Exhibit 10.2
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of December 22, 2006 (the "Agreement"), is
executed by and between CTI GROUP (HOLDINGS), INC., a Delaware corporation
("Borrower"), whose address is 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxxx, Xxxxxxx 00000, and NATIONAL CITY BANK, a national banking
association (the "Bank"), whose address is Xxx Xxxxxxxx Xxxx Xxxxxx, Xxxxx 000X,
Xxxxxxxxxxxx, Xxxxxxx 00000.
In consideration of the mutual agreements hereinafter set forth, the
Borrower and the Bank hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.
"Acquisition Loan" shall mean the direct advance made by the Bank to
the Borrower in the form of a term loan under and pursuant to this Agreement, as
set forth in Section 2.1 of this Agreement.
"Acquisition Loan Commitment" shall mean Two Million Six Hundred
Thousand and No/100 Dollars ($2,600,000.00).
"Acquisition Loan Maturity Date" shall mean December 21, 2009, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Acquisition Loan Note.
"Acquisition Loan Note" shall have the meaning set forth in Section
4.1 hereof.
"Acquisitions" shall mean any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or otherwise, or (ii) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
"Affiliate" shall mean any Person other than the Borrower that
directly or indirectly controls, is controlled by, or is under common control of
the Borrower.
"Applicable LIBOR Interest Rate" shall mean, with respect to a
particular thirty (30) day period, the rate per annum equal to the LIBOR Base
Rate applicable to such thirty (30)
day-period plus the Applicable Margin for the Acquisition Loan or the Revolving
Loan. The Applicable LIBOR Interest Rate shall adjust automatically upon each
adjustment of the LIBOR Base Rate.
"Applicable Interest Rate" as of any date shall mean a rate per annum
equal to (i) the Applicable LIBOR Interest Rate in effect on such date or (ii)
in the event the LIBOR Base Rate is not available, then the Floating Rate in
effect on such date.
"Applicable Margin" shall mean the rate per annum added to the LIBOR
Base Rate to determine the Interest Rate for the Acquisition Loan and the
Revolving Loan as set forth below:
Loans Applicable Margin
----- -----------------
Acquisition Loan 2.00%
Revolving Loan 2.35%
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as now
existing or hereafter amended.
"Borrowing Base Amount" shall mean an amount equal to the sum of: (i)
one hundred percent (100%) of the cash held in Borrower's collateral account
#985306193 with the Bank, (ii) eighty percent (80%) of the net amount of the
Domestic Eligible Accounts, and (iii) ninety percent (90%) of the net amount of
the Foreign Eligible Accounts.
"Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Indianapolis, Indiana, or for purposes
of determining the LIBOR Base Rate, in London, United Kingdom.
"Capital Expenditures" shall mean expenditures (including Capital
Lease obligations which should be capitalized under GAAP) for the acquisition of
fixed assets which are required to be capitalized under GAAP.
"Capital Lease" shall mean, as to any Person, a lease of any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, by such Person as lessee that is, or should be, in accordance
with Financial Accounting Standards Board Statement No. 13, as amended from time
to time, or, if such Statement is not then in effect, such statement of GAAP as
may be applicable, recorded as a "capital lease" on the balance sheet of the
Borrower prepared in accordance with GAAP.
"Change in Control" shall have the meaning set forth in Section 10.9
hereof.
2
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning set forth in the Security
Agreement executed by Borrower in favor of Bank.
"Consolidated" (whether in upper or lower case) refers to the
consolidation of the accounts of the Borrower and its Subsidiaries, in
accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum for such
period of (a) Consolidated Net Income, plus (b) to the extent included in the
calculation of Consolidated Net Income for such period, (i) Consolidated
Interest Charges, (ii) federal, state and local income taxes, and (iii)
depreciation, amortization and other non-cash charges, minus (c) cash payments
made during such period with respect to any non-cash charges previously added
back in determining Consolidated EBITDA for any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, at any date of
determination, the ratio of (a) Consolidated EBITDA for the applicable Reference
Period, to (b) the sum of (i) Consolidated Interest Charges for such Reference
Period, plus (ii) principal payments due and payable on Consolidated Funded Debt
during such Reference Period, plus (iii) Capital Lease obligations due and
payable during such Reference Period, plus (iv) federal, state and local income
taxes for such Reference Period, plus (v) dividends and distributions made by
Borrower or any of its Subsidiaries during such Reference Period (other than by
a Wholly-Owned Subsidiary to Borrower or another Wholly-Owned Subsidiary), plus
(vi) capital expenditures made during such Reference Period.
"Consolidated Funded Debt Ratio" as of any date shall mean (a) the sum
of (i) Consolidated Funded Debt as of such date; plus (ii) accrued and unpaid
Consolidated Interest Charges as of such date; plus (iii) all other liabilities
and obligations of Borrower to Bank or any other lender as of such date; divided
by (b) an amount equal to Consolidated EBITDA for the applicable Reference
Period multiplied by (i) two (2) if such Reference Period consists of two
calendar quarters, (ii) four thirds (4/3) if such Reference Period consists of
three calendar quarters, or (iii) one (1) if such Reference Period consists of
four calendar quarters.
"Consolidated Funded Debt" at any time of determination means the sum
at such time, without duplication, of (a) the outstanding principal amount of
the Loans and any other outstanding Obligations, plus (b) the outstanding
principal amount of any other Indebtedness for borrowed money owed by the
Borrower or any of its Subsidiaries, plus (c) all obligations (contingent or
otherwise) relating to letters of credit (other than the Security Letter of
Credit) issued for the account of the Borrower or its Subsidiaries, plus (d) to
the extent not otherwise included, all liabilities in respect of Capitalized
Leases of the Borrower or its Subsidiaries, plus (e) to the extent not otherwise
included, all purchase money Indebtedness; all as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Charges" shall mean, for any period, the sum,
without duplication, of (a) all interest, charges and related expenses payable
by Borrower and its Subsidiaries for such period on or related to borrowed money
or the deferred purchase price of
3
assets that are treated as interest in accordance with GAAP, plus (b) the
portion of rent payable by Borrower and its Subsidiaries for such period under
Capital Leases that should be treated as interest in accordance with GAAP, plus
(c) all charges paid or payable by Borrower and its Subsidiaries during such
period pursuant to any Interest Rate Agreements; all determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the net income
of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, after eliminating all extraordinary
or nonrecurring gains or losses, including, without limitation, any gains (or
losses) from the sale of assets or services other than in the ordinary course of
business.
"Consolidated Net Worth" means, as of any date, the excess of the
total assets of Borrower and its Subsidiaries over the total liabilities of
Borrower and its Subsidiaries, as determined at such date on a consolidated
basis in accordance with GAAP.
"Consolidated Tangible Net Worth" of Borrower and its Subsidiaries at
any date of determination shall mean (a) the Consolidated Net Worth as of such
date, minus (b) the sum (in each case only to the extent included in the
determination of such Consolidated Net Worth) of (i) all assets that would be
classified as intangible assets under GAAP, including, without limitation,
goodwill (whether representing the excess of cost over book value of assets
acquired or otherwise), patents, tradenames, copyrights, franchises, operating
permits, unamortized debt discount and expense, organization costs, research and
development costs and any revaluation or write-up in the book value of assets
subsequent to the date of this Agreement, (ii) treasury stock and minority
interests in subsidiaries or other entities, (iii) cash set apart and held in a
sinking or other similar fund established for the purpose of redemption or other
retirement of capital stock, and (iv) reserves for depreciation, depletion,
obsolescence and amortization and all other reserves or appropriations of
retained earnings that, in accordance with GAAP, should be established in
connection with the businesses conducted by Borrower and its Subsidiaries.
"Contingent Liability" and "Contingent Liabilities" shall mean,
respectively, each obligation and liability of the Borrower and all such
obligations and liabilities of the Borrower incurred pursuant to any agreement,
undertaking or arrangement by which the Borrower: (a) guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, dividend, obligation or other liability of any
other Person in any manner (other than by endorsement of instruments in the
course of collection), including without limitation, any indebtedness, dividend
or other obligation which may be issued or incurred at some future time; (b)
guarantees the payment of dividends or other distributions upon the shares or
ownership interest of any other Person; (c) undertakes or agrees (whether
contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire
any indebtedness, obligation or liability of any other Person or any property or
assets constituting security therefor, (ii) to advance or provide funds for the
payment or discharge of any indebtedness, obligation or liability of any other
Person (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of income,
working capital or other financial condition of any
4
other Person, or (iii) to make payment to any other Person other than for value
received; (d) agrees to lease property or to purchase securities, property or
services from such other Person with the purpose or intent of assuring the owner
of such indebtedness or obligation of the ability of such other Person to make
payment of the indebtedness or obligation; (e) to induce the issuance of, or in
connection with the issuance of, any letter of credit for the benefit of such
other Person; or (f) undertakes or agrees otherwise to assure a creditor against
loss. The amount of any Contingent Liability shall (subject to any limitation
set forth herein) be deemed to be the outstanding principal amount (or maximum
permitted principal amount, if larger) of the indebtedness, obligation or other
liability guaranteed or supported thereby.
"Default Rate" shall mean a per annum rate of interest equal to the
Applicable Interest Rate plus five percent (5%) per annum.
"Domestic Eligible Accounts" shall mean those accounts receivable of
the Borrower and its Subsidiaries (which are included in the term "Borrower" for
purposes of this definition only) which:
(a) are genuine in all respects and have arisen in the ordinary course
of the Borrower's business from (i) the performance of services by the
Borrower, which services have been fully performed, acknowledged and
accepted by the account debtor or (ii) the sale or lease of Goods by the
Borrower, including C.O.D. sales, which Goods have been completed in
accordance with the account debtor's specifications (if any) and delivered
to and accepted by the account debtor, and the Borrower has possession of,
or has delivered to the Bank at the Bank's request, shipping and delivery
receipts evidencing such shipment;
(b) are evidenced by an invoice delivered to the account debtor
thereunder, and are not more than ninety (90) days (or one hundred twenty
(120) days in the case of Extended Pay Account Debtors) past invoice date;
(c) do not arise from a "sale on approval" or a "sale or return";
(d) have not come from an account debtor which is the United States or
any state, county, city or other governmental body, or any department,
agency or instrumentality thereof;
(e) are not due from an account debtor which is a Subsidiary or a
director, officer, employee, agent, parent or Affiliate of the Borrower;
(f) arise in connection with a sale to an account debtor who is either
a resident or citizen of, or that is an entity domiciled and principally
doing business in, the United States of America;
(g) do not arise in connection with a sale to an account debtor who is
located within a state which requires the Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either to
(i) receive a certificate of
5
authority to do business and be in good standing in such state, or (ii)
file a notice of business activities or similar report with such state's
taxing authority, unless (A) the Borrower has taken one of the actions
described in clauses (i) or (ii), (B) the failure to take one of the
actions described in either clause (i) or (ii) may be cured retroactively
by the Borrower at its election, or (C) the Borrower has proven to the
satisfaction of the Bank that it is exempt from any such requirements under
such state's laws;
(h) do not arise out of a contract or order which, by its terms,
forbids or makes void or unenforceable the assignment by the Borrower to
the Bank of the Account arising with respect thereto and are not
unassignable to the Bank for any other reason;
(i) do not arise out of a contract or order which, by its terms,
requires payment by an account debtor in advance of services provided by
Borrower or its Subsidiaries;
(j) are the valid, legally enforceable and unconditional obligation of
the account debtor, are not the subject of any setoff, counterclaim,
credit, allowance or adjustment by the account debtor, or of any claim by
the account debtor denying liability thereunder in whole or in part, and
the account debtor has not refused to accept and has not returned or
offered to return any of the Goods or services which are the subject of
such account, provided that any account that would qualify as an Domestic
Eligible Account except for the existence of a credit with respect to such
account shall qualify as a Domestic Eligible Account to the extent of the
positive difference between the amount of the account and the amount of the
credit with respect to such account; and
(k) are not subject to any Lien whatsoever, other than the Lien of the
Bank and Permitted Liens.
