Exhibit 10.1
AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
AMONG
CITIZENS BANK OF MASSACHUSETTS
(AS LENDER AND AS AGENT)
AND
THE FINANCIAL INSTITUTIONS PARTY HERETO
FROM TIME TO TIME
(AS LENDERS)
WITH
PC CONNECTION, INC.
(AS BORROWER)
AND
COMTEQ FEDERAL OF NEW HAMPSHIRE, INC.
GOVCONNECTION, INC.
MERRIMACK SERVICES CORPORATION
PC CONNECTION SALES CORPORATION
PC CONNECTION SALES OF MASSACHUSETTS, INC.
MOREDIRECT, INC.
(AS GUARANTORS)
May 31, 2002
TABLE OF CONTENTS
Page
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I. DEFINITIONS. ........................................................................ 1
1.1 Accounting Terms ........................................................... 1
1.2 General Terms .............................................................. 1
1.3 Uniform Commercial Code Terms .............................................. 17
1.4 Certain Matters of Construction ............................................ 17
II. ADVANCES, PAYMENTS. ................................................................. 17
2.1 Revolving Advances. ........................................................ 17
2.2 Procedure for Revolving Advances Borrowing; Eurodollar Advances ............ 18
2.3 Disbursement of Advance Proceeds ........................................... 20
2.4 Intentionally Left Blank ................................................... 21
2.5 Maximum Advances ........................................................... 21
2.6 Repayment of Advances ...................................................... 21
2.7 Repayment of Excess Advances ............................................... 21
2.8 Statement of Account ....................................................... 22
2.9 Letters of Credit .......................................................... 22
2.10 Issuance of Letters of Credit .............................................. 22
2.11 Requirements For Issuance of Letters of Credit ............................. 23
2.12 Additional Payments ........................................................ 24
2.13 Manner of Borrowing and Payment ............................................ 24
2.14 Intentionally Left Blank ................................................... 26
2.15 Use of Proceeds ............................................................ 26
2.16 Defaulting Lender .......................................................... 26
2.17 Swingline Advances ......................................................... 27
2.18 LCMS Agreement ............................................................. 29
III. INTEREST AND FEES. .................................................................. 29
3.1 Interest ................................................................... 29
3.2 Letter of Credit Fees ...................................................... 29
3.3 Fees ....................................................................... 30
3.4 Collateral Audit Fee ....................................................... 30
3.5 Intentionally Left Blank ................................................... 30
3.6 Computation of Interest and Fees ........................................... 31
3.7 Maximum Charges ............................................................ 31
3.8 Increased Costs ............................................................ 31
3.9 Basis For Determining Interest Rate Inadequate or Unfair ................... 32
3.10 Capital Adequacy ........................................................... 32
3.11 Gross Up for Taxes ......................................................... 33
3.12 Withholding Tax Exemption .................................................. 33
IV. COLLATERAL: GENERAL TERMS .......................................................... 33
4.1 Security Interest in the Collateral ........................................ 33
4.2 Perfection of Security Interest ............................................ 34
4.3 Disposition of Collateral .................................................. 34
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4.4 Preservation of Collateral .......................................... 34
4.5 Ownership of Collateral ............................................. 35
4.6 Defense of Agent's and Lenders' Interests ........................... 35
4.7 Books and Records ................................................... 36
4.8 Financial Disclosure ................................................ 36
4.9 Compliance with Laws ................................................ 36
4.10 Inspection of Premises .............................................. 36
4.11 Insurance ........................................................... 37
4.12 Failure to Pay Insurance ............................................ 38
4.13 Payment of Taxes .................................................... 38
4.14 Payment of Leasehold Obligations .................................... 38
4.15 Receivables ......................................................... 38
4.16 Inventory ........................................................... 41
4.17 Maintenance of Equipment ............................................ 41
4.18 Exculpation of Liability ............................................ 41
4.19 Environmental Matters ............................................... 42
4.20 Financing Statements ................................................ 44
V. REPRESENTATIONS AND WARRANTIES. .............................................. 44
5.1 Authority ........................................................... 44
5.2 Formation and Qualification ......................................... 44
5.3 Survival of Representations and Warranties .......................... 45
5.4 Tax Returns ......................................................... 45
5.5 Financial Statements ................................................ 45
5.6 Corporate Name ...................................................... 46
5.7 O.S.H.A. and Environmental Compliance ............................... 46
5.8 Solvency; No Litigation, Violation, Indebtedness or Default ......... 46
5.9 Intentionally Left Blank ............................................ 48
5.10 Licenses and Permits ................................................ 48
5.11 Default of Indebtedness ............................................. 48
5.12 No Default .......................................................... 48
5.13 Intentionally Left Blank ............................................ 48
5.14 Margin Regulations .................................................. 48
5.15 Investment Company Act .............................................. 48
5.16 Disclosure .......................................................... 48
5.17 Intentionally Left Blank ............................................ 48
5.18 Interest Rate Protection Agreement .................................. 49
5.19 Conflicting Agreements .............................................. 49
5.20 Application of Certain Laws and Regulations ......................... 49
5.21 Business and Property of Borrower ................................... 49
5.22 Section 20 Subsidiaries ............................................. 49
5.23 Investigations, Audits, Etc ......................................... 49
5.24 Brokerage ........................................................... 49
VI. AFFIRMATIVE COVENANTS. ....................................................... 49
6.1 Payment of Fees ..................................................... 49
6.2 Conduct of Business and Maintenance of Existence and Assets. ........ 50
6.3 Violations .......................................................... 50
6.4 Intentionally Left Blank ............................................ 50
6.5 Minimum Consolidated Net Worth ...................................... 50
6.6 Maximum Funded Debt Ratio ........................................... 50
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6.7 Execution of Supplemental Instruments ............................... 50
6.8 Payment of Indebtedness ............................................. 50
6.9 Standards of Financial Statements ................................... 51
6.10 Covenant to Assume Obligations and Give Security .................... 51
6.11 Further Assurances. ................................................. 51
6.12 Keeping of Books and Records ........................................ 52
6.13 Bank Accounts ....................................................... 52
6.14 Minimum Reserves .................................................... 52
VII. NEGATIVE COVENANTS. .......................................................... 52
7.1 Merger, Consolidation, Acquisition and Sale of Assets ............... 52
7.2 Creation of Liens ................................................... 52
7.3 Guarantees .......................................................... 52
7.4 Investments ......................................................... 53
7.5 Loans ............................................................... 53
7.6 Intentionally Left Blank ............................................ 53
7.7 Dividends ........................................................... 53
7.8 Indebtedness ........................................................ 53
7.9 Nature of Business .................................................. 54
7.10 Transactions with Affiliates ........................................ 54
7.11 Subsidiaries. ....................................................... 54
7.12 Fiscal Year and Accounting Changes .................................. 54
7.13 Pledge of Credit .................................................... 54
7.14 Amendment of Articles of Incorporation, By-Laws ..................... 54
7.15 Compliance with ERISA ............................................... 54
7.16 Prepayment of Indebtedness .......................................... 55
7.17 MoreDirect Payments ................................................. 55
7.18 Other Agreements .................................................... 55
VIII. CONDITIONS PRECEDENT. ........................................................ 55
8.1 Conditions to Initial Advances ...................................... 55
8.2 Conditions to Each Advance .......................................... 58
IX. INFORMATION AS TO BORROWER. .................................................. 59
9.1 Disclosure of Material Matters ...................................... 59
9.2 Schedules ........................................................... 59
9.3 Environmental Reports ............................................... 59
9.4 Litigation .......................................................... 59
9.5 Material Occurrences ................................................ 60
9.6 Intentionally Left Blank ............................................ 60
9.7 Annual Financial Statements ......................................... 60
9.8 Quarterly Financial Statements ...................................... 61
9.9 Monthly Financial Statements ........................................ 61
9.10 Intentionally Left Blank ............................................ 61
9.11 Other Reports ....................................................... 61
9.12 Additional Information .............................................. 61
9.13 Projected Operating Budget .......................................... 62
9.14 Notice of Suits, Adverse Events ..................................... 62
9.15 ERISA Notices and Requests .......................................... 62
9.16 Additional Documents ................................................ 63
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X. EVENTS OF DEFAULT. ................................................... 63
10.1 Specified Events of Default ................................. 63
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT ........................... 66
11.1 Rights and Remedies ......................................... 66
11.2 Agent's Discretion .......................................... 67
11.3 Setoff ...................................................... 67
11.4 Rights and Remedies not Exclusive ........................... 67
11.5 Allocation of Payments After Event of Default ............... 67
XII. WAIVERS AND JUDICIAL PROCEEDINGS ..................................... 68
12.1 Waiver of Notice ............................................ 68
12.2 Delay ....................................................... 68
12.3 Jury Waiver ................................................. 68
XIII. EFFECTIVE DATE AND TERMINATION ....................................... 69
13.1 Term ........................................................ 69
13.2 Termination ................................................. 69
XIV. REGARDING AGENT ...................................................... 69
14.1 Appointment ................................................. 69
14.2 Nature of Duties ............................................ 70
14.3 Lack of Reliance on Agent and Resignation ................... 70
14.4 Certain Rights of Agent ..................................... 71
14.5 Reliance .................................................... 71
14.6 Notice of Default ........................................... 71
14.7 Indemnification ............................................. 71
14.8 Agent in its Individual Capacity ............................ 71
14.9 Delivery of Documents ....................................... 72
14.10 Borrower's Undertaking to Agent ............................. 72
14.11 Amendment of Article 14 ..................................... 72
14.12 Additional Rights of Agent .................................. 72
XV. MISCELLANEOUS ........................................................ 72
15.1 Governing Law ............................................... 72
15.2 Entire Understanding ........................................ 73
15.3 Successors and Assigns; Participations; New Lenders ......... 75
15.4 Application of Payments ..................................... 76
15.5 Indemnity ................................................... 77
15.6 Notice ...................................................... 77
15.7 Survival .................................................... 78
15.8 Severability ................................................ 78
15.9 Expenses .................................................... 78
15.10 Injunctive Relief ........................................... 79
15.11 Consequential Damages ....................................... 79
15.12 Captions .................................................... 79
15.13 Counterparts; Facsimile Signatures .......................... 79
15.14 Construction ................................................ 79
15.15 Confidentiality; Sharing Information ........................ 79
15.16 Publicity ................................................... 80
15.17 Other Document .............................................. 80
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List of Exhibits and Schedules
Exhibits
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Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.17(a) Swingline Note
Exhibit 5.5(a) Projections
Exhibit 9.7 Compliance Certificate
Exhibit 15.3 Commitment Transfer Supplement
Exhibit A Borrowing Base Certificate
Exhibit B Pledge Agreement
Schedules
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Schedule 1.3 Permitted Encumbrances
Schedule 1.4 Permitted Subordinated Indebtedness
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.11 Insurance
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.10 Licenses and Permits
Schedule 5.23 Audits
Schedule 5.24 Commissions
Schedule 7.3 Guarantees
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AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
-----------------------------
Amended and Restated Credit and Security Agreement dated as of May 31, 2002
(the "Agreement" or the "Loan Agreement") by and among PC Connection Inc., a
corporation organized under the laws of the State of Delaware (the "Borrower"),
ComTeq Federal of New Hampshire, Inc., a corporation organized under the laws of
the State of Delaware, GovConnection, Inc., a corporation organized under the
laws of the State of Maryland, Merrimack Services Corporation, a corporation
organized under the laws of the State of Delaware, PC Connection Sales
Corporation, a corporation organized under the laws of the State of Delaware, PC
Connection Sales of Massachusetts, Inc., a corporation organized under the laws
of the State of Delaware, MoreDirect, Inc., a corporation organized under the
laws of the State of Florida (each a "Guarantor" and collectively the
"Guarantors"), the financial institutions which are now or which hereafter
become a party hereto (collectively, the "Lenders" and individually a "Lender")
and Citizens Bank of Massachusetts ("Citizens"), as agent for Lenders (Citizens,
in such capacity, the "Agent").
WHEREAS, the Borrower has entered into an Amended and Restated Loan
Agreement dated as of February 25, 2000, as amended (the "Existing Loan
Agreement") with Citizens, as lender and agent, and the Lenders, as lenders,
pursuant to which the Lenders extended certain credit facilities to the
Borrower;
WHEREAS, the Borrower, the Agent and the Lenders desire to further amend
and restate the Existing Loan Agreement by entering into this Agreement, on the
terms and conditions set forth therein
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrower, Guarantors, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1 Accounting Terms. As used in this Agreement, the Other Documents or any
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certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrower for the fiscal year ended December 31,
2001.
1.2 General Terms. For purposes of this Agreement the following terms shall
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have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
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"Advances" shall mean and include the Revolving Advances, the Swingline
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Advances and Letters of Credit.
"Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof.
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"Affiliate" of any Person shall mean (a) any Person (other than a
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Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or(iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
"Agent" shall have the meaning set forth in the preamble to this Agreement
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and shall include its successors and assigns.
"Agent Fee Letter" shall mean that certain fee letter dated as of May 31,
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2002 between Borrower and Agent.
"Applicable Law" shall mean all laws, rules and regulations applicable to
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the Person, conduct, transaction, covenant, Other Document or contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations and orders of any Governmental Body, and all orders,
judgments and decrees of all courts and arbitrators.
"Authority" shall have the meaning set forth in Section 4.19(d).
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"Base Rate" shall mean the base commercial lending rate of Citizens as
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publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by Citizens as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by Citizens to any particular class or category of customers of
Citizens.
"Blocked Account Agreement" shall have the meaning set forth in Section
-------------------------
4.15(h).
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
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"Borrower" shall have the meaning set forth in the preamble to this
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Agreement.
"Borrower Pledge Agreement" shall mean that certain Pledge Agreement
-------------------------
between Borrower and the Agent on behalf of the Lenders substantially in the
form of Exhibit B hereto pursuant to which the Borrower pledges as security for
the Obligations, 100% of its interest in MoreDirect, Inc., whether now owned or
hereinafter acquired.
"Borrower's Account" shall have the meaning set forth in Section 2.8.
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"Borrowing Base Certificate" shall mean a certificate duly executed by an
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authorized senior officer of Borrower appropriately completed and substantially
in the form of Exhibit A hereto.
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"Business Day" shall mean any day other than Saturday or Sunday or a legal
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holiday on which commercial banks are authorized or required by law to be closed
for business in Boston, Massachusetts and, if the applicable Business Day
relates to any Eurodollar Rate Loans, such day must also be a day on which
transactions are carried on in the London interbank market.
"Capitalized Lease Obligation" shall mean any Indebtedness of Borrower or
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any of its Subsidiaries represented by obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP and Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
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and Liability Act of 1980, as amended, 42 U.S.C. (S)(S)9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event (whether in
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one or more transactions) which results in a transfer by the Borrower of any
ownership interest of its Subsidiaries to any Person, except as expressly
permitted under this Agreement, or (b) any merger or consolidation of or with
Borrower or any of its Subsidiaries or sale of all or substantially all of the
property or assets of Borrower or any of its Subsidiaries, except as otherwise
permitted herein.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
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assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, Borrower, any of
its Subsidiaries.
"Closing Date" shall mean May 31, 2002 or such other date as may be agreed
------------
to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
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(a) all Receivables;
(b) all Equipment;
(c) all Inventory;
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(d) all Investment Property;
(e) all Real Property;
(f) all Stock in MoreDirect, Inc.;
(g) the Leasehold Interests;
(h) Letter of Credit Rights;
(i) Supporting Obligations;
(j) all of Borrower's and any of its Subsidiaries' right, title
and interest in and to (i) its respective goods and other property including,
but not limited to, all merchandise returned or rejected by Customers, relating
to or securing any of the Receivables; (ii) all of Borrower's or any of its
Subsidiaries' rights as a consignor, a consignee, an unpaid vendor, mechanic,
artisan, or other lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional amounts due to
Borrower or any of its Subsidiaries from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of Borrower's or any of its Subsidiaries'
contract rights, rights of payment which have been earned under a contract
right, instruments (including promissory notes), documents, chattel paper
(including electronic chattel paper), warehouse receipts, deposit accounts,
letters of credit and money; (vi) all commercial tort claims (whether now
existing or hereafter arising); (vii) if and when obtained by Borrower or any of
its Subsidiaries, all real and personal property of third parties in which
Borrower or any of its Subsidiaries has been granted a lien or security interest
as security for the payment or enforcement of Receivables; and (viii) any other
goods, personal property or real property now owned or hereafter acquired in
which Borrower or any of its Subsidiaries has expressly granted a security
interest or may in the future grant a security interest to Agent hereunder, or
in any amendment or supplement hereto or thereto, or under any other agreement
between Agent and Borrower or any of its Subsidiaries;
(k) all of Borrower's or any of its Subsidiaries' ledger sheets,
ledger cards, files, correspondence, records, books of account, business papers,
computers, computer software (owned by Borrower or any of its Subsidiaries or in
which it has an interest), computer programs, tapes, disks and documents
relating to any of the property described in this definition; and
(l) all proceeds and products of any of the property described in
this definition in whatever form, including, but not limited to: cash, deposit
accounts (whether or not comprised solely of proceeds but excluding designated
payroll accounts), certificates of deposit, insurance proceeds (including
hazard, flood and credit insurance), negotiable instruments, investment property
and other instruments for the payment of money, chattel paper, security
agreements, documents, eminent domain proceeds, condemnation proceeds and tort
claim proceeds provided, however, notwithstanding the foregoing or any other
provision of this Agreement or any Other Document, as of the date hereof, such
grant of a security interest shall not extend to, and shall not include (x) any
and all property (including any insurance proceeds thereof) of the Borrower or
any of its Subsidiary which has been financed by IBM Credit
4
Corporation or Deutsche Financial Services or against which a Lien has been
granted in favor of IBM Credit Corporation or Deutsche Financial Services
Corporation as security for the Indebtedness permitted under this Agreement, (y)
any stock or other equity ownership interest of the Borrower or any of its
Subsidiaries (other than MoreDirect, Inc.) held or owned by the Borrower or any
of its Subsidiaries, or (z) all general intangibles including, without
limitation (i) trade names, product names, corporate names, service marks,
trademarks, applications for any of the foregoing and related goodwill; (ii)
inventions, trade secrets, patents and patent applications; (iii) copyrights and
copyright applications; (iv) computer programs, software, firmware, source code,
operating manuals and information relating thereto, (v) customer lists; (vi) tax
refunds and insurance refunds; (vii) warranty, indemnity and insurance claims;
(viii) contracts and contract rights and (ix) anything constituting general
intangibles under the Uniform Commercial Code.
"Collateral Audit" shall have the meaning set forth in Section 4.10 hereto.
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"Commitment Percentage" of any Lender shall mean the percentage set forth
---------------------
below such Lender's name on the signature page hereof for all Advances as same
may be adjusted upon any assignment by a Lender pursuant to Section 15.3(c)
hereof or pursuant to Section 2.1(c) hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
------------------------------
Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Compliance Certificate" shall mean the certificate represented in Section
----------------------
9.7.
"Consents" shall mean all filings and all licenses, permits, consents,
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approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on Borrower's
or any of its Subsidiaries' business, including, without limitation, any
Consents required under all applicable foreign, federal, state or other
applicable law.
"Consolidated EBIT" shall mean for any period the sum of (a) Consolidated
-----------------
Net Income and (b) all amounts deducted in computing Consolidated Net Income in
respect of (i) interest expense on Indebtedness and (ii) taxes based on or
measured by income, in each case for the period under review.
"Consolidated EBITDA" shall mean the sum of (a) Consolidated EBIT, plus (b)
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the aggregate amount of consolidated depreciation and amortization expense plus
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(c) non-cash extraordinary or non-recurring losses less (d) extraordinary or
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non-recurring gains.
"Consolidated Net Income" of Borrower and its Subsidiaries for any fiscal
-----------------------
period shall mean the net income (or loss) from operations of the Borrower and
its Subsidiaries for such period, after taxes, determined in accordance with
GAAP consistently applied.
"Consolidated Net Worth" at a particular date, shall mean the consolidated
----------------------
total assets of the Borrower and its Subsidiaries, less the consolidated total
liabilities of the Borrower and its Subsidiaries.
5
"Contract Interest Rate" shall have the meaning set forth in Section
----------------------
3.1 hereof.
"Contractual Obligations," as applied to any Person, means any
-----------------------
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
"Controlled Group" shall mean all members of a group of corporations
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under common control of a Person with a "controlling interest" in such
corporations, and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect to
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any Receivable or and/or any party who enters into any contract or other
arrangement with Borrower or any of its Subsidiaries, pursuant to which Borrower
or any of its Subsidiaries is to deliver any personal property or perform any
services.
"Default" shall mean an event which, with the giving of notice or
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passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
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"Defaulting Lender" shall have the meaning set forth in Section 2.16(a)
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hereof.
"Depository Accounts" shall have the meaning set forth in Section
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4.15(h) hereof.
"Documents" shall mean this Agreement, the Other Documents and any
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other agreement, document or instrument issued pursuant to or in connection with
any of the foregoing and in each case as amended, restated, supplemented or
otherwise modified from time to time.
"Dollar" and the sign "$" shall mean lawful money of the United States
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of America.
"Domestic Rate Loan" shall mean any Advance that bears interest based
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upon the Base Rate.
"Eligible Government Receivables" shall mean those Receivables arising
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solely from purchase orders that are not due or unpaid more than ninety (90)
days after the original invoice where the Customer is the United States of
America, any state or local government or municipality, and any department,
agency or instrumentality of any of them.
"Eligible Government Receivables Advance Rate" shall have the meaning
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set froth in Section 2.1(a) hereof.
