FINANCING AND SECURITY AGREEMENT
BY AND AMONG
DISPATCH MANAGEMENT SERVICES CORP.
DISPATCH MANAGEMENT SERVICES SAN FRANCISCO CORP.
DISPATCH MANAGEMENT SERVICES NEW YORK CORP.
DISPATCH MANAGEMENT SERVICES ACQUISITION CORP.
ROAD MANAGEMENT SERVICES CORPORATION
BALMERINO HOLDINGS LIMITED
STATETIP LIMITED
AND
NATIONSBANK, N.A.
February 2, 1998
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS 1
SECTION 1.1 CERTAIN DEFINED TERMS 1
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS 13
ARTICLE 2 THE CREDIT FACILITY 14
SECTION 2.1 THE REVOLVING CREDIT FACILITY 14
SECTION 2.2 THE LETTERS OF CREDIT 17
SECTION 2.3 GENERAL FINANCING PROVISIONS 18
ARTICLE 3 THE COLLATERAL 20
SECTION 3.1 DEBT AND OBLIGATIONS SECURED 20
SECTION 3.2 GRANT OF LIENS 21
SECTION 3.3 COLLATERAL DISCLOSURE LIST 21
SECTION 3.4 PERSONAL PROPERTY 21
SECTION 3.4.1 SECURITIES, CHATTEL PAPER, PROMISSORY NOTES, ETC. 21
SECTION 3.5 RECORD SEARCHES 21
SECTION 3.6 RELEASE 22
SECTION 3.7 INCONSISTENT PROVISIONS 22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES 22
SECTION 4.1 REPRESENTATIONS AND WARRANTIES 22
SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES 27
ARTICLE 5 CONDITIONS PRECEDENT 27
SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE AND INITIAL
LETTER OF CREDIT 27
SECTION 5.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT 30
SECTION 5.3. CONDITIONS TO ALL EXTENSIONS OF CREDIT AFTER
MARCH 2, 1998 30
ARTICLE 6 COVENANTS OF THE BORROWERS 31
SECTION 6.1 AFFIRMATIVE COVENANTS 31
SECTION 6.2 NEGATIVE COVENANTS 38
ARTICLE 7 DEFAULT AND RIGHTS AND REMEDIES 41
SECTION 7.1 EVENTS OF DEFAULT 41
SECTION 7.2 REMEDIES 43
ARTICLE 8 MISCELLANEOUS 47
SECTION 8.1 NOTICES 47
SECTION 8.2 AMENDMENTS; WAIVERS 47
SECTION 8.3 CUMULATIVE REMEDIES 48
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SECTION 8.4 SEVERABILITY 49
SECTION 8.5 ASSIGNMENTS BY LENDER 49
SECTION 8.6 SUCCESSORS AND ASSIGNS 49
SECTION 8.7 CONTINUING AGREEMENTS 50
SECTION 8.8 ENFORCEMENT COSTS 50
SECTION 8.9 APPLICABLE LAW; JURISDICTION 50
SECTION 8.10 DUPLICATE ORIGINALS AND COUNTERPARTS 51
SECTION 8.11 HEADINGS 51
SECTION 8.12 NO AGENCY 51
SECTION 8.13 DATE OF PAYMENT 52
SECTION 8.14 ENTIRE AGREEMENT 52
SECTION 8.15 WAIVER OF TRIAL BY JURY 52
SECTION 8.16 LIABILITY OF THE LENDER 52
SECTION 8.17 ARBITRATION 53
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FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this
2nd day of February, 1998, by and among DISPATCH MANAGEMENT SERVICES CORP., a
corporation organized under the laws of the State of Delaware (the
"Company"), DISPATCH MANAGEMENT SERVICES SAN FRANCISCO CORP., a corporation
organized under the laws of the State of Delaware, DISPATCH MANAGEMENT
SERVICES NEW YORK CORP., a corporation organized under the laws of the State
of New York, DISPATCH MANAGEMENT SERVICES ACQUISITION CORP., a corporation
organized under the laws of the State of Delaware, ROAD MANAGEMENT SERVICES
CORPORATION, a corporation organized under the laws of the State of Delaware
(collectively, the "Domestic Subsidiaries" and each a "Domestic Subsidiary")
and BALMERINO HOLDINGS LIMITED, a company incorporated under the laws of New
Zealand, and STATETIP LIMITED, a private limited liability company organized
under the laws of England and Wales (collectively, the "Foreign Subsidiaries"
and each a "Foreign Subsidiary") (the Domestic Subsidiaries and the Foreign
Subsidiaries being called collectively, the "Subsidiaries" and each a
"Subsidiary" and together with the Company, being called collectively the
"Borrowers" and each a "Borrower") and NATIONSBANK, N.A., a national banking
association, its successors and assigns, (the "Lender").
