TERM LOAN AGREEMENT
-------------------
THIS TERM LOAN AGREEMENT is entered into as of December 29, 1994, by and
between CPS ACQUISITION CORP., a Georgia corporation, and GREYHOUND FINANCIAL
CORPORATION, a Delaware corporation.
R E C I T A L S:
----------------
A. CPS Acquisition Corp., a Georgia corporation, is acquiring all of the
issued and outstanding capital stock of CPS Systems, Inc., a Texas corporation,
from the existing shareholders of CPS Systems, Inc., pursuant to that certain
Stock Purchase Agreement between such shareholders and PHF Associates, Inc., a
Georgia corporation (and whose interest has been assigned to CPS Acquisition
Corp.), dated as of November 11, 1994, in exchange for the payment of Five
Million Two Hundred Fifty Thousand Dollars ($5,250,000) cash, subject to
adjustments as set forth in the Stock Purchase Agreement.
B. Immediately following the consummation of the acquisition of the
capital stock of CPS Systems, Inc., CPS Acquisition Corp. proposes to merge with
and into CPS Systems, Inc., with CPS Systems, Inc. being the surviving
corporation. CPS Systems, Inc., will, by virtue of the merger and operation of
law, assume all of the obligations and liabilities of CPS Acquisition Corp.,
including all of CPS Acquisition Corp.'s obligations and liabilities under this
Term Loan Agreement and the promissory note and other documents pertaining
thereto.
C. CPS Acquisition Corp. desires to borrow from Greyhound Financial
Corporation a principal amount of One Million Five Hundred Thousand Dollars
($1,500,000), the proceeds of which will be used to pay a portion of the
purchase price of the capital stock of CPS Systems, Inc.
D. Greyhound Financial Corporation desires to grant the credit
accommodation requested by CPS Acquisition Corp., subject to the terms and
conditions set forth herein.
A G R E E M E N T:
------------------
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties agree as follows:
ARTICLE 1
---------
DEFINITIONS AND DETERMINATIONS
------------------------------
1.1 Definitions. As used in this Term Loan Agreement and in the other Term
-----------
Loan Documents (as hereinafter defined), unless otherwise expressly
indicated herein or therein, the following terms shall have the following
meanings (such meanings to be applicable equally to both the singular and plural
forms of the terms defined):
Accountants: an independent certified public accounting firm selected
-----------
by Borrower and satisfactory to Lender.
Accounting Changes: changes in generally accepted accounting
------------------
principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or any successor
thereto) or other appropriate authoritative body.
Acquisition: the transaction pursuant to which Acquisition
-----------
Corporation intends to acquire all of the Company's Stock.
Acquisition Corp.: CPS Acquisition Corp., a Georgia corporation.
-----------------
Acquisition Documents: the Stock Purchase Agreement and any and all
---------------------
other documents, instruments, or agreements pursuant to which the
Acquisition will be effected.
ADA: the Americans with Disabilities Act of 1990 (42 U.S.C. 12101, et
--- --
seq.) and all applicable rules, regulations, codes, ordinances and guidance
---
documents promulgated or published thereunder.
Affiliate: as to any Person, any other Person who directly or
---------
indirectly controls, is under common control with, or is controlled by such
Person. As used in this definition, "control" (including with its
correlatives "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of the power to direct (or cause the
direction of) the management and policies of another Person, whether
through ownership of securities, partnership or other ownership interests,
by contract or otherwise), provided that, in any event: (a) any Person who
owns directly or indirectly, five percent (5%) or more of the securities
having ordinary voting power for the election of directors or other
governing body of a corporation or five percent (5%) or more of the
partnership or other ownership interests of any other such Person (other
than as a limited partner of such other Person), whether voting or non-
voting will be deemed to "control" such corporation or other Person, and
(b) each director and officer of Borrower or any Subsidiary of Borrower
shall be deemed to be an Affiliate of Borrower.
Assignment of Contracts, Intangibles, Licenses and Permits: the
----------------------------------------------------------
assignment of contracts, intangibles, licenses and permits of Company, for
security purposes, executed by Company in favor of Lender, as it may be
from time to time amended, restated or replaced.
-2-
Assignment of Life Insurance: the assignment required pursuant to
----------------------------
subsection 6.7.2, as it may be from time to time amended, restated or
replaced.
Assignment of Stock Purchase Agreement: the assignment of the Stock
---------------------------------------
Purchase Agreement, for security purposes, executed by Acquisition Corp. in
favor of Lender, with respect to the Stock Purchase Agreement, as it may be
from time to time amended, restated or replaced.
Assignment of Trademarks: the assignment of trademarks, for security
------------------------
purposes, executed by Company, in favor of Lender, as it may be from time
to time amended, restated or replaced.
Assumption Agreement: an assumption agreement to be executed by
--------------------
Company for Lender upon consummation of the Merger, pursuant to which
Company assumes all of the Term Loan Obligations.
Authorized Officer: any of the following officers of Borrower: Chief
------------------
Executive Officer, Chief Financial Officer/Treasurer/Controller or
Assistant Controller.
Bankruptcy Code: the United States Bankruptcy Code and any successor
---------------
statute thereto, and the rules and regulations issued thereunder, as in
effect from time to time.
Base Rate: the per annum rate of interest publicly announced, from
---------
time to time, by Citibank, N.A., New York, New York ("Citibank"), as the
base (or equivalent") rate of interest charged by Citibank to its largest
and most creditworthy commercial borrowers notwithstanding the fact that
some borrowers of Citibank may borrower from Citibank at rates less than
the announced base rate, or if Citibank ceases to publish its base rate,
then such other published rate as the holder of the Term Loan Note shall
determine to be comparable.
Base Term Loan Fee: the meaning given to in subsection 2.12.1.
------------------
Borrower: Acquisition Corp., prior to the Merger; and thereafter,
--------
Company (the entity surviving the Merger), and subject to the restrictions
on assignment and transfer contained in this Term Loan Agreement, the
successor and assigns of Company.
Borrower's Collateral: that portion of the Collateral which is owned
---------------------
by Borrower or in which Borrower otherwise has an interest.
Borrower's Stock: all of the present and (subject to the limitations
----------------
on the issuance of such stock contained herein) future issued and
outstanding stock of Borrower prior to the Merger; and from and after the
Merger, the Company's Stock.
Borrower's Stockholders: the Persons listed in Schedule 1.1
-----------------------
(Borrower's Stockholders).
-3-
Borrower's Stockholders Pledge Agreement: a pledge of the Borrower's
----------------------------------------
Stock, executed prior to the Merger by Borrower's Stockholders in favor of
Lender, as it may be from time to time amended, restated or replaced.
Borrower's Warrantholders: the Persons listed in Schedule 1.1
-------------------------
(BORROWER'S WARRANTHOLDERS).
Business: with respect to Borrower, holding all of the capital stock
--------
of Company; and with respect to Company, the business conducted by Company
of designing, installing, licensing and maintaining proprietary computer
software; providing customer assistance with respect to such software; and
selling and maintaining computer hardware.
Business Day: any day other than a Saturday, Sunday or other day on
------------
which banks in Los Angeles, California, or New York, New York, are required
to close.
Capital Expenditure: with respect to any Person, any payment that is
-------------------
made or liability that is incurred by such Person for the lease, purchase,
improvement, construction or use of any Property, the value or cost of
which under GAAP is required to be capitalized and appears on such Person's
balance sheet in the category of property, plant or equipment, without
regard to the manner in which such payment or liability or the instrument
pursuant to which it is made is characterized by such Person or any other
Person.
Capitalized Lease: with respect to any Person, any lease of Property
-----------------
by such Person as lessee, the obligation for rental of which is required to
be capitalized under GAAP.
Chief Executive Officer: with respect to any Person, the chief
-----------------------
executive officer of such Person appointed to such duties by such Person's
Board of Directors.
Chief Financial Officer: with respect to any Person, the chief
-----------------------
financial officer of such Person appointed to such duties by such Person's
Board of Directors.
Closing: the disbursement of the Term Loan.
-------
Closing Date: the date of the Closing.
------------
Collateral: (a) all Property of Company, whether now owned or
----------
hereafter acquired, together with all additions thereto and accessions
thereof; (b) subject to the provisions of 6.17, Borrower's Stock; (c)
Company's Stock; (d) the Life Insurance; (e) any other Property in which
Lender is granted a Security Interest; and (f) the proceeds and products
whether tangible or intangible, of any of the foregoing.
Company: CPS Systems, Inc., a Texas corporation.
-------
-4-
Company Security Documents: the Assignment of Contracts, Intangibles,
--------------------------
Licenses and Permits, the Assignment of Life Insurance, the Assignment of
Trademarks, and the Revolver Loan Agreement.
Company Stock: all of the issued and outstanding capital stock of
-------------
Company.
Company Stockholders Pledge Agreement: a pledge of Company's Stock,
-------------------------------------
executed by Borrower in favor of Lender, as it may be from time to time
amended, restated or replaced.
Controlled Group: with respect to any Person, all members of a
----------------
controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with such Person,
are treated as a single employer under Section 414(b) and 414(c) of the
IRC.
Credit Facilities Documents: the Term Loan Documents and the Revolver
---------------------------
Loan Documents.
Default Rate: a per annum rate equal to the Term Loan Interest Rate
------------
from time to time in effect plus four hundred (400) basis points.
Depreciation: with respect to any period, all depreciation on
------------
Property taken during such period, as determined in accordance with GAAP.
Environmental Laws: any and all federal, state and local laws that
------------------
relate to or impose liability or standards of conduct concerning public or
occupational health and safety or the environment, as now or hereafter in
effect and as have been or hereafter may be amended or reauthorized,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. (S)9601 et seq.), the Hazardous
-- ---
Materials Transportation Act (42 U.S.C. (S)1802 et seq.), the Resources
-- ---
Conservation and Recovery Act (42 U.S.C. (S)6901 et seq.), the Federal
-- ---
Water Pollution Control Act (33 U.S.C. (S)1251 et seq.), the Toxic
-- ---
Substances Control Act (14 U.S.C. (S)2601 et seq.), the Clean Air Act (42
-- ---
U.S.C. (S)7401 et seq.), the National Environmental Policy Act (42 U.S.C.
-- ---
(S)4321 et seq.), the Refuse Act (33 U.S.C. (S)407 et seq.), the Safe
-- --- -- ---
Drinking Water Act (42 U.S.C. (S)300(f) et seq.), the Occupational Safety
-- ---
and Health Act (29 U.S.C. (S)651 et seq.), and all rules, regulations,
-- ---
codes, ordinances and guidance documents promulgated or published
thereunder, and the provisions of any licenses, permits, orders and decrees
issued pursuant to any of the foregoing.
ERISA: the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto, and the rules and regulations
issued thereunder, as in effect from time to time.
ERISA Affiliates: as to any Person, any trade, business or other
----------------
entity, whether or not incorporated, which, together with such Person, is
treated as a single employer under Section 414(c) of the IRC.
-5-
Event of Default: any of the Events of Default set forth in Section
----------------
8.1.
Excess Cash Flow: for any period, Operating Cash Flow (calculated,
----------------
however, using permitted rather than actual Capital Expenditures) for such
period minus Total Contractual Debt Service.
-----
Excluded Trade Payables: with respect to any Person, such Person's
-----------------------
normal and customary trade payables incurred in the ordinary course of
business and paid within 90 days from the date incurred, [or, if not paid
within ninety (90) days from the date incurred,payment is being disputed
pursuant to a Permitted Protest or the normal terms offered to such Person
by the trade creditor provide that payment is due more than ninety (90)
days from the incurrence of the trade payable].
Existing Leases: the Leases (if any) so described in Schedule 1.1
---------------
(Leases) under which Borrower or Company is a tenant.
Existing Operating Agreements: the Operating Agreements (if any) so
-----------------------------
described in Schedule 1 (Operating Agreements) for Borrower and Company.
Fees: the Term Loan Fees and the Revolver Loan Fees.
----
Fiscal Year: with respect to Borrower, the twelve (12) month period
-----------
beginning on each January 1 and ending on the following December 31; and
with respect to Company, the twelve (12) month period beginning on each
January 1 and ending on the following December 31.
GAAP: generally accepted accounting principles in the United States
----
as in effect from time to time during the period in which such principles
are to be applied, which shall include the official interpretations thereof
by the Financial Accounting Standards Board, or any successor thereto, and
Accounting Changes.
Good Funds: United States Dollars available to Lender in federal
----------
funds at or before 1:00 p.m. Chicago time on a Business Day by virtue of
receipt by Union Bank, in accordance with Section 2.11.
Governmental Body: any foreign, federal, state, municipal or other
-----------------
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or arbitrator.
Hazardous Materials: any pollutant (including, without limitation,
-------------------
petroleum, or any portion thereof), hazardous, toxic or dangerous waste,
substance or material defined as such in or for purposes of any
Environmental Law.
Incipient Default: any event or condition which, with the giving of
-----------------
notice or the lapse of time, or both, would become an Event of Default.
-6-
Indebtedness: With respect to any Person, all liabilities, obligations and
------------
reserves of such Person, contingent or otherwise, which in accordance with GAAP,
would be reflected as a liability on a balance sheet or would be required to be
disclosed in a financial statement, including, without limitation or
duplication, the following: (a) all Indebtedness for Borrowed Money; (b) all
obligations secured by any Lien upon Property of the Person for whom such
determination is being made, whether or not such obligation or liability is
assumed by such Person; (c) all guaranties, letters of credit and other
contingent obligations, including, without limitation, obligations to repurchase
or reimburse; (d) obligations with respect to the capital stock of the Person
for whom such determination of Indebtedness is being made, which capital stock
is subject either to mandatory redemption or redemption at the option of the
holder of such stock, whether such mandatory or optional redemption is in whole
or in part; and (e) liabilities with respect to unfunded, vested benefits under
any Plan and with respect to withdrawal liabilities incurred under ERISA with
respect to any Multi-employer Plan by any member of a Controlled Group.
Indebtedness for Borrowed Money: with respect to any Person, without
-------------------------------
duplication, all Indebtedness of such Person (a) with respect to borrowed money,
(b) evidenced by a note, debenture or other like written obligation to pay money
(including, without limitation, with respect to Borrower, all of Borrower's
Obligations), (c) with respect to obligations under Capitalized Leases or for
the deferred purchase price of Property, or (d) pertaining to obligations under
conditional sales or other title retention agreements, and all guaranties of any
or all of the foregoing.
Insured Persons: Xxxx X. Xxxx and Xxxxx X. Xxxxxxx, xx.
---------------
Intellectual Property: the patent, copyrights trademarks, service marks,
---------------------
trade names, and applications for any of the foregoing so described in SECTION
1.1 (INTELLECTUAL PROPERTY).
Interest Hedge Contract: an interest rate cap, hedge or similar agreement
-----------------------
to be executed by and between Borrower and a financial institution acceptable to
Lender, which agreement shall (a) be in effect for the first two (2) Loan Years,
(b) at the option of Lender, be renewed for an additional two (2) year period,
except that Lender agrees that if a renewal is available for a period of one
-----------------------------------------------------------------------------
year, such renewal shall be for such one year period, (c) be in an amount of not
----------------------------------------------------
less than the product of (i) .75, multiplied by (B) the Term Loan Principal
Balance which is outstanding (A) as of the Closing Date, with respect to the
agreement described in clause (a) hereof or (ii) as of the date of renewal, with
respect to the agreement described in clause (b) hereof, (d) provide protection
for borrower if the Base Rate is in excess of eleven and one half percent
(11.5%) and (e) otherwise be in form and content acceptable to Lender.
Investment: with respect to any Person, the amount paid or committed to be
----------
paid or the value of Property or wages contributed or
-7-
committed to be contributed by the Person making the Investment on its
account for or in connection with the acquisition by such Person of any
stock, partnership or other ownership interest, bonds, notes, debentures,
or any other security of the Person in whom such investment is made or any
evidence of Indebtness by reason of a loan advance, extension of credit,
guaranty or other similar obligation of any debt, liability or Indebtedness
of such Person in whom the Investment is made; provided, however, that the
-------- -------
term "Investment" shall not include (a) trade and customer accounts
receivable of such Person for inventory sold by it or services rendered by
it in the ordinary course of business and payable in accordance with
customary trade terms, or any letters of credit or other instruments
securing the same, or (b) reasonable advances by such Person in the
ordinary course of business to its employees for travel expenses, drawing
accounts and similar expenditures.
IRC: the Internal Revenue Code of 1986, as amended, and any successor
---
statute thereto, and the rules, regulations and interpretations issued
thereunder, as in effect from time to time.
Leasehold Property: the real property which is the subject of the
------------------
Leases.
Leases: the Existing Leases and, without implying Lender's consent to
------
the formation of any such lease except in accordance with the terms of this
Term Loan Agreement, any and all future leases or subleases under which
Borrower or Company has a leasehold or subleasehold interest in real
property.
Lender: Greyhound Financial Corporation, a Delaware corporation, and
------
its successors and assigns.
Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or
----
security interest of any kind, or the interest of a vendor or lessor under
any conditional sale agreement, or other title retention agreement.
Loans: collectively, the Term Loan and the Revolver Loan.
-----
Loan Year: a period from the Closing Date through the first
---------
anniversary of the Closing Date and, thereafter, each twelve (12) month
period following such anniversary.
Material Adverse Effect: with respect to any set of circumstances or
-----------------------
events and their effect on a Person, the reasonable likelihood of a
material and adverse effect on (i) such Person's financial condition,
operations, prospects or profits, (ii) the validity or enforceability
against such Person of any Credit Facilities Document to which such Person
is a party or any of the transactions contemplated thereby, (iii) the
ability of such Person to perform its obligations under any of the Credit
Facilities Loan Documents to which such Person is a party, (iv) the
priority against such Person of the Security Interests (other than
-8-
Permitted Prior Liens), or (v) with respect to Borrower only, the value of
the Collateral.
Maturity Date: the fourth anniversary of the Closing Date.
-------------
Merger: the merger of Acquisition Corp. into Company.
------
Merger Documents: that Plan of Merger between Company and Borrower,
----------------
and, after the merger, the Certificate of Merger issued by the Texas and
Georgia Secretaries of State.
Multi-employer Plan: a "multi-employer plan" as defined in Section
-------------------
4001(a)(3) of ERISA under which Borrower is an employer.
Negotiable Collateral: all of Company's present and future letters of
---------------------
credit, notes, drafts, instruments, documents, personal property leases
(where such Person is the lessor) and chattel paper.
Net Worth: at any time with respect to a Person, all amounts which in
---------
accordance with GAAP should be included in shareholder's equity of such
Person.
Notes: collectively, the Term Loan Note and the Revolver Loan Note.
-----
Obligations: collectively, the Term Loan Obligations and the Revolver
-----------
Loan Obligations.
Operating Agreement: any lease, license, equipment lease, collective
-------------------
bargaining agreement, servicing agreement, service xxxx, trademark, patent,
copyright, permit, Governmental Body approval or other agreement relating
to the operation of the Business of Borrower or Company.
Operating Cash Flow: for any period, the net income or loss of
-------------------
Borrower (excluding the effect of any changes in GAAP and extraordinary
gains or losses), plus depreciation, amortization, interest expense, the
Term Loan Maintenance Fee, and the Unused Line Fee, accrued but unpaid
federal and state income taxes and other non-cash expenses, and minus its
-----
actual state and federal income taxes paid, other non-cash income, and
actual Capital Expenditures.
PBGC: the Pension Benefit Guaranty Corporation or any Governmental
----
Body succeeding to its functions.