"Eligible Receivables" shall mean and include with respect to Borrower
--------------------
or any of its Subsidiaries, each Receivable of Borrower or any of its
Subsidiaries arising in the ordinary course of Borrower's or any of its
Subsidiaries' business. A Receivable shall not be deemed eligible unless such
Receivable is subject to Agent's first priority perfected security interest and
no other Lien (other than Permitted Encumbrances), and is evidenced by an
invoice or other
6
customary evidence reasonably satisfactory to the Agent. In addition, no
Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower or any of its
Subsidiaries to an Affiliate of the Borrower or any of its Subsidiaries or to a
Person controlled by an Affiliate of the Borrower or any of its Subsidiaries;
(b) it is due or unpaid more than ninety (90) days after the original
invoice;
(c) fifty percent (50%) or more of the Receivables from such Customer
are due or unpaid more than 90 days after the original invoice. Such percentage
may, in Agent's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement or Other Document with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the United States of America,
unless the sale is on letter of credit, guaranty or acceptance terms, in each
case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;
(h) the Customer is the United States of America, any state or local
government unit within the United States of America or any department, agency or
instrumentality of any of them, unless Borrower or the applicable Subsidiary
assigns its right to payment of such Receivable to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq.
and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
(i) the Receivable is owing to a Customer located in New Jersey,
Minnesota, West Virginia (or any other state that requires a creditor to qualify
to do business or file a report in order to enforce remedies against an account
debtor), unless Borrower or the applicable Subsidiary has complied with the
requirements of such state so as to be authorized to bring suit and enforce
remedies through judicial process against such account debtor;
7
(j) the goods giving rise to such Receivable have not been
shipped to the Customer or the services giving rise to such Receivable have not
been performed by Borrower or the applicable Subsidiary or the Receivable
otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in its sole discretion, to the extent such Receivable
exceeds such limit;
(l) if the Receivable is owing from a Customer that is also a
creditor or supplier of the Borrower or any of its Subsidiaries, the portion of
such Receivable equal to the amount of any offset, deduction, defense, dispute,
or counterclaim, or the Receivable is contingent in any respect or for any
reason;
(m) the Borrower or any of its Subsidiaries has made any
agreement with any Customer for any deduction therefrom, except for discounts or
allowances made in the ordinary course of business for prompt payment, all of
which discounts or allowances are reflected in the calculation of the face value
of each respective invoice related thereto;
(n) any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed but only to extent of
such return, rejection, repossession or dispute;
(o) such Receivable is not payable to Borrower or any of its
Subsidiaries;
(p) all Receivables from any Customer (excluding any governmental
entity or agency) where the aggregate of otherwise Eligible Receivables from
such Customer is greater than fifteen percent (15%) of all Eligible Receivables
(including such otherwise Eligible Receivables from such Customer) at any one
time, but only to the extent in excess of fifteen percent (15%) of such
Receivables; or
(q) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner, provided any exclusion promulgated by the Agent under this
subparagraph (q) shall not be effective until ten (10) days after receipt by the
Borrower of written notice from the Agent.
"Environmental Complaint" shall have the meaning set forth in Section
-----------------------
4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
------------------
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean all Equipment as defined in the UCC whether now
---------
owned or hereafter acquired and wherever located.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time and the rules and regulations promulgated
thereunder.
8
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
---------------
current Interest Period relating thereto the interest rate per annum determined
by Citizens by dividing (the resulting quotient rounded upwards, if necessary,
to the nearest 1/100th of 1% per annum) (a) the rate of interest determined by
Citizens in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the London interbank
offered rates for U.S. Dollars quoted by the British Bankers' Association as set
forth on Bridge Information Services (formerly known as Dow Xxxxx Markets
Service) (or appropriate successor or, if British Banker's Association or its
successor ceases to provide such quotes, a comparable replacement determined by
Citizens) display page 3750 (or such other display page on the Bridge
Information Services system as may replace display page 3750) two (2) Business
Days prior to the first day of such Interest Period for an amount comparable to
such Eurodollar Rate Loan and having a borrowing date and a maturity comparable
to such Interest Period by (b) a number equal to 1.00 minus the Reserve
Percentage. The Eurodollar Rate may also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA as shown on
Eurodollar Rate = Bridge Information Services display page 3750 or appropriate
successor
--------------------------------------------------------------
1.00 - Reserve Percentage.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
--------------------
interest based on the Eurodollar Rate.
"Event of Default" shall have the meaning set forth in Section 10.1
----------------
hereof.
"Facility Fee" shall have the meaning set forth in Section 3.3(b)
------------
hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of
------------------
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by Citizens from three Federal funds brokers of recognized
standing reasonably selected by Citizens.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
--------------
"Funded Debt Ratio" shall mean, with respect to any fiscal quarter, the
-----------------
ratio of (a) the average daily outstanding Advances over such fiscal quarter to
(b) the rolling four fiscal quarter Consolidated EBITDA (including such fiscal
quarter) of Borrower and its Subsidiaries (which shall, for periods prior to the
acquisition of MoreDirect, Inc. include the EBITDA of MoreDirect, Inc. for such
quarters, on a pro forma basis).
"GAAP" shall mean generally accepted accounting principles set forth
----
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable statute and
9
authority within the U.S. accounting profession) that are applicable to the
circumstances as of the Closing Date.
"Governmental Body" shall mean any nation or government, any state or
-----------------
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" shall mean (i) ComTeq Federal of New Hampshire, Inc., (ii)
---------
GovConnection, Inc., (iii) Merrimack Services Corporation, (iv) PC Connection
Sales Corporation., (v) PC Connection Sales of Massachusetts, Inc., (vi)
MoreDirect, Inc. and (vi) any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and "Guarantors" means
collectively all such Persons.
"Guaranty" shall mean any guaranty of the Obligations of Borrower
--------
executed by a Guarantor in favor of Agent for its benefit and for the ratable
benefit of Lenders.
"Hazardous Discharge" shall have the meaning set forth in Section
-------------------
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
-------------------
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to regulation
----------------
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"Indebtedness" as applied to any Person, means: (a) all indebtedness
------------
for borrowed money; (b) that portion of obligations with respect to capital
leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) any obligation under any lease (a "synthetic lease")
treated as an operating lease under GAAP and as a loan or financing for United
States income tax purposes or creditors rights purposes; (d) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money; (e) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six (6) months from the date the obligation is incurred or is
evidenced by a note or similar written instrument; (f) "earnouts" and similar
payment obligations; and (g) all indebtedness secured by any Lien on any
property or assets owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person.
"Interest Expense" shall mean, as of any date of determination, (a)
----------------
total interest expense (including the portion that is attributable to
capitalized leases in accordance with GAAP) of Borrower and each of its
Subsidiaries with respect to all outstanding Indebtedness of Borrower and each
of its Subsidiaries, including, without limitation, all commissions, discounts
and other
10
fees and charges owed with respect to letters of credit financing and the net
costs under the Interest Rate Protection Agreements, less (b) any portion
thereof not payable in cash.
"Interest Period" shall mean the period provided for any Eurodollar Rate
---------------
Loan pursuant to Section 2.2(b).
"Interest Rate Protection Agreement" shall mean any interest rate swap
----------------------------------
agreement, interest rate cap agreement, interest rate collar agreement
(including costless collars), interest rate hedging agreement, interest rate
floor agreement or other similar agreement or arrangement.
"Inventory" shall mean Inventory as defined in the UCC and shall include
---------
all of Borrower's or any of its Subsidiaries' now owned or hereafter acquired
goods, merchandise and other personal property, wherever located, to be
furnished under any consignment arrangement, contract of service or held for
sale or lease, all raw materials, work in process, finished goods and materials
and supplies of any kind, nature or description which are or might be used or
consumed in Borrower's or any of its Subsidiaries' business or used in selling
or furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"Investment Property" shall mean Investment Property as defined in the UCC
-------------------
and shall include all of Borrower's or any of its Subsidiaries' now owned or
hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.
"Issuer" shall mean any Person who issues a Letter of Credit and/or accepts
------
a draft pursuant to the terms hereof.
"Leasehold Interests" shall mean all of Borrower's or any of its
-------------------
Subsidiaries' right, title and interest in and to any of the based premises
designated by the Agent in writing to Borrower.
"Lender" and "Lenders" shall have the meaning ascribed to such term in the
------ -------
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Letter of Credit Application" shall mean all documents executed in
----------------------------
connection with a request for a Letter of Credit to be issued to Borrower under
the terms and conditions hereunder.
"Letter of Credit Fees" shall have the meaning set forth in Section 3.2.
---------------------
"Letter of Credit Rights" shall have the meaning ascribed to it in the UCC.
-----------------------
"Letters of Credit" shall mean set forth in Section 2.9.
-----------------
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
----
assignment, security interest, lien (whether statutory or otherwise), charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any easement, right of way or other
11
encumbrance relating to real property, any lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction.
"Line of Business" shall mean national and international rapid-response
----------------
direct marketers of information technology (IT) products, services and
solutions, including brand-name products to large and small businesses, federal,
state and local governments, educational institutions and consumers.
"LMCS Agreement" shall mean an agreement entered into between the Agent and
--------------
the Borrower governing the cash management of the Borrower on terms satisfactory
to the Agent and Borrower.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
condition, operations, assets, properties, business or prospects of Borrower or
any of its Subsidiaries, or (b) Borrower's or any of its Subsidiary's ability to
pay the Obligations in accordance with the terms thereof.
"Maximum Advance Amount" shall mean $45,000,000, provided that the Maximum
----------------------
Advance Amount shall be permanently reduced to $35,000,000 on August 31, 2002.
"MoreDirect Merger Agreement" shall mean that certain Agreement and Plan of
---------------------------
Merger dated as of March 25, 2002 by and among the Borrower, Boca Acquisition
Corp., MoreDirect, Inc. and certain shareholders of MoreDirect, Inc., as amended
by the First Amendment.
"Mortgages" shall mean each mortgage on any Real Property securing all or a
---------
portion of the Obligations together with all extensions, renewals, amendments,
supplements, modifications, substitutions and replacements thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Sections 3(37) and 4001(a)(3) of ERISA.
"Note" shall mean collectively the Revolving Credit Note and the Swingline
----
Note.
"Obligations" shall mean and include any and all loans, advances (including
-----------
overdrafts and Interest Rate Protection Agreements) debts, liabilities,
obligations (including, without limitation, reimbursement obligations on any
drawn Letters of Credit), covenants and duties owing by Borrower or any of its
Subsidiaries to Lenders or Agent or to any other direct or indirect subsidiary
or affiliate of Agent or any Lender of any kind or nature, present or future
(including, without limitation, any interest accruing thereon after maturity, or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding relating to Borrower or any of its
Subsidiaries, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether or not evidenced by any note, guaranty
or other instrument, whether arising under any agreement, instrument or
document, (including, without limitation, this Agreement and the Other
Documents) whether or not for the payment of money, whether arising by reason of
an extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or
12
other similar agreement, or in any other manner, whether arising out of
overdrafts or deposit or other accounts or electronic funds transfers (whether
through automated clearing houses or otherwise) or out of the Agent's or any
Lenders non-receipt of or inability to collect funds or otherwise not being made
whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of
Borrower's or any of its Subsidiaries' Indebtedness and/or liabilities under
this Agreement, the Other Documents or under any other agreement between Agent
or Lenders and Borrower and any of its Subsidiaries and any amendments,
extensions, renewals or increases and all reasonable costs and expenses of Agent
and any Lender incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including but not limited to reasonable attorneys' fees and expenses and all
obligations of Borrower or any of its Subsidiaries to Agent or Lenders to
perform acts or refrain from taking any action.
"Other Documents" shall mean the Note, the Questionnaire, any Guaranty,
---------------
each Letter of Credit and Letter of Credit Application, the Borrower Pledge
Agreement, Blocked Account Agreements, the Agent Fee Letter, landlord waivers,
warehouseman's waivers, and any and all other agreements, instruments and
documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, interest or currency swap agreements or other similar
agreements and all other writings heretofore, now or hereafter executed by
Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of
the transactions contemplated by this Agreement.
"Out-of-Formula Loans" shall have the meaning set forth in Section 15.2(b).
--------------------
"Participant" shall mean each Person who shall be granted the right by any
-----------
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
"Payment Office" shall mean initially 00 Xxxxx Xxxxxx, 13/th/ Floor,
--------------
Xxxxxx, Xxxxxxxxxxxxx 00000, thereafter, such other office of Agent, if any,
which it may designate by notice to Borrower and to each Lender to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Permitted Acquisitions" shall mean the acquisition by Borrower of all or
----------------------
substantially all of the assets or capital stock of any Person (the "Acquired
Entity") engaged in a business substantially similar to the Line of Business,
which acquisition satisfies all of the following criteria: (a) the aggregate
consideration paid or payable by Borrower in connection with such acquisition
(including earn out payments, seller paper or deferred purchase price payments)
shall not exceed $5,000,000; (b) Borrower, as the case may be, complies, and
cause any new Subsidiary acquired or formed in connection with such Permitted
Acquisition to comply, with all of the provisions of Section 6.10; and (c) no
Default or Event of Default shall have occurred or
13
result from such Acquisition (to be demonstrated through delivery by the
Borrower of a pro forma Compliance Certificate to Agent satisfactory to the
Agent).
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the
----------------------
benefit of Agent and the other Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in good faith and
by appropriate proceedings and with respect to which proper reserves have been
taken by Borrower or the applicable Subsidiary; (c) Liens disclosed in the
financial statements referred to in Section 5.5, the existence of which Agent
has consented to in writing; (d) deposits or pledges to secure obligations under
worker's compensation, social security or similar laws, or under unemployment
insurance; (e) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of Borrower's or any of its Subsidiaries' business; (f) judgment Liens
that have been stayed or bonded and discharged within sixty (60) days and
mechanics', workers', materialman's or other like Liens arising in the ordinary
course of Borrower's or any of its Subsidiaries' business with respect to
obligations which are not due or which are being contested in good faith by
Borrower or the applicable Subsidiary and with respect to which proper reserves
have been taken by Borrower or the applicable Subsidiary; (g) Liens placed upon
fixed assets and proceeds thereof hereafter acquired to secure a portion of the
purchase price or financing thereof, provided that (x) any such lien shall not
encumber any other property of Borrower or any of its Subsidiaries and proceeds
thereof; (h) Liens disclosed on Schedule 1.3; (i) Liens arising from the
------------
refinancing of capitalized leases or purchase money security interests within
the limitations of Section 7.8(c); and (j) Liens arising by operation of law to
secure landlords, lessors or renters under leases or rental agreements made in
the ordinary course of business and confined to the premises or property rented.
"Permitted Subordinated Indebtedness" shall mean unsecured Indebtedness of
-----------------------------------
the Borrower or any of its Subsidiaries in a principal amount not to exceed
$50,000,000, in the aggregate, and on terms and conditions acceptable to the
Agent incurred (i) in connection with Permitted Acquisitions or (ii) as set
forth on Schedule 1.4 hereto.
------------
"Permitted Vendor Debt" shall mean Indebtedness of the Borrower to IBM
---------------------
Credit Corporation and Deutsche Financial Services Corporation in an amount not
to exceed $50,000,000 and on terms and conditions reasonably acceptable to the
Agent (which shall include existing terms) and refinancing thereof.
"Person" shall mean any individual, sole proprietorship, partnership,
------
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether foreign,
federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of Section
----
3(3) of ERISA, maintained for employees of Borrower or any of its Subsidiaries
or any member of the Controlled Group or any such Plan to which Borrower or any
of its Subsidiaries or any member of the Controlled Group is required to
contribute on behalf of any of its employees.
14
"Projections" shall have the meaning set forth in Section 5.5(a) hereof.
-----------
"Purchasing Lender" shall have the meaning set forth in Section 15.3(c)
-----------------
hereof.
"Questionnaire" shall mean the Documentation Information Questionnaire and
-------------
the responses thereto provided by Borrower and each of its Subsidiaries and
delivered to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
----
U.S.C.(S)(S)6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Borrower's and any of its Subsidiaries'
-------------
right, title and interest in and to the owned and leased premises identified on
Schedule 4.19 hereto.
-------------
"Receivables" shall mean Receivables as defined in the UCC owed to Borrower
-----------
or any of its Subsidiaries, now existing or hereafter created.
"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.
-------
"Reportable Event" shall mean a reportable event described in Section
----------------
4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean any Lenders holding more than sixty-six and
----------------
two-thirds percent (66 2/3%) of the Advances and unused commitment and, if no
Advances are outstanding, shall mean Lenders holding sixty-six and two-thirds
percent (66 2/3%) of the Commitment Percentages; provided, however, if there are
only two Lenders, the Required Lenders shall mean Lenders holding one hundred
percent (100%) of the Advances and, if no Advances are outstanding, shall mean
Lenders holding one hundred percent (100%) of the Commitment.
"Reserve Percentage" shall mean the maximum effective percentage in effect
------------------
on any day as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding.
"Revolving Advances" shall mean Advances other than Swingline Advances and
------------------
Letters of Credit.
"Revolving Credit Note" shall mean, collectively, the promissory notes
---------------------
referred to in Section 2.1(a) hereof.
"Section 20 Subsidiary" shall mean the Subsidiary of the bank holding
---------------------
company controlling Citizens, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
"Secured Interest Rate Protection Agreement" shall mean any Interest Rate
------------------------------------------
Protection Agreement entered into by Borrower with a counter party that is a
Lender (or an affiliate thereof).
15
"Senior Debt Payments" shall mean and include all cash actually expended by
--------------------
Borrower to make (a) interest payments on any Advances hereunder, plus (b)
payments for all fees, commissions and charges set forth herein to the Lenders,
plus (c) scheduled capitalized lease payments or payments of purchase money
indebtedness permitted under Section 7.8 hereof, plus (d) scheduled payments
with respect to any other Indebtedness for borrowed money that, by its terms or
by the terms of a subordinated agreement, is not subordinate to the Obligations.
"Settlement Date" shall mean the Closing Date and thereafter Wednesday or
---------------
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.
"Subordinated Debt Documentation" shall mean any agreements, documents or
-------------------------------
instruments executed in connection with any Indebtedness permitted hereunder
that is expressly subordinated to the Obligations, including, but not limited
to, Permitted Subordinated Indebtedness.
"Subsidiary" shall mean a corporation or other entity of whose shares of
----------
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the capital stock of any Subsidiary of
----------------
the Borrower.
"Supporting Obligations" shall have the meaning ascribed to it in the UCC.
----------------------
"Swingline Advance" means an Advance made pursuant to Section 2.17.
-----------------
"Swingline Lender" means Citizens, in its capacity as lender of Swingline
----------------
Advances hereunder.
"Swingline Note" means, collectively, the promissory notes referred to in
--------------
Section 2.17 hereof.
"Term" shall have the meaning set forth in Section 13.1 hereof.
----
"Termination Event" shall mean (a) a Reportable Event with respect to any
-----------------
Plan or Multiemployer Plan; (b) the withdrawal of Borrower or any of its
Subsidiaries or any member of the Controlled Group from a Plan or Multiemployer
Plan during a plan year in which such entity was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; (c) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (d) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (e) any event or condition (i) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (ii) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (f) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of Borrower or any of its Subsidiaries or any member of
the Controlled Group from a Multiemployer Plan.
16
"Total Liabilities" at a particular date, shall mean all amounts which
-----------------
would, in conformity with GAAP, be included under total liabilities on a balance
sheet of Borrower and its Subsidiaries, as at such date, but in any event,
including, without limitation, the amounts of (a) all Indebtedness of Borrower
and its Subsidiaries, (b) all reserves in respect of liabilities or Indebtedness
and (c) all accruals for federal or other taxes measured by income payable.
"Toxic Substance" shall mean and include any material present on the Real
---------------
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601 et seq., applicable state
law, or any other applicable Federal or state laws now in force or hereafter
enacted relating to toxic substances. "Toxic Substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Transferee" shall have the meaning set forth in Section 15.3(b) hereof.
----------
"UCC" shall have the meaning set forth in Section 1.3 hereof.
---
"Week" shall mean the time period commencing with the opening of business
----
on a Wednesday and ending on the end of business the following Tuesday.
1.3 Uniform Commercial Code Terms. All terms used herein and defined in
-----------------------------
the Uniform Commercial Code as adopted in the Commonwealth of Massachusetts from
time to time shall have the meaning given therein unless otherwise defined
herein (the "UCC"). To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision.
1.4 Certain Matters of Construction. The terms "herein", "hereof" and
-------------------------------
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1 Revolving Advances.
------------------
(a) Subject to the terms and conditions set forth in this Agreement
including, without limitation, Section 2.1(b), each Lender, severally and not
jointly, will make Revolving Advances to Borrower in aggregate amounts
outstanding at any time equal to such Lender's Commitment Percentage of the
lesser of (x) the Maximum Advance Amount less the aggregate amount of
outstanding Letters of Credit or (y) an amount equal to the sum of:
17
(i) up to 80%, subject to the provisions of Section 2.1(b)
hereof ("Eligible Receivables Advance Rate"), of Eligible Receivables,
other than Eligible Government Receivables, plus
(ii) up to 50%, subject to the provisions of Section 2.1(b)
hereof ("Eligible Government Receivables Advance Rate"), of Eligible
Government Receivables (the Eligible Receivables Advance Rate and the
Eligible Government Receivables Advance Rate shall be referred to
collectively as the "Advance Rates"), minus
(iii) the aggregate amount of charges outstanding and additional
amounts available under Letters of Credit (other than Letters of Credit
that are 105% cash collateralized), minus
(iv) such reserves as Agent may determine in its good faith
business judgment to be necessary from time to time.
The amount derived from (x) the sum of Sections 2.1(a)(y)(i) and (ii) minus
(y) the sum of Sections 2.1(a)(y)(iii) and (iv) at any time and from time to
time shall be referred to as the "Formula Amount". The Revolving Advances shall
be evidenced by one or more secured promissory notes (collectively, the
"Revolving Credit Note") substantially in the form attached hereto as Exhibit
-------
2.1(a).
