INTERCREDITOR AND SUBORDINATION AGREEMENT
between
FOOTHILL CAPITAL CORPORATION,
as Lender
and
PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.
as Collateral Agent
Dated as of February 15, 2002
Table of Contents
Page
1. DEFINITIONS............................................................2
1.1. Capitalized terms used in this Agreement and not defined
herein shall have the meaning assigned to them in the
Revolver Loan Agreement (as such agreement is in effect
on the date hereof)............................................2
1.2. As used in this Agreement, the following terms shall have
the meanings assigned to them below:...........................2
1.3. All terms defined in the Uniform Commercial Code (the
"UCC") as in effect from time to time in the State of New
York, unless otherwise defined herein shall have the
meanings set forth therein. All references to any term
in the plural shall include the singular and all
references to any term in the singular shall include the
plural.........................................................6
2. SECURITY INTERESTS; PRIORITIES; REMEDIES...............................6
2.1. Priority.......................................................6
2.2. No Alteration..................................................6
2.3. Application of Proceeds of Collateral..........................6
2.4. Management of Collateral.......................................8
2.5. Enforcement of Security; Notice of Event of Default;
Remedies.......................................................8
2.6. No Marshalling................................................11
3. MISCELLANEOUS.........................................................11
3.1. Representations and Warranties................................11
3.2. Inducement. This Agreement is executed as an inducement
to Foothill to make loans or advances to the Borrowers or
otherwise to extend credit or financial accommodations to
the Borrowers, and to enter into and continue a financing
arrangement with the Borrowers and is executed in
consideration of Foothill entering into and continuing
such financial arrangement....................................11
3.3. Waivers and Amendments........................................12
3.4. Successors and Assigns........................................12
3.5. Insolvency....................................................12
3.6. Bankruptcy Financing..........................................13
3.7. Bailee for Perfection.........................................13
3.8. Consultation..................................................13
3.9. Action Against................................................13
3.10. Notices.......................................................14
3.11. Counterparts..................................................15
3.12. Governing Law.................................................15
3.13. Consent to Jurisdiction; Waiver of Jury Trial.................15
3.14. Complete Agreement............................................15
3.15. Terms.........................................................16
3.16. No Joint Venture..............................................16
i
3.17. No Third Parties Benefited....................................16
3.18. Loan Agreements; Security Documents...........................16
3.19. Headings......................................................16
3.20. Inconsistencies...............................................16
ii
INTERCREDITOR AND SUBORDINATION AGREEMENT
INTERCREDITOR AND SUBORDINATION AGREEMENT (this "Agreement") dated
as of February 15, 2002, by and between Foothill Capital Corporation, a
California corporation ("Foothill"), as lender, and Palisade Concentrated Equity
Partnership, L.P., as collateral agent for the Investors (as defined herein) (in
such capacity, together with its successors and assigns, hereinafter referred to
as the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, Xxxxx Inc., an Ohio corporation ("Kroll"), each of its
subsidiaries that is a signatory thereto (Kroll and its subsidiaries
collectively, together with their successors and assigns, hereinafter referred
to as "Borrowers"), and Foothill are parties to a Loan and Security Agreement,
dated as of February 15, 2002 (as amended or otherwise modified from time to
time, the "Revolver Loan Agreement"), pursuant to which Foothill has agreed to
make loans and provide other financial accommodations to Borrowers;
WHEREAS, Kroll and the Investors are parties to a Securities
Purchase Agreement, dated November 14, 2001 (as amended or otherwise modified
from time to time, the "Palisade Securities Purchase Agreement"), pursuant to
which Kroll, among other things, issued and sold and the Investors acquired an
aggregate of $30,000,000 principal amount of Xxxxx'x 6% Senior Secured
Subordinated Convertible Notes due 2006 (the "Palisade Notes");
WHEREAS, in connection with the Palisade Securities Purchase
Agreement, Kroll and the Collateral Agent entered into a Pledge Agreement, dated
as of November 14, 2001 (as amended or otherwise modified from time to time, the
"Palisade Pledge Agreement"), pursuant to which Kroll pledged and granted to the
Collateral Agent (for the ratable benefit of the Investors) a security interest
in the Pledged Collateral (as defined in the Palisade Pledge Agreement);
WHEREAS, in connection with the Palisade Securities Purchase
Agreement, Kroll and the Collateral Agent entered into a Security Agreement,
dated as of November 14, 2001 (as amended or otherwise modified from time to
time, the "Palisade Security Agreement"), pursuant to which Kroll pledged and
granted to the Collateral Agent (for its benefit and for the ratable benefit of
the Investors) a continuing security interest in and to the Collateral (as
defined herein);
WHEREAS, the obligations of Borrowers to Foothill are secured by
the Security Documents (as defined herein); and
WHEREAS, Foothill and the Collateral Agent desire to enter into this
Agreement to, among other things, (a) confirm the relative priority of the
security interests of Foothill, on the one hand, and the Investors and the
Collateral Agent, on the other hand, in the assets and properties of Kroll and
each other Obligor (as defined herein) and (b) provide for the orderly
sharing among them, in accordance with such priorities, of proceeds of such
assets and properties upon any foreclosure thereon or other disposition thereof;
NOW THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and each intending
to be bound hereby, the parties hereto agree as follows:
1. DEFINITIONS
1.1. Capitalized terms used in this Agreement and not defined herein shall
have the meaning assigned to them in the Revolver Loan Agreement (as such
agreement is in effect on the date hereof).
