FINANCING AND SECURITY AGREEMENT
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THIS FINANCING AND SECURITY AGREEMENT (the "Agreement") is made this
day of October, 1996, by and among FORENSIC TECHNOLOGIES INTERNATIONAL 28th
CORPORATION, a Maryland corporation (the "Borrower"), the Subsidiary listed on
the signature page hereto, and NATIONSBANK, N.A., a national banking
association, its successors and assigns (the "Lender").
RECITALS
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A. The Borrower has applied to the Lender for a revolving credit
facility in the maximum principal amount of Ten Million Dollars ($10,000,000) to
be used by the Borrower primarily to support working capital needs and for
general corporate purposes, including, but not limited to, financing Bank
Financed Acquisitions (as hereinafter defined).
B. The Lender is willing to make the credit facility available to the
Borrower upon the terms and subject to the conditions hereinafter set forth.
AGREEMENTS
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NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, each Subsidiary and
the Lender hereby agree as follows:
I. DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
terms defined in the Preamble and Recitals hereto shall have the respective
meanings specified therein, and the following terms shall have the following
meanings:
"Account" individually and "Accounts" collectively mean all
presently existing or hereafter acquired or created accounts, accounts
receivable, contract rights, notes, drafts, instruments, acceptances, chattel
paper, leases and writings evidencing a monetary obligation or a security
interest in or a lease of goods, all rights to receive the payment of money or
other consideration under present or future contracts (including, without
limitation, all rights to receive payments under presently existing or hereafter
acquired or created letters of credit), or by virtue of merchandise sold or
leased, services rendered, loans and advances made or other considerations
given, by or set forth in or arising out of any present or future chattel paper,
note, draft, lease, acceptance, writing, bond, insurance policy, instrument,
document or general intangible, and all extensions and renewals of any thereof,
all rights under or arising out of present or future contracts, agreements or
general interest in merchandise which gave rise to any or all of the foregoing,
including all goods, all claims or causes of action now existing or hereafter
arising in connection with or under any agreement or document or by operation of
law
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or otherwise, all collateral security of any kind (including real property
mortgages) given by any person with respect to any of the foregoing and all
proceeds (cash and non-cash) of the foregoing.
"Affiliate" means, with respect to the Borrower, any Person,
directly or indirectly controlling, directly or indirectly controlled by, or
under direct or indirect common control with the Borrower or any Subsidiary, as
the case may be.
"Agreement" means this Financing and Security Agreement and
all amendments, modifications and supplements hereto which may from time to time
become effective in accordance with the provisions of Section 11.10 hereof.
"Assets" means, at any time, all assets that should, in
accordance with GAAP consistently applied, be classified as assets on a combined
balance sheet of the Borrower and its Subsidiaries.
"Bank Financed Acquisitions" shall have the meaning set forth
in Section 8.04 (b).
"Banking Day" shall mean any day that is not a Saturday,
Sunday or banking holiday in the State of Maryland
"Borrowing Base" means eighty percent (80%) of the Eligible
Billed Receivables and forty percent (40%) of the Eligible Unbilled Receivables.
"Collateral" shall mean all of the Borrower's Accounts,
chattel paper, documents and instruments (whether or not designated with initial
capital letters), as those terms are defined in the Uniform Commercial Code as
presently adopted and in effect in the State and shall also cover, without
limitation, (i) any and all property specifically included in those respective
terms in this Agreement or in the Financing Documents and (ii) all proceeds
(cash and non-cash, including, without limitation, insurance proceeds) of the
foregoing.
"Collection" means each check, draft, cash, money, instrument,
item, and other remittance in payment or on account of payment of the Accounts
or otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and
"Collections" means the collective reference to all of the foregoing.
"Commonly Controlled Entity" shall mean an entity, whether or
not incorporated, which is under common control with the Borrower within the
meaning of Section 414(b) or (c) of the Internal Revenue Code.
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"Current Assets" means at any date, the amount which, in
conformity with GAAP, would be set forth opposite the caption "total current
assets" (or any like caption) on a consolidated balance sheet of the Borrower
and its Subsidiaries.
"Current Liabilities" means at any date, the amount which, in
conformity with GAAP, would be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Current Ratio" means the ratio of (a) Current Assets to (b)
Current Liabilities, including, without, limitation, the unpaid principal
balance of the Revolving Loans outstanding at such time.
"Default" has the meaning described in Article IX.
"Default Rate" means the default rate of interest set forth in
the Note.
"Documents" means all documents and documents of title,
whether nor existing or hereafter acquired or created, and all proceeds (cash
and non-cash of the foregoing).
"EBITDA" means as to the Borrower and its Subsidiaries for any
period of determination thereof, the sum of (a) the net profit (or loss)
determined in accordance with GAAP consistently applied, plus (b) interest
expense and taxes for such period, plus (c) depreciation and amortization of
assets for such period.
"EBITDAR" means as to the Borrowers and its Subsidiaries for
any period of determination thereof, the sum of (a) the net profit (or loss)
determined in accordance with GAAP consistently applied, plus (b) interest
expense and taxes for such period, plus (c) depreciation and amortization of
assets for such period, plus (d) rent expense for such period.
"Eligible Billed Receivable" and "Eligible Billed Receivables"
mean, at any time of determination thereof, each Account which conforms and
continues to conform to the Eligibility Standards and which has been invoiced by
the Borrower.
"Eligible Unbilled Receivable" and "Eligible Unbilled
Receivables" mean, at any time of determination thereof, each Account which
conforms and continues to conform to the Eligibility Standards and which has not
been invoiced, but will be invoiced by the Borrower within the next billing
cycle.
"Eligibility Standards" means each account which conforms and
continues to conform to the following standards: (a) the Account arose from a
bona fide outright sale or lease of goods by the Borrower, or from services
performed by the Borrower, and (i) such goods have been delivered to the
appropriate account debtors or their respective designees, the Borrower has in
its possession shipping and delivery receipts evidencing such shipment and
delivery, no return,
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rejection or repossession has occurred, and such goods have been finally
accepted by the account debtor, or (ii) such services have been satisfactorily
completed and accepted by the appropriate account debtor; or (b) the Account is
a valid, legally enforceable obligation of the account debtor and requires no
further act on the part of the Borrower to make the Account payable by the
account debtor; (c) the Account is based upon an enforceable order or contract,
written or oral, for goods delivered or for services performed, and the same
were shipped, held, or performed in accordance with such order or contract; (d)
the title of the Borrower to the Account and, except as to the account debtor
and any creditor which finances the account debtor's purchase of such goods, to
any goods is absolute and is not subject to any prior assignment, claim, Lien,
or security interest, except Permitted Liens and Liens created by the account
debtors in connection with their interests in the goods, and the Borrower
otherwise has the full and unqualified right and power to assign and grant a
security interest in it to the Lender as security and collateral for the payment
of the Obligations; (e) the amount shown on the books of the Borrower and on any
invoice, certificate, schedule or statement delivered to the Lender is owing to
the Borrower and no partial payment has been received unless reflected with that
delivery; (f) the Account is not subject to any claim of reduction,
counterclaim, setoff, recoupment, or other defense in law or equity, or any
claim for credits, allowances, or adjustments by the account debtor because of
returned, inferior, or damaged goods or unsatisfactory services, or for any
other reason; (g) the account debtor has not returned or refused to retain, or
otherwise notified the Borrower of any dispute concerning, or claimed
nonconformity of, any of the goods or services from the sale of which the
Account arose; (h) the Account is not outstanding more than ninety (90) days
from the date of the invoice therefor; (i) the Account is not owing by any
account debtor for which the Lender has deemed fifty percent (50%) or more of
such account debtor's other Accounts due to the Borrower to be non-Eligible
Receivables; (j) the Account does not arise out of a contract with, or order
from, an account debtor that, by its terms, forbids or makes void or
unenforceable the assignment by the Borrower to the Lender of the Account
arising with respect thereto; (k) the account debtor is not a Subsidiary or
other Affiliate of the Borrower; (l) the account debtor is not incorporated in
or primarily conducting business in any jurisdiction located outside of the
United States of America; (m) the account debtor is not a foreign governmental
authority or agency; (n) the Borrower is not indebted in any manner to the
account debtor, with the exception of customary credits, adjustments and/or
discounts given to an account debtor by the Borrower in the ordinary course of
its business, (o) no bond has been issued or is contemplated with respect to the
goods or services furnished by the Borrower or with respect to the project or
contract for which those goods or services were furnished, and (p) the Lender in
the exercise of its sole and absolute discretion has not deemed the Account
ineligible because of uncertainty as to the creditworthiness of the account
debtor or because the Lender otherwise considers the collateral value thereof to
the Lender to be impaired or its ability to realize such value to be insecure.
In the event of any dispute, under the foregoing criteria, as to whether an
Account satisfies the Eligibility Standards, the decision of the Lender in the
exercise of its sole and absolute discretion shall control.
"Enforcement Costs" shall mean all expenses, charges, costs
and fees whatsoever (including, without limitation, reasonable outside
attorney's fees and expenses) of any nature
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whatsoever paid or incurred by or on behalf of the Lender in connection with (a)
the collection or enforcement of any or all of the Obligations, (b) the
preparation of or changes to this Agreement, the Note, the Security Documents
and/or any of the other Financing Documents, (c) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral,
including, without limitation, those sums paid or advanced, and costs and
expenses, more specifically described in Section 10.3, and (d) the monitoring,
administration, processing, servicing of any or all of the Obligations and/or
the Collateral.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" means an event which, with the giving of
notice or lapse of time, or both, could or would constitute a Default under the
provisions of this Agreement.
"Fees" means the fees described in Section 2.05 hereof.
"Financing Documents" means at any time collectively and
include this Agreement, the Note, the Security Documents, and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by the Borrower and/or any other Person, singly or
jointly with another Person or Persons, evidencing, securing, guarantying or in
connection with any of the Obligations and/or in connection with this Agreement,
any Note, any of the Security Documents, the Loan and/or any of the Obligations.
"Fixed Charge Coverage Ratio" means the ratio of (i) EBITDAR,
less cash dividends paid, to (ii) the sum of interest expense, plus scheduled
principal repayments on Indebtedness for Borrowed Money and capitalized leases,
plus rent expense, plus income tax expense for such period.
