collateral, or any proceeds thereof, in favor of any
other person other than the holders of the Permitted Encumbrances; and that the
Equipment does not comprise a part of the Inventory of the Company; and (vi) the
Equipment is and will only be used by the Company in its business and will not
be held for sale or lease, or removed from its premises, or otherwise disposed
of by the Company except as otherwise permitted in this Financing Agreement.
7.2 The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope
as the Agent shall reasonably require. The Company agrees that the Agent or its
agents, and any of the Lenders who may wish to accompany the Agent at their own
cost expense, may enter upon the Company's premises at any time during normal
business hours, and from time to time in its reasonable business judgment, for
the purpose of inspecting the Collateral and any and all records pertaining
thereto. The Company agrees to afford the Agent thirty (30) days prior written
notice of any change in the location of any Collateral, other than to locations,
that as of the Closing Date, are known to the Agent and at which the Agent has
filed financing statements and otherwise fully perfected its liens thereon. The
Company is also to advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to the Agent therein.
7.3 The Company agrees to: (a) execute and deliver to the Agent, from time
to time, solely for the Agent's convenience in maintaining a record of the
Collateral, such written statements, and schedules as the Agent may reasonably
require, designating, identifying or describing the Collateral; and (b) provide
the Agent, on request, with an appraisal of the Inventory which appraisal shall
be at the Company's expense and otherwise acceptable to the Agent. The Company's
failure, however, to promptly give the Agent such statements, or schedules shall
not affect, diminish, modify or otherwise limit the Agent's and/or the Lenders'
security interests in the Collateral.
7.4 The Company agrees to comply with the requirements of all state and
federal laws in order to grant to the Agent valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. The
Agent is hereby authorized by the Company to file (including pursuant to the
applicable terms of the UCC) from time to time any financing statements,
continuations or amendments covering the Collateral. The Company hereby consents
to and ratifies any and all execution and/or filing of financing statements on
or prior to the Closing Date by the Agent. The Company agrees to do whatever the
Agent may reasonably request, from time to time, by way of: (a) filing notices
of liens, financing statements, amendments, renewals and continuations thereof;
(b) cooperating with the Agent's agents and employees; (c) keeping Collateral
records; (d) transferring proceeds of Collateral to the Agent's possession; and
(e) performing such further acts as the Agent and/or the Lenders may reasonably
require in order to effect the purposes of this Financing Agreement, including
but not limited to obtaining control agreements with respect to deposit accounts
and/or Investment Property.
31
7.5(a) The Company agrees to maintain insurance on its Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to the Agent. All policies covering the
Real Estate, Equipment and Inventory are, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to the Agent, to be made payable
to the Agent, on behalf of the Lenders, in case of loss, under a standard
non-contributory "mortgagee", "lender" or "secured party" clause and are to
contain such other provisions as the Agent may require to fully protect the
Agent's interest in the Real Estate, Inventory and Equipment and to any payments
to be made under such policies. All original policies or true copies thereof are
to be delivered to the Agent, premium prepaid, with the loss payable endorsement
in the Agent's favor, and shall provide for not less than thirty (30) days prior
written notice to the Agent of the exercise of any right of cancellation. At the
Company's request, or if the Company fails to maintain such insurance, the Agent
may arrange for such insurance, but at the Company's expense and without any
responsibility on the Agent's part for: (i) obtaining the insurance; (ii) the
solvency of the insurance companies; (iii) the adequacy of the coverage; or
(iv) the collection of claims. Upon the occurrence of an Event of Default which
is not waived in writing by the Required Lenders, the Agent shall, subject to
the rights of any holders of Permitted Encumbrances holding claims senior to the
Agent, have the sole right and at its option, in the name of the Agent or the
Company, to file claims under any insurance policies, to receive, receipt and
give acquittance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments, reassignments or
other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(b)(i) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory shall first reduce the Company's
Revolving Loans, and then to any other Obligations. Upon the occurrence of a
Default or Event of Default, such Insurance Proceeds may be applied to the
Obligations in such order as the Agent may elect;
(ii) In the event any part of any of the Company's Real Estate or Equipment
is damaged by fire or other casualty and the Insurance Proceeds for such damage
or other casualty is less than or equal to $100,000.00, the Agent shall promptly
apply such Proceeds to reduce the Company's outstanding balance in the Revolving
Loan Account. Upon the occurrence of a Default or Event of Default, such
Insurance Proceeds may be applied to the Obligations in such order as the Agent
may elect. Absent the occurrence of an Event of Default, and provided that
(x) such Company has sufficient business interruption insurance to replace the
lost profits of such Company's facilities, and (y) the Insurance Proceeds are in
excess of $100,000.00, such Company may elect (by delivering written notice to
the Agent) to replace, repair or restore such Real Estate or Equipment to
substantially the equivalent condition prior to such fire or other casualty as
set forth herein. If the Company does not, or cannot, elect to use the Insurance
Proceeds as set forth above, the Agent may, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to the Agent, apply the
Insurance Proceeds to the payment of the Obligations in such manner and in such
order as the Agent may reasonably elect.
32
(c) In the event the Company fails to provide the Agent with timely
evidence, acceptable to the Agent, of its maintenance of insurance coverage
required pursuant to paragraph 7.5(a) above, the Agent may purchase, at the
Company's expense, insurance to protect the Agent's interests in the Collateral.
The insurance acquired by the Agent may, but need not, protect the Company's
interest in the Collateral, and therefore such insurance may not pay claims
which the Company may have with respect to the Collateral or pay any claim which
may be made against the Company in connection with the Collateral. In the event
the Agent purchases, obtains or acquires insurance covering all or any portion
of the Collateral, the Company shall be responsible for all of the applicable
costs of such insurance, including premiums, interest (at the applicable Chase
Bank Rate for Revolving Loans set forth in paragraph 8.1 of Section 8 hereof),
fees and any other charges with respect thereto, until the effective date of the
cancellation or the expiration of such insurance. The Agent may charge all of
such premiums, fees, costs, interest and other charges to the Company's
Revolving Loan Account. The Company hereby acknowledges that the costs of the
premiums of any insurance acquired by the Agent may exceed the costs of
insurance which the Company may be able to purchase on its own. In the event
that the Agent purchases such insurance, the Agent will notify the Company of
said purchase within thirty (30) days of the date of such purchase. If, within
thirty (30) days after the date of such notice, the Company provides the Agent
with proof that the Company had the insurance coverage required pursuant to
7.5(a) above (in form and substance satisfactory to the Agent) as of the date on
which the Agent purchased insurance and the Company continued at all times to
have such insurance, then the Agent agrees to cancel the insurance purchased by
the Agent and credit the Company's Revolving Loan Account with the amount of all
costs, interest and other charges associated with any insurance purchased by the
Agent, including with any amounts previously charged to the Revolving Loan
Account.
7.6 The Company agrees to pay, when due, all Taxes, including sales taxes,
assessments, claims and other charges lawfully levied or assessed upon the
Company or the Collateral unless such Taxes are being diligently contested in
good faith by the Company by appropriate proceedings and adequate reserves are
established in accordance with GAAP. Notwithstanding the foregoing, if any lien
shall be filed or claimed thereunder (a) for Taxes due the United States of
America, or (b) which in the Agent's opinion might create a valid obligation
having priority over the rights granted to the Agent herein (exclusive of Real
Estate), such lien shall not be deemed to be a Permitted Encumbrance hereunder
and the Company shall immediately pay such tax and remove the lien of record. If
the Company fails to do so promptly, then at the Agent's election, the Agent may
(i) create an Availability Reserve in such amount as it may deem appropriate in
its business judgment, or (ii) upon the occurrence of a Default or Event of
Default, imminent risk of seizure, filing of any priority lien, forfeiture, or
sale of the Collateral, pay Taxes on the Company's behalf, and the amount
thereof shall be an Obligation secured hereby and due on demand.
7.7 The Company: (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the business or operations of
the Company, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in the
33
Agent's reasonable opinion, materially and adversely effect the Agent's and/or
the Lenders' rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the Collateral, the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Company; and (c) shall not be deemed to have breached any provision of this
Paragraph 7.7 if (i) the failure to comply with the requirements of this
Paragraph 7.7 resulted from good faith error or innocent omission, (ii) the
Company promptly commences and diligently pursues a cure of such breach, and
(iii) such failure is cured within (30) days following the Company's receipt of
notice of such failure, or if such cannot in good faith be cured within thirty
(30) days, then such breach is cured within a reasonable time frame based upon
the extent and nature of the breach and the necessary remediation, and in
conformity with any applicable consent order, consensual agreement and
applicable law.