1.2. As used in this Agreement, the following terms shall have the
meanings assigned to them below:
"Advances" shall have the meaning set forth in the Revolver Loan
Agreement; provided, however, that for the purposes of this Agreement,
"Advances" shall also include the Letter of Credit Usage.
"Borrowers" shall have the meaning set forth in the recitals hereof.
"Collateral" means all assets and properties of any kind whatsoever,
real or personal, tangible or intangible and wherever located, of Kroll or any
other Obligor, whether now owned or hereafter acquired, upon which a Lien is now
or hereafter granted by such Person in favor of either or both of (i) Foothill
and (ii) the Collateral Agent for the benefit of the Investors, as security for
all or any part of the Obligations.
"Collateral Agent" shall have the meaning set forth in the preamble
hereto.
"Commence Legal Action" means assert, participate in or bring, or
join any other creditor of Kroll or the other Borrowers (other than Foothill) in
asserting, participating in or bringing any sort of action, suit or proceeding
(including, without limitation, any Insolvency Proceeding) either at law or in
equity for the enforcement, collection or realization on the whole, or any part
of, the Palisade Debt or the Collateral.
"Documents" means the Revolver Loan Documents and the Palisade
---------
Financing Documents, collectively.
"Event of Default" means each "Default," "Event of Default" or
similar term, as such term is defined in any Revolver Loan Document or any
Palisade Financing Document, so long as any such Document is in effect.
"Insolvency Proceeding" means, as to any Person, any of the
following: (i) any case or proceeding with respect to such Person under the
Bankruptcy Code or any other Federal or State bankruptcy, insolvency,
reorganization or other law affecting creditors' rights or any other or similar
proceedings seeking any stay, reorganization, arrangement, composition or
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readjustment of the obligations and indebtedness of such Person, (ii) any
proceeding seeking the appointment of any trustee, receiver, liquidator,
custodian or other insolvency official with similar powers with respect to such
Person or any of its assets, (iii) any proceeding for liquidation, dissolution
or other winding up of the business of such Person or (iv) any assignment for
the benefit of creditors or any marshalling of assets of such Person.
"Investors" means Palisade Concentrated Equity Partnership, L.P.
and Pegasus Partners II, L.P, together with their successors and assigns.
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any capitalized lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"Lien Enforcement Action" means (i) any action by Foothill or the
Collateral Agent (on behalf of itself or the Investors) to foreclose on their
respective Liens, in all or a material portion of the Collateral, (ii) any
action by Foothill or the Collateral Agent (on behalf of itself or the
Investors) to take possession of, sell or otherwise realize upon all or any
material portion of the Collateral and/or (iii) the commencement by Foothill or
the Collateral Agent (on behalf of itself or the Investors) of any legal
proceedings or actions against or with respect to all or any material portion of
the Collateral to facilitate the actions described in (i) and (ii) above.
"Obligations" means the "Obligations" (as defined in the Revolver
Loan Documents as such documents are in effect on the date hereof), and the
"Obligations" (as defined in the Palisade Financing Documents as such documents
are in effect on the date hereof), collectively, provided that "Obligations"
shall exclude (a) any obligations owing to any Affiliates of Foothill and (b)
any Obligations owing to Affiliates of the Collateral Agent.
"Obligor" means a Person liable on or in respect of the Revolver
Debt or the Palisade Debt or that has granted a Lien on any property or assets
as collateral for any of the Obligations, together with such Person's successors
and assigns, including a receiver, trustee or debtor-in-possession on behalf of
such Person.
"Palisade Debt" means all obligations, liabilities and indebtedness
of every kind, nature and description owing by Kroll or any Obligor to the
Collateral Agent and/or the Investors evidenced by or arising under the Palisade
Financing Documents, whether direct or indirect, absolute or contingent, joint
or several, due or not due, primary or secondary, liquidated or unliquidated,
including principal, interest, charges, fees, costs, indemnities and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the commencement of any Insolvency Proceeding with respect to
Kroll or any Obligor (and including, without limitation, the payment of interest
which would accrue and become due but for the commencement of such Insolvency
Proceeding, whether or not such interest is allowed or allowable in whole or in
part in any such Insolvency Proceeding).
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"Palisade Financing Documents" means the Palisade Securities
Purchase Agreement, Palisade Pledge Agreement, the Palisade Security Agreement,
the Palisade Notes, the Palisade Subsidiary Security Agreement, the Palisade
Subsidiary Guaranty Agreement and the Palisade Subsidiary Pledge Agreement and
all other agreements, documents and instruments at any time executed and/or
delivered by Kroll, any Obligor or any other Person with, to or in favor of the
Collateral Agent or the Investors in connection therewith or related thereto, in
each case, as amended or otherwise modified from time to time.
"Palisade Notes" shall have the meaning set forth in the recitals
hereof.
"Palisade Pledge Agreement" shall have the meaning set forth in the
recitals hereof.
"Palisade Securities Purchase Agreement" shall have the meaning set
forth in the recitals hereof.
"Palisade Security Agreement" shall have the meaning set forth in
the recitals hereof.
"Palisade Subsidiary Guaranty Agreement" means that certain
Subsidiary Guaranty Agreement, dated as of February 15, 2002 (as amended or
otherwise modified from time to time), by and among the Borrowers (other than
Kroll) and the Collateral Agent pursuant to which the Borrowers (other than
Kroll) agreed to guarantee to the Collateral Agent, for its benefit and the
ratable benefit of the Investors, the payment and performance of the Obligations
of Kroll to the Collateral Agent and the Investors under the Palisade Financing
Documents.