An account which is a Domestic Eligible Account shall cease to be a
Domestic Eligible Account whenever it ceases to meet any one of the foregoing
requirements.
If invoices representing twenty-five percent (25%) or more of the unpaid
net amount of all accounts from any one account debtor are more than ninety (90)
days (or one hundred twenty (120) days in case of Extended Pay Account Debtors)
past invoice date, then all accounts relating to such account debtor shall cease
to be Domestic Eligible Accounts.
"Employee Plan" includes any pension, stock bonus, employee stock
ownership plan, retirement, disability, medical, dental or other health plan,
life insurance or other death benefit plan, profit sharing, deferred
compensation, stock option, bonus or other incentive plan, vacation benefit
plan, severance plan or other employee benefit plan or arrangement, including,
without limitation, those pension, profit-sharing and retirement plans of the
Borrower or its Subsidiaries described from time to time in the financial
statements of the Borrower or its Subsidiaries and any pension plan, welfare
plan, Defined Benefit Pension Plans (as defined in ERISA) or any multi-employer
plan, maintained or administered by the Borrower or its
6
Subsidiaries or to which the Borrower or its Subsidiaries is a party or may have
any liability or by which the Borrower or its Subsidiaries is bound.
"Environmental Laws" shall mean all federal, state, district and local
laws, rules, regulations, ordinances, and consent decrees relating to Hazardous
Materials, pollution and environmental matters, as now or at any time hereafter
in effect, applicable to the Borrower's or its Subsidiaries' businesses or
facilities owned and operated by the Borrower or its Subsidiaries, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes in the environment (including, without
limitation, ambient air, surface water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" shall mean any of the events or conditions set
forth in Section 10 hereof.
"Extended Pay Account Debtors" shall mean the account debtors listed
on Schedule 1.1 attached hereto, if any, as the same may be amended to add
additional account debtors subject to the prior written consent of the Bank in
its sole and absolute discretion.
"Floating Rate" means, for any day, a rate per annum equal to the
Prime Rate minus one-half percent (0.5%).
"Foreign Eligible Accounts" shall mean those accounts receivable of
the Borrower and its Subsidiaries (which are included in the term "Borrower" for
purposes of this definition only) which are not Domestic Eligible Accounts and
are insured by Euler Hermes, Inc.
"GAAP" shall mean United States generally accepted accounting
principles; provided, however, that GAAP as applied in the preparation of any
interim financial statements or reports shall exclude normal fiscal year-end
adjustments that are not materially adverse and information required by GAAP to
be disclosed in footnotes to financial statements.
"Guaranties" shall mean, collectively, the U.S. Guaranties and the UK
Guarantees.
"Guarantors" shall mean, collectively, the U.S. Guarantors and the UK
Guarantors who shall be jointly and severally liable for all obligations
guaranteed pursuant to the Guaranties.
"Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
7
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials or wastes that are or become regulated under any Environmental Law
(including without limitation, any that are or become classified as hazardous or
toxic under any Environmental Law).
"Indebtedness" shall mean, as to any Person, (a) all Liabilities of
the Person, including, but not limited to, every obligation of such Person (i)
for borrowed money, (ii) every obligation of such Person under Capital Leases,
and (iii) any other debt, secured or unsecured, created, issued, incurred or
assumed by such Person for the deferred purchase price of any property or
services; (b) all indebtedness secured by any Lien existing on property owned by
such Person whether or not such Person is personally liable for payment of such
indebtedness; and (c) all Contingent Liabilities of such Person whether or not
required by GAAP to be reflected on such Person's balance sheet.
"Indemnified Party" and "Indemnified Parties" shall mean,
respectively, each of the Bank and any parent corporations, affiliated
corporations or subsidiaries of the Bank, and each of their respective officers,
directors and employees, attorneys and agents, and all of such parties and
entities.
"Interest Rate Agreements" shall mean any interest rate protection
agreement, interest rate swap or other interest rate hedge arrangement (other
than any interest rate cap or other similar agreement or arrangement pursuant to
which the Borrower has no credit exposure to the Bank) to or under which the
Borrower or any Subsidiary of the Borrower is a party or beneficiary.
"Liabilities" shall mean at all times all liabilities of the Borrower
or any Subsidiary that would be shown as such on a balance sheet of the Borrower
or its Subsidiary prepared in accordance with GAAP.
"LIBOR Base Rate" shall mean the rate of interest per annum as
determined by the Bank for each consecutive thirty (30)-day period based on the
rates for thirty (30)-day dollar deposits (in an amount comparable to the then
outstanding principal amount of the Loans) offered two Business Days prior to
the applicable thirty (30)-day period by major banks in the London interbank
market, as selected by the Bank. The Bank shall not be obligated to give notice
of any change in the LIBOR Base Rate.
"Lien" shall mean any mortgage, pledge, hypothecation, judgment lien
or similar legal process, title retention lien, or other lien or security
interest, including, without limitation, the interest of a vendor under any
conditional sale or other title retention agreement and the interest of a lessor
under a lease of any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, by such Person as lessee that is,
or should be, a Capital Lease on the consolidated balance sheet of the Borrower
and its Subsidiaries prepared in accordance with GAAP.
8
"Loans" shall mean, collectively, the Acquisition Loan and the
Revolving Loan made by the Bank to the Borrower under and pursuant to this
Agreement.
"Loan Documents" shall have the meaning set forth in Section 3.1.
"Note" and "Notes" shall mean, respectively, each of and collectively,
the Acquisition Loan Note and the Revolving Note.
"Obligations" shall mean the Loans, as evidenced by the Notes, all
interest accrued thereon, any fees due the Bank hereunder, any expenses incurred
by the Bank hereunder and any and all other liabilities and obligations of the
Borrower and its Subsidiaries to the Bank hereunder or under any of the other
Loan Documents, howsoever created, arising or evidenced, and howsoever owned,
held or acquired, whether now or hereafter existing, whether now due or to
become due, direct or indirect, absolute or contingent, and whether several,
joint or joint and several, including, but not limited to, any Interest Rate
Agreements.
"Obligor" shall mean the Borrower, any guarantor, accommodation
endorser, third party pledgor, or any other party liable with respect to the
Obligations.
"Permitted Liens" shall have the meaning set forth in Section 7.2.
"Person" shall mean any individual, partnership, limited liability
company, corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Prime Rate" shall mean, for any day, the rate of interest in effect
for such day as publicly announced from time to time by the Bank as its prime
rate (whether or not such rate is actually charged by the Bank), which is not
intended to be the Bank's lowest or most favorable rate of interest at any one
time. Any change in the Prime Rate announced by the Bank shall take effect at
the opening of business on the day specified in the public announcement of such
change; provided that the Bank shall not be obligated to give notice of any
change in the Prime Rate.
"Reference Period shall mean:
(a) in reference to March 31, 2007, the calendar quarter ending on such
date;
(b) in reference to June 30, 2007, the period of two consecutive calendar
quarters ending on such date;
(c) in reference to September 30, 2007, the period of three consecutive
calendar quarters ending on such date; and
(d) in reference to December 31, 2007, and each succeeding date that is the
last day of a calendar quarter, the period of four consecutive calendar quarters
ending on such date.
9
"Revolving Loan" shall mean each direct advance and the aggregate of
all such direct advances, from time to time made by the Bank to the Borrower
under and pursuant to this Agreement, as set forth in Section 2.2 of this
Agreement.
"Revolving Loan Availability" shall mean at any time, the lesser of
(a) the Revolving Loan Commitment, or (b) the Borrowing Base Amount.
"Revolving Loan Commitment" shall mean Eight Million and 00/100
Dollars ($8,000,000.00).
"Revolving Loan Maturity Date" shall mean December 21, 2009, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Revolving Note.
"Revolving Note" shall have the meaning set forth in Section 4.2
hereof.
"Security Letter of Credit" shall mean that certain irrevocable,
standby letter of credit issued by SEB Bank, located in Sweden, to the Bank
securing the Acquisition Loan and expiring December 21, 2010, that, except to
the extent inconsistent with its express terms, shall be subject to the Uniform
Customs and Practice for Documentary Credits, 1993 Revision, International
Chamber of Commerce Publication No. 500.
"SPA" means the Stock Purchase Agreement by and between the Borrower's
Subsidiary, CTI Data Solutions Ltd, and the shareholders of Ryder Systems Ltd,
dated December 22, 2006, providing for the purchase by CTI Data Solutions Ltd.
of all the stock of Ryder Systems Ltd.
"Subsidiary" and "Subsidiaries" shall mean any corporation,
association, trust, partnership, limited liability company or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
"UCC" shall mean the Uniform Commercial Code in effect in Indiana from
time to time.
"UK Guarantees" shall have the meaning set forth in Section 3.1(h).
"UK Guarantors" shall mean, collectively, CTI Data Solutions Ltd, CTI
Billing Solutions Ltd and Ryder Systems Ltd., who shall be jointly and severally
liable for all obligations guaranteed pursuant to the UK Guarantees.
"U.S. Guaranties" shall have the meaning set forth in Section 3.1(g).
"U.S. Guarantors" shall mean, collectively, CTI Data Solutions (USA)
Inc., CTI Billing Solutions, Inc., Centillion Data Systems, L.L.C., CTI Delaware
Holdings, Inc., CTI Data
10
Solutions Ltd, CTI Billing Solutions Ltd and Ryder Systems Ltd., who shall be
jointly and severally liable for all obligations guaranteed pursuant to the U.S.