------
(b) Discretionary Rights. The Advance Rates may be increased or
--------------------
decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion. Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing or imposing the
reserves may limit or restrict Advances requested by Borrower.
(c) Reduction of Maximum Advance Amount. The parties hereto agree
-----------------------------------
that on August 31, 2002 the Maximum Advance Amount shall be permanently reduced
from $45,000,000 to $35,000,000. Upon such reduction of the Maximum Advance
Amount, the Commitment Percentage of Citizens Bank of Massachusetts shall be
71.43% and of Fleet National Bank shall be 28.57%, unless otherwise agreed to in
writing by the Lenders.
2.2 Procedure for Revolving Advances Borrowing; Eurodollar Advances.
---------------------------------------------------------------
(a) With respect to Revolving Advances, Borrower may notify Agent
prior to 12:00 noon (Boston time) at least one Business Day prior to the date of
the proposed borrowing of Borrower's request to incur a Revolving Advance
hereunder. The amount of any Revolving Advance request shall be a minimum of
$100,000. Should any amount required to be paid as interest hereunder, or as
fees or other charges under this Agreement or any other agreement with Agent or
Lenders, or with respect to any other Obligation, become due, same shall be
deemed a request for a Revolving Advance as of the date such payment is due, in
the amount required to pay in full such interest, fee, charge or Obligation
under this Agreement or any other agreement with Agent or Lenders, and such
request shall be irrevocable.
18
(b) Notwithstanding the provisions of subsection (a) above, with
respect to all Advances, other than Swingline Advances, in the event Borrower
desires to obtain a Eurodollar Rate Loan, Borrower must notify Agent prior to
10:00 a.m. (Boston Time) at least two (2) Business Days' prior to the date of
the proposed borrowing, specifying (i) the date of the proposed borrowing (which
shall be a Business Day), (ii) the type of borrowing and the amount on the date
of such Advance to be borrowed, which amount shall be a minimum of $1,000,000
and an integral multiple of $1,000,000, and (iii) the duration of the first
Interest Period therefor. Interest Periods for Eurodollar Rate Loans shall be
for one, two, three, four or six months; provided, if an Interest Period would
end on a day that is not a Business Day, it shall end on the next succeeding
Business Day unless such day falls in the next succeeding calendar month in
which case the Interest Period shall end on the next preceding Business Day. No
Eurodollar Rate Loan shall be made available to Borrower during the continuance
of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in subsection (b)(iii) above provided that the
exact length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the last day of the Term.
Borrower shall elect the initial Interest Period applicable to a Eurodollar
Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(b)
or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the
case may be. Borrower shall elect the duration of each succeeding Interest
Period by giving irrevocable written notice to Agent of such duration not less
than three (3) Business Days prior to the last day of the then current Interest
Period applicable to such Eurodollar Rate Loan. If Agent does not receive timely
notice of the Interest Period elected by Borrower, Borrower shall be deemed to
have elected to convert to a Domestic Rate Loan subject to Section 2.2(d) herein
below.
(d) Provided that no Default or Event of Default shall have occurred
and be continuing, Borrower may, subject to the notice requirements set forth
below, as to the last Business Day of the then current Interest Period
applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with
respect to Domestic Rate Loans, convert any such loan into a loan of another
type in the same aggregate principal amount. If Borrower desires to convert a
loan, Borrower shall give Agent not less than two (2) Business Days' prior
written notice to convert from a Domestic Rate Loan to a Eurodollar Rate Loan or
one (1) Business Day's prior written notice to convert from a Eurodollar Rate
Loan to a Domestic Rate Loan, specifying the date of such conversion, the loans
to be converted and if the conversion is from a Domestic Rate Loan to any other
type of loan, the duration of the first Interest Period therefor. After giving
effect to any borrowing or each such conversion, there shall not be outstanding
more than four (4) Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon two (2) Business Days' prior written
notice, Borrower may (subject to Sections 3.1 and 13.1 hereof) prepay the
Eurodollar Rate Loans in whole at any time or in part from time to time with
accrued interest on the principal being prepaid to the date of such repayment.
Borrower shall specify the date of prepayment of Advances which are Eurodollar
Rate Loans and the amount of such prepayment. In the event
19
that any prepayment of a Eurodollar Rate Loan is required or permitted on a date
other than the last Business Day of the then current Interest Period with
respect thereto, Borrower shall indemnify Agent and Lenders therefor in
accordance with Section 2.2(f) hereof.
(f) Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent and
Lenders may sustain or incur as a consequence of any prepayment, conversion of
or any default, whether voluntary or involuntary by Borrower in the payment of
the principal of or interest on any Eurodollar Rate Loan or failure by Borrower
to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar
Rate Loan after notice thereof has been given, including, but not limited to,
any interest payable by Agent or the Lenders to other lenders of funds obtained
by them in order to make or maintain their Eurodollar Rate Loans hereunder. A
certificate or statement as to any additional amounts payable pursuant to the
foregoing sentence (which shall include upon the written request of the Borrower
a reasonably detailed calculation and description) submitted by Agent or any
Lender to Borrower shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where Lender or any corporation or bank controlling
such Lender makes or maintains Eurodollar Rate Loans hereof) to make or maintain
its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate
Loans hereunder shall automatically be cancelled and Borrower shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from
Agent, either pay all such affected Eurodollar Rate Loans in full or convert
such affected Eurodollar Rate Loans into loans of another type. If any such
payment or conversion of any Eurodollar Rate Loan is made on a day that is not
the last day of the Interest Period applicable to such Eurodollar Rate Loan,
Borrower shall pay Agent, upon Agent's request, such amount or amounts as may be
necessary to compensate Lenders for any loss or expense sustained or incurred by
Lenders in respect of such Eurodollar Rate Loan as a result of such payment or
conversion, including (but not limited to) any interest or other amounts payable
by Agent or the Lenders to other lenders of funds obtained by Lenders in order
to make or maintain such Eurodollar Rate Loan. A certificate or statement as to
any additional amounts payable pursuant to the foregoing sentence (which shall
include upon the written request of the Borrower a reasonably detailed
calculation and description) submitted by Lenders to Borrower shall be
conclusive absent manifest error.
2.3 Disbursement of Advance Proceeds. All Advances shall be disbursed
--------------------------------
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Borrower or deemed to have been requested by
Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances, be made available
to Borrower by [3:00 p.m. (Eastern Time)] on the day so requested by way of
credit to Borrower's operating account at Agent, or such other bank as Borrower
may designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to
20
Revolving Advances deemed to have been requested by Borrower, be disbursed to
Agent to be applied to the outstanding Obligations giving rise to such deemed
request.
2.4 Intentionally Left Blank.
------------------------
2.5 Maximum Advances. The aggregate balance of Revolving Advances and
----------------
Swingline Advances outstanding at any time shall not exceed the lesser of (a)
the Maximum Advance Amount less the aggregate amount of drawings outstanding and
additional amounts available under Letters of Credit or (b) the Formula Amount.
2.6 Repayment of Advances.
---------------------
(a) The Revolving Advances shall be due and payable in full on the
last day of the Term subject to acceleration on the occurrence of an Event of
Default under this Agreement, any prior termination or earlier prepayment as
herein provided. The Swingline Advances shall be due and payable in full on the
earlier of the last day of the Term and the first date after such Swingline
Advance is made that is the 15/th/ day or last Business Day of a calendar month
and is at least two Business Days after such Swingline Advance is made; provided
--------
that on each date that a Revolving Advance is made, the Borrower shall repay all
Swingline Advances then outstanding, subject to acceleration on the occurrence
of an Event of Default under this Agreement, any prior termination or earlier
prepayment as herein provided.
(b) Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit Borrower's Account as of the Business
Day on which Agent receives those items of payment, Borrower agrees that, in
computing the charges under this Agreement, all items of payment shall be deemed
applied by Agent on account of the Obligations as they are collected, consistent
with past practices. Agent is not, however, required to credit Borrower's
Account for the amount of any item of payment which is unsatisfactory to Agent
and Agent may charge Borrower's Account for the amount of any item of payment
which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 p.m. (Boston time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrower's
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Repayment of Excess Advances. The aggregate balance of Revolving
----------------------------
Advances plus Swingline Advances outstanding at any time in excess of the
Maximum Advance Amount shall be immediately due and payable without the
necessity of any demand at the Payment Office, whether or not a Default or Event
of Default has occurred.
21
2.8 Statement of Account. Agent shall maintain, in accordance with its
--------------------
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Agent and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower unless Agent receives a written
statement of Borrower's specific exceptions thereto within sixty (60) days after
such statement is received by Borrower. The records of Agent with respect to the
loan amount shall be conclusive evidence absent manifest error of the amounts of
Advances and other charges thereto and of payments applicable thereto.
2.9 Letters of Credit. Subject to the terms and conditions hereof, Agent
-----------------
shall issue or cause the issuance of letters of credit (each a "Letter of
Credit" and collectively "Letters of Credit") on behalf of Borrower; provided,
however, that Agent will not be required to issue or cause to be issued any
Letters of Credit to the extent that the face amount of such Letters of Credit
would then cause the sum of (a) the outstanding Revolving Advances plus
Swingline Advances plus (b) the aggregate amount of drawing outstanding and
additional amounts available under Letters of Credit outstanding to exceed the
lesser of (x) the Maximum Advance Amount or (y) the Formula Amount. The maximum
undrawn amount of outstanding Letters of Credit shall not exceed $10,000,000 in
the aggregate at any time. All disbursements or payments related to Letters of
Credit shall be deemed to be Domestic Rate Loans consisting of Revolving
Advances and shall bear interest at the Contract Interest Rate for Domestic Rate
Loans. Letters of Credit that have not been drawn upon shall not bear interest.
2.10 Issuance of Letters of Credit.
-----------------------------
(a) Borrower may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent at the Payment Office, Agent's form of
Letter of Credit Application (the "Letter of Credit Application") completed to
the satisfaction of Agent; and, such other certificates, documents and other
papers and information as Agent may reasonably request. Borrower also has the
right to give instructions and make agreements with respect to any application,
any applicable letter of credit and security agreement, any applicable letter of
credit reimbursement agreement and/or any other applicable agreement, any letter
of credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts or acceptances of usance drafts when presented for
honor thereunder in accordance with the terms thereof and when accompanied by
the documents described therein and (ii) have an expiry date not later than one
year after such Letter of Credit's date of issuance and in no event later than
the last day of the Term. Each Letter of Credit shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, and any amendments or revision thereof
adhered to by the
22
Issuer and, to the extent not inconsistent therewith, the laws of the
Commonwealth of Massachusetts.
(c) Agent shall use its reasonable efforts to notify Lenders of the
request by Borrower for a Letter of Credit hereunder.
(d) Agent shall have absolute discretion whether to accept any draft
related to any Letter of Credit. Without in any way limiting Agent's absolute
discretion whether to accept any draft, Borrower will not present for acceptance
any draft, and Agent will generally not accept any drafts (i) that arise out of
transactions involving the sale of goods by Borrower not in the ordinary course
of its business, (ii) that involve a sale to an Affiliate of Borrower, (iii)
that involve any purchase for which Agent has not received all related
documents, instruments and forms requested by Agent, (iv) for which Agent is
unable to locate a purchaser in the ordinary course of business on customary
terms, or (v) that is not eligible for discounting with Federal Reserve Banks
pursuant to paragraph 7 of Section 13 of the Federal Reserve Act, as amended.
2.11 Requirements For Issuance of Letters of Credit.
----------------------------------------------
(a) In connection with the issuance of any Letter of Credit, Borrower
shall indemnify, save and hold Agent, each Lender and each Issuer harmless from
any loss, cost, expense or liability, including, without limitation, payments
made by Agent, any Lender or any Issuer and reasonable expenses and reasonable
attorneys' fees incurred by Agent, any Lender or Issuer arising out of, or in
connection with, any Letter of Credit to be issued or created for Borrower.
Borrower shall be bound by Agent's or any Issuer's regulations and good faith
interpretations of any Letter of Credit issued or created for Borrower's
Account, although this interpretation may be different from its own; and,
neither Agent, nor any Lender, nor any Issuer nor any of their correspondents
shall be liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrower's instructions or those contained in any
Letter of Credit, or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit or except for Agent's, any Lender's,
any Issuer's or such correspondents' gross negligence or willful misconduct.
(b) Borrower shall authorize and direct any Issuer to name Borrower
as the "Applicant" or "Account Party" of each Letter of Credit. If Agent is not
the Issuer of any Letter of Credit, Borrower shall authorize and direct the
Issuer to deliver to Agent all instruments, documents, and other writings and
property received by the Issuer pursuant to the Letter of Credit and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit, or the application therefor.
(c) Solely, in connection with all Letters of Credit issued or caused
to be issued by Agent under this Agreement, Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority (i) to sign and/or
endorse Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Borrower's name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of Borrower or Agent or Agent's designee, and to sign
and deliver to Customs officials powers of attorney in the name of Borrower for
such purpose; and (iv) to complete in Borrower's name or Agent's, or in the name
of Agent's designee, any order,
23
sale or transaction, obtain the necessary documents in connection therewith, and
collect the proceeds thereof. Neither Agent nor its attorneys will be liable for
any acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's gross negligence or willful misconduct.
This power, being coupled with an interest, is irrevocable as long as any
Letters of Credit remain outstanding.
(d) Each Lender shall, to the extent of the percentage amount equal
to the product of such Lender's Commitment Percentage for Advances multiplied by
the aggregate amount of all unreimbursed reimbursement obligations arising from
disbursements made or obligations incurred with respect to the Letters of Credit
be deemed to have irrevocably purchased an undivided participation in each such
unreimbursed reimbursement obligation. In the event that at the time a
disbursement is made the unpaid balance of Revolving Advances and Swingline
Advances exceeds or would exceed, with the making of such disbursement, the
lesser of the Maximum Advance Amount or the Formula Amount, and such
disbursement is not reimbursed by Borrower within two (2) Business Days, Agent
shall promptly notify each Lender and upon Agent's demand each Lender shall pay
to Agent such Lender's proportionate share of such unreimbursed disbursement
together with such Lender's proportionate share of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from Borrower of any amount disbursed by Agent for which Agent
had already been reimbursed by Lenders, Agent shall deliver to each Lender that
Lender's pro rata share of such repayment. Each Lender's participation
commitment shall continue until the last to occur of any of the following
events: (A) Agent ceases to be obligated to issue or cause to be issued Letters
of Credit hereunder; (B) no Letter of Credit issued hereunder remains
outstanding and uncancelled or (C) all Persons (other than Borrower) have been
fully reimbursed for all payments made under or relating to Letters of Credit.
2.12 Additional Payments. Any reasonable sums expended by Agent or any
-------------------
Lender due to Borrower's failure to perform or comply with its obligations under
this Agreement or any Other Document including, without limitation, Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrower's Account as a Revolving Advance and added to the
Obligations.
2.13 Manner of Borrowing and Payment.
-------------------------------
(a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders for Revolving Advances.
Subject to the terms and conditions herein, Borrower may request daily Revolving
Advances.
(b) Each payment (including each prepayment) by Borrower on account
of the principal of and interest on the Revolving Advances, shall be applied to
the Revolving Advances pro rata according to the applicable Commitment
Percentages of Lenders for Revolving Advances. Each payment (including each
prepayment) by Borrower on account of the principal of and interest on the
Swingline Advances, shall be applied to the Swingline Advances pro rata
according to the applicable commitment of Lenders for Swingline Advances. Except
as expressly provided herein, all payments (including prepayments) to be made by
Borrower on account of principal, interest and fees shall be made without set
off or counterclaim and shall be
24
made to Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 p.m., Boston time, in Dollars and in immediately available funds.
(c) Each payment by Borrower shall be applied first to Swingline
Advances, to the extent that there are outstanding Swingline Advances, and then,
to the extent that there are no outstanding Swingline Advances, to Revolving
Advances. Notwithstanding anything to the contrary contained in Sections 2.13(a)
and (b) hereof, commencing with the first Business Day following the Closing
Date, each borrowing of Swingline Advances shall be advanced by the Swingline
Lender and each payment by Borrower on account of Swingline Advances shall be
applied first to those Swingline Advances advanced by the Swingline Lender. On
or before 1:00 p.m., Boston time, on each Settlement Date commencing with the
first Settlement Date following the Closing Date, Agent and Lenders shall make
certain payments as follows: (A) if the aggregate amount of new Swingline
Advances made by the Swingline Lender during the preceding Week (if any) exceeds
the aggregate amount of repayments applied to outstanding Swingline Advances
during such preceding Week, then each Lender shall provide the Swingline Lender
with funds in an amount equal to its applicable Commitment Percentage of
Swingline Advances multiplied by the difference between (w) such Swingline
Advances and (x) such repayments and (B) if the aggregate amount of repayments
applied to outstanding Swingline Advances during such Week exceeds the aggregate
amount of new Swingline Advances made during such Week, then the Swingline
Lender shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage multiplied by the difference between (y) such repayments
and (z) such Swingline Advances.
Notwithstanding anything to the contrary contained in Sections 2.13(a) and
(b) hereof, commencing with the first Business Day following the Closing Date,
each borrowing of Revolving Advances shall be advanced by Agent and each payment
by Borrower on account of Revolving Advances shall be applied first to those
Revolving Advances advanced by Agent. On or before 1:00 p.m., Boston time, on
each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (A) if
the aggregate amount of new Revolving Advances made by Agent during the
preceding Week (if any) exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week, then each Lender
shall provide Agent with funds in an amount equal to its applicable Commitment
Percentage for Revolving Advances multiplied by the difference between (w) such
Revolving Advances and (x) such repayments and (B) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage multiplied by the difference between (y) such repayments
and (z) such Revolving Advances.
(i) Each Lender shall be entitled to earn interest at the
applicable Contract Interest Rate on outstanding Advances which it has
funded.
(ii) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and Advances
made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
25
(d) If any Lender or Participant (a "Benefited Lender") shall at
any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such Benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the excess payment or benefits
of such Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to Borrower a
corresponding amount. Agent will promptly notify Borrower of its receipt of any
such notice from a Lender. If such amount is made available to Agent on a date
after such next Settlement Date, such Lender shall pay to Agent on demand an
amount equal to the product of (i) the daily average Federal Funds Rate
(computed on the basis of a year of 360 days) during such period as quoted by
Agent, times (ii) such amount, times (iii) the number of days from and including
such Settlement Date to the date on which such amount becomes immediately
available to Agent. A certificate of Agent submitted to any Lender with respect
to any amounts owing under this paragraph (e) shall be conclusive, in the
absence of manifest error. If such amount is not in fact made available to Agent
by such Lender within three (3) Business Days after such Settlement Date, Agent
shall be entitled to recover such an amount, with interest thereon at the rate
per annum then applicable to such Revolving Advances hereunder, on demand from
Borrower; provided, however, that Agent's right to such recovery shall not
prejudice or otherwise adversely affect Borrower's rights (if any) against such
Lender.
2.14 Intentionally Left Blank.
------------------------
2.15 Use of Proceeds. Borrower shall apply the proceeds of Advances to
---------------
(a) refinance existing senior indebtedness, (b) pay fees and expenses related to
this transaction, (c) to provide for the Borrower's ongoing working capital
needs and (d) to fund Permitted Acquisitions.
2.16 Defaulting Lender.
------------------
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) fails or refuses (which failure or refusal
constitutes a breach by such Lender of its obligations under this Agreement) to
make available its portion of any Advance or (y) notifies
26
either Agent or Borrower that it does not intend to make available its portion
of any Advance (if the actual refusal would constitute a breach by such Lender
of its obligations under this Agreement) (each, a "Lender Default"), all rights
and obligations hereunder of such Lender (a "Defaulting Lender") as to which a
Lender Default is in effect and of the other parties hereto shall be modified to
the extent of the express provisions of this Section 2.16 while such Lender
Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition
of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.16, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.16 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
2.17 Swingline Advances.
------------------
(a) Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make Swingline Advances to the Borrower from time to
time, in an aggregate principal amount at any time outstanding that will not
result in (i) the aggregate principal amount of outstanding Swingline Advances
exceeding $2,500,000 or (ii) the sum of (a) the outstanding Revolving Advances
and Swingline Advances plus (b) the aggregate amount of drawing outstanding and
additional amounts available under Letters of Credit to exceed the lesser of (x)
the Maximum Advance Amount or (y) the Formula Amount; provided that the
--------
Swingline Lender shall not be required to make a Swingline Advance to refinance
an outstanding Swingline
27
Advance and provided further that the Swingline Lender shall not, without
----------------
the consent of the Required Lenders, make any Swingline Advance if any Event of
Default exists of which the Swingline Lender has actual knowledge. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Swingline Advances.
The Swingline Advances shall be evidenced by one or more secured
promissory notes (collectively, the "Swingline Notes"), substantially in the
form attached hereto as Exhibit 2.17(a).
---------------
(b) To request a Swingline Advance, the Borrower shall notify the
Agent of such request by telephone (confirmed by telecopy), not later than 12:00
noon, Boston time, on the day of a proposed Swingline Advance. Each such notice
shall be irrevocable and shall specify the requested date (which shall be a
Business Day) and amount of the requested Swingline Advance. The Agent will
promptly advise the Swingline Lender of any such notice received from the
Borrower. The Swingline Lender shall make each Swingline Advance available to
the Borrower by means of a credit to the general deposit account of the Borrower
with the Swingline Lender (or, in the case of a Swingline Advance made to
finance the reimbursement of Letter of Credit as provided in Section 2.9 by
remittance to the Issuer) by 3:00 p.m., Boston time, on the requested date of
such Swingline Advance.
(c) All Swingline Advances shall be Domestic Rate Loans.