"Palisade Subsidiary Pledge Agreement" means that certain Subsidiary
Pledge Agreement, dated as of February 15, 2002 (as amended or otherwise
modified from time to time), by and among the pledgors named therein and the
Collateral Agent pursuant to which each pledgor agreed to pledge and grant to
the Collateral Agent, for its benefit and for the ratable benefit of the
Investors, a security interest in the Pledged Collateral (as defined therein) as
security for the satisfaction of the Obligations of Kroll to the Collateral
Agent and the Investors under the Palisade Financing Documents.
"Palisade Subsidiary Security Agreement" means that certain
Subsidiary Security Agreement, dated as of February 15, 2002 (as amended or
otherwise modified from time to time), by and among the Borrowers (other than
Kroll) and the Collateral Agent pursuant to which each Borrower (other than
Kroll), jointly and severally, agreed to pledge and grant to the Collateral
Agent for its benefit and for the ratable benefit of the Investors, a security
interest in the Collateral (as defined therein) as security for the satisfaction
of the Obligations of Kroll to the Collateral Agent and the Investors under the
Palisade Financing Documents.
"Party" means Foothill or the Collateral Agent.
"Person" means an individual, corporation, partnership, limited
liability company, limited liability partnership, association, joint-stock
company, trust, unincorporated organization, joint venture, governmental
authority or other regulatory body.
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"Priority Event" means (i) prior to the occurrence of an Insolvency
Proceeding by or against Borrowers or an Obligor, the occurrence of an Event of
Default, all amounts of Revolver Debt becoming immediately due and payable and
the taking of any Lien Enforcement Action by Foothill or the Collateral Agent
(as the case may be), provided that any Priority Event occurring prior to an
Insolvency Proceeding by or against Borrowers or an Obligor shall cease to
constitute a Priority Event as of the occurrence of such Insolvency Proceeding
if Foothill continues making loans or providing letter of credit accommodations
or other financial accommodations (whether pursuant to the Revolver Loan
Documents or otherwise) or consents to the use of cash collateral after the
occurrence of such Insolvency Proceeding or (ii) after the occurrence of an
Insolvency Proceeding by or against Borrowers or an Obligor, the occurrence of
any of the following: (A) the entry of an order of the Bankruptcy Court pursuant
to Section 363 of the Bankruptcy Code authorizing the sale of all or
substantially all of any Borrower's or Obligor's assets or (B) the taking of any
Lien Enforcement Action described in clauses (i) and (ii) of the definition of
such term by Foothill or the entry of an order of the Bankruptcy Court pursuant
to Section 362 of the Bankruptcy Code vacating the automatic stay and
authorizing Foothill to take any Lien Enforcement Action.
"Revolver Borrowing Base" means the "Borrowing Base" as such term is
defined in the Revolver Loan Agreement as such agreement is in effect on the
date hereof.
"Revolver Debt" means all existing and future obligations,
liabilities and indebtedness of every kind, nature and description owing by
Borrowers or any Obligor to Foothill evidenced by or arising under the Revolver
Loan Documents, whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
including principal, interest, charges, fees, costs, indemnities and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Revolver Loan Agreement
or after the commencement of any Insolvency Proceeding with respect to any
Borrower or Obligor (and including, without limitation, the payment of interest
which would accrue and become due but for the commencement of such Insolvency
Proceeding whether or not such interest is allowed or allowable in whole or in
part in any such Insolvency Proceeding); provided, however, that the principal
amount of the Revolver Debt (excluding all accrued and unpaid interest, fees,
expenses and other amounts that have been capitalized to principal) shall not
exceed $17,000,000. "Revolver Debt" shall include obligations related to the
Revolver Loan Documents including, without limitation, interest, fees, costs or
expenses, in each case in respect of the Revolver Debt whether or not charged by
Foothill to the loan account of Borrowers pursuant to the Revolver Loan
Agreement.
"Revolver Loan Agreement" shall have the meaning set forth in the
recitals hereof.
"Revolver Loan Documents" means the Revolver Loan Agreement, all
Loan Documents (as such term is defined in the Revolver Loan Agreement) and all
other agreements, documents and instruments at any time executed and/or
delivered by any Borrower or any other Obligor or any other Person with, to or
in favor of Foothill in connection therewith or related thereto, in each case,
as amended or otherwise modified from time to time.
5
"Revolver Nonmonetary Default" means the occurrence or existence of
any event, circumstance, condition or state of facts that, by the terms of the
Revolver Loan Agreement or any Revolver Loan Document (without regard to any
notice or cure period) permits Foothill to declare all or any portion of the
Revolver Debt due and payable prior to the date on which it would otherwise
become due and payable, other than a Revolver Payment Default.
"Revolver Payment Default" means any default in the payment of
principal of (or premium, if any) or interest, fees, costs or expenses on the
Revolver Debt when due.
"Security Documents" means the Revolver Loan Agreement, the Stock
Pledge Agreement, the Cash Management Agreements, the Trademark Security
Agreement, the Copyright Security Agreement, the Patent Security Agreement, the
Palisade Security Agreement, the Palisade Pledge Agreement, the Palisade
Subsidiary Pledge Agreement, the Palisade Subsidiary Guaranty Agreement, the
Palisade Subsidiary Security Agreement and all other agreements, documents and
instruments at any time executed and/or delivered by Kroll, any Borrower, any
Obligor or any other Person with, to or in favor of either Foothill, the
Collateral Agent or the Investors in connection therewith or related thereto, in
each case, as amended or otherwise modified from time to time.