Guaranties.
"Voting Stock" shall mean the capital stock or similar interests of
any class or classes (however designated) of a corporation or any other Person,
the holders of which are at the time entitled to vote for the election of a
majority of the directors (or persons performing similar functions) of such
Person.
"Wholly-Owned" shall mean a Subsidiary all of whose equity interests
are owned, directly or indirectly, legally and beneficially by the Borrower.
1.2 Accounting Terms. Any accounting terms used in this Agreement which are
not specifically defined herein shall have the meanings customarily given them
in accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with GAAP as used in the preparation of the most recently audited
financial statements of the Borrower. If any changes in accounting principles or
practices from those used in the preparation of the financial statements are
hereafter occasioned by the promulgation of rules, regulations, pronouncements
and opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or any successor thereto or
agencies with similar functions), which results in a material change in the
method of accounting in the financial statements required to be furnished to the
Bank hereunder or in the calculation of financial covenants, standards or terms
contained in this Agreement, the parties hereto agree to enter into good faith
negotiations to amend such provisions so as equitably to reflect such changes to
the end that the criteria for evaluating the financial condition and performance
of the Borrower will be the same after such changes as they were before such
changes; and if the parties fail to agree on the amendment of such provisions,
the Borrower will furnish financial statements in accordance with such changes
but shall provide calculations for all financial covenants and perform all
financial covenants herein in accordance with applicable accounting principles
and practices in effect immediately prior to such changes.
1.3 Other Terms Defined in UCC. All other capitalized words and phrases
used herein and not otherwise specifically defined shall have the respective
meanings assigned to such terms in the UCC, as amended from time to time, to the
extent the same are used or defined therein.
1.4 Other Definitional Provisions; Construction. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa, and in particular the word
"Borrower" shall be so construed. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
references to Article, Section, Subsection, Schedule, Exhibit and like
references are references to this Agreement unless otherwise specified. An Event
of Default shall "continue" or be "continuing" until such Event of Default has
either been cured by the Borrower with the Bank's written consent thereto or
waived by the Bank in accordance with Section 12.3 hereof.
11
References in this Agreement to any party shall include such party's successors
and permitted assigns. References to any "Section" shall be a reference to such
Section of this Agreement unless otherwise stated. To the extent any of the
provisions of the other Loan Documents are inconsistent with the terms of this
Loan Agreement, the provisions of this Loan Agreement shall govern.
2. COMMITMENT OF THE BANK.
2.1 Acquisition Loan.
(a) Acquisition Loan Commitment. Subject to the terms and conditions
of this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrower and its Subsidiaries set
forth herein and in the other Loan Documents, the Bank agrees to make the
Acquisition Loan. The Acquisition Loan shall be used by the Borrower to
purchase all of the shares of Ryder Systems Ltd. The Acquisition Loan may
be prepaid in whole or in part at any time pursuant to Section 2.1(c), but
shall be due in full on the Acquisition Loan Maturity Date, unless the
credit extended under the Acquisition Loan is otherwise terminated or
extended as provided in this Agreement.
(b) Acquisition Loan Interest and Payments. Except as otherwise
provided in this Section 2.1(b), the principal amount of the Acquisition
Loan outstanding from time to time shall bear interest at the Applicable
Interest Rate. Accrued and unpaid interest on the unpaid principal balance
of the Acquisition Loan outstanding from time to time shall be due and
payable monthly, in arrears, commencing on January 5, 2007 and continuing
on the 5th day of each calendar month thereafter, and on the Acquisition
Loan Maturity Date. Any amount of principal or interest on the Acquisition
Loan which is not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest payable on demand at the
Default Rate.
(c) Principal Prepayments. The Borrower may from time to time prepay
the Acquisition Loan, in whole on in part, without any prepayment premium
or penalty whatsoever.
2.2 Revolving Loan.
(a) Revolving Loan Commitment. Subject to the terms and conditions of
this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrower and its Subsidiaries set
forth herein and in the other Loan Documents, the Bank agrees to make
advances on such Revolving Loan at such times as the Borrower may from time
to time request until, but not including, the Revolving Loan Maturity Date,
and in such amounts as the Borrower may from time to time request,
provided, however, that the aggregate principal balance of all Revolving
Loan outstanding at any time shall not exceed the Revolving Loan
Availability. The Revolving Loan made by the Bank may be repaid and,
subject to the terms and conditions hereof, borrowed again up to, but not
including, the Revolving Loan Maturity
12
Date unless the Revolving Loan is otherwise terminated or extended as
provided in this Agreement. The Revolving Loan shall be used by the
Borrower for the purpose of acquiring all of the shares of Ryder Systems
Ltd and working capital.
(b) Revolving Loan Interest and Payments. Except as otherwise provided
in this Section 2.2(b), the principal amount of the Revolving Loan
outstanding from time to time shall bear interest at the Applicable
Interest Rate. Accrued and unpaid interest on the unpaid principal balance
of the Revolving Loan outstanding from time to time shall be due and
payable monthly, in arrears, commencing on January 5, 2007 and continuing
on the 5th day of each calendar month thereafter, and on the Revolving Loan
Maturity Date. Any amount of principal or interest on the Revolving Loan
which is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest payable on demand at the Default Rate.
(c) Revolving Loan Principal Repayments.
(i) Mandatory Principal Prepayments. The Revolving Loan shall be
repaid by the Borrower on the Revolving Loan Maturity Date, unless
payable sooner pursuant to the provisions of this Agreement. In the
event the aggregate outstanding principal balance of the Revolving
Loan hereunder exceeds the Revolving Loan Availability, the Borrower
shall, without notice or demand of any kind, immediately make such
repayments of the Revolving Loan or take such other actions as shall
be necessary to eliminate such excess.
(ii) Optional Prepayments. In addition to a mandatory prepayment
under Section 2.2(c)(i), the Borrower may from time to time prepay the
Revolving Loan, in whole or in part, without any prepayment premium or
penalty whatsoever.
2.3 Interest and Fee Computation; Collection of Funds. Except as otherwise
set forth herein, all interest and fees shall be calculated on the basis of a
year consisting of 360 days and shall be paid for the actual number of days
elapsed. Principal payments submitted in funds not immediately available shall
continue to bear interest until collected. If any payment to be made by the
Borrower hereunder or under the Notes shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment.
2.4 Commitment Fee and Funds Transfer Fee. In addition to the principal and
interest and other amounts payable under the Notes, Borrower agrees to pay to
Bank (i) a nonrefundable commitment fee in the amount of Twenty-Five Thousand
and No/100 Dollars ($25,000.00), which is due and payable on even date herewith,
and (ii) a funds transfer fee in the amount of $20,319.40 to compensate the Bank
for the Bank's use of funds necessary to make the Loans available to the
Borrower on even date herewith in order for the Borrower to consummate the
transactions contemplated by the SPA.
13
2.5 Unused Revolving Loan Commitment Fee. The Borrower agrees to pay to the
Bank a fee with respect to the unused portion from time to time of the Revolving
Loan Commitment calculated at the rate of one-quarter percent (0.25%) per annum
for each calendar quarter (or portion thereof) from the date of this Agreement
to the Revolving Loan Maturity Date on the average daily amount by which the
Revolving Loan Commitment exceeds the outstanding principal amount of the
Revolving Loan during such calendar quarter. Such fee shall be payable quarterly
in arrears on the fifth day after the end of each calendar quarter, with a final
payment on the earlier of the Revolving Loan Maturity Date or such other date on
which the Revolving Loan Commitment terminates.
2.6 Indemnity. Borrower agrees to indemnify and hold Bank harmless from and
against any loss, cost or expense that Bank incurs as a result of (i) any
default by Borrower in payment, when due, of the principal or interest on any
Loan, including any loss or expense arising from interest or fees payable by
Bank to banks for funds obtained by it in order to maintain its LIBOR Base Rate,
or (ii) Borrower's payment of principal on a Loan on a day that either (i) is
not the last day of a thirty (30)-day period for which the LIBOR Base Rate has
been, or is to be, determined, or (ii) if the last day of such a thirty (30)-day
period is not a Business Day, on the first Business Day following such thirty
(30)-day period.
3. CONDITIONS OF BORROWING.
Notwithstanding any other provision of this Agreement, the Bank shall not
be required to disburse or make all or any portion of the Loans if any of the
following conditions shall have occurred.
3.1 Loan Documents. At the initial disbursement of the Acquisition Loan,
the Borrower shall have failed to execute and deliver to the Bank any of the
following Loan Documents (collectively, the "Loan Documents"), all of which must
be reasonably satisfactory to the Bank and the Bank's counsel in form, substance
and execution:
(a) Loan Agreement. Three copies of this Agreement duly executed by
the Borrower.
(b) Acquisition Loan Note. An Acquisition Loan Note duly executed by
the Borrower.
(c) Revolving Note. A Revolving Note duly executed by the Borrower.
(d) Security Agreement. A Security Agreement duly executed by each of
the Borrower, CTI Data Solutions (USA) Inc., CTI Billing Solutions, Inc.,
Centillion Data Systems, L.L.C. and CTI Delaware Holdings, Inc.
(collectively, the "U.S. Security Agreements").
(e) Charge Over Shares In Ryder Systems Ltd. A Charge Over Shares In
Ryder Systems Ltd duly executed by Ryder Systems Ltd (the "Ryder Charge
Over Shares").
14
(f) Charge Over Shares in CTI Data Solutions Ltd. A Charge Over Shares
In CTI Data Solutions (the "CTI Charge Over Shares").
(g) Debenture. A Debenture duly executed by each of the Borrower, CTI
Data Solutions Ltd. and Ryder Systems Ltd. (collectively, the "UK Security
Agreements").
(h) Guaranty. A Guaranty duly executed by each of the U.S. Guarantors
(collectively, the "U.S. Guaranties").
(i) Guarantee and Indemnity. A Guarantee and Indemnity duly executed
by each of the UK Guarantors (collectively, the "UK Guarantees").
(j) Borrowing Base Certificate. If required by Bank in its sole
discretion, a Borrowing Base Certificate in a form satisfactory to Bank in
its sole discretion (a "Borrowing Base Certificate"), certified as accurate
by the Borrower.
(k) Resolutions. Resolutions of the board of directors, shareholders,
managers and/or members of the Borrower and Guarantors authorizing the
execution of this Agreement and the Loan Documents.
(l) Additional Documents. Such other certificates, financial
statements, schedules, resolutions, opinions of counsel, notes and other
documents which are provided for hereunder or which the Bank shall
reasonably require.
3.2 Insurance. Borrower shall fail to furnish to Bank evidence of insurance
coverage as required by the Loan Documents.