"Funded Debt" means for any period of determination thereof an
amount equal to the sum of senior debt, stockholder debt, subordinated debt and
the value of all capitalized leases, all as determined on a consolidated basis.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Materials" means (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, and regulations promulgated thereunder; (c) any
substance the presence of which on any property now or hereafter owned or
acquired by the Borrower is prohibited by any Law similar to those set forth in
this definition; and (d) any other substance which by Law requires special
handling in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination
(whether presently existing or occurring after the date of this Agreement) by
Hazardous Materials of any property owned, operated or controlled by the
Borrower or for which the Borrower has respon sibility, including, without
limitation, improvements, facilities, soil, ground water, air or other elements
on, or of, any property now or hereafter owned or acquired by the Borrower, and
any other contamination by Hazardous Materials for which the Borrower is, or is
claimed to be, responsible.
"Indebtedness for Borrowed Money" of a Person, at any time
shall mean the sum at such time of (a) indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services, (b) any
obligations of such Person in respect of letters of credit, banker's or other
acceptances or similar obligations issued or created for the account of such
Person, (c) lease obligations of such Person which have been or should be, in
accordance with GAAP, capitalized on the books of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person, to the
extent attached to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof, and (e) any
obligation of such Person or a commonly controlled entity to a multiemployer
plan (as those terms are used under applicable ERISA statutes and regulations).
"Items of Payment" means each check, draft, cash, money,
instrument, item, and other remittance in payment or on account of payment of
the Accounts or otherwise with respect to any Collateral, including, without
limitation, cash proceeds of any returned, rejected or repossessed Goods, the
sale or lease of which gave rise to an Account, and other proceeds or products
of Collateral; and "Items of Payment" means the collective reference to all of
the foregoing.
"Law" or "Laws" means all ordinances, statutes, rules,
regulations, orders, injunctions, writs, or decrees of any Governmental
Authority or political subdivision or agency thereof, or any court or similar
entity established by any thereof.
"Liabilities" means, at any time, all liabilities that should,
in accordance with GAAP consistently applied, be classified as liabilities on a
combined balance sheet of the Borrower and its Subsidiaries.
"Lien" means any mortgage, deed of trust, deed to secure debt,
grant, pledge, security interest, assignment, encumbrance, judgment, lien or
charge of any kind, whether perfected or unperfected, avoidable or unavoidable,
including, without limitation, any conditional
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sale or other title retention agreement, any lease in the nature thereof, and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction, excluding the precautionary filing of any
financing statement by any lessor in a true lease transaction, by any xxxxxx in
a true bailment transaction or by any consignor in a true consignment
transaction under the Uniform Commercial Code of any jurisdiction or the
agreement to give any financing statement by any lessee in a true lease
transaction, by any bailee in a true bailment transaction or by any consignee in
a true consignment transaction.
"Loan" means a Revolving Loan, and "Loans" mean all Revolving
Loans.
"Multiemployer Plan" shall mean a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Note" means the Revolving Promissory Note, and "Notes" mean
collectively the Revolving Promissory Note, and any other promissory note which
may from time to time evidence the Obligations.
"Obligations" means all present and future debts, obligations,
and liabilities, whether now existing or contemplated or hereafter arising, of
the Borrower to the Lender under, arising pursuant to, in connection with and/or
on account of the provisions of this Agreement, the Note, each Security
Document, and any of the other Financing Documents, any of the Loans, and the
Loan including, without limitation, the principal of, and interest on, the Note,
late charges, fees charged with respect to any guaranty of any letter of credit,
and also means all other present and future indebtedness, liabilities and
obligations, whether now existing or contemplated or hereafter arising, of the
Borrower to the Lender of any nature whatsoever regardless of whether such
debts, obligations and liabilities be direct, indirect, primary, secondary,
joint, several, joint and several, fixed or contingent; and any and all
renewals, extensions and rearrangements of any such debts, obligations and
liabilities.
"Overdraft" means any excess of debit entries over collected
funds on deposit in any banking account of the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" has the meaning set forth in Section
8.04 of this Agreement.
"Permitted Liens" means: (a) Liens for Taxes which are not
delinquent or which the Lender has determined in the exercise of its sole and
absolute discretion (i) are being diligently contested in good faith and by
appropriate proceedings, (ii) the Borrower has the financial ability to pay,
with all penalties and interest, at all times without materially and adversely
affecting the Borrower, and (iii) are not, and will not be with appropriate
filing, the giving of notice and/or the passage of time, entitled to priority
over any Lien of the Lender; (b)
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deposits or pledges to secure obligations under worker's compensation, social
security or similar laws, or under unemployment insurance in the ordinary course
of business; (c) Liens in favor of the Lender; (d) judgment Liens to the extent
the entry of such judgment does not constitute an Event of Default under the
terms of this Agreement or result in the sale of, or levy of execution on, any
of the Collateral; and (e) such other Liens, if any, as are set forth on EXHIBIT
C attached hereto and made a part hereof.
"Person" shall mean and include an individual, a corporation,
a partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof or any other entity.
"Prime Rate" means the prime rate charged by the Lender as
fixed by management of the Lender for the guidance of its loan officers, whether
or not such rate is otherwise published or announced. The Prime Rate is not
necessarily the lowest rate of interest charged by the Lender to borrowers.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means the chief executive officer of the
Borrower or the president of the Borrower or, with respect to financial matters,
the chief financial officer of the Borrower.
"Restricted Period" means any period where the Borrower's
ratio of Funded Debt to EBITDA equals or exceeds 2.0 to 1.0., based on the
financial statements most recently received by the Lender pursuant to Section
7.01 of this Agreement.
"Revolving Loan Committed Amount" has the meaning described in
Section 2.01(a) herein.
"Revolving Loan" and "Revolving Loans" have the meanings
described in Section 2.01(a).
"Revolving Promissory Note" has the meaning described in
Section 2.01(c).
"Revolving Loan Account" has the meaning described in Section
2.03.
"Security Documents" shall mean collectively any assignment,
pledge agreement, security agreement, mortgage, deed of trust, deed to secure
debt, financing statement and any similar instrument, document or agreement
under or pursuant to which a Lien is now or hereafter granted to, or for the
benefit of, the Lender on any collateral to secure the Obligations, as the same
may from time to time be amended, restated, supplemented or otherwise modified.
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"Senior Management" shall be deemed to refer to the following
executive positions: President/CEO, Chairman of the Board, Chief Operating
Officer and Chief Financial Officer.
"State" means the State of Maryland.
"Subsidiary" means Teklicon, and any corporation the majority
of the voting shares of which at the time are owned directly by the Borrower
and/or by one or more Subsidiaries of the Borrower.
"Taxes" mean all taxes and assessments whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied, confirmed or imposed by any Governmental Authority on the
Borrower or any of its properties or assets or any part thereof or in respect of
any of its franchises, businesses, income or profits.
"Teklicon" means Teklicon, Inc., a California corporation and
its successors and assigns.
"Wholly Owned Subsidiary" means any domestic United States
corporation all the shares of stock of all classes of which (other than
directors' qualifying shares) at the time are owned directly or indirectly by
the Borrower and/or by one or more Wholly Owned Subsidiaries of the Borrower.
SECTION 1.02 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. Unless
otherwise defined herein, as used in this Agreement and in any certificate,
report or other document made or delivered pursuant hereto, accounting terms not
otherwise defined herein, and accounting terms only partly defined herein, to
the extent not defined, shall have the respective meanings given to them under
GAAP. Unless otherwise defined herein, all terms used herein which are defined
by the Maryland Uniform Commercial Code shall have the same meanings as assigned
to them by the Maryland Uniform Commercial Code unless and to the extent varied
by this Agreement. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are references to sections or
subsections of, or schedules or exhibits to, as the case may be, this Agreement
unless otherwise specified. As used herein, the singular number shall include
the plural, the plural the singular and the use of the masculine, feminine or
neuter gender shall include all genders, as the context may require. Reference
to any one or more of the Financing Documents and any of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified.
II. BORROWING
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SECTION 2.01 THE REVOLVING LOAN. (a) The Lender agrees to lend to the
Borrower and the Borrower agrees to borrow on a revolving basis from time to
time the principal amount (the "Revolving Loan") not to exceed at any time
outstanding $10,000,000 or during any Restricted Period, the lesser (the
"Revolving Loan Committed Amount") of $10,000,000, or the Borrowing Base.
(b) If at any time the outstanding principal balance of the
Revolving Loan exceeds the limitations provided in subsection (a) above, the
Borrower promises to pay to the order of the Lender, on demand, the amount of
the excess.
(c) The obligation of the Borrower to repay the advances under
the Revolving Loan shall be evidenced by the Borrower's Revolving Promissory
Note of even date herewith (the "Revolving Promissory Note") payable to the
Lender in the form attached hereto as EXHIBIT A. The Revolving Promissory Note
shall bear interest and shall be repaid by the Borrower in the manner and at the
times set forth in the Revolving Promissory Note.
(d) The Borrower may prepay the principal sum outstanding on
the Revolving Loan only in accordance with the terms of the Revolving Note. Sums
borrowed and repaid may be readvanced under the terms and conditions of this
Agreement.
(e) The proceeds of the Revolving Loan shall be used by the
Borrower for the purposes set forth in Recital A above, and, unless prior
written consent of the Lender is obtained, for no other purpose.
SECTION 2.02 REVOLVING LOAN PROCEDURE. (a) The Borrower shall give the
Lender at least two (2) Banking Days' notice of each proposed advance.
(b) The Borrower shall furnish to the Lender such schedules,
certificates, lists, records, reports, information and documents as required by
the Lender from time to time so that the Lender may, in its discretion,
determine the Borrowing Base.
(c) In addition, the Borrower hereby irrevocably authorizes
the Lender to make advances under the Revolving Loan at any time and from time
to time, without further request from or notice to the Borrower, which the
Lender, in its sole and absolute discretion, deems necessary or appropriate to
protect the Lender's interests under this Agreement or otherwise, including,
without limitation, advances made to cover Overdrafts, principal of, and/or
interest on, any Loans, fees, and/or Enforcement Costs, prior to, on, or after
the termination of this Agreement, regardless of whether the aggregate amount of
the advances which the Lender may make hereunder exceeds the Revolving Credit
Committed Amount. The Lender shall have no obligation whatsoever to make any
advance under this subsection and the making of one or more advances under this
subsection shall not obligate the Lender to make other similar advance or
advances. Any such advances will be secured by the Collateral.