RECITALS
A. The Borrowers have applied to the Lender for a revolving credit
facility in the maximum principal amount of $25,000,000 to be used by the
Borrowers for short term working capital, to finance Permitted Acquisitions,
and for the issuance of Letters of Credit.
B. The Lender is willing to make this credit facility available to the
Borrowers upon the terms and subject to the conditions set forth in this
Agreement.
ARTICLE 1
DEFINITIONS
SECTION 1.1 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 or
otherwise, all collateral security of any kind (including real property
mortgages) given by any person with respect to any of the foregoing, all
books and records in whatever media (paper, electronic or otherwise) recorded
or stored, with respect to any or all of the foregoing and all equipment and
general intangibles necessary or beneficial desirable to retain, access
and/or process the information contained in those books and records, and all
proceeds (cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Affiliate" means, with respect to the Company, any Person, directly or
indirectly controlling, directly or indirectly controlled by, or under direct
or indirect common control with the Company 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 8.1.
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a consolidated balance
sheet of the Company and its Subsidiaries.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended from
time to time.
"Borrowing Base" has the meaning described in Section 2.1.3 and 5.2.2
(Borrowing Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
and 5.2.2 (Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.3
(Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the State are authorized or required to close.
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"Capital Lease" means any lease of real or personal property, for which
the related Lease Obligations have been or should be, in accordance with GAAP
consistently applied, capitalized on the balance sheet.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods;
any returned, rejected or repossessed goods covered by any such writing or
writings and all proceeds (in any form including, without limitation,
accounts, contract rights, documents, chattel paper, instruments and general
intangibles) of such returned, rejected or repossessed goods; and all
proceeds (cash and non-cash) of the foregoing.
"Closing Date" means the Business Day, in any event not later than
February 13, 1998 on which the Lender shall be satisfied that the conditions
precedent set forth in Section 5.1 (Conditions) have been fulfilled.
"Collateral" means all property of the Borrowers subject from time to
time to the Liens of this Agreement, the Security Documents and the other
Financing Documents, together with any and all cash and non-cash proceeds and
products thereof.
"Collateral Disclosure List" has the meaning described in Section 3.3
(Collateral Disclosure List).
"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.
"Commitment" means the Revolving Credit Commitment.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of Section
414(b) or (c) of the Internal Revenue Code.
"Credit Facility" means the Revolving Credit Facility, and "Credit
Facilities" means collectively the Revolving Credit Facility and any and all
other credit facilities now or hereafter extended under or secured by this
Agreement.
"Default" means an event which, with the giving of notice or lapse of
time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Default Rate" has the meaning set forth in the Revolving Credit Note.
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"Documents" means all documents of title, whether now existing or hereafter
acquired or created, and all proceeds (cash and non-cash of the foregoing).
"Early Termination Fee" has the meaning described in Section 2.1.9 (Early
Termination Fee).
"Earnings" means as to the Company and its Subsidiaries for any period
of determination thereof, the sum of (a) net income (or loss) determined in
accordance with GAAP consistently applied, plus (b) depreciation and
amortization of assets for such period, plus (c) interest for such period,
less (d) all non financed capital expenditures, all as determined on a
consolidated basis on an annualized basis.