Permitted Liens: any of the following Liens:
---------------
(a) the Security Interests;
(b) Liens for taxes or assessments and similar charges, which
either are (i) not delinquent or (ii) being contested
diligently and in good faith by appropriate
-9-
proceedings, and as to which Borrower has set aside reserves on
its books which are satisfactory to Lender;
(c) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carrier's or other like Liens, incurred in good
faith in the ordinary course of business, provided that the
--------
underlying obligations relating to such Liens are paid in the
ordinary course of business or the repayment of such obligations
is otherwise secured in a manner satisfactory to Lender;
(d) Zoning ordinances and, to the extent acceptable to Lender,
easements, licenses, reservations, provisions, covenants,
conditions and other title exceptions;
(e) Liens to secure payment of insurance premiums (i) to be paid in
accordance with applicable laws in the ordinary course of
business relating to payment of worker's compensation, or (ii)
that are required for the participation in any fund in connection
with worker's compensation, unemployment insurance, old-age
pensions or other social security programs;
(f) Liens arising out of adverse judgments or awards against Borrower
on appeal, provided that (i) no Event of Default would exist with
--------
respect thereto pursuant to subsection 8.1.6 and (ii) Borrower
diligently is pursuing such appeal pursuant to a Permitted
Protest;
(g) subject to the terms of the Subordination Agreement, the
Subordinated Indebtedness Liens; and
(h) the security interest retained by International Business Machines
Corporation pursuant to that Value Added Reseller Agreement
between it and Company, a copy of which is attached hereto as
Exhibit 1.1 (IBM AGREEMENT) or by another hardware manufacturer
under any similar agreement between it and Company.
Permitted Prior Liens: (a) the Permitted Liens which are described in
---------------------
clause (b) and (c) of the definition of that term and are accorded priority to
the Security Interests by law; and (b) the Permitted Liens described in clauses
(d), (e) and (f) of the definition of that term, subject to the limitations set
forth therein.
Permitted Protest: the right of Borrower to protest any Lien, tax or other
-----------------
charge, other than any such Lien or charge which constitutes a portion of the
Obligations, provided (a) at the option of Lender, either (i) the repayment of
the obligations which gave rise to such Liens, taxes or other charges is secured
in a manner satisfactory to Lender within sixty (60) days after such obligations
become due and owing or (ii) a
-10-
reserve with respect to such obligations is established on the Books in an
amount which is satisfactory to Lender, (b) any such protest is instituted
and diligently prosecuted by Borrower in good faith and (c) Lender is
satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity or priority of any of the
Security Interests.
Person: any individual, firm, corporation, business enterprise,
------
trust, association, joint venture, partnership, Governmental Body or other
entity, whether acting in an individual, fiduciary or other capacity.
Plan: with respect to any Person, any employee pension benefit plan
----
subject to Title IV of ERISA, established or maintained by such Person, or
any such Plan to which such Person is required to contribute on behalf of
any of its employees.
Property: all types of real, personal or mixed property and all types
--------
of tangible or intangible property.
Qualified Depository: a member bank of the Federal Reserve System
--------------------
having a combined capital and surplus of at least One Hundred Million
Dollars ($100,000,000).
Real Property: all legally or beneficially owned estates in real
-------------
property, except leasehold estates in the Leasehold Property.
Revolver Loan: the revolving loan in principal amount not to exceed
-------------
$1,000,000 at any time to be made to Company pursuant to the Revolver Loan
Documents.
Revolver Loan Agreement: that Revolver Loan and Security Agreement to
-----------------------
be entered into between Company and Lender simultaneously with the Closing,
as it may be from time to time renewed, amended, restated or replaced.
Revolver Loan Documents: the Revolver Loan Agreement and the other
-----------------------
documents now or hereafter executed in connection with the Revolver Loan.
Revolver Loan Fees: the meaning given to it in the Revolver Loan
------------------
Agreement.
Revolver Loan Guaranty: an agreement, executed by Acquisition Corp.,
----------------------
pursuant to which Acquisition Corp. (subject to the provisions of Section
6.17) shall unconditionally guarantee full payment and performance of the
Revolver Loan Obligations and fully subordinate any Indebtedness now or
hereafter owing by Acquisition Corp. to Company and the Liens pertaining to
such Indebtedness.
Revolver Loan Note: the promissory note executed by Company pursuant
------------------
to the Revolver Loan Agreement.
-11-
Revolver Loan Obligations: the covenants, agreements, obligations and
-------------------------
conditions to be paid or performed by Company and/or Borrower under the
Revolver Loan Documents (including the Revolver Loan Guaranty).
Revolver Loan Principal Balance: the principal balance of the
-------------------------------
Revolver Loan which is outstanding from time to time.
Security Documents: this Term Loan Agreement, the Assignment of Stock
------------------
Purchase Agreement, the Company Security Documents, the Borrower's
Stockholders Pledge Agreement, the Company's Stockholders Pledge Agreement,
and any and all other documents now or hereafter executed to evidence or
perfect the Security Interests in the Collateral.
Securities Act: the Securities Act of 1933, as amended, or any
--------------
similar federal statue, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, as in effect from time to time.
Security Interests: the Liens in the Collateral granted to Lender
------------------
pursuant to the Term Loan Documents.
Senior Contractual Debt Service: for any period, the sum of: (a)
-------------------------------
payments made or required to be made by Borrower or Company during such
period for principal and interest on the Term Loan, interest only on the
Revolver Loan, the Term Loan Maintenance Fee and the Unused Line Fee due,
excluding, however, any Excess Cash Flow prepayments made or required to be
made pursuant to subsection 2.8.3; and (b) without implying Lender's
consent to any such Capitalized Lease, payments due on Capitalized Leases
of Borrower or Company.
Shareholder Debt: long-term debt as of December 28, 1994 in the
----------------
principal amount of Eight Hundred Sixty-Three Thousand Fifty-Three and
03/100 Dollars ($863,053.03) owing to the following former shareholders of
Company: Xxxx X. Xxxxxx and Xxxxxx X. Xxxxxx.
Solvency Certificate (Borrower): a certificate executed by the Chief
-------------------------------
Executive Officer and Chief Financial Officer of Borrower with respect to
the solvency of Borrower and related matters.
Solvency Certificate (Company): a certificate executed by the Chief
------------------------------
Executive Officer and Chief Financial Officer of Company with respect to
the Solvency of Company and related matters.
Solvent: with respect to any Person, as of the date as to which such
-------
Person's solvency is to be measured:
(a) the "fair saleable value" (defined below) of the assets of
such Person is in excess of the total amount of the liabilities of
such Person (including contingent liabilities) as they become absolute
and matured:
-12-
(b) such Person has sufficient capital to conduct its business;
and
(c) such Person is able to meet its debts as they mature.
For purpose of this definition, the phrase "fair saleable value" shall mean
the amount which may be realized within a reasonable time through a sale of
such Person as a going concern in a transaction between a willing and able
buyer under no compulsion to buy and a willing and able seller under no
compulsion to sell.
Stock Purchase Agreement: collectively, that Stock Purchase Agreement
------------------------
dated as of November 11, 1994, by and among PHF Associates, Inc. (to whose
interest Acquisition Corp. has succeeded), as buyer, and Xxxxxxx X.
Xxxxxxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx X. XxXxxx, Xxxxx X.
Xxxxxxx, Xx., Xxxxxxxxx X. Xxxxxxxxxx, Xxxxxxx X. Xxxxxxx, XX, and Xxxxxxx
X. Xxxxxxxxx, as sellers, and the escrow agreement related thereto.
Subordinated Indebtedness: the Indebtedness to be owned by Borrower to
-------------------------
Subordinated Lender in the Current principal amount of Two Million One
Hundred Thousand Dollars ($2,100,000).
Subordinated Indebtedness Documents: all loan documents executed and
-----------------------------------
delivered by Borrower, Company or their respective Affiliates related to
the Subordinated Indebtedness.
Subordinated Indebtedness Liens: the Liens granted to Subordinated
-------------------------------
Lender pursuant to the Subordinated Indebtedness Documents and junior to
the Security Interests.
Subordinated Lender: Xxxxxxx Xxxxxx Mezzanine Fund, L.P., a Colorado
-------------------
limited partnership.
Subordination Agreement: that Subordination and Intercreditor
-----------------------
Agreement to be executed by Lender, Subordinated Lender, Borrower,
Borrower's Stockholders, Company and Company's Stockholders simultaneously
with Closing.
Subsidiary: with respect to any Person, any corporation, association,
----------
partnership, joint venture or other business entity of which such Person,
directly or indirectly, either (a) with respect to a corporation, owns or
controls fifty percent (50%) or more of the voting power and has the
ability to elect at least a majority of the board of directors or similar
managing body, whether or not a class or classes shall or might have voting
power by reason of the happening of any contingency, or (b) with respect to
an association, partnership, joint venture or other business entity, is
entitled to share in fifty percent (50%) or more of the profits and losses,
however determined, and has voting control with respect thereto.
-13-
Term Loan: the Senior Term Loan made pursuant to this Term Loan
---------
Agreement and described in Paragraph 2.1.
Term Loan Interest Rate: a variable per annum rate equal to the Base
-----------------------
Rate plus two hundred fifty (250) basis points, which rate shall be
adjusted as and when the Base Rate changes.
Term Loan Agreement: this Term Loan Agreement, as it may be from time
-------------------
to time renewed, amended, restated or replaced.
Term Loan Documents: the Term Loan Documents (Closing) and all other
-------------------
documents now or hereafter executed in connection with the Term Loan.
Term Loan Documents (Closing): the following loan documents:
----------------------------
(a) this Term Loan Agreement;
(b) the Term Loan Note;
(c) the Security Documents;
(d) the Environmental Certificates;
(e) the Solvency Certificate (Borrower);
(f) the Solvency Certificate (Company);
(g) UCC financing statements executed by debtors with respect to
the Collateral:
(h) the Term Loan Guaranty;
(i) the Subordination Agreement; and
(j) such other instruments and documents as Lender may require
at Closing to evidence the Term Loan and to evidence and
perfect the Security Interests.
Term Loan Fees: collectively, the Base Term Loan Fee, the Term Loan
--------------
Maintenance Fee and the Term Loan Success Fee.
Term Loan Guaranty: an agreement, executed by Company, pursuant to
------------------
which Company (subject to the provisions of Section 6.17) shall
unconditionally guarantee full payment and performance of the Term Loan
Obligations and fully subordinate any Indebtedness now or hereafter owing
by Company to Borrower and the Liens pertaining to such Indebtedness.
Term Loan Maintenance Fee: the fee described in subsection 2.12.2(b).
-------------------------
-14-
Term Loan Note: the promissory note executed by Borrower in a form
--------------
acceptable to Lender in the principal amount of $1,500,000 to evidence the
Term Loan.
Term Loan Obligations: the covenants, agreements, obligations and
---------------------
conditions to be paid or performed by Borrower under the Term Loan
Documents.
Term Loan Prepayment Premium: the meaning given to it in subsection
----------------------------
2.8.1 (b).
Term Loan Principal Balance: the principal balance of the Term Loan
---------------------------
which is outstanding from time to time.
Term Loan Success Fee: the meaning given to it in subsection 2.12.3
---------------------
Total Contractual Debt Service: for any period, the sum of Senior
-------------------------------
Contractual Debt Service and payments made on the Subordinated Indebtedness
to the extent such payments are not prohibited pursuant to the terms of the
Subordination Agreement.
Total Debt: at any time, the sum of the unpaid principal balance of
----------
(a) the Term Loan, (b) the Revolver Loan, (c) the Subordinated Indebtedness
and (d) without implying Lender's consent to any such Indebtedness, all
other Indebtedness for Borrowed Money of Borrower and Company.
Transaction Documents: the Term Loan Documents, the Revolver Loan
---------------------
Documents, the Acquisition Documents and the Merger Documents.
UCC: The Uniform Commercial Code, as from time to time adopted in the
---
State of Arizona .
Unused Line Fee: the meaning given to in the Revolver Loan Agreement.
---------------
1.2 Time Periods. In this Term Loan Agreement and the other Term Loan
------------
Documents, in the computation of periods of time from a specified date to a
later specified date, (a) the word "from" means "from and including," (b) the
words "to" and "until" each mean "to, but excluding" and (c) the words
"through," "end of" and "expiration" each mean "through and including." Unless
otherwise specified, all references in this Term Loan Agreement and the other
Term Loan Documents to (a) a "month" shall be deemed to refer to a calendar
month, (b) a "quarter" shall be deemed to refer to a calendar quarter, and (c) a
"year" shall be deemed to refer to a calendar year.
1.3 Accounting Terms and Determinations. All accounting terms not
-----------------------------------
specifically defined herein shall be construed, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
pursuant hereto shall be prepared, in accordance with GAAP. If any Accounting
-15-
Changes occur and such changes result in a change in the method of calculation
of financial covenants, standards or terms contained in this Term Loan
Agreement, then Borrower and Lender agree to enter into negotiations to amend
such provisions of this Term Loan Agreement so as to reflect such Accounting
Changes with the desired result that the criteria for evaluating the financial
condition of Borrower shall be the same after such Accounting Changes as if such
Accounting Changes had not been made.
1.4 References. All references in this Term Loan Agreement to "Article,"
----------
"Section," "subsection," "subparagraph," "clause," "Exhibit," or "Schedule,"
unless otherwise indicated, shall be deemed to refer to an Article, Section,
subsection, subparagraph, clause, Exhibit or Schedule, as applicable, of this
Term Loan Agreement.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
----------------------
this Term Loan Agreement shall be deemed to be incorporated herein by reference.
1.6 Lender's Discretion. Whenever the terms "satisfactory to Lender,"
-------------------
"determined by Lender," "acceptable to Lender," consent of Lender," "Lender
shall elect," "Lender shall request," "in Lender's judgment," or similar terms
are used in the Term Loan Documents, except as otherwise specifically provided
therein, such terms shall mean satisfactory to, at the election of, determined
by, acceptable to, requested by, or judged by, as applicable, Lender in its sole
and unlimited discretion.
1.7 Borrower's Knowledge. Any statements, representations or warranties
--------------------
that are based upon the knowledge of Borrower shall be deemed to have been made
after due inquiry by Borrower with respect to the matter in question.
1.8 Payments in Kind. For purposes of this Term Loan Agreement, any
----------------
payment of Indebtedness or interest accrued on Indebtedness which is made
through the delivery of a promissory note or other instrument evidencing
additional Indebtedness, shall not be considered to have been "made" or "paid"
hereunder until such time as the obligor with respect to such promissory note or
other instrument makes payment on the same in cash or other form of legal
tender, and until such time as payment is so made the Indebtedness represented
by such promissory note or other instrument shall be considered "due" hereunder.
ARTICLE 2
---------
TERM LOAN AND TERMS OF PAYMENT
------------------------------
2.1 Amount of Term Loan. The Term Loan shall consist of an advance in the
-------------------
amount of One Million Five Hundred Thousand Dollars ($1,500,000) disbursed to
(or at the direction of) Borrower on the Closing Date.
2.2 Reborrowing. Borrower shall not be entitled to reborrow any portion
-----------
of the principal balance of the Term Loan that is repaid or prepaid.
-16-
2.3 Closing.
-------
2.3.1 Disbursement of the Term Loan on Closing Date. On the Closing
---------------------------------------------
Date, provided no Incipient Default or Event of Default shall exist and all
of the terms and conditions set forth in Article 4 shall have been
satisfied, Lender shall make the Term Loan to Borrower, the proceeds of
which shall be disbursed in accordance with the instructions described on
Exhibit 2.3.1.
2.3.2 Notification of Closing. Borrower shall provide Lender with at
-----------------------
least forty-eight (48) hours prior written notice of the Closing, which
notice shall enable Lender to arrange for the availability of funds. In the
event the Closing does not take place on the date specified in such notice,
Borrower shall reimburse Lender for the costs incurred by Lender to
maintain the necessary funds available for the Closing, at the rate of two
percent (2%) per annum on the Term Loan for the number of days which elapse
between the date specified in such notice and the date upon which the
Closing actually occurs (which number of days shall not include the date
specified in Borrower's notice, but shall include the Closing Date).
2.4 Interest.
--------
2.4.1 Interest Rate. Except as provided in Section 2.7 or elsewhere
-------------
in the Term Loan Documents, the Term Loan shall bear interest at the Term
Loan Interest Rate.
2.4.2 Interest Computation. Interest shall be computed on the basis
--------------------
of a year consisting of three hundred sixty (360) days and charged for the
actual number of days during the period for which interest is being
charged.
2.4.3. Maximum Interest. Notwithstanding any provision to the contrary
----------------
herein contained, Lender shall not collect a rate of interest on any
obligation or liability due and owing by Borrower to Lender in excess of
the maximum contract rate of interest permitted by applicable law. Lender
and Borrower have agreed that the interest laws of the State of Arizona
shall govern the relationship between them, but in the event of a final
adjudication to the contrary, Borrower shall be obligated to pay, nunc pro
tunc, to Lender only such interest as then shall be permitted by the laws
of the state found to govern the contract relationship between Lender and
Borrower. All interest found in excess of that rate of interest allowed and
collected by Lender shall be applied to the principal balance in such
manner as to prevent the payment and collection of interest in excess of
the rate permitted by applicable law.
2.5 Payment of Principal and Interest. The principal of and interest on
---------------------------------
the Term Loan shall be due and payable in forty-seven (47) consecutive monthly
installments of Thirty-Two Thousand Six Hundred Fourteen Dollars ($32,614)
each, commencing on February 1, 1995, and continuing on the first day of each
month thereafter through and including December 1, 1998. All remaining
principal, accrued and unpaid interest, the Term Loan Success Fee, any balance
of the Term
-17-
Loan Maintenance Fee and any other sums due and owing pursuant to the Term Loan
Documents shall be due and payable on the Maturity Date.
2.6 Late Charges. If a payment of principal, or interest to be made
------------
pursuant to this Term Loan Agreement becomes past due for a period in excess of
ten (10) Business Days, Borrower shall pay on demand to Lender a late charge of
two percent (2%) of the amount of such overdue payment.
2.7 Default Rate. Payments of principal, interest and any other amounts
------------
due and payable under the Term Loan Documents shall, at the option of Lender,
earn interest after they are due at the Default Rate. At the option of Lender,
-----
while an Event of Default exists, and in all events after an acceleration of the
Term Loan Obligations by Lender, interest shall accrue on the entire outstanding
principal balance of the Term Loan at the Default Rate.
2.8 Prepayments.
-----------
2.8.1 Prepayment of the Term Loan. Borrower may voluntarily prepay
---------------------------
the principal balance of the Term Loan in whole, but not in part, at any
time, subject to the following conditions:
(a) Notice of Prepayment. Not less than thirty (30) days
--------------------
prior to the date upon which Borrower desires to make such prepayment,
Borrower shall deliver to Lender written notice of its intention to
prepay, which notice shall be irrevocable and state the prepayment
date:
(b) Term Loan Prepayment Premium. Borrower shall pay to
----------------------------
Lender, concurrently with such prepayment of the Term Loan Principal
Balance: (i) a prepayment premium (the "Term Loan Prepayment Premium")
equal to (A) five precent (5%) of the amount prepaid if such
prepayment is made during the first Loan Year, (B) four percent (4%)
of the amount prepaid if such prepayment is made during the second
Loan Year, (C) three percent (3%) of the amount prepaid if such
prepayment is made during the third Loan Year, and (D) two percent
(2%) of the amount prepaid if such prepayment is made during the
fourth Loan Year; (ii) accrued and unpaid interest through the date of
such prepayment on the principal balance being prepaid; and (iii) any
and all of the other Obligations then due which remain unpaid,
including without limitation, and the unpaid balance of the Term Loan
Maintenance Fee.