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SECTION 2.03 REVOLVING LOAN ACCOUNT. The Lender will establish and main
tain a loan account on its books (the "Revolving Loan Account") to which the
Lender will (a) debit (i) the principal amount of each Revolving Loan made by
the Lender hereunder as of the date made, (ii) the amount of any interest
accrued on the Revolving Loans as and when due, and (ii) any other amounts due
and payable by the Borrower to the Lender from time to time under the provisions
of this Agreement in connection with the Revolving Loans, including, without
limitation, Enforcement Costs, Fees, late charges, and service, collection and
audit fees, as and when due and payable, and (b) credit all payments made by the
Borrower to the Lender on account of the Revolving Loans as of the date made
including, without limitation, funds credited to the Collateral Account and
collected and paid to the Lender, the Lender reserving the right, exercised in
its sole and absolute discretion from time to time, to provide earlier credit or
to disallow credit for any Collection which is unsatisfactory to the Lender.
The Lender may debit the Revolving Loan Account for the amount of any
Collection which is returned to the Lender unpaid. All credit entries to the
Revolving Loan Account are conditional and shall be readjusted as of the date
made if final and indefeasible payment is not received by the Lender in cash or
solvent credits. The Borrower hereby promises to pay to the order of the Lender,
on demand, an amount equal to the excess, if any, of all debit entries over all
credit entries recorded in the Revolving Loan Account under the provisions of
this Agreement.
SECTION 2.04 COLLATERAL ACCOUNT. The Borrower will deposit or cause to
be deposited to a bank account designated by the Lender and from which the
Lender alone has power of access and withdrawal (the "Collateral Account"), all
Items of Payment. The Borrower shall deposit Items of Payment for credit to the
Collateral Account not later than the next Banking Day after the receipt
thereof, and in precisely the form received, except for the endorsements of the
Borrower where necessary to permit the collection of any such Items of Payment,
which endorsement the Borrower hereby agrees to make. Pending such deposit to
the Collateral Account, endorsement and/or other delivery thereof to the Lender,
the Borrower will not commingle any Items of Payment with any of its other funds
or property, but will hold them separate and apart therefrom in trust and for
the account of the Lender. The Lender is not, however, required to credit the
Collateral Account for the amount of any Collection which is unsatisfactory to
the Lender. In addition, the Borrower shall, if so directed by the Lender,
establish a lock box to which Items of Payments may be sent and shall direct the
Borrower's customers and others as the Lender may require to forward payments to
that lock box. Items of Payment received in the lock box shall be deposited in
the Collateral Account or as otherwise directed by the Lender from time to time.
SECTION 2.05 COMMITMENT FEE. The Borrower agrees to pay to the Lender
on the first day of each three month period commencing after the date of this
Agreement a commitment fee (computed on the basis of a year consisting of three
hundred and sixty (360) days for the actual number of days elapsed) of three
eighths of one percent (.375%) per annum on the daily average of the unused
amount of the Revolving Loan.
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SECTION 2.06 TRANSACTIONS UNDER THIS AGREEMENT BETWEEN THE BORROWER AND
THE LENDER. In respect to any advance and all other matters under or in
connection with this Agreement and any transactions contemplated hereby, the
Borrower authorizes the Lender to accept, rely upon, act upon and comply with,
any verbal or written instructions, requests, confirmations and orders of any
employee or representative of the Borrower designated by the Borrower in writing
delivered to the Lender from time to time. The Borrower acknowledges that the
transmission between the Borrower and the Lender of any such instructions,
requests, confirmations and orders involves the possibility of errors,
omissions, mistakes and discrepancies and agrees to adopt such internal measures
and operational procedures to protect its interests. By reason thereof, the
Borrower hereby assumes all risk of loss and responsibility for, releases and
discharges the Lender from any and all responsibility or liability for, and
agrees to indemnify, reimburse on demand and hold the Lender harmless from, any
and all claims, actions, damages, losses, liability and expenses by reason of,
arising out of or in any way connected with or related to, (i) the Lender's
acceptance, reliance and actions upon, compliance with or observation of any
such instructions, requests, confirmations or orders, and (ii) any such errors,
omissions, mistakes and discrepancies, except those caused by the Lender's gross
negligence or willful misconduct.
SECTION 2.07 ACCOUNT STATEMENTS. Any and all periodic or other
statements or reconciliations, and the information contained in those statements
or reconciliations, of the Revolving Loan Account shall be presumed conclusively
to be correct and shall constitute an account stated between the Lender and the
Borrower unless the Lender receives specific written objection thereto from the
Borrower within thirty (30) Banking Days after such statement or reconciliation
shall have been sent by the Lender.
SECTION 2.08 OVERDRAFT ADVANCES. If, after the close of business on any
Banking Day, any banking account of the Borrower with the Lender is determined
by the Lender to have an Overdraft, the Lender, in its sole discretion on each
and any such occasion may (and is hereby irrevocably authorized by the Borrower
to), but is not obligated to, make an advance under the Revolving Loan to the
Borrower in a principal amount equal to any such Overdraft as of the close of
business on such Banking Day. All Overdrafts shall be secured by the Collateral.
III. COLLATERAL
----------
As security for the payment of all of the Obligations, the Borrower
hereby assigns, grants and conveys to the Lender and agrees that the Lender
shall have a perfected, continuing security interest in all of the Collateral.
The Borrower further agrees that the Lender shall have in respect the Collateral
all of the rights and remedies of a secured party under the Maryland Uniform
Commercial Code and under other applicable Laws and Security Documents, as well
as those provided in this Agreement. The Borrower covenants and agrees to
execute and deliver such financing statements and other instruments and filings
as are necessary in the opinion of the Lender to perfect such security interest.
Notwithstanding the fact that the proceeds of the Col lateral constitute a part
of the Collateral, the Borrower may not dispose of the Collateral, or any
12
part thereof, other than in the ordinary course of its business or as otherwise
may be permitted by this Agreement.
13
IV. UNCONDITIONAL OBLIGATIONS
-------------------------
The payment and performance by the Borrower of the Obligations shall be
absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim it might otherwise have against the Lender
and the Borrower shall pay absolutely net all of the Obligations, free of any
deductions and without abatement, diminution or set-off; and until payment in
full of all of the Obligations, the Borrower: (a) will not suspend or
discontinue any payments provided for in the Note; (b) will perform and observe
all of its other agreements con tained in this Agreement, including (without
limitation) all payments required to be made to the Lender; and (c) will not
terminate or attempt to terminate this Agreement for any cause.
V. REPRESENTATIONS AND WARRANTIES
-------------------------------
To induce the Lender to make the Loan, the Borrower represents and
warrants to the Lender and, unless the Lender is notified by the Borrower of a
change or changes effecting such representations and warranties, shall be deemed
to represent and warrant to the Lender at the time each request for an advance
under the Loan is submitted and again at the time any advance is made under the
Loan that:
SECTION 5.01 SUBSIDIARIES. The Borrower has no Subsidiaries, except as
set forth on the signature page of this Agreement.
SECTION 5.02 GOOD STANDING. The Borrower and each of its Subsidiaries
(a) is a corporation duly organized, existing and in good standing under the
laws of the jurisdiction of its incorporation, (b) has the corporate power to
own its property and to carry on its business as now being conducted, and (c) is
duly qualified to do business and is in good standing in each juris diction in
which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary.
SECTION 5.03 POWER AND AUTHORITY. The Borrower and each of its
Subsidiaries has full power and authority to execute and deliver this Agreement
and each of the other Financing Documents executed and delivered by it, to make
the borrowing hereunder, and to incur the Obligations, all of which have been
duly authorized by all proper and necessary corporate action. No consent or
approval of stockholders or of any public authority is required as a condition
to the validity or enforceability of this Agreement or any of the other
Financing Documents executed and delivered by the Borrower and each Subsidiary.
SECTION 5.04 BINDING AGREEMENTS. This Agreement and each of the other
Financing Documents executed and delivered by the Borrower and each Subsidiary
have been properly executed by the Borrower and each Subsidiary, constitute
valid and legally binding obligations of the Borrower and each Subsidiary, and
are fully enforceable against the Borrower and each Subsidiary in accordance
with their respective terms, subject to (a) bankruptcy,
14
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally, (b) general principles of equity (regardless of whether such
principles of equity are asserted in an action or proceeding at law or in
equity) or the discretion of the court before which any action or proceeding may
be brought and (c) other applicable laws which may limit the enforceability of
certain of the remedial or procedural provisions contained in the Financing
Documents.
SECTION 5.05 LITIGATION. There are no proceedings pending or, so far as
the Borrower knows, threatened before any court or administrative agency which
will materially adversely affect the financial condition or operations of the
Borrower or any Subsidiary , or the authority of the Borrower to enter into this
Agreement or any of the other Financing Documents executed and delivered by the
Borrower or any Subsidiary.
SECTION 5.06 NO CONFLICTING AGREEMENTS. There is (a) no charter, by-law
or preference stock provision of the Borrower or any Subsidiary and no provision
of any existing mortgage, indenture, contract or agreement binding on the
Borrower, or any Subsidiary, or affecting their properties, and (b) to the
knowledge of the Borrower and each Subsidiary, no provision of law or order of
court binding upon the Borrower or any Subsidiary, which would conflict with or
in any way prevent the execution, delivery, or performance of the terms of this
Agreement or of any of the other Financing Documents executed and delivered by
the Borrower or any Subsidiary, or which would be violated as a result of such
execution, delivery or performance.
SECTION 5.07 FINANCIAL CONDITION. The financial statements of the
Borrower dated June 30, 1996 are complete and correct and, in the opinion of the
Borrower, fairly present the current financial condition of the Borrower and
have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved. There are no material liabilities, direct or
indirect, fixed or contingent, of the Borrower as of the date of such financial
statements which are not reflected therein or in the notes thereto. There has
been no adverse change in the financial condition or operations of the Borrower
since the date of such financial statements (and to the Borrower's knowledge, no
such adverse change is pending or threatened), and the Borrower has not
guaranteed the obligations of, or made any investments in or advances to, any
company, individual or other entity except as disclosed in such financial
statements and in connection with the acquisition of Teklicon. The Borrower
agrees to provide the Lender with updated financial statements within forty five
(45) days of completion of the acquisition of Teklicon.
SECTION 5.08 TAXES. The Borrower and each Subsidiary has filed or has
caused to have been filed all federal, state and local tax returns which, to the
knowledge of the Borrower and each Subsidiary, are required to be filed, and has
paid or caused to have been paid all taxes as shown on such returns or on any
assessment received by it, to the extent that such taxes have become due, unless
and to the extent only that such taxes, assessments and governmental charges are
currently contested in good faith and by appropriate proceedings by the Borrower
or such
15
Subsidiary and adequate reserves therefor have been established as required
under generally accepted accounting principles.
SECTION 5.09 COMPLIANCE WITH LAW. The Borrower and each Subsidiary is
not in violation of any applicable law, ordinance, governmental rule or
regulation to which it is subject and the Borrower has obtained any and all
material licenses, permits, franchises or other governmental authorizations
necessary for the ownership of its properties and the conduct of its business.