3.3 Event of Default. Any Event of Default, or any event which, with notice
or lapse of time, or both would constitute an Event of Default, shall have
occurred and be continuing.
3.4 Adverse Changes. A material adverse change in the financial condition
or affairs of the Borrower or any Guarantor, as determined in the Bank's
reasonable discretion, shall have occurred.
3.5 Litigation. Any litigation or governmental proceeding shall have been
instituted against the Borrower, its Subsidiaries, any Guarantor or any of their
respective officers, managers or members which in the opinion of the Bank's
legal counsel, materially adversely affects the financial condition or continued
operation of the Borrower, its Subsidiaries or any Guarantor.
3.6 Representations and Warranties. Any representation or warranty of the
Borrower, its Subsidiaries or any Guarantor contained herein or in any Loan
Document shall be untrue or incorrect as of the date of any Loan as though made
on such date, except to the extent such representation or warranty expressly
relates to an earlier date.
15
3.7 Stock Purchase Agreement. At the initial disbursement of the
Acquisition Loan, Borrower shall fail to furnish to Bank a fully-executed copy
of the SPA and evidence of the closing on the date of this Agreement of the
purchase of stock pursuant to the SPA, all in form and substance satisfactory to
Bank in its sole discretion.
4. NOTES EVIDENCING LOANS.
4.1 Acquisition Loan Note. The Acquisition Loan shall be evidenced by a
single note (together with any and all renewal, extension, modification or
replacement notes executed by the Borrower and delivered to the Bank and given
in substitution therefor, the "Acquisition Loan Note") duly executed by the
Borrower and payable to the order of the Bank. At the time of the initial
disbursement of the Acquisition Loan or a repayment made in whole or in part
thereon, an appropriate notation thereof shall be made on the books and records
of the Bank. All amounts recorded shall be, absent demonstrable error,
conclusive and binding evidence of (i) the principal amount of the Acquisition
Loan advanced hereunder, (ii) any unpaid interest owing on the Acquisition Loan,
and (iii) all amounts repaid on the Acquisition Loan. The failure to record any
such amount or any error in recording such amounts shall not, however, limit or
otherwise affect the obligations of the Borrower under the Acquisition Loan Note
to repay the principal amount of the Acquisition Loan, together with all
interest accruing thereon.
4.2 Revolving Note. The Revolving Loan shall be evidenced by a single note
(together with any and all renewal, extension, modification or replacement notes
executed by the Borrower and delivered to the Bank and given in substitution
therefor, the "Revolving Note"), duly executed by the Borrower and payable to
the order of the Bank. At the time of the initial disbursement of the Revolving
Loan and at each time an additional disbursement shall be requested hereunder or
a repayment made in whole or in part thereon, an appropriate notation thereof
shall be made on the books and records of the Bank. All amounts recorded shall
be, absent demonstrable error, conclusive and binding evidence of (i) the
principal amount of the Revolving Loan advanced hereunder, (ii) any unpaid
interest owing on the Revolving Loan, and (iii) all amounts repaid on the
Revolving Loan. The failure to record any such amount or any error in recording
such amounts shall not, however, limit or otherwise affect the obligations of
the Borrower under the Revolving Note to repay the principal amount of the
Revolving Loan, together with all interest accruing thereon.
5. MANNER OF BORROWING.
Each advance of the Revolving Loan shall be made available to the Borrower
upon its request, from any Person whose authority to so act has not been revoked
by the Borrower in writing previously received by the Bank. A request for an
advance of the Revolving Loan must be received by no later than 11:00 a.m.
Indianapolis, Indiana time, on the day it is to be funded. The proceeds of each
advance of the Revolving Loan shall be made available at the office of the Bank
by credit to the account of the Borrower or by other means requested by the
Borrower and acceptable to the Bank.
16
The Bank is authorized to rely on any written, verbal, electronic,
telephonic or telecopy loan requests which the Bank believes in its good faith
judgment to emanate from a properly authorized representative of the Borrower,
whether or not that is in fact the case. The Borrower does hereby irrevocably
confirm, ratify and approve all such advances by the Bank and does hereby
indemnify the Bank against reasonable costs and expenses (including court costs,
attorneys' and paralegals' fees) and shall hold the Bank harmless with respect
thereto.
6. REPRESENTATIONS AND WARRANTIES.
To induce the Bank to make the Loans, the Borrower makes the following
representations and warranties to the Bank, each of which shall be true and
correct as of the date of the execution and delivery of this Agreement, and
which shall survive the execution and delivery of this Agreement:
6.1 Organization and Name. Each of the Borrower and its Subsidiaries (a) is
a corporation, partnership or limited liability company (or similar business
entity) duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation, (b) has all requisite corporate,
partnership or limited liability company (or the equivalent company) power to
own its property and conduct its business as now conducted and as presently
contemplated, and (c) is in good standing as a foreign corporation, partnership
or limited liability company (or similar business entity) and is duly authorized
to do business in each jurisdiction where such qualification is necessary. The
exact legal name of the Borrower is as set forth in the first paragraph of this
Agreement, and the Borrower currently does not conduct, nor has it during the
last five (5) years conducted, business under any other name or trade name,
except CTI Group (Holdings), Inc., CTI Group, CTI Data Solutions (USA) Inc., CTI
Billing Solutions, Inc., CTI Delaware Holdings, Inc., CTI Data Solutions Ltd.,
CTI Billings Solutions Ltd. and Centillion Data Systems, L.L.C.
6.2 Authorization; Validity. Each of the Borrower and its Subsidiaries has
full right, power and authority to enter into this Agreement, to make the
borrowings and execute and deliver the Loan Documents as provided herein and to
perform all of its duties and obligations under this Agreement and the Loan
Documents. The execution and delivery of this Agreement and the Loan Documents
will not, nor will the observance or performance of any of the matters and
things herein or therein set forth, violate or contravene any provision of law
or of the articles of incorporation, operating agreement, partnership agreement
or similar charter document, or any by-laws or similar documents, of Borrower or
any of its Subsidiaries. All necessary and appropriate company action has been
taken on the part of the Borrower and each of its Subsidiaries to authorize the
execution and delivery of this Agreement and the Loan Documents. This Agreement
and the Loan Documents to which Borrower or any of its Subsidiaries are parties
are valid and binding agreements and contracts of such parties in accordance
with their respective terms, except that the binding effect and the
enforceability thereof are subject to application of insolvency, reorganization,
moratorium, and other laws in effect from time to time affecting the rights of
creditors generally, as such laws may be applied in the event of a bankruptcy,
insolvency, reorganization or other similar proceeding of, or moratorium
applicable to the Bank and by the exercise of judicial discretion in the
application of general principles of equity.
17
6.3 Compliance With Laws. Borrower and its Subsidiaries are not in
violation of any material ordinance, law or regulation of any governmental
authority as to their businesses, premises or properties. Without limiting the
preceding sentence, Borrower and its Subsidiaries will (i) ensure that no person
who owns a controlling interest in or otherwise controls Borrower or its
Subsidiaries is or shall be (A) listed on the Specially Designated Nationals and
Blocked Person List maintained by the Office of Foreign Assets Control ("OFAC"),
Department of the Treasury, and/or any other similar lists maintained by OFAC
pursuant to any authorizing statute, Executive Order or regulation or (B) a
person designated under Section 1(b), (c) or (d) of Executive Order No. 13224
(September 23, 2001), any related enabling legislation or any other similar
Executive Orders and (ii) comply with all applicable Bank Secrecy Act and
anti-money laundering laws and regulations.
6.4 Environmental Laws and Hazardous Substances. The Borrower represents,
warrants and agrees with the Bank that (i) the Borrower and its Subsidiaries
have not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off any of the premises
of the Borrower or its Subsidiaries (whether or not owned by them) in any manner
which at any time violates any Environmental Law or any license, permit,
certificate, approval or similar authorization thereunder, (ii) the operations
of the Borrower and its Subsidiaries comply in all material respects with all
Environmental Laws and all licenses, permits certificates, approvals and similar
authorizations thereunder, (iii) there has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other Person, nor is any pending or to Borrower's knowledge
threatened, and the Borrower shall immediately notify the Bank upon becoming
aware of any such investigation, proceeding, complaint, order, directive, claim,
citation or notice, and shall take prompt and appropriate actions to respond
thereto, with respect to any non-compliance with, or violation of, the
requirements of any Environmental Law by the Borrower or its Subsidiaries or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Material or any other environmental,
health or safety matter, which affects the Borrower or its Subsidiaries, or
their businesses, operations or assets or any properties at which the Borrower
or Subsidiaries have transported, stored or disposed of any Hazardous Materials,
(iv) the Borrower and its Subsidiaries have no material liability, contingent or
otherwise, in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material; and (v) without limiting the generality of the foregoing, the Borrower
shall, following reasonable determination by the Bank that there is a material
non-compliance, with any Environmental Law, at the Borrower's sole expense,
cause an independent environmental engineer reasonably acceptable to the Bank to
conduct such tests of the relevant site as are appropriate, and prepare and
deliver a report setting forth the result of such tests, a proposed plan for
remediation and an estimate of the costs thereof.
6.5 Absence of Breach. The execution, delivery and performance of this
Agreement, the Loan Documents and any other documents or instruments to be
executed and delivered by the Borrower and its Subsidiaries in connection with
the Loans shall not: (i) violate any provisions of law or any applicable
regulation, order, writ, injunction or decree of any court or
18
governmental authority, or (ii) conflict with, be inconsistent with, or result
in any breach or default of any of the terms, covenants, conditions, or
provisions of any indenture, mortgage, deed of trust, instrument, document,
agreement or contract of any kind to which the Borrower or its Subsidiaries are
a party or by which the Borrower, its Subsidiaries or any of their property or
assets are bound.
6.6 Collateral Representations. The Borrower or a Guarantor is the sole
owner of the Collateral, free from any Lien of any kind, other than the
Permitted Liens.
6.7 Financial Statements. All financial statements submitted to the Bank
have been prepared in accordance with GAAP on a basis, except as otherwise noted
therein, consistent with the previous fiscal year and fairly present in all
material respects the financial condition of the Borrower and its Subsidiaries
and the results of the operations for the Borrower and its Subsidiaries as of
such date and for the periods indicated. Since the date of the most recent
financial statement submitted by the Borrower to the Bank, there has been no
material adverse change in the financial condition or in the assets or
liabilities of the Borrower and its Subsidiaries, or any changes except those
occurring in the ordinary course of business.
6.8 Litigation and Taxes. There is no litigation, demand, charge, claim,
petition or governmental investigation or proceeding pending, or, to the
Borrower's knowledge, threatened, against the Borrower or its Subsidiaries,
which, if adversely determined, would result in any material adverse change in
the financial condition or properties, business or operations of the Borrower or
any Guarantor. Except as disclosed on Schedule 6.8 hereof, the Borrower and
Guarantors have duly filed all applicable income or other tax returns and have
paid all income or other taxes when due. There is no controversy or objection
pending, or, to the Borrower's knowledge, threatened in respect of any tax
returns of the Borrower or any Guarantor.