7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that, unless
the Agent shall have otherwise consented in writing, the Company will furnish to
the Agent and each Lender: (a) within (i) ninety (90) days after the end of each
Fiscal Year of the Company, an audited Consolidated Balance Sheet, with a
Consolidating Balance Sheet attached thereto, as at the close of such year, and
statements of profit and loss, cash flow and reconciliation of surplus of the
Company and its consolidated subsidiaries for such year, audited by independent
public accountants selected by the Company and satisfactory to the Agent, and
(ii) ten (10) days of the issuance thereof, the Company's filings with the SEC,
including its 10K's and 10Q's; (b) within sixty (60) days after the end of each
Fiscal Quarter a Consolidated Balance Sheet and Consolidating Balance Sheet as
at the end of such period and statements of profit and loss, cash flow and
surplus of the Company and its consolidated subsidiaries, certified by an
authorized financial or accounting officer of the Company; (c) within thirty
(30) days after the end of each month an internally prepared Consolidated
Balance Sheet as at the end of such period and statements of profit and loss,
cash flow and surplus of the Company and all subsidiaries for such period,
certified by an authorized financial or accounting officer of the Company;
(d) yearly cash flow projections (including a break-down for each month of such
period) provided by the Company within thirty (30) days of its fiscal year end,
including profit and loss, cash flow and surplus, in form satisfactory to the
Agent; and (e) from time to time and without duplication of the foregoing, such
further information regarding the business affairs and financial condition of
the Company and its consolidated subsidiaries as the Agent may reasonably
request, including, without limitation (i) the accountant's management practice
letter and (ii) annual cash flow projections in form satisfactory to the Agent
and (iii) any audits conducted by the Company's auditors of its Accounts or
systems relating thereto. Each financial statement which the Company is required
to submit hereunder must be accompanied by an officer's certificate, signed by
the President, Vice President, Controller, or Treasurer, pursuant to which any
one such officer must certify that: (x) the financial statement(s) fairly and
accurately represent(s) the Company's financial condition at the end of the
particular accounting period, as well as the Company's operating results during
such accounting period, subject to year-end audit adjustments; and (y) during
the particular accounting period: (A) there has been no Default or Event of
Default under this Financing
34
Agreement, PROVIDED, HOWEVER, that if any such officer has knowledge that any
such Default or Event of Default, has occurred during such period, the existence
of and a detailed description of same shall be set forth in such officer's
certificate; (B) the Company has not received any notice of cancellation with
respect to its property insurance policies; (C) the Company has not received any
notice that could result in a material adverse effect on the value of the
Collateral taken as a whole; and (D) the exhibits attached to such financial
statement(s) constitute detailed calculations showing compliance with all
financial covenants contained in this Financing Agreement.
7.9 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that, without the
prior written consent of the Agent, except as otherwise herein provided, the
Company will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or other
security interest, or otherwise) to exist on any of the Company's
Collateral or any other assets, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of (i) Collateral,
except as otherwise specifically permitted by this Financing
Agreement, or (ii) either all or substantially all of the Company's
assets, which do not constitute Collateral, provided that the Company
may sell all or substantially all of the assets or stock of EB
Networks and Princeton Softech, Inc., provided further that any such
sale shall occur on or before six months from the Closing Date;
(d) Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, or existence, re-incorporate
or re-organize, or enter into or engage in any operation or activity
materially different from that presently being conducted by the
Company, except that the Company may change its corporate name or
address; provided that: (i) the Company shall give the Agent thirty
(30) days prior written notice thereof and (ii) the Company shall
execute and deliver, prior to or simultaneously with any such action,
any and all documents and agreements requested by the Agent to confirm
the continuation and preservation of all security interests and liens
granted to the Agent hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
(f) Declare or pay any dividend or distributions of any kind on, or
purchase, acquire, redeem or retire, any of the capital stock or
equity interest, of any class whatsoever, whether now or hereafter
outstanding of the Company or any of its subsidiaries, PROVIDED
HOWEVER THAT, the Company may redeem its publicly traded stock in an
aggregate amount not to exceed $3,000,000 in any fiscal quarter,
provided further
35
that, prior to and after giving affect to any such redemption, the
Company's Availability is in an amount of $15,000,000 or more; or
(g) Make any advance or loan to, or any investment in, any firm, entity,
person or corporation, or purchase or acquire all or substantially all
of the stock or assets of any entity, person or corporation, or pay
any management, consulting or other similar fees to any person,
corporation or other entity affiliated with the Company, in excess of
$100,000 in the aggregate in any fiscal year, excepted for Permitted
Investments.
7.10 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company shall:
(a) The Company shall maintain Availability, as required under (a)(i)
below, from the Closing Date through the date when, pursuant to written mutual
agreement of the Company and the Agent, the Company maintains a Fixed Charge
Coverage Ratio of 1.0 to 1.0. Absent such mutual agreement, the Availability
covenant shall continue uninterrupted and in full force and effect. Upon such
written mutual agreement and attaining the Required Fixed Charge Coverage Ratio
set forth herein above, the Availability provision in (a)(i) shall be deemed
terminated (absent the occurrence of and for so long as no Default or Event of
Default has occurred hereunder, provided that for purposes hereof, upon any
Default or Event of Default such covenant shall be deemed reinstated), and the
Fixed Charge Coverage Ratio covenant will thereafter remain in full force and
effect.
(i) The Company shall maintain $15,000,000 in Availability at all times, as
evidenced by a Borrowing Base certificate delivered by the Company to the Agent
from time to time hereunder, but in no event less frequently than weekly. It is
understood that such requirement contemplates that all debts and obligations of
the Company are current, and that all payables are being handled in the normal
course of the Company's business and consistent with its past practice, provided
that for purposes of calculation of this provision, Availability shall include
any deposits in the Company's "invest-a-cash" account (#1770) with The Chase
Manhattan Bank.
(ii) The Company shall maintain, on a consolidated basis, a Fixed Charge
Coverage Ratio of not less than an amount to be mutually agreed upon in writing
by the parties hereto. It is contemplated as of the Closing Date that such
amount shall be approximately 85% of the amount set forth in the Company's
projections for the period beginning with the Fiscal Quarter ending March 31,
2002, all to be in form and substance satisfactory to the Agent. The Fixed
Charge Coverage Ratio shall be determined on a cumulating basis for the period
of four consecutive Fiscal Quarters.
(b) without the prior written consent of the Agent, the Company will not:
36
(i) enter into or have outstanding any Operating Lease if after giving
effect thereto the Company's aggregate obligations with respect to
Operating Leases during any Fiscal Year would exceed $9,000,000.00;
(ii) contract for, purchase, make expenditures for, lease pursuant to
a Capital Lease or otherwise incur obligations with respect to Capital
Expenditures (whether subject to a security interest or otherwise)
during any period below in the aggregate amount in excess of the
amount set forth for such period:
(A) $8,000,000.00 for the Fiscal Year ending December 31, 2001;
(B) $8,000,000.00 for the Fiscal Year ending December 31, 2002;
(C) $8,000,000.00 for the Fiscal Year ending December 31, 2003;
(D) $8,000,000.00 for the Fiscal Year ending December 31, 2004; and
(E) $8,000,000.00 for the Fiscal Year ending December 31, 2005, and
for each Fiscal Year ending thereafter.
(c) obtain minimum monthly collections of $20,000,000. For purposes of
calculation hereof, "collections" shall refer solely to the Company's
Accounts, and exclude any amounts due or received from any of the Company's
affiliates.
7.11 The Company agrees to advise the Agent and the Lenders in writing of:
(a) all expenditures (actual or anticipated) in excess of $150,000.00 from the
budgeted amount therefor in any Fiscal Year for (i) environmental clean-up,
(ii) environmental compliance or (iii) environmental testing and the impact of
said expenses on the Company's Working Capital; and (b) any notices the Company
receives from any local, state or federal authority advising the Company of any
environmental liability (real or potential) stemming from the Company's
operations, its premises, its waste disposal practices, or waste disposal sites
used by the Company and to provide the Agent with copies of all such notices if
so required; and (c) any accrued and unpaid Taxes (including payroll taxes) in
an amount of $100,000 or more.
7.12 The Company hereby agrees to indemnify and hold harmless the Agent,
the Lenders and their respective officers, directors, employees, attorneys and
agents (each an "Indemnified Party") from, and holds each of them harmless
against, any and all losses, liabilities, obligations, claims, actions, damages,
costs and expenses (including attorney's fees) arising in connection with this
Financing Agreement or the Loan Documents, including without limitation for any
payments made by the Agent pursuant to any indemnity provided by the Agent with
respect to or subject to the Loan Documents, including without limitation those
which may arise from or relate to: (a) the Depository Account, the Blocked
Accounts, the lockbox and/or any other depository account and/or the agreements
executed in connection therewith; and (b) any and all claims or expenses
asserted against the Agent as a result of any environmental pollution, hazardous
material or environmental clean-up relating to the Real Estate; or any claim or
expense which results from the Company's operations (including, but not limited
to, the Company's off-site disposal practices) and use of the Real Estate, which
the Agent may sustain or incur (other than solely as a result of the physical
actions of the
37
Agent on the Company's premises which are determined to constitute gross
negligence or willful misconduct by a court of competent jurisdiction), all
whether through the alleged or actual negligence of such person or otherwise,
except and to the extent that the same results solely and directly from the
gross negligence or willful misconduct of such Indemnified Party as finally
determined by a court of competent jurisdiction. The Company hereby agrees that
this indemnity shall survive termination of this Financing Agreement, as well as
payments of Obligations which may be due hereunder. The Agent may, in its sole
business judgment, establish such Availability Reserves with respect thereto as
it may deem advisable under the circumstances and, upon any termination hereof,
hold such reserves as cash reserves for any such contingent liabilities.