SECTION 5.10 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL. The
Borrower and each Subsidiary warrants that the address of the Borrower's and
each Subsidiary's chief executive office is as specified in EXHIBIT B attached
hereto and made a part hereof and that the address of each other place of
business of the Borrower and each Subsidiary, if any, is as disclosed to the
Lender in EXHIBIT B. The Collateral and all books and records pertaining to the
Collateral are and will be located at the address indicated on EXHIBIT B. The
Borrower will immediately advise the Lender in writing of the opening of any new
place of business or the closing of any of its existing places of business, and
of any change in the location of the places where the Collateral, or any part
thereof, or the books and records concerning the Collateral, or any part
thereof, are kept. The proper and only places to file financing statements with
respect to the Collateral within the meaning of the Uniform Commercial Code are
the State Department of Assessments and Taxation. A copy of a fully executed
financing statement shall be sufficient to satisfy for all purposes the
requirements of a financing statement as set forth in Article 9 of the Maryland
Uniform Commercial Code.
SECTION 5.11 TITLE TO PROPERTIES. The Borrower and each Subsidiary has
good and marketable title to all of its properties, including the Collateral,
and the Collateral is free and clear of mortgages, pledges, liens, charges and
other encumbrances other than the Permitted Liens.
SECTION 5.12 MARGIN STOCK. None of the proceeds of the Loan will be
used, directly or indirectly, by the Borrower or any Subsidiary for the purpose
of purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock") or for any other purpose which might make the transactions
contemplated herein a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
SECTION 5.13 ERISA. With respect to any "pension plan" as defined in
Section 3(2) of ERISA, which plan is now or previously has been maintained or
contributed to by the
16
Borrower and/or by any Commonly Controlled Entity: (a) no "accumulated funding
deficiency" as defined in Code ss.412 or ERISA ss.302 has occurred, whether or
not that accumulated funding deficiency has been waived; (b) no "reportable
event" as defined in ERISA ss.4043 has occurred; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any
Commonly Controlled Entity has incurred a "complete withdrawal" within the
meaning of ERISA ss.4203 from any multiemployer plan; (e) neither the Borrower
nor any Commonly Controlled Entity has incurred a "partial withdrawal" within
the meaning of ERISA ss.4205 with respect to any multiemployer plan; (f) no
multiemployer plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
ss.4241 nor has notice been received by the Borrower or any Commonly Controlled
Entity that such a multiemployer plan will be placed in "reorganization".
SECTION 5.14 GOVERNMENTAL CONSENT. Neither the nature of the Borrower
or of its business or properties, nor any relationship between the Borrower and
any other entity or person, nor any circumstance in connection with the making
of the Loan, or the offer, issue, sale or delivery of the Note is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority, on the part of the Borrower, as
a condition to the execution and delivery of this Agreement or any of the other
Financing Documents, the borrowing of the principal amounts of the Loan or the
offer, issue, sale or delivery of the Note.
SECTION 5.15 FULL DISCLOSURE. The financial statements referred to in
this Part V do not, nor does this Agreement, nor do any written statements
furnished by the Borrower to the Lender in connection with the making of the
Loan, contain any untrue statement of material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading.
There is no material fact which the Borrower has not disclosed to the Lender in
writing which materially adversely affects or, will or could prove to materially
adversely affect the properties, business, prospects, profits or condition
(financial or otherwise) of the Borrower or the ability of the Borrower to
perform this Agreement.
SECTION 5.16 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS
CONTAMINATION. To the best of the Borrower's knowledge, (a) no Hazardous
Materials are located on any real property owned, controlled or operated by of
the Borrower or for which the Borrower is responsible, except for reasonable
quantities of necessary supplies for use by the Borrower in the ordinary course
of the its current line of business and stored, used and disposed in accordance
with applicable Laws; and (b) no property owned, controlled or operated by the
Borrower has ever been used as a manufacturing, storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials Contamination at any
other property.
SECTION 5.17 INTELLECTUAL PROPERTY. The Borrower owns or possesses all
of the material patents, trademarks, service marks, trade names, copyrights and
licenses and all rights with respect thereto necessary for the present and
planned future operation of its business, to the best of the Borrower's
knowledge without any conflict with the rights of any other Person.
17
SECTION 5.18 BUSINESS NAMES AND ADDRESSES. In the twelve (12) years
preceding the date hereof, the Borrower has not conducted business under any
name other than its current name nor conducted its business in any jurisdiction
other than those disclosed on EXHIBIT B attached hereto.
SECTION 5.19 NO DEFAULT. There is no Event of Default (as hereinafter
defined) and no event has occurred and no condition exists which with the giving
of notice or the passage of time would constitute an Event of Default. The
Borrower is not in default under the terms of any other agreement or instrument
to which it may be a party or by which the Collateral or any of its properties
may be bound or subject.
SECTION 5.20 COMPLIANCE WITH ELIGIBILITY STANDARDS. Unless the Lender
is advised by the Borrower in writing to the contrary, to the best of the
Borrower's knowledge each Account described in any schedule, certificate, record
and data furnished to the Lender for purposes of calculating the Borrowing Base
will at all times meet and comply with the Eligibility Standards.
SECTION 5.21 ACCOUNTS. With respect to all Accounts and to the best of
the Borrower's knowledge (a) they are genuine, and in all respects what they
purport to be, and are not evidenced by a judgment, an instrument, or chattel
paper (unless such judgment has been assigned and such instrument or chattel
paper has been endorsed and delivered to the Lender); (b) they represent
undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in the invoices and purchase orders relating thereto; (c)
the goods sold (or services rendered) which resulted in the creation of the
Accounts have been delivered or rendered to and accepted by the account debtor;
(d) the amounts shown on the Borrower's books and records, with respect thereto
are actually and absolutely owing to the Borrower and are not contingent for any
reason; (e) no payments have been or shall be made thereon except payments
turned over to the Lender by the Borrower; (f) there are no set-offs,
counterclaims or disputes known by the Borrower or asserted with respect
thereto, and the Borrower has made no agreement with any account debtor thereof
for any deduction or discount of the sum payable thereunder except regular
discounts, or credit adjustments allowed by the Borrower in the ordinary course
of its business for prompt payment; (g) there are no facts, events or
occurrences known to the Borrower which in any way impair the validity or
enforcement thereof or tend to reduce the amount payable thereunder; (h) all
account debtors thereof, to the best of the Borrower's knowledge, have the
capacity to contract; (i) the goods sold or transferred or the services
furnished giving rise thereto are not subject to any liens except the security
interest granted to the Lender by this Agreement and Permitted Liens; (j) the
Borrower has no knowledge of any fact or circumstance which would impair the
validity or collectibility thereof; and (k) there are no proceedings or actions
known to the Borrower which are threatened or pending against any account debtor
which might result in any material adverse change in its financial condition.
18
VI. CONDITIONS OF LENDING
---------------------
The making of the Loan and any advance thereunder is subject to the
following conditions precedent:
SECTION 6.01 OPINION OF COUNSEL FOR THE BORROWER. On the date hereof,
the Lender shall receive the favorable written opinion of counsel for the
Borrower satisfactory in all respects to the Lender.
SECTION 6.02 APPROVAL OF COUNSEL FOR THE LENDER. All legal matters
incident to the Loans and all documents necessary in the opinion of the Lender
to make the Loan shall be satisfactory in all material respects to counsel for
the Lender.
SECTION 6.03 SUPPORTING DOCUMENTS. The Lender shall receive on the date
hereof: (a) a certificate of the Secretary of the Borrower, in a form acceptable
to the Lender in all respects, dated as of the date hereof and certifying (i)
that attached thereto is a true, complete and correct copy of resolutions
adopted by the Board of Directors of the Borrower authorizing the execution and
delivery of this Agreement, the Note and the other Financing Documents, and the
Obligations, and (ii) as to the incumbency and specimen signature of each
officer of the Borrower executing this Agreement, the Note and the other
Financing Documents, and a certifi cation by the President or any Vice President
of the Borrower as to the incumbency and signature of the Secretary of the
Borrower; (b) such other documents as the Lender may reasonably require the
Borrower to execute, in form and substance acceptable to the Lender; and (c)
such additional information, instruments, opinions, documents, certificates and
reports as the Lender may reasonably deem necessary.
SECTION 6.04 FINANCING DOCUMENTS. All of the Financing Documents
required by the Lender shall be executed, delivered and, if deemed necessary by
the Lender, recorded, all at the sole expense of the Borrower.
SECTION 6.05 INSURANCE. The Borrower shall have satisfied the Lender
that any and all insurance required by this Agreement is in effect as of the
date of this Agreement, and that, to the extent required by the Financing
Documents, the Lender has been named as an insured lienholder.
SECTION 6.06 SECURITY DOCUMENTS. In order to perfect the lien and
security interest created by this Agreement, the Borrower shall have executed
and delivered to the Lender all financing statements and Security Documents (in
form and substance acceptable to the Lender in its sole discretion) deemed
necessary by the Lender, in a sufficient number of counterparts for recordation,
and, at the Borrower's sole expense, shall record all such financing statements
and Security Documents, or cause them to be recorded, in all public offices
deemed necessary by the Lender.
19
SECTION 6.07 TERMINATION STATEMENTS. The Lender shall have received
from creditors of the Borrower all termination statements covering the
Collateral required by the Lender. The termination statements shall be fully and
properly executed, in recordable form and sufficient, in the opinion of counsel
for the Lender, to terminate the interests of other creditors of the Borrower in
the Collateral.
SECTION 6.08 COMPLIANCE. At the time of the making of each advance
hereunder (a) the Borrower and each Subsidiary shall have complied and shall
then be in compliance with all the terms, covenants and conditions of this
Agreement which are binding upon it, (b) there shall exist no Event of Default
and no event which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default, and (c) the representations and warranties
contained in Part V shall be true with the same effect as though such
representations and warranties had been made at the time of the making of the
advance.
VII. AFFIRMATIVE COVENANTS OF BORROWER
---------------------------------
Until payment in full and the performance of all of the Obligations
hereunder, the Borrower shall:
SECTION 7.01 Financial Statements. Furnish to the Lender:
--------------------
(a) Annual Statements and Certificates. As soon as available
but in no event more than one hundred twenty (120) days after the close of each
of the Borrower's fiscal years, (i) a copy of the consolidated and consolidating
audited financial statement relating to the Borrower and its Subsidiaries in
reasonable detail satisfactory to the Lender, including detail with regard to
expenses, including, but not limited to, lease expense, non-cash charges and
interest expense, prepared in accordance with GAAP and certified by an
independent certified public accountant satisfactory to the Lender, which
financial statement shall include a balance sheet as at the end of such fiscal
year, profit and loss statement and a statement of changes in financial
condition, and (ii) a cash flow projection report prepared by the Borrower in a
format acceptable to the Lender.