"Standstill Period" shall have the meaning set forth in Section
2.5(b) hereof.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York.
1.3. All terms defined in the Uniform Commercial Code (the "UCC") as in
effect from time to time in the State of New York, unless otherwise defined
herein shall have the meanings set forth therein. All references to any term in
the plural shall include the singular and all references to any term in the
singular shall include the plural.
2. SECURITY INTERESTS; PRIORITIES; REMEDIES
2.1. Priority. As between Foothill, on the one hand, and the Collateral
Agent and the Investors, on the other hand, so long as any Revolver Debt shall
remain unpaid or Foothill shall have any obligation to make loans and issue
letters of credit under the Revolver Loan Documents, the right, title and
interest of Foothill in and to any Collateral shall have priority over, and
shall be senior to, the right, title and interest of the Collateral Agent and
the Investors in and to such Collateral (which shall be junior to, the right,
title and interest of Foothill in and to such Collateral).
2.2. No Alteration. The priorities provided for in Section 2.1 hereof
shall not be altered or otherwise affected by any amendment, modification,
supplement, extension, renewal, restatement, replacement or refinancing of the
Obligations or Documents, nor by any action or inaction which any of Foothill,
the Collateral Agent or the Investors may take or fail to take in respect of the
Collateral.
2.3. Application of Proceeds of Collateral.
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(a) So long as no Priority Event shall have occurred and be continuing,
Kroll shall be entitled to pay and shall pay the Obligations due and payable to
Foothill and the Investors in accordance with the terms of the Documents between
Borrowers and Foothill, on the one hand, and between Kroll and the Investors, on
the other hand, even if such payments are made using the proceeds of Collateral
and/or the proceeds of loans made by Foothill to Borrowers under the Revolver
Loan Agreement.
(b) After the occurrence and during the continuance of a Priority Event,
all proceeds of the Collateral, whether pursuant to the Security Documents, the
other Documents or otherwise, shall be forthwith paid over, in the funds and
currency received, to and held by Foothill, and applied in whole or in part by
Foothill against, all or any part of the Obligations as follows:
(i) first, to the reasonable out-of-pocket costs and expenses of
Foothill in connection with the retaking, holding, preparing for sale, selling
or other disposition of the Collateral, including, without limitation, all court
costs and the reasonable fees and expenses of its agents and legal counsel;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding paragraph (i), an amount equal to the outstanding
Revolver Debt of Foothill shall be paid to Foothill, with such amounts to be
distributed in accordance with the terms of the Revolver Loan Agreement;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding paragraphs (i) and (ii), an amount equal to the
outstanding Palisade Debt shall be paid to the Investors, with such amounts to
be distributed in accordance with the terms of the Palisade Financing Documents;
and
(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding paragraphs (i), (ii) and (iii), and following the
termination of this Agreement pursuant to Section 3.15 hereof, to Kroll or its
successors and assigns or, to the extent directed by a court of competent
jurisdiction, to whomever may be lawfully entitled to receive such surplus.
Notwithstanding anything to the contrary contained in this
Agreement, Kroll (and Borrowers with respect to the Revolver Debt) shall remain
liable to Foothill and the Investors for any deficiency.
(c) Each of Foothill, the Collateral Agent and the Investors, by their
acceptance of the benefits hereof, agrees and acknowledges that if Foothill is
to receive a distribution on account of undrawn amounts with respect to any
letter of credit issued under the Revolver Loan Agreement, such amounts shall be
kept by Foothill as cash security for the repayment of the Revolver Debt owing
to Foothill. If any amount is held as cash security pursuant to the immediately
preceding sentence, then upon the termination of the applicable letter of credit
under the Revolver Loan Agreement and after the application of all such cash
security to the repayment of all Revolver Debt owing to Foothill after giving
effect to the termination of such letter of credit, if there remains any excess
cash, such excess cash shall be distributed in accordance with Section 2.3(b)
hereof.
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2.4. Management of Collateral.
(a) Subject to Section 2.5, Foothill shall have the exclusive right
as to (x) the management, performance and enforcement of the terms of the
Security Documents with respect to the Collateral, and (y) the exercise and
enforcement of all privileges and rights thereunder with respect to the
Collateral according to its discretion and the exercise of its good faith
business judgment, including, without limitation, the exclusive right to take or
retake control or possession of such Collateral and to hold, prepare for sale,
process, sell, lease, dispose of, or liquidate such Collateral, provided that,
if Foothill commences any Lien Enforcement Action in accordance with this
Agreement, Foothill shall diligently pursue in good faith the exercise and
enforcement of its rights or remedies against all or a material portion of the
Collateral in a commercially reasonable manner designed to maximize the value to
be obtained from the Collateral. In the event that the Collateral Agent enforces
its Liens on the Collateral pursuant to Section 2.5, the Collateral Agent shall
diligently pursue in good faith the exercise and enforcement of its rights or
remedies against all or a material portion of the Collateral in a commercially
reasonable manner designed to maximize the value to be obtained from the
Collateral.
(b) In any sale or other disposition of any of the Collateral by
Foothill or the Collateral Agent, Foothill and the Collateral Agent (as
applicable) shall conduct such sale or other disposition in a commercially
reasonable manner.