7.13 Without the prior written consent of the Agent, the Company agrees
that it will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any subsidiary or
affiliate of the Company, provided that, except as otherwise set forth in this
Financing Agreement, the Company may enter into sale and service transactions in
the ordinary course of its business and pursuant to the reasonable requirements
of the Company, and upon standard terms and conditions and fair and reasonable
terms, no less favorable to the Company than the Company could obtain in a
comparable arms length transaction with an unrelated third party, provided
further that no Default or Event of Default exists or will occur hereunder prior
to and after giving effect to any such transaction..
SECTION 8. INTEREST, FEES AND EXPENSES
8.1 (a) Interest on the Revolving Loans shall be payable monthly as of the
end of each month. Chase Bank Rate Loans shall be at a rate equal to the Chase
Bank Rate (listed as "Prime" in the table below) plus any applicable margin (as
set forth in the table below), per annum on the average of the net balances
owing by the Company to the Agent in the Revolving Loan Account at the close of
each day during such month. In the event of any change in said Chase Bank Rate,
the rate hereunder for Chase Bank Rate Loans shall change as of the date of such
change. The rate hereunder for Chase Bank Rate Loans shall be calculated based
on a 360-day year. The Agent shall be entitled to charge the Company's Revolving
Loan Account at the rate provided for herein when due until all Obligations have
been paid in full. Notwithstanding anything to the contrary herein, for purposes
of calculation hereof, during the first ninety (90) days from the Closing Date
all Revolving Loans shall bear interest at the Chase Bank Rate plus 0.50%.
----------------------------------------------------------------------------------
AVAILABILITY PRIME RATE LIBOR RATE
----------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO $30,000,000 Prime LIBOR + 2.25%
----------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO $20,000,000 Prime + 0.25% LIBOR + 2.50%
----------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO $10,000,000 Prime + 0.50% LIBOR + 2.75%
----------------------------------------------------------------------------------
LESS THAN OR EQUAL TO $10,000,000 Prime + 1.0% LIBOR + 3.25%
----------------------------------------------------------------------------------
38
(b) Notwithstanding any provision to the contrary contained in this
section 8, in the event that the sum of (i) the outstanding Revolving Loans and
(ii) the outstanding Letters of Credit exceed the lesser of either (x) the
maximum aggregate amount available under Sections 3 and 5 of this Financing
Agreement or (y) the Revolving Line of Credit: (A) as a result of Revolving
Loans advanced by the Agent at the request of the Company (herein "Requested
Overadvances"), for any one (1) or more days in any month, or (B) for any other
reason whatsoever (herein "Other Overadvances") and such Other Overadvances
continue for five (5) or more days in any month, the average net balance of all
Revolving Loans for such month shall bear interest at the Overadvance Rate.
(c) Upon and after the occurrence of an Event of Default and the giving of
any required notice by the Agent in accordance with the provisions of
Section 10, Paragraph 10.2 hereof, all Obligations shall bear interest at the
Default Rate of Interest.
8.2 Intentionally Omitted.
8.3 In consideration of the Letter of Credit Guaranty of the Agent, the
Company shall pay the Agent the Letter of Credit Guaranty Fee which shall be an
amount equal to (a) one and one half percent (1.5%) on the face amount of each
documentary Letter of Credit payable upon issuance thereof and (b) one and one
half percent (1.5%) per annum, payable monthly, on the face amount of each
standby Letter of Credit less the amount of any and all amounts previously drawn
under such standby Letter of Credit.
8.4 Any and all charges, fees, commissions, costs and expenses charged to
the Agent for the Company's account by any Issuing Bank in connection with, or
arising out of, Letters of Credit or out of transactions relating thereto will
be charged to the Revolving Loan Account in full when charged to, or paid by the
Agent, or as may be due upon any termination of this Financing Agreement hereof,
and when made by any such Issuing Bank shall be conclusive on the Agent.
8.5 The Company shall reimburse or pay the Agent, as the case may be, for:
(a) all Out-of-Pocket Expenses and (b) any applicable Documentation Fee.
8.6 Upon the last Business Day of each month, commencing on July 31, 2001,
the Company shall pay to the Agent (i) the Line of Credit Fee, and (ii) solely
for the account of the Agent, interest on the Collection Days. Interest will be
computed at the rate, and in the manner, set forth in Paragraph 8.1 of this
Financing Agreement.
8.7 To induce the Agent to enter into this Financing Agreement and to
extend to the Company the Revolving Loan and Letters of Credit Guaranties, the
Company shall pay to the Agent, solely for its account, a Loan Facility Fee in
the amount of $400,000.00 payable upon execution of this Financing Agreement.
The Commitment Fee (of $150,000 paid by the Company to the Agent upon execution
of the Commitment Letter) shall be credited toward the Loan Facility Fee upon
consummation of this financing transaction on the Closing Date.
39
8.8 On the Closing Date and each anniversary of the Closing Date
thereafter, the Company shall pay to the Agent the Administrative Management
Fee, which shall be deemed fully earned when paid.
8.9 The Company shall pay the Agent's standard charges and fees for the
Agent's personnel used by the Agent for reviewing the books and records of the
Company and for verifying, testing, protecting, safeguarding, preserving or
disposing of all or any part of the Collateral (which fees shall be in addition
to the Administrative Management Fee and any Out-of-Pocket Expenses).
8.10 The Company hereby authorizes the Agent to charge the Revolving Loan
Account with the amount of all payments due hereunder as such payments become
due. The Company confirms that any charges which the Agent may so make to the
Revolving Loan Account as herein provided will be made as an accommodation to
the Company and solely at the Agent's discretion.
8.11 In the event that the Agent or any participant hereunder (or any
financial institution which may from time to time become a participant or lender
hereunder) shall have determined in the exercise of its reasonable business
judgment that, subsequent to the Closing Date, any change in applicable law,
rule, regulation or guideline regarding capital adequacy, or any change in the
interpretation or administration thereof, or compliance by the Agent or such
participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Agent's or such participant's capital as a consequence of its obligations
hereunder to a level below that which the Agent or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
the Agent or such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by the Agent or such participant to be material, then,
from time to time, the Company shall pay no later than five (5) days following
demand to the Agent or such participant such additional amount or amounts as
will compensate the Agent's or such participant's for such reduction. In
determining such amount or amounts, the Agent or such participant may use any
reasonable averaging or attribution methods. The protection of this
Paragraph 8.11 shall be available to the Agent or such participant regardless of
any possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition. A certificate of the Agent or such
participant setting forth such amount or amounts as shall be necessary to
compensate the Agent or such participant with respect to this Section 8 and the
calculation thereof when delivered to the Company shall be conclusive on the
Company absent manifest error. Notwithstanding anything in this paragraph to the
contrary, in the event the Agent or such participant has exercised its rights
pursuant to this paragraph, and subsequent thereto determines that the
additional amounts paid by the Company in whole or in part exceed the amount
which the Agent or such participant actually required to be made whole, the
excess, if any, shall be returned to the Company by the Agent or such
participant.
8.12. In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by the Agent or such participant
40
with any request or directive (whether or not having the force of law) from any
central bank or other financial, monetary or other authority, shall:
(a) subject the Agent or such participant to any tax of any kind whatsoever
with respect to this Financing Agreement or change the basis of taxation of
payments to the Agent or such participant of principal, fees, interest or any
other amount payable hereunder or under any other documents (except for changes
in the rate of tax on the overall net income of the Agent or such participant by
the federal government or the jurisdiction in which it maintains its principal
office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by the Agent or
such participant by reason of or in respect to this Financing Agreement and the
Loan Documents, including (without limitation) pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or
(c) impose on the Agent or such participant any other condition with
respect to this Financing Agreement or any other document, and the result of any
of the foregoing is to increase the cost to the Agent or such participant of
making, renewing or maintaining its loans hereunder by an amount that the Agent
or such participant deems to be material in the exercise of its reasonable
business judgment or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the loans by an amount that the
Agent or such participant deems to be material in the exercise of its reasonable
business judgment, then, in any case the Company shall pay the Agent or such
participant, within five (5) days following its demand, such additional cost or
such reduction, as the case may be. The Agent or such participant shall certify
the amount of such additional cost or reduced amount to the Company and the
calculation thereof and such certification shall be conclusive upon the Company
absent manifest error. Notwithstanding anything in this paragraph to the
contrary, in the event the Agent or such participant has exercised its rights
pursuant to this paragraph, and subsequent thereto determine that the additional
amounts paid by the Company in whole or in part exceed the amount which the
Agent or such participant actually required pursuant hereto, the excess, if any,
shall be returned to the Company by the Agent or such participant.