(b) Annual Opinion of Accountant. As soon as available but in
no event more than one hundred twenty (120) days after the close of each of the
Borrower's fiscal years, a letter or opinion of the independent certified public
accountant who examined the annual financial statement relating to the Borrower
and its Subsidiaries stating whether anything in such certified public
accountant's examination has revealed the occurrence of an event which
constitutes an Event of Default or which would constitute an Event of Default
with the giving of notice or the lapse of time or both, and, if so, stating the
facts with respect thereto.
(c) Quarterly Statements and Certificates. As soon as
available but in no event more than forty-five (45) days after the close of each
of the Borrower's fiscal quarters, consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries as at the close
20
of such period and consolidated and consolidating income and expense statements
for such period, and an aging of accounts receivable, all certified by the
principal financial officer of the Borrower. The quarterly statements shall be
in such detail as Lender may reasonably require and will provide, among other
things, detail with regard to expenses, lease expense, non-cash charges and
interest expense and shall be accompanied by a certificate in form and detail
satisfactory to the Lender in all material respects (the "Compliance
Certificate") of that officer stating whether any event has occurred which
constitutes an Event of Default or which would constitute an Event of Default
with the giving of notice or the lapse of time or both, and, if so, stating the
facts with respect thereto. Each Compliance Certificate will clearly set forth
the methodology used in determining compliance and/or non-compliance and shall
be the basis for determining the Additional Percentage and the Additional LIBOR
Rate Percentage under the Note.
(d) Reports to SEC and to Stockholders. The Borrower will
furnish to the Lender, promptly upon the filing or making thereof, but not later
than fifteen (15) days after the date of filing, , at least one (l) copy of all
financial statements, reports, notices and proxy statements sent by the Borrower
to its stockholders, and of all regular and other reports filed by the Borrower
with any securities exchange or with the Securities and Exchange Commission.
(e) Borrowing Base Reports. During any Restricted Period, the
Borrower shall deliver to the Lender at the same time as the quarterly financial
information required under subsection (c) above, a fully completed certificate
(each a "Borrowing Base Certificate" and collectively, the "Borrowing Base
Certificates") as of such date in the form of EXHIBIT ___ attached hereto. Each
Borrowing Base Certificate shall be effective only as accepted by the Lender
(and with such revision, if any, as the Lender may require as a condition to
such acceptance), such acceptance to be presumed unless the Lender otherwise
notifies the Borrower within five (5) Banking Days after receipt of such
Borrowing Base Certificate.
(f) Monthly Funded Debt Report. Within forty five (45) days
after the end of each calender month, a fully completed certificate as of the
last day of such month, listing the Borrower's Funded Debt and the EBITDA for
the prior twelve (12) month period (the "Funded Debt Report"). If the Borrower
determines based on the Funded Debt Report that it is within a Restricted
Period, the Borrower will thereafter submit to the Lender a monthly Borrowing
Base Certificate pursuant to subsection (e) above.
(g) Additional Reports and Information. With reasonable
promptness, such additional information, reports or statements as the Lender may
from time to time reasonably request.
SECTION 7.02 Financial Covenants.
-------------------
21
(a) FIXED CHARGE COVERAGE RATIO. Maintain at all times, a
Fixed Charge Ratio of not less than 1.30 to 1.0 tested as of the last
day of each of the Borrower's fiscal quarters for the four (4) quarter
period ending on that date.
(b) FUNDED DEBT TO EBITDA. Maintain, a ratio of Funded Debt to
EBITDA not to exceed at any time 3.0 to 1.0 tested as of the last day
of each of the Borrower's fiscal quarters for the four (4) quarter
period ending on that date.
(c) CURRENT RATIO. Maintain, a Current Ratio of not less than
1.30 to 1.0 tested as of the last day of each of the Borrower's fiscal
quarters for the four (4) quarter period ending on that date.
SECTION 7.03 TAXES AND CLAIMS. Pay and discharge and cause each of its
Subsidiaries to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or any of its income or properties prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any of its properties; provided,
however, the Borrower and the Subsidiaries shall not be required to pay any such
tax, assessment, charge, levy or claim, the payment of which is being contested
in good faith and by proper proceedings.
SECTION 7.04 CORPORATE EXISTENCE. Maintain, and cause each of its
Subsidiaries to maintain, its corporate existence in good standing in the
jurisdiction in which it is incorporated and in each jurisdiction where it is
required to register or qualify to do business.
SECTION 7.05 COMPLIANCE WITH LAWS. Comply, and cause each of its
Subsidiaries to comply, with all applicable federal, state and local laws, rules
and regulations to which it is subject and the violation of which would have a
material adverse effect on the conduct of its business.
SECTION 7.06 GOVERNMENTAL REGULATION. Promptly notify the Lender in the
event that the Borrower or any Subsidiary receives any notice, claim or demand
from any governmental agency which alleges that the Borrower or any Subsidiary
is in violation of any of the terms of, or has failed to comply with any
applicable order issued pursuant to any federal or state statute regulating its
operation and business, including, but not limited to, the Occupational Safety
and Health Act and the Environmental Protection Act.
SECTION 7.07 LITIGATION. Give prompt notice in writing, with a full
description to the Lender, of all litigation and of all proceedings before any
court or any governmental or regulatory agency affecting the Borrower or any
Subsidiary which, if adversely decided, would materially affect the conduct of
the Borrower's or such Subsidiary's business, the financial condi tion of the
Borrower or such Subsidiary, or in any manner affect the Collateral.
22
SECTION 7.08 USE OF PROCEEDS. Use the proceeds of the Loan for the
purpose or purposes set forth in Recital A above and, without the prior written
consent of the Lender, for no other purpose or purposes.
SECTION 7.09 MAINTENANCE OF PROPERTIES. Keep, and cause the
Subsidiaries to keep and maintain, its properties, whether owned in fee or
otherwise, or leased, in good operating condition (normal war and tear
excepted); make and, cause the Subsidiaries to make, all proper repairs,
renewals, replacements, additions and improvements thereto needed to maintain
such properties in good operating condition; comply, and cause the Subsidiaries
to comply, with the material provisions of all material leases to which it is
party or under which it occupies property so as to prevent any loss or
forfeiture thereof or thereunder; and comply, or cause the Subsidiaries to
comply, with all laws, rules, regulations and orders applicable to its
properties or business or any part thereof and the violation of which would have
a material adverse effect on the conduct of its business.
SECTION 7.10 OTHER LIENS, SECURITY INTERESTS, ETC. Keep, and cause the
Subsidiaries to keep, its material properties and assets, including, without
limitation, the Collateral, free from all liens, security interests and claims
of every kind and nature, other than the security interest granted to the Lender
pursuant to this Agreement and the Permitted Liens.
SECTION 7.11 BOOKS AND RECORDS. (a) Keep and maintain and cause the
Subsidiaries to keep and maintain accurate books and records, (b) make and cause
the Subsidiaries to make entries on such books and records in form satisfactory
to the Lender dis closing the Lender's assignment of, and security interest in
and lien on, the Collateral and all collections received by the Borrower or any
of the Subsidiaries on its Accounts, (c) furnish and cause the Subsidiaries to
furnish to the Lender promptly upon request such information, reports,
contracts, invoices, lists of purchases of Inventory (showing names, addresses
and amount owing) and other data concerning account debtors and the Borrower's
and Subsidiaries' Accounts and Inventory and all contracts and collection(s)
relating thereto as the Lender may from time to time specify, (d) unless the
Lender shall otherwise consent in writing, keep and maintain and cause the
Subsidiaries to keep and maintain all such books and records mentioned in (a)
above only at the addresses listed in EXHIBIT B, and (e) permit and cause the
Subsidiaries to permit any Person designated by the Lender to enter the premises
of the Borrower and the Subsidiaries and examine, audit and inspect the books
and records at any reasonable time and from time to time without notice.
SECTION 7.12 BUSINESS NAMES. Immediately notify and cause each of the
Subsidiaries to notify the Lender of any change in the name under which it
conducts its business.
SECTION 7.13 ERISA. Maintain at all times such bonding as is required
by ERISA. As soon as practicable and in any event within 15 days after it knows
or has reason to know that, with respect to any plan, a "reportable event" has
occurred, the Borrower will deliver to the Lender a certificate signed by its
chief financial officer setting forth the details of such "re-
23
portable event". The Borrower shall agrees that with respect to any pension plan
which the Borrower and/or any Commonly Controlled Entity maintains or
contributes to, either now or in the future, that: (a) such bonding as is
required under ERISA will be maintained; (b) as soon as practicable and in any
event within 15 days after the Borrower or any Commonly Controlled Entity knows
or has reason to know that a "reportable event" has occurred or is likely to
occur, the Borrower will deliver to the Lender a certificate signed by its chief
financial officer setting forth the details of such "reportable event"; (c)
within 15 days after notice is received by the Borrower or any Commonly
Controlled Entity that any multiemployer plan has been or will be placed in
"reorganization" within the meaning of ERISA ss.4241, the Borrower will notify
the Lender to that effect; and (d) upon the Lender's request, the Borrower will
deliver to the Lender a copy of the most recent actuarial report, financial
statements and annual report completed with respect to any "defined benefit
plan", as defined in ERISA ss.3(35).
SECTION 7.14 MANAGEMENT. Promptly notify the Lender of any contemplated
changes in its Senior Management subsequent to the date hereof.
SECTION 7.15 BANKING RELATIONSHIP. Maintain the Lender as its principal
depository.
SECTION 7.16 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. The Borrower will promptly notify the Lender upon obtaining
knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any event, development or circumstance whereby the
financial statements furnished hereunder fail in any
material respect to present fairly, in accordance
with GAAP, the financial condition and operational
results of the Borrower or its Subsidiaries;
(d) any judicial, administrative or arbitral proceeding
pending against the Borrower or any of its
Subsidiaries and any judicial or administrative
proceeding known by the Borrower to be threatened
against it or any of its Subsidiaries which, if
adversely decided, could materially adversely affect
its financial condition or operations (present or
prospective); and
(e) any other development in the business or affairs of
the Borrower and any of its Subsidiaries which may be
materially adverse;
in each case describing in detail satisfactory to the Lender the nature thereof
and, in the case of notification under clauses (a) and (b), the action the
Borrower proposes to take with respect thereto.