6.9 Event of Default. No Event of Default has occurred and is continuing,
and no event has occurred and is continuing which, with the lapse of time, the
giving of notice, or both, would constitute such an Event of Default under this
Agreement or any of the Loan Documents and neither the Borrower nor any of its
Subsidiaries is in default (without regard to grace or cure periods) under any
other material contract or agreement to which it is a party.
6.10 ERISA Obligations. All Employee Plans of the Borrower and its
Subsidiaries meet the minimum funding standards of Section 302 of ERISA where
applicable and each such Employee Plan that is intended to be qualified within
the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified. No
withdrawal liability has been incurred under any such Employee Plans and no
"Reportable Event" or "Prohibited Transaction" (as such terms are defined in
ERISA), has occurred with respect to any such Employee Plans, unless approved by
the appropriate governmental agencies. Except as disclosed on Schedule 6.10
hereto, the Borrower and its Subsidiaries have promptly paid and discharged all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets.
6.11 Adverse Circumstances. No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding
19
or, to the knowledge of Borrower, basis therefor) exists which (a) could
adversely affect the validity or priority of the Liens granted to the Bank under
the Loan Documents, (b) could reasonably be expected to materially adversely
affect the ability of the Borrower or its Subsidiaries to perform their
obligations under the Loan Documents, (c) would constitute an Event of Default
under any of the Loan Documents, or (d) would constitute such an Event of
Default with the giving of notice or lapse of time or both.
6.12 Lending Relationship. The Borrower acknowledges and agrees that the
relationship hereby created with the Bank is and has been conducted on an open
and arm's length basis in which no fiduciary relationship exists and that the
Borrower has not relied and is not relying on any such fiduciary relationship in
executing this Agreement and in consummating the Loans.
6.13 Business Loan. The Loans, including interest rate, fees and charges as
contemplated hereby are business loans and the proceeds thereof are being
utilized solely for business purposes.
6.14 Compliance with Regulation U. No portion of the proceeds of the Loans
shall be used by the Borrower, its Subsidiaries or any Affiliates of the
Borrower, either directly or indirectly, for the purpose of purchasing or
carrying any margin stock, within the meaning of Regulation U as adopted by the
Board of Governors of the Federal Reserve System.
6.15 Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries is, and after giving effect to any Loan, will not be, subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
6.16 Bank Accounts. The account numbers and locations of all Deposit
accounts and other bank accounts of the Borrower and its Subsidiaries are as set
forth on Schedule 6.16 attached hereto.
6.17 Place of Business. The principal place of business of the Borrower is
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxx 00000, and the
Borrower shall promptly notify the Bank of any change in such location.
6.18 Complete Information. This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to the Bank in connection with or in furtherance of this
Agreement by or on behalf of the Borrower and its Subsidiaries fully and fairly
state the matters required to be stated therein, and neither misstate any
material fact nor, separately or in the aggregate, fail to state any material
fact necessary to make the statements made not misleading.
6.19 Borrower's Subsidiaries. With the exception of CTI Data Solutions
(USA) Inc., CTI Billings Solutions, Inc., CTI Delaware Holdings, Inc.,
Centillion Data Systems, L.L.C., CTI Data Solutions Ltd, CTI Billing Solutions
Ltd and Ryder Systems Ltd. (effective immediately
20
after disbursement of the Acquisition Loan) the Borrower does not own any equity
interests in any other corporation, association, trust, partnership, limited
liability company or other business entity.
7. NEGATIVE COVENANTS.
7.1 Indebtedness. Without the prior written consent of the Bank, the
Borrower shall not, and shall not permit any of its Subsidiaries to, either
directly or indirectly, create, assume, incur or have outstanding any
Indebtedness (including purchase money indebtedness in excess of Twenty Thousand
Dollars ($20,000.00) individually or One Hundred Thousand Dollars ($100,000.00)
in the aggregate in principal amount at any time outstanding) or become liable,
whether as endorser, guarantor, surety or otherwise, for any debt or obligation
of any other Person, except:
(a) the Obligations;
(b) endorsement for collection or deposit of any commercial paper
secured in the ordinary course of business;
(c) obligations of the Borrower and its Subsidiaries for taxes,
assessments, municipal or other governmental charges;
(d) Indebtedness for Capital Expenditures incurred after December 22,
2006 in a maximum principal amount of Twenty Thousand Dollars ($20,000.00)
individually or One Hundred Thousand Dollars ($100,000.00) in the aggregate
at any time outstanding;
(e) obligations of the Borrower and its Subsidiaries for accounts
payable, other than for money borrowed, incurred in the ordinary course of
business; and
(f) obligations existing on the date hereof which are disclosed on the
financial statements referred to in Section 6.
7.2 Encumbrances. Without the prior written consent of the Bank, the
Borrower shall not, and and shall not permit any of its Subsidiaries to, either
directly or indirectly, create, assume, incur or suffer or permit to exist any
Lien or charge of any kind or character upon any asset of the Borrower or its
Subsidiaries, whether owned at the date hereof or hereafter acquired except (all
of the following being "Permitted Liens"):
(a) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith by appropriate proceedings
in such a manner as not to make the property forfeitable;
(b) Liens or charges incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in connection
with the borrowing of money or the obtaining of an advance or credit, and
which do not in the aggregate
21
materially detract from the value of its property or assets or materially
impair the use thereof in the operation of its business;
(c) Liens arising out of judgments or awards against the Borrower or
its Subsidiaries with respect to which it shall concurrently therewith be
prosecuting a timely appeal or proceeding for review and with respect to
which it shall have secured a stay of execution pending such appeal or
proceedings for review;
(d) pledges or deposits to secure obligations under worker's
compensation laws or similar legislation;
(e) good faith deposits in connection with lending contracts or leases
to which the Borrower or any of its Subsidiaries is a party;
(f) deposits to secure public or statutory obligations of the Borrower
or any of its Subsidiaries;
(g) Liens existing on the date hereof and disclosed on the financial
statements referred to in Section 6;
(h) Liens granted to the Subordinated Lenders to secure the
Subordinated Debt; and
(i) Liens granted to the Bank hereunder.
7.3 Investments. Without the prior written consent of the Bank, the
Borrower shall not, and and shall not permit any of its Subsidiaries to, either
directly or indirectly, make or have outstanding any new investments (whether
through purchase of stocks, obligations or otherwise) in, or loans or advances
to, any other Person, except:
(a) the Guarantors;
(b) investments in direct obligations of the United States;
(c) investments in certificates of deposit issued by the Bank or any
bank with assets greater than One Hundred Million Dollars
($100,000,000.00); or
(d) investments in Prime Commercial Paper (for purposes hereof, Prime
Commercial Paper shall mean short-term unsecured promissory notes sold by
large corporations and rated A-1/P-1 by Standard & Poor's Ratings Group, a
division of McGraw Hill, Inc., and Xxxxx'x Investment Service, Inc.).
7.4 Transfer; Merger. Without the prior written consent of the Bank, the
Borrower shall not, and and shall not permit any of its Subsidiaries to, except
in the ordinary course of its business, either directly or indirectly, merge,
consolidate, sell, transfer, license, lease, encumber or otherwise dispose of
all or any part of their property or businesses or all or any substantial
22
part of their assets, or sell or discount (with or without recourse) any of
their Promissory Notes, Chattel Paper, Payment Intangibles or Accounts.
7.5 Issuance of Stock. Without the prior written consent of the Bank, the
Borrower shall not, and and shall not permit any of its Subsidiaries to, either
directly or indirectly, issue or distribute any additional shares of stock or
other securities of the Borrower or its Subsidiaries, except as otherwise
permitted pursuant to the Borrower's Stock Option Plan; provided, however, that
pursuant to such Stock Option Plan, the Borrower shall not issue in excess of
ten percent (10%) of the Borrower's capital stock on a fully-diluted basis.
7.6 Use of Proceeds. The Borrower shall not, and and shall not permit any
of its Subsidiaries or Affiliates to, use any portion of the proceeds of the
Loans, either directly or indirectly, for the purpose of purchasing any
securities underwritten by any Affiliate of the Bank.
7.7 Bank Accounts. The Borrower shall not, and and shall not permit any of
its Subsidiaries to, establish any new Deposit Accounts or other bank accounts,
other than bank accounts established at or with the Bank and the bank accounts
set forth in Section 6.16, without the prior written consent of the Bank.
7.8 Change of Legal Status. Without the prior written consent of the Bank,
the Borrower shall not, and and shall not permit any of its Subsidiaries to,
change their names, organizational identification numbers, their types of
organization, their jurisdictions of organization or other legal structures.
7.9 Acquisitions. The Borrower shall not, and and shall not permit any of
its Subsidiaries to, make any Acquisitions without the prior written consent of
Bank.
7.10 Hazardous Substances. The Borrower shall not, and and shall not permit
any of its Subsidiaries to, except in the ordinary course of their businesses in
compliance with all Environmental Laws, place, suffer or permit the presence of
any hazardous or toxic substance at, on, under, within or about any premises of
the Borrower or its Subsidiaries (whether or not owned by them) or any portion
thereof.
8. AFFIRMATIVE COVENANTS.
8.1 Company Existence. The Borrower shall at all times preserve and
maintain, and shall cause its Subsidiaries at all times to preserve and
maintain, its and their company existences, rights, franchises and privileges,
and at all times continue as a going concern in substantially the same
businesses which the Borrower and its Subsidiaries are presently conducting.
8.2 Maintain Property. The Borrower shall at all times and in all material
respects, and shall cause its Subsidiaries to, maintain, preserve and keep their
plants, properties and Equipment, including, but not limited to, any Collateral,
in good repair, working order and condition, reasonable wear and tear and acts
of God excepted, and shall from time to time make all material and proper
repairs, renewals, replacements, and additions thereto so that at all times
23
the efficiency thereof shall be fully preserved and maintained. The Borrower
shall permit, and cause its Subsidiaries to permit, the Bank to examine and
inspect such plants, properties and Equipment, including, but not limited to,
any Collateral, at all reasonable times.