(c) Revolver Loan. The Revolver Loan, including, without
-------------
limitation, the Revolver Loan Prepayment Premium (as defined in the
Revolver Loan Agreement) and the unpaid Revolver Loan Fees shall be
paid pursuant to the provisions of Revolver Loan Agreement.
2.8.2 Additional Payments. Borrower shall pay to Lender any and all
-------------------
reasonable out-of-pocket expenses incurred by Lender in connection with
such prepayment, including, without limitation, reasonable attorneys' fees
-18-
and other costs of preparing, filing and/or recording documents
releasing the Collateral.
2.8.3 Excess Cash Flow Prepayments. Within thirty (30) days after
----------------------------
the receipt by Lender of the annual financial statements described in
subsection 6.3.2, Lender may deliver a notice to Borrower requiring
Borrower to repay the Term Loan in an amount not to exceed fifty percent
(50%) of Excess Cash Flow for the Fiscal Year covered by such financial
statements. All prepayments under this subsection 2.8.3 shall be paid to
Lender from Excess Cash Flow before Borrower pay any dividends, bonuses, or
------
capital distributions. Any prepayments required under this subsection 2.8.3
are strictly at the sole option of Lender.
2.8.4 Prepayment of Life Insurance Proceeds. Proceeds received by
-------------------------------------
lender from the Life Insurance shall be applied as a prepayment of the
Obligations in such order and manner as Lender may determine. Lender shall
notify Borrower promptly of the receipt by Lender of any proceeds from the
Life Insurance.
2.8.5 Interest Hedge Contract. Proceeds of the Interest Hedge
-----------------------
Contract shall be applied as a prepayment of the Term Loan Principal.
Lender shall give Borrower prompt notice of the receipt by Lender of any
proceeds of the Interest Hedge Contract.
2.8.6 Prepayment of Stock Purchase Agreement Proceeds. Proceeds of
-----------------------------------------------
the Stock Purchase Agreement shall be applied to the Term Loan Principal
Balance.
2.8.7 Permitted Voluntary Partial Prepayments. Borrower may not make
---------------------------------------
voluntary partial principal prepayments on the Term Loan Note in addition
to the payments it is required to make pursuant to the Term Loan Agreement.
2.8.8 No Term Loan Prepayment Premium. No Term Loan Prepayment
-------------------------------
Premium shall be payable with respect to any prepayment received by Lender
pursuant to subsection 2.8.3, 2.8.4, 2.8.5 or 2.8.6
2.8.9 Involuntary Prepayment. Any payment of the principal balance
----------------------
received by Lender resulting from the exercise by Lender of any remedy
available to Lender subsequent to the occurrence of an Event of Default and
the acceleration of the Term Loan Obligations shall be deemed to be a
prepayment subject to the provision of this Section 2.8, and the applicable
Term Loan Prepayment Premium [calculated in accordance with subsection
2.8.1 (b)] and any other payment (including, without limitation, the Term
Loan Success Fee and the unpaid balance of the Term Loan Maintenance Fee)
required under Section 2.8.1(b) shall be payable on demand with respect to
such payment.
2.9 Application of Prepayments. Subject to Lender's rights under this
--------------------------
Term Loan Agreement or any of the other Credit Facilities Documents to apply
such proceeds in a different manner, any proceeds of the Collateral received by
Lender
-19-
when no Event of Default exists shall be applied by Lender in the following
order of priority:
2.9.1 Late Charges and Fees. First, to the payment of any and all
---------------------
late charges, all fees (including the Fees) and expenses due to Lender
under the Credit Facilities Documents;
2.9.2 Revolver Loan Interest. Second, to the payment of the
----------------------
interest which shall be due and payable on the Revolver Loan Principal
Balance at the time of such payment;
2.9.3 Term Loan Interest. Third, to the payment of interest which
------------------
shall be due and payable on the Term Loan Principal Balance at the time of
such payment;
2.9.4 Term Loan Principal. Fourth, to the payment of the Term
-------------------
Loan Principal due on to Term Loan Note;
2.9.5 Revolver Loan Principal. Fifth, to the payment of the
-----------------------
Revolver Loan Principal Balance; and
2.9.6 Borrower. Sixth, any surplus to the Borrower or such other
--------
Person(s) as may be entitled thereto.
Prepayments of principal received by Lender pursuant to subsections 2.8.3,
2.8.4, 2.8.5 and 2.8.6 shall be applied to the payment of installments of the
Principal Balance in the inverse order of maturity.
2.10 Payments after Event of Default. All payments received by Lender
-------------------------------
during the existence of any Event of Default shall be applied in accordance with
Section 8.6.
2.11 Method of Payment; No Setoff; Good Funds.
----------------------------------------
2.11.1 Method of Payment. Except as may be otherwise provided in
-----------------
the Revolver Loan Agreement with respect to payments due after the Merger,
all payments to be made by Borrower pursuant to the Term Loan Documents
shall be made to Lender by wire transfer to the account of Lender at Union
Bank, 000 Xx. Xxxxxxxx Xx., Xxx Xxxxxxx, Xxxxxxxxxx, Credit Greyhound
Financial Corporation, Credit Account No. 0700470377, ABA 000000000
reference: CPS Acquisition Corp., or to such other address as Lender shall
notify Borrower.
2.11.2 No Setoff. All payments hereunder and under the other Term
---------
Loan Documents made by or on behalf of Borrower shall be made without
setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state or local taxes.
2.11.3 Good Funds. Payment shall not be deemed to have been
----------
received by Lender until Lender is in receipt of Good Funds.
-20-
2.12 Payment of Term Loan Fees.
-------------------------
2.12.1 Term Loan Fee. Borrower will pay a loan fee in the amount of
-------------
Thirty Thousand Dollars ($30,000) on or before the Closing Date ("Base Term
Loan Fee").
2.12.2 Term Loan Maintenance Fee. Borrower shall pay to Lender a
-------------------------
fee ("Term Loan Maintenance Fee") in an amount equal to Two Hundred
Thousand Dollars ($200,000). The Term Loan Maintenance Fee shall be paid in
forty-seven (47) equal monthly installments of Four Thousand One Hundred
Sixty-Six and 77/100 Dollars ($4,166.77) each, commencing on the first day
of February, 1995, and continuing on the first day of each month thereafter
until fully paid; and the unpaid balance of the Term Loan Maintenance Fee
shall be due and payable by Borrower on the earlier (a) of the prepayment
of the Term Loan Obligations or (b) the Maturity Date.
2.12.3 Term Loan Success Fee. Borrower shall pay to Lender a fee
---------------------
("Term Loan Success Fee") in an amount equal to Fifty Thousand Dollars
($50,000) on the earlier to occur of (a) prepayment of the Term Loan
Obligations or (b) the Maturity Date.
2.12.4 Fees Earned and Non-Refundable. The Term Loan has been fully
------------------------------
earned by Lender and is non-refundable in all instances. The Term Loan
Maintenance Fee and the Term Loan Success Fee shall be deemed fully earned
upon Closing and are non-refundable in all instances.
ARTICLE 3
---------
NOTE, SECURITY AND GUARANTIES
-----------------------------
3.1 Note. The Term Loan shall be evidenced by the Term Loan Note.
----
3.2 Grant of Security Interest. The Obligations shall be secured by the
--------------------------
Security Interests, which shall be superior and prior to all other Liens except
the Permitted Prior Liens.
3.3 Borrower's Stockholders Pledge Agreement. In consideration for
----------------------------------------
Lender's providing financing to Borrower and to secure payment and performance
of all of the Term Loan Obligations: (a) the Borrower's Stockholders shall
pledge to Lender the Borrower's Stock pursuant to Borrower's Stockholders Pledge
Agreement; and (b) the Company's Stockholders shall pledge to Lender all of the
Company's Stock.
3.4 Guaranties. In consideration of Lender's providing financing to
----------
Borrower, Company shall, until the Merger has been consummated, guarantee
payment and performance of all of the Term Loan Obligations in accordance with
the terms and conditions of the Guaranty, which Guaranty shall be joint,
several and primary with the obligations of Borrower.
3.5 Maintenance of Security Documents; Releases Upon Termination. Borrower
------------------------------------------------------------
shall maintain the Security Documents or cause the Security Documents
-21-
to be maintained in full force effect until full and permanent satisfaction of
the Obligations. Upon the full and permanent satisfaction of and payment in full
of all of the Obligations, Lender shall deliver to Borrower, after receipt of
request therefor and at Borrower's expense, releases and satisfactions of all
financing statements, mortgages, notices of assignment and other registrations
of security.
3.6 Recourse to Security. Recourse to security shall not be required for
--------------------
any of the Obligations nor shall Lender be required to first marshal, dispose
of, or realize upon the Collateral or any other security.
ARTICLE 4
---------
CONDITIONS OF CLOSING
---------------------
Lender's obligation to make the Term Loan shall be subject to the
satisfaction at Borrower's expense of all of the following conditions on or
before the Closing Date, but not later than December 31, 1994, in a manner, form
and substance satisfactory to Lender, and if such conditions are not so
satisfied on or before such date, Lender's commitment hereunder to make the Term
Loan shall expire:
4.1 Representations and Warranties. On the closing Date the
------------------------------
representations and warranties of Borrower set forth in the Documents to which
Borrower is a party shall be true and correct when made and at and as of the
time of the Closing, except to the extent that such representations and
warranties expressly relate to an earlier date.
4.2 Delivery of Documents. The following shall have been delivered to
---------------------
Lender, each duly authorized and executed, where applicable, all of which shall
be acceptable in form and substance to Lender:
4.2.1 the Term Loan Documents (Closing);
4.2.2 a certificate of the respective Secretaries (or an Assistant
Secretary) of Borrower and Company which delivers to Lender the following
and certifies as to the true and complete nature of the following:
(a) a certificate of incumbency for Borrower and Company;
(b) a certificate of good standing for Borrower and Company in
each state in which it is organized and/or qualified to do business;
(c) certified copies of the corporate charter and bylaws of
Borrower and Company, together with all effective and proposed
amendments thereto;
(d) certified copies of resolutions adopted by the board of
directors of Borrower and Company authorizing the execution and
-22-
delivery of the Term Loan Documents to which they are parties and the
consummation of the transactions contemplated therein;
4.2.3 certified or executed original true and complete copies of:
(a) Existing Leases;
(b) any other Existing Operating Agreements of Borrower,
including, without limitation, employment and non-
competition agreements of Borrower's employees and other
instruments, documents, certificates, consents, waivers and
opinions as Lender may reasonably request;
(c) the Subordinated Indebtedness Documents;
(b) the Acquisition Documents; and
(e) the Merger Documents.
4.2.4 share certificates representing the Borrower's Stock and the
Company's Stock; and
4.2.5 a Request for Advance, Certification and Disbursement
Instructions in form and substance identical to Exhibit 4.2.5, properly
completed.
4.3 Representations and Warranties; Performance; No Default. The
-------------------------------------------------------
representations and warranties of Borrower set forth in this Term Loan Agreement
and in each of the other Term Loan Documents shall be true and complete in all
respects. Borrower shall have performed and complied with all agreements and
conditions contained in the Term Loan Documents to be performed by or complied
with by prior to or at the Closing, and no Event of Default or Incipient Default
shall then exist or result from the making of the Term Loan.
4.4 Opinions of Counsel. Lender shall have received a favorable legal
-------------------
opinion dated the Closing Date from counsel to Borrower, Company and other
parties to the Term Loan Documents, which counsel are satisfactory to Lender.
The opinions described shall cover the due authorization, execution, delivery,
enforceability, validity and binding effect of the Term Loan Documents and
Security Interests, compliance with applicable usury laws, the enforceability
under the laws of Texas of the choice of Borrower and Company and Lender that
Arizona law shall govern the Term Loan and the Term Loan Documents, together
with opinions that the Term Loan is not usurious under Texas law (without
reliance on any usury savings clause) and with respect to such other matters as
Lender may require. Each opinion of counsel described in this Section 4.4 shall
confirm, to the satisfaction of Lender, that such opinion is being delivered to
Lender at the instruction of the party represented by such counsel, that Lender
is entitled to rely on such opinion and that, for purposes of such reliance,
Lender is deemed to be in privity with each such opining counsel.
-23-
4.5 Approval of Term Loan Documents and Security Interests. Lender shall
------------------------------------------------------
have received evidence that there have been obtained all approvals and/or
consents of, or other action by, any shareholder, Governmental Body or other
Person whose approval or consent is necessary or required to enable Borrower and
Company to (a) enter into and perform their respective Obligations under the
Term Loan Documents to which they are parties and (b) grant to Lender the
Security Interests.
4.6 Security Interests. All filings of UCC financing statements and all
------------------
other filings and actions necessary to perfect and maintain the Security
Interests as first, valid and perfected Liens in the Property covered thereby,
subject only to Permitted Prior Liens, shall have been filed or taken and
confirmation thereof shall have been received by Lender.
4.7 INTENTIONALLY LEFT BLANK.
4.8 Financial Statements and Projections. Lender shall have received (i)
------------------------------------
such financial statements, reports and tax returns relating to the operations of
Borrower and Company as Lender shall request, including, without limitation,
pro-forma balance sheets and operating projections, indicating that from and
after the Closing Date, and after giving effect to the transactions contemplated
by the Transaction Documents, based on the projections contained therin,
Borrower and Company shall remain solvent and retain sufficient capital to carry
on their respective Businesses and pay their respective debts as they mature,
including the Loans.
4.9 Material Adverse Change. No circumstance or event shall have occurred
-----------------------
which (a) has or could have a Material Adverse Effect on Borrower or Company, or
(b) has or could have a Material Adverse Effect on (i) the ability of any Person
to perform its obligations under any of the Term Loan Documents to which such
Person is a party, or (ii) the projections for financial performance of the
Businesses of Borrower and Company as set forth in any of the documents or
papers furnished to Lender by Borrower or its representatives.
4.10 Payments of Fees. Borrower shall pay to Lender the Base Term Loan
----------------
Fee. Borrower acknowledges that this fee is non-refundable and has been earned
by Lender.
4.11 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connections with the transactions contemplated by the Term Loan Documents and
all documents and instruments incident to such transactions shall be
satisfactory to Lender and its counsel, and Lender and its counsel shall have
received all such counterpart originals or certified or other copies as Lender
or its counsel may request. Lender shall have received such documents as Lender
may require to establish (a) the proper organization and good standing of
Borrower and Company and their respective authority to transact business in any
jurisdiction in which the failure to be so authorized would have a Material
Adverse Effect on such persons and (b) the authority of each Person who is any
party of any of the Term Loan Documents to execute such Term Loan Documents.
-24-
4.12 Title: Use of Assets. Lender shall be satisfied that Borrower and
--------------------
Company have good, marketable and legal title to their respective Properties and
that they at all times shall be entitled to the use and quiet enjoyment of all
assets necessary and desirable for the continued ownership and operation of
their respective Businesses and such Property at each location at which such
Businesses presently are conducted, including, without limitation, the use of
equipment, inventory, fixtures, Operating Agreements, offices, warehouses and
means of ingress and egress thereto, including any easements or rights-of-way
necessary to reach any equipment or other items necessary for the operation of
their respective Businesses.
4.13 Compliance with Americans with Disabilities Act. Evidence satisfactory
----------------------------------------------
to Lender that, as of the Closing Date, Borrower and Company are in compliance
with the ADA, or, if any renovations of either such Person's facilities or
modifications of either such Person's prior employment practices shall be
required to bring them into compliance with the ADA, review and approval by
Lender of Borrower's proposed plan to come into such compliance.
4.14 Broker Fees. If services of a broker have been performed in
-----------
connection with the Term Loan, Borrower shall pay all fees for such services and
deliver to Lender evidence of such payment (or evidence that the broker has
released any claims against Lender), and such fees shall not be included within
transaction costs to be paid/reimbursed with Term Loan proceeds.
4.15 Operating Agreements and Leases. The Existing Leases and other
-------------------------------
material Operating Agreements of Borrower and Company shall be satisfactory to
Lender. If required by Lender, each lessor under the Existing Leases shall have
delivered to Lender a consent and lien waiver, in form and substance
satisfactory to Lender.
4.16 Searches and References. Lender shall have received searches of the
-----------------------
records of the U.S. Bureau of Patents and Trademarks and the U.S. Copyright
Office with respect to the Intellectual Property (if required) and shall have
received UCC, tax lien, litigation, judgment and bankruptcy searches on
Borrower and Company and any other entities which owned any of Company's
Property. Such searches, reports and references shall be acceptable to Lender.
Lender shall have received credit references, and customer supplier and bank
references acceptable to Lender for Borrower and Company as Lender may require.
4.17 Releases. Borrower shall provide all other documents necessary to
--------
evidence the release of any and all Liens, other than the Permitted Liens on the
Collateral, including, without limitation, termination of financing statements.
4.18 Insurance. Lender shall have received, at least one Business Day
---------
prior to the Closing Date, evidence satisfactory to Lender that all insurance
coverage required pursuant to Section 6.7.1 is in full force and effect,
including originals or certified copies of the policies of such insurance.
4.19 Life Insurance. Lender shall have received a completed and signed
--------------
application of the Life Insurance, together with evidence that an application
has been made for the Life Insurance.
-25-
4.20 Transaction Costs. Lender shall have reviewed and approved, on or
-----------------
before the Closing Date, an itemized list of the transaction costs incurred by
Borrower in connection with the incurring by Borrower of the Indebtedness
represented by the Transaction Documents, the closing of the transaction
contemplated by the Transaction Documents, and the other transactions which are
to be consummated on the Closing Date, together with appropriate backup
documentation required by, and satisfactory to, Lender.
4.21 Shareholder Debt. Lender shall have received evidence that the
----------------
Shareholder Debt has been discharged in consideration of a payment not to exceed
the par value of such debt.
4.22 Subordinated Indebtedness. The terms and conditions of the
-------------------------
Subordinated Indebtedness and the Subordinated Indebtedness Documents shall be
satisfactory to Lender.
4.23 Acquisition Documents. The terms and conditions of the Acquisition and
---------------------
the Acquisition Documents shall be satisfactory to Lender.
4.24 Merger Documents. The terms and conditions of the Merger and the
----------------
Merger Documents shall be satisfactory to Lender.
4.25 Employment Agreements. Lender shall have reviewed and approved the
---------------------
terms and conditions of all employment agreements between Borrower and its
employees.
4.26 Equity Investment. Lender shall have received evidence satisfactory to
-----------------
it that on or before Closing, Borrower's Stockholders shall have made a cash
equity investment in Borrower of not less than Nine Hundred Fifty Thousand
Dollars ($950,000).
4.27 Other Information. Borrower shall have furnished Lender such other
-----------------
information concerning itself and the transactions contemplated hereby as Lender
may reasonably require.
4.28 Revolver Loan. The Revolver Loan Documents shall have been executed
-------------
and delivered to Lender and Borrower shall have minimum availability under the
Revolver Loan in an amount not less than Five Hundred Thousand Dollars
($500,000).
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Lender as follows:
5.1 Corporate Existence and Power. Borrower is a corporation duly
-----------------------------
organized, validly existing and in good standing under the laws of Georgia;
Company is a corporation duly organized, validly existing and in good standing
under the laws of Texas; each of Borrower and Company has all requisite
corporate power and authority to own its Property and to carry on its Business;
each of
-26-
Borrower and Company is in good standing and authorized to do business in each
jurisdiction in which the failure so to qualify would have a Material Adverse
Effect on such Person; and, in any event, Company is in good standing and
authorized to do business in each jurisdiction in which each site of its
Business is now located.