8.13 The Company may request LIBOR Loans on the following terms and
conditions:
(a) The Company may elect, subsequent to 90 days from the Closing Date
and from time to time thereafter (i) to request any loan made hereunder to be a
LIBOR Loan as of the date of such loan or (ii) to convert Chase Bank Rate Loans
to LIBOR Loans, and may elect from time to time to convert LIBOR Loans to Chase
Bank Rate Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election, PROVIDED that any such conversion of LIBOR
Loans to Chase Bank Rate Loans shall only be made, subject to the second
following sentence, on the last day of an Interest Period with respect thereto.
Should the Company elect to convert Chase Bank Rate Loans to LIBOR Loans, it
shall give the Agent at least four Business Days' prior irrevocable notice of
such election. If the last day of an Interest Period with respect to a loan that
is to be converted is not a Business Day or Working Day, then such conversion
shall be made on
41
the next succeeding Business Day or Working Day, as the case may be, and during
the period from such last day of an Interest Period to such succeeding Business
Day, as the case may be, such loan shall bear interest as if it were a Chase
Bank Rate Loan. All or any part of outstanding Chase Bank Rate Loans then
outstanding with respect to Revolving Loans may be converted to LIBOR Loans as
provided herein, PROVIDED that partial conversions shall be in multiples in an
aggregate principal amount of $1,000,000 or more. The Agent shall be entitled to
charge the Company a $500 fee upon the first effective day of any such election
for a LIBOR Loan.
(b) Any LIBOR Loans may be continued as such upon the expiration of an
Interest Period, PROVIDED the Company so notifies the Agent, at least three (3)
Business Days' prior to the expiration of said Interest Period, and PROVIDED
FURTHER that no LIBOR Loan may be continued as such upon the occurrence of any
Default or Event of Default under this Financing Agreement, but shall be
automatically converted to a Chase Bank Rate Loan on the last day of the
Interest Period during which occurred such Default or Event of Default. Absent
such notification, LIBOR Rate Loans shall convert to Chase Bank Rate Loans on
the last day of the applicable Interest Period. Each notice of election,
conversion or continuation furnished by the Company pursuant hereto shall
specify whether such election, conversion or continuation is for a one, two, or
three month period. Notwithstanding anything to the contrary contained herein,
the Agent (or any participant, if applicable) shall not be required to purchase
United States Dollar deposits in the London interbank market or from any other
applicable LIBOR Rate market or source or otherwise "match fund" to fund LIBOR
Rate Loans, but any and all provisions hereof relating to LIBOR Rate Loans shall
be deemed to apply as if the Agent (and any participant, if applicable) had
purchased such deposits to fund any LIBOR Rate Loans.
(c) The Company may request a LIBOR Loan, convert any Chase Bank Rate
Loan or continue any LIBOR Loan provided there is then no Default or Event of
Default in effect.
8.14 (a) The LIBOR Loans shall bear interest for each Interest Period with
respect thereto on the unpaid principal amount thereof at a rate per annum equal
to the LIBOR determined for each Interest Period in accordance with the terms
hereof plus the following applicable margin (calculated on the Company's
Availability on the lesser of the date of any such request or the date of
funding):
-----------------------------------------------------------------------------------------
AVAILABILITY PRIME RATE LIBOR RATE
-----------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO $30,000,000 Prime LIBOR + 2.25%
-----------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO $20,000,000 Prime + 0.25% LIBOR + 2.50%
-----------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO $10,000,000 Prime + 0.50% LIBOR + 2.75%
-----------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO $10,000,000 Prime + 1.0% LIBOR + 3.25%
-----------------------------------------------------------------------------------------
(b) If all or a portion of the outstanding principal amount of the
Obligations shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such outstanding
42
amount, to the extent it is a LIBOR Loan, shall be converted to a Chase Bank
Rate Loan at the end of the last Interest Period therefor.
(c) The Company may not have more than three (3) LIBOR Loans
outstanding at any given time.
8.15 (a) Interest in respect of the LIBOR Loans shall be calculated on the
basis of a 360 day year and shall be payable as of the end of each month.
(b) The Agent shall, at the request of the Company, deliver to the
Company a statement showing the quotations given by The Chase Manhattan Bank and
the computations used in determining any interest rate pursuant to
Paragraph 8.14 of Section 8 hereof.
8.16 As further set forth in paragraph 8.12 above, in the event that the
Agent (or any financial institution which may become a participant hereunder)
shall have determined in the exercise of its reasonable business judgment (which
determination shall be conclusive and binding upon the Company) that by reason
of circumstances affecting the interbank LIBOR market, adequate and reasonable
means do not exist for ascertaining LIBOR applicable for any Interest Period
with respect to: (a) a proposed loan that the Company has requested be made as a
LIBOR Loan; (b) a LIBOR Loan that will result from the requested conversion of a
Chase Bank Rate Loan into a LIBOR Loan; or (c) the continuation of LIBOR Loans
beyond the expiration of the then current Interest Period with respect thereto,
the Agent shall forthwith give written notice of such determination to the
Company at least one day prior to, as the case may be, the requested borrowing
date for such LIBOR Loan, the conversion date of such Chase Bank Rate Loan or
the last day of such Interest Period. If such notice is given (i) any requested
LIBOR Loan shall be made as a Chase Bank Rate Loan, (ii) any Chase Bank Rate
Loan that was to have been converted to a LIBOR Loan shall be continued as a
Chase Bank Rate Loan, and (iii) any outstanding LIBOR Loan shall be converted,
on the last day of then current Interest Period with respect thereto, to a Chase
Bank Rate Loan. Until such notice has been withdrawn by the Agent, no further
LIBOR Loan shall be made nor shall the Company have the right to convert a Chase
Bank Rate Loan to a LIBOR Loan.
8.17 If any payment on a LIBOR Loan becomes due and payable on a day other
than a Business Day or Working Day, the maturity thereof shall be extended to
the next succeeding Business Day or Working Day unless the result of such
extension would be to extend such payment into another calendar month in which
event such payment shall be made on the immediately preceding Business Day or
Working Day.
8.18 Notwithstanding any other provisions herein, if any law, regulation,
treaty or directive or any change therein or in the interpretation or
application thereof, shall make it unlawful for the Agent to make or maintain
LIBOR Loans as contemplated herein, the then outstanding LIBOR Loans, if any,
shall be converted automatically to Chase Bank Rate Loans as of the end of such
month, or within such earlier period as required by law. The Company hereby
agrees promptly to pay the Agent, upon demand, any additional amounts necessary
to compensate the Agent for any
43
costs incurred by the Agent in making any conversion in accordance with this
Section 8 including, but not limited to, any interest or fees payable by the
Agent to lenders of funds obtained by the Agent in order to make or maintain
LIBOR Loans hereunder.
8.19 The Company agrees to indemnify and to hold the Agent (including any
participant) harmless from any loss or expense which the Agent or such
participant may sustain or incur as a consequence of: (a) Default by the Company
in payment of the principal amount of or interest on any LIBOR Loans, as and
when the same shall be due and payable in accordance with the terms of this
Financing Agreement, including, but not limited to, any such loss or expense
arising from interest or fees payable by the Agent or such participant to
lenders of funds obtained by either of them in order to maintain the LIBOR Loans
hereunder; (b) default by the Company in making a borrowing or conversion after
the Company has given a notice in accordance with Paragraph 8.13 of Section 8
hereof; (c) any prepayment of LIBOR Loans on a day which is not the last day of
the Interest Period applicable thereto, including, without limitation,
prepayments arising as a result of the application of the proceeds of Collateral
to the Revolving Loans; and (d) default by the Company in making any prepayment
after the Company had given notice to the Agent thereof. The determination by
the Agent of the amount of any such loss or expense, when set forth in a written
notice to the Company, containing the Agent's calculations thereof in reasonable
detail, shall be conclusive on the Company in the absence of manifest error.
Calculation of all amounts payable under this paragraph with regard to LIBOR
Loans shall be made as though the Agent had actually funded the LIBOR Loans
through the purchase of deposits in the relevant market and currency, as the
case may be, bearing interest at the rate applicable to such LIBOR Loans in an
amount equal to the amount of the LIBOR Loans and having a maturity comparable
to the relevant interest period; PROVIDED, HOWEVER, that the Agent may fund each
of the LIBOR Loans in any manner the Agent sees fit and the foregoing assumption
shall be used only for calculation of amounts payable under this paragraph. In
addition, notwithstanding anything to the contrary contained herein, the Agent
shall apply all proceeds of Collateral and all other amounts received by it from
or on behalf of the Company (i) initially to the Chase Bank Rate Loans and
(ii) subsequently to LIBOR Loans; PROVIDED, HOWEVER, (x) upon the occurrence of
an Event of Default or (y) in the event the aggregate amount of outstanding
LIBOR Rate Loans exceeds Availability or the applicable maximum levels set forth
therefor, the Agent may apply all such amounts received by it to the payment of
Obligations in such manner and in such order as the Agent may elect in its
reasonable business judgment. In the event that any such amounts are applied to
Revolving Loans which are LIBOR Loans, such application shall be treated as a
prepayment of such loans and the Agent shall be entitled to indemnification
hereunder. This covenant shall survive termination of this Financing Agreement
and payment of the outstanding Obligations.