2.5. Enforcement of Security; Notice of Event of Default; Remedies.
(a) Notwithstanding anything in this Agreement to the contrary, if
Foothill has provided Kroll and the Collateral Agent with written notice of the
occurrence of a Revolver Payment Default under the Revolver Loan Documents and
Foothill does not, within a period of one hundred eighty (180) days of such
notice, declare all of the Revolver Debt to be immediately due and payable and
take any Lien Enforcement Action, the Collateral Agent may, take Lien
Enforcement Action and/or Commence Legal Action (provided, however, that if
prior to the conclusion of the one hundred eighty (180) day period, Kroll or any
Borrower becomes subject to an Insolvency Proceeding, then Foothill shall have
the greater of (such period, the "Insolvency Extension Period"): (i) the
remaining portion of such one hundred eighty (180) day period or (ii) ninety
(90) days to take any Lien Enforcement Action, and the Collateral Agent shall
not have the right to Commence Legal Action or take any Lien Enforcement Action
prior to the expiration of the Insolvency Extension Period. If Foothill takes
any Lien Enforcement Action prior to the expiration of the Insolvency Extension
Period, then the Collateral Agent shall not take any Lien Enforcement Action or
Commence Legal Action.).
(b) In the event that any Revolver Nonmonetary Default shall have
occurred and be continuing (including a Revolver Nonmonetary Default occurring
as a result of an Event of Default under any Palisade Financing Document) and
the amount of Advances outstanding is at least one $1.00, then, (i) upon the
receipt by any Borrower and the Collateral Agent of written notice of such
Revolver Nonmonetary Default from Foothill or (ii) upon the receipt by Kroll and
Foothill of written notice of an Event of Default under any Palisade Financing
Document, the Collateral Agent may not take any Lien Enforcement Action and/or
Commence Legal Action during the period (the "Standstill Period") commencing on
the date of receipt of such written
8
notice and ending on the earlier of (x) if the principal amount of Revolver Debt
outstanding is less than or equal to $5,000,000 (calculated on the 120th day
following the receipt by the Collateral Agent or Foothill, as the case may be,
of written notice of such Revolver Nonmonetary Default), the 121st day after the
day of such receipt of such written notice, and (y) if the principal amount of
Revolver Debt outstanding is more than $5,000,000 (calculated on the 120th day
following the receipt by the Collateral Agent or Foothill, as the case may be,
of written notice of such Revolver Nonmonetary Default), the 181st day after the
day of such receipt of such written notice (provided, however, that if prior to
the conclusion of such period (either 120 days, in the case of clause (x), or
180 days, in the case of clause (y)), Kroll or any Borrower becomes subject to
an Insolvency Proceeding, then Foothill shall have the greater of (the
"Standstill Insolvency Extension Period"): (i) the remaining portion of such
period (120 days or 180 days (as applicable)) or (ii) ninety (90) days to take
any Lien Enforcement Action, and the Collateral Agent shall not have the right
to Commence Legal Action or take any Lien Enforcement Action prior to the
expiration of the Standstill Insolvency Extension Period. If Foothill takes any
Lien Enforcement Action prior to the expiration of the Standstill Insolvency
Extension Period, then the Collateral Agent shall not take any Lien Enforcement
Action or Commence Legal Action.). In the event that a Revolver Nonmonetary
Default shall have occurred and be continuing and the amount of Advances
outstanding at the time of such Revolver Nonmonetary Default shall be zero, the
Collateral Agent may take any Lien Enforcement Action and/or Commence Legal
Action. Following the occurrence of a Revolver Nonmonetary Default and upon the
request of the Collateral Agent, Foothill shall promptly deliver to the
Collateral Agent a statement of the Borrowers' Loan Account setting forth the
amount of Advances outstanding, if any, as of the date requested.
(c) In the event that the Collateral Agent enforces its Liens on the
Collateral pursuant to Section 2.5(a) or (b), then upon the payment in full of
the Palisade Debt, the Collateral Agent shall deliver to Foothill all Collateral
in its control or possession. Notwithstanding anything to the contrary contained
herein, in the event that the Collateral Agent enforces its Liens on the
Collateral pursuant to Section 2.5(a) or (b), no payment (whether in respect of
principal, interest, fees or otherwise) in respect of the Palisade Debt shall be
made until all amounts due and payable in respect of the Revolver Debt shall
have been paid in full in cash, or provision shall have been made for payment in
full in cash or otherwise in a manner satisfactory to Foothill (in its sole and
absolute discretion).
(d) Notwithstanding anything to the contrary in this Section 2.5(a)
or (b), Foothill shall not be entitled to give successive notices based on any
particular continuing Event of Default under the Revolver Loan Documents, which
Event of Default was the basis for a prior such notice; provided, however, that
nothing contained herein shall prohibit Foothill from giving successive notices
based upon an Event of Default under the Revolver Loan Documents other than the
Event of Default which was the basis for any prior such notice or any other
Event of Default of which Foothill had actual knowledge at the time it gave such
prior notice of an Event of Default; provided, further, that no subsequent
notice shall be effective prior to the expiration of a number of days equal to
the Standstill Period last in effect.
(e) Each of Foothill and the Collateral Agent shall give to each
other concurrently with the giving thereof to Kroll, any other Borrower (in the
case of the Revolver Loan Documents) or any other Obligor (i) a copy of any
written notice by such Party of an Event
9
of Default under any of its Documents, including, without limitation, written
notice of demand of payment from Kroll, any other Borrower (in the case of the
Revolver Loan Documents) or any other Obligor, and (ii) a copy of any written
notice sent by such Party to Kroll, any other Borrower (in the case of the
Revolver Loan Documents) or any other Obligor, stating such Party's intention to
exercise any of its enforcement rights or remedies against Kroll, any such
Borrower or Obligor, including, without limitation, written notice pertaining to
any foreclosure by Foothill or the Collateral Agent, as applicable, on any of
the Collateral or other judicial or non-judicial remedy in respect thereof to
the extent permitted hereunder, and any legal process served or filed in
connection therewith; provided that the failure of any Party to give such notice
shall not affect the relative priorities of the Parties as provided herein or
the validity or effectiveness of any such notice as against Kroll, any other
Borrower or any other Obligor.