5.2 Authority. Each of Borrower and Company has full corporate power and
---------
authority to enter into, execute, deliver and carry out the terms of the Term
Loan Documents to which it is a party and to incur its Obligations under the
Term Loan Documents, all of which have been duly authorized by all proper and
necessary corporate action (including the consent of shareholders where
required) and are not prohibited by the corporate charter or by-laws of such
Person. There is no provision in the articles of incorporation or bylaws of
Borrower or Company, or in the laws of the state of incorporation of such
Person, requiring any vote or consent of shareholders to authorize the creation
of the Security Interests granted by such Person, which power is vested
exclusively in the board of directors of such Person.
5.3 Capital Stock and Related Matters: Subsidiaries.
-----------------------------------------------
5.3.1 Capitalization of Borrower. Exhibit 5.3.1 sets forth a complete
--------------------------
description of the capitalization of Borrower. All of Borrower's Stock is
validly issued, fully paid and non-assessable, and has been issued in
compliance with all applicable federal and state securities laws, rules and
regulations. All of the shares of the Borrower's Stock are owned
beneficially and of record by Borrower's Shareholders, free and clear of
all Liens except as described in Schedule 5.3.1. There is no other Person
which directly or indirectly owns (beneficially or of record) any interest
in Borrower.
5.3.2 Other Restrictions of Borrower. Except as set forth on Schedule
------------------------------
5.3.2, Borrower (a) is not a party to or has no knowledge of any agreements
restricting the transfer of any shares of Borrower's Stock; (b) has no
outstanding stock or securities convertible into or exchangeable or
exercisable for any shares of Borrower's Stock, or any rights to subscribe
for or to purchase, or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, any shares of the
Borrower's Stock or any securities convertible into or exchangeable or
exercisable for any shares of the Borrower's Stock; and (c) is not subject
to any obligation to acquire or retire any shares of Borrower's Stock or
any convertible securities, rights or options for any shares of Borrower's
Stock. Borrower is not required to file, and Borrower has not filed,
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended,
a registration statement relating to any class of debt or equity
securities.
5.3.3 Subsidiaries of Borrower. Schedule 5.3.3 sets forth a complete
------------------------
list of the Subsidiaries of Borrower.
-27-
5.3.4 Capitalization of Company. Exhibit 5.3.4 sets forth a complete
-------------------------
description of the capitalization of Company. All of Company's Stock is
validly issued, fully paid and non-assessable, and has been issued in
compliance with all applicable federal and state securities laws, rules and
regulations. All of the shares of the Company's Stock are owned
beneficially and of record by Company's Shareholders, free and clear of all
Liens except as described in Schedule 5.3.4. There is no other Person,
which directly or indirectly owns (beneficially or of record) any interest
in Company.
5.3.5 Other Restrictions of Company. Except as set forth on Schedule
-----------------------------
5.3.5 or for Liens which will be removed at Closing, Company (a) is not a
party to or has no knowledge of any agreements restricting the transfer of
any shares of Company's Stock; (b) has no outstanding stock or securities
convertible into or exchangeable or exercisable for any shares of Company's
Stock, or any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments or claims of any character
relating to, any shares of the Company's Stock or any securities
convertible into or exchangeable or exercisable for any shares of the
Company's Stock; and (c) is not subject to any obligation to acquire or
retire any shares of Company's Stock or any convertible securities, rights
or options for any shares of Company's Stock. Company is not required to
file, and Company had not filed, pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, a registration statement relating to any
class of debt or equity securities.
5.3.6 Subsidiaries of Company. Schedule 5.3.6 sets forth a complete
-----------------------
list of the Subsidiaries of Company.
5.4 Binding Agreements. This Term Loan Agreement and the other Term Loan
------------------
Documents, when executed and delivered, shall constitute the valid and legally
binding obligations of Borrower and Company to the extent they are a party
thereto, enforceable against such Person in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by equitable principles (whether or not any
action to enforce such document is brought at law or in equity).
5.5 Solvency; Bankruptcy: Creditors.
-------------------------------
5.5.1 Solvency. Borrower and Company are Solvent.
--------
5.5.2 No Contemplated Bankruptcy. Neither Borrower nor Company
--------------------------
contemplates the filing of a petition in bankruptcy or for a reorganization
under the U.S. Bankruptcy Code (or other applicable laws) and has no
knowledge of any threatened bankruptcy or insolvency proceeding against
Borrower or Company.
5.5.3 Hindering Creditors. Borrower, by executing, delivering or
-------------------
performing the transactions contemplated by the Term Loan Documents, or by
-28-
taking any action with respect thereto, does not intend to hinder, delay or
defraud either its present or future creditors.
5.6 Location of Principal Place of Business; Other Facility Sites.
-------------------------------------------------------------
5.6.1 Principal Place of Business. The chief executive office and
---------------------------
principal place of business of Borrower is located at Atlanta, Georgia.
5.6.2 Location of Goods and Offices. All inventory, equipment, other
-----------------------------
Goods and offices that now used and contemplated to be used after the
Closing Date in the operation of the Business of Borrower are located at
the sites listed in Schedule 5.6.2.
5.7 Title to Property, Liens. Borrower and Company have good and
------------------------
marketable title to all of their respective Property, except the portion thereof
consisting of Company's Leasehold Properties and Company's leased equipment, all
of which has been leased in the ordinary course of Company's business; and
Company has a valid leasehold estate in Company's Leasehold Property and
lessee's interest in all leased Equipment. All of such Property is free and
clear of all Liens, except Permitted Liens. The applicable Security Documents
shall create valid and perfected first Liens in the Property of Company, subject
only to Permitted Prior Liens.
5.8 Projections and Financial Statements.
------------------------------------
5.8.1 Financial Statements. Borrower has delivered to Lender
--------------------
financial statements described in Schedule 5.8.1. Such financial statements
(a) comport with the books of Borrower or Company, as the case may be; (b)
are complete and correct in all material respects, subject to normal year-
end adjustments; and (c) fairly present in all material respects, subject
to normal year-end adjustments, the financial condition and the results of
operations as of the dates and for the periods described therein with
respect to the subject thereof.
5.8.2 Pro Forma Balance Sheet. Borrower has delivered to Lender
-----------------------
pro-forma balance sheets for itself and Company as of the Closing Date
(which assume the consummation of the transactions contemplated by the
terms of the Term Loan Documents). Such pro-forma balance sheets present
fairly the anticipated financial condition of the Borrower and Company as
of the Closing Date, except that such pro-forma balance sheet (a) does not
reflect any year-end adjustments, provided that, to the best of the
knowledge of Borrower, there will be no material adjustments to such pro-
forma balance sheet and (b) has not been audited.
5.8.3 Forecasts. Borrower has delivered to Lender forecasts of the
---------
future operations of Borrower and Company, consisting of balance sheets,
cash flow statements and income statements of Borrower and Company,
together with a statement of the underlying assumptions upon which such
forecasts are based. Such forecasts (a) have been prepared in good faith
and (b) represent the good faith opinion of Borrower and its senior
management as to the course of the Business of Borrower and Company.
-29-
5.9 Litigation. Except as set forth in Schedule 5.9, there are no actions,
----------
suits, arbitration proceedings or claims pending or, to the best knowledge of
Borrower, threatened against Borrower or Company or maintained by Borrower or
Company at law or in equity or before any Governmental Body. None of the matters
set forth in Schedule 5.9 (if any), if adversely determined, could have a
Material Adverse Effect on Borrower or Company; and none of such matters calls
into question the validity or enforceability of any of the Term Loan Documents
or any of the transactions contemplated thereby or the priority of the Security
Interests.
5.10 Conflicting Agreements: Consents. Neither Borrower nor Company is in
--------------------------------
default under any agreement to which it is a party or by which it or any of its
Property is bound, and there is no event or condition which, with the giving of
notice or the lapse of time, or both would become a default under any agreement
to which it is a party or by which it or any of its Property is bound, the
effect of which default might have a Material Adverse Effect on Borrower or
Company or the validity or enforceability of any of the Term Loan Documents or
any of the transactions contemplated thereby or the priority of the Security
Interests. No authorization, consent, approval or other action by, and no notice
to or filing with, any shareholder, any Governmental Body or any other Person
which has not already been obtained, taken or filed, as applicable, is required
(a) for the due execution, delivery or performance by Borrower or Company of any
of the Term Loan Documents to which it is a party or (b) as a condition to the
validity or enforceability of any of the Term Loan Documents to which it is a
party or any of the transactions contemplated thereby or the priority of the
Security Interests, except for certain filings to establish and perfect the
Security Interests. No provision of any mortgage, indenture, contract,
agreement, statute, rule, regulation, judgment, decree or order binding on
Borrower or Company, or affecting the Business or Property of Borrower or
Company, conflicts with, or requires any consent which has not already been
obtained or is anticipated to be obtained as described above, or in any way
would prevent the execution, delivery or performance of the terms of any of the
Term Loan Documents. The execution, delivery or performance of the terms of the
Term Loan Documents shall not constitute a default under, or result in the
creation or imposition of, or obligation to create, any Lien upon the Property
of Borrower or Company pursuant to the terms of any such mortgage, indenture,
contract or agreement.
5.11 Taxes. Each of Borrower and Company has filed or caused to be filed
-----
all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes due and payable on such returns or to
become due and payable upon the filing of such returns or in any assessments
made against it and any of its Property; and no tax liens have been filed and,
to the best knowledge of Borrower, no claims are being asserted in respect of
such taxes which (a) (i) are required by GAAP to be reflected in its financial
statements or (ii) would have a Material Adverse Effect on Borrower or Company,
and (b) are not so reflected therein. The charges, accruals and reserves on the
books of Borrower and Company with respect to all federal, state, local and
other taxes are considered by the management of Borrower to be adequate, and
Borrower has no knowledge of any unpaid assessment which is or might be due and
payable against it or any of its Property, except such assessments as are being
contested in good
-30-
faith and by appropriate proceedings diligently conducted, and for which
adequate reserves have been set aside in accordance with GAAP.
5.12 Compliance with Applicable Laws. Neither Borrower nor Company is in
-------------------------------
default with respect to any judgment, order, writ, injunction, decree or
decision of any Governmental Body, which default would have a Material Adverse
Effect on either such Person. Each of Borrower and Company is in compliance in
all material respects with all applicable statutes and regulations, including
Environmental Laws, of all Governmental Bodies, a violation of which would have
a Material Adverse Effect on such Person or the validity or enforceability of
any of the Term Loan Documents or any of the transactions contemplated thereby
or the priority of the Security Interests.
5.13 Regulatory Matters. Each of Borrower and Company has duly and timely
------------------
filed all material reports and other filings which are required to be filed by
it under any rules or regulations promulgated by any Governmental Body or other
Person having jurisdiction over the operation of its Business. All information
provided by or on behalf of Borrower and Company in any filing with any
Governmental Body or other Person having jurisdiction over the operation of its
Business was, at the time of filing, true, complete and correct in all material
respects when made, and the appropriate Person has been notified of any
substantial or significant changes in such information as may be required in
accordance with applicable laws, rules and regulations.
5.14 Environmental Matters. Except to the extent set forth in the
---------------------
Disclosure Schedule to the Environmental Certificate, (a) each of Borrower and
Company is in compliance in all material respects with all applicable
Environmental Laws and (b) there currently are not any known Hazardous
Materials generated, manufactured, released, stored, buried or deposited over,
beneath, in or on (or used in the construction and/or renovation of) the
Property in violation of applicable Environmental Laws.
5.15 Application of Certain Laws and Regulations. Neither Borrower, Company
-------------------------------------------
nor any Affiliate of Borrower or Company is:
5.15.1 Investment Company Act. an "investment company," or a company
----------------------
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended;
5.15.2 Holding Company Act. a "holding company," or a "subsidiary
-------------------
company" of a "holding company," or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended;
5.15.3 Regulations as to Borrowing. subject to any statute or
---------------------------
regulation which regulates the incurrence of any Indebtedness for Borrowed
Money, including, without limitation, statutes or regulations relative to
common or interstate carriers or to the sale of electricity, gas, steam,
water, telephone, telegraph or other public utility services;
-31-
5.15.4 Foreign or Enemy Status. (a) an "enemy" or an "ally of an
-----------------------
enemy" within the meaning of Section 2 of the Trading With the Enemy Act,
(b) a "national" of a foreign country designated in Executive Order No.
8389, as amended, or of any "designated enemy country" as defined in
Executive Order No. 9095, as amended, of the President of the United States
of America, in each case within the meaning of such Executive Orders, as
amended, or of any regulation issued thereunder, (c) a "national of any
designated foreign country" within the meaning of the Foreign Assets
Control Regulations or of the Cuban Assets Control Regulations of the
United States of America (Code of Federal Regulations, Title 31, Chapter V,
Part 515, Subpart B, as amended), or (d) an alien or a representative of
any alien or foreign government within the meaning of Section 310 of Title
47 of the United States Code.
5.16 Margin Regulations. None of the transactions contemplated by this Term
------------------
Loan Agreement or any of the other Term Loan Documents, including the use of the
proceeds of the Term Loan, have violated or shall violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations G, T, U and X, and Borrower does not own or intend to carry or
purchase any "margin security" within the meaning of such Regulation G or U.
5.17 Other Indebtedness. There is no, and upon Closing there will be no,
------------------
Indebtedness for Borrowed Money owned by Borrower or Company to any Person,
except the Obligations and the Subordinated Indebtedness.
5.18 Certain Agreements. Neither Borrower nor Company (a) has committed to
------------------
make any Investment, (b) is a party to any indenture, agreement, contract,
instrument or lease or subject to any charter, bylaw or other corporate
restriction or any injunction, order, restriction or decree, which is so unusual
or burdensome so as to cause, in the foreseeable future, a Material Adverse
Effect on either such Person, (c) is a party to any "take or pay" contract under
which it is the purchaser, (d) has any contingent or long-term liability or
commitment, including management contracts (excluding employment contracts of
full-time individual officers or employees) except those set forth in SCHEDULE
5.19, and (e) has assumed, guaranteed or endorsed, or otherwise become directly
or contingently liable in connection with any liability of any other Person,
except for the endorsement of checks and other negotiable instruments for
collection in the ordinary course of business.
5.19 Business and Property of Borrower.
---------------------------------
5.19.1 Business and Property. After the Closing, Borrower will
---------------------
immediately merge into Company. Company does not propose to engage in any
business or activity other than its Business. Each of Borrower and Company
owns or has the right to use all Property which is necessary for the
conduct of its Business, as its Business is proposed to be conducted
following the Closing Date.
5.19.2 Real Property; Leases. There is set forth in Schedule 1.1 (Real
---------------------
Property) a description or all existing Real Property
-32-
of Borrower and Company. There is set forth in Schedule 1.1 (Existing
Leases) a list of all existing Leases of Borrower and Company. Each Lease
is in full force and effect, there has been no material default in the
performance of any of its terms or conditions by Borrower or Company or, to
the knowledge of Borrower, by any landlord thereunder, and no claims of
default have been asserted with respect thereto. The present and
contemplated use of the Real Property and Leasehold Property of Borrower
and Company is in compliance with all applicable zoning ordinances and
regulations and other laws and regulations.
5.19.3 Operation and Maintenance of Equipment. Neither Borrower,
--------------------------------------
Company nor, to the knowledge of Borrower, any other Person owning or
operating any equipment necessary for the operation of the Business of
Borrower or Company has used, operated or maintained the same in a manner
which now or hereafter could result in the cancellation or termination of
the right of Borrower or Company to use the same or which could result in
any material liability of Borrower for damages in connection therewith. All
of the equipment and other tangible personal property owned by Borrower or
Company is in good operating condition and repair, reasonable wear and tear
from ordinary usage excepted, and has been used, operated and maintained in
compliance with all applicable laws, rules and regulations.
5.19.4 Intellectual Property. There is set forth in Schedule 1.1
---------------------
(Intellectual Property) a list of all existing patents, copyrights,
trademarks and trade names owned by Borrower or Company and applications
therefor submitted by such Person. There is set forth in Schedule 1.1
(Existing Operating Agreements) a list of all existing Operating Agreements
of Borrower and Company. Neither Borrower nor Company has been charged with
any material infringement of any patent, copyright, trademark, or service
xxxx, or notified or advised of any such claim. Each of Borrower and
Company owns, possesses or has the right to use all Operating Agreements,
and all rights with respect thereto, necessary for the conduct of its
Business as heretofore conducted and as proposed to be conducted after the
Closing Date, without any known conflict with the rights of others and, in
each case, free of any Liens other than Permitted Liens. No event has
occurred that could result in the cancellation or termination of any
Operating Agreement or the imposition thereunder of any liability upon
Borrower or Company, and there is no reason to believe that any Operating
Agreement will not be renewed in the ordinary course, except where the
failure to renew would not have had a Material Adverse Effect on Borrower
or Company. Except as set forth in Schedule 5.19, neither Borrower nor
Company has any Operating Agreement which consists of a license to use
patents, copyrights, trademarks, service marks, trade names, or other
similar items of intellectual property. The consummation of the transaction
contemplated hereby will not alter or impair any right, title or interest
of Borrower or Company in any of its Operating Agreements, except for
Security Interests in favor of Lender.
-33-
5.20 No Misrepresentation. No representation or warranty made by Borrower
--------------------
or any Person other than Lender and contained herein or in the order Term Loan
Documents, and no certificate, information or report furnished or to be
furnished by or on behalf of Borrower or any Person other than Lender in
connection with any of the Term Loan Documents or any of the transactions
contemplated hereby or thereby, contains or shall contain a misstatement of
material fact, or omits or shall omit to state a material fact required to be
stated in order to make the statements contained herein or therein not
misleading in the light of the circumstances under which such statements were
made. There is no fact known to or reasonably foreseen by Borrower that shall
have a Material Adverse Effect on Borrower or Company other than facts which
generally are known to the public, that has not expressly been disclosed to
Lender in writing.
5.21 Plans. Neither Borrower nor Company is a member of any Multi-employer
-----
Plan. Each Plan maintained by Borrower or Company is in material compliance with
the applicable provisions of ERISA and the IRC, and Borrower and Company have
filed all reports required to be filed by ERISA and the IRC in respect of such
Plan. Borrower, Company and each of their respective ERISA Affiliates has met
all requirements imposed by ERISA and the IRC in respect of the funding of all
Plans, including, without limitation, the making when due of all required
installment contributions to such Plans. There has not been, with respect to any
Plan maintained by Borrower or Company, any prohibited transaction, reportable
event, or accumulated funding deficiency, as those terms are defined in ERISA.
5.22 Employee Matters.
----------------
5.22.1 Union Activities. None of the employees of Borrower or Company
----------------
is subject to any collective bargaining agreement, and there are no
strikes, work stoppages or controversies pending or, to the best knowledge
of Borrower, threatened against Borrower or Company by any of its
employees, other than employee grievances arising in the ordinary course of
business which do not in the aggregate have a Material Adverse Effect on
Borrower or Company.
5.22.2 Claims Relating to Employment. Neither Borrower nor Company nor
-----------------------------
any employee is subject to any employment agreement or non-competition
agreement with any former employer or any other Person, which agreement
would (a) prohibit Borrower or Company from using any material information
which Borrower or Company would not otherwise be prohibited from using or
(b) raise any legal considerations relating to unfair competition, trade
secrets or propriety information.
5.23 Use of Term Loan Proceeds. The proceeds of the Term Loan will be used
-------------------------
by Borrower to pay a portion of the purchase price for the Company's Stock
in connection with the Acquisition, as more fully provided in Exhibit
2.3.1.