8.3 Maintain Insurance. The Borrower shall at all times insure and keep
insured, and shall cause its Subsidiaries to at all times insure and keep
insured, by insurance companies reasonably acceptable to the Bank, all insurable
property owned by them which is of a character usually insured by companies
similarly situated and operating like properties, against loss or damage from
fire and such other hazards or risks as are customarily insured against by
companies similarly situated and operating like properties; and shall similarly
insure employers', public and professional liability risks. Prior to the date of
the funding of the Notes, the Borrower shall deliver to the Bank a certificate
setting forth in summary form the nature and extent of the insurance maintained
by the Borrower and its Subsidiaries pursuant to this Section 8.3. All such
policies of insurance must be reasonably satisfactory to the Bank in relation to
the amount and term of the Obligations and type and value of the Collateral and
assets of the Borrower and its Subsidiaries, shall identify the Bank as Bank's
loss payee and as an additional insured. In the event the Borrower or its
Subsidiaries either fail to provide the Bank with evidence of the insurance
coverage required by this Section or at any time hereafter shall fail to obtain
or maintain any of the policies of insurance required above, or to pay any
premium in whole or in part relating thereto, then the Bank, without waiving or
releasing any obligation or default by the Borrower hereunder, may at any time
(but shall be under no obligation to so act), obtain and maintain such policies
of insurance and pay such premium and take any other action with respect
thereto, which the Bank deems advisable. This insurance coverage (i) may, but
need not, protect the Borrower's and its Subsidiaries' interest in such
property, including, but not limited to the Collateral, and (ii) may not pay any
claim made by, or against, the Borrower or its Subsidiaries in connection with
such property, including, but not limited to the Collateral. The Borrower and
its Subsidiaries may later cancel any such insurance purchased by the Bank, but
only after providing the Bank with evidence that the Borrower has obtained, or
caused its Subsidiaries to obtain, the insurance coverage required by this
Section. The costs of such insurance obtained by the Bank, through and including
the effective date such insurance coverage is canceled or expires, shall be
payable on demand by the Borrower to the Bank, together with interest at the
Default Rate on such amounts until repaid and any other charges by the Bank in
connection with the placement of such insurance. The reasonable costs of such
insurance, which may be greater than the cost of insurance which the Borrower
may be able to obtain on its own, together with interest thereon at the Default
Rate and any other charges by the Bank in connection with the placement of such
insurance may be added to the total Obligations due and owing.
8.4 Tax Liabilities. The Borrower shall at all times pay and discharge, and
cause its Subsidiaries to at all times pay and discharge, all material property
and other taxes, assessments and governmental charges upon, and all claims
(including claims for labor, materials and supplies) against the Borrower and
its Subsidiaries or any of their properties, Equipment or Inventory, before the
same shall become delinquent and before penalties accrue thereon; provided that
the Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith and diligently and by
appropriate proceedings and the Borrower shall
24
have set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim, so contested.
8.5 ERISA Liabilities; Employee Plans. The Borrower shall (i) keep in full
force and effect, and cause its Subsidiaries to keep in full force and effect,
any and all Employee Plans which are presently in existence or may, from time to
time, come into existence under ERISA, and not withdraw from any such Employee
Plans, unless such withdrawal can be effected or such Employee Plans can be
terminated without liability to the Borrower and its Subsidiaries; (ii) make
contributions to all of its and their Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA; including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee Plans; (iv) notify the Bank immediately upon
receipt by the Borrower or its Subsidiaries of any notice concerning the
imposition of any withdrawal liability or of the institution of any proceeding
or other action which may result in the termination of any such Employee Plans
or the appointment of a trustee to administer such Employee Plans; (v) promptly
advise the Bank of the occurrence of any "Reportable Event" or "Prohibited
Transaction" (as such terms are defined in ERISA), with respect to any such
Employee Plans; and (vi) amend any Employee Plan that is intended to be
qualified within the meaning of Section 401 of the Internal Revenue Code of 1986
to the extent necessary to keep the Employee Plan qualified, and to cause the
Employee Plan to be administered and operated in a manner that does not cause
the Employee Plan to lose its qualified status.
8.6 Financial Statements. The Borrower shall at all times maintain, and
cause its Subsidiaries to at all times maintain, a standard and modern system of
accounting, on the accrual basis of accounting and in all respects in accordance
with GAAP, and shall furnish to the Bank or its authorized representatives such
information regarding the business affairs, operations and financial condition
of the Borrower and its Subsidiaries as the Bank may from time to time
reasonably request, including, but not limited to:
(a) as soon as available, and in any event, within one hundred twenty
(120) days after the close of each of its fiscal years, a copy of the
annual audited financial statements of the Borrower and its Subsidiaries,
including consolidated balance sheet, statement of income and retained
earnings and statement of cash flows for the fiscal year then ended,
prepared and certified without adverse reference to going concern value and
without qualification by an independent certified public accountant
reasonably acceptable to the Bank; and
(b) as soon as available, and in any event, within forty-five (45)
days following the end of each calendar quarter, a copy of the consolidated
financial statements of the Borrower and its Subsidiaries regarding such
quarter, including balance sheet and statement of income and retained
earnings for the quarter then ended and such other information (including
nonfinancial information) as the Bank may reasonably request, in reasonable
detail, prepared and certified by the Borrower to fairly present the
Borrower's consolidated financial condition and the results of its
operations in all material respects in accordance with GAAP, and (ii) each
month, a copy of the consolidated financial statements of the Borrower and
its Subsidiaries regarding such
25
month, including balance sheet and statement of income and retained
earnings for the month then ended and such other information (including
nonfinancial information) as the Bank may reasonably request, in reasonable
detail, prepared and certified by the Borrower to fairly present the
Borrower's consolidated financial condition and the results of its
operations in all material respects in accordance with GAAP.
No material change with respect to such accounting principles (as
determined by Borrower's outside accountants) shall be made by the Borrower
without giving prior notification to the Bank and unless such change is
consistent with GAAP and does not affect the calculation of any financial ratio
provided to the Bank or to which the Borrower covenants pursuant to this
Agreement. The Borrower represents and warrants to the Bank that the financial
statements delivered to the Bank at or prior to the execution and delivery of
this Agreement and to be delivered at all times thereafter fairly present and
will fairly present the Borrower's consolidated financial condition and the
results of its operations in all material respects in accordance with GAAP. The
Bank shall have the right at all times during business hours upon at least
forty-eight (48) hours prior notice from the Bank to the Borrower to inspect the
books and records of the Borrower and make extracts therefrom. The Borrower
agrees to advise the Bank immediately of any material adverse change in the
financial condition or operations of the Borrower.
8.7 Supplemental Financial Statements. The Borrower shall promptly upon
receipt thereof, provide to the Bank copies of interim and supplemental reports
if any, submitted to the Borrower by independent accountants in connection with
any interim audit or review of the books of the Borrower or its Subsidiaries.
8.8 Borrowing Base Certificate. The Borrower shall, within twenty (20) days
after the end of each month, deliver to the Bank a Borrowing Base Certificate,
certified as accurate by the Borrower.
8.9 Aged Accounts Schedules. The Borrower shall, within twenty (20) days
after the end of each month, deliver to the Bank aged schedules of (i) the
accounts receivable of the Borrower and its Subsidiaries displayed in U.S.
Dollars and in form acceptable to the Bank in its sole discretion, listing the
name and amount due from each account debtor and showing the aggregate amounts
due by invoice date and certified as accurate in all material respects by the
Borrower, and (ii) the accounts payable of the Borrower and its Subsidiaries
displayed in U.S. Dollars and in form acceptable to the Bank in its sole
discretion, listing the name of the account creditor of the Borrower and its
Subsidiaries and amount due to each such account creditor and showing the
aggregate amounts due by invoice date and certified as accurate in all material
respects by the Borrower.
8.10 Projections. As soon as practicable, and in any event not later than
ninety (90) days following calendar year end, financial projections for the
Borrower and its Subsidiaries for such calendar year (including monthly
operating and cash flow budgets) prepared in a manner consistent with the
projections delivered by the Borrower to the Bank prior to the date hereof or
otherwise in a manner reasonably satisfactory to the Bank, accompanied by a
certificate of any of the chief executive officer, the chief financial officer,
the chief operating officer or the treasurer of the Borrower (each a "Senior
Officer") on behalf of the Borrower to the effect that
26
(a) such projections were prepared by the Borrower in good faith, (b) the
Borrower has a reasonable basis for the assumptions contained in such
projections and (c) such projections have been prepared in accordance with such
assumptions.
8.11 Compliance Certificates. As soon as practicable, and in any event not
later than thirty (30) days following each calendar quarter, a duly completed
compliance certificate in the form of Exhibit A attached hereto, with
appropriate insertions, dated the date of such quarterly statements and signed
by a Senior Officer of the Borrower, containing (i) a computation of each of the
financial ratios and restrictions set forth in Section 9 and a statement to the
effect that such officer has not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing or, if there is
any such event, describing it and the steps, if any, being taken to cure it and
(ii) a written statement of the Borrower's management setting forth a discussion
of the Borrower's and its Subsidiaries' financial condition, changes in
financial condition and results of operations.
8.12 Field Audits. The Borrower shall allow, and cause its Subsidiaries to
allow, the Bank, at the Bank's option and at the Borrower's expense at any time
at which any amount is outstanding under the Loans (and, after the occurrence
and during the continuance of an Event of Default, also at the Borrower's sole
expense), to conduct an annual field examination of the Accounts and Inventory
of the Borrower and its Subsidiaries, the results of which must be satisfactory
to the Bank in the Bank's reasonable discretion.
8.13 Other Reports. The Borrower shall, within such period of time as the
Bank may reasonably specify, deliver, and cause its Subsidiaries to deliver, to
the Bank such other schedules and reports as the Bank may reasonably require.
8.14 Collateral Records. Borrower shall keep, and cause its Subsidiaries to
keep, full and accurate books and records relating to the Collateral and shall
xxxx such books and records to indicate the Bank's Lien in the Collateral.
8.15 Notice of Proceedings. The Borrower shall, promptly after knowledge
thereof shall have come to the attention of any officer of the Borrower or its
Subsidiaries, give written notice to the Bank of all threatened or pending
actions, suits, and proceedings before any court or governmental department,
commission, board or other administrative agency which may have a material
adverse effect on the business, property or operations of the Borrower or its
Subsidiaries.
8.16 Notice of Default. The Borrower shall, immediately after the
commencement thereof, give notice to the Bank in writing of the occurrence of an
Event of Default or of any event which, with the lapse of time, the giving of
notice or both, would constitute an Event of Default hereunder.
8.17 Banking Relationship. The Borrower covenants and agrees to keep its
primary deposit account with the Bank.
9. FINANCIAL COVENANTS.
27
9.1 Consolidated Fixed Charge Coverage Ratio. The Borrower shall not permit
the Consolidated Fixed Charge Coverage Ratio to be less than (i) 0.80:1.00 as of
September 30, 2007, (ii) 1.10:1.00 as of December 31, 2007, or (iii) 1.20:1.00
as of March 31, 2008, and as of the last day of each successive calendar
quarter.