24
SECTION 7.17 INSURANCE GENERALLY. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible insurance companies on such
of its properties, in such amounts and against such risks as is customarily
maintained by similar businesses operating in the same vicinity; maintain
general public liability insurance against claims for personal injury, death or
property damage in such amounts as are satisfactory to the Lender and workmen's
compensation insurance in statutory amounts with such companies as are licensed
to do business in the state requiring the same; file, and cause each of its
Subsidiaries to file, with the Lender, upon its request, a detailed list of the
insurance then in effect and stating the names of the insurance companies, the
amounts and rates of the insurance, dates of the expiration thereof and the
properties and risks covered thereby; and, within thirty (30) days after notice
in writing from the Lender, obtain, and cause each of its Subsidiaries to
obtain, such additional insurance as the Lender may reasonably request.
SECTION 7.18 MAINTENANCE OF THE COLLATERAL. Not permit anything to be
done to the Collateral which may materially impair the value thereof. The
Lender, or an agent designated by the Lender, shall be permitted to enter the
premises of the Borrower, and the Subsidiaries, and examine, audit and inspect
the Collateral at any reasonable time and from time to time without notice. The
Lender agrees to act in a commercially reasonable manner when inspecting,
examining or auditing the Collateral. The Lender shall not have any duty to, and
the Borrower hereby releases the Lender from all claims of loss or damage caused
by the delay or failure to collect or enforce any of the Accounts or to,
preserve any rights against any other party with an interest in the Collateral.
SECTION 7.19 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its expense
defend the title to the Collateral (or any part thereof), and promptly upon
request execute, acknowledge and deliver any financing statement, renewal,
affidavit, deed, assignment, continuation statement, security agreement,
certificate or other document the Lender may reasonably require in order to
perfect, preserve, maintain, protect, continue and/or extend the lien or
security interest granted to the Lender under this Agreement and its priority.
The Borrower shall pay to the Lender on demand all taxes, costs and reasonable
expenses incurred by the Lender in connection with the preparation, execution,
recording and filing of any such document or instrument.
SECTION 7.20 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING
REQUIREMENTS. Provide to the Lender a subsequent opinion of counsel as to the
filing, recording and other requirements with which the Borrower and the
Subsidiaries have complied to maintain the lien and security interest in favor
of the Lender in the Collateral in the event that the Borrower or any Subsidiary
shall transfer its principal place of business or the office where it keeps its
records pertaining to the Accounts.
SECTION 7.21 ASSIGNMENTS OF ACCOUNTS. Promptly, upon request, execute
and deliver to the Lender written assignments, in form and content acceptable to
the Lender, of specific Accounts or groups of Accounts; provided, however, the
lien and/or security interest granted to the Lender under this Agreement shall
not be limited in any way to or by the inclusion
25
or exclusion of Accounts within such assignments. Such Accounts shall secure
payment of the Obligations and are not sold to the Lender whether or not any
assignment thereof, which is separate from this Agreement, is in form absolute.
SECTION 7.22 NOTICE OF RETURNED GOODS, ETC. Promptly notify and cause
the Subsidiaries to promptly notify the Lender of the return, rejection or
repossession of any goods sold or delivered in respect of any Accounts, and of
any claims made in regard thereto. Whenever the Borrower obtains possession (by
return, rejection, repossession or otherwise) of any goods, the sale or lease of
which gave rise to an Account, the Borrower will (unless the Lender shall
otherwise consent in writing) physically segregate such goods from the
Borrower's other property, and label and hold such goods as trustee for the
Lender for such disposition as the Lender may direct.
SECTION 7.23 COLLECTIONS. Until such time as the Lender shall notify
the Borrower and each of the Subsidiaries of the revocation of such privilege,
the Borrower and each of the Subsidiaries (a) shall at its own expense have the
privilege for the account of and in trust for the Lender of collecting its
Accounts and receiving in respect thereto all items of payment and shall
otherwise completely service all of the Accounts including (i) the billing,
posting and maintaining of complete records applicable thereto, and (ii) the
taking of such action with respect to such Accounts as the Lender may request or
in the absence of such request, as the Borrower and each of the Subsidiaries may
deem advisable; and (b) may grant, in the ordinary course of business, to any
account debtor, any discount, rebate, refund or adjustment to which the account
debtor may be lawfully entitled, and may accept, in connection therewith, the
return of goods, the sale or lease of which shall have given rise to an Account.
The Lender may, at its option, at any time or from time to time after default
hereunder, revoke the collection privilege given to the Borrower and each of the
Subsidiaries herein by either giving notice of its assignment of, and lien on
the Collateral to the account debtors or giving notice of such revocation to the
Borrower and each of the Subsidiaries.
SECTION 7.24 NOTICE TO ACCOUNT DEBTORS AND ESCROW ACCOUNT. In the event
(a) an Event of Default exists, (b) an event has occurred or condition exists
which, with the giving of notice or the lapse of time will constitute an Event
of Default, or (c) demand has been made for any or all of the Obligations, the
Borrower and the Subsidiaries shall promptly upon the request of the Lender (a)
in such form and at such times as specified by the Lender, give notice of the
Lender's lien on the Accounts to the account debtors requiring the account
debtors to make payments thereon directly to the Lender, (b) promptly upon
receipt deposit the Items of Payment into the Collateral Account in the original
form received by the Borrower and the Subsidiaries (except for the endorsement
of the Borrower and the Subsidiaries where necessary, which endorsement the
Borrower agrees to make, and the Lender, by its duly authorized officers or
nominee, is also hereby irrevocably authorized to make such endorsement on the
Borrower's behalf). Pending deposit thereof to the Collateral Account, the
Borrower and the Subsidiaries shall not commingle any Items of Payment with any
of its other funds or property, but will hold them separate and apart therefrom
in trust and for the account of the Lender until deposit to the
26
Collateral Account or other delivery thereof is made to the Lender. The Lender
will in its discretion apply the whole or any part of the collected funds
credited to the Collateral Account against the Obligations or credit such
collected funds to the depository account of the Borrower with the Lender, the
order and method of such application to be in the sole discretion of the Lender.
SECTION 7.25 GOVERNMENT ACCOUNTS. Immediately notify the Lender if any
of the Accounts arise out of contracts with the United States or with any state
or political subdivision thereof or any department, agency or instrumentality of
the United States, or any state or political subdivision thereof, and execute
any instruments and take any steps required by the Lender in order that all
moneys due and to become due under such contracts shall be assigned to the
Lender and notice thereof given to the government under the Federal Assignment
of Claims Act or any other applicable law.
SECTION 7.26 HAZARDOUS MATERIALS; CONTAMINATION. The Borrowers agree to
(a) give notice to the Lender immediately upon either Borrower's acquiring
knowledge of the presence of any Hazardous Materials on any property owned or
controlled by either Borrower or for which either Borrower is responsible or of
any Hazardous Materials Contamination with a full description thereof, except
for reasonable quantities of necessary supplies for use by the Borrower in the
ordinary course of the its current line of business and stored, used and
disposed in accordance with applicable Laws; (b) promptly comply with any Laws
requiring the removal, treatment or disposal of Hazardous Materials or Hazardous
Materials Contamination and provide the Lender with satisfactory evidence of
such compliance; (c) provide the Lender, within thirty (30) days after a demand
by the Lender, with a bond, letter of credit or similar financial assurance
evidencing to the Lender's satisfaction that the necessary funds are available
to pay the cost of removing, treating, and disposing of such Hazardous Materials
or Hazardous Materials Contamination and discharging any Lien which may be
established as a result thereof on any property owned or controlled by either
Borrower or for which either Borrower is responsible; and (d) defend, indemnify
and hold harmless the Lender and its agents, employees, trustees, successors and
assigns from any and all claims which may now or in the future (whether before
or after the termination of this Agreement) be asserted as a result of the
presence of any Hazardous Materials on any property owned or controlled by
either Borrower for which either Borrower is responsible for any Hazardous
Materials Contamination.
VIII. NEGATIVE COVENANTS OF BORROWER
------------------------------
Until payment in full and the performance of all of the Obligations,
without the prior written consent of the Lender, the Borrower will not and will
neither cause nor permit any of its Subsidiaries to, directly or indirectly:
SECTION 8.01 BORROWINGS. Create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money in excess of One Million Dollars ($1,000,000) in
the aggregate at any one time, except (a) borrowings in existence on the date
hereof and reflected on
27
the financial statements which the Borrower furnished to the Lender in writing
prior to the date hereof, (b) borrowings secured by Permitted Liens, and (c)
Indebtedness for Borrowed Money approved by the Lender in connection with any
Permitted Acquisition, which approval will not be unreasonably withheld.
SECTION 8.02 MORTGAGES AND PLEDGES. Create, incur, assume or suffer to
exist any Lien on any of its property or assets, whether now owned or hereafter
acquired, except for Permitted Liens.
SECTION 8.03 METHOD OF ACCOUNTING. Change the method of accounting
employed in the preparation of the financial statements furnished prior to the
date of this Agreement to the Lender pursuant to Part V of this Agreement,
unless required to conform to GAAP and on the condition that the Borrower's
accountants shall furnish such information as the Lender may request to
reconcile the changes with the Borrower's prior financial statements.
SECTION 8.04 Merger, Acquisition or Sale of Assets.
-------------------------------------
(a) The Borrower and each Subsidiary shall not alter or amend
its capital structure or authorize any additional class of equity if as a result
of such action the Borrower would own less than fifty one percent (51%) of any
Subsidiary, or acquire all or substantially all the assets of any Person, or
sell, lease or otherwise dispose of any of net assets in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate, during any twelve (12) month
period.
(b) The Borrower may acquire by merger, stock purchase or
asset purchase all or substantially all the assets of any Person or make
investments in any such Person (each a "Permitted Acquisition" and collectively,
the "Permitted Acquisitions") during the existence of this Agreement and in
connection with, whether concurrently or subsequent to, any such Permitted
Acquisition, alter or amend its capital structure or authorize any additional
class of equity, provided that the Person being acquired or invested in shall be
in a business complementary to the Borrower's current line of business, the
Borrower will own at all times not less than fifty-one percent (51%) of each of
its Subsidiaries, and after completing said Permitted Acquisition the Borrower
shall remain in compliance with all of the terms and conditions of this
Agreement. The Borrower shall provide the Lender with financial information on
the Person being acquired within fifteen (15) days of such Permitted
Acquisition. The Borrower may advance funds for Permitted Acquisitions (said
acquisitions being called "Bank Financed Acquisitions").