(f) Section 2.5 shall not be construed to limit or impair in any way
the right of Foothill, the Collateral Agent or the Investors to bid for or
purchase Collateral at any foreclosure upon such Collateral initiated by
Foothill or the Collateral Agent. Each right, power and remedy of Foothill, the
Collateral Agent and the Investors provided for in this Agreement, any Document,
or any other loan document relating to any of the foregoing, whether now
existing or hereafter available at law or in equity or by statute or otherwise,
shall be cumulative (except to the extent otherwise provided in any such
Document) and shall be in addition to every other such right, power or remedy.
Except to the extent otherwise provided in this Agreement, any Document or any
other loan document relating to any of the foregoing, the exercise by or on
behalf of any Party of any one or more of such rights, powers or remedies shall
not preclude the simultaneous or later exercise of all other such rights, powers
and remedies, and no course of dealing or failure or delay on the part of any
Party in exercising any such right, power or remedy shall operate as a waiver
thereof or otherwise prejudice its rights, powers or remedies. Each Party agrees
that it will not take any action with respect to the Collateral except in
accordance with this Agreement.
(g) During the one hundred eighty (180) day period following the
occurrence of a Revolver Payment Default (including during the Insolvency
Extension Period, if applicable) as set forth in Section 2.5(a) and during the
Standstill Period following the occurrence of a Revolver Nonmonetary Default
(including a Revolver Nonmonetary Default occurring as a result of an Event of
Default under any Palisade Financing Document) (including during the Standstill
Insolvency Extension Period, if applicable) as set forth in Section 2.5(b), no
payment (whether in respect of principal, interest, fees or otherwise) may be
made on or in respect to the Palisade Debt. If Foothill, for any reason, shall
not declare all of the Revolver Debt to be immediately due and payable or take
any Lien Enforcement Action prior to the conclusion of the applicable period,
then following the conclusion of the applicable period, regularly scheduled
payments of interest may be made on or with respect to the Palisade Debt, but no
payment of principal may be made on or with respect to the Palisade Debt until
all amounts due and payable in respect of the Revolver Debt shall have been paid
in full in cash, or provision shall have been made for payment in full in cash
or otherwise in a manner satisfactory to Foothill (in its sole and absolute
discretion). If any payment or distribution of assets of Kroll or any Borrower
of any kind or character, whether in cash, property or securities, is received
by the Collateral Agent or any Investor as payment in respect of the Palisade
Debt at a time when that payment or distribution should not have been made in
accordance with the terms of this Agreement, such payment or
10
distribution shall be received and held for and shall be paid over to Foothill
until all of the Revolver Debt has been indefeasibly paid in full in cash.
2.6. No Marshalling. Each of the parties waives all rights which it may
have to require that all or any part of the Collateral be marshalled upon any
sale (public or private) thereof.
3. MISCELLANEOUS
3.1. Representations and Warranties.
(a) Each of the Collateral Agent and the Investors represents and
warrants, severally for itself and not jointly, to Foothill that:
(i) the execution, delivery and performance of this Agreement
by such Person is within its partnership powers, has been duly authorized and
does not contravene any law, any provision of any of the Palisade Financing
Documents or any agreement to which such Person is a party or by which it is
bound;
(ii) this Agreement constitutes the legal, valid and binding
obligations of such Person, enforceable in accordance with its terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally; and
(iii) it will not, directly or indirectly, assert any right
which it may have to set-off against the Palisade Debt any amounts which are or
may be owing by the Collateral Agent or the Investors to Kroll or any other
Borrower, and that until such time as this Agreement is terminated as provided
herein, and except as provided herein, the Collateral Agent or the Investors
will not, directly or indirectly, except to the extent expressly permitted by
the terms of this Agreement, demand or receive payment of; exchange, forgive or
modify; request or obtain collateral or security or guarantees for; or Commence
Legal Action
(b) Foothill represents and warrants to the Collateral Agent and the
Investors that:
(i) the execution, delivery and performance of this Agreement
by such Person is within its corporate powers, has been duly authorized and does
not contravene any law, any provision of any of the Revolver Loan Documents or
any agreement to which such Person is a party or by which it is bound; and
(ii) this Agreement constitutes the legal, valid and binding
obligations of such Person, enforceable in accordance with its terms and shall
be binding on it, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
3.2. Inducement. This Agreement is executed as an inducement to Foothill
to make loans or advances to the Borrowers or otherwise to extend credit or
financial accommodations to
11
the Borrowers, and to enter into and continue a financing arrangement with the
Borrowers and is executed in consideration of Foothill entering into and
continuing such financial arrangement.
3.3. Waivers and Amendments.
(a) Any waiver, permit, consent or approval by any of the Collateral
Agent, the Investors or Foothill of or under any provision, condition or
covenant to this Agreement must be in writing and shall be effective only to the
extent it is set forth in writing and as to the specific facts or circumstances
covered thereby.
(b) Any amendment of this Agreement must be in writing and signed by
each of Foothill, the Collateral Agent and the Investors.