5.24 Good Consideration. The Term Loan Documents and the transactions
------------------
contemplated thereby have been or will be executed, delivered and performed
in good faith and in exchange for reasonably equivalent value.
-34-
5.25 No Default. There is neither an Event of Default nor Incipient Default
----------
under the Term Loan Documents.
5.26 Additional Representations and Warranties. The representations,
-----------------------------------------
warranties and covenants contained in this Article 5 are in addition to, and not
in derogation of, the representations, warranties and covenants contained
elsewhere in the Term Loan Documents and shall be deemed to be made and
reaffirmed prior to the making of the Term Loan.
ARTICLE 6
---------
AFFIRMATIVE COVENANTS
---------------------
Until all of the Term Loan Obligations are paid and performed in full
(other than the Term Loan Obligations arising under Section 9.2 with respect to
which there is no pending or threatened event or situation known to Borrower
which could give rise to an indemnity obligation of Borrower under Section 9.2),
Borrower agrees that:
6.1 Legal Existence; Good Standing. Subject to the provisions of Section
------------------------------
6.17, Borrower shall maintain, and shall cause Company to maintain, their
respective corporate existence and their respective good standing in the
jurisdiction of its incorporation and maintain their respective qualification in
each jurisdiction in which the failure to qualify would have a Material Adverse
Effect on Borrower or Company.
6.2 Inspection. Borrower shall permit and shall cause Company to permit
----------
representatives of Lender to (a) visit their respective offices, (b) examine
their respective books and Accountants' reports relating thereto, (c) make
copies or extracts therefrom, (d) discuss the Business and affairs of such
Person with their respective employees, (e) examine and inspect their respective
Property, and (f) meet and discuss the Business and affairs of such Person with
the Accountants, all at reasonable times and upon reasonable prior notice.
Borrower hereby acknowledges that the provisions of this Section 6.2 shall
permit Lender to conduct (x) an annual inspection of some or all of the
Collateral and (y) an audit of the Books of Borrower and Company at such times
as Lender may require or may be otherwise expressly provided herein.
6.3 Financial Statements and Other Information. Borrower shall maintain a
------------------------------------------
standard system of accounting in accordance with GAAP and furnish or cause to be
furnished to Lender:
6.3.1 Monthly Statements. Within thirty (30) days after the end of
------------------
each month, the following statements and reports for Borrower and Company:
(a) a statement of profit and loss, a balance sheet, and a
statement of cash flows for Borrower and Company as of the
end of each month, showing operating results for such month
and for the period from the beginning of the then Fiscal
Year through the end of such month, and for the comparable
period of the preceding Fiscal Year;
-35-
(b) a detailed accounts receivables aging report;
(c) a detailed accounts payable aging report;
(d) a perpetual inventory listing;
(e) a detailed trial balance; and
(f) monthly reconciled bank statements.
6.3.2 Annual Statements. As soon as available and in any event within
-----------------
ninety (90) days after the close of each Fiscal Year, on a consolidated and
consolidating basis; a statement of profit and loss, a balance sheet, and a
statement of cash flows for Borrower and Company, as of the end of such
Fiscal Year, setting forth in each case in comparison form the
corresponding figures for the preceding year. Such annual financial
statements shall be audited and accompanied by an opinion of the
Accountants stating that (i) the examination by the Accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, included such tests
of the accounting records and such other procedures as were considered
necessary under the circumstances, (ii) such financial statements have been
prepared in accordance with GAAP, and (iii) such financial statements
fairly present the financial position and results of operations of the
Person(s) which is/are the subject of such statements; and
6.3.3 Officer's Certificates. The financial statements of Borrower
----------------------
and Company described in subsections 6.3.1 and 6.3.2 shall be accompanied
by a certificate of the Chief Financial Officer of such Person in the form
of EXHIBIT 6.3.3. reasonable detail (a) certifying that no condition or
event has occurred or exists which constitutes an Incipient Default or an
Event of Default, or, if so, specifying in any such certificate such
violations, conditions and events, and the nature and status thereof, and
what actions Borrower proposes to take with respect thereto, and (b)
showing all calculations necessary to demonstrate compliance with the
provisions of Article 6 of this Term Loan Agreement. Simultaneously with
the delivery of the annual audited financial statements, Borrower also
shall deliver to Lender a certificate from the respective Chief Executive
Officers of Borrower and Company, certifying that, to the best of the
knowledge of such Chief Executive Officer, Borrower and Company are in
compliance with all applicable Environmental Laws and confirming the
absence of matters which would require notice to Lender pursuant to the
provisions of Section 6.7.
6.3.4 Accountant's Certificate. Simultaneously with the delivery of
------------------------
the certified statements required by subsection 6.3.2, copies of a
certificate of the Accountants for Borrower and Company stating that, (a)
in making the examination necessary for their audit of the financial
statements of Borrower and Company for such year, nothing came to their
attention of a financial or accounting nature that caused them to believe
-36-
that (i) Borrower or Company, as the case may be, was not in compliance
with the terms, covenants, provisions or conditions of any of the Term Loan
Documents or (ii) there had occurred an Incipient Default or Event of
Default, or (b) specifying all such instances of non-compliance and the
nature of the status thereof.
6.3.5 Audit Reports. Within five (5) Business Days after receipt
-------------
thereof, a copy of each report, other than the reports referred to in
subsection 6.3.3, including any so-called "Management Letter" or similar
report, submitted to Borrower by the Accountants in connection with any
annual, interim or special audit made by the Accountants of the books of
Borrower.
6.3.6 Notice of Change of Accountants; Accountants' Cooperation. At
---------------------------------------------------------
least thirty (30) days prior to any change of Accountants of Borrower or
Company, notice that such change is to occur together with the name of the
new Accountants and an appropriate letter of the type described below in
this subsection addressed to such new Accountants. Such new Accountants
shall be an independent, public accounting firm satisfactory to Lender.
Borrower authorizes and shall cause Company to authorize Lender to
communicate directly with its officers and employees and with their
respective Accountants. Borrower authorizes and shall cause Company to
authorize the Accountants to disclose to Lender any and all financial
statements, work papers and other information of any kind that they may
have with respect to Borrower or Company and the Business of such Person
and financial and other affairs. Lender shall treat information so obtained
as confidential, except Lender shall be permitted to disclose such
information on a need-to-know basis to such Persons as Lender reasonably
deems necessary. Upon the request of Lender, Borrower shall deliver a
letter addressed to such Accountants instructing them to comply with the
provisions of this Section.
6.3.7 Notice of Defaults; Loss. Within five (5) Business Days after
------------------------
the occurrence of any such event, written notice if: (a) any Indebtedness
of Borrower or Company is declared or shall become due and payable prior to
its declared or stated maturity, or called and not paid when due; (b) an
event has occurred that enables the holder of any Indebtedness of Borrower
or Company or of any note, certificate or security evidencing any such
Indebtedness of Borrower or Company to declare such Indebtedness due and
payable prior to its stated maturity; (c) there shall occur and be
continuing an Incipient Default or Event of Default, accompanied by a
statement of the Chief Executive Officer of Borrower or Company setting
forth what action Borrower or Company, as the case may be (and any other
obligor with respect to which the Incipient Default or Event of Default has
occurred) proposes to take in respect thereof; or (d) any event shall occur
causing loss or depreciation in the value of assets having a Material
Adverse Effect on Borrower or Company, including the amount or the
estimated amount of any such loss or depreciation or adverse effect.
6.3.8 Notice of Suits, Adverse Events. Within five (5) Business Days
-------------------------------
after the occurrence of any such event, written notice of: (a) any
-37-
citation, summons, subpoena, order to show cause or other order naming
Borrower or Company a party to any proceeding before any Governmental Body
which may have a Material Adverse Effect on Borrower or Company, and
including with such notice a copy of such citation, summons, subpoena,
order to show cause or other order; (b) any lapse or other termination of
any license, permit, franchise, agreement or other authorization issued to
Borrower or Company by any Governmental Body or any other Person or the
refusal to renew or extend any such license, permit, franchise, agreement
or other authorization; and (c) any dispute between Borrower or Company and
any Governmental Body or any other Person; provided that notice shall not
be required pursuant to clauses (b) or (c) above unless the lapse,
termination, refusal or dispute referred to in such clauses may have a
Material Adverse Effect on Borrower or Company.
6.3.9 Reports to Security Holders. Creditors and Governmental Bodies.
--------------------------------------------------------------
(a) Within five (5) Business Days after becoming available,
copies of (i) all financial statements, reports, notices and proxy
statements sent or made available generally by Borrower or Company to
its security holders, (ii) all regular and periodic reports and all
registration statements and prospectuses filed by Borrower with any
securities exchange or with the Securities and Exchange Commission or
any Governmental Body succeeding to any of its functions, and (iii)
all statements generally made available by Borrower, Company or others
concerning material developments in the Business of Borrower or
Company.
(b) Within five (5) Business Days after becoming available,
copies of any periodic or special reports filed by Borrower or Company
with any Governmental Body or Person, if such reports indicate any
material change in the financial condition, operations, Business,
profits, prospects or Property of such Person, or if copies thereof
are requested by Lender, and copies of any material notices and other
communications from any Governmental Body or Person which specifically
relate to Borrower or Company.
6.3.10 ERISA Notices and Requests.
--------------------------
(a) Within five (5) Business Days after the occurrence of any
such event, written notice if (i) Borrower or Company shall fail to
make any payments when due and payable under any Plan, or (ii)
Borrower or Company shall receive notice from the Internal Revenue
Service or the Department of Labor that it shall have failed to meet
the minimum funding requirements of any Plan, and include therewith a
copy of such notice, or (iii) Borrower or Company gives or is required
to give notice to the PBGC of any "reportable event" (as defined in
Title IV of ERISA) in respect of any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, or (iv) a
-38-
notice of intent to terminate any Plan is filed with the PBGC, or (v)
proceedings are instituted by the PBGC under Section 4042 of ERISA to
terminate, or to appoint a trustee to administer, any Plan of Borrower
or Company, or (vi) any prohibited transaction occurs involving the
assets of any Plan, or (vii) Borrower or Company or any of its ERISA
Affiliates fails to make a required installment or other payment to
any Plan if such failure would result in the imposition of a Lien upon
the Property of Borrower or Company pursuant to Section 412(n) of the
IRC.
(b) Copies of any request for a waiver of the funding standards
or any extension of the amortization periods required by Sections 303
and 304 of ERISA or Section 412 of the IRC within five (5) Business
Days after any such request is submitted to the Department of Labor or
the Internal Revenue Service, as the case may be.
6.3.11 Shareholder Lists. Simultaneously with the delivery of the
-----------------
certified statement required by subsection 6.3.2, a complete listing of all
holders of record of each class of equity security of Borrower or Company
and of warrants and/or options to acquire such equity securities, and (to
the best of Borrower's knowledge) all beneficial holders of such equity
securities, warrants and options, together with the exercise price
applicable to any warrants and options.
6.3.12 Deposit Accounts. Simultaneously with the delivery of the
----------------
certified statement required by Section 6.3.2 and at any other time upon
Lender's request, a list of all deposit accounts of Borrower or Company,
containing the name and address of the depository financial institution
with respect to such deposit accounts. Borrower shall also promptly (but in
no event more than ten (10) days after opening or closing a deposit
account) notify Lender of each deposit account of Borrower or Company which
from time to time is opened or closed.
6.3.13 Annual Budget. Not later than the end of each of its Fiscal
-------------
Years, Borrower will deliver and cause Company to deliver to Lender their
respective operating budgets for the succeeding Fiscal Year.
6.3.14 Other Information.
-----------------
(a) Within five (5) Business Days after the occurrence of any
such event, notice: (i) if any officer of Company or any employee will
no longer be actively involved in the Business of Company or if the
functions of such officer or employee will be performed by a different
person, (ii) change of location of the Collateral, (iii) any change in
the name of Borrower or Company or the name(s) under which it is
conducting business, or (iv) any sale or purchase of Property by
Borrower or Company outside the ordinary course of business; and
-39-
(b) Within five (5) Business Days after Lender's request
therefor, and so long as reasonably available, such other information
concerning the financial condition, operations, Business, prospects or
Property of Borrower or Company as Lender may from time to time
reasonably request.
6.4 Taxes; Tax Returns.
------------------
6.4.1 Payment. Borrower shall pay and shall cause Company to pay in
-------
full, before delinquency or before the expiration of any extension period,
all assessments and taxes, whether real, personal or otherwise, due or
payable by, or imposed, levied or assessed against Borrower, Company or any
of their respective Property; provided; however, that Borrower shall not be
-------- -------
required to pay or discharge any such assessment or tax if the payment
thereof is being contested pursuant to a Permitted Protest.
6.4.2 Tax Returns. Borrower shall furnish and shall cause Company to
-----------
furnish to Lender true, complete and correct copies of their respective
income tax returns filed with the Internal Revenue Service annually, within
thirty (30) days following such filing (but no later than August 30). If
Borrower or Company files its tax returns for any year after March 15, it
shall provide Lender with a copy of its request for or extension of the
time in which to file federal income tax returns.
6.5 Reports to Governmental Bodies and Other Persons. Borrower shall
------------------------------------------------
timely file and shall cause Company to file all reports, applications,
documents, instruments and information required to be filed pursuant to all
rules, regulations or requests of any Governmental Body or other Person having
jurisdiction over such Persons, including, without limitation, such of the Term
Loan Documents as are required to be filed with any such Governmental Body or
other Person pursuant to applicable rules and regulations promulgated by such
Governmental Body or other Person.
6.6 Maintenance of Licenses and Other Operating Agreements. Borrower shall
------------------------------------------------------
maintain and shall cause Company to maintain in force at all times, and apply in
a timely manner for renewal of, all their respective licenses, approvals,
permits, franchises, patents, copyrights, trademarks, service marks, trade
names, and other Operating Agreements necessary for the continuation of the
operation of their respective Businesses, unless the loss thereof would not have
a Material Adverse Effect on such Person. Borrower shall give and shall cause
Company to give Lender at least thirty (30) days prior written notice of the
proposed material amendment of any of their respective Operating Agreements,
including, without limitation, any amendment thereto, which would result in the
loss of any material benefit or the incurrence of any material detriment by
Borrower or Company under the terms of such agreement, substantially impair the
value of the Collateral or otherwise have a Material Adverse Effect on Borrower
or Company.
6.7 Insurance.
---------
-40-
6.7.1 General. Borrower shall obtain, maintain and deliver, and
-------
shall cause Company to obtain, maintain and deliver, to Lender at all
times and in full force and effect such casualty, hazard, business
interruption, public liability, product liability, and other insurance as
is required by Lender, written by insurers and in amounts and forms
satisfactory to Lender. Except in the case of any minor casualty which in
no event involves a loss of more than Ten Thousand Dollars ($10,000) and
subject to the rights of holders of Permitted Prior Liens, in case of loss,
Lender shall be entitled to receive all insurance proceeds from policies
required to be maintained hereunder. Lender may apply such proceeds to the
payment of the Obligations (including any unpaid Fees) in such order and
manner as it may elect or, at its option, apply such proceeds to
restoration and repair of the of the damaged Property upon such conditions
as Lender may impose. Application of insurance proceeds by Lender,
regardless of the manner or order, shall not waive full and timely
performance of any of Obligations, cure or waive any default by Borrower in
the full and timely performance of the Obligations, or invalidate or affect
any act hereunder because of such default. Lender shall not be obligated to
see to the proper application of any insurance proceeds paid over to
Borrower or Company. Borrower shall promptly notify Lender of substantial
loss or damage to the Property and make proof of loss if loss or damage
occurs that is covered by insurance. Borrower hereby appoints Lender as its
attorney-in-fact to do any of the following at Lender's option: make proof
of loss, adjust or compromise in the name of Borrower any loss covered by
an insurance policy on Borrower's Collateral and collect and receipt for
the proceeds from such policies. If Lender acquires title to Borrower's
Collateral or Borrower's Collateral is sold pursuant to subsection 8.3.3.,
then Lender or the purchaser at foreclosure, as the case may be, shall
become the owner of the insurance policies required pursuant to this
subsection, the unearned premiums on the policies and insurance proceeds
relating to prior damage to the Collateral.
6.7.2 Life Insurance. Prior to February 28, 1995, Borrower shall
--------------
assign the Life Insurance to Lender pursuant to an assignment form
("Assignment of Life Insurance"), in form and substance substantially
indentical to Exhibit 6.7.2, subject to such reasonable changes thereto as
Lender may make to such form for its use after the date of this Term Loan
Agreement. Borrower hereby grants to Lender a Security Interest in the Life
Insurance, all replacements and proceeds thereof, any supplementary
contract issued in connection therewith and the proceeds thereof (including
without limitation, the beneficiary's interest therein, collectively
referred to as the "Life Insurance Collateral") to secure payment and
performance of all Obligations. The insurer under the Life Insurance and
the terms and conditions of the Life Insurance are subject to the approval
of Lender. Replacement policies as to each policy compromising the Life
Insurance shall be delivered to Lender not later than thirty (30) days
before the expiration date of each insurance policy as evidence of the
renewal of such Life Insurance. The Life Insurance shall require the
insurer to provide Lender with thirty (30) days advance written notice of
any cancellation and/or any material change in coverage.
-41-
On or before delivery of the Assignment of Life Insurance, Borrower shall
execute in favor of Lender a UCC-1 financing statement reflecting Lender's
Security Interest in the Life Insurance. Notwithstanding anything herein to
the contrary, upon the maturity of the Life Insurance or upon the death of
the Insured Persons, the proceeds of the Life Insurance shall be paid
directly to Lender, shall be treated as a prepayment and shall be applied
against the Obligations (including any unpaid Fees) in such order and
manner as Lender may determine. No prepayment premium shall be due and
owing in connection with such prepayment. To the extent that the proceeds
of the Life Insurance exceed the amount of the Obligations, any such excess
shall be promptly paid by Lender directly to Borrower. Upon the payment in
full and performance of all of the Obligations, Lender shall reassign and
deliver the Life Insurance Collateral to Borrower. In the event of the
termination or other cessation of employment by any Insured Person with
Borrower not resulting from the death of any Insured Person, Lender shall
reassign and deliver the Insurance Collateral to Borrower upon delivery to
Lender of replacement Insurance Collateral, in form and substance
satisfactory to Lender, insuring such of Borrower's then existing officers
and other key employees as Lender shall determine, provided, however, that
in no event shall the aggregate of insurance required to be provided by
Borrower exceed the aggregate amount of insurance required to be maintained
hereunder with respect to the Insured Persons.
6.8 Environmental Matters. Borrower shall provide to Lender and shall
---------------------
cause Company to provide to Lender, within three (3) Business Days after receipt
thereof, a copy of (a) any notice of any violation or administrative or judicial
complaint or order having been filed or about to be filed against Borrower or
Company, their respective Real Property or Leasehold Property or any other real
property used by Borrower or Company alleging violations of any law, ordinance
and/or regulation requiring Borrower or Company to take any action in connection
with the release, transportation and/or clean-up of any Hazardous Materials, or
(b) any notice from any Governmental Body or any other Person alleging that
Borrower or Company is or may be liable for costs associated with a response or
clean-up of any Hazardous Materials or any damages resulting from a release or
transportation of Hazardous Materials. Borrower shall comply, and shall cause
Company to comply, at their sole cost and expense, in all material respects (or
comply in all respects if the failure to do so could have a Material Adverse
Effect on Borrower or Company) with the foregoing notices or diligently contest
in good faith by appropriate proceedings any demands set forth in such notices
and, in all events, shall at all times comply in all material respects with, and
be responsible for, all applicable Environmental Laws.