8.20 Notwithstanding anything to the contrary in this Agreement, in the
event that, by reason of any Regulatory Change (for purposes hereof "Regulatory
Change" shall mean, with respect to the Agent, any change after the date of this
Financing Agreement in United States federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including the Agent of or under any United States federal, state
or foreign law or regulations (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful), the
44
Agent either (a) incurs any material additional costs based on or measured by
the excess above a specified level of the amount of a category of deposits or
other liabilities of such bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Financing
Agreement or a category of extensions of credit or other assets of the Agent
which includes LIBOR Loans, or (b) becomes subject to any material restrictions
on the amount of such a category of liabilities or assets which it may hold,
then, if the Agent so elects by notice to the Company, the obligation of the
Agent to make or continue, or to convert Chase Bank Rate Loans into LIBOR Loans
hereunder shall be suspended until such Regulatory Change ceases to be in
effect.
8.21 For purposes of this Financing Agreement and Section 8 thereof, any
reference to the Agent shall include any financial institution which may become
a participant or co-lender subsequent to the Closing Date.
SECTION 9. POWERS
The Company hereby constitutes the Agent, or any person or agent the Agent
may designate, as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to the Agent have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the name of
the Agent or the Company, any and all checks, notes, drafts, and other documents
or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Company and
to notify postal authorities to change the address for delivery thereof to such
address as the Agent may designate;
(c) To request from customers indebted on Accounts at any time, in the name
of the Agent information concerning the amounts owing on the Accounts;
(d) To request from customers indebted on Accounts at any time, in the name
of the Company, in the name of certified public accountant designated by the
Agent or in the name of the Agent's designee, information concerning the amounts
owing on the Accounts;
(e) To transmit to customers indebted on Accounts notice of the Agent's
interest therein and to notify customers indebted on Accounts to make payment
directly to the Agent for the Company's account; and
(f) To take or bring, in the name of the Agent or the Company, all steps,
actions, suits or proceedings deemed by the Agent necessary or desirable to
enforce or effect collection of the Accounts.
45
Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (b), (c), (e) and (f) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Notwithstanding anything hereinabove to the contrary, the Agent may
terminate this Financing Agreement immediately upon the occurrence of any of the
following Events of Default:
(a) cessation of the business of the Company or the calling of a meeting
of the creditors of the Company for purposes of compromising the debts
and obligations of the Company;
(b) the failure of the Company to generally meet its debts as they mature;
(c) (i) the commencement by The Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under
any federal or state law; (ii) the commencement against the Company,
of any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding under any federal or state law by
creditors of the Company, provided that such Default shall not be
deemed an Event of Default if such proceeding is controverted within
ten (10) days and dismissed and vacated within forty-five (45) days of
commencement, except in the event that any of the actions sought in
any such proceeding shall occur or the Company shall take action to
authorize or effect any of the actions in any such proceeding; or
(iii) the commencement (x) by the Company's subsidiaries, or any one
of them, of any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding under any applicable state law, or
(y) against the Company's subsidiaries, or any one of them, of any
involuntary bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding under applicable law, provided that
such Default shall not be deemed an Event of Default if such
proceeding is controverted within ten (10) days and dismissed or
vacated within forty-five (45) days of commencement, except in the
event that any of the actions sought in any such proceeding shall
occur or the Company's subsidiaries, or any one of them, shall take
action to authorize or effect any of the actions in any such
proceeding;
(d) breach by the Company of any warranty, representation or covenant
contained herein (other than those referred to in sub-paragraph (e)
below) or in any other written agreement between the Company or the
Agent, provided that such Default by the Company of any of the
warranties, representations or covenants referred in this clause (d)
shall not be deemed to be an Event of Default unless and until such
Default shall remain unremedied to the Agent's satisfaction for a
period of thirty (30) days from the date of such breach;
(e) breach by the Company of any warranty, representation or covenant of
Paragraphs 3.3 (other than the fourth sentence of Paragraph 3.3) and
3.4 of Section 3 hereof;
46
Paragraphs 6.3 and 6.4 (other than the first sentence of
Paragraph 6.4) of Section 6 hereof; Paragraphs 7.1, 7.5, 7.6, and 7.8
through 7.14 hereof;
(f) failure of the Company to pay any of the Obligations within five (5)
Business Days of the due date thereof, provided that nothing contained
herein shall prohibit the Agent from charging such amounts to the
Revolving Loan Account on the due date thereof;
(g) the Company shall be found by a competent tribunal to have(i) engage
in any "prohibited transaction" as defined in ERISA, (ii) have any
"accumulated funding deficiency" as defined in ERISA, (iii) have any
"reportable event" as defined in ERISA, (iv) terminate any "plan", as
defined in ERISA or (v) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is
appointed, as trustee or administrator of any "plan", as defined in
ERISA, and with respect to this sub-paragraph (g) such event or
condition (x) remains uncured for a period of thirty (30) days from
date of receipt by the Company of written notice or the occurrence
thereof and (y) could, in the reasonable opinion of the Agent, subject
the Company to any tax, penalty or other liability material to the
business, operations or financial condition of the Company;
(h) without the prior written consent of the Agent and, except as
permitted in the Subordination Agreement, the Company shall (x) amend
or modify the Subordinated Debt, or (y) make any payment on account of
the Subordinated Debt; or
(i) the occurrence of any default or event of default (after giving effect
to any applicable grace or cure periods) under any instrument or
agreement evidencing (x) Subordinated Debt or (y) any other
Indebtedness of the Company having a principal amount in excess of
$250,000.
10.2 Upon the occurrence of a Default and/or an Event of Default, the Agent
in its sole discretion may, or upon the written direction of the Required
Lenders the Agent shall, declare that, all loans, advances and extensions of
credit provided for in Sections 3 and 5 of this Financing Agreement shall be
thereafter in the Agent's or the Required Lenders' sole discretion, and the
obligation of the Agent and/or the Lenders to make Revolving Loans, open Letters
of Credit and provide Letters of Credit Guaranties shall cease unless such
Default or Event of Default is waived in writing by the Required Lenders or
cured to the Agent's or the Required Lenders' satisfaction in the exercise of
the Agent's and the Lenders' reasonable judgment. Upon the occurrence of an
Event of Default, the Agent in its sole discretion may, or upon the written
direction of the Required Lenders the Agent shall, declare that: (a) all
Obligations shall become immediately due and payable; (b) the Agent may charge
the Company the Default Rate of Interest on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in Section 8 of this
Financing Agreement, provided that, with respect to this clause "(b)" the Agent
has given the Company written notice of the Event of Default, provided further
however, that no notice is required if the Event of Default is the Event listed
in Paragraph 10.1(c) of this Section 10; and (c) the Agent may immediately
terminate this Financing Agreement upon notice to the Company; provided,
however, that upon the occurrence
47
of an Event of Default listed in Paragraph 10.1(c) of this Section 10, this
Financing Agreement shall automatically terminate and all Obligations shall
become due and payable, without any action, declaration, notice or demand by the
Agent. The exercise of any option is not exclusive of any other option, which
may be exercised at any time by the Agent.
10.3 Immediately upon the occurrence of any Event of Default, the Agent
may, to the extent permitted by law: (a) remove from any premises where same may
be located any and all books and records, computers, electronic media and
software programs associated with any Collateral (including any electronic
records, contracts and signatures pertaining thereto), documents, instruments,
files and records, and any receptacles or cabinets containing same, relating to
the Accounts, or the Agent may use, at the Company's expense, such of the
Company's personnel, supplies or space at the Company's places of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon; (b) bring suit, in the
name of the Company or the Agent, and generally shall have all other rights
respecting said Accounts, including without limitation the right to: accelerate
or extend the time of payment, settle, compromise, release in whole or in part
any amounts owing on any Accounts and issue credits in the name of the Company
or the Agent; (c) sell, assign and deliver the Collateral and any returned,
reclaimed or repossessed Inventory, with or without advertisement, at public or
private sale, for cash, on credit or otherwise, at the Agent's sole option and
discretion, and the Agent may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Company; (d) foreclose the security interests in the Collateral created herein
or by the Loan Documents by any available judicial procedure, or to take
possession of any or all of the Collateral, including any Inventory, Equipment
and/or Other Collateral without judicial process, and to enter any premises
where any Inventory and Equipment and/or Other Collateral may be located for the
purpose of taking possession of or removing the same; and (e) exercise any other
rights and remedies provided in law, in equity, by contract or otherwise. The
Agent shall have the right, without notice or advertisement, to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, in the name of the Company
or the Agent, or in the name of such other party as the Agent may designate,
either at public or private sale or at any broker's board, in lots or in bulk,
for cash or for credit, with or without warranties or representations (including
but not limited to warranties of title, possession, quiet enjoyment and the
like), and upon such other terms and conditions as the Agent in its sole
discretion may deem advisable, and the Agent shall have the right to purchase at
any such sale. If any Inventory and Equipment shall require rebuilding,
repairing, maintenance or preparation, the Agent shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
the Inventory and Equipment in such saleable form as the Agent shall deem
appropriate and any such costs shall be deemed an Obligation hereunder. Any
action taken by CIT pursuant to this paragraph shall not effect commercial
reasonableness of the sale. The Company agrees, at the request of the Agent, to
assemble the Inventory and Equipment and to make it available to the Agent at
premises of the Company or elsewhere and to make available to the Agent the
premises and facilities of the Company for the purpose of the Agent's taking
possession of, removing or putting the Inventory and Equipment in saleable form.