3.4. Successors and Assigns.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, each of Foothill, the Collateral Agent and the Investors and their
respective successors and assigns.
(b) To the extent provided in their respective Documents, each of
Foothill and the Investors reserves the right to grant participations in, or
otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, its Obligations and the Collateral securing same; provided, that,
none of Foothill, the Collateral Agent or the Investors shall be obligated to
give any notices to or otherwise in any manner deal directly with any
participant, and no participant shall be entitled to any rights or benefits
under this Agreement except through the Person with which it is a participant
and any sale of a participation in such Obligations shall be expressly made
subject to the provisions of this Agreement.
(c) In connection with any participation or other transfer or
assignment, Foothill, the Collateral Agent or the Investors (as the case may be)
(i) may disclose to such assignee, participant or other transferee or assignee
all documents and information which such Person now or hereafter may have
relating to Kroll, any other Borrower or any other Obligor or the Collateral and
(ii) shall disclose to such participant or other transferee or assignee the
existence and terms and conditions of this Agreement.
(d) In the case of an assignment or transfer, the assignee or
transferee acquiring any interest in the Palisade Debt shall execute and deliver
to each of Foothill, the Collateral Agent and the Investors a written
acknowledgment of receipt of a copy of this Agreement and the written agreement
by such Person to be bound by the terms of this Agreement. Any purported
assignment of the Palisade Debt without compliance with the foregoing sentence
shall be void and of no force or effect.
3.5. Insolvency. This Agreement shall be applicable both before and after
the filing of any petition by or against Kroll, any other Borrower or any other
Obligor under the Bankruptcy Code and all converted or succeeding cases in
respect thereof, and all references herein to Kroll, any other Borrower or any
other Obligor shall be deemed to apply to a trustee for Kroll, such Borrower or
such Obligors as debtor-in-possession. The relative rights of Foothill or the
Investors to repayment of their respective Obligations and in or to any
distributions from or in
12
respect of any Collateral or proceeds of Collateral, shall continue after the
filing thereof on the same basis as prior to the date of the petition, subject
to any court order approving the financing of, or use of cash collateral by,
Kroll, any other Borrower or any other Obligor as debtor-in-possession.
3.6. Bankruptcy Financing. If Kroll, any other Borrower or any other
Obligor shall become subject to a case under the U.S. Bankruptcy Code and if as
debtor-in-possession moves for approval of financing to be provided in good
faith by Foothill (the "DIP Lender") under Section 364 of the Bankruptcy Code or
the use of cash collateral with the consent of the DIP Lender under Section 363
of the Bankruptcy Code, each of the Collateral Agent and the Investors agrees
that no objection will be raised by it to any such financing on the grounds of a
failure to provide "adequate protection" for its Liens so long as (i) the
interest rate, fees, advance rates, lending sublimits and limits and other terms
are commercially reasonable under the circumstances, (ii) each of Foothill and
the Collateral Agent for the benefit of the Investors retains a Lien on the
Collateral (including proceeds thereof arising after the commencement of such
proceeding) with the same priority as existed prior to the commencement of the
case under the Bankruptcy Code, (iii) each of Foothill and the Collateral Agent
for the benefit of the Investors receives a replacement Lien on post-petition
assets to the same extent granted to the DIP Lender, with the same priority as
existed prior to the commencement of the case under the U.S. Bankruptcy Code,
and (iv) such financing or use of cash collateral is subject to the terms of
this Agreement. Nothing contained herein shall be deemed to limit the rights of
the Collateral Agent to object to post-petition financing or use of cash
collateral on any grounds other than the failure to provide "adequate
protection" for its Liens. For purposes of this Section, notice of a proposed
financing or use of cash collateral shall be deemed given when provided in the
manner prescribed by Section 3.10 hereof.
3.7. Bailee for Perfection. Each of the Parties hereto appoints each other
Party hereto as agent for the purposes of perfecting any Liens in and on any of
the Collateral in such other Party's possession; provided, that no Party shall
have any duty or liability to protect or preserve any rights pertaining to any
of the Collateral and, except for gross negligence or willful misconduct, each
Party hereto hereby waives, and releases the other parties from, all claims and
liabilities arising pursuant to such other Parties' role as bailee with respect
to the Collateral.
3.8. Consultation. Each of Foothill and the Collateral Agent agrees to use
commercially reasonable efforts to, in the absence of exigent circumstances,
consult in good faith with the other Party with respect to the enforcement of
rights and remedies.
3.9. Action Against. If the Collateral Agent or the Investors, in
violation of this Agreement, shall Commence Legal Action against Kroll or any
other Borrower, Kroll or any Borrower (as applicable) may interpose as a defense
or dilatory plea the making of this Agreement, and Foothill is hereby
irrevocably authorized to intervene and to interpose such defense or plea in its
name or in the name of Kroll or any other Borrower. If either the Collateral
Agent or the Investors shall attempt to enforce, collect or realize upon any
Palisade Debt or, any collateral, security or guarantees securing the Palisade
Debt in violation of this Agreement, Kroll or any Borrower (as applicable) may,
by virtue of this Agreement, restrain any such
13
enforcement, collection or realization, or upon failure to do so, Foothill may
restrain such enforcement, collection or realization, either in its own name or
in the name of Kroll or any other Borrower, as the case may be.
3.10. Notices. All notices and other communications provided for hereunder
shall be in writing and shall be mailed, sent by overnight courier,
telecopied, or delivered, as follows:
if to Foothill, to it at the following address:
FOOTHILL CAPITAL CORPORATION
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Business Finance Division Manager
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to:
XXXXXXXX & XXXXXXXX LLP
1290 Avenue of the Americas, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
if to the Collateral Agent, to it at the following address:
Palisade Concentrated Equity Partnership, L.P.