6.9 Leases.
------
6.9.1 Future Leases. Concurrently with the execution by Borrower or
-------------
Company as lessee under any Lease pertaining to real property, shall deliver to
Lender or cause Company to deliver to Lender: (a) notice of the execution of
such Lease, together with a conformed copy thereof, (b) at the option of Lender,
either a (i) collateral assignment of such Operating Lease in favor of
Lender or (ii) leasehold mortgage or deed of trust with respect to the lessee's
interest
-42-
in the Leasehold Property which is the subject of such Lease; (c) an estoppel
letter, consent and lien waiver from the lessor under such Lease and (d) if
Lender has elected to obtain a leasehold mortgage or deed of trust on such
Property, a lender's policy of title insurance, which policy shall be in an
amount and contain such endorsements as shall be required by Lender, all of
which items described in clauses (b)-(d) shall be in form and content
satisfactory to Lender.
6.9.2 Existing Leases. On or before April 1, 1995, unless Borrower has
---------------
replaced such Lease with another Lease as to which Borrower has satisfied the
requirements of Section 6.9.1, Borrower shall deliver or cause Company to
deliver to Lender (a) a collateral assignment of that Existing Lease covering
Company's chief executive office in Dallas, Texas, and (b) an estoppel letter,
consent and lien waiver from the lessor under such Lease.
6.10 Future Acquisitions of Real Property. Borrower, concurrently with the
------------------------------------
(a) execution by Borrower or Company of any contract relating to the purchase by
Borrower or Company of Real Property, shall deliver or cause Company to deliver
to Lender notice of the execution of such contract, together with a conformed
copy of such contract and (b) closing of the purchase of such real property,
deliver to Lender or cause Company to deliver to Lender, in form and content
satisfactory to Lender (i) a first mortgage or deed of trust in favor of Lender
on such Real Property, (ii) a lender's policy of title insurance on such Real
Property, which policy of title insurance shall be in an amount and contain such
endorsements as may be required by Lender, and (iii) such other documents and
assurances with respect to such Real Property as Lender may require.
6.11 Compliance with Laws. Borrower shall comply and shall cause Company
--------------------
to comply with all laws, regulations, judgments, orders, injunctions, decrees
and decisions of all Governmental Bodies applicable to such Persons and their
respective operations.
6.12 Maintenance of Properties. Borrower shall maintain and shall cause
-------------------------
Company to maintain in good working order and condition, subject to normal wear
and tear from ordinary usage, all of Property.
6.13 Payment of Indebtedness. Borrower shall promptly pay and shall cause
-----------------------
Company to pay when due all their respective Indebtedness of Borrower.
6.14 Infringement Actions. Borrower shall maintain, defend and prosecute,
--------------------
and shall cause Company to maintain, defend and prosecute fully all infringement
actions with respect to their respective patents, copyrights, trademarks,
service marks, trade names, and other intellectual property.
6.15 Senior Debt Service Coverage Covenants. Borrower and Company shall
--------------------------------------
maintain after the Closing Date an Operating Cash Flow on a combined basis of at
least One Hundred Fifty percent (150%) of the Senior Contractual Debt Service.
Compliance with this covenant will be measured quarterly throughout the term of
the Term Loan on a trailing twelve (12) month basis, except for the first three
(3) calendar quarters during the term of the Term Loan, during which the
covenant shall be measured with reference back to the Closing Date.
-43-
6.16 Total Debt Service Coverage Covenants. Borrower and Company shall
-------------------------------------
maintain after the Closing Date an Operating Cash Flow on a combined basis of at
least (a) One Hundred Five percent (105%) of the Total Contractual Debt Service
through December 31, 1995, and (b) thereafter One Hundred Ten percent (110%).
Compliance with this covenant will be measured quarterly throughout the term of
the Revolver Loan on a trailing twelve (12) month basis, except for the first
three (3) calendar quarters during the term of the Term Loan, during which the
covenant shall be measured with reference back to the Closing Date.
6.17 Merger: Delivery of Assumption Agreement. Borrower shall cause the
----------------------------------------
merger to be consummated not later than the next Business Day after Closing and
to cause Company to execute the Assumption Agreement immediately upon
consummation of the Merger.
6.18 Source Code On or before March 1, 1995, Borrower shall cause Company
-----------
to enter into an escrow agreement among Company, Lender and an escrow agent
satisfactory to Lender pursuant to which the source code(s) described in
SCHEDULE 6.18 shall be escrowed in a manner satisfactory to Lender. Borrower
shall cause Company to escrow modifications to the source code(s) from time to
time not to exceed one time per year at Lender's request.
6.19 Minimum Current Ratio: Borrower shall cause Company to maintain a
---------------------
current ratio of at least 1.15 to 1.0, tested quarterly. As used herein,
"current ratio" means at any time the ratio of current assets, as determined in
accordance with GAAP, to current liabilities as determined in accordance with
GAAP but excluding the Revolver Principal Balance.
ARTICLE 7
---------
NEGATIVE COVENANTS
------------------
7.1 Borrower Covenants. Until all of the Obligations are paid and
------------------
performed in full, Borrower shall not do, and shall not permit or suffer Company
to do, any of the following:
7.1.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
liability for Indebtedness, except (a) the Obligations, (b) the
Subordinated Indebtedness, and (c) Excluded Trade Payables of such Person.
7.1.2 Liens. Create, incur, assume or suffer to exist any Lien upon
-----
any of the Property of such Person, whether now owned or hereafter
acquired, except Permitted Liens.
7.1.3 Consolidation, Merger and Acquisition. Subject to the
-------------------------------------
provisions of Section 6.17, consolidate with or merge with or into any
Person, or acquire directly or indirectly all or substantially all of the
capital stock or Property of any Person.
7.1.4 Limitation on Other Liabilities. Assume, guarantee, endorse,
-------------------------------
contingently agree to purchase, become liable in respect of any letter of
-44-
credit, or otherwise become liable upon the obligation of any Person;
provided, however, the foregoing shall not prohibit the negotiation of
-------- -------
Negotiable Collateral of Borrower or Company for deposit or collection or
similar transactions in the ordinary course of business.
7.1.5 Dividends and Purchase of Stock; Distributions. Declare or pay
----------------------------------------------
any dividends or apply any of the Property of such Person to the purchase,
redemption or other retirement of, or set apart any sum for the payment of
any dividends on, or make any other distribution by reduction of capital or
otherwise in respect of, any shares of Borrower's Stock.
7.1.6 Investments. Purchase or otherwise acquire, hold or invest in
-----------
the capital stock of, or any other interest in, any arrangement for the
purpose of providing funds or credit to, or make any other Investment,
whether by way of capital contribution or otherwise, in or with any Person,
including, without limitation, any of the Affiliates, except for the
following Investments having a maturity not exceeding ninety (90) days: (a)
Investments in direct obligations of, or instruments unconditionally
guaranteed by, the United States of America or in certificates of deposit
issued by a Qualified Depository; (b) Investments in commercial or finance
paper which is rated either "Aaa" or "AAA" -or better by Xxxxx'x Investors
Services, Inc., or Standard & Poor's Corporation, respectively, or at the
equivalent rate by any of their respective successors; or (c) any interests
in any money market account maintained with a Qualified Depository, the
Investments of which are restricted to the types specified in clause (a)
above.
7.1.7 Capital Structure Changes. Issue or sell any additional shares
-------------------------
of the capital stock of such Person or any securities convertible into or
exercisable for any shares of such capital stock other than shares issued
pursuant to an employee incentive stock option plan approved by such
Person's board of directors and consented to by Lender, such consent not to
be unreasonably withheld or otherwise allow for the change in control of
such Person.
7.1.8 Corporate Offices; Name: Records. Transfer the chief executive
--------------------------------
office or principal place of business, establish new offices or locations
or change or relocate existing offices or locations of such Person, change
corporate name of such Person, add any new fictitious business name or
maintain records (including computer printouts and programs) with respect
to accounts or keep inventory or equipment at any locations other than
those at which the same currently are kept or maintained and transfers of
Inventory in the ordinary course of business, except with the prior written
consent of Lender and after the delivery to and filing by Lender of
financing statements in form satisfactory to Lender; provided that in
connection with any addition to or change in the location of any office or
place of business of Borrower or Company, Borrower shall give or cause
Company to give at least ten (10) days prior written notice of such event,
together with the address of the new location.
-45-
7.1.9 Management. Enter into any management contract permitting a
----------
third party to manage any portion of its Business.
7.1.10 Sales Practices. Sell goods on the basis of any of the
---------------
following: a sale on extended terms, "dating," a xxxx-and-hold sale, a
consignment sale, a sale and return, a "guaranteed sale" (i.e., one in
----
which such Person guarantees resale by vendee or agrees to accept return of
such goods), or any other sale pursuant to which such Person agrees to
accept the return of goods, or to exchange the same upon the happening of
any event other than failure to conform with quality specifications except
where Lender first has been advised of such proposed transaction and
consented thereto in writing.
7.1.11 Fundamental Business Changes. Engage in any business other
----------------------------
than the Business of such Person or a business substantially related to
such Business or materially change the nature of such Business.
7.1.12 Fiscal Year. Change its fiscal year.
-----------
7.1.13 Sale or Transfer of Assets. Sell, lease, assign, transfer or
--------------------------
otherwise dispose of its Property except for (a) sales or leases of
Inventory of such Person in the ordinary course of business and (b)
disposition of (i) Property which is not material to or necessary for the
continued operation of the Business of such Person, provided, however, that
-------- -------
the proceeds from such disposition shall remain subject to the Security
Interests, or (ii) unusable items or equipment which promptly are replaced
with new items or equipment of like function and comparable value to the
unusable items or equipment when the same were new; provided, however, that
-------- -------
such replacement items and equipment shall become subject to the Security
Interests.
7.1.14 Payments on Subordinated Indebtedness. Make any payment on the
-------------------------------------
Subordinated Indebtedness, except as provided in the Subordination
Agreement.
7.1.15 Amendment of Charter and By-laws. Amend, modify or waive any
--------------------------------
term or provision of its corporate charter or by-laws, unless required by
law.
7.1.16 Amendment of the Acquisition Documents or Subordinated
------------------------------------------------------
Indebtedness Documents. Amend, modify or waive any term or provision of any
----------------------
of the Acquisition Documents or the Subordinated Indebtedness Documents.
7.1.17 Transactions with Affiliates. Sell, lease, assign, transfer or
----------------------------
otherwise dispose of any Property to any Affiliate of such Person, or lease
Property, render or receive services or purchase assets from any such
Affiliate, unless such transaction is on terms and at rates no more
favorable than those that would have been provided in an arms-length
transaction between such Person and an unrelated third party
-46-
7.1.18 Bank Deposits. Change the banks or savings institutions when
-------------
such Person maintains deposit account without at least ten (10) days prior
notification to Lender.
7.1.19 Compliance with ERISA. (a) Terminate, or permit any member of a
---------------------
Controlled Group of which Borrower or Company is a part to terminate, or take
any other action with respect to, any Plan (including, without limitation, a
substantial cessation of operations within the meaning of Section 4068(f) of
ERISA) which would result in any material liability of such Person or any member
of a Controlled Group of which such Person is a part, to the PBGC or to any
Plan, or (b) permit the occurrence of any "reportable event" (as defined in
Title IV of ERISA), or any other event or condition, which presents a risk of
such a termination by the PBGC of any Plan, or (c) permit the present value of
all benefit liabilities under all Plans to exceed the current value of the
assets of such Plans allocable to such benefit liabilities, or (d) permit any
unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA
allocable to such Person or its ERISA Affiliates.
7.1.20 Salaries; Bonuses. During any of its Fiscal Years, pay annual
-----------------
compensation including, without limitation, salaries, bonuses (except as
provided below) and consulting fees, to Borrower's Stockholders in excess of the
sum of Three Hundred Thousand Dollars ($300,000) on a combined basis per each of
its Fiscal Years; provided that no compensation shall be paid to a Borrower's
Stockholder who ceases to be actively engaged in the Business of Company and
compensation shall be paid only to the extent reasonable; and provided further
the limitation on total compensation to Borrower's Stockholders shall not apply
to incentive compensation paid to Borrower's Stockholders actively engaged in
the Business of Company pursuant to a plan which has been adopted by the board
of directors of Company and has been approved by Lender, such approval not to be
unreasonably withheld.
7.1.21 Proxy Recognition. Recognize or give effect to any proxy given in
-----------------
violation of Borrower's Stockholders Pledge Agreement.
7.1.22 Capital Expenditures. Without Lender's prior written consent,
--------------------
make Capital Expenditures on a combined basis in any twelve (12) month period in
excess of Three Hundred Thousand Dollars ($300,000).
7.1.23 Limitation on Rental Payments. Become obligated, as lessee, under
-----------------------------
any Lease if, at the time of entering into such Lease and after giving effect
thereto, the aggregate rentals payable by Borrower and Company in any one fiscal
year under all Leases would exceed $300,000 plus 5% of Net Revenues for such
fiscal year; and for such purpose, "Net revenues" shall mean the net revenue of
Company and Borrower on a combined basis before deducting costs and expenses.
-47-
ARTICLE 8
---------
DEFAULT AND REMEDIES
--------------------
8.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an Event of Default under the Term Loan Documents:
8.1.1 Default in Payment. If Lender shall fail to receive when due
------------------
and payable, (a) any amount payable under the Term Loan Note or (b)
any other payment due under this Term Loan Agreement or any of the
other Term Loan Documents.
8.1.2 Breach of Covenants.
-------------------
(a) If Borrower shall fail to observe or perform any covenant
or agreement made by Borrower contained in Section 6.1, 6.2,
6.4, 6.5, 6.6, 6.7.1, 6.7.2, 6.8, 6.9, 6.10, 6.15, 6.16, 6.17,
6.18, 6.19, or 7.1; or
(b) If Borrower shall fail to observe or perform any covenant
or agreement (other than those referred to elsewhere in this
Section 8.1) made by Borrower in any of the Term Loan Documents
to which Borrower is a party, and such failure shall continue
unremedied (i) for a period of five (5) Business Days after
notice of such failure to Borrower in the case of any failure
which can be cured by the payment of money alone, or (ii) for a
period of twenty (20) Business Days after notice to Borrower in
the case of any other default or violation.
8.1.3 Breach of Warranty. If any representation or warranty which is
------------------
made by a Person other than Lender and is contained in the Term Loan
Documents or in any certificate furnished to Lender under the Term
Loan Documents by or on behalf of Borrower proves to be, in any
material adverse respect, false or misleading as of the date deemed
made.
8.1.4 Other Term Loan Documents. If an "Event of Default" occurs, as
-------------------------
the term may be defined herein or in the other Term Loan Documents.
8.1.5 Default Under Any Indebtedness. If(a) Borrower at any time
------------------------------
shall be in default (as principal or guarantor or other surety) in the
payment of any principal of or premium or interest on any Indebtedness
for Borrowed Money (other than Borrower's Obligations) beyond the
greater of (i) fifteen (15) days or (ii) the grace period, if any,
applicable thereto and the aggregate amount of such payments then in
default beyond such grace period shall exceed Twenty Thousand Dollars
($20,000) with respect to Borrower, or (b) any default shall occur in
respect of any issue of Indebtedness for Borrowed Money (other than
Borrower's Obligations) outstanding in a principal amount of at least
Twenty Thousand Dollars ($20,000) with respect to Borrower,or in
respect of any agreement or instrument relating to any such issue or
indebtedness for Borrowed Money,
-48-
and such default shall continue beyond the greater of (x) thirty (30) days or
(y) the grace period, if any, applicable thereto.
8.1.6. Bankruptcy, Etc.
----------------
(a) If Borrower shall (i) generally not be paying its debts as they
become due, (ii) file, or consent, by answer or otherwise, to the filing
against Borrower of a petition for relief or reorganization or arrangement
or any other petition in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the benefit of creditors, (iv)
consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers for Borrower or any of Borrower's Collateral,
(v) be adjudicated insolvent, or (vi) take corporate action for the
purpose of any of the foregoing.
(b) If a petition for relief or reorganization, arrangement or
liquidation, or any other petition in bankruptcy or insolvency, or the
appointment of a custodian, receiver, trustee or other officer with similar
powers under the laws of any jurisdiction is filed against Borrower or any
of Borrower's Collateral or a custodian, receiver, trustee or other officer
with similar powers is appointed for any of Borrower's Collateral, and such
proceeding is not dismissed and/or appointment vacated within ninety (90)
days thereafter.
8.1.7 Judgements. If there shall exist a final judgement or award against
----------
Borrower which shall have been outstanding for a period of thirty (30) days or
more from the date of the entry thereof and shall not have been discharged in
full or stayed pending appeal provided that the aggregate amount of all such
judgements and awards exceeds Twenty Thousand Dollars ($20,000) for Borrower.
8.1.8 Impairment of Licenses. If (a) any Governmental Body shall (i)
----------------------
revoke, terminate, suspend or adversely modify any license, permit, approvals,
or trademark, service xxxx or trade name of Borrower, the continuation of which
is material to the continuation of Business, or (ii) commence proceedings to
suspend, revoke, terminate or adversely modify any such license, permit,
approvals, trademark, service xxxx, or trade name and such proceedings shall not
be dismissed or discharged within sixty (60) days, or (iii) schedule or conduct
a hearing on the renewal of any such license, permit, trademark, service xxxx or
trade name and the staff of the Governmental Body having jurisdiction over such
hearing issues a report recommending the termination, revocation, suspension or
material or adverse modification of such license, permit, approvals, trademark,
trade name, service xxxx or service name, (b) there shall exist any violation or
default in the performance of, or (c) an Operating Agreement shall cease to be
in full force and effect unless an event occurring under (a), (b) or (c) does
not have a Material Adverse Effect on Borrower.
-49-
8.1.9 Collateral. If any material portion of the collateral shall be
----------
seized or taken by a Governmental Body, or Borrower shall fail to maintain
the Security Interests and the priority of the Term Loan Documents as
against any Person, or the title and rights of Borrower or any surety to
any material portion of the Collateral shall have become the subject matter
of litigation which might, in the reasonable opinion of Lender, upon final
determination result in impairment or loss of the security provided by the
Term Loan Documents.
8.1.10 Plans. If an event or condition specified in subsection 6.3.13
-----
hereof shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions,
Borrower, Company or any of their respective ERISA Affiliates shall incur,
or, in the opinion of Lender, reasonably be likely to incur, a liability to
a Plan or the PBGC (or both) which, in the reasonable judgment of Lender,
would have a Material Adverse Effect on Borrower or Company.
8.1.11 Company or Surety Defaults. If any of the events enumerated in
--------------------------
subsection 8.1.2, 8.1.4, 8.1.5, 8.1.6, 8.1.7, 8.1.8 or 8.1.9 occurs with
respect to Company or any other surety (other than one of Borrower's
Stockholders) or any Collateral granted by such Person for the performance
of the Term Loan Obligations.
8.1.12 Material Adverse Effect. If any act or event has occurred or
-----------------------
circumstance exists which act, event or circumstance is no enumerated in
this Section 8.1 and has a Material Adverse Effect on Borrower or Company.
8.1.13 Revolver Loan. If any "Event of Default" shall occur, as that
-------------
term is defined under any of the Revolver Loan Documents.
8.1.14 Change of Control. If less than fifty-one percent (51%) of the
-----------------
Borrower's Stock ceases to be owned by one or more of the Borrower's
Stockholders.
8.2 Acceleration of Borrower's Obligations.
--------------------------------------
8.2.1 Upon the occurrence of any Event of Default described in clauses
(ii), (iii), (iv) and (v) of subsection 8.1.5(a) or in 8.1.5(b), all of the
Term Loan Obligations at that time outstanding automatically shall mature
and become due and payable in full.