If notice of intended disposition of any Collateral is required by law, it is
agreed that ten (10) days notice shall constitute reasonable notification and
full compliance with
48
the law. The net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights, (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Obligations, whether due or to become due, in such order as the Agent may elect,
and the Company shall remain liable to the Agent for any deficiencies, and the
Agent in turn agrees to remit to the Company or its successors or assigns, any
surplus resulting therefrom. The enumeration of the foregoing rights is not
intended to be exhaustive and the exercise of any right shall not preclude the
exercise of any other rights, all of which shall be cumulative. The Company
hereby indemnifies the Agent and holds the Agent harmless from any and all
costs, expenses, claims, liabilities, Out-of-Pocket Expenses or otherwise,
incurred or imposed on the Agent by reason of the exercise of any of its rights,
remedies and interests hereunder, including, without limitation, from any sale
or transfer of Collateral, preserving, maintaining or securing the Collateral,
defending its interests in Collateral (including pursuant to any claims brought
by the Company, the Company as debtor-in-possession, any secured or unsecured
creditors of the Company, any trustee or receiver in bankruptcy, or otherwise),
and the Company hereby agrees to so indemnify and hold the Agent harmless,
absent the Agent's gross negligence or willful misconduct as finally determined
by a court of competent jurisdiction. The foregoing indemnification shall
survive termination of this Financing Agreement until such time as all
Obligations (including the foregoing) have been finally and indefeasibly paid in
full. In furtherance thereof the Agent, may establish such reserves for
Obligations hereunder (including any contingent Obligations) as it may deem
advisable in its reasonable business judgment. Any applicable mortgage(s),
deed(s) of trust or assignment(s) issued to the Agent on the Real Estate shall
govern the rights and remedies of the Agent thereto.
SECTION 11. TERMINATION
Except as otherwise permitted herein, the Agent may terminate this
Financing Agreement only as of the initial or any subsequent Anniversary Date
and then only by giving the Company at least sixty (60) days prior written
notice of termination. Notwithstanding the foregoing the Agent may terminate the
Financing Agreement immediately upon the occurrence of an Event of Default,
provided, however, that if the Event of Default is an event listed in
Paragraph 10.1(c) of Section 10 of this Financing Agreement, this Financing
Agreement shall terminate in accordance with paragraph 10.2 of Section 10. This
Financing Agreement, unless terminated as herein provided, shall automatically
continue from Anniversary Date to Anniversary Date. The Company may terminate
this Financing Agreement at any time upon sixty (60) days' prior written notice
to the Agent, provided that the Company pays to the Agent immediately on demand
an Early Termination Fee and/or the Prepayment Premium, if applicable. All
Obligations shall become due and payable as of any termination hereunder or
under Section 10 hereof and, pending a final accounting, the Agent may withhold
any balances in the Company's account (unless supplied with an indemnity
satisfactory to the Agent) to cover all of the Obligations, whether absolute or
contingent, including, but not limited to, cash reserves for any contingent
Obligations, including an amount of 110% of the face amount of any outstanding
Letters of Credit with an expiry date on, or within thirty (30) days of the
effective date of termination of this Financing Agreement. All of the Agent's
rights, liens and security interests shall continue after any termination until
all Obligations have been paid and satisfied in full.
49
SECTION 12. MISCELLANEOUS
12.1 Except as otherwise set forth herein, the Company hereby waives
diligence, notice of intent to accelerate, notice of acceleration, demand,
presentment and protest and any notices thereof as well as notice of nonpayment.
No delay or omission of the Agent or the Company to exercise any right or remedy
hereunder, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any
such Event of Default. No single or partial exercise by the Agent of any right
or remedy precludes any other or further exercise thereof, or precludes any
other right or remedy.
12.2 This Financing Agreement and the Loan Documents executed and delivered
in connection therewith constitute the entire agreement between the Company and
the Agent; supersede any prior agreements; can be changed only by a writing
signed by both the Company and the Agent; and shall bind and benefit the Company
and the Agent and their respective successors and assigns.
12.3 In no event shall the Company, upon demand by the Agent for payment of
any Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, the Agent shall never be entitled to receive, charge or
apply, as interest on any indebtedness relating hereto, any amount in excess of
the maximum amount of interest permissible under applicable law. If the Agent
ever receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof, the Loan Documents and of any other
agreement made in connection herewith.
12.4 If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
12.5 THE COMPANY, THE LENDERS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL THE AGENT BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
12.6 Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing (provided that, any electronic
communications from the Company with
50
respect to any request, transmission, document, electronic signature, electronic
mail or facsimile transmission shall be deemed binding on the Company for
purposes of this Financing Agreement, provided further that any such
transmission shall not relieve the Company from any other obligation hereunder
to communicate further in writing), and shall be deemed to have been validly
served, given or delivered when hand delivered or sent by facsimile, or three
days after deposit in the United States mail, with proper first class postage
prepaid and addressed to the party to be notified or to such other address as
any party hereto may designate for itself by like notice, as follows:
(A)if to CIT, at:
THE CIT GROUP/BUSINESS CREDIT, INC., AS AGENT
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
Attn: Regional Credit Manager
Fax No.: (000) 000-0000
(B)if to the Company at:
COMPUTER HORIZONS CORP.
00 Xxx Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxx Xxxxxx, 00000
Attn: Xxxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
With a courtesy copy of any material notice to the Company's counsel at:
COMPUTER HORIZONS CORP.
00 Xxx Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxx Xxxxxx, 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
provided, however, that the failure of the Agent to provide the Company's
counsel with a copy of such notice shall not invalidate any notice given to the
Company and shall not give the Company any rights, claims or defenses due to the
failure of the Agent to provide such additional notice.
12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF
NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN
EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
51
SECTION 13. AGREEMENT BETWEEN THE LENDERS
13.1 (a) The Agent, for the account of the Lenders, shall disburse all
loans and advances to the Company and shall handle all collections of Collateral
and repayment of Obligations. It is understood that for purposes of advances to
the Company and for purposes of this Section 13 the Agent is using the funds of
the Agent.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Company that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Company a corresponding amount. A
certificate of the Agent submitted to any Lender with respect to any amount
owing under this subsection shall be conclusive, absent manifest error. If such
Lender's share of such borrowing is not in fact made available to the Agent by
such Lender on the Settlement Date, the Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to Revolving Loans
hereunder, on demand, from the Company without prejudice to any rights which the
Agent may have against such Lender hereunder. Nothing contained in this
subsection shall relieve any Lender which has failed to make available its
ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate the Agent to make available to the Company the full amount of a
requested advance when the Agent has any notice (written or otherwise) that any
of the Lenders will not advance its ratable portion thereof.
13.2 On the Settlement Date, the Agent and the Lenders shall each
remit to the other, in immediately available funds, all amounts necessary so as
to ensure that, as of the Settlement Date, the Lenders shall have their
proportionate share of all outstanding Obligations.
13.3 The Agent shall forward to each Lender, at the end of each month,
a copy of the account statement rendered by the Agent to the Company.
13.4 The Agent shall, after receipt of any interest and fees earned
under this Financing Agreement, promptly remit to the Lenders: (a) their pro
rata portion of all fees, provided, however, that the Lenders (other than CIT in
its role as the Agent) shall (i) not share in the Collateral Management Fee or
Documentation Fees or the fees provided for in Section 8, Paragraph 8.12; and
(ii) receive their share of the Loan Facility Fee in accordance with their
respective agreements with the Agent; (b) interest computed at the rate and as
provided for in Section 8 of this Financing Agreement on all outstanding amounts
advanced by the Lenders on each Settlement Date, prior to adjustment, that are
subsequent to the last remittance by the Agent to the Lenders of the Company's
interest computed at the rate and as provided for in Section 8 of this Financing
Agreement.