Xxx Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the terms
of this Section 3.10. All such notices
14
and other communications shall be effective (i) if sent by registered mail,
return receipt requested, when received or three business days after mailing,
whichever first occurs, (ii) if telecopied, when transmitted and a confirmation
is received, provided the same is on a business day and, if not, on the next
business day, or (iii) if delivered by messenger or overnight courier, upon
delivery, provided the same is on a business day and, if not, on the next
business day.
3.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original with the same force and effect
as if the signatures thereto and hereto were upon the same instrument.
3.12. Governing Law. THIS AGREEMENT AND THE SECURITY DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT TO THE EXTENT THAT THE
VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED THEREBY, OR REMEDIES THEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
3.13. Consent to Jurisdiction; Waiver of Jury Trial. EACH PARTY HERETO
HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN NEW YORK COUNTY, STATE OF NEW YORK FOR THE PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
3.14. Complete Agreement. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDES ALL OTHER AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF. THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
15
3.15. Terms. This Agreement is a continuing agreement and shall remain in
full force and effect until the earlier of (a)(i) the repayment in full of the
Obligations owing under the Revolver Loan Agreement, (ii) the termination of the
Revolving Credit Commitments (as defined in the Revolver Loan Agreement) and
(iii) the termination of all letters of credit, or (b) the repayment in full of
the Palisade Debt. Upon the termination of this Agreement, Foothill shall
deliver to the Collateral Agent all Collateral in its control or possession.
3.16. No Joint Venture. Nothing contained in this Agreement, and no action
taken by Foothill, the Collateral Agent or the Investors pursuant hereto or in
connection herewith or pursuant to or in connection with the Security Documents
shall be deemed to constitute Foothill, the Collateral Agent or the Investors, a
partnership, association, joint venture, or other entity.
3.17. No Third Parties Benefited. Except for the Investors who are
intended and third party beneficiaries of this Agreement, no Person not a party
hereto (including, without limitation, Kroll, Borrowers or any other Obligor)
shall be an intended or third party beneficiary hereof.
3.18. Loan Agreements; Security Documents. Foothill acknowledges that it
has reviewed the Palisade Financing Documents prior to its execution of this
Agreement. The Collateral Agent and the Investors acknowledge that they have
reviewed the Revolver Loan Agreement prior to its execution of this Agreement.
The Collateral Agent and the Investors agree that no Palisade Financing Document
or provision therein may be amended, modified, supplemented or waived without
obtaining the prior written consent of Foothill so as to provide for: (i) any
increase in the rate of interest chargeable thereunder other than as provided in
the Palisade Notes; (ii) any increase in the principal amount due under the
Palisade Notes or any installment thereunder; (iii) any reduction of the
maturity date of any payment of principal or interest; (iv) any amendment or
other modification of the timing of payment; (v) the granting or obtaining of
any additional collateral security or obtaining any additional liens on any
collateral; (vi) any additional financial covenants or events of default or
making more restrictive any existing covenants or events of default applicable
to Kroll; or (vii) any other amendment, modification, supplement or waiver which
would (A) have a material adverse effect on the operations of the Borrowers, as
a whole, or (B) materially impair the enforceability or priority of Foothill's
liens with respect to the Collateral.
3.19. Headings. Section headings used in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement
for any purpose or affect the construction of this Agreement.
3.20. Inconsistencies. If there are any inconsistencies or conflicts
between the terms and provisions of the Palisade Notes and the terms and
provisions of this Agreement, then the terms and provisions of this Agreement
shall control.
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
FOOTHILL CAPITAL CORPORATION
By:
----------------------------
Name:
Title:
PALISADE CONCENTRATED EQUITY
PARTNERSHIP, L.P., as collateral agent
By: Palisade Concentrated Holdings, L.L.C.,
as General Partner
By:
----------------------------
Name:
Title:
The undersigned hereby acknowledges and agrees to the foregoing terms and
provisions.
PALISADE CONCENTRATED EQUITY
PARTNERSHIP, L.P.
By: Palisade Concentrated Holdings, L.L.C.,
as General Partner
By:
-------------------------------
Name:
Title:
PEGASUS PARTNERS II, L.P.
By: Pegasus Investors II GP, LLC
as General Partner
By:
-------------------------------
Name:
Title:
XXXXX INC.
By:
-------------------------------
Name:
Title:
KROLL BACKGROUND AMERICA, INC.
By:
-------------------------------
Name:
Title:
KROLL INFORMATION SERVICES, INC.
By:
-------------------------------
Name:
Title:
XXXXX ASSOCIATES, INC.
By:
-------------------------------
Name:
Title:
KROLL LABORATORY SPECIALISTS, INC.
By:
-------------------------------
Name:
Title:
KROLL XXXXXXXXX XXXX, INC.
By:
-------------------------------
Name:
Title:
2
KROLL CRISIS MANAGEMENT GROUP, INC.
By:
-------------------------------
Name:
Title:
KROLL XXXXXX & ASSOCIATES, INC.
By:
-------------------------------
Name:
Title:
FINANCIAL RESEARCH, INC.
By:
-------------------------------
Name:
Title:
CORPLEX, INC.
By:
-------------------------------
Name:
Title:
INPHOTO SURVEILLANCE, INC.
By:
-------------------------------
Name:
Title:
3