"EBITDA" means shall mean as to the Company and its Subsidiaries for any
period of determination thereof, the sum of (a) net profit (or loss)
determined in accordance with GAAP, plus (b) interest expense and federal and
state taxes for such period, plus (c) depreciation and amortization of assets
for such period, all as determined on a consolidated basis for the twelve
(12) month period then ending.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
determination thereof, each account which conforms and continues to conform
to the following criteria to the satisfaction of the Lender: (a) the Account
arose in the ordinary course of the Company's or any Domestic Subsidiary's
business from a bona fide outright sale or lease of goods by the Company or a
Domestic Subsidiary, or from services performed by the Company or any
Domestic Subsidiary, and (i) such goods have been delivered to the
appropriate Account Debtors or their respective designees, the Company or
such Domestic Subsidiary has in its possession shipping and delivery receipts
evidencing such shipment and delivery, no return, 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; (b) 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; (c) the title of the Company or such
Domestic Subsidiary 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
Company and the Domestic Subsidiary 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; (d) the amount
shown on the books of the Company or the Domestic Subsidiary and on any
invoice, certificate, schedule or statement delivered to the Lender is owing
to the Company or such Domestic Subsidiary and no partial payment has been
received unless reflected with that delivery; (e) 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; (f) the Account Debtor has
not returned or refused to
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retain, or otherwise notified the Company or such Domestic Subsidiary of any
dispute concerning, or claimed nonconformity of, any of the goods or services
from the sale of which the Account arose; (g) the Account is not outstanding
more than ninety (90) days from the date of the invoice therefor; (h) 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 (or any
portion thereof) due to the Company or such Domestic Subsidiary to be
non-Eligible Receivables; (i) 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 Company or such Domestic
Subsidiary to the Lender of the Account arising with respect thereto; (j) the
Account Debtor is not a Subsidiary or other Affiliate of the Company; (k) the
Account Debtor is not incorporated in or primarily conducting business in any
jurisdiction located outside of the United States of America; (l) the Company
or such Domestic Subsidiary 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 Company or such Domestic Subsidiary in the
ordinary course of its business, (m) no part of the Account represents a
progress billing or a retainage, (n) the Account is not excluded based on the
results of the Lender's prefunding audit, or any subsequent audit; and (o)
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. The foregoing criteria may be revised by the Lender in
its sole but reasonable discretion based on the results of the Lender's
prefunding audit, or any subsequent audit. In the event of any dispute,
under the foregoing criteria, as to whether an account is, or has ceased to
be, an Eligible Receivable, the decision of the Lender in the exercise of its
sole and absolute discretion shall control.
"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, reasonable attorney's fees and
expenses) of any nature whatsoever paid or incurred by or on behalf of the
Lender in connection with (a) any or all of the Obligations, this Agreement
and/or any of the other Financing Documents, (b) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral, this
Agreement or any of the other Financing Documents, including, without
limitation, those costs and expenses more specifically enumerated in Section
8.8 (Enforcement Costs), and (c) all customary processing and/or servicing
fees incident to the administration of the Credit Facility.
"Equipment" means all equipment, machinery, computers, chattels, tools,
parts, machine tools, furniture, furnishings, fixtures and supplies of every
nature, presently existing or hereafter acquired or created and wherever
located, whether or not the same shall be deemed to be affixed to real
property, together with all accessions, additions, fittings, accessories,
special tools, and improvements thereto and substitutions therefor and all
parts and equipment which may be attached to or which are necessary or
beneficial for the operation, use and/or disposition of such personal
property, all licenses, warranties, franchises and general intangibles
related thereto or necessary or beneficial for the operation, use and/or
disposition of the same, together with all Accounts, Chattel Paper,
Instruments and other consideration received by any Borrower
5
on account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all proceeds
(cash and non-cash) of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning described in Article 7.
"Facilities" means the collective reference to the Revolving Loan and
other credit facilities now or hereafter provided to the Borrowers by the
Lender whether under this Agreement or otherwise.