(d) The Swingline Lender may by written notice given to the Agent
not later than 12:00 noon, Boston time, on any Business Day require the Lenders
to acquire participations on such Business Day in all or a portion of the
Swingline Advances outstanding. Such notice shall specify the aggregate amount
of Swingline Advances in which Lenders will participate. The Agent will give
notice thereof to each Lender by 1:00 p.m., Boston time on such Business Day,
specifying in such notice such Lender's Commitment Percentage of Revolving
Advances of such Swingline Advance or Advances. Each Lender hereby absolutely
and unconditionally agrees, upon receipt of notice as provided above, to pay to
the Agent, for the account of the Swingline Lender, such Lender's Commitment
Percentage of Revolving Advances of such Swingline Advance or Advances. Each
Lender acknowledges and agrees that its obligation to acquire participations in
Swingline Advances pursuant to this paragraph is absolute and unconditional,
subject to Swingline Lender's compliance with the provisions of Section 2.17(a)
hereof, and shall not be affected by any circumstance whatsoever, including the
occurrence and continuance of a Default or reduction or termination of the
commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever. Each Lender shall comply with
its obligation under this paragraph by wire transfer of immediately available
funds, in the same manner as provided in Section 2.13 with respect to Advances
made by such Lender (and Section 2.13 shall apply, mutatis mutandis, to the
------- --------
payment obligations of the Lenders), and the Agent shall promptly pay to the
Swingline Lender the amounts so received by it from the Lenders. The Agent shall
notify the Borrower in writing of any participations in any Swingline Advance
acquired pursuant to this paragraph, and thereafter payments in respect of such
Swingline Advance shall be made to the Agent and not to the Swingline Lender.
Any amounts received by the Swingline Lender from the Borrower (or other party
on behalf of the Borrower) in respect of a Swingline Advance after receipt by
the
28
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Agent; any such amounts received by the Agent shall be
remitted by the Agent to the Swingline Lender and to the Lenders that shall have
made their payments pursuant to this paragraph, as their interests may appear,
such remittance to be made on the day of receipt if such payment is received by
2:00 p.m., Boston time and prior to 10:00 a.m. of the following Business Day if
such payment is received after 2:00 p.m., Boston time. The purchase of
participations in a Swingline Advance pursuant to this paragraph shall not
relieve the Borrower of any default in the payment thereof.
2.18 LCMS Agreement. To the extent that inconsistencies between Sections
--------------
2.2, 2.6, 2.13, 2.17, 4.15(d) and 4.15(h), on one hand and the LCMS Agreement,
on the other, the terms and conditions of the LCMS Agreement shall prevail.
III. INTEREST AND FEES.
3.1 Interest. Interest on Advances shall be payable in arrears on the first
--------
day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months on the anniversary date of the commencement of such
Eurodollar Rate Loan and (b) the end of the Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month at a rate per annum equal to (x) with respect to Domestic Rate Loans,
the Base Rate and (y) with respect to Eurodollar Rate Loans, the Eurodollar Rate
plus two (2%) percent per annum (as applicable, the "Contract Interest Rate").
Whenever, subsequent to the date of this Agreement, the Base Rate is increased
or decreased, the applicable Contract Interest Rate for Domestic Rate Loans
shall be similarly changed without notice or demand of any kind by an amount
equal to the amount of such change in the Base Rate during the time such change
or changes remain in effect. The Eurodollar Rate shall be adjusted with respect
to Eurodollar Rate Loans without notice or demand of any kind on the effective
date of any change in the Reserve Percentage as of such effective date.
Immediately upon and after the occurrence of an Event of Default under Section
10(a), and during the continuation thereof, the Obligations shall bear interest
at the applicable Contract Interest Rate, plus three (3%) percent per annum (the
"Default Rate"). Upon and after the occurrence and during continuance of an
Event of Default other than under Section 10.1(a), the obligations shall bear
interest at the Default Rule if thirty (30) days after Agent gives notice to
Borrower that such an Event of Default has occurred, the Event of Default
continues to occur.
3.2 Letter of Credit Fees.
----------------------
(a) Borrower shall pay (i) to Agent, for the benefit of Lenders, fees
for each Letter of Credit for the period from and excluding the date of issuance
of same to and including the date of expiration or termination, equal to the
average daily face amount of each outstanding Letter of Credit multiplied by the
applicable Eurodollar margin set forth on Schedule 1.1 hereto per annum, such
fee to be calculated on the basis of a 360-day year for the actual number of
days elapsed and to be payable quarterly in arrears on the first day of each
quarter and on the last day of the Term, (ii) to the Agent, a facing fee equal
to the average daily face amount of each outstanding Letter of Credit
multiplying one quarter percent (0.25%), such fee to be calculated
29
on the basis of a 360-day year for the actual number of days elapsed and to be
payable quarterly in arrears on the first day of each quarter and on the last
day of the Term and (iii) all fees and expenses as agreed upon by the Issuer and
Borrower in connection with any Letter of Credit, including, without limitation,
in connection with the opening, amendment or renewal of any such Letter of
Credit and any acceptances created thereunder and shall reimburse Agent for any
and all fees and expenses, if any, paid by Agent to the Issuer (all of the
foregoing fees, the "Letter of Credit Fees"). All such charges shall be deemed
earned in full on the date when the same are due and payable hereunder and shall
not be subject to rebate or proration upon the termination of this Agreement for
any reason. Any such charge in effect at the time of a particular transaction
shall be the charge for that transaction, notwithstanding any subsequent change
in the Issuer's prevailing charges for that type of transaction.
(b) During the continuance of Event of Default, upon demand by
Agent, Borrower will cause cash to be deposited and maintained in an account
with Agent, as cash collateral, in an amount equal to one hundred and five
percent (105%) of the outstanding Letters of Credit, and Borrower hereby
irrevocably authorizes Agent, in its discretion, on Borrower's behalf and in
Borrower's name, to open such an account and to make and maintain deposits
therein, or in an account opened by Borrower, in the amounts required to be made
by Borrower, out of the proceeds of Receivables or other Collateral or out of
any other funds of Borrower coming into any Lender's possession at any time.
Agent will invest such cash collateral (less applicable reserves) in such
short-term money-market items as to which Agent and Borrower mutually agree and
the net return on such investments shall be credited to such account and
constitute additional cash collateral. Borrower may not withdraw amounts
credited to any such account except upon payment and performance in full of all
Obligations and termination of this Agreement.
3.3 Fees.
----
(a) Facility Fee. Upon the execution of this Agreement, Borrower
------------
shall pay to Agent for the ratable benefit of Lenders a closing fee of $75,000.
(b) Commitment Fee. For any quarter during the Term where the
--------------
average daily unpaid balance of the Advances outstanding for each day of the
quarter does not equal the Maximum Advance Amount, then Borrower shall pay to
Agent for the ratable benefit of Lenders a fee at a rate equal to three-eighths
of one percent (.375%) per annum on the amount by which the Maximum Advance
Amount exceeds such average daily unpaid balance during such quarter. Such fee
(the "Commitment Fee") shall be payable to Agent in arrears on the first
Business Day of each quarter with respect to the previous calendar quarter.
3.4 Collateral Audit Fee. Agent may conduct three Collateral Audits
--------------------
per year, and Borrower shall pay to Agent on the first day of each month
following any month in which Agent performs such Collateral Audit the sum of
$6,000. Agent may conduct additional Collateral Audits at any time determined by
Agent, at Lender's expense so long as no Default or Event of Default has
occurred, and in such case at the Borrower's expense.
3.5 Intentionally Left Blank.
------------------------
30
3.6 Computation of Interest and Fees. Interest and fees hereunder shall be
--------------------------------
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Interest Rate during such extension.
3.7 Maximum Charges. In no event whatsoever shall interest and other
---------------
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such interest or other charges shall be
deemed to be decreased to such highest rate as is permitted under the law and
the excess amount paid by Borrower, if any, shall be first applied to any unpaid
principal balance owed by Borrower, and if the then remaining excess amount is
greater than the previously unpaid principal balance, Lenders shall promptly
refund such excess amount to Borrower and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.8 Increased Costs. 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 any Lender (for purposes of this Section
3.8, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) 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 Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender 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 Agent or any Lender by 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, any office of
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be. Agent or such Lender shall certify
the amount of such additional cost or reduced amount to Borrower, and such
certification shall be conclusive absent manifest error.
31
3.9 Basis For Determining Interest Rate Inadequate or Unfair. In the event
--------------------------------------------------------
that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. (Boston time) two (2) Business Days
prior to the date of such proposed borrowing, that its request for such
borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of Eurodollar Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (Boston time) two (2) Business Days prior to the proposed
conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan,
and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into
a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00
a.m. (New York City time) two (2) Business Days prior to the last Business Day
of the then current Interest Period applicable to such affected Eurodollar Rate
Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the
last Business Day of the then current Interest Period for such affected
Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall have
no obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and Borrower shall not have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.
3.10 Capital Adequacy.
-----------------
(a) In the event that Agent or any Lender shall have determined that
any change in the applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.10, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any 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 Agent or any Lender's capital as a
consequence of its obligations hereunder to a level below that which Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material,
then, from time to time, Borrower shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender for
such reduction. In determining such amount or amounts, Agent or such
32
Lender may use any reasonable averaging or attribution methods. The protection
of this Section 3.9 shall be available to Agent and each Lender regardless of
any possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrower shall be conclusive absent
manifest error.
3.11 Gross Up for Taxes. If Borrower shall be required by Applicable Law to
------------------
withhold or deduct any taxes from or in respect of any sum payable under this
Agreement or any of the Other Documents, (a) the sum payable to Agent or such
Lender shall be increased as may be necessary so that, after making all required
withholding or deductions, Agent or such Lender (as the case may be) receives an
amount equal to the sum it would have received had no such withholding or
deductions been made, (b) Borrower shall make such withholding or deductions,
and (c) Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with Applicable Law.
3.12 Withholding Tax Exemption. At least five (5) Business Days prior to
-------------------------
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States or any state thereof agrees that it will deliver to Borrower and Agent
two (2) duly completed copies of United States Internal Revenue Service Form
1001 or 4224, certifying in either case that such Lender is entitled to receive
payment under this Agreement and the Note without deduction or withholding of
any United States federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to Borrower and Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires (currently, three (3) successive calendar years for Form 1001
and one calendar year for Form 4224) or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by Borrower or Agent, in each case, certifying that such Lender is
entitled to receive payments under this Agreement and its Note without deduction
or withholding of any United States federal income taxes, unless an event
(including any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required that renders all
such forms inapplicable or that would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises Borrower
and Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income taxes.
IV. COLLATERAL: GENERAL TERMS
4.1 Security Interest in the Collateral. To secure the prompt payment and
-----------------------------------
performance to Agent and each Lender of the Obligations, Borrower and each of
its Subsidiaries hereby grant to Agent for its benefit and for the ratable
benefit of each Lender a continuing security interest in and to all of its
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Borrower and each of its Subsidiaries shall xxxx its books
and records as may be necessary or appropriate to evidence, protect and perfect
Agent's security interest and shall cause its financial statements to reflect
such security interest. Borrower and each of its Subsidiaries shall promptly
provide Agent with written notice of all
33
commercial tort claims in excess of $1,000,000, such notice to contain the case
title together with the applicable court and a brief description of the
claim(s). Upon delivery of each such notice, Borrower or the applicable
Subsidiary shall be deemed to hereby grant to Agent a security interest and lien
in and to such commercial tort claims and all proceeds thereof.
4.2 Perfection of Security Interest. Borrower and each of its Subsidiaries
-------------------------------
shall take all action that may be necessary or desirable, or that Agent may
reasonably request, so as at all times to maintain the validity, perfection,
enforceability and priority of Agent's security interest in the Collateral or to
enable Agent to protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to, (a) immediately discharging all Liens
other than Permitted Encumbrances, (b) obtaining landlords', warehouseman's or
mortgagees' lien waivers, (c) delivering to Agent, endorsed or accompanied by
such instruments of assignment as Agent may specify, and stamping or marking, in
such manner as Agent may reasonably request, any and all chattel paper,
instruments, letters of credits and advices thereof and documents evidencing or
forming a part of the Collateral, (d) entering into warehousing, lockbox and
other custodial arrangements reasonably satisfactory to Agent, and (e) executing
and delivering financing statements, control agreements, instruments of pledge,
mortgages, notices and assignments, in each case in form and substance
reasonably satisfactory to Agent, relating to the creation, validity,
perfection, maintenance or continuation of Agent's security interest under the
Uniform Commercial Code or other applicable law. Agent is hereby authorized to
file financing statements in accordance with the Uniform Commercial Code as
adopted in the Commonwealth of Massachusetts from time to time to the extent
consistent herewith. By their signatures hereto, Borrower and each of its
Subsidiaries hereby authorizes Agent to file against Borrower or such
Subsidiary, one or more financing continuation or amendment statements pursuant
to the Uniform Commercial Code in form and substance satisfactory to Agent
(which statements may have a description of collateral which is broader than
that set forth herein) to the extent consistent herewith. All reasonable
charges, expenses and fees Agent may incur in doing any of the foregoing, and
any local taxes relating thereto, shall be charged to Borrower's Account as a
Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at
Agent's option, shall be paid to Agent for its benefit and for the ratable
benefit of Lenders immediately upon demand.
4.3 Disposition of Collateral. Borrower and each of its Subsidiaries will
-------------------------
safeguard and protect all Collateral for Agent's general account and make no
disposition thereof whether by sale, lease or otherwise except (a) the sale of
Inventory in the ordinary course of business or (b) as provided for under
Section 7.1(b) hereof.
4.4 Preservation of Collateral. In addition to the rights and remedies set
--------------------------
forth in Section 11.1 hereof but subject to the limitations therein, including,
without limitation, providing ten (10) days prior written notice to the
Borrower, Agent: (a) may at any time take such reasonable steps as Agent deems
necessary to protect Agent's interest in and to preserve the Collateral
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of Borrower's or any of its Subsidiaries' premises a custodian who shall
have full authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use Borrower's or any of its Subsidiaries' owned
or leased lifts, hoists, trucks and other facilities or equipment for handling
or removing the
34
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrower's or any of its Subsidiaries' owned or leased property.
Borrower and each of its Subsidiaries shall cooperate fully with all of Agent's
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as Agent may direct. Agent's reasonable expenses of preserving the
Collateral, including any reasonable expenses relating to the bonding of a
custodian, shall be charged to Borrower's Account as a Revolving Advance and
added to the Obligations.
4.5 Ownership of Collateral. With respect to the Collateral, at the time
-----------------------
the Collateral becomes subject to Agent's security interest: (a) Borrower and
each of its Subsidiaries (as applicable) shall be the sole owner of and fully
authorized and able to sell, transfer, pledge and/or grant a first priority
security interest in each and every item of the its respective Collateral to
Agent (other than purchase money security interests permitted hereunder and
statutory liens); and, except for Permitted Encumbrances the Collateral shall be
free and clear of all Liens and encumbrances whatsoever; (b) each document and
agreement executed by Borrower or delivered to Agent or any Lender in connection
with this Agreement shall be true and correct in all respects; (c) all
signatures and endorsements of Borrower and each of its Subsidiaries that appear
on such documents and agreements shall be genuine and Borrower and each of its
Subsidiaries shall have full capacity to execute same; and (d) Borrower's and
its Subsidiaries' Equipment and Inventory shall be located at the locations set
forth on Schedule 4.5 and shall not be removed from such location(s) without the
------------
prior written consent of Agent except (i) with respect to the sale of Inventory
in the ordinary course of business, including, without limitation, to customer
locations, or dispositions in accordance with Section 7.1(b), (ii) Inventory in
transit from one location on Schedule 4.5 or otherwise permitted hereunder to
------------
another one location on Schedule 4.5 or otherwise permitted hereunder, (iii)
------------
transportation by employees of personal computing devices and related
accessories used by such employees in the ordinary course of business of the
Borrower or any Guarantor, or (iv) (A) upon thirty (30) days prior written
notice by Borrower to the Agent with respect to any new location and (B) receipt
by Agent of an executed landlord waiver for such location in form and substance
satisfactory to Agent.
4.6 Defense of Agent's and Lenders' Interests. Until (a) payment and
-----------------------------------------
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. Except as otherwise permitted herein, during such period Borrower or any
of its Subsidiaries shall not, without Agent's prior written consent, pledge,
sell (except Inventory in the ordinary course of business), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Borrower and each of its Subsidiaries shall defend Agent's interests
in the Collateral against any and all Persons whatsoever. At any time following
demand by Agent for payment of all Obligations but subject to the limitations of
Section 11.1 hereof, including, without limitation, providing ten (10) days
prior written notice to the Borrower, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: books, records, labels,
stationery, documents, instruments and advertising materials. If Agent exercises
this right to take possession of the Collateral, Borrower and each of its
Subsidiaries shall, upon demand, assemble it in the best manner possible and
make it available to Agent at a place reasonably convenient to Agent. In
addition, with respect to all Collateral, Agent and Lenders shall be entitled to
all of the rights and remedies set forth herein and further provided by the
Uniform
35
Commercial Code or other applicable law. Upon the occurrence of an Event of
Default, Borrower and each of its Subsidiaries shall, and Agent may, at its
option, instruct all suppliers, carriers, forwarders, warehousers or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent's order and if they shall come into Borrower's or any of its Subsidiaries'
possession, they, and each of them, shall be held by Borrower or its Subsidiary,
as applicable, in trust as Agent's trustee, and Borrower or its Subsidiary, as
applicable, will immediately deliver them to Agent in their original form
together with any necessary endorsement.
4.7 Books and Records. Borrower and of its Subsidiaries shall (a) keep
-----------------
proper books of record and account in which full, true and correct entries will
be made of all dealings or transactions of or in relation to its business and
affairs; (b) set up on its books accruals with respect to all taxes,
assessments, charges, levies and claims; and (c) on a reasonably current basis
set up on its books, from its earnings, allowances against doubtful Receivables,
advances and investments and all other proper accruals (including without
limitation by reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence, or amortization
of properties), which should be set aside from such earnings in connection with
its business. All determinations pursuant to this subsection shall be made in
accordance with, or as required by, GAAP consistently applied in the opinion of
such independent public accountant as shall then be regularly engaged by
Borrower and its Subsidiaries and meet the standards for such accountants
required under Section 9.7 hereof.
4.8 Financial Disclosure. Borrower and each of its Subsidiaries hereby
--------------------
irrevocably authorizes and directs all accountants and auditors employed by
Borrower or any of its Subsidiaries at any time during the Term to exhibit and
deliver to Agent and each Lender copies of any of Borrower's or its
Subsidiaries' financial statements.
4.9 Compliance with Laws. Borrower and each of its Subsidiaries shall (a)
--------------------
comply in all material respects with (i) all acts, rules, regulations and orders
of any legislative, administrative or judicial body or official applicable to
the Collateral or any part thereof or to the operation of Borrower's or its
Subsidiaries' business and (ii) all obligations, covenants and conditions
contained in all material Contractual Obligations and (b) maintain or obtain all
licenses, qualifications and permits now held or hereafter required to be held
by such Person, unless the non-compliance or absence with which could not
reasonably be expected to have a Material Adverse Effect. Borrower and each of
its Subsidiaries may, however, contest or dispute any acts, rules, regulations,
orders and directions of those bodies or officials in good faith and in any
reasonable manner, provided that any related Lien is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of Agent to
protect Agent's Lien on or security interest in the Collateral. The assets of
Borrower and each of its Subsidiaries at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the assets of Borrower and its Subsidiaries so that
such insurance shall remain in full force and effect.
4.10 Inspection of Premises. Subject to Section 3.4, at all reasonable
----------------------
times and at reasonable intervals Agent shall have access to and the right to
audit, check, inspect and make abstracts and copies from Borrower's and its
Subsidiaries' books, records, audits, correspondence and all other papers
relating to the Collateral and the operation of Borrower's or
36
its Subsidiaries' business. Agent and its agents may upon prior written notice
enter upon any of Borrower's and its Subsidiaries' premises at any time during
business hours and at any other reasonable time, and from time to time, for the
purpose of inspecting the Collateral and any and all records pertaining thereto
and the operation of Borrower's or its Subsidiaries' business. All reasonable
costs and expenses of inspections permitted under this Section 4.10 shall be
borne by Borrower.
4.11 Insurance. Schedule 4.11 hereto describes all of the casualty and
--------- -------------
property insurance policies, held by the Borrower and each of its Subsidiaries,
including the amounts of such policies. Borrower shall bear the full risk of any
loss of any nature whatsoever with respect to the Collateral. At Borrower's own
cost and expense in amounts and with carriers reasonably acceptable to Agent.
Borrower and each of its Subsidiaries shall (a) keep all its insurable
properties and properties in which Borrower or any of its Subsidiaries has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to Borrower's or any of its Subsidiaries including, without limitation,
business interruption insurance; (b) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to Borrower or
its Subsidiaries insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of Borrower
or any of its Subsidiaries either directly or through authority to draw upon
such funds or to direct generally the disposition of such assets; (c) maintain
public and product liability insurance against claims for personal injury, death
or property damage suffered by others; (d) maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which Borrower or its Subsidiaries are engaged in business;
and (e) furnish Agent upon request with (i) copies of all policies and evidence
of the maintenance of such policies by the renewal thereof at least thirty (30)
days before any expiration date, and (ii) appropriate loss payable endorsements
in form and substance reasonably satisfactory to Agent, naming Agent as a
co-insured and additional loss payee as its interests may appear with respect to
all insurance coverage referred to in clauses (a), and (c) above, and providing
(A) that all proceeds (subject to below) thereunder shall be payable to Agent,
(B) no such insurance shall be affected by any act or neglect of the insured or
owner of the property described in such policy, and (C) that such policy and
loss payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. In the event of any
loss thereunder of $1,000,000 or less in the aggregate, the carriers named
therein hereby are directed by Agent to make payment for such loss to Borrower
or any of its Subsidiaries and not to the Agent. In the event of any loss
thereunder in excess of $1,000,000 in the aggregate, the carriers named therein
hereby are directed by Borrower and its Subsidiaries to make payment for such
loss to Agent and not to Borrower or any of its Subsidiaries and Agent jointly.