13.5 (a) The Company acknowledges that the Lenders with the prior
written consent of the Agent may sell participation in the loans and
extensions of credit made and to be made to the Company hereunder. The
Company further acknowledges that in doing so, the Lenders may grant to such
participants certain rights which would require the participant's consent to
certain waivers, amendments and other actions with respect to the provisions
of this Financing Agreement, provided
52
that the consent of any such participant shall not be required except for
matters requiring the consent of all Lenders hereunder as set forth in
Section 14, Paragraph 14.10 hereof.
(b) The Company authorizes each Lender to disclose to any participant
or purchasing lender (each, a "TRANSFEREE") and any prospective Transferee any
and all financial information in such Lender's possession concerning the Company
and their affiliates which has been delivered to such Lender by or on behalf of
the Company pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Company in connection with such Lender's credit
evaluation of the Company and their affiliates prior to entering into this
Agreement, provided that such Transferee agrees to hold such information in
confidence in the ordinary course of its business.
13.6 The Company hereby agrees that each Lender is solely responsible for
its portion of the Line of Credit and that neither the Agent nor any Lender
shall be responsible for, nor assume any obligations for the failure of any
Lender to make available its portion of the Line of Credit. Further, should any
Lender refuse to make available its portion of the Line of Credit, then the
other Lender may, but without obligation to do so, increase, unilaterally, its
portion of the Line of Credit in which event the Company are so obligated to
that other Lender.
13.7 In the event that the Agent, the Lenders or any one of them is sued or
threatened with suit by the Company or any one of them, or by any receiver,
trustee, creditor or any committee of creditors on account of any preference,
voidable transfer or lender liability issue, alleged to have occurred or been
received as a result of, or during the transactions contemplated under this
Financing Agreement, then in such event any money paid in satisfaction or
compromise of such suit, action, claim or demand and any expenses, costs and
attorneys' fees paid or incurred in connection therewith, whether by the Agent,
the Lenders or any one of them, shall be shared proportionately by the Lenders.
In addition, any costs, expenses, fees or disbursements incurred by outside
agencies or attorneys retained by the Agent to effect collection or enforcement
of any rights in the Collateral, including enforcing, preserving or maintaining
rights under this Financing Agreement shall be shared proportionately between
and among the Lenders to the extent not reimbursed by the Company or from the
proceeds of Collateral. The provisions of this paragraph shall not apply to any
suits, actions, proceedings or claims that (x) predate the date of this
Financing Agreement or (y) are based on transactions, actions or omissions that
predate the date of this Financing Agreement.
13.8 Each of the Lenders agrees with each other Lender that any money or
assets of the Company held or received by such Lender, no matter how or when
received, shall be applied to the reduction of the Obligations (to the extent
permitted hereunder) after (x) the occurrence of an Event of Default and (y) the
election by the Required Lenders to accelerate the Obligations. In addition, the
Company authorize, and the Lenders shall have the right, without notice, upon
any amount becoming due and payable hereunder, to set-off and apply against any
and all property held by, or in the possession of such Lender the Obligations
due such Lenders.
13.9 The Agent shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial institutions all
or a portion of its rights and obligations
53
under this Financing Agreement (including, without limitation, its obligations
under the Line of Credit, the Revolving Loans and its rights and obligations
with respect to Letters of Credit). Upon execution of an Assignment and Transfer
Agreement, (a) 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, have the rights and obligations of the Agent as the case may
be hereunder and (b) the Agent shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such assignment, relinquish its
rights and be released from its obligations under this Financing Agreement. The
Company shall, if necessary, execute any documents reasonably required to
effectuate the assignments. No other Lender may assign its interest in the loans
and advances and extensions of credit hereunder without the prior written
consent of the Agent. In the event that the Agent consents to any such
assignment by any other Lenders (i) the amount being assigned shall in no event
be less than the lesser of (x) $5,000,000 or (y) the entire interest of such
Lender hereunder, (ii) such assignment shall be of a pro-rata portion of all of
such assigning Lender's loans and commitments hereunder and (iii) the parties to
such assignment shall execute and deliver to the Agent an Assignment and
Transfer Agreement, and, at the Agent's election, a processing and recording fee
of $3,000 payable by the Company to the Agent for its own account.
SECTION 14. AGENCY
14.1 Each Lender hereby irrevocably designates and appoints CIT as the
Agent for the Lenders under this Financing Agreement and any ancillary loan
documents and irrevocably authorizes CIT as the Agent for such Lender, to take
such action on its behalf under the provisions of this Financing Agreement and
all ancillary documents and to exercise such powers and perform such duties as
are expressly delegated to the Agent by the terms of this Financing Agreement
and all ancillary documents together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Financing Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
14.2 The Agent may execute any of its duties under this Financing Agreement
and all ancillary documents by or through agents or attorneys-in-fact and shall
be entitled to the advice of counsel concerning all matters pertaining to such
duties.
14.3 Neither the Agent nor any of its officers, directors, employees,
agents, or attorneys-in-fact shall be (i) liable to any Lender for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with this Financing Agreement and all ancillary documents (except for
its or such person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Company or any officer
thereof contained in this Financing Agreement and all ancillary documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Financing
Agreement and all ancillary documents or for the
54
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Financing Agreement and all ancillary documents or for any failure of the
Company to perform their obligations thereunder. The Agent shall not 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
Financing Agreement and all ancillary documents or to inspect the properties,
books or records of the Company.
14.4 The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order 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, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence of the Lenders, or the
Required Lenders, as the case may be, as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Financing Agreement and all ancillary
documents in accordance with a request of the Lenders, or the Required Lenders,
as the case may be, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
14.5 The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received written notice from a Lender or the Company describing such Default or
Event of Default. In the event that the Agent receives such a notice, the Agent
shall promptly give notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Lenders, or Required Lenders, as the case may be; PROVIDED that
unless and until the Agent shall have received such direction, the Agent may in
the interim (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 and in the best interests of the Lenders. In the event the Agent
in its sole discretion, or at the request of the Required Lenders, continues to
make Revolving Loans and advances under this Financing Agreement upon the
occurrence of a Default or Event of Default, any such Revolving Loans and
advances may be in such amounts (subject to Paragraph 14.10 hereof) and on such
additional terms and conditions as the Agent or the Required Lenders may deem
appropriate.
14.6 Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition
55
and creditworthiness of the Company and made its own decision to enter into this
Financing Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent 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 analysis, appraisals and decisions in taking or not taking action
under the Financing Agreement and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition or creditworthiness of the Company. The Agent, however,
shall provide the Lenders with copies of all financial statements, projections
and business plans which come into the possession of the Agent or any of its
officers, employees, agents or attorneys-in-fact.
14.7 (a) The Lenders agree to indemnify the Agent in its capacity as such
(to the extent not reimbursed by the Company and without limiting the obligation
of the Company to do so), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (including, without limitation, all Out-of-Pocket Expenses) of any
kind whatsoever (including negligence on the part of the Agent) which may at any
time be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Financing Agreement or any ancillary
documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; PROVIDED that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this paragraph shall survive the payment of the
Obligations.
(b) The Agent will use its reasonable business judgment in handling
the collection of the Accounts, enforcement of its rights hereunder and
realization upon the Collateral but shall not be liable to the Lenders for any
action taken or omitted to be taken in good faith or on the written advice of
counsel. The Lenders expressly release the Agent from any and all liability and
responsibility (express or implied), for any loss, depreciation of or delay in
collecting or failing to realize on any Collateral, the Obligations or any
guaranties therefor and for any mistake, omission or error in judgment in
passing upon or accepting any Collateral or in making (or in failing to make)
examinations or audits or for granting indulgences or extensions to the Company,
any account debtor or any guarantor, other than resulting from the Agent's gross
negligence or willful misconduct.
14.8 The Agent may make loans to, and generally engage in any kind of
business with the Company as though the Agent were not the Agent hereunder. With
respect to its loans made or renewed by it or loan obligations hereunder as
Lender, the Agent shall have the same rights and powers, duties and liabilities
under this Financing Agreement as any Lender and may exercise the same as though
it was not the Agent and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacity.
14.9 The Agent may resign as the Agent upon 30 days' notice to the Lenders
and such resignation shall be effective upon the appointment of a successor
Agent. If the Agent shall resign as Agent, then the Lenders shall appoint a
successor Agent for the Lenders whereupon such successor
56
Agent shall succeed to the rights, powers and duties of the Agent and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Financing Agreement. After any retiring Agent's resignation
hereunder as the Agent the provisions of this Section 14 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent.