"Fees" means the collective reference to each fee payable to the Lender
under the terms of this Agreement or under the terms of any of the other
Financing Documents, including, without limitation, the following: Revolving
Credit Unused Line Fees, Letter of Credit Fees, Early Termination Fee,
Origination Fee, and Field Examination Fees.
"Field Examination Fee" and "Field Examination Fees" have the meanings
described in Section 2.3.4 (Field Examination Fees).
"Financing Documents" means at any time collectively this Agreement, the
Note, the Security Documents, the Letter of Credit Documents, and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by the Company, any Subsidiary 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, the Note, any of the Security Documents, any
of the Facilities, and/or any of the Obligations.
"Fixed or Capital Assets" of a Person at any date means all assets which
would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment at such date.
"Fixed Charges" means for any period of determination thereof, the
scheduled or required payments (including, without limitation, principal and
interest) on all Indebtedness for Borrowed Money of the Company and its
Subsidiaries, plus Capital Leases of the Company and its Subsidiaries, plus
interest expense, plus the Implied Amortization of the Loan.
"Fixed Charge Coverage Ratio" means for the period of any determination
thereof the ratio of (a) Earnings to (b) Fixed Charges.
"Funded Debt" shall mean for any period of determination thereof, an
amount equal to the aggregate amount of all payments in principal in respect
to all Liabilities scheduled to be due and payable during such period,
together with all other indebtedness due in connection
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with any Capital Leases.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" means all general intangibles of every nature,
whether presently existing or hereafter acquired or created, including
without limitation all books and records, claims (including without
limitation all claims for income tax and other refunds), choses in action,
contract rights, judgments, patents, patent licenses, trademarks, trademark
licenses, licensing agreements, rights in intellectual property, goodwill
(including goodwill of the Borrowers' business symbolized by and associated
with any and all trademarks, trademark licenses, copyrights and/or service
marks), royalty payments, licenses, contractual rights, rights as lessee
under any lease of real or personal property, literary rights, copyrights,
service names, service marks, logos, trade secrets, amounts received as an
award in or settlement of a suit in damages, deposit accounts, interests in
limited liability companies, any and all trade secrets, any and all
intellectual property rights in computer software and computer software
products, now or hereafter existing, created, acquired or held; rights in
applications for any of the foregoing, books and records in whatever media
(paper, electronic or otherwise) recorded or stored, with respect to any or
all of the foregoing and all equipment and general intangibles necessary or
beneficial desirable to retain, access and/or process the information
contained in those books and records, and all proceeds (cash and non-cash) of
the foregoing.
"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 and any department, agency or instrumentality
thereof.
"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 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 any 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 any
Borrower or for which any Borrower has responsibility, including, without
limitation, improvements, facilities, soil, ground water, air or other
elements on, or of, any property now or hereafter owned or acquired by any
Borrower, and any other contamination by Hazardous Materials for which any
Borrower is, or is claimed to be, responsible.
7
"Implied Amortization of the Loan" means for any period, shall be the
greater of $2,000,000, or one fifth (1/5th) of the outstanding principal
balance of the Loan as of the end of any fiscal quarter.
"Indebtedness" of a Person means at any date the total liabilities of
such Person at such time determined in accordance with GAAP consistently
applied.
"Indebtedness for Borrowed Money" of a Person means at any time means
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 with respect to Capital Leases; (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 personally liable for the payment thereof,
(e) obligations of third parties which are being guarantied or indemnified
against by such Person or which are secured by the property of such Person;
(f) any obligation of such Person under a employee stock ownership plan or
other similar employee benefit plan; and (g) any obligation of such Person or
a Commonly Controlled Entity to a Multiemployer Plan; but excluding trade and
other accounts payable in the ordinary course of business in accordance with
customary trade terms and which are not overdue (as determined in accordance
with customary trade practices) or which are being disputed in good faith by
such Person and for which adequate reserves are being provided on the books
of such Person in accordance with GAAP.