9.2 Consolidated Funded Debt Ratio. The Borrower shall not permit the
Consolidated Funded Debt Ratio to be more than (i) 6.75:1.00 as of June 30,
2007, (ii) 3.50:1.00 as of September 30, 2007, or (iii) 3.00:1.00 as of December
31, 2007, and as of the last day of each successive calendar quarter.
9.3 Minimum Consolidated Tangible Net Worth. The Borrower shall not permit
its Consolidated Tangible Net Worth to be less than (i) negative $833,333 as of
December 31, 2006, (ii) negative $1,480,000 as of March 31, 2007, and (iii) as
of the last day of each subsequent calendar quarter, the sum of (A) negative
$1,480,000 plus (B) fifty percent (50%) of the total positive Consolidated Net
Income for each calendar quarter during the period from April 1, 2007 to the
last day of the calendar quarter most recently ending.
9.4 Minimum EBITDA. The Borrower shall not permit its Consolidated EBITDA
to be less than (i) negative $90,000 for the Reference Period ending on Xxxxx
00, 0000, (xx) $650,000 for the Reference Period ending on June 30, 2007, (iii)
$2,100,000 for the Reference Period ending on September 30, 2007, and (iv)
$3,600,000 for the Reference Period ending on December 31, 2007.
10. EVENTS OF DEFAULT.
The Borrower shall be in default under this Agreement upon the occurrence
of any of the following events (each an "Event of Default").
10.1 Nonpayment of Obligations. Any amount due and owing on the Notes or
any of the Obligations, whether by its terms or as otherwise provided herein, is
not paid within ten (10) days of when due.
10.2 Misrepresentation. Any warranty, representation, certificate or
statement in this Agreement, the Loan Documents or any other agreement with the
Bank shall be false when made or at any time.
10.3 Nonperformance. Any failure to perform or default in the performance
of any covenant, condition or agreement contained in this Agreement (after the
expiration of any applicable notice and/or cure periods, and if no notice or
grace period is specified, then if such default is not remedied within thirty
(30) Business Days after the Bank delivers written notice of such default to the
Borrower).
10.4 Default under Loan Documents. A default under any of the other Loan
Documents (after the expiration of any applicable notice and/or cure periods),
all of which covenants, conditions and agreements contained therein are hereby
incorporated in this
28
Agreement by express reference, shall be and constitute an Event of Default
under this Agreement and any other of the Obligations.
10.5 Default under Other Agreements. Any default in the payment of
principal, interest or any other sum for any other Indebtedness having a
principal amount in excess of Ten Thousand Dollars ($10,000.00) beyond any
period of grace provided with respect thereto or in the performance of any other
term, condition or covenant contained in any agreement (including, but not
limited to any capital or operating lease or any agreement in connection with
the deferred purchase price of property) under which any such Indebtedness is
created, the effect of which default is to cause or permit the holder of such
Indebtedness to cause such Indebtedness to become due prior to its stated
maturity.
10.6 Assignment for Creditors. Any Obligor makes an assignment for the
benefit of creditors, fails to pay, or admits in writing its inability to pay
its debts as they mature; or if a trustee of any substantial part of the assets
of any Obligor is applied for or appointed.
10.7 Bankruptcy. Any proceeding involving any Obligor, is commenced by or
against such Obligor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law or statute of
the federal government or any state government and, if filed against any
Obligor, remains undismissed or unstayed for ninety (90) days.
10.8 Judgments. The entry of any material judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against any
Obligor which is not fully covered by insurance and which exceeds Fifty Thousand
Dollars ($50,000.00).
10.9 Change in Control. Any sale, conveyance, assignment or other transfer,
directly or indirectly, of any ownership interest of the Borrower or its
Subsidiaries, which results in any change in the identity of the individuals or
entities previously owning a majority of the capital stock of the Borrower or a
change in the Chairman or Chief Executive Officer of the Borrower.
11. REMEDIES.
Upon the occurrence of an Event of Default, the Bank shall have all rights,
powers and remedies set forth in the Loan Documents, in any written agreement or
instrument (other than this Agreement or the Loan Documents) relating to any of
the Obligations or any security therefor, or as otherwise provided at law or in
equity. Without limiting the generality of the foregoing, the Bank may, at its
option upon the occurrence and during the continuance of an Event of Default,
declare its commitments to the Borrower to be terminated and all Obligations to
be immediately due and payable, provided, however, that upon the occurrence of
an Event of Default under either Section 10.6, "Assignment for Creditors", or
Section 10.7, "Bankruptcy", all commitments of the Bank to the Borrower shall
immediately terminate and all Obligations shall be automatically due and
payable, all without demand, notice or further action of any kind required on
the part of the Bank. The Borrower hereby waives any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of Bank's rights under the Loan Documents, and
hereby consents to, and waives notice of release, with or without consideration,
of the Borrower, any guarantor or of any
29
Collateral, notwithstanding anything contained herein or in the Loan Documents
to the contrary. In addition to the foregoing, upon the Obligations becoming due
and payable:
11.1 Possession and Assembly of Collateral. The Bank may, without notice,
demand or legal process of any kind, take possession of any or all of the
Collateral (in addition to Collateral of which the Bank already has possession),
wherever it may be found, and for that purpose may pursue the same wherever it
may be found, and may enter into any of the Borrower's premises where any of the
Collateral may be or is supposed to be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of and the Bank shall have the right to store the same in any
of the Borrower's premises without cost to the Bank. At the Bank's request, the
Borrower will, at the Borrower's sole expense, assemble, and cause its
Subsidiaries to assemble, the Collateral and make it available to the Bank at a
place or places to be designated by the Bank which is reasonably convenient to
the Bank and the Borrower.
11.2 Sale of Collateral. The Bank may sell any or all of the Collateral at
a commercially reasonable public or private sale, upon such terms and conditions
as the Bank may reasonably deem proper, and the Bank may purchase any or all of
the Collateral at any such sale. The Bank shall apply the net proceeds, after
deducting all costs, expenses, attorneys' and paralegals' fees incurred or paid
at any time in the collection, protection and sale of the Collateral and the
Obligations, to the payment of the Notes and/or any of the other Obligations,
returning the excess proceeds, if any, to the Borrower. The Borrower shall
remain liable for any amount remaining unpaid after such application, with
interest. Any notification of intended disposition of the Collateral required by
law shall be conclusively deemed reasonably and properly given if given by the
Bank at least ten (10) calendar days before the date of such disposition. The
Borrower hereby confirms, approves and ratifies all acts and deeds of the Bank
relating to the foregoing, and each part thereof.
11.3 Standards for Exercising Remedies. To the extent that applicable law
imposes duties on the Bank to exercise remedies in a commercially reasonable
manner, the Borrower acknowledges and agrees that it is not commercially
unreasonable for the Bank (a) to fail to incur expenses reasonably deemed
significant by the Bank to prepare Collateral for disposition or otherwise to
complete raw material or work-in-process into finished goods or other finished
products for disposition, (b) to fail to exercise collection remedies against
account debtors or other Persons obligated on Collateral or to remove liens or
encumbrances on or any adverse claims against Collateral, (c) to exercise
collection remedies against account debtors and other Persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (d) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (e) to contact other Persons, whether or not in the
same business as the Borrower or its Subsidiaries, for expressions of interest
in acquiring all or any portion of the Collateral, (f) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (g) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (h) to dispose of assets in
wholesale rather than retail markets, (i) to disclaim disposition warranties,
including, without limitation, any
30
warranties of title, (j) to purchase insurance or credit enhancements to insure
the Bank against risks of loss, collection or disposition of Collateral or to
provide to the Bank a guaranteed return from the collection or disposition of
Collateral, or (k) to the extent deemed appropriate by the Bank, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist the Bank in the collection or disposition of any of the
Collateral. The Borrower acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by the Bank
would not be commercially unreasonable in the Bank's exercise of remedies
against the Collateral and that other actions or omissions by the Bank shall not
be deemed commercially unreasonable solely on account of not being indicated in
this Section. Without limitation upon the foregoing, nothing contained in this
Section shall be construed to grant any rights to the Borrower or its
Subsidiaries or to impose any duties on the Bank that would not have been
granted or imposed by this Agreement or by applicable law in the absence of this
Section.
11.4 UCC and Offset Rights. The Bank may exercise, from time to time, any
and all rights and remedies available to it under the UCC or under any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
unmatured, including costs of collection and reasonable attorneys' fees, and in
such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including,
but not limited to, balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to the Bank. The
Borrower hereby waives the benefit of any law that would otherwise restrict or
limit the Bank in the exercise of its right, which is hereby acknowledged, to
appropriate at any time hereafter any such indebtedness owing from the Bank to
the Borrower.
11.5 Additional Remedies. The Bank shall have the right and power to:
(a) instruct the Borrower, at its own expense, to notify any parties
obligated on any of the Collateral, including, but not limited to, any
Account debtors, to make payment directly to the Bank of any amounts due or
to become due thereunder, or the Bank may directly notify such obligors of
the security interest of the Bank, and/or of the assignment to the Bank of
the Collateral and direct such obligors to make payment to the Bank of any
amounts due or to become due with respect thereto, and thereafter, collect
any such amounts due on the Collateral directly from such Persons obligated
thereon;
(b) enforce collection of any of the Collateral, including, but not
limited to, any Accounts, by suit or otherwise, or make any compromise or
settlement with respect to any of the Collateral, or surrender, release or
exchange all or any part thereof, or compromise, extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder;
(c) take possession or control of any proceeds and products of any of
the Collateral, including the proceeds of insurance thereon;
31
(d) extend, renew or modify for one or more periods (whether or not
longer than the original period) the Notes, any other of the Obligations,
any obligation of any nature of any other obligor with respect to the Notes
or any of the Obligations;
(e) grant releases, compromises or indulgences with respect to the
Notes, any of the Obligations, any extension or renewal of any of the
Obligations, any security therefor, or to any other obligor with respect to
the Notes or any of the Obligations;
(f) transfer the whole or any part of securities which may constitute
Collateral into the name of the Bank or the Bank's nominee without
disclosing, if the Bank so desires, that such securities so transferred are
subject to the security interest of the Bank, and any corporation,
association, or any of the managers or trustees of any trust issuing any of
said securities, or any transfer agent, shall not be bound to inquire, in
the event that the Bank or said nominee makes any further transfer of said
securities, or any portion thereof, as to whether the Bank or such nominee
has the right to make such further transfer, and shall not be liable for
transferring the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under Section 1111
of the Bankruptcy Code or take action under Section 364 or any other
section of the Bankruptcy Code; provided, however, that any such action of
the Bank as set forth herein shall not, in any manner whatsoever, impair or
affect the liability of the Borrower hereunder, nor prejudice, waive, nor
be construed to impair, affect, prejudice or waive the Bank's rights and
remedies at law, in equity or by statute, nor release, discharge, nor be
construed to release or discharge, the Borrower, any guarantor or other
Person liable to the Bank for the Obligations; and
(i) at any time, and from time to time, accept additions to, releases,
reductions, exchanges or substitution of the Collateral, without in any way
altering, impairing, diminishing or affecting the provisions of this
Agreement, the Loan Documents, or any of the other Obligations, or the
Bank's rights hereunder, under the Notes or under any of the other
Obligations.