(c) Not less than five (5) Business Days prior to finalizing
any Bank Financed Acquisition, and in all cases prior to the Lender advancing
any monies for such Bank Financed Acquisition, the Borrower shall provide the
Lender with a written summary of the transaction, which summary shall set forth,
among other things, the structure of the transaction, including whether the
transaction shall cause a change in the Borrower's or any Subsidiary's capital
structure, require the issuance of stock, or options to purchase stock, or
require the Borrower or
28
any Subsidiary to redeem any stock. For purposes hereof, all consideration
incurred in connection with each Bank Financed Acquisition including, but not
limited to non-compete agreements and the value of assets, stock, warrants, or
other property transferred, pledged or given in connection with any Bank
Financed Acquisition shall be deemed the "Acquisition Price." In addition, the
Borrower shall at the same time provide the Lender with a pro-forma Compliance
Certificate which indicates that no default will occur under this Agreement as a
result of the contemplated Bank Financed Acquisition. The pro-forma Compliance
Certificate may take into consideration the income statement of the targeted
acquisition, adjusted for the projected elimination of any officer compensation.
However, other projected financial efficiencies as of the result of such
acquisition may not be included in the pro-forma. If the target company has had
negative income or EBITDA during the prior twelve month period, the income
statement will be included by the Borrower in the pro-forma Compliance
Certificate.
(d) The Borrower shall seek and obtain the prior written
approval of the Lender prior to finalizing any Bank Financed Acquisition, if:
(i) the Acquisition Price is in excess of $2,500,000;
or
(ii) the total Acquisition Price for all Bank
Financed Acquisitions exceeds $5,000,000; or
(iii) the acquisition is a "hostile" acquisition; or
(iv) the target of the acquisition is a business
whose principal office is located outside of the United States.
(e) Upon completion of each Bank Financed Acquisition, the
Borrower and each Subsidiary shall promptly provide the Lender with all material
details of the transaction requested by the Lender.
(f) In addition, each Person now or hereafter acquired either
through a Permitted Acquisition of a Bank Financed Acquisition shall join as a
co-maker on the Note, and be added to each of the Financing Documents,
including, but not limited to, this Agreement.
SECTION 8.05 ADVANCES AND LOANS. Lend money, give credit or make
advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, Subsidiaries and Affiliates of the
Borrower.
SECTION 8.06 CONTINGENT LIABILITIES. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any person, firm, partnership, joint venture or corporation, except (a) by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (b) guaran-
29
ties by the Borrower of contractual obligations (other than for the payment of
borrowed money) of any Wholly Owned Subsidiary of the Borrower.
SECTION 8.07 INVESTMENTS. Purchase or acquire the obligations or stock
of, or any other or additional interest in, any person, firm, partnership, joint
venture or corporation except (a) in connection with a Permitted Acquisition
and/or a Bank Finance Acquisition, (b) general obligations of, or obligations
unconditionally guaranteed as to principal and interest by, the United States of
America, (c) bonds, debentures, participation certificates or notes issued by
any agency or corporation which is or may hereafter be created by Act of the
Congress of the United States as an agency or instrumentality thereof, (d)
Public Housing Bonds, Temporary Notes or Preliminary Loan Notes, fully secured
by contracts with the United States, and (e) certificates of deposit issued by
the Lender.
SECTION 8.08 SUBSIDIARIES. Except as permitted under Section 8.04 of
this Agreement, create or acquire any Subsidiaries other than the Subsidiaries
existing as of the date hereof.
SECTION 8.09 ADDITIONAL STOCK. Issue any additional stock of any class,
except stock of an existing class issued as a stock dividend.
SECTION 8.10 ERISA Compliance. Neither the Borrower nor any Commonly
Controlled Entity will: (a) engage in or permit any "prohibited transaction" (as
defined in ERISA); (b) cause any "accumulated funding deficiency" as defined in
ERISA and/or the Internal Revenue Code; (c) terminate any pension plan in a
manner which could result in the imposition of a lien on the property of the
Borrower pursuant to ERISA; (d) terminate or consent to the termination of any
Multiemployer Plan; or (e) incur a complete or partial withdrawal with respect
to any Multiemployer Plan.
SECTION 8.11 PROHIBITION ON HAZARDOUS MATERIALS. The Borrower shall not
place, manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned, controlled or operated by the
Borrower or for which the Borrower is responsible, except for reasonable
quantities of necessary supplies for use by the Borrower in the ordinary course
of the its current line of business and stored, used and disposed in accordance
with applicable Laws.
SECTION 8.12 TRANSFER OF COLLATERAL. Transfer, or permit the transfer,
to another location of any of the Collateral or the books and records related to
any of the Collateral; provided, however, that the Borrower may transfer the
Collateral or the books and records related thereto to another location if (a)
the Borrower shall have provided to the Lender prior to such transfer an opinion
of counsel addressed to the Lender to the effect that the Lender's perfected
security interest shall not be affected by such move or if it shall be affected,
setting forth the steps necessary to continue the Lender's perfected security
interest together with the commencement of such steps by the Borrower at its
expense, and (b) shall have taken such steps.
30
SECTION 8.13 SALE AND LEASEBACK. Directly or indirectly enter into any
arrangement to sell or transfer all or any substantial part of its fixed assets
then owned by it and thereupon or within one year thereafter rent or lease the
assets so sold or transferred.
SECTION 8.14 SALE OF ACCOUNTS. Sell, discount, transfer, assign or
otherwise dispose of any of its Accounts, notes receivable, installment or
conditional sales agreements or any other rights to receive income, revenues or
moneys, however evidenced.
SECTION 8.15 LINE OF BUSINESS. Enter into any lines or areas of
business which do not complement the Borrower's current line of business.
IX. EVENTS OF DEFAULT
-----------------
The occurrence of one or more of the following events shall be "Events
of Default" under this Agreement, and the terms "Event of Default" or "Default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
SECTION 9.01 FAILURE TO PAY. The Borrower shall fail to (a) make any
payment of principal or interest on either of the Note or (b) pay any of the
Obligations, when and as the same shall become due and payable.
SECTION 9.02 BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty made herein or in any report, certificate, opinion
(including any opinion of counsel for the Borrower), financial statement or
other instrument furnished in connection with the Obligations or with the
execution and delivery of any of the Financing Documents, shall prove to have
been false or misleading when made in any material respect.
SECTION 9.03 FAILURE TO COMPLY WITH INSURANCE PROVISIONS. The Borrower
shall fail to duly and promptly perform, comply with or observe the terms,
covenants, conditions and agreements set forth in SECTION 7.17 .
SECTION 9.04 FAILURE TO COMPLY WITH COVENANTS. Default shall be made by
the Borrower in the due observance and performance of any covenant, condition or
agreement contained in SECTIONS 7.02, 7.04 or 7.08 hereof or in Part VIII
hereof.
SECTION 9.05 OTHER DEFAULTS. Default shall be made by the Borrower in
the due observance or performance of any other term, covenant or agreement
herein contained, which default shall remain unremedied for thirty (30) days
after written notice thereof to the Borrower by the Lender.
SECTION 9.06 DEFAULT UNDER OTHER FINANCING DOCUMENTS. An event of
default shall occur under any of the other Financing Documents, and such event
of default is not cured within any applicable grace period provided therein.
31
SECTION 9.07 RECEIVER; BANKRUPTCY. The Borrower or any Subsidiary shall
(a) apply for or consent to the appointment of a receiver, trustee or liquidator
of itself or any of its property, (b) admit in writing its inability to pay its
debts as they mature, (c) make a general assignment for the benefit of
creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law or if corporate action shall be
taken by the Borrower or any Subsidiary for the purposes of effecting any of the
foregoing, or (f) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship or
proceeding to continue undischarged for a period of sixty (60) days.
SECTION 9.08 JUDGMENT. Unless adequately insured in the opinion of the
Lender, the entry of a final judgment for the payment of money involving more
than $10,000 against the Borrower or any Subsidiary and the failure by the
Borrower or such Subsidiary to discharge the same, or cause it to be discharged,
within thirty (30) days from the date of the order, decree or process under
which or pursuant to which such judgment was entered, or to secure a stay of
execution pending appeal of such judgment.
SECTION 9.09 EXECUTION; ATTACHMENT. Any execution or attachment shall
be levied against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.
SECTION 9.10 DEFAULT UNDER OTHER BORROWINGS. Default shall be made with
respect to any evidence of indebtedness or liability for borrowed money (other
than the Loan) if the effect of such default is to accelerate the maturity of
such evidence of indebtedness or liability or to permit the holder or obligee
thereof to cause any indebtedness to become due prior to its stated maturity.
SECTION 9.11 MATERIAL ADVERSE CHANGE. If the Lender in its sole
discretion determines in good faith that a material adverse change has occurred
in the financial condition of the Borrower from the financial condition set
forth in the financial statements dated June 30, 1996 or from the financial
condition of the Borrower most recently disclosed to the Lender in any manner.
SECTION 9.12 IMPAIRMENT OF POSITION. If the Lender in its sole
discretion determines in good faith that an event has occurred which impairs the
prospect of payment of the Obligations and/or the value of the Collateral.
SECTION 9.13 CHANGE IN MANAGEMENT. Any change in the composition of
more than two members of the Senior Management of the Borrower.
32
SECTION 9.14 AUDIT RESULTS. If the Lender concludes after examining the
results of any audits of the Borrower's books and records or the Collateral that
the condition of the Borrower is unsatisfactory.
X. RIGHTS AND REMEDIES UPON DEFAULT
--------------------------------
SECTION 10.01 DEMAND; ACCELERATION. The occurrence or non-occurrence of
an Event of Default under this Agreement shall in no way affect or condition the
right of the Lender to demand payment at any time of any of the Obligations
which are payable on demand regardless of whether or not an Event of Default has
occurred. Upon the occurrence of an Event of Default, and in every such event
and at any time thereafter, the Lender may declare the Obligations due and
payable, without presentment, demand, protest, or any notice of any kind, all of
which are hereby expressly waived, anything contained herein or in any of the
other Financing Documents to the contrary notwithstanding.