If any insurance losses are paid by check, draft or other instrument payable to
Borrower and Agent jointly, Agent may endorse Borrower's or its Subsidiaries'
name thereon and do such other things as Agent may deem advisable to reduce the
same to cash. During the continuance of an Event of Default, Agent is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a), and (b) above. All loss recoveries in excess of $1,000,000 in
the aggregate received by Agent upon any such insurance may be applied to the
Obligations, (x) first to outstanding fees, expenses and interest owing to the
Agent and Lenders,
37
(y) second to any outstanding Swingline Advances and (z) third, to the remaining
Advances in such order as Agent may determine, subject to Borrower's ability to
reborrow Revolving Advances in accordance with the terms hereof. Any surplus
shall be paid by Agent to Borrower or applied as may be otherwise required by
law. Any deficiency thereon shall be paid by Borrower to Agent, on demand. In
the event Borrower or any of its Subsidiaries receives any insurance proceeds,
then Agent may, in its sole discretion, either remit the insurance proceeds to
Borrower or any of its Subsidiaries (as applicable) upon Borrower providing
Agent with evidence reasonably satisfactory to Agent that the insurance proceeds
will be used by Borrower or any of its Subsidiaries (as applicable) to repair,
replace or restore the insured property which was the subject of the insurable
loss, or apply the proceeds to the Obligations, as aforesaid.
4.12 Failure to Pay Insurance. If Borrower or any of its Subsidiaries fails
------------------------
to obtain insurance as hereinabove provided, or to keep the same in force,
Agent, if Agent so elects, may obtain such insurance and pay the premium
therefor on behalf of Borrower or any of its Subsidiaries, and charge Borrower's
Account therefor as a Revolving Advance of a Domestic Rate Loan (subject to
Section 3.1 hereof) and such reasonable expenses so paid shall be part of the
Obligations.
4.13 Payment of Taxes. Borrower and each of its Subsidiaries will pay, when
----------------
due, all taxes, assessments and other Charges lawfully levied or assessed upon
Borrower or any of its Subsidiaries or any of the Collateral including, without
limitation, real and personal property taxes, assessments and charges and all
franchise, income, employment, social security benefits, withholding, and sales
taxes unless being contested in good faith and for which proper reserves have
been established. If any tax by any governmental authority is or may be imposed
on or as a result of any transaction between Borrower or any of its Subsidiaries
and Agent or any Lender which Agent or any Lender may be required to withhold or
pay or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent's or any
Lender's opinion, may reasonably be expected to create a valid Lien on the
Collateral Agent may without notice to Borrower or any of its Subsidiaries pay
such taxes, assessments or other Charges and Borrower and each of its
Subsidiaries hereby indemnify and hold Agent and each Lender harmless in respect
thereof. The amount of any payment by Agent under this Section 4.13 shall be
charged to Borrower's Account as a Revolving Advance and added to the
Obligations and, until Borrower shall furnish Agent with an indemnity therefor
(or supply Agent with evidence satisfactory to Agent that due provision for the
payment thereof has been made), Agent may hold without interest any balance
standing to Borrower's credit and Agent shall retain its security interest in
any and all Collateral held by Agent.
4.14 Payment of Leasehold Obligations. Borrower and each of its
--------------------------------
Subsidiaries shall at all times pay, when and as due, its rental obligations
under all leases under which it is a tenant, and shall otherwise comply, in all
material respects, with all other terms of such leases and keep them in full
force and effect, in each case, unless contested in good faith and reasonable
reserves are established and, at Agent's request will provide evidence of having
done so.
4.15 Receivables.
-----------
(a) Nature of Receivables. Each of the Eligible Receivables and
---------------------
Eligible Government Receivables shall be a bona fide and valid account
representing a bona fide
38
indebtedness incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto (provided immaterial invoice errors shall
not be deemed to be a breach hereof) with respect to an absolute sale or lease
and delivery of goods upon stated terms of Borrower or the applicable
Subsidiary, or work, labor or services theretofore rendered by Borrower or the
applicable Subsidiary as of the date each Receivable is created.
(b) Solvency of Customers. Each Eligible Receivables and Eligible
---------------------
Government Receivables included in the Formula Amount and, to the best of
Borrower's or any of its Subsidiaries' knowledge, as of the date each such
Receivable is created, is and will be solvent and able to pay all such
Receivables on which the Customer is obligated in full when due or with respect
to such Customers of Borrower or Subsidiary who are not solvent Borrower or the
applicable Subsidiary has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
(c) Location of Borrower. Borrower's chief executive office is
--------------------
located at 000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxxxxx 00000 and all of
Borrower's books and records pertaining to its receivable are maintained at such
executive office or other permitted locations. Until written notice is given to
Agent by Borrower of any other office at which Borrower keeps its records
pertaining to Receivables, all such records shall be kept at such executive
office or other permitted locations.
(d) Collection of Receivables. Until Borrower's or its
-------------------------
Subsidiaries' authority to do so is terminated by Agent (which notice Agent may
give at any time following the occurrence of an Event of Default or a Default or
when Agent in its sole discretion deems it to be in Lenders' best interest to do
so), Borrower and each of its Subsidiaries will, at Borrower's and its
Subsidiaries' sole cost and expense, collect all amounts received on Receivables
subject to permitted adjustments and usual terms and conditions, and shall not
commingle such collections with Borrower's funds or use the same except to pay
Obligations. Borrower and each of its Subsidiaries shall deposit in the Blocked
Account or, upon request by Agent, deliver to Agent, in original form and on the
date of receipt thereof, all checks, drafts, notes, money orders, acceptances,
cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. Upon the occurrence
-----------------------------------------
of an Event of Default, Agent shall have the right to send notice of the
assignment of, and Agent's security interest in, the Receivables to any and all
Customers or any third party holding or otherwise concerned with any of the
Collateral. Thereafter, Agent shall have the sole right to collect the
Receivables, take possession of the Collateral, or both. Agent's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrower's
Account and added to the Obligations.
(f) Power of Agent to Act on Borrower's Behalf. Agent shall have
------------------------------------------
the right to receive, endorse, assign and/or deliver in the name of Agent or
Borrower or any of its Subsidiaries any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and Borrower
and each of its Subsidiaries hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed. Upon an Event of Default except with
respect to the following subparagraph (iii) (which power the Agent may exercise
at
39
any time), Borrower and each of its Subsidiaries hereby constitute Agent or
Agent's designee as Borrower's and each of its Subsidiaries' attorney with power
(i) to endorse Borrower's and each of its Subsidiaries' name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign Borrower's and each of its Subsidiaries' name on any
invoice or xxxx of lading relating to any of the Receivables, drafts against
Customers, assignments and verifications of Receivables; (iii) to send
verifications of Receivables to any Customer; (iv) to sign Borrower's and each
of its Subsidiaries' name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent's interest in the Collateral and to file same; (v) to demand
payment of the Receivables; (vi) to enforce payment of the Receivables by legal
proceedings or otherwise; (vii) to exercise all of Borrower's and each of its
Subsidiaries' rights and remedies with respect to the collection of the
Receivables and any other Collateral; (viii) to settle, adjust, compromise,
extend or renew the Receivables; (ix) to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (x) to prepare, file and sign
Borrower's and each of its Subsidiaries' name on a proof of claim in bankruptcy
or similar document against any Customer; (xi) to prepare, file and sign
Borrower's and each of its Subsidiaries' name on any notice of Lien, assignment
or satisfaction of Lien or similar document in connection with the Receivables;
and (xii) to do all other acts and things necessary to carry out this Agreement.
All acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence; this power being coupled with
an interest is irrevocable while any of the Obligations remain unpaid. Agent
shall have the right at any time to change the address for delivery of mail
addressed to Borrower or any of its Subsidiaries to such address as Agent may
designate and to receive, open and dispose of all mail addressed to Borrower or
any of its Subsidiaries.
(g) No Liability. Neither Agent nor any Lender shall, under any
------------
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Agent may, without notice or consent from
Borrower or any of its Subsidiaries, xxx upon or otherwise collect, extend the
time of payment of, compromise or settle for cash, credit or upon any terms any
of the Receivables or any other securities, instruments or insurance applicable
thereto and/or release any obligor thereof. Agent is authorized and empowered to
accept the return of the goods represented by any of the Receivables, without
notice to or consent by Borrower or any of its Subsidiaries, all without
discharging or in any way affecting Borrower's or any of its Subsidiaries'
liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All
----------------------------------------------------
proceeds of Collateral shall be deposited by Borrower and each of its
Subsidiaries into a lockbox account, dominion account or such other "blocked
account" ("Blocked Accounts") as Agent may require pursuant to an agreement
("Blocked Account Agreement") with such bank as may be selected by Borrower and
each of its Subsidiaries and be acceptable to Agent, including Mellon Bank,
N.A., Bank of America, N.A. and SunTrust Bank, N.A., provided that the Borrower
shall not be required to enter into a Blocked Account Agreement with respect to
its investment account at Fleet National Bank unless otherwise requested in
writing by the Agent. Borrower and each of its Subsidiaries shall issue to any
such bank, an irrevocable letter of instruction directing said
40
bank to transfer such funds so deposited to Agent, either to any account
maintained by Agent at said bank or by wire transfer to appropriate account(s)
of Agent. All funds deposited in such Blocked Accounts shall immediately become
the property of Agent and Borrower and each of its Subsidiaries shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
blocked account arrangement, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts ("Depository
Accounts") in the name of Agent at a bank or banks for the deposit of such funds
and Borrower or the applicable Subsidiary shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts. All costs and
expenses of opening and maintaining the Blocked Accounts (and any Depository
Accounts) shall be borne by Borrower. Notwithstanding the foregoing, the
definition of "Blocked Accounts" shall not include any account with a balance at
all times of less than $25,000 during any consecutive ninety (90) day period.
(i) Adjustments. Borrower and each of its Subsidiaries will
-----------
not, without Agent's consent, compromise or adjust any Receivables in excess of
$25,000 (or extend the time for payment thereof) or accept any returns of
merchandise or grant any additional discounts, allowances or credits thereon
except for those compromises, adjustments, extensions, returns, discounts,
credits and allowances as have been heretofore customary in the business of
Borrower and each of its Subsidiaries.
4.16 Inventory. To the extent Inventory held for sale or lease has
---------
been produced by Borrower or any of its Subsidiaries, it has been and will be
produced by Borrower and its Subsidiaries in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder.
4.17 Maintenance of Equipment. The Equipment shall be maintained in
------------------------
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower and each of its Subsidiaries shall not use or operate the Equipment in
violation of any law, statute, ordinance, code, rule or regulation, unless such
violation could not reasonably be expected to result in a Material Adverse
Effect.
4.18 Exculpation of Liability. Nothing herein contained shall be
------------------------
construed to constitute Agent or any Lender as Borrower's and each of its
Subsidiaries' agent for any purpose whatsoever, nor shall Agent or any Lender be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof unless arising from gross negligence or willful misconduct of
Agent or Lender or their agents. Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assume any of Borrower's or
any of its Subsidiaries' obligations under any contract or agreement assigned to
Agent or such Lender, and neither Agent nor any Lender shall be responsible in
any way for the performance by Borrower or any of its Subsidiaries of any of the
terms and conditions thereof.
41
4.19 Environmental Matters.
---------------------
(a) Borrower and each of its Subsidiaries shall ensure that
the Real Property remains in compliance in all material respects with all
Environmental Laws and they shall not place, use, handle, generate, store,
discharge, treat, dispose or permit any of the above with respect to any
Hazardous Substances on any Real Property, except as permitted by applicable
Environmental Laws.
(b) Borrower and each of its Subsidiaries shall (i) employ in
connection with the use of the Real Property appropriate technology necessary to
maintain compliance in all material respects with any applicable Environmental
Laws and (ii) dispose of any and all Hazardous Waste generated at the Real
Property only at facilities and with carriers that maintain valid permits under
RCRA and any other applicable Environmental Laws.
(c) In the event Borrower or any of its Subsidiaries obtains,
gives or receives notice of any Release or threat of Release of a reportable
quantity of any Hazardous Substances at the Real Property (any such event being
hereinafter referred to as a "Hazardous Discharge") or receives any notice of
violation, request for information or notification that it is potentially
responsible for investigation or cleanup of environmental conditions at the Real
Property, demand letter or complaint, order, citation, or other written notice
with regard to any Hazardous Discharge or violation of Environmental Laws
affecting the Real Property or Borrower's or any of its Subsidiaries' interest
therein (any of the foregoing is referred to herein as an "Environmental
Complaint") from any Person, including any state agency responsible in whole or
in part for environmental matters in the state in which the Real Property is
located or the United States Environmental Protection Agency (any such person or
entity hereinafter the "Authority"), then Borrower or the applicable Subsidiary
shall, within five (5) Business Days, give written notice of same to Agent,
along with a summary, detailing facts and circumstances of which Borrower or any
of its Subsidiaries is aware giving rise to the Hazardous Discharge or
Environmental Complaint and the measures that Borrower or the applicable
Subsidiary proposes to take with respect thereto. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and the Collateral and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(d) Borrower and each of its Subsidiaries shall promptly
forward to Agent copies of any request for information, notification of
potential liability, demand letter relating to potential responsibility with
respect to the investigation or cleanup of Hazardous Substances at any other
site owned, operated or used by Borrower or any of its Subsidiaries to dispose
of Hazardous Substances and shall keep Agent updated (including forwarding
copies of material correspondence) regarding the status such claims to Agent
until the claim is settled. Borrower and each of its Subsidiaries shall promptly
forward to Agent copies of all documents and reports concerning a Hazardous
Discharge at the Real Property that Borrower and any of its Subsidiaries are
required to file under any Environmental Laws. Such information is to be
provided solely to allow Agent to protect Agent's security interest in the Real
Property and the Collateral and is not intended to create nor shall it create
any obligation upon Agent or any Lender with respect thereto.
42
(e) Borrower and each of its Subsidiaries shall respond promptly to
any Hazardous Discharge or Environmental Complaint and take all necessary action
in order to comply with Environmental Laws and to avoid subjecting the
Collateral or Real Property to any Lien. If Borrower or any of its Subsidiaries
shall fail to respond promptly to any Hazardous Discharge or Environmental
Complaint or Borrower or any of its Subsidiaries shall fail to comply with any
of the requirements of any Environmental Laws, Agent on behalf of Lenders may,
but without the obligation to do so, for the sole purpose of protecting Agent's
interest in the Collateral: (A) give required notices, or (B) enter onto the
Real Property (or authorize third parties to enter onto the Real Property) and
take such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances, shall
be paid upon demand by Borrower, and until paid shall be charged to Borrower's
Account as a Revolving Advance of a Domestic Rate Loan (subject to Section 3.1
hereof) and such expenses so paid shall be part of the Obligations.
(f) Promptly upon the reasonable written request of Agent from time
to time, Borrower and each of its Subsidiaries shall provide Agent, at
Borrower's expense, with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable in the
reasonable opinion of Agent and in conformity with applicable ASTM or industry
standards for such site assessment or audit, to ascertain the existence of a
Hazardous Discharge and the potential costs in connection with abatement,
cleanup and removal of any Hazardous Substances found on, under, at or within
the Real Property as required by applicable Environmental Laws in connection
with such Hazardous Discharge. Any report or investigation of such Hazardous
Discharge proposed and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent.
If such estimates, individually or in the aggregate, exceed $100,000, Agent
shall have the right to require Borrower or any of its Subsidiaries to post a
bond, letter of credit or other security reasonably satisfactory to Agent to
secure payment of such costs and expenses.
(g) Borrower and each of its Subsidiaries shall defend and
indemnify Agent and Lenders and hold Agent, Lenders and their respective
employees, agents, directors and officers harmless from and against all loss,
liability, damage and expense, claims, costs, fines and penalties, including
reasonable attorney's fees, suffered or incurred by Agent or Lenders under or on
account of any Environmental Laws, including, without limitation, the assertion
of any Lien thereunder, with respect to any Hazardous Discharge, the presence of
any Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
except to the extent such loss, liability, damage or expense is attributable to
any Hazardous Discharge resulting from actions on the part of Agent or any
Lender. Borrower's and each of its Subsidiaries' obligations under this Section
4.19 shall arise upon the discovery of the presence of any Hazardous Substances
at the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrower's and each of its
43
Subsidiaries' obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(h) The Real Property of Borrower and each of its Subsidiaries is
set forth on Schedule 4.19 attached hereto. For purposes of Section 4.19 and
-------------
5.7, all references to Real Property shall be deemed to include all of
Borrower's and each of its Subsidiaries' right, title and interest in and to its
owned and leased premises.
4.20 Financing Statements. Except as respects the financing statements
--------------------
filed by Agent and the financing statements described on Schedule 1.3, no
------------
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Authority. Borrower and each Guarantor has full power, authority and
---------
legal right to enter into this Agreement and the Other Documents and to perform
all its respective Obligations hereunder and thereunder. This Agreement and the
Other Documents constitute the legal, valid and binding obligation of Borrower
and each of its Subsidiaries enforceable in accordance with their terms, except
as such enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally or general
equitable principles. The execution, delivery and performance of this Agreement
and of the Other Documents (a) are within Borrower's and each of its
Subsidiaries' corporate powers, have been duly authorized, are not in
contravention of law or the terms of Borrower's and each of its Subsidiaries'
by-laws, certificate of incorporation or other similar documents relating to
Borrower's and each of its Subsidiaries' formation or to the conduct of
Borrower's and each of its Subsidiaries' business or of any material agreement
or undertaking to which Borrower or any of its Subsidiaries is a party or by
which Borrower or any of its Subsidiaries is bound, and (b) will not conflict
with nor result in any breach in any of the provisions of or constitute a
default under or result in the creation of any Lien except Permitted
Encumbrances upon any asset of Borrower or any of its Subsidiaries under the
provisions of any agreement, charter document, instrument, by-law, or other
instrument to which Borrower or any of its Subsidiaries is a party or by which
it or its property may be bound.
5.2 Formation and Qualification.
---------------------------
(a) The Borrower is duly incorporated and in good standing under the
laws of the State of Delaware and the Borrower is qualified to do business and
is in good standing in the states listed on Schedule 5.2(a) which constitute all
---------------
states in which qualification and good standing are necessary for the Borrower
to conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect. The Borrower has
delivered to Agent true and complete copies of its certificate of incorporation
and by-laws and will promptly notify Agent of any amendment or changes thereto.
(b) All the Subsidiaries of the Borrower are listed on Schedule 5.2
------------
(b), along with each Subsidiary's state of incorporation and all states in which
---
the Subsidiary is qualified to
44
do business. Each Subsidiary is in good standing under the laws of the state in
which it is incorporated and is qualified to do business and is in good standing
under the laws of all other states listed on Schedule 5.2(b) which constitute
---------------
all states in which qualification and good standing are necessary for the
Borrower to conduct its business and own its property and where the failure to
so qualify could reasonably be expected to have a Material Adverse Effect. The
Borrower has delivered to Agent true and complete copies of the certificates of
incorporation and by-laws of all Subsidiaries, and the Borrower will promptly
notify Agent of any amendment or changes thereto.
5.3 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties of Borrower and each of its Subsidiaries contained in this Agreement
and the Other Documents shall be true at the time of Borrower's execution of
this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
5.4 Tax Returns. Borrower's and each of its Subsidiaries' federal tax
-----------
identification number are set forth on Schedule 5.4. Borrower and each of its
------------
Subsidiaries' have filed all federal, state and local tax returns and other
reports each is required by law to file and has paid all taxes, assessments,
fees and other governmental charges that are due and payable unless being
contested in good faith and for which adequate reserves have been established.
Federal, state and local income tax returns of Borrower and each of its
Subsidiaries have been examined and reported upon by the appropriate taxing
authority or closed by applicable statute and satisfied for all fiscal years
prior to and including the fiscal year ending December 31, 1998. The provision
for taxes on the books of Borrower and each of its Subsidiaries is adequate for
all years not closed by applicable statutes, and for its current fiscal year,
and Borrower and each of its Subsidiaries have no knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.
5.5 Financial Statements.
--------------------
(a) The twelve-month cash flow projections of Borrower and each of
its Subsidiaries and their projected balance sheets as of the Closing Date
copies of which are annexed hereto as Exhibit 5.5(a) (the "Projections"), were
prepared by the Chief Financial Officer of Borrower, are based on underlying
assumptions which provide a reasonable basis for the projections contained
therein.
(b) The consolidated balance sheets of Borrower, its Subsidiaries
and such other Persons described therein (including the accounts of all
Subsidiaries for the respective periods during which a subsidiary relationship
existed) as of December 31, 2001, and the related consolidated statements of
income, changes in stockholder's equity, and changes in cash flow for the period
ended on such date, all accompanied by a report thereon containing opinions
without qualification by independent certified public accountants, copies of
which have been delivered to Agent, have been prepared in good faith and in
accordance with GAAP, consistently applied (except for changes in application in
which such accountants concur and present fairly the financial position of
Borrower or its Subsidiaries at such date and the results of their operations
for such period. Since December 31, 2001 and except for losses in the Borrower's
fiscal quarter ending March 30, 2002 (which the Borrower does not concede was
material), there has been no
45
material change in the condition, financial or otherwise, of Borrower and its
Subsidiaries as shown on the consolidated balance sheet as of such date, except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.
5.6 Corporate Name. Borrower and its Subsidiaries have not been known by
--------------
any other corporate name in the past five years and do not sell Inventory under
any other name except as set forth on Schedule 5.6, nor has Borrower or any of
------------
its Subsidiaries been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person during the
preceding five (5) years.