"Initial Public Offering" means a sale to the public of common stock of
the Company under the Securities Act of 1933, as amended, or any similar
statute then in effect (the "Securities Act"), pursuant to the terms and
conditions set forth in the Company's Registration Statement on Form S-1
(Registration No. 33339971), as amended (the "Registration Statement"), and
as filed with the Securities and Exchange Commission on December 24, 1997.
Such sale shall be concluded not later than the Closing Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the Income Tax Regulations issued and proposed
to be issued thereunder.
"Instrument" means a negotiable instrument (as defined under Article 3
of the Uniform Commercial Code), a "certificated security" (as defined under
Article 8 of the Uniform Commercial Code), or any other writing which
evidences a right to payment of money and is not itself a security agreement
or lease and is of a type which is in the ordinary course of business
transferred by delivery with any necessary indorsement.
"Inventory" means all inventory of the Borrowers and all right, title
and interest of the Borrowers in and to all of its now owned and hereafter
acquired goods, merchandise and other personal property furnished under any
contract of service or intended for sale or lease, including, without
limitation, all raw materials, work-in-progress, finished goods and materials
and supplies of any kind, nature or description which are used or consumed in
any Borrower's
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business or are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and
other licenses, warranties, franchises, general intangibles, personal
property and all documents of title or documents relating to the same and all
proceeds (cash and non-cash) of the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument, item, and
other remittance in payment or on account of payment of the Receivables 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 a Receivable, and other proceeds of Collateral; and "Items
of Payment" means the collective reference to all of the foregoing.
"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.
"Lease Obligations" of a Person means at any date the rental commitments
of such Person for such period under leases for real and/or personal property
(net of rent from subleases thereof, but including taxes, insurance,
maintenance and similar expenses which the lessee is obligated to pay under
the terms of said leases, except to the extent that such taxes, insurance,
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
"Letter of Credit" and "Letters of Credit" shall have the meanings
described in Section 2.2.1 hereof.
"Letter of Credit Agreement" means the collective reference to each
letter of credit application and agreement substantially in the form of the
Lender's then standard form of application for letter of credit or such other
form as may be approved by the Lender, executed and delivered by any Borrower
in connection with the issuance of a Letter of Credit, as the same may from
time to time be amended, restated, supplemented or modified and "Letter of
Credit Agreements" means all of the foregoing in effect at any time and from
time to time.
"Letter of Credit Documents" means any and all drafts under or
purporting to be under a Letter of Credit, any Letter of Credit Agreement,
and any other instrument, document or agreement executed and/or delivered by
any Borrower or any other Person under, pursuant to or in connection with a
Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Fee" and "Letter of Credit Fees" have the meanings
described in Section 2.2.2 hereof.
"Letter of Credit Obligations" means all Obligations of the Borrowers
with respect to the Letters of Credit and the Letter of Credit Agreements.
"Liabilities" means at any date all liabilities that in accordance with
GAAP consistently applied should be classified as liabilities on a
consolidated balance sheet of the
9
Company and its Subsidiaries on a consolidated basis.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien, claim or
charge of any kind, whether perfected or unperfected, avoidable or
unavoidable, including, without limitation, any conditional 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 the Revolving Loan.
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure for
Making Advances).
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note" means the Revolving Credit Note, and "Notes" means collectively
the Revolving Credit Note and any other promissory note which may from time
to time evidence the Obligations.
"Obligations" means all present and future indebtedness, obligations,
and liabilities, whether now existing or contemplated or hereafter arising,
of any Borrower to the Lender under, arising pursuant to, in connection with
and/or on account of the provisions of this Agreement, each Note, each
Security Document, and any of the other Financing Documents, the Loan, and
the Credit Facility including, without limitation, the principal of, and
interest on, the Note, late charges, the Fees, Enforcement Costs, and other
prepayment penalties (if any), letter of credit fees or 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 Borrowers 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.
"Origination Fee" has the meaning described in Section 2.3.3 (Origination
Fee).