8.2.2 Upon the occurrence of any other Event of Default not described
in subsection 8.2.1, Lender, at any time (unless such Event of Default
shall have been waived in writing or remedied), at its option, without
further notice or demand, may declare all of the Term Loan Obligations due
and payable.
8.2.3 If the Term Obligations are accelerated pursuant to either
subsection 8.2.1 or 8.2.2, the Term Loan Obligation immediately shall
-50-
mature and become due and payable, all without presentment, demand, protest
or notice, all of which hereby are waived.
8.3 Remedies on Default. In addition to acceleration under paragraph
-------------------
8.2, upon the occurrence of an Event of Default, Lender, at its option, may:
8.3.1 Enforcement of Security Interests. Enforce its rights and
---------------------------------
remedies under the Term Loan Documents in accordance with their respective
terms.
8.3.2 Receiver. Have a receiver appointed for Borrower or its
--------
Property.
8.3.3 Possession of Collateral. Without further notice or demand and
------------------------
without legal process, take possession of the Collateral wherever found
and, for this purpose, enter upon any property occupied by or in the
control of Borrower; and Borrower, upon demand by Lender, shall at its sole
cost and expense assemble or cause the Collateral to be assembled and
deliver or cause the Collateral to be delivered to Lender or to a place
designated by Lender that is reasonably convenient to Borrower and Lender.
8.3.4 Sale of Collateral. After notice to Borrower, sell all or any
------------------
portion of the Collateral at public or private sale either with or without
having such Collateral at the place of sale.
8.3.5 Other Remedies. Enforce any of the other rights or remedies
--------------
accorded to Lender at equity or law, by virtue of statute (including,
without limitation, the UCC) or otherwise.
8.4 No Obligation to Preserve. Borrower agrees that Lender has no
-------------------------
obligation to preserve any Collateral for the benefit of any Person.
8.5 Sale. Any notice of sale or other disposition of the Collateral given
----
not less than ten (10) Business Days prior to such proposed action in connection
with the exerciser of Lender's rights and remedies shall constitute commercially
reasonable and fair notice of such action. For such purpose, notice of public
sale describing the Collateral to be sold in general non-specific terms and
published once no later than ten (10) business days prior to the public sale
shall be deemed commercially reasonable and fair notice of such public sale. No
notice of any public or private sale need be given if the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. Borrower expressly agrees that, with respect to any
disposition of accounts, instruments and general intangibles, it shall be
commercially reasonable for Lender to direct any prospective purchaser thereof
to ascertain directly from Borrower any and all information concerning such
Collateral, including, but not limited to, the terms of payment, aging and
delinquency, if any, the financial condition of any account debtor or other
obligor thereon or guarantor thereof, and any collateral therefor. Lender may
postpone or adjourn any such sale from time to time by announcement at the time
and place or sale stated on the notice of sale or by announcement of any
adjourned sale, without being required to give a further notice of sale. Lender,
-51-
so far as may be lawful, may purchase all or any part of the Collateral offered
at any sale made in the enforcement of Lender's rights hereunder. Any such
sale may be for cash or, unless prohibited by applicable law, upon such credit
or installment as Lender may determine. The net proceeds of such sale shall be
credited to the Obligations only when such proceeds are actually received by
Lender in good current funds.
8.6 Application of Funds. Any funds received by Lender pursuant to the
--------------------
exercise of any rights accorded to Lender pursuant to, or by the operation of
any of the terms of, any of the Term Loan Documents, including, without
limitation, insurance proceeds, condemnation proceeds or proceeds from the sale
of Collateral, shall be applied by Lender in the following order of priority:
8.6.1 Expenses. First, to the payment of (a) all fees and expenses,
--------
including, without limitation, court costs, fees of appraisers, title
charges, costs of maintaining and preserving the Collateral, costs of sale,
and all other costs incurred by Lender in exercising any rights accorded to
Lender pursuant to the Credit Facilities Documents or by applicable law,
including, without limitation, attorneys' fees, and (b) all Liens superior
to the Liens of Lender except such superior Liens subject to which any
sale of the Collateral may have been made;
8.6.2 Obligations. Next, to the payment of the remaining portion of
-----------
Obligations, including, without limitation, the unpaid balance of the Fees,
in such order and manner as Lender may determine; and
8.6.3 Surplus. Any surplus, to the Person or Persons entitled
-------
thereto.
Borrower shall be liable for any deficiency remaining after application of such
proceeds of the Collateral to the Obligations.
8.7 Lender's Right to Perform. Lender may, at its option, and without
-------------------------
any obligation to do so, pay, perform and discharge any and all obligations
(including, without limitation, the Borrower's Obligations under Section 6.7.1)
agreed to be paid or performed in the Term Loan Documents by Borrower or any
surety for the performance of the Borrower's Obligations if such Person has
failed to do so and either (a) an Event of Default exists or (b) Lender in its
judgment deems such action necessary to protect any of the Collateral or its
value. For such purposes, Lender may use the proceeds of the Collateral. All
amounts expended by Lender is so doing or in exercising any of its remedies
following an Event of Default shall become part of the Term Loan Obligations,
shall be immediately due and payable by Borrower to Lender upon demand, and
shall bear interest at the Default Rate from the dates of such expenditure until
paid.
ARTICLE 9
---------
EXPENSES AND INDEMNITY
----------------------
9.1 Attorneys' Fees and Other Fees and Expenses. Whether or not any of
-------------------------------------------
the transactions contemplated by this Term Loan Agreement shall be consummated,
-52-
Borrower agrees to pay to Lender on demand all reasonable expenses incurred by
Lender in connection with the transactions contemplated hereby (including,
without limitation, any appraisal fees, title insurance premiums and recording
charges) and in connection with any amendments, modifications or waivers
(whether or not the same become effective) under or in respect of any of the
Term Loan Documents, including, without limitation:
9.1.1 Fees and Expenses for Preparation of Term Loan Documents. All
--------------------------------------------------------
expenses, disbursements and attorneys' fees (including, without limitation,
charges for required lien searches, reproduction of documents, long
distance telephone calls and overnight express carriers) of special counsel
and other counsel retained by Lender in connection with the preparation and
negotiation of any of the Term Loan Documents or any amendments,
modifications or waivers hereto or thereto (whether or not the same become
effective).
9.1.2 Fees and Expenses in Enforcement of Rights or Defense of Term
-------------------------------------------------------------
Loan Documents. Any expenses or other costs, including attorneys' fees and
--------------
expert witness fees, incurred by Lender in connection with the enforcement
or collection against Borrower of any provision of any of the Term Loan
Documents, and in connection with or arising out of any litigation,
investigation or proceeding instituted by any Governmental Body or any
other Person with respect to any of the Term Loan Documents, whether or not
suit is instituted, including, without limitation, such costs or expenses
arising from the enforcement or collection against any Obligor of any
provision of any of the Term Loan Documents in any state or federal
bankruptcy or reorganization proceeding.
9.2 Indemnity. Borrower agrees to indemnify and save Lender harmless
---------
to and from the following:
9.2.1 Brokerage Fees. The fees, if any, of brokers and finders.
--------------
9.2.2 Securities Violations, Matters Relating to Bankruptcy. Any loss,
-----------------------------------------------------
cost, liability, damage or expense (including attorneys' fees) incurred by
Lender in investigating, preparing for, defending against, or providing
evidence, producing documents or taking other action in respect of any
commenced or threatened litigation, administrative proceeding, suit
instituted by any creditors of Borrower or investigation under any federal
securities law, the Bankruptcy Code, any relevant state corporate statute
or any other securities law, bankruptcy law or law affecting creditors
generally of any jurisdiction, or any regulation pertaining to any of the
foregoing, or at common law or otherwise, relating, directly or indirectly,
to the transactions contemplated by the Term Loan Documents, except that
nothing herein shall require Borrower to indemnify and save Lender harmless
from liability for losses, costs, damages or expenses, the sole and
proximate cause of which is (a) Lender's own gross negligence or willful
misconduct or (b) Lender's violation of its corporate charter or by-laws or
of laws or regulations applicable to Lender.
-53-
9.2.3 Operation of Collateral; Joint Venturers. Any loss, cost,
----------------------------------------
liability, damage or expense (including attorneys' fees) incurred in
connection with the ownership, operation or maintenance of the Collateral,
the construction of Lender and Borrower as having the relationship of joint
venturers or partners or the determination that Lender or Borrower has
acted as agent for the other.
9.2.4 Environmental Indemnity. Any and all claims, losses, damages,
-----------------------
response costs, clean-up costs and expenses suffered and/or incurred at any
time by Lender arising out of or in any way relating to the existence at
any time of any Hazardous Materials in, on, under, at, transported to or
from, or used in the construction and/or renovation of, any of the Real
Property or Leasehold Property, and/or the failure of Borrower to perform
its obligations and covenants hereunder with respect to environmental
matters, including, but not limited: (a) claims of any Persons for damages,
penalties, response costs, clean-up costs, injunctive or other relief, (b)
costs of removal and restoration, including fees of attorneys and experts,
and costs of reporting the existence of Hazardous Materials to any
Governmental Body, and (c) any expenses or obligations, including
attorneys' fees and expert witness fees, incurred at, before and after any
trial or other proceeding before any Governmental Body or appeal therefrom
whether or not taxable as costs, including, without limitation, witness
fees, deposition costs, copying and telephone charges and other expenses,
all of which shall be paid by Borrower to Lender when incurred by Lender.
ARTICLE 10
----------
MISCELLANEOUS
-------------
10.1 Notices. All notices, requests or demands required or permitted to be
-------
given under the Term Loan Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business Day
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, and addressed as shown below, or to
such other address as the party being notified may have requested in writing to
the other party. Written notice may be given by telecopy to the telecopier
number shown below or to such other number as the party being notified may have
requested in writing to the other party, provided that such notice shall not be
deemed effective unless it is confirmed within twenty-four (24) hours by hand
delivery, courier delivery or mailing of a copy of such notice in accordance
with the requirements set forth above.
-54-
If to Borrower: CPS Acquisition Corp.
c/o CPS Systems, Inc.
0000 Xxxxxxxx Xx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxx
Telecopy No.: (000) 000-0000
If to Lender: Greyhound Financial Corporation
Dial Corporate Center
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Vice-President Law
Telecopy No.: (000) 000-0000
Greyhound Financial Corporation
000 Xx. Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Portfolio Manager
Telecopy No.: (000) 000-0000
10.2 Survival of Term Loan Agreement; Indemnities. All covenants,
--------------------------------------------
agreements, representations and warranties made in the Term Loan Documents and
in the certificates delivered pursuant hereto shall survive the making by Lender
of the Term Loan and the execution and delivery to Lender of the Term Loan Note
and of all other Term Loan Documents and shall continue in full force and effect
so long as any of Obligations remain outstanding, unperformed or unpaid.
Notwithstanding the repayment of all amounts due under the Term Loan Documents,
the cancellation of the Notes and the release and/or cancellation of any and all
of the Term Loan Documents or the foreclosure of any Liens on the Collateral,
the obligations of Borrower to indemnify Lender with respect to the expenses,
damages, losses, costs and liabilities described in Section 9.2 shall survive
until all applicable statute of limitations periods with respect to actions
which may be brought against Lender have run.
10.3 Further Assurance. Borrower shall execute and deliver to Lender,
-----------------
prior to or concurrently with its execution and delivery of this Term Loan
Agreement and at any time thereafter at the request of Lender, all financing
statements, continuation financing statements, fixture filings, security
agreements, chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Lender
may reasonably request, in form satisfactory to Lender, to perfect and continue
perfected the Security Interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Term Loan Documents.
10.4 Taxes and Fees. Should any tax (other than taxes based upon the net
--------------
income of Lender), recording or filing fees become payable in respect of any of
the Term Loan Documents, or any amendment, modification or supplement thereof,
Borrower agrees to pay the same to Lender on demand, together with any interest
or penalties thereon attributable to any delay by Borrower in meeting Lender's
demand, and agrees to hold Lender harmless with respect thereto.
-55-
10.5 Serverability. In the event that any provision of any Term Loan
-------------
Document is deemed to be invalid by reason of the operation of any law, or by
reason of the interpretation placed thereon by any court or other Governmental
Body, as applicable, such Term Loan Document shall be construed as not
containing such provision and the invalidity of such provision shall not affect
the validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect. In lieu of each such unenforceable provision there shall be added
automatically as a part of such Term Loan Document, a provision that is legal,
valid and enforceable and is in similar in terms to such unenforceable
provisions as may be possible.
10.6 Waiver. No delay on the part of Lender in exercising any right,
------
power or privilege hereunder shall operate as a waiver thereof, and no single
or partial exercise of any right, power or privilege hereunder shall preclude
other or further exercise thereof, or be deemed to establish a custom or course
of dealing or performance between the parties hereto, or preclude the exercise
of any other right, power or privilege.
10.7 Modification of Term Loan Documents. No modification or waiver of
-----------------------------------
any provision of any of the Term Loan Documents shall be effective unless the
same shall be in writing and executed by the Person sought to be charged with
the effect thereof, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
10.8 Captions. The headings in this Term Loan Agreement are for purposes
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
10.9 Successors and Assigns. This Term Loan Agreement shall be binding
----------------------
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided, however, that neither
this Term Loan Agreement nor any rights or obligations hereunder shall be
assignable by Borrower without the prior express written consent of Lender, and
any purported assignment made in contravention hereof shall be void. No standard
of reasonableness shall attach to Lender's discretion in consenting or not
consenting to any assignment.
10.10 Remedies Cumulative. All rights and remedies of Lender pursuant to
-------------------
this Term Loan Agreement, any other Term Loan Documents or otherwise, shall be
cumulative and non-exclusive, and may be exercised singularly or concurrently.
Lender shall not be required to prosecute collection, enforcement or other
remedies against Borrower before proceeding to enforce or resort to any
Collateral.
10.11 Entire Agreement; Conflict. This Term Loan Agreement and the other
--------------------------
Term Loan Documents, all executed prior or pursuant hereto, constitute the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby or thereby and supersede any prior agreements, whether
written or oral, relating to the subject matter hereof. In the event of a
conflict between the terms and conditions set forth in one Term Loan Document
and the terms and conditions set forth in any other Term Loan Document, the
provisions imposing the
-56-
greatest obligation upon Borrower, Company or other sureties for the Term Loan
Obligations and granting the most expansive rights to Lender shall control.
10.12 Participation. Lender shall have the right without the consent of or
-------------
notice to Borrower to grant participating interests in the Term Loan. If
Borrower receives notice from Lender of the grant of a participation interest,
Borrower shall comply with any request set forth in such notice as to the
payment directly to the participant of such participant's proportionate share of
payments due from Borrower with respect to the Term Loan.
10.13 Joint and Several Liability. Any obligations of more than one party
---------------------------
hereunder, including, without limitation, any obligations of Borrower, shall be
joint and several obligations of such parties.
10.14 Choice of Law; Jurisdiction; Venue; Waiver of Jury Trial.
--------------------------------------------------------
10.14.1 THIS TERM LOAN AGREEMENT AND THE OTHER TERM LOAN DOCUMENTS
AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES THERETO SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF ARIZONA AND TO THE EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS
OF THE UNITED STATES.
10.14.2 BORROWER: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA,
MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF
SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO THIS TERM
LOAN AGREEMENT OR THE SUBJECT MATTER HEREOF OR, IF LENDER INITIATES SUCH
ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION AND THE CHOICE
OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES
NOT TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT,
ACTION OR PROCEEDING ANY CLAIM THAT BORROWER IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. BORROWER HEREBY WAIVERS THE RIGHT TO COLLATERALLY
ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
10.14.3 LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE TERM LOAN DOCUMENTS WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE PARTIES AGREE
THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A
JUDGE SITTING WITHOUT A JURY, AND BORROWER HEREBY KNOWINGLY AND VOLUNTARILY
WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.
10.14.4 ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH ARE A
MATERIAL INDUCEMENT FOR LENDER'S MAKING THE TERM LOAN TO BORROWER.
[Borrower's initials [SIGNATURE ILLEGIBLE]]
-------------------
-57-
10.15 WRITTEN CREDIT AGREEMENT. THIS TERM LOAN AGREEMENT AND THE OTHER TERM
------------------------
LOAN DOCUMENTS HEREIN COLLECTIVELY CONSTITUTE THE WRITTEN CREDIT AGREEMENT WHICH
IS THE COMPLETE AND FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN BORROWER
AND LENDER WITH REGARD TO THE EXTENSION OF CREDIT AND/OR FINANCIAL ACCOMMODATION
REFERRED TO HEREIN AS THE SAME EXISTS TODAY AND SUCH WRITTEN CREDIT AGREEMENT
MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL OR WRITTEN CREDIT
AGREEMENT OR OF ANY CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWER AND
LENDER. BORROWER AGREES THAT ALL NON-STANDARD TERMS OF THE CREDIT AGREEMENT
BETWEEN BORROWER AND LENDER WITH RESPECT TO THE EXTENSION OF CREDIT REFERRED TO
HEREIN AND ALL PRIOR ORAL CREDIT AGREEMENTS AND CONTEMPORANEOUS ORAL AND WRITTEN
CREDIT AGREEMENTS BETWEEN THEM WITH RESPECT TO THE EXTENSION OF CREDIT REFERRED
TO HEREIN ARE SUFFICIENTLY SET FORTH HEREIN AND IN THE OTHER TERM LOAN
DOCUMENTS, WITHOUT EXCEPTION. BY SIGNING AND/OR ACCEPTING THIS TERM LOAN
AGREEMENT, BORROWER AND LENDER AFFIRM THAT NO UNWRITTEN ORAL CREDIT AGREEMENT
BETWEEN BORROWER AND LENDER WITH REGARD TO THE AFORESAID EXTENSION OF CREDIT OR
OTHER FINANCIAL ACCOMMODATION EXISTS.
10.16 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY
---------------
BORROWER AND THE OTHER OBLIGORS OF THE OBLIGATIONS SET FORTH IN THIS TERM LOAN
AGREEMENT AND THE OTHER TERM LOAN DOCUMENTS.
10.17 COUNTERPARTS. This Term Loan Agreement may be executed by the parties
------------
hereto in several counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same agreement.
10.18 SURETYSHIP RIGHTS AND DEFENSES. To the extent that any of the
------------------------------
Security Documents secures the Obligations of Company, Borrower hereby agrees
that all of its agreements set forth in the Revolver Loan Guaranty with respect
to suretyship rights and defenses by virtue of its status as a guarantor are and
shall be applicable to all suretyship rights and defenses Borrower may have by
virtue of it being a surety in any other capacity for the Obligations of
Company.
-58-
IN WITNESS WHEREOF, this Term Loan Agreement has been executed and
delivered by each of the parties hereto by a duly authorized officer of each
such party on the date first set forth above.