The Borrower agrees that the Bank shall not be liable for any good faith
error of judgment or mistakes of fact or law with respect to actions taken in
connection with the Collateral so long as the Bank exercised reasonable care in
connection with same.
11.6 Attorney-in-Fact. Effective upon the Obligations becoming due and
payable under this Section 11, the Borrower hereby irrevocably makes,
constitutes and appoints the Bank (and any officer of the Bank or any Person
designated by the Bank for that purpose) as the Borrower's true and lawful proxy
and attorney-in-fact (and agent-in-fact) in the Borrower's name, place and
stead, with full power of substitution, to (i) take such actions as are
permitted in this Agreement, (ii) file such financing statements and other
documents and to do such other acts as the Bank may reasonably require to
perfect and preserve the Bank's security interest in, and to enforce such
interests in the Collateral, and (iii) carry out any remedy provided for in this
32
Agreement, including, without limitation, endorsing the Borrower's name to
checks, drafts, instruments and other items of payment, and proceeds of the
Collateral, executing change of address forms with the postmaster of the United
States Post Office serving the address of the Borrower, changing the address of
the Borrower to that of the Bank, opening all envelopes addressed to the
Borrower and applying any payments contained therein to the Obligations. The
Borrower hereby acknowledges that the constitution and appointment of such proxy
and attorney-in-fact are coupled with an interest and are irrevocable.
11.7 No Marshaling. The Bank shall not be required to marshal any present
or future collateral security (including but not limited to this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order. To the extent that it lawfully may, the Borrower hereby
agrees that it will not invoke any law relating to the marshaling of collateral
which might cause delay in or impede the enforcement of the Bank's rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Borrower hereby irrevocably waives the
benefits of all such laws.
11.8 Application of Proceeds. The Bank will within three (3) business days
after receipt of cash or solvent credits from collection of items of payment,
proceeds of Collateral or any other source, apply the whole or any part thereof
against the Obligations secured hereby. The Bank shall further have the
exclusive right to reasonably determine, in good faith, how, when and what
application of such payments and such credits shall be made on the Obligations,
and such determination shall be conclusive upon the Borrower. Any proceeds of
any disposition by the Bank of all or any part of the Collateral may be first
applied by the Bank to the payment of expenses incurred by the Bank in
connection with the Collateral, including attorneys' fees and legal expenses as
provided for in Section 12 hereof.
12. MISCELLANEOUS.
12.1 Obligations Absolute. None of the following shall affect the
Obligations of the Borrower to the Bank under this Agreement or the Bank's
rights with respect to the Collateral:
(a) acceptance or retention by the Bank of other property or any
interest in property as security for the Obligations;
(b) release by the Bank of any guarantor or of all or any part of the
Collateral or of any party liable with respect to the Obligations;
(c) release, extension, renewal, modification or substitution by the
Bank of the Notes, or any note evidencing any of the Obligations, or the
compromise of the liability of any guarantor of the Obligations; or
33
(d) failure of the Bank to resort to any other security or to pursue
the Borrower or any other obligor liable for any of the Obligations before
resorting to remedies against the Collateral.
12.2 Entire Agreement. This Agreement (i) is valid, binding and enforceable
against the Borrower and the Bank in accordance with its provisions and no
conditions exist as to its legal effectiveness; (ii) together with the Loan
Documents, constitutes the entire agreement between the parties; and (iii) is
the final expression of the intentions of the Borrower and the Bank. No
promises, either expressed or implied, exist between the Borrower and the Bank,
unless contained herein or in the Loan Documents. This Agreement, together with
the Loan Documents, supersedes all negotiations, representations, warranties,
commitments, offers, contracts (of any kind or nature, whether oral or written)
prior to or contemporaneous with the execution hereof.
12.3 Amendments; Waivers. No amendment, modification, termination,
discharge or waiver of any provision of this Agreement or of the Loan Documents,
or consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only for the specific purpose for
which given. No failure or delay on the part of the Bank in exercising any
right, power or remedy hereunder shall operate as a waiver of the exercise of
the same or any other right at any other time; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
There shall be no obligation on the part of the Bank to exercise any remedy
available to the Bank in any order. The remedies provided for herein are
cumulative and not exclusive of any remedies provided at law or in equity.
12.4 GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS
(EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN ANY SUCH OTHER LOAN DOCUMENT) ARE
CONTRACTS UNDER THE LAWS OF THE STATE OF INDIANA AND SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF INDIANA
(EXCLUDING THE LAWS OF SUCH STATE APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
12.5 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL,
OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE
BANK AND THE BORROWER ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.
34
12.6 CONSENT TO JURISDICTION. BORROWER (i) AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT
IN THE COURTS OF THE STATE OF INDIANA OR IN ANY FEDERAL COURT SITTING IN
INDIANA; (ii) CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY SUCH COURT AND
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON BORROWER BY MAIL AT THE
ADDRESS SPECIFIED IN SECTION 12.15; AND (iii) HEREBY WAIVES ANY OBJECTION THAT
IT MAY NOW OR IN THE FUTURE HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT
OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
12.7 Assignability. The Bank may at any time upon prior written notice to
the Borrower assign the Bank's rights in this Agreement, the Notes, the
Obligations, or any part thereof and transfer the Bank's rights in any or all of
the Collateral, and the Bank thereafter shall be relieved from all liability
with respect to such Collateral. In addition, the Bank may at any time sell one
or more participations in the Loans. The Borrower may not sell or assign this
Agreement, or any other agreement with the Bank or any portion thereof, either
voluntarily or by operation of law, without the prior written consent of the
Bank. This Agreement shall be binding upon the Bank and the Borrower and their
respective successors. All references herein to the Borrower shall be deemed to
include any successors, whether immediate or remote.
12.8 Binding Effect. This Agreement shall become effective upon execution
by the Borrower and the Bank. If this Agreement is not dated or contains any
blanks when executed by the Borrower, the Bank is hereby authorized, without
notice to the Borrower, to date this Agreement as of the date when it was
executed by the Borrower, and to complete any such blanks according to the terms
upon which this Agreement is executed.
12.9 Enforceability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
12.10 Survival of Borrower Representations. All covenants, agreements,
representations and warranties made by the Borrower herein shall,
notwithstanding any investigation by the Bank, be deemed material and relied
upon by the Bank and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of the Notes, and shall be deemed to be
continuing representations and warranties until such time as the Borrower has
fulfilled all of its Obligations to the Bank, and the Bank has been paid in
full. The Bank, in extending financial accommodations to the Borrower, is
expressly acting and relying on the aforesaid representations and warranties.
12.11 Extensions of Bank's Commitment and Notes. This Agreement shall
secure and govern the terms of any extensions or renewals of the Bank's
commitment hereunder and the Notes pursuant to the execution of any
modification, extension or renewal note executed by the Borrower and accepted by
the Bank in its sole and absolute discretion in substitution for the
35
Notes. The Bank represents that it will receive the Notes payable to its order
as evidence of a bank loan.
12.12 Time of Essence. Time is of the essence in making payments of all
amounts due the Bank under this Agreement and in the performance and observance
by the Borrower of each covenant, agreement, provision and term of this
Agreement.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
12.14 Facsimile Signatures. The Bank is hereby authorized to rely upon and
accept as an original any Loan Documents or other communication which is sent to
the Bank by facsimile, telegraphic or other electronic transmission (each, a
"Communication") which the Bank in good faith believes has been signed by
Borrower and has been delivered to the Bank by a properly authorized
representative of the Borrower, whether or not that is in fact the case.
Notwithstanding the foregoing, the Bank shall not be obligated to accept any
such Communication as an original and may in any instance require that an
original document be submitted to the Bank in lieu of, or in addition to, any
such Communication.
12.15 Notices. Except as otherwise provided herein or in the other Loan
Documents, the Borrower waives all notices and demands in connection with the
enforcement of the Bank's rights hereunder. All notices, requests, demands and
other communications provided for hereunder shall be in writing, sent by
certified or registered mail, postage prepaid, by facsimile, by overnight
courier, telegram or delivered in person, and addressed as follows:
If to the Borrower: CTI Group (Holdings), Inc.
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx,
Chairman and Chief Executive
Officer
with a copy to its Counsel: Xxxxxxx XxXxxx LLP
2700 Market Tower
00 X. Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxx
If to the Bank: National City Bank
Xxx Xxxxxxxx Xxxx Xxxxxx, Xxxxx 000X
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxxx
with a copy to its Counsel: Bose XxXxxxxx & Xxxxx LLP
0000 Xxxxx Xxxxxxx Xxxxx
36
000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
12.16 Indemnification. The Borrower agrees to defend (with counsel
reasonably satisfactory to the Bank), protect, indemnify and hold harmless each
Indemnified Party from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
distributions of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party
thereto) which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities, Environmental Laws and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any of the Loan Documents, or
any act, event or transaction related or attendant thereto, the preparation,
execution and delivery of this Agreement and the Loan Documents, including, but
not limited to, the making or issuance and management of the Loans, the use or
intended use of the proceeds of the Loans, the enforcement of the Bank's rights
and remedies under this Agreement, the Loan Documents, the Notes, any other
instruments and documents delivered hereunder, or under any other agreement
between the Borrower and the Bank; provided, however, that the Borrower shall
not have any obligations hereunder to any Indemnified Party with respect to
matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnified Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it violates any law
or public policy, the Borrower shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and, failing prompt payment, shall, together with
interest thereon at the Applicable Interest Rate for the Revolving Loan from the
date incurred by each Indemnified Party until paid by the Borrower, be added to
the Obligations of the Borrower and be secured by the Collateral. The provisions
of this Section 12.16 shall survive the satisfaction and payment of the other
Obligations and the termination of this Agreement.
12.17 USA Patriot Act. As required by federal law and the Bank's policies
and practices, the Bank may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts, or establishing or continuing to provide services.
37
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Loan
Agreement as of the date first above written.
CTI GROUP (HOLDINGS), INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxxx
------------------------------------
Xxxx Xxxxxxx,
Chief Executive Officer
Agreed and accepted:
NATIONAL CITY BANK,
a national banking association
By: /s/ Xxxx X. Xxxxxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxxxxx, Vice President
38