SECTION 10.02 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In addition to
all other rights and remedies provided hereunder or as shall exist at law or in
equity from time to time, the Lender may, without notice to the Borrower:
(a) request any account debtor obligated on any of the
Accounts to make payments thereon directly to the Lender, with the Lender taking
control of the cash and non-cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any
part of the Collateral;
(d) remove from any of the Borrower's or any Subsidiary's
place of business all books, records, ledger sheets, correspondence, invoices
and documents, relating to or evidencing any of the Collateral or without cost
or expense to the Lender, make such use of the Borrower's or any Subsidiary's
place(s) of business as may be reasonably necessary to administer, control and
collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill in
whole or in part the purchase order of any account debtor;
(f) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
33
(h) settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(i) endorse the name of the Borrower upon any items of payment
relating to the Collateral or on any proof of claim in bankruptcy against an
account debtor; and
(j) notify the post office authorities to change the address
for the delivery of mail to the Borrower to such address or post office box as
the Lender may designate and receive and open all mail addressed to the
Borrower.
SECTION 10.03 PERFORMANCE BY LENDER. If the Borrower shall fail to pay
the Obligations or otherwise fail to perform, observe or comply with any of the
conditions, covenants, terms, stipulations or agreements contained in this
Agreement or any of the other Financing Documents, the Lender without notice to
or demand upon the Borrower and without waiving or releasing any of the
Obligations or any Event of Default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account and
at the expense of the Borrower, and may enter upon the premises of the Borrower
for that purpose and take all such action thereon as the Lender may consider
necessary or appropriate for such purpose. All sums so paid or advanced by the
Lender and all costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred in connection therewith (the "Expense
Payments") together with interest thereon from the date of payment, advance or
incurring until paid in full at the rate of one percent (1%) per annum in excess
of the highest fluctuating interest rate payable under the Note from time to
time shall be paid by the Borrower to the Lender on demand and shall constitute
and become a part of the Obligations.
SECTION 10.04 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES. Upon the
occurrence of an Event of Default (and in addition to all of its rights, powers
and remedies under this Agreement), the Lender shall have all of the rights and
remedies of a secured party under the Maryland Uniform Commercial Code and other
applicable laws, and the Lender is authorized to offset and apply to all or any
part of the Obligations all moneys, credits and other property of any nature
whatsoever of the Borrower now or at any time hereafter in the possession of, in
transit to or from, under the control or custody of, or on deposit with, the
Lender. Upon demand by the Lender, the Borrower shall assemble the Collateral
and make it available to the Lender, at a place designated by the Lender. The
Lender or its agents may enter upon the Borrower's premises to take possession
of the Collateral, to remove it, to render it unusable, or to sell or otherwise
dispose of it.
Any written notice of the sale, disposition or other intended action by
the Lender with respect to the Collateral which is sent by regular mail, postage
prepaid, to the Borrower at the address set forth in Part XI hereof, or such
other address of the Borrower which may from time to time be shown on the
Lender's records, at least ten (10) days prior to such sale, disposition or
other action, shall constitute reasonable notice to the Borrower. The Borrower
shall pay on demand all costs and expenses, including, without limitation,
attorney's fees and expenses,
34
incurred by or on behalf of the Lender in preparing for sale or other
disposition, selling, managing, collecting or otherwise disposing of, the
Collateral. All of such costs and expenses (the "Liquidation Costs") together
with interest thereon from the date incurred until paid in full at the Default
Rate, shall be paid by the Borrower to the Lender on demand and shall constitute
and become a part of the Obligations. Any proceeds of sale or other disposition
of the Collateral will be applied by the Lender to the payment of the
Liquidation Costs and Expense Payments, and any balance of such proceeds will be
applied by the Lender to the payment of the balance of the Obligations in such
order and manner of application as the Lender may from time to time in its sole
discretion determine. After such application of the proceeds, any balance shall
be paid to the Borrower or to any other party entitled thereto.
XI. MISCELLANEOUS
-------------
SECTION 11.01 NOTICES. All notices, certificates or other
communications hereunder shall be deemed given when delivered by hand or
courier, or three (3) days after the date when mailed by certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to the Lender: NATIONSBANK, N.A.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Vice President
if to the Borrower: FORENSIC TECHNOLOGIES INTERNATIONAL
CORPORATION
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxx Xxxxxxx
Chief Financial Officer
with a copy to: Xxxxxx Xxxxxx, Esquire
Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
SECTION 11.02 CONSENTS AND APPROVALS. If any consent, approval, or
authorization of any state, municipal or other governmental department, agency
or authority or of any person, or any person, corporation, partnership or other
entity having any interest therein, should be necessary to effectuate any sale
or other disposition of the Collateral, the Borrower agrees to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.
SECTION 11.03 Remedies, etc. Cumulative. Each right, power and remedy
of the Lender as provided for in this Agreement or in any of the other Financing
Documents or now or
35
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
or remedy provided for in this Agreement or in any of the other Financing
Documents or now or hereafter existing at law or in equity, by statute or
otherwise, and the exercise or beginning of the exercise by the Lender of any
one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers or remedies. In order to entitle the Lender to exercise any remedy
reserved to it herein, it shall not be necessary to give any notice, other than
such notice as may be expressly required in this Agreement.
SECTION 11.04 NO WAIVER OF RIGHTS BY THE LENDER. No failure or delay by
the Lender to insist upon the strict performance of any term, condition,
covenant or agreement of this Agreement or of any of the other Financing
Documents, or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver of any such term, condition, covenant or
agreement or of any such breach or preclude the Lender from exercising any such
right, power or remedy at any later time or times. By accepting payment after
the due date of any amount payable under this Agreement or under any of the
other Financing Documents, the Lender shall not be deemed to waive the right
either to require prompt payment when due of all other amounts payable under
this Agreement or under any of the other Financing Documents, or to declare a
default for failure to effect such prompt payment of any such other amount.
SECTION 11.05 ENTIRE AGREEMENT. The Financing Documents shall
completely and fully supersede all other agreements, both written and oral,
between the Lender and the Borrower relating to the Obligations. Neither the
Lender nor the Borrower shall hereafter have any rights under such prior
agreements but shall look solely to the Financing Documents for definition and
determination of all of their respective rights, liabilities and
responsibilities relating to the Obligations.
SECTION 11.06 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS. All
covenants, agreements, representations and warranties made by the Borrower
herein and in any certificate, in the Financing Documents and in any other
instruments or documents delivered pursuant hereto shall survive the making by
the Lender of the Loans and the execution and delivery of the Note, and shall
continue in full force and effect so long as any of the Obligations are
outstanding and unpaid. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrower, which are contained in this Agreement shall inure to the
benefit of the successors and assigns of the Lender, and all covenants, promises
and agreements by or on behalf of the Lender which are contained in this
Agreement shall inure to the benefit of the permitted successors and permitted
assigns of the Borrower, but this Agreement may not be assigned by the Borrower
without the prior written consent of the Lender.
SECTION 11.07 EXPENSES. The Borrower agrees to pay all out-of-pocket
expenses of the Lender (including the reasonable fees and expenses of its legal
counsel) in connection with the preparation of this Agreement, the recordation
of all financing statements and such other
34
instruments as may be required by the Lender at the time of, or subsequent to,
the execution of this Agreement to secure the Obligations (including any and all
recordation tax and other costs and taxes incident to recording), the
enforcement of any provision of this Agreement and the collection of the
Obligations. The Borrower agrees to indemnify and save harmless the Lender for
any liability resulting from the failure to pay any required recordation tax,
transfer taxes, recording costs or any other expenses incurred by the Lender in
connection with the Obligations. The provisions of this Section shall survive
the execution and delivery of this Agreement and the repayment of the
Obligations. The Borrower further agrees to reimburse the Lender upon demand for
all out-of-pocket expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in enforcing any of the Obligations or any
security therefor, which agreement shall survive the termination of this
Agreement and the repayment of the Obligations.
SECTION 11.08 COUNTERPARTS. This Agreement may be executed in any
number of counterparts all of which together shall constitute a single
instrument.
SECTION 11.09 GOVERNING LAW. This Agreement and all of the other
Financing Documents shall be governed by, and construed in accordance with the
laws of the State of Maryland.
SECTION 11.10 MODIFICATIONS. No modification or waiver of any provision
of this Agreement or of any of the other Financing Documents, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing, 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 the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.
SECTION 11.11 ILLEGALITY. If fulfillment of any provision hereof or any
transaction related hereto or to any of the other Financing Documents, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof pertaining to
repayment of the Obligations operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such clause or provision
only shall be void, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect; and if such
provision pertains to repayment of the Obligations, then, at the option of the
Lender, all of the Obligations of the Borrower to the Lender shall become
immediately due and payable.
SECTION 11.12 EXTENSION OF MATURITY. Should the principal of or
interest on the Note become due and payable on other than a Banking Day, the
maturity thereof shall be extended to the next succeeding Banking Day and in the
case of principal, interest shall be payable thereon at the rate per annum
specified in the Note during such extension.
37
SECTION 11.13 GENDER, ETC. Whenever used herein, the singular number
shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders.
SECTION 11.14 HEADINGS. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect any of the terms
hereof.
SECTION 11.15 WAIVER OF TRIAL BY JURY. The parties hereto hereby waive
trial by jury in any action or proceeding to which both of them may be parties,
arising out of or in any way pertaining to (a) this Agreement, (b) the Loan,
Obligations, and Collateral which are the subject of this Agreement, and (c) any
and all notes, guarantees, assignments or agreements of any kind relating to the
Loan. It is agreed and understood that this waiver constitutes a waiver of trial
by jury of all claims against all parties to such actions or proceedings,
including claims against parties who are not parties to this Agreement.
This waiver is knowingly, willingly and voluntarily made by each of the
parties hereto, and the parties hereby represent that no representations of fact
or opinion have been made by any individual to induce this waiver of trial by
jury or to in any way modify or nullify its effect. The parties further
represent that they have been represented in the signing of this Agreement and
in the making of this waiver by independent legal counsel, selected of their own
free will, and that they have had the opportunity to discuss this waiver with
counsel.
SECTION 11.16 LIABILITY OF THE LENDER. The Borrower hereby agrees that
the Lender shall not be chargeable for any negligence, mistake, act or omission
of any accountant, examiner, agency or attorney employed by the Lender (except
for the willful misconduct of any person, corporation, partnership or other
entity employed by the Lender) in making examinations, investigations or
collections, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
Borrower:
WITNESS OR ATTEST: FORENSIC TECHNOLOGIES INTERNATIONAL
CORPORATION
-------------------------- By:
--------------------------(SEAL)
Name:
Title:
Subsidiaries:
WITNESS OR ATTEST: TEKLICON, INC.
__________________________ By:
--------------------------(SEAL)
Name:
Title:
Lender:
WITNESS: NATIONSBANK, N.A.
__________________________ By:/s/ Xxxxxxx X. Xxxx
--------------------------(SEAL)
Xxxxxxx X. Xxxx
Vice President
39