5.7 O.S.H.A. and Environmental Compliance.
-------------------------------------
(a) Borrower and each of its Subsidiaries has duly complied with, and
its facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there are no outstanding citations, notices or
orders of non-compliance issued to Borrower or any of its Subsidiaries or
relating to its business, assets, property, leaseholds or Equipment under any
such laws, rules or regulations.
(b) Borrower and each of its Subsidiaries has been issued all
required federal, state and local licenses, authorizations, approvals,
certificates or permits relating to all applicable Environmental Laws.
(c) (i) Neither Borrower nor its Subsidiaries have released (as that
term is defined in the Federal Comprehensive Environmental Response,
Compensation & Liability Act, as amended) and, to the Borrower's knowledge, no
party has released Hazardous Substances at, upon, to, in, under or within any
Real Property or any premises leased by Borrower or any of its Subsidiaries in
violation of applicable Environmental Law; (ii) to the knowledge of Borrower and
its Subsidiaries, there are no underground storage tanks or polychlorinated
biphenyls on the Real Property or any premises leased by Borrower or any of its
Subsidiaries; (iii) to the knowledge of Borrower and its Subsidiaries, neither
the Real Property nor any premises leased by Borrower or any of its Subsidiaries
has ever been used as a treatment, storage or disposal facility of Hazardous
Waste; and (iv) to the knowledge of Borrower and its Subsidiaries, no Hazardous
Substances are present on the Real Property or any premises leased by Borrower
or any of its Subsidiaries, excepting which do not violate applicable
Environmental Law.
5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
-----------------------------------------------------------
(a) Borrower and each of its Subsidiaries, individually and taken as
a whole, is solvent, able to pay its debts as they mature, has capital
sufficient to carry on its business and all businesses in which it is about to
engage, and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of its
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
its assets (calculated on a going concern basis) will be in excess of the amount
of its liabilities.
46
(b) Except as disclosed in Schedule 5.8(b), neither Borrower nor
---------------
any of its Subsidiaries has any (i) pending or threatened litigation,
arbitration, actions or proceedings which if adversely determined could not
reasonably be expected to result in a Material Adverse Effect and (ii)
liabilities or indebtedness for borrowed money other than the Obligations and
the Permitted Indebtedness.
(c) Neither Borrower nor any of its Subsidiaries is in violation
of any applicable statute, regulation or ordinance in any respect which could
reasonably be expected to have a Material Adverse Effect, nor is Borrower or any
of its Subsidiaries in violation of any order of any court, governmental
authority or arbitration board or tribunal.
(d) Neither Borrower nor any of its Subsidiaries nor any member
of the Controlled Group maintains or contributes to any Plan other than those
listed on Schedule 5.8(d) hereto. Except as set forth in Schedule 5.8(d), (i) no
--------------- ---------------
Plan has incurred any "accumulated funding deficiency," as defined in Section
302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and
Borrower and each of its Subsidiaries and each member of the Controlled Group
has met all applicable minimum funding requirements under Section 302 of ERISA
in respect of each Plan, (ii) each Plan which is intended to be a qualified plan
under Section 401(a) of the Code as currently in effect has been determined by
the Internal Revenue Service to be qualified under Section 401(a) of the Code
and the trust related thereto is exempt from federal income tax under Section
501(a) of the Code, (iii) neither Borrower nor any of its Subsidiaries nor any
member of the Controlled Group has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither
Borrower nor any of its Subsidiaries nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) neither Borrower
nor any of its Subsidiaries nor any member of the Controlled Group has breached
any of the responsibilities, obligations or duties imposed on it by ERISA with
respect to any Plan, (vii) neither Borrower nor any of its Subsidiaries nor any
member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which could
give rise to any such liability, (viii) neither Borrower nor any of its
Subsidiaries nor any member of the Controlled Group nor any fiduciary of, nor
any trustee to, any Plan, has engaged in a "prohibited transaction" described in
Section 406 of the ERISA or Section 4975 of the Code nor taken any action which
would constitute or result in a Termination Event with respect to any such Plan
which is subject to ERISA, (ix) Borrower, each of its Subsidiaries and each
member of the Controlled Group has made all contributions due and payable with
respect to each Plan, (x) there exists no event described in Section 4043(b) of
ERISA, for which the thirty (30) day notice period contained in 29 CAR (S)
2615.3 has not been waived, (xi) neither Borrower nor any of its Subsidiaries
nor any member of the Controlled Group has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than employees or former employees of Borrower, any of its Subsidiaries and any
member of the Controlled Group, and (xii) neither Borrower nor any of its
Subsidiaries nor any member of the Controlled Group has withdrawn,
47
completely or partially, from any Multiemployer Plan so as to incur liability
under the Multiemployer Pension Plan Amendments Act of 1980.
5.9 Intentionally Left Blank
------------------------
5.10 Licenses and Permits. Except as set forth in Schedule 5.10, Borrower
-------------------- -------------
and each of its Subsidiaries (a) are in compliance with and (b) have procured
and are now in possession of, all material licenses or permits required by any
applicable federal, state, provincial or local law or regulation for the
operation of its business in each jurisdiction wherein it is now conducting or
proposes to conduct business and where the failure to procure such licenses or
permits could have a Material Adverse Effect.
5.11 Default of Indebtedness. Borrower and each of its Subsidiaries are
-----------------------
not in default in the payment of the principal of or interest on any
Indebtedness in excess of $1,000,000 or under any instrument or agreement under
or subject to which any Indebtedness has been issued and no event has occurred
under the provisions of any such instrument or agreement which with or without
the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
5.12 No Default. Borrower and each of its Subsidiaries are not in default
----------
in the payment or performance of any of its contractual obligations in excess of
$1,000,000 and no Default has occurred.
5.13 Intentionally Left Blank
------------------------
5.14 Margin Regulations. Neither Borrower nor any of its Subsidiaries is
------------------
engaged, nor will it engage, principally or as one of its important activities,
in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.
5.15 Investment Company Act. Neither Borrower nor any of its Subsidiaries
----------------------
is an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is it controlled by such a
company.
5.16 Disclosure. No representation or warranty made by Borrower or any of
----------
its Subsidiaries in this Agreement or in any financial statement, report,
certificate or any other document furnished in connection herewith contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower or any of its Subsidiaries or which reasonably should be
known to Borrower or any of its Subsidiaries which Borrower or any of its
Subsidiaries has not disclosed to Agent in writing with respect to the
transactions contemplated by this Agreement which could reasonably be expected
to have a Material Adverse Effect.
5.17 Intentionally Left Blank.
------------------------
48
5.18 Interest Rate Protection Agreement. Neither Borrower nor any of its
----------------------------------
Subsidiaries is not a party to, nor will it be a party to, any Interest Rate
Protection Agreement unless it is a Secured Interest Rate Protection Agreement.
5.19 Conflicting Agreements. No provision of any mortgage, indenture,
----------------------
contract, agreement, judgment, decree or order binding on Borrower or any of its
Subsidiaries or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the Other
Documents.
5.20 Application of Certain Laws and Regulations. Neither Borrower nor any
-------------------------------------------
Subsidiary of Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.21 Business and Property of Borrower. Upon and after the Closing Date,
---------------------------------
Borrower and each of its Subsidiaries do not propose to engage in any business
other than the Line of Business or lines of business and activities necessary,
incidental or related to conduct its business as presently conducted. On the
Closing Date, Borrower and its Subsidiaries will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of Borrower and each of its Subsidiaries. Neither Borrower nor any of its
Subsidiaries has changed or otherwise added any locations at which it conducts
business or maintains any assets or other property, except as previously
disclosed in writing to the Agent or as otherwise permitted herein.
5.22 Section 20 Subsidiaries. Borrower does not intend to use and shall
-----------------------
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
5.23 Investigations, Audits, Etc. Except as set forth on Schedule 5.23, as
--------------------------- -------------
of Closing neither Borrower nor any of its Subsidiaries is the subject of any
review or audit by the Internal Revenue Service or any governmental
investigation concerning the violation or possible violation of any law.
5.24 Brokerage. Except as set forth on Schedule 5.24, there are no claims
--------- -------------
for broker's, finder's, due diligence, structuring, debt or equity placement
fees, commissions, or similar compensation payable with respect to the
consummation of this financing, other than fees payable to the Lenders.
VI. AFFIRMATIVE COVENANTS.
Borrower shall and shall cause each of its Subsidiaries to, until payment
in full of the Obligations and termination of this Agreement:
6.1 Payment of Fees. Pay to Agent on demand all usual and customary fees
---------------
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b)
49
the establishment and maintenance of any Blocked Accounts or Depository Accounts
as provided for in Section 4.15(h). Agent may, without making demand, charge
Borrower's Account for all such fees and expenses.
6.2 Conduct of Business and Maintenance of Existence and Assets.
-----------------------------------------------------------
(a) Conduct and operate its business according to good business
practices and maintain all of its properties useful or necessary in its business
in good working order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of this Agreement),
(b) keep in full force and effect its existence and comply in all material
respects with the laws and regulations governing the conduct of its business
where the failure to do so could reasonably be expected to have a Material
Adverse Effect; and (c) make all such reports and pay all such franchise and
other taxes and license fees and do all such other acts and things as may be
lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision, the
absence of which could not reasonably be expected to have a Material Adverse
Effect.
6.3 Violations. Promptly notify Agent in writing of any violation of any
----------
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.
6.4 Intentionally Left Blank
------------------------
6.5 Minimum Consolidated Net Worth. Maintain a minimum Consolidated Net
------------------------------
Worth of (i) $125,000,000 plus (ii) on a cumulative basis, an amount equal to
fifty percent (50%) of the Consolidated Net Income of Borrower and its
Subsidiaries in each quarter thereafter, commencing with the fiscal quarter
ended March 30, 2002.
6.6 Maximum Funded Debt Ratio. Maintain a Funded Debt Ratio of not
-------------------------
greater than 2.0:1.0.
6.7 Execution of Supplemental Instruments. Execute and deliver to Agent
-------------------------------------
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.8 Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
-----------------------
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower and each of its Subsidiaries shall have provided for
such reserves as Agent may reasonably deem proper and necessary, subject at all
times to any applicable subordination arrangement in favor of Lenders.
50
6.9 Standards of Financial Statements. Cause all financial statements
---------------------------------
referred to in Sections 9.7, 9.8, 9.9, 9.11, 9.12, 9.13 and 9.14 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
6.10 Covenant to Assume Obligations and Give Security. Upon (a) the
------------------------------------------------
request of the Agent, (b) the formation or acquisition of any new direct or
indirect Subsidiary of Borrower or any of its Subsidiaries, or (c) the
acquisition of any property by Borrower or any of its Subsidiaries, and such
property, in the judgment of the Agent, upon request shall not already be
subject to a perfected first priority security interest in favor of the Agent
for the benefit of the Lenders, then Borrower and each of its Subsidiaries
shall, in each case at Borrower's and each Subsidiary's expense jointly and
severally:
(i) within 15 days after such request, formation or
acquisition of a Subsidiary, cause each such Subsidiary and each direct
and indirect Subsidiary of such Subsidiary to duly execute and deliver
to the Agent a joinder agreement, in form and substance satisfactory to
the Agent, thereby joining this agreement, as a guarantor and grantor
of security interests and liens and assuming all of the Obligations
under this Agreement and the Other Documents provided that no joinder,
grant of a security interest or assumption may be required (if
acceptable to the Agent) from a Subsidiary organized or located outside
of the United States if the execution and delivery thereof would result
in material adverse tax consequences to Borrower or any of its
Subsidiaries (as applicable); and
(ii) at any time from time to time, promptly execute and
deliver any and all further instruments and documents and take all such
other action as the Agent may deem reasonably necessary or desirable in
obtaining the full benefits of, or in perfecting and preserving the
Liens of, such assumptions, joinders, mortgages, pledges, assignments,
security agreements and security agreement supplements.
6.11 Further Assurances.
------------------
(a) Promptly upon request by the Agent, or any Lender through
the Agent, correct any material defect or error that may be discovered in this
Agreement or any Other Document or in the execution, acknowledgement, filing or
recordation thereof, and
(b) Promptly upon request by the Agent, or any party through the
Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register any and all such further acts, deeds, conveyances,
pledge agreements, mortgages, deeds of trust, trust deeds, assignments,
financing statements and continuations thereof, termination statements, notices
of assignment, transfers, certificates, assurances and other instruments as the
Agent, or any Lender through the Agent, may reasonably require from time to time
in order to (i) carry out more effectively the purposes of this Agreement or any
Other Document, (ii) to the fullest extent permitted by applicable law, subject
Borrower's or any of its Subsidiaries' properties, assets, rights or interests
to the Liens now or hereafter intended to be covered by any of the Other
51
Documents, (iii) perfect and maintain the validity, effectiveness and priority
of any of the Other Documents and any of the Liens intended to be created
thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect
and confirm more effectively unto the Agent and the Lenders the rights granted
or now or hereafter intended to be granted to the Agent and the Lenders under
this Agreement or any Other Documents or under any other instrument executed in
connection with this Agreement or any Other Document to which Borrower or any of
its Subsidiaries is or is to be a party.
6.12 Keeping of Books and Records. Keep proper books of record and
----------------------------
account, in which full and correct entries shall be made of all financial
transactions and the assets and business of Borrower and each of its
Subsidiaries in accordance with GAAP.
6.13 Bank Accounts. Maintain at all times of its primary operating and
-------------
disbursement account with the Agent; provided, however, that Borrower and each
of its Subsidiaries may maintain deposits in employee payroll or other similar
ordinary course of business accounts with financial institutions other than the
Agent so long as Borrower, each of its Subsidiaries, the third party bank and
the Agent have executed a Blocked Account Agreement.
6.14 Minimum Reserves. Maintain a minimum level of reserves such as
----------------
Agent may establish in good faith.
VII. NEGATIVE COVENANTS.
Borrower shall not, and shall not permit any of its Subsidiaries to,
until satisfaction in full of the Obligations and termination of this Agreement
unless approved by Agent:
7.1 Merger, Consolidation, Acquisition and Sale of Assets.
-----------------------------------------------------
(a) Enter into any merger, consolidation or other reorganization
with or into any other Person or acquire all or a substantial portion of the
assets or stock of any Person or permit any other Person to consolidate with or
merge with it, except Permitted Acquisitions or the merger of a Subsidiary into
another Subsidiary or the Borrower.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except (i) inventory or other assets in the ordinary
course of its business, or (ii) as provided for under Section 4.3 hereof, or
(iii) from a Subsidiary to the Borrower or a Guarantor, (iv) from the Borrower
to a Guarantor, or (iv) obsolete equipment not to exceed $500,000 net book value
per annum; or
(c) Acquire all or a substantial portion of the assets or stock
or other equity interests in any Person other than a Permitted Acquisition.
7.2 Creation of Liens. Create or suffer to exist any Lien or transfer
-----------------
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3 Guarantees. Become liable upon the obligations of any Person by
----------
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on
52
Schedule 7.3, (b) the endorsement of checks in the ordinary course of business
-----------------
and (c) guarantees of the Borrower or Guarantors to third party vendors, service
providers or lessors of obligations permitted hereunder, provided that the Agent
shall have received written notice of such guarantees prior to execution thereof
by such Borrower or Guarantor.
7.4 Investments. Purchase or acquire obligations or stock of, or any
-----------
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America,
state or municipality or an agency thereof and (e) Permitted Acquisitions, (f)
intercompany loans to a Borrower or Guarantor and (g) transactions permitted
under Sections 7.1 and 7.5 hereof.
7.5 Loans. Make advances, loans or extensions of credit to any Person,
-----
including without limitation, any Subsidiary or Affiliate except (a) with
respect to the extension of commercial trade credit in connection with the sale
of Inventory in the ordinary course of its business, (b) employee advances not
to exceed $200,000 in the aggregate outstanding at any one time, (c) loans for
employee purchases of computer products not to exceed $400,000 in the aggregate
at any one time, (d) temporary relocation advances not to exceed $250,000 in the
aggregate outstanding at any one time and (e) intercompany loans to the Borrower
or a Guarantor.
7.6 Intentionally Left Blank
------------------------
7.7 Dividends. Declare, pay or make any dividend or distribution
---------
(including a distribution to any Affiliate not otherwise permitted by Section
7.10 hereof), whether direct or indirect, on any shares of the common stock or
preferred stock of Borrower (other than dividends or distributions payable in
its stock, or split-ups or reclassifications of its stock) or apply any of its
funds, property or assets to the purchase, redemption or other retirement of any
common or preferred stock, or of any options to purchase or acquire any such
shares of common or preferred stock of Borrower, except (a) Borrower may
repurchase or redemption Borrower's capital stock not to exceed $5,000,000, (b)
any Subsidiary, may make a distribution to the Borrower or its direct or
indirect Parent and (c) subject to Section 7.17 hereof, the MoreDirect Earnout
(as such term is defined in the MoreDirect Merger Agreement).
7.8 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness (exclusive of trade debt) except in respect of (a) Obligations
owing to Lenders; (b) Permitted Subordinated Indebtedness; (c) Permitted Vendor
Debt including guarantees thereof; (d) Indebtedness secured by purchase money
liens or incurred in connection with capital leases; provided, however, that the
maximum aggregate amount outstanding at any time of such Indebtedness shall not
exceed $15,000,000; (e) guarantees permitted under Section 7.3, (f) intercompany
loans to the Borrower or a Guarantor and (g) the MoreDirect Earnout.
53
7.9 Nature of Business. Substantially change the nature of the
------------------
business in which it is presently engaged or substantially related thereto, nor
except as specifically permitted hereby purchase or invest, directly or
indirectly, in any assets or property other than in the ordinary course of
business for assets or property which are useful in, necessary for and are to be
used in its business as presently conducted or substantially related thereto.
7.10 Transactions with Affiliates. Directly or indirectly, purchase,
----------------------------
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except (a) transactions in the ordinary
course of business consistent with past practices and necessary or desirable for
the prudent operation of Borrower's and its Subsidiaries' business for fair
consideration and, on an arm's-length basis on terms no less favorable than
terms which have been disclosed to the Agent and which would have been
obtainable from a Person other than an Affiliate and (b) payment of salaries,
fees and bonuses to it directors, officers and employees as are usual and
customary in the Borrower's or its Subsidiaries business.
7.11 Subsidiaries.
------------
(a) Form any Subsidiary unless (i) such Subsidiary expressly
joins in this Agreement as a Guarantor and guarantees the obligations of
Borrower hereunder, under the Note, and under any Other Agreement and (ii) Agent
shall have received all documents, including legal opinions, it may reasonably
require to establish compliance with each of the foregoing conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
(c) Make a capital contribution to any Subsidiary, unless such
Subsidiary and Borrower have complied with Section 7.12(a) hereof.
7.12 Fiscal Year and Accounting Changes. Change its fiscal year from
----------------------------------
ending on December 31, or make any change in accounting treatment and reporting
practices except as required by GAAP.
7.13 Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
----------------
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower's and its Subsidiaries'
business as conducted on the date of this Agreement, or for transactions
permitted hereunder.
7.14 Amendment of Articles of Incorporation, By-Laws. Amend, modify or
-----------------------------------------------
waive any term or material provision of its Articles of Incorporation or by-laws
in any way that is adverse to the Agent or any Lender, unless required by law.
7.15 Compliance with ERISA. (a) (i) Maintain, or permit any member of
---------------------
the Controlled Group to maintain, or (ii) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.8(d), except that
---------------
contributions are permitted to the Plan or Plans of a newly-acquired Subsidiary
that is also a Guarantor if such Plan or Plans or contributions would not place
the Borrower or Subsidiary in violation of this Section 7.15, (b) engage, or
permit any
54
member of the Controlled Group to engage, in any non-exempt "prohibited
transaction", as that term is defined in section 406 of ERISA and Section 4975
of the Code, (c) incur, or permit any member of the Controlled Group to incur,
any "accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (d) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could reasonably likely
result in any material liability of Borrower or any of its Subsidiaries or any
member of the Controlled Group or the imposition of a lien on the material
property of Borrower or any of its Subsidiaries or any member of the Controlled
Group pursuant to Section 4068 of ERISA, (e) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d), (f) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(g) fail promptly to notify Agent of the occurrence of any Termination Event,
(h) fail to comply, or permit a member of the Controlled Group to fail to
comply, with the material requirements of ERISA or the Code or other applicable
laws in respect of any Plan, (i) fail to meet, or permit any member of the
Controlled Group to fail to meet, all minimum funding requirements under ERISA
or the Code or postpone or delay or allow any member of the Controlled Group to
postpone or delay any funding requirement with respect of any Plan such as could
in any instance have a Material Adverse Effect.
7.16 Prepayment of Indebtedness. Except Indebtedness permitted pursuant
--------------------------
to Sections 7.8(b) and 7.8(c) hereof, at any time, directly or indirectly
(including by offset), prepay any Indebtedness (other than to Lenders), or
repurchase, redeem, retire or otherwise acquire any Indebtedness of Borrower or
any of its Subsidiaries.
7.17 MoreDirect Payments. Make any payments pursuant to Sections 1.7(b)
-------------------
and (c) or Article VI of the MoreDirect Merger Agreement (other than payments
made pursuant to that certain Escrow Agreement dated as of April 5, 2002
executed in connection with the MoreDirect Merger Agreement) unless (a) no Event
of Default shall have occurred and be continuing and (b) after giving effect to
such payment, the Formula Amount less all outstanding Advances shall be at least
$20,000,000. Notwithstanding any other provision in this Agreement or any Other
Document to the contrary, payments pursuant to Section 1.7(a) of the MoreDirect
Merger Agreement may be made irrespective of whether or not an Event of Default
shall have occurred and be continuing.
7.18 Other Agreements. Enter into any material amendment, waiver or
----------------
modification of any material agreement in any manner materially adverse to
Lenders.