"Outstanding Letter of Credit Obligations" has the meaning described in
Section 2.2.3 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
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"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 Borrowers have the financial ability to
pay, with all penalties and interest, at all times without materially and
adversely affecting the Borrowers, 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) deposits or pledges to secure
obligations under workers' 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 a Default or 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; (e) Liens in connection with any Capital Leases, now or
hereafter entered into by any Borrower, not to exceed $5,000,000 in the
aggregate at any time; (f) Liens existing as of the Closing Date in
connection with Capital Leases or Equipment which do not exceed $3,500,000 in
the aggregate; and (g) such other Liens, if any, as are set forth on EXHIBIT
"D" attached hereto and made a part hereof.
"Permitted Uses" means with respect to the Revolving Loan, the payment
of expenses incurred in the ordinary course of any Borrower's business.
"Person" means and includes an individual, a corporation, a partnership,
a joint venture, a trust, an unincorporated association, a limited liability
company, a government or political subdivision or agency thereof or any other
organization or entity.
"Plan" means any pension plan which is covered by Title IV of ERISA and
in respect of which the Company or a Commonly Controlled Entity is an
"employer" as defined in Section 3 of ERISA.
"Purchase Agreements" means all those certain purchase agreements set
forth on EXHIBIT "F" attached hereto, together with any and all amendments,
modifications, and supplements thereto, restatements thereof, and substitutes
therefor.
"Purchase Agreement Documents" means collectively the Purchase
Agreements and any and all other agreements, documents or instruments,
previously, now or hereafter executed and delivered by the Borrowers, the
Sellers, or any other Person in connection with the Purchase Agreement
Transaction.
"Purchase Agreement Transaction" means the asset purchase agreement
transaction under the provisions of the Purchase Agreements.
"Purchase Price" means all consideration incurred in connection with
each Permitted 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 Permitted Acquisition.
11
"Receivable" means one of the Borrowers' now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments and "Receivables" means all of the Borrowers' now or hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments, and all cash and non-cash proceeds and products thereof.
"Reportable Event" means 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 Company
or a Subsidiary, or, with respect to financial matters, the chief financial
officer of the Company.
"Revolving Credit Commitment" means the agreement of the Lender relating
to the making of the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in Section
2.1.1. (Revolving Credit Facility).
"Revolving Credit Expiration Date" means May 31, 2000.
"Revolving Credit Facility" means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement.
"Revolving Credit Note" has the meaning described in Section 2.1.5
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Revolving
Credit Commitment is terminated pursuant to Section 7.2.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line
Fees" have the meanings described in Section 2.1.8 (Revolving Credit Unused
Line Fee).
"Revolving Loan" has the meaning described in Section 2.1.1 (Revolving
Credit Facility).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory
Prepayments).
"Second Tier Subsidiaries" means the subsidiaries of the Subsidiaries
listed on
12
EXHIBIT C attached hereto.
"Securities" means the stock pledged to secure the Obligations, pursuant
to the Stock Pledge Agreements, and all proceeds (cash and non-cash) of the
foregoing.
"Security Documents" means collectively any assignment, pledge
agreement, security agreement, 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 real or
personal property to secure all or any portion of the Obligations, all as the
same may from time to time be amended, restated, supplemented or otherwise
modified, including, without limitation, this Agreement and the Stock Pledge
Agreements.
"Sellers" means the sellers named in the Purchase Agreements.
"State" means the State of Maryland.
"Stock Pledge Agreements" means those certain Pledge, Assignment and
Security Agreements and that certain Deed of Charge over Shares each of even
date herewith from the Company pursuant to which the Company, among other
things, assigns, pledges, grants and conveys to the Lender a first lien
security interest in all of the common stock of the Domestic Subsidiaries and
Foreign Subsidiaries.
"Subsidiary" means the subsidiaries set forth in the first paragraph of
this Agreement, and any corporation the majority of the voting shares of
which at the time are owned directly by any Borrower and/or by one or more
Subsidiaries of any Borrower and for purposes hereof, include each Second
Tier Subsidiary and each Second Tier Subsidiary which is subsequently
converted into a limited liability company in accordance with Section 6.2.2
of this Agreement.
"Target" has the meaning set forth in Section 6.2.1 hereof.