14.10 Notwithstanding anything contained in this Financing Agreement to the
contrary, the Agent will not, without the prior written consent of all Lenders:
(a) amend the Financing Agreement to (i) increase the Line of Credit;
(ii) reduce the interest rates; (iii) reduce or waive (x) any fees in which the
Lenders share hereunder, or (y) the repayment of any Obligations due the
Lenders; (iv) extend the maturity of the Obligations; or (v) alter or amend
(x) this Paragraph 14.10 or (y) the definitions of Eligible Accounts Receivable,
Eligible Inventory, Inventory Loan Cap, Collateral or Required Lenders, or
(vi) increase the advance percentages against Eligible Accounts Receivable or
Eligible Inventory or alter or amend the Agent's criteria for determining
compliance with such definitions of Eligible Accounts Receivable and/or Eligible
Inventory if the effect thereof is to increase Availability; (b) except as
otherwise required in this Financing Agreement, release any guaranty or
Collateral in excess of $500,000 during any year, or (c) knowingly make any
Revolving Loan or assist in opening any Letter of Credit hereunder if after
giving effect thereto the total of Revolving Loans and Letters of Credit
hereunder for the Company would exceed one hundred and ten percent (110%) of the
maximum amount available under this Financing Agreement (the portion in excess
of 100% of such maximum available amount shall be referred to herein as the
"Agent Permitted Overadvances"), provided that the Agent shall not be entitled
to continue to knowingly make such Agent Permitted Overadvances for a period in
excess of ninety (90) days without the Lenders' consent, and provided further
that the foregoing limitations shall not prohibit or restrict advances by the
Agent to preserve and protect Collateral. Subject to the provisions of
Section 12, Paragraph 12.2 and the provisions of this Paragraph 14.10 of
Section 14 of this Financing Agreement, in all other respects the Agent is
authorized by each of the Lenders to take such actions or fail to take such
actions under this Financing Agreement if the Agent, in its reasonable
discretion, deems such to be advisable and in the best interest of the Lenders.
Notwithstanding any provision to the contrary contained in this Financing
Agreement (including the provisions of Section 12, Paragraph 12.2 and Section
14, Paragraph 14.10 hereof) the Agent is authorized to take such actions or fail
to take such actions in connection with (a) the exercise of (i) any and all
rights and remedies under this Financing Agreement (including but not limited to
the exercise of rights and remedies under Section 10, Paragraph 10.2 of this
Financing Agreement) and (ii) its discretion in (x) determining compliance with
the eligibility requirements of Eligible Accounts Receivable and/or Eligible
Inventory and establishing reserves against Availability in connection therewith
and/or (y) the making of Agent Permitted Overadvances, and/or (b) the release of
Collateral not to exceed $250,000 in the aggregate during any Fiscal Year,
and/or (c) curing any ambiguity, defect or inconsistency in the terms of this
Financing Agreement; provided that the Agent, in its reasonable discretion,
deems such to be advisable and in the best interests of the Lenders. In the
event the Agent terminates this Financing Agreement pursuant to the terms
hereof, the Agent will cease making any loans or advances upon the effective
date of termination except for any loans or advances which the
57
Agent may deem, in its sole discretion, are reasonably required to maintain,
protect or realize upon the Collateral.
14.11 In the event any Lender's consent is required pursuant to the
provisions of this Financing Agreement and such Lender does not respond to any
request by the Agent for such consent within 10 days after such request is made
to such Lender, such failure to respond shall be deemed a consent. In addition,
in the event that any Lender declines to give its consent to any such request,
it is hereby mutually agreed that the Agent and/or any other Lender shall have
the right (but not the obligation) to purchase such Lender's share of the Loans
for the full amount thereof together with accrued interest thereon to the date
of such purchase.
14.12 Each Lender agrees that notwithstanding the provisions of Section 11
of this Financing Agreement any Lender may terminate this Financing Agreement
and the Line of Credit only as of the initial or any subsequent Anniversary Date
and then only by giving the Agent 90 days prior written notice thereof. Within
30 days after receipt of any such termination notice, the Agent shall, at its
option, either (i) give notice of termination to the Company hereunder or
(ii) purchase, or arrange for the purchase of, the Lender's share of the
Obligations hereunder for the full amount thereof plus accrued interest thereon.
Unless so terminated this Financing Agreement and the Line of Credit shall be
automatically extended from Anniversary Date to Anniversary Date. Termination of
this Financing Agreement by any of the Lenders as herein provided shall not
affect the Lenders' respective rights and obligations under this Financing
Agreement incurred prior to the effective date of termination as set forth in
the preceding sentence.
14.13 If the Agent is required at any time to return to the Company or to a
trustee, receiver, liquidator, custodian or other similar official any portion
of the payments made by the Company to the Agent as result of a bankruptcy or
similar proceeding with respect to the Company, any guarantor or any other
person or entity or otherwise, then each Lender shall, on demand of the Agent,
forthwith return to the Agent its ratable share of any such payments made to
such Lender by the Agent, together with its ratable share of interest and/or
penalties, if any, payable by the Lenders; this provision shall survive the
termination of this Financing Agreement.
14.14 The Lenders agree to maintain the confidentiality of any non-public
information provided by the Company to them, in the ordinary course of their
business, provided that the foregoing confidentiality provision shall terminate
one (1) year after the termination date of this Financing Agreement, and
provided further that any such Lenders may disclose such information (i) to any
applicable bank regulatory and auditor personnel and (ii) upon the advise of
their counsel.
58
IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement
to be effective, executed, accepted and delivered at
New York, New York, by
their proper and duly authorized officers as of the date set forth above.
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS AGENT AND LENDER)
By:
--------------------
Title:
COMPUTER HORIZONS CORP.
By:
--------------------
Title:
59
EXHIBIT A
REVOLVING CREDIT NOTE
Dated as of July ___, 2001
$40,000,000
FOR VALUE RECEIVED, the undersigned,
COMPUTER HORIZONS CORP. (herein the
"Company"), a New York corporation with a principal place of business at 00 Xxx
Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxx Xxxxxx, 00000, hereby, absolutely and
unconditionally promises to pay to the order of THE CIT GROUP/BUSINESS CREDIT,
INC., a New York corporation, (hereinafter "CIT") with offices located at 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and CIT as agent for the
Lenders (the "Agent"), and any other party which now or hereafter becomes a
lender hereunder pursuant to Section 13 hereof (individually a "Lender" and
collectively the "Lenders"), in lawful money of the United States of America and
in immediately available funds, the principal amount of Forty Million Dollars
($40,000,000), or such other principal amount advanced pursuant to Section 3 and
Section 5 of the Financing Agreement (as herein defined), such Revolving Loan
advances shall be repaid on a daily basis as a result of the application of the
proceeds of collections of the Accounts and the making of additional Revolving
Loans as described in Section 3. Subject to the terms of the Financing
Agreement, the Revolving Loans may be borrowed, repaid and reborrowed by the
Company. A final balloon payment in an amount equal to the outstanding aggregate
balance of principal and interest remaining unpaid, if any, under this Note as
shown on the books and records of the Agent shall be due and payable on the
termination of the Financing Agreement, as set forth in Section 11 thereof.
The Company further absolutely and unconditionally promises to pay to the order
of the Agent at said office, interest, in like money, on the unpaid principal
amount owing hereunder from time to time from the date hereof on the dates and
at the rates specified in Section 8, of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than a
business day, the maturity thereof shall be extended to the next succeeding
business day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is one of the Promissory Notes referred to in the Financing Agreement,
dated as of the date hereof, as the same may be amended and restated and in
effect from time to time, among the Company, the Agent, and the Lenders thereto
from time to time (the "Financing Agreement"), and is subject to, and entitled
to, all of the terms, provisions and benefits thereof and is subject to optional
and mandatory prepayment, in whole or in part, as provided therein. All
capitalized terms used
60
herein shall have the meaning provided therefor in the Financing Agreement,
unless otherwise defined herein.
The date and amount of the advance(s) made hereunder may be recorded on the grid
page or pages which are attached hereto and hereby made part of this Note or the
separate ledgers maintained by the Agent. The aggregate unpaid principal amount
of all advances made pursuant hereto may be set forth in the balance column on
said grid page or such ledgers maintained by the Agent. All such advances,
whether or not so recorded, shall be due as part of this Note.
The Company confirms that any amount received by or paid to the Agent in
connection with the Financing Agreement and/or any balances standing to its
credit on any of its or their accounts on the Agent's books under the Financing
Agreement may in accordance with the terms of the Financing Agreement be applied
in reduction of this Note, but no balance or amounts shall be deemed to effect
payment in whole or in part of this Note unless the Agent shall have actually
charged such account or accounts for the purposes of such reduction or payment
of this Note.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, immediately
due and payable as provided in the Financing Agreement.
Attest:
COMPUTER HORIZONS CORP.
By:
------------------------- --------------------
Secretary Title:
61
SCHEDULE TO GRID
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62
SCHEDULE 1 - COLLATERAL INFORMATION
[TO BE PROVIDED BY
COMPUTER HORIZONS CORP. AND COMPANY'S COUNSEL]
EXACT COMPANY NAME IN STATE OF ORGANIZATION:
STATE OF INCORPORATION OR FORMATION:
FEDERAL TAX I.D. NO.
CHIEF EXECUTIVE OFFICE:
COLLATERAL LOCATIONS:
63