VIII. CONDITIONS PRECEDENT.
8.1 Conditions to Initial Advances. The agreement of Lenders to make
------------------------------
the initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
(a) Loan Documentation. Agent shall have received this
------------------
Agreement and the Other Documents duly executed and delivered by an authorized
officer of Borrower and each of its Subsidiaries;
55
(b) Filings, Registrations and Recordings. Each document (including,
-------------------------------------
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
the Agent to be filed, registered or recorded in order to create, in favor of
Agent, a perfected first priority security interest in or lien upon the
Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) Corporate Proceedings of Borrower. Agent shall have received a
---------------------------------
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the Board of Directors of Borrower authorizing (i) the execution, delivery
and performance of this Agreement, the Other Documents and any related
agreements, and (ii) the granting by Borrower of the security interests in and
liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of Borrower as of the Closing Date; and, such certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower. Agent shall have received a
-----------------------------------
certificate of the Secretary or an Assistant Secretary of Borrower, dated the
Closing Date, as to the incumbency and signature of the officers of Borrower
executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Corporate Proceedings of each Guarantor. Agent shall have
---------------------------------------
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of each Guarantor authorizing the execution,
delivery and performance of the Guaranty certified by the Secretary or an
Assistant Secretary of each Guarantor as of the Closing Date; and, such
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such certificate;
(f) Incumbency Certificates of each Guarantor. Agent shall have
-----------------------------------------
received a certificate of the Secretary or an Assistant Secretary of each
Guarantor, dated the Closing Date, as to the incumbency and signature of the
officers of each Guarantor executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(g) Certificates. Agent shall have received a copy of the Articles of
------------
Incorporation of the Borrower and each Guarantor, and all amendments thereto,
certified by the Secretary of State or other appropriate official of such
jurisdiction of incorporation, together with copies of the by-laws of the
Borrower and each Guarantor certified as accurate and complete by the Secretary
of the Borrower;
(h) Good Standing Certificates. Agent shall have received good
--------------------------
standing certificates for Borrower and each Guarantor dated not more than ten
(10) days prior to the Closing Date, issued by the Secretary of State or other
appropriate official of the applicable
56
jurisdiction of incorporation or formation, as applicable, and each jurisdiction
where the conduct of Borrower's and each of its Subsidiaries' business
activities or the ownership of its properties necessitates qualification;
(i) Legal Opinion. Agent shall have received the executed legal
-------------
opinion of (i) Xxxx and Xxxx LLP and (ii) [local counsel] in form and substance
satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement, the Other Documents, and related
agreements as Agent may reasonably require and Borrower and each of its
Subsidiaries hereby authorize and direct such counsel to deliver such opinions
to Agent and Lenders;
(j) No Litigation. (i) No litigation, investigation or proceeding
-------------
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or any of its Subsidiaries or against the officers
or directors of Borrower or any of its Subsidiaries arising from their conduct
as officers or directors of Borrower or any of its Subsidiaries (A) in
connection with this Agreement, the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to Borrower or any of its Subsidiaries or the
conduct of its business shall have been issued by any Governmental Body;
(k) Collateral Examination. Agent shall have completed
----------------------
investigations, Collateral examinations and received appraisals, the results of
which shall be satisfactory in form and substance to Lenders, of the
Receivables, Inventory, Real Property, Leasehold Interest and Equipment of
Borrower and each of its Subsidiaries and all books and records in connection
therewith;
(l) Fees. Agent shall have received all fees payable to Agent and
----
Lenders on or prior to the Closing Date;
(m) Projections. Agent shall have received a copy of the Projections
-----------
which shall be satisfactory in all respects to Lenders;
(n) Insurance. Agent shall have received in form and substance
---------
satisfactory to Agent, a certificate of insurance of Borrower's and each of its
Subsidiaries' existing casualty insurance policies, together with loss payable
endorsements on Agent's standard form of loss payee endorsement naming Agent as
loss payee and additional insured;
(o) Payment Instructions. Agent shall have received written
--------------------
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(p) Blocked Accounts. Agent shall have received duly executed
----------------
agreements establishing the Blocked Accounts for Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
57
(q) Consents. Agent shall have received any and all consents
--------
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary including without
limitation, any UCC-3 termination statement or mortgages assigned to the Agent
or discharged;
(r) No Adverse Material Change. (a) since December 31, 2001, other
--------------------------
than the losses incurred by the Borrower for the fiscal quarter ending March 30,
2002, there shall not have occurred any event, condition or state of facts which
could reasonably be expected to have a Material Adverse Effect and (b) no
representations made or information supplied to Agent or Lenders shall have been
proven to be inaccurate or misleading in any material respect;
(s) Leasehold Agreements. Agent shall have received landlord,
--------------------
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrower or any of its Subsidiaries at which Inventory and
books and records are located;
(t) Closing Certificate. Agent shall have received a closing
-------------------
certificate signed by the Chief Financial Officer of Borrower dated as of the
date hereof, stating that (i) all representations and warranties set forth in
this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrower is on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(u) Borrowing Base. Agent shall have received a completed and
--------------
executed Borrowing Base Certificate reasonably acceptable to the Agent which
provides evidence that the aggregate amount of Eligible Receivables is
sufficient in value and amount to support Revolving Advances in the amount
requested by Borrower on the Closing Date; and
(v) Other. All corporate and other proceedings, and all documents,
-----
instruments and other legal matters in connection with the transactions
contemplated hereunder shall be satisfactory in form and substance to Agent and
its counsel.
8.2 Conditions to Each Advance. The agreement of Lenders to make any
--------------------------
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by Borrower and its Subsidiaries in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related 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
except those representations and warranties made as of a specific date;
(b) No Default. No Event of Default or Default shall have occurred
----------
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made,
58
on such date; provided, however that Agent, in its sole discretion, may continue
to make Advances notwithstanding the existence of an Event of Default or Default
and that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be
----------------
made, after giving effect thereto, the aggregate Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower shall and shall cause each Guarantor to, until satisfaction in
full of the Obligations and the termination of this Agreement:
9.1 Disclosure of Material Matters. Immediately upon learning thereof
------------------------------
report to Agent all matters materially and adversely affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, Borrower's or any of its Guarantors' reclamation or
repossession of, or the return to Borrower or any of its Guarantor of, a
material amount of goods or claims or disputes asserted by any Customer.
9.2 Schedules. Borrower will deliver to Agent at such intervals as
---------
Agent may require: (x) copies of Customer's invoices, (y) evidence of shipment
or delivery, and (z) such further schedules, documents and/or information
regarding the Collateral as Agent may require including, without limitation,
trial balances and test verifications. Agent shall have the right to confirm and
verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its
interests hereunder. The items to be provided under this Section are to be in
form satisfactory to Agent and executed by Borrower and delivered to Agent from
time to time solely for Agent's convenience in maintaining records of the
Collateral, and Borrower's failure to deliver any of such items to Agent shall
not affect, terminate, modify or otherwise limit Agent's Lien with respect to
the Collateral.
9.3 Environmental Reports. Furnish Agent, concurrently with the
---------------------
delivery of the financial statements referred to in Section 9.7, with a
certificate signed by the President of Borrower stating, to the best of his
knowledge, that Borrower and each of its Subsidiaries is in compliance in all
material respects with all federal, state and local laws relating to
environmental protection and control and occupational safety and health. To the
extent Borrower or any of its Subsidiaries is not in compliance with the
foregoing laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action Borrower or the applicable Subsidiary
will implement in order to achieve full compliance.
9.4 Litigation. Promptly notify Agent in writing of any litigation,
----------
suit or administrative proceeding affecting Borrower or any of its Subsidiaries,
whether or not the claim is covered by insurance, and of any suit or
administrative proceeding, which in any such case could reasonably be expected
to have a Material Adverse Effect.
59
9.5 Material Occurrences. Promptly notify Agent in writing upon the
--------------------
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of Borrower
or any of its Subsidiaries as of the date of such statements; (c) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject Borrower or any of its Subsidiaries to a tax imposed
by Section 4971 of the Code; (d) each and every default by Borrower or any of
its Subsidiaries which could reasonably be expected to result in the
acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other development
in the business or affairs of Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower or the applicable
Subsidiary proposes to take with respect thereto.
9.6 Intentionally Left Blank.
------------------------
9.7 Annual Financial Statements. Furnish Agent within ninety (90)
---------------------------
days after the end of each fiscal year of Borrower and each of its Subsidiaries,
consolidated financial statements of Borrower and each of its Subsidiaries
including, but not limited to, (a) statements of income and stockholders' equity
and cash flow from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon without qualification by
Deloitte & Touche LLP or another independent certified public accounting firm
selected by Borrower and satisfactory to Agent (the "Accountants"), (b) a
management prepared schedule of the outstanding Indebtedness for borrowed money
of Borrower and each of its Subsidiaries describing in reasonable detail each
such Indebtedness issued or loan outstanding and the principal amount and amount
accrued and unpaid interest with respect to each such Indebtedness issued or
loan, and (c) any management letters delivered by the Accountants to the
Borrower. The report of the Accountants shall be accompanied by a statement of
the Accountants certifying that (a) they have caused this Agreement to be
reviewed, (b) in making the examination upon which such report was based either
no information came to their attention which to their knowledge constituted an
Event of Default or a Default under this Agreement or any related agreement or,
if such information came to their attention, specifying any such Default or
Event of Default, its nature, when it occurred and whether it is continuing, and
such report shall contain or have appended thereto calculations which set forth
Borrower's and any of its Subsidiaries', as applicable, compliance with the
requirements or restrictions imposed by Sections 6.5 and 6.6 hereof. In
addition, the reports shall be accompanied by (a) accounts receivable agings (b)
accounts payable schedules (c) a Borrowing Base Certificate in form and
substance satisfactory to Agent (which shall be calculated as of the last day of
the prior month and which shall not be binding upon Agent or restrictive of
Agent's rights under this Agreement) and (e) a compliance certificate of
Borrower's Chief Financial Officer substantially in the form of Exhibit 9.7 (the
"Compliance Certificate") which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying
60
such Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower or the applicable Subsidiary
with respect to such event, and such certificate shall have appended thereto
calculations which set forth Borrower's and any of its Subsidiaries', as
applicable, compliance with the requirements or restrictions imposed by Sections
6.5 and 6.6 hereof.
9.8 Quarterly Financial Statements. Furnish Agent within forty-five (45)
------------------------------
days after the end of each quarter, including the last quarter of the fiscal
year (a) an unaudited consolidated and management prepared consolidating balance
sheet of Borrower and its Subsidiaries and unaudited statements of income and
stockholders' equity and cash flow of Borrower and its Subsidiaries reflecting
results of operations from the beginning of the fiscal year to the end of such
quarter and for such quarter, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
and recurring year end adjustments. The reports shall be accompanied by a
Compliance Certificate substantially in the form of Exhibit 9.7 which shall
include a certificate of Borrower's Chief Financial Officer, which shall state
that, based on an examination sufficient to permit him to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrower or the applicable
Subsidiary with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrower's and any of its Subsidiaries', as
applicable, compliance with the requirements or restrictions imposed by Sections
6.5 and 6.6 hereof.
9.9 Monthly Financial Statements. Furnish Agent within thirty (30) days
----------------------------
after the end of each month, including the last month of the fiscal year (a)
accounts receivable agings, (b) accounts payable schedules and (c) a Borrowing
Base Certificate in form and substance reasonably satisfactory to Agent, (which
shall be calculated as of the last day of the prior month and which shall not be
binding upon Agent or restrictive of Agent's rights under this Agreement).
9.10 Intentionally Left Blank
------------------------
9.11 Other Reports. Furnish Agent as soon as available, but in any event
-------------
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as Borrower or any of its Subsidiaries shall
send to its stockholders.
9.12 Additional Information. Furnish Agent with such additional information
----------------------
as Agent shall reasonably request in order to enable Agent to determine whether
the terms, covenants, provisions and conditions of this Agreement and the Note
have been complied with by Borrower and each of its Subsidiaries including,
without limitation and without the necessity of any request by Agent, (a) copies
of all environmental audits and reviews, (b) at least thirty (30) days prior
thereto, notice of Borrower's or any of its Subsidiaries' opening of any new
office or place of business or Borrower's or any of its Subsidiaries' closing of
any existing office or place of business, and (c) promptly upon Borrower's or
any of its Subsidiaries' learning thereof, notice of any labor dispute to which
Borrower or any of its Subsidiaries may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the expiration of
61
any labor contract to which Borrower or any of its Subsidiaries is a party or by
which Borrower or any of its Subsidiaries is bound.
9.13 Projected Operating Budget. Furnish Agent, (a) no later than fifteen
--------------------------
(15) days after the beginning of Borrower's fiscal years commencing with fiscal
year 2003, a month by month projected operating budget and cash flow of Borrower
and its Subsidiaries for such fiscal year (including an income statement for
each month and a balance sheet as at the end of the last month and cash flow
projections in each fiscal quarter), such projections to be accompanied by a
certificate signed by the President or Chief Financial Officer of Borrower.
9.14 Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
-------------------------------
(a) any lapse or other termination of any Consent issued to Borrower or any of
its Subsidiaries by any Governmental Body or any other Person that is material
to the operation of Borrower's or any of its Subsidiaries' business, (b) any
refusal by any Governmental Body or any other Person to renew or extend any such
Consent; and (c) copies of any periodic or special reports filed by Borrower or
any of its Subsidiaries or any of its Subsidiaries with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of Borrower or any of its Subsidiaries, or if
copies thereof are requested by Lender, and (d) copies of any material notices
and other communications from any Governmental Body or Person which specifically
relate to Borrower or any of its Subsidiaries.
9.15 ERISA Notices and Requests. Furnish Agent with immediate written
--------------------------
notice in the event that (a) Borrower, any of its Subsidiaries or any member of
the Controlled Group knows or has reason to know that a Termination Event has
occurred, together with a written statement describing such Termination Event
and the action, if any, which Borrower, any of its Subsidiaries or any member of
the Controlled Group has taken, is taking, or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal Revenue
Service, Department of Labor or PBGC with respect thereto, (b) Borrower, any of
its Subsidiaries or any member of the Controlled Group knows or has reason to
know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975
of the Code) has occurred together with a written statement describing such
transaction and the action which Borrower, any of its Subsidiaries or any member
of the Controlled Group has taken, is taking or proposes to take with respect
thereto, (c) a funding waiver request has been filed with respect to any Plan
together with all communications received by Borrower, any of its Subsidiaries
or any member of the Controlled Group with respect to such request, (d) any
increase in the benefits of any existing Plan or the establishment of any new
Plan or the commencement of contributions to any Plan to which Borrower, any of
its Subsidiaries or any member of the Controlled Group was not previously
contributing shall occur, (e) Borrower, any of its Subsidiaries or any member of
the Controlled Group shall receive from the PBGC a notice of intention to
terminate a Plan or to have a trustee appointed to administer a Plan, together
with copies of each such notice, (f) Borrower, any of its Subsidiaries or any
member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (g) Borrower, any of its Subsidiaries or any member of the
Controlled Group shall receive a notice regarding the imposition of withdrawal
liability, together with copies of each such notice; (h) Borrower, any of its
Subsidiaries or any member of the Controlled Group shall fail to make a required
installment or any other required payment under Section 412 of the Code on or
before
62
the due date for such installment or payment; (i) Borrower, any of its
Subsidiaries or any member of the Controlled Group knows that (A) a
Multiemployer Plan has been terminated, (B) the administrator or plan sponsor of
a Multiemployer Plan intends to terminate a Multiemployer Plan, or (C) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16 Additional Documents. Execute and deliver to Agent, upon request, such
--------------------
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
10.1 Specified Events of Default. The occurrence of any one or more of the
---------------------------
following events shall constitute an "Event of Default":
(a) failure by Borrower to pay any principal or interest on the
Obligations when due (including the payment of excess Advances pursuant to
Section 2.7 hereof), whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
(b) any representation or warranty made or deemed made by Borrower or
any of its Subsidiaries in this Agreement, any Other Document or any related
agreement or in any certificate, document or financial or other statement
furnished at any time in connection herewith or therewith shall prove to have
been misleading in any material respect on the date when made or deemed to have
been made;
(c) issuance of a notice of Lien (other than a Permitted Encumbrance),
levy, assessment, injunction or attachment securing Indebtedness in excess of
$1,000,000 against a material portion of Borrower's or any of its Subsidiaries'
property;
(d) except as otherwise provided for in subparagraphs (a) and (c),
failure or neglect of Borrower or any of its Subsidiaries to perform, keep or
observe any term, provision, condition, covenant herein contained, or contained
in any Other Agreement, now or hereafter entered into between Borrower and Agent
or any Lender (except for a failure or neglect of Borrower or any of its
Subsidiaries to perform, keep or observe any term, provision, condition or
covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof)
for which no cure period is applicable or which is not cured within thirty (30)
days from the occurrence of such failure or neglect;
(e) any judgment or judgments are rendered or judgment liens filed
against Borrower or any of its Subsidiaries for an aggregate amount in excess of
$1,000,000 which within thirty (30) days of such rendering or filing is not
either satisfied, stayed or discharged of record;
(f) Borrower or any of its Subsidiaries shall (i) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or
63
similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(g) Borrower or any of its Subsidiaries ceases to be solvent or shall
admit in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business;
(h) any Subsidiary of Borrower, or any Guarantor, shall (i) apply for,
consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
(i) any change in Borrower's or any of its Subsidiaries' condition or
affairs (financial or otherwise) which has a Material Adverse Effect;
(j) any Lien created hereunder or provided for hereby or under any related
agreement for any reason ceases to be or is not a valid and perfected Lien
having a first priority interest except purchase money security interests
permitted by Section 7.2 hereof (other than Permitted Liens);
(k) an event of default has occurred and been declared under (i) the
Permitted Vendor Debt or (ii) the Subordinated Debt Documentation, which default
shall not have been cured or waived within any applicable grace period and for
which any lender therein is permitted to take action thereunder;
(l) default of the obligations of Borrower or any Guarantor under any
other agreement to which it is a party shall occur which materially and
adversely affects its condition, affairs or prospects (financial or otherwise)
which default is not cured within any applicable grace period;
(m) termination or breach of any Guaranty or similar agreement executed
and delivered to Agent in connection with the Obligations of Borrower or any of
its Subsidiaries, or if any Guarantor attempts to terminate, challenges the
validity of, or its liability under, any such Guaranty or Guaranty Security
Agreement or similar agreement;
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(n) termination or breach of any Guaranty or Guaranty Security Agreement
or similar agreement executed and delivered to Agent in connection with the
Obligations of Borrower, or if any Guarantor attempts to terminate, challenges
the validity of, or its liability under, any such Guaranty or Guaranty Security
Agreement or similar agreement;
(o) any Change of Control shall occur;
(p) any material provision of this Agreement or any Other Agreement shall,
for any reason, cease to be valid and binding on Borrower, or Borrower shall so
claim in writing to Agent;
(q) (i) any Governmental Body shall revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of Borrower
or any of its Subsidiaries necessary for its operations, or (ii) any agreement
which is necessary or material to the operation of Borrower's or any of its
Subsidiaries business shall be revoked or terminated and not replaced by a
substitute acceptable to Agent within thirty (30) days after the date of such
revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect;
(r) any portion of the Collateral having an aggregate value in excess of
$250,000 shall be seized or taken by a Governmental Body, or Borrower or any
Guarantor or the title and rights of Borrower or any of its Subsidiaries shall
have become the subject matter of litigation which might, in the reasonable
judgment of Agent, upon final determination, result in impairment or loss of the
security provided by this Agreement or the Other Documents;
(s) an event or condition specified in Sections 7.16 or 9.16 hereof shall
occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any of
its Subsidiaries or any member of the Controlled Group shall incur, or in the
opinion of Agent be reasonably likely to incur, a liability to a Plan or the
PBGC (or both) which, in the reasonable judgment of Agent, would have a Material
Adverse Effect; or
(t) (i) failure of Borrower or any of its Subsidiaries to pay when due or
within any applicable grace period any principal or interest on Indebtedness or
any contingent obligations or (ii) breach or default of Borrower or any of its
Subsidiaries or the occurrence of any condition or event, with respect to any
Indebtedness or any contingent obligations if the effect of such failure to pay,
breach, default or occurrence is to cause or to permit the holder or holders
then to cause, such Indebtedness and/or contingent obligations having an
individual principal amount in excess of $1,000,000; or
(u) termination of an existing Blocked Account Agreement by a third party
bank party thereto that results in the termination of the Agent's control over
the cash proceeds in a Blocked Account.
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XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies. Upon the occurrence of (a) an Event of
-------------------
Default pursuant to Sections 10(f) or (h) all Obligations shall be immediately
due and payable and this Agreement and the obligation of Lenders to make
Advances shall be deemed terminated; and, (b) any of the other Events of Default
and at any time thereafter (such default not having previously been cured), and
(c) a filing of a petition against Borrower or any Guarantor in any involuntary
case under any state or federal bankruptcy laws, the obligation of Lenders to
make Advances hereunder shall be terminated other than as may be required by an
appropriate order of the bankruptcy court having jurisdiction over Borrower or
the applicable Guarantor and in each case at the option of the Agent in its
discretion or upon written directions to do so from the Required Lenders all
Obligations shall be immediately due and payable and Lenders shall have the
right to terminate this Agreement and to terminate the obligation of Lenders to
make Advances. Upon the occurrence and the continuance of any Event of Default
and upon ten (10) days prior written notice from the Agent to the Borrower
(except with respect to the Agent's and Lenders' right of setoff hereunder the
exercise of which may be at any time after a Default and without any notice to
the Borrower), Agent shall have the right to exercise any and all other rights
and remedies provided for herein, under the Uniform Commercial Code and at law
or equity generally, including, without limitation, the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process. During the continuance of an
Event of Default and upon ten (10) days written notice by the Agent to the
Borrower, Agent may enter any of Borrower's or any Guarantor's premises or other
premises without legal process and without incurring liability to Borrower or
the applicable Subsidiary therefor, and Agent may thereupon, or at any time
thereafter, in its discretion without notice or demand, take the Collateral and
remove the same to such place as Agent may deem advisable and Agent may require
Borrower or the applicable Guarantor to make the Collateral available to Agent
at a convenient place. With or without having the Collateral at the time or
place of sale, Agent may sell the Collateral, or any part thereof, at public or
private sale, at any time or place, in one or more sales, at such price or
prices, and upon such terms, either for cash, credit or future delivery, as is
commercially reasonable. Except as to that part of the Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Agent shall give Borrower reasonable notification
of such sale or sales, it being agreed that in all events written notice mailed
to Borrower at least ten (10) days prior to such sale or sales is reasonable
notification. At any public sale Agent or any Lender may bid for and become the
purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by Borrower and each Guarantor.