LENDER: GREYHOUND FINANCIAL CORPORATION, a
Delaware corporation
By:/s/Xxxxxxxx Xxxxxx
--------------------------------
Xxxxxxxx Xxxxxx, Vice-President
CPS ACQUISITION CORP., a Georgia
corporation
By:/s/Xxxx X. Xxxx
--------------------------------
Xxxx X.Xxxx, President
-59-
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Schedule 1.1 (Borrower's Stockholders)
Schedule 1.1 (Borrower's Warrantholders)
Schedule 1.1 (Leases)
Schedule 1.1 (Intellectual Property)
Schedule 1.1 (Existing Operating Agreements)
Schedule 5.3.1 (Liens on Borrower's Stock)
Schedule 5.3.2 (Other Restrictions on Borrower's Stock)
Schedule 5.3.3 (Subsidiaries of Borrower)
Schedule 5.3.4 (Lien's on Company's Stock)
Schedule 5.3.6 (Subsidiaries of Company)
Schedule 5.6.2 (Location of Borrower's Goods and Offices)
Schedule 5.8.1 (Borrower's Financial Statements)
Schedule 5.9 (Litigation)
Schedule 5.19 (Operating Agreements)
Schedule 6.18 (Source Codes)
Exhibit 1.1 (IBM Agreement)
Exhibit 2.3.1 (Uses of Funds)
Exhibit 4.2.5 (Request for Advance, Certification and Disbursement
Instructions)
Exhibit 5.3.1 (Capitalization of Borrower)
Exhibit 5.3.4 (Capitalization of Company)
Exhibit 6.3.3 (Certificate of Chief Financial Officer)
Exhibit 6.7.2 (Assignment of Life Insurance)
-60-
SCHEDULE 1.1
------------
(BORROWER'S STOCKHOLDERS)
Xxxx X. Xxxx, Xxxxxx X. Courdier, Xxxxx X. Xxxxxx, G. Xxxx Xxxxx, and Xxxxx X.
Xxxxxxx, Xx.
SCHEDULE 1.1
------------
(BORROWER'S WARRANTHOLDERS)
Xxxxxxx Xxxxxx Mezzanine Fund, L.P. and Xxxxxxxx Xxxxxxx & Company, Inc.
SCHEDULE 1.1
------------
(LEASES)
1. Office Lease dated April 30, 1991 between Sovereign Center Company and
Company for lease of office at 0000 Xxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx. Now on a month-to-month basis.
2. Lease Agreement dated July 1993 between West Texas Investors #103 and
Company for lease of office at 0000 - 00xx Xxxxxx, Xxxxxxx, Xxxxx. Now on a
month to-month basis.
3. Lease Agreement dated May 1, 1992, between Life and Casualty Insurance
Company and Company for lease of xxxxxx xx 000 Xxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxx. Expiration: 12-31-94.
4. Lease Agreement dated February 18, 1990, between Aetna Life Insurance
Company and Company for lease of principal executive offices at 0000
Xxxxxxxx, Xxxxx 000, Xxxxxx. Expiration: April 30, 1995.
5. Lease dated October 18, 1990 between Kroger Properties and Company for
office lease at 0000 X. 000, Xxxx Xxxxxx, Xxxxx, XX. Expiration: November
30, 1994 .
6. Agreement to Lease dated February 18, 1994 between Spectrum Real Estate
Service, Inc. and Company for office lease at 0000 Xxxx xxxxxx, Xxxxx, XX.
Expiration: April 30, 1997.
7. Equipment Lease dated January 28, 1994 between Third Century Leasing and
Company for lease of three Mita copiers. Expiration: January 31, 1997.
8. Pitney Xxxxx Credit Corporation: Four equipment leases for postage meters
and scales.
SCHEDULE 1.1
------------
(INTELLECTUAL PROPERTY)
1. Oklahoma trademark "INFOTRIEV".
2. Texas trademark or service xxxx "INFOTRIEV"
3. U.S. Trademark reg. no. 1288749 for "INFOTRIEV"
4. Copyright protection claimed on all Company Products and materials;
however, no copyrights have been registered.
SCHEDULE 1.1
(EXISTING OPERATING AGREEMENTS)
CPS BUSINESS SYSTEMS. INC.
OKLAHOMA SHERIFF SYSTEM
-----------------------
ITEM # DESCRIPTION ILF MLF MCA MSM IC ATH
------ ----------- --- --- --- --- -- ---
810370 Basic Law Enforcement System
15.000* po $7.500 $138 $37 $74 $50 5/6/8
w/ Uniform Crime Reporting (UCR) includes:
.General Offense System
.Employee/Security System
.Name File/Known Offenders
.Night-Emergency Listing
.Fingerprint/Single Fingerprint File
.Calls for Service
.Warrants System/Civil Process
.Method of Operations (MO File)
.Criminal History
.Arrests
Basic Law - Less than 15.000 pop. 5.000 138 37 74 50 5/6/8
810390 Field Interview System (FIR) 1.500 33 10 20 50 1/2/2.5
810400 Pawn Shop System 2.000 40 11 22 50 1/2.2.5
810360 Juvenile System with UCR Reporting 1.500 33 10 20 50 1/3/4
810410 Small Jail Management 3.750 83 22 44 50 6/8/12
(Book-in for under 60 inmates)
810411 Large Jail Management 5.100 115 31 62 50 6/8/12
810420 Small County Computer Aided 10.400 260 70 139 50 6/8/12
Dispatching (Population of
under 40.000 people)
810345 Property Room Management 1.100 25 10 20 50 1/2/3
810230 Bogus Checks 3.300 75 20 40 50 8/12/16
810270 Fleet/Equipment Management 5.000 118 32 64 50
NOTE: No training is provided by CPS Systems. DPS in Atlanta is the only
authorized training facility
For any IBM system, ADD 20% to the Initial License Fee.
February 11, 1991 Page 19-1
CPS BUSINESS SYSTEMS, INC.
Commercial Accounting
---------------------
ITEM # DESCRIPTION ILF MLF MCA MSM IC ATH
------ ----------- --- --- --- --- -- ---
500012 Integrated General Ledger with $2,200 $53 $15 $29 $50
Fixed Budget Reporting
500860 Financial Report Writer 500 13 10 20 50
500052 Intergrated Accounts Payable 1,700 43 12 23 50
500060 Accounts Receivables 2,500 63 17 35 50
(Open Items)
500061 Accounts Receivables 1,200 30 10 20 50
(Balance Forward)
500042 Intergrated Payroll 2,000 50 13 27 50
500043 After-the-Fact Payroll with 1,000 25 10 20 50
941's & W2's
500720 Depreciation (Tax & Book) 1,800 45 12 24 50
500112 Inventory by Warehouse 3,000 75 20 40 50
500022 Purchase Orders 3,000 75 20 40 50
500270 Fleet/Equipment Management 4,750 118 32 64 50
NOTE:
For any IBM system, ADD 20% to the Initial License Fee.
February 11, 1991 Page 20-1
CPS BUSINESS SYSTEMS, INC.
OIL AND GAS PRODUCERS
---------------------
ITEM # DESCRIPTION ILF MLF MCA MSM IC ATH
------ ----------- --- --- --- --- -- ---
600012 General Ledger with YTD $3,500 $58 $23 $46 $50
& Comparative Statements
600860 Financial Report Writer 500 13 10 20 50
600052 Accounts Payable 3,200 50 21 43 50
600570 Joint-Interest Billing 3,500 38 23 46 50
(Requires 600061 or 600060)
600061 Accounts Receivables 1,750 ?? 12 24 50
(Balance Forward)
600060 Accounts Receivables 3,000 75 20 40 50
(Open Item)
600580 Revenue Distribution 2,750 69 18 36 50
(Royal Payable)
600590 WPT Module (Rev. Dist.) 1,200 30 10 20 50
600600 Revenue Accounting with WPT
Module 3,500 88 23 46 50
600042 Payroll 3,000 75 20 40 50
600044 Expanded Drilling Payroll 3,000 75 20 40 50
600043 After-the-Fact Payroll with 500 13 10 20 50
941's and W2's
600710 Lease Reporting 2,400 60 16 32 50
600610 Production Cost Report 2,400 60 16 32 50
(8/8 Information)
600620 Reserves and Economics
Evaluation 3,000 75 20 40 50
NOTE:
For any IBM system, ADD 20% to the Initial License Fee.
February 11, 191 Page 20-2s
CPS BUSINESS SYSTEMS, INC.
OIL AND GAS PRODUCERS
---------------------
ITEM # DESCRIPTION ILF MLF MCA MSM IC ATH
------ ----------- --- --- --- --- -- ---
600630 Monthly Production Reporting $1,500 $38 $10 $20 $50
(P1 & P2)
600640 (Depletion Requires 600012) 2,400 60 16 32 50
600720 Depreciation (Tax & Book) 2,400 60 16 32 50
(Requires 600012)
600660 Authorization for Expenditures 1,500 38 10 20 50
600670 Basic Land Management System 3,500 88 23 46 50
600680 Delay Rentals (Requires 600670) 2,000 50 13 26 50
600690 Land Joint Billing 2,000 50 13 26 50
(Requires 600670 & 600680)
600700 Lease Equipment Inventory 2,400 60 16 32 50
600790 Production Accounting 3,500 88 23 46 50
(Run, Ticket, Gas, Water)
600870 Partnership Accounting 2,500 63 17 34 50
600022 Purchase Orders 3,000 75 20 40 50
600270 Fleet/Equipment Management 4,750 118 32 64 50
NOTE:
For any IBM system, ADD 20% to the Initial License Fee.
February 11, 1991 Page 20-2b
SCHEDULE 5.3.1
--------------
(LIENS ON BORROWER'S STOCK)
NONE
SCHEDULE 5.3.2
--------------
(OTHER RESTRICTIONS ON BORROWER'S STOCK)
Subordination Pledge to Xxxxxxx Xxxxxx Mezzanine Fund, L.P.
SCHEDULE 5.3.3
--------------
(SUBSIDIARIES OF BORROWER)
CPS Systems, Inc. is a subsidiary of CPS Acquisition Corp. until those entities
are merged.
SCHEDULE 5.3.4
--------------
(LIENS ON COMPANY'S STOCK)
Pledge of 7,132 shares of CPS Systems, Inc. treasury stock to secure
indebtedness to Xxxx X. Xxxxxx and Xxxxxx X. Xxxxxx, which pledge will be
released at closing.
SCHEDULE 5.3.6
--------------
(SUBSIDIARIES OF COMPANY)
NONE
SCHEDULE 5.6.2
LOCATION OF GOODS AND OFFICES
CPS OFFICES
CPS - DALLAS (000) 000-0000
0000 Xxxxxxxx, Xxxxx 000 AFTER HOURS (000) 000-0000
Xxxxxx, XX 00000 TOLL FREE (000) 000-0000
FAX (000) 000-0000
CPS - HOUSTON (000) 000-0000
0000 Xxxx Xxxx Xx., Xxxxx 000 FAX (000) 000-0000
Xxxxxxx, XX 00000
CPS - LUBBOCK (806) 791-2406
0000 00Xx Xxxxxx, Xxxxx X
Xxxxxxx, XX 00000
CPS - OKLAHOMA CITY (000) 000-0000
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
CPS - SAN ANTONIO (210) 366-0263
000 Xxxx Xx., Xxxxx 000 FAX (000) 000-0000
Xxx Xxxxxxx, XX 00000
CPS - TAMPA (000) 000-0000
0000 Xxxx Xxxxxx, Xxxxx 000 TOLL FREE (000) 000-0000
Xxxxx, XX 00000 FAX (000) 000-0000
CPS - TULSA (918) 665-6755
0000 Xxxxx 000xx Xxx., Xxxxx 000 AFTER HOURS (000) 000-0000
Xxxxx, XX 00000 OR (000) 000-0000
FAX (000) 000-0000
CPS - WICHITA FALLS XXX XXXXXX (000) 000-0000
3508 XxXxxx, Suite D XXXX XXXX (000) 000-0000
XXXXXXX XXXXX, XX 00000 FAX (000) 000-0000
SCHEDULE 5.8.1
--------------
(BORROWER FINANCIAL STATEMENTS)
Audited year end financial statements for CPS Systems, Inc. for years 1990
through 1993 and unaudited interim 1994 financial statement for CPS Systems,
Inc. through November 30, 1994.
SCHEDULE 5.9
------------
(LITIGATION)
A complaint alleging discrimination based on sex was filed in Tampa,
Florida, with the EEOC by Xxx Xxxxx. Xxx. Xxxxx was terminated shortly following
her return from pregnancy leave, based on her substandard performance before and
after the leave. Such finding was upheld by the investigator for the Florida
Human Relations Department; however, the Department issued a conflicting finding
of just cause for Xxx. Xxxxx'x complaint. No suit has been filed by Xxx. Xxxxx,
and efforts toward settlement have been unsuccessful.
A charge of discrimination based on sex and sexual harassment was filed
September 14, 1994, with the EEOC in Dallas by Xxxxx X. Xxxxxxx. Xx. Xxxxxxx
alleged that he was harassed on the day she resigned. The Company strongly deny
the claim. No further action has been taken by any party on such complaint.
SCHEDULE 5.19
-------------
(OPERATING AGREEMENTS)
NONE
SCHEDULE 6.18
-------------
(SOURCE CODES)
Source Codes of current products being marketed by Company.
EXHIBIT 1.1
(IBM AGREEMENT)
You agree to pay amount equal to any applicable taxes resulting from any
transaction under this Agreement. This does not include taxes based on our
net income. You are responsible for personal property taxes for each
Product from the date we ship it to you or the End User.
You agree to provide us with valid reseller-exemption documentation for
each applicable taxing jurisdiction. Otherwise, we will charge you all
applicable state and local taxes or duties. You agree to notify us promptly
if this documentation is revoked or modified. You are liable for any claims
or assessments that result from any taxing jurisdiction refusing to
recognize your exemption.
FAILURE TO PAY ANY AMOUNTS DUE
If your account becomes delinquent, you agree that we may do one or more of
the following:
1. impose a finance change, up to the maximum permitted by law, on the
delinquent portion of, the balance due:
2. repossess any Products if we do so, you agree to pay all expenses
associated with repossession and collection, including reasonable
attorney's fees. You agree to make the Products available to us at
a site that is mutually convenient:
3. terminate this Agreement: or
4. pursue any other remedy available at law.
In addition, if your account with any of our subsidiaries becomes
delinquent, we may terminate this Agreement.
12. TITLE
As an Aggregator, when you order a Machine from us, we do not transfer
title to you. As any other remarkater, when you order a Machine, we
transfer title to you when the Machine is shipped by us or your Aggregator.
Any prior transfer of title to a Machine to you is void from its inception
when 1) it is accepted as a returned Machine or 2) you deliver it under the
IBM Employee Sales Program.
If an End User orders a Machine from us (and not from you) and we pay you a
fee to deliver that Machine, we transfer title to the End User (and not to
you) when you deliver the Machine.
We do not transfer title to Programs.
PURCHASE MONEY SECURITY INTEREST
We reserve a purchase money security interest in a Machine, and you grant
us a purchase money security interest in your proceeds from the sale of,
and your accounts receivable for, a Product, until we receive the amounts
due. For a feature, conversion, or upgrade involving the removal of parts
that become our property, we reserve the security interest until we receive
the amounts due and the removed parts. You agree to sign an appropriate
document (for example, a "UCC-1") to permit us to perfect our purchase
money security interest.
END USER LEASE FINANCING
If an End User obtain a Lease for a Machine for legitimate financing
purposes, you may transfer title to the Machine to the lessor. You may
finance End Users, Product acquisitions.
13. RISK OF LOSS
We bear the risk of loss for a Product until its initial delivery from us.
EXHIBIT 2.3.1
-------------
(USE OF FUNDS)
1. The proceeds of the Term Loan will be used by CPS Acquisition Corp. to
finance its acquisition of CPS Systems, Inc.
2. The proceeds of the Revolver Loan will be used for working capital by CPS
Systems, Inc.
EXHIBIT 4.2.5
(REQUEST FOR ADVANCE, CERTIFICATION AND
DISBURSEMENT INSTRUCTIONS)
REQUEST FOR ADVANCE, CERTIFICATION
AND DISBURSEMENT INSTRUCTIONS
1. The undersigned ("Borrower") requests Greyhound Financial Corporation
("Lender") to disburse loan proceeds in the amount of One Million Five Hundred
Thousand Dollars ($1,500,000) upon receipt hereof, pursuant to the Term Loan and
Security Agreement between such parties dated as of December 30, 1994 (with all
amendments, "Agreement").
2. Borrower certifies that all conditions required by the Agreement to be
satisfied prior to the requested disbursement have been satisfied.
3. Borrower hereby instructs Lender to disburse the advance as follows:
(i) Amount: $1,500,000
Name: CPS Shareholders Clearing Account
Bank: Comerica Bank - Texas
Bank Address:__________________________
Notify Xxxxxx Xxx Xxxxxx 890-4660 upon
arrival
ABA Routing No.: 000000000
Credit:________________________________
Account No. 0000-00000-0
(ii) Amount: $_____________________
Name:__________________________________
Bank:__________________________________
Bank Address:__________________________
_______________________________________
ABA Routing No.:_______________________
Credit:________________________________
Account No.:___________________________
(iii) Amount: $_____________________
Name:__________________________________
Bank:__________________________________
Bank Address:__________________________
_______________________________________
ABA Routing No.:_______________________
Credit:________________________________
Account No.:___________________________
(iv) Amount: $_____________________
Name:__________________________________
Bank:__________________________________
Bank Address:__________________________
_______________________________________
ABA Routing No.:_______________________
Credit:________________________________
Account No.: ______________________
4. Borrower acknowledges and agrees that, even though all or a portion
of the disbursements described above are to be directed to entities other than
Borrower, receipt of such disbursements by such payees shall constitute receipt
of the undersigned.
5. Except as otherwise defined herein otherwise requires, all capitalized
terms used meaning given to them in the Agreement.
DATED: December 30, 1994
BORROWER CPS ACQUISITION CORP.,
a Georgia corporation
By: /s/ Xxxx X. Xxxx
---------------------------
Type/Print Name: Xxxx X. Xxxx
Title: President
-2-
EXHIBIT 5.3.1
-------------
(CAPITALIZATION OF BORROWER)
SHAREHOLDER NUMBER OF SHARES
------------ ----------------
Xxxx X. Xxxx 2918
CPS Systems, Inc.
0000 Xxxxxxxx
Xxxxx 000
Xxxxxx, Xx 00000
Xxx X. Xxxxxxx 0000
Xxxxxxxxx
#00 XXXX Xxxx Xx.
Xxxxxxx, Xxxxxx
Xxxxxxx XX00XX
Xxxxx X. Xxxxxx 2918
00 Xxxxxx Xxxx
Xxxxxx, Xxxxxxx
X00XX
Xxxxx X. Xxxxxxx 623
CPS Systems, Inc.
0000 Xxxxxxxx
Xxxxx 000
Xxxxxx, Xx 00000
G. Xxxx Xxxxx 000
Xxxxx, Xxxx & Xxxxxxxx
0000 Xxxxxxxxxx Xxx
Xxxxx 0000
Xxxxxxx, XX 00000
EXHIBIT 5.3.4(POST MERGER)
-------------
(CAPITALIZATION OF COMPANY)
SHAREHOLDER NUMBER OF SHARES
------------ ----------------
Xxxx X. Xxxx 2918
CPS Systems, Inc.
0000 Xxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Xxx X. Xxxxxxx 0000
Xxxxxxxxx
#00 XXXX Xxxx Xx.
Xxxxxxx, Xxxxxx
Xxxxxxx XX00XX
Xxxxx X. Xxxxxx 2918
00 Xxxxxx Xxxx
Xxxxxx, Xxxxxxx
X00XX
Xxxxx X. Xxxxxxx 623
CPS Systems, Inc.
0000 Xxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
G. Xxxx Xxxxx 000
Xxxxx, Xxxx & Xxxxxxxx
0000 Xxxxxxxxxx Xxx
Xxxxx 0000
Xxxxxxx, XX 00000
EXHIBIT 6.3.3
-------------
(TO BE PROVIDED POST-CLOSING)
EXHIBIT 6.7.2
-------------
(ASSIGNMENT OF LIFE INSURANCE)
To be on life insurer's form, subject to Lender's approval, which approval shall
not unreasonably be withheld.