In connection with the exercise of the foregoing remedies, Agent is granted
permission to use all of Borrower's and each Guarantor's (a) trademarks, trade
styles, trade names, patents, patent applications, licenses, franchises and
other proprietary rights which are used in connection with Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied in the order set forth in Section 11.5
hereof. If any deficiency shall arise, Borrower and each of its Subsidiaries
shall remain liable to
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Agent and Lenders therefor. Upon the occurrence of any Event of Default, Agent
shall have the right to appoint a receiver on behalf of Borrower or the
applicable Subsidiary.
11.2 Agent's Discretion. Agent shall have the right in its sole
------------------
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3 Setoff. Notwithstanding any provision on this Agreement or any
------
Other Document, in addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence and during the continuance of an
Event of Default hereunder, Agent and such Lender shall have a right without
notice to Borrower or any Guarantor to apply Borrower's or any Guarantor's
property held by Agent and such Lender to reduce the Obligations.
11.4 Rights and Remedies not Exclusive. The enumeration of the
---------------------------------
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any rights or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5 Allocation of Payments After Event of Default. Notwithstanding any
---------------------------------------------
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent's
discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees and fees of
other professionals) of the Agent in connection with enforcing its rights and
the rights of the Lenders under this Agreement and the Other Documents and any
protective advances made by the Agent with respect to the Collateral under or
pursuant to the terms of this Document;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees and fees of
other professionals) of each of the Lenders in connection with enforcing its
rights under this Agreement and the Other Documents or otherwise with respect to
the Obligations owing to such Lender;
FOURTH, to the payment of all of the Obligations consisting of accrued
fees and interest;
FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit);
SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "FIFTH" above;
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SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus including the Borrower.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses "FOURTH", "FIFTH," "SIXTH" and "SEVENTH" above; and (iii) to the
extent that any amounts available for distribution pursuant to clause "FIFTH"
above are attributable to the issued but undrawn amount of outstanding Letters
of Credit, such amounts shall be held by the Agent in a cash collateral account
and applied (A) first, to reimburse the Issuer from time to time for any
drawings under such Letters of Credit and (B) then, following the expiration of
all Letters of Credit, to all other obligations of the types described in
clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 11.5.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice. Borrower and each of its Subsidiaries hereby
----------------
waive notice of non-payment of any of the Receivables, demand, presentment,
protest and notice thereof with respect to any and all instruments, notice of
acceptance hereof, notice of loans or advances made, credit extended, Collateral
received or delivered, or any other action taken in reliance hereon, and all
other demands and notices of any description, except such as are expressly
provided for herein or any Other Document.
12.2 Delay. No delay or omission on Agent's or any Lender's part in
-----
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
-----------
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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XIII. EFFECTIVE DATE AND TERMINATION.
13.1 Term. This Agreement, which shall inure to the benefit of and
----
shall be binding upon the respective successors and permitted assigns of
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until June 30, 2004 (the "Term") unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time upon prior written notice to the Agent and the Lenders and upon payment
in full of the Obligations.
13.2 Termination. The termination of the Agreement shall not affect
-----------
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Agent and Lenders with
an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, Borrower waives any rights which it may have under the Uniform
Commercial Code to demand the filing of termination statements with respect to
the Collateral, and Agent shall not be required to send such termination
statements to Borrower, or to file them with any filing office, unless and until
this Agreement shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1 Appointment. Each Lender hereby designates Citizens to act as
-----------
Agent for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.4 and the Agent Fee Letter), charges and collections (without giving effect to
any collection days) received pursuant to this Agreement, for the ratable
benefit of Lenders. Agent may perform any of its duties hereunder by or through
its agents or employees. As to any matters not expressly provided for by this
Agreement (including without limitation, collection of the Note) Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
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14.2 Nature of Duties. Agent shall have no duties or responsibilities
----------------
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any of its
Subsidiaries or any officer thereof contained in this Agreement, or in any of
the Other Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, due execution, enforceability or sufficiency of this
Agreement, or any of the Other Documents or for any failure of Borrower or any
of its Subsidiaries to perform its obligations hereunder. 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 Agreement or any of the Other Documents, or to inspect the properties,
books or records of Borrower and each of its Subsidiaries. The duties of Agent
as respects the Advances to Borrower shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3 Lack of Reliance on Agent and Resignation. Independently and
-----------------------------------------
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Borrower and its Subsidiaries in connection with the
making and the continuance of the Advances hereunder and the taking or not
taking of any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of Borrower. Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of Borrower or
any of its Subsidiaries, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement, the Note, the Other Documents or the financial condition of
Borrower or any of its Subsidiaries, or the existence of any Event of Default or
any Default.
Agent may resign on ten (10) days' written notice to each of Lenders
and Borrower and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrower.
Any such successor Agent shall succeed to the rights, powers and duties
of 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. After any Agent's resignation as Agent, the provisions
70
of this Article XIV shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
14.4 Certain Rights of Agent. If Agent shall request instructions from
-----------------------
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5 Reliance. Agent shall be entitled to rely, and shall be fully
--------
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and the
Other Documents and its duties hereunder, upon advice of counsel selected by it.
Agent may employ agents and attorneys-in-fact and shall not be liable for the
default or misconduct of any such agents or attorneys-in-fact selected by Agent
with reasonable care.
14.6 Notice of Default. Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders.
14.7 Indemnification. To the extent Agent is not reimbursed and indemnified
---------------
by Borrower, each Lender will reimburse and indemnify Agent in proportion to its
respective portion of the Advances (or, if no Advances are outstanding,
according to its Commitment Percentage), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Document; provided that, Lenders shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross (not mere)
negligence or willful misconduct.
14.8 Agent in its Individual Capacity. With respect to the obligation of
--------------------------------
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrower as
if
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it were not performing the duties specified herein, and may accept fees and
other consideration from Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.
14.9 Delivery of Documents. To the extent Agent receives financial
---------------------
statements required under Sections 9.7, 9.9, 9.10, 9.13 and 9.14 from Borrower
pursuant to the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.
14.10 Borrower's Undertaking to Agent. Without prejudice to its obligations
-------------------------------
to Lenders under the other provisions of this Agreement, Borrower hereby
undertakes with Agent to pay to Agent from time to time on demand all amounts
from time to time due and payable by it for the account of Agent or Lenders or
any of them pursuant to this Agreement to the extent not already paid. Any
payment made pursuant to any such demand shall pro tanto satisfy the relevant
Borrower's obligations to make payments for the account of Lenders or the
relevant one or more of them pursuant to this Agreement.
14.11 Amendment of Article 14. Borrower agrees that the foregoing
-----------------------
provisions of this Article 14 constitute an agreement among the Agent and the
Lenders (and the Agent and the Lenders acknowledge that except for the
provisions of Section 14.3, Borrower is not a party to or bound by such
foregoing provisions) and that any and all of the provisions of this Article 14,
with the exception of the reasonable approval of Borrower as may be required
under Section 14.3 hereto, may be amended at any time by the Lenders without the
consent or approval of, or notice to, Borrower (other than the requirement of
notice to Borrower of the resignation of the Agent and the appointment of a
successor Agent).
14.12 Additional Rights of Agent. The parties hereto agree that no
--------------------------
amendment, waiver, consent or other action under this Agreement will be taken
that adversely affects Agent, unless Agent shall have consented in writing to
such amendment, waiver, consent or other action.
XV. MISCELLANEOUS.
15.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts applied to
contracts to be performed wholly within the Commonwealth of Massachusetts. Any
judicial proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement, the Other Documents or any related agreement may be
brought in any court of competent jurisdiction in the Commonwealth of
Massachusetts, United States of America, and, by execution and delivery of this
Agreement, Borrower accepts for itself and in connection with its properties,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Borrower hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by registered mail (return receipt requested) directed to Borrower at its
address set forth in Section 15.6 and service so made shall be deemed completed
five (5) days after the same shall have been so deposited in the mails of the
United States of America. Nothing herein shall affect the right to serve process
in any manner permitted by law or shall limit the right of Agent or any Lender
to bring proceedings against Borrower in the courts of any other jurisdiction.
Borrower waives any objection to jurisdiction and venue of any action
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instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. Borrower waives the
right to remove any judicial proceeding brought against Borrower in any state
court to any federal court. Any judicial proceeding by Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the
County of Suffolk, Commonwealth of Massachusetts.
15.2 Entire Understanding.
(a) This Agreement and the documents executed concurrently herewith
contain the entire understanding between Borrower, Agent and each Lender and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by Borrower's, Agent's and each Lender's respective officers.
Neither this Agreement nor any portion or provisions hereof may be changed,
modified, amended, waived, supplemented, discharged, cancelled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged. Borrower acknowledges that it has
been advised by counsel in connection with the execution of this Agreement and
Other Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrower may, subject to the provisions of this Section
15.2 (b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Borrower, for the purpose of adding
or deleting any provisions or otherwise changing, varying or waiving in any
manner the rights of Lenders, Agent or Borrower thereunder or the conditions,
provisions or terms thereof of waiving any Event of Default hereunder or
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage, the maximum dollar
commitment of any Lender or the Maximum Advance Amount;
(ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any
fee payable by Borrower to Lenders pursuant to this Agreement;
(iii) alter the definition of the term Required Lenders or alter,
amend or modify this Section 15.2(b);
(iv) release any Collateral during any calendar year (other than
in accordance with the provisions of this Agreement, including Section 7.1
hereof) having an aggregate value in excess of $250,000;
(v) change the rights and duties of Agent;
73
(vi) increase the Advance Rates above the Advance Rates in
effect on the Closing Date; or
(vii) release any Guarantor.
Any such supplemental agreement shall apply equally to each Lender and
shall be binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 15.2 and
such consent is denied, then Agent may, at its option, require such Lender to
assign its interest in the Advances to Agent or to another Lender or to any
other Person designated by the Agent (the "Designated Lender"), for a price
equal to the then outstanding principal amount thereof plus accrued and unpaid
interest and fees due such Lender, which interest and fees shall be paid when
collected from Borrower. In the event Agent elects to require any Lender to
assign its interest to Agent or to the Designated Lender, Agent will so notify
such Lender in writing within forty five (45) days following such Lender's
denial, and such Lender will assign its interest to Agent or the Designated
Lender no later than five (5) days following receipt of such notice pursuant to
a Commitment Transfer Supplement executed by such Lender, Agent or the
Designated Lender, as appropriate, and Agent.
Notwithstanding (a) the existence of a Default or an Event of Default, (b)
that any of the other applicable conditions precedent set forth in Section 8.2
hereof have not been satisfied or (c) any other provision of this Agreement,
Agent may at its discretion and without the consent of the Required Lenders,
voluntarily permit the outstanding Revolving Advances and Swingline Advances at
any time to exceed the Formula Amount by up to one hundred and ten percent
(110%) of the Formula Amount for up to thirty (30) consecutive Business Days
(the "Out-of-Formula Loans"). If Agent is willing in its sole and absolute
discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be
payable on demand and shall bear interest at the Default Rate for Revolving
Advances consisting of Domestic Rate Loans; provided that, if Lenders do make
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have
changed the limits of Section 2.1(a). For purposes of this paragraph, the
discretion granted to Agent hereunder shall not preclude involuntary
overadvances that may result from time to time due to the fact that the Formula
Amount was unintentionally exceeded for any reason, including, but not limited
to, Collateral previously deemed to be "Eligible Receivables" becomes
ineligible, collections of Receivables applied to reduce outstanding Advances
are thereafter returned for insufficient funds or overadvances are made to
protect or preserve the Collateral. In the event Agent involuntarily permits the
outstanding Advances to exceed the Formula Amount by more than one hundred and
ten percent (110%), Agent shall use its efforts to have Borrower decrease such
excess in as expeditious a manner as is practicable under the circumstances and
74
not inconsistent with the reason for such excess. Advances made after Agent has
determined the existence of involuntary overadvances shall be deemed to be
involuntary overadvances and shall be decreased in accordance with the preceding
sentence.
In addition to (and not in substitution of) the discretionary Advances
permitted above in this Section 15.2, the Agent is hereby authorized by Borrower
and the Lenders, from time to time in the Agent's sole discretion, (A) after the
occurrence and during the continuation of a Default or an Event of Default, or
(B) at any time that any of the other applicable conditions precedent set forth
in Section 8.2 hereof have not been satisfied, to make Advances to Borrower on
behalf of the Lenders which the Agent, in its reasonable business judgment,
deems necessary or desirable (a) to preserve or protect the Collateral, or any
portion thereof, (b) to enhance the likelihood of, or maximize the amount of,
repayment of the Advances and other Obligations, or (c) to pay any other amount
chargeable to Borrower pursuant to the terms of this Agreement; provided, that
-------- ----
at any time after giving effect to any such Advances the outstanding Advances do
not exceed one hundred and ten percent (110%) of the Formula Amount.
15.3 Successors and Assigns; Participations; New Lenders.
---------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Transferee. Borrower and each of its Subsidiaries
hereby grant to any Transferee a continuing security interest in any deposits,
moneys or other property actually or constructively held by such Transferee as
security for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent and Borrower which
consent shall not be unreasonably withheld or delayed sell, assign or transfer
all or any part of its rights under this Agreement and the Other Documents to
one or more additional banks or financial institutions and one or more
additional banks or financial institutions may commit to make Advances hereunder
(each a "Purchasing Lender"), in minimum amounts of not less than $5,000,000
(or, if less, the entire interest of such transferring Lender), pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording, provided that the
Borrower's consent to any such sale,
75
assignment or transfer shall not be required upon an Event of Default and during
the continuance thereof. Upon such execution, delivery, acceptance and
recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrower hereby
consents to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Borrower and each of its
Subsidiaries shall execute and deliver such further documents and do such
further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of each Lender and the outstanding
principal, accrued and unpaid interest and other fees due hereunder. The entries
in the Register shall be conclusive, in the absence of manifest error, and
Borrower, Agent and Lenders may treat each Person whose name is recorded in the
Register as the owner of the Advance recorded therein for the purposes of this
Agreement. The Register shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice. Agent shall receive a fee in the amount of $3,500 payable by the
applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.
(e) Borrower authorizes each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrower which
has been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrower
provided that Agent consistent with its past practices obtains an agreement from
such Transferee or Purchasing Lender to keep such information confidential.
(f) Each Lender authorizes Agent to transmit a borrowing request of
Borrower to the Lenders electronically.
15.4 Application of Payments. Agent shall have the continuing and exclusive
-----------------------
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that Borrower makes
a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for Borrower's benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any
76
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
15.5 Indemnity. Borrower and each of its Subsidiaries shall indemnify
---------
Agent, each Lender and each of their respective officers, directors, Affiliates,
attorneys, employees and agents from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against Agent or any Lender in any litigation, proceeding or
investigation instituted or conducted by any governmental agency or
instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Agent or any Lender is a party
thereto, except to the extent that any of the foregoing arises out of the
willful misconduct of the party being indemnified.
15.6 Notice. Any notice or request hereunder may be given to Borrower or to
------
Agent or any Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice, request, demand, direction
or other communication (for purposes of this Section 15.6 only, a "Notice") to
be given to or made upon any party hereto under any provision of this Loan
Agreement shall be given or made by telephone or in writing (which includes by
means of electronic transmission (i.e., "e-mail") or facsimile transmission in
accordance with this Section 15.6. Any such Notice must be delivered to the
applicable parties hereto at the addresses and numbers set forth under their
respective names on Section 15.6 hereof or in accordance with any subsequent
unrevoked Notice from any such party that is given in accordance with this
Section 15.6. Any Notice shall be effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, four days after such Notice is deposited with
the United States Postal Service, with first-class postage prepaid, return
receipt requested;
(c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
(d) In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;
(e) In the case of electronic transmission, when actually received;
and
(f) If given by any other means (including by overnight courier), when
actually received.
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Any Lender giving a Notice to Borrower shall concurrently send a copy
thereof to the Agent, and the Agent shall promptly notify the other Lenders of
its receipt of such Notice.
(A) If to Agent or Citizens Bank of Massachusetts
Citizens at: 00 Xxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx S St. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx Procter LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Xxxxxx X. Xxxxx, P.C.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(B) If to a Lender other than Agent, as specified on the signature
pages hereof
(C) If to Borrower PC Connection, Inc.
or any Guarantor: Xxxxx 000X (000 Xxxxxxx Xxxx)
Xxxxxxxxx, Xxx Xxxxxxxxx 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
15.7 Survival. The obligations of Borrower or any of its Subsidiaries, as
--------
applicable, under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), 14.7, 15.1, 15.5 and
15.10 shall survive termination of this Agreement and the Other Documents and
payment in full of the Obligations.
15.8 Severability. If any part of this Agreement is contrary to, prohibited
------------
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
15.9 Expenses. All reasonable costs and expenses including, without
--------
limitation, reasonable attorneys' fees (including the allocated costs of in
house counsel) and disbursements incurred by Agent on its behalf or on behalf of
Lenders and Lenders (a) in connection with the syndication, preparation,
execution, delivery, administration, modification and amendment of
78
this Agreement or any Other Documents, (b) in all efforts made to enforce
payment of any Obligation or effect collection of any Collateral, or (c) in
connection with the negotiation, execution, modification, amendment,
administration and enforcement of this Agreement or any consents or waivers
hereunder and all related agreements, documents and instruments, or (d) in
instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (e) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with Borrower, or (f) in connection with any advice given to Agent or any Lender
with respect to its rights and obligations under this Agreement and all related
agreements, may be charged to Borrower's Account and shall be part of the
Obligations, other than costs or expenses incurred by the Agent or Lender as a
result of the gross negligence or willful misconduct of such Agent or Lender.
15.10 Injunctive Relief. Borrower recognizes that, in the event Borrower
-----------------
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy at law may prove to be inadequate relief to
Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving that actual damages are not an adequate remedy.
15.11 Consequential Damages. Neither Agent nor any Lender, nor any agent or
---------------------
attorney for any of them, shall be liable to Borrower for consequential damages
(whether direct or indirect) or special damages arising from any breach of
contract, tort or other claim relating to the establishment, administration or
collection of the Obligations.
15.12 Captions. The captions at various places in this Agreement are
--------
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13 Counterparts; Facsimile Signatures. This Agreement may be executed in
----------------------------------
any number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.
15.14 Construction. The parties acknowledge that each party and its counsel
------------
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.15 Confidentiality; Sharing Information.
------------------------------------
Agent, each Lender, each Transferee and each potential Transferee shall
hold all non-public information obtained by Agent, such Lender or such
Transferee pursuant to the requirements of this Agreement in accordance with
Agent's, such Lender's and such Transferee's customary procedures for handling
confidential information of this nature; provided, however, Agent, each Lender
and each Transferee may disclose such confidential information (i) to its
examiners, affiliates, outside auditors, counsel and other professional advisors
and rating agencies, (ii) to Agent, any Lender or to any prospective Transferee
or
79
Purchasing Lender, and (iii) as required or requested by any Governmental Body
or representative thereof or pursuant to legal or regulatory process or inquiry;
provided, further that (x) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify Borrower of the applicable request for
disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body or any regulatory review) or (B) pursuant to legal process and
(y) in no event shall Agent, any Lender or any Transferee be obligated to return
any materials furnished by Borrower other than those documents and instruments
in possession of Agent or any Lender in order to perfect its Lien on the
Collateral once the Obligations have been paid in full and this Agreement has
been terminated.
15.18 Publicity. Borrower and each Lender hereby authorizes Agent to make
---------
appropriate announcements of the financial arrangement entered into among
Borrower, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.
15.19 Other Document. Borrower agrees and acknowledges that to the extent
--------------
any provision of this Agreement is inconsistent with any provisions of any Other
Documents (other than the LMCS Agreement), this Agreement shall govern.
[Signature page to follow]
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Each of the parties has signed this Amended and Restated Revolving Credit
and Security Agreement under seal as of the day and year first above written.
PC CONNECTION, INC., as Borrower.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
COMTEQ FEDERAL OF NEW HAMPSHIRE, INC.,
as Guarantor.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: President
GOVCONNECTION, INC., as Guarantor.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: President
MERRIMACK SERVICES CORPORATION, as
Guarantor.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
PC CONNECTION SALES CORPORATION, as
Guarantor.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
PC CONNECTION SALES OF MASSACHUSETTS,
INC., as Guarantor.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
MOREDIRECT, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President and
Chief Financial Officer
CITIZENS BANK OF MASSACHUSETTS, as
Lender and as Agent
By: /s/ Xxxxxxx X. St. Xxxx
-----------------------------------
Name: Xxxxxxx X. St. Xxxx
Title: Vice President
00 Xxxxx Xxxxxx
00/xx/ Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Commitment Percentage: 77.78%
FLEET NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
0000 Xxx Xxxxxx
Xxxxxxxxxx, XX 00000
Commitment Percentage: 22.22%