"Taxes" means 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 any
Borrower or any of its properties or assets or any part thereof or in respect
of any of its franchises, businesses, income or profits.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time
to time in the State.
"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 any
Borrower and/or by one or more Wholly Owned Subsidiaries
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of any Borrower.
SECTION 1.2 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 Uniform Commercial Code shall have
the same meanings as assigned to them by the 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 article, section, subsection, schedule and exhibit
references are references to articles, 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 shall mean the same as the foregoing may
from time to time be amended, restated, substituted, extended, renewed,
supplemented or otherwise modified.
ARTICLE 2
THE CREDIT FACILITY
SECTION 2.1 The Revolving Credit Facility.
2.1.1 Revolving Credit Facility. Subject to and upon the
provisions of this Agreement, the Lender establishes a revolving credit
facility in favor of the Borrowers. The aggregate of all advances under the
Revolving Credit Facility are sometimes referred to in this Agreement
collectively as the "Revolving Loan".
The principal amount of Twenty Five Million Dollars ($25,000,000) is the
"Revolving Credit Committed Amount".
During the Revolving Credit Commitment Period, the Lender agrees to make
advances under the Revolving Loan requested by the Borrowers from time to
time provided that after giving effect to any Borrower's request, the
outstanding principal balance of the Revolving Loan and of the Letter of
Credit Obligations would not exceed the lesser of (a) the Revolving Credit
Committed Amount, or (b) the most current Borrowing Base. The Lender may, in
its sole and absolute discretion, eliminate the Borrowing Base restrictions
set forth in this Agreement, after the first anniversary date of the Closing
Date, if the Lender determines, among other things, that the Company has
successfully converted its Subsidiaries to the "DMS Model" and the Company
and its Subsidiaries financial performance is satisfactory in all respects.
14
2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender
Protection Loans. The Borrowers may borrow under the Revolving Credit
Commitment on any Business Day. Advances under the Revolving Loan shall be
deposited to the Company's demand deposit account with the Lender or shall be
otherwise applied as directed by the Borrowers, which direction the Lender
may require to be in writing. No later than 10:00 a.m. (Washington, D.C.
time) on the date of the requested borrowing, the Borrowers shall give the
Lender oral or written notice (a "Loan Notice") of the amount and (if
requested by the Lender) the purpose of the requested borrowing. Any oral
Loan Notice shall be confirmed in writing by the Borrowers within three (3)
Business Days after the making of the requested Revolving Loan. In addition,
the Borrowers hereby irrevocably authorize the Lender at any time and from
time to time, without further request from or notice to the Borrowers, to
make advances under the Revolving Loan which the Lender, in its sole and
absolute discretion, deems necessary or appropriate to protect the Lender's
interests under this Agreement, including, without limitation, advances under
the Revolving Loan made to cover, principal of, and/or interest on, the Loan,
the Obligations, and/or Enforcement Costs, prior to, on, or after the
termination of other advances under this Agreement, regardless of whether the
outstanding principal amount of the Revolving Loan which the Lender may make
hereunder exceeds the Revolving Credit Committed Amount.
2.1.3 Borrowing Base. As used in this Agreement, the term
"Borrowing Base" means at any time, an amount equal to eighty percent (80%)
of the amount of Eligible Receivables or Twenty Five Million ($25,000,000),
whichever is less. The Borrowing Base may be revised by the Lender in its
sole but reasonable discretion based on the results of the Lender's
prefunding audit or any subsequent audit.
The Borrowing Base shall be computed based on the Borrowing Base Report
most recently delivered to the Lender, in form satisfactory to the Lender.
In the event the Borrowers fail to furnish a Borrowing Base Report required
by Section 2.1.4 below, or in the event the Lender reasonably believes that a
Borrowing Base Report is no longer accurate, the Lender may, in its sole and
absolute discretion exercised from time to time and without limiting its
other rights and remedies under this Agreement, suspend the making of or
limit advances under the Revolving Loan. The Borrowing Base shall be subject
to reduction by the amount of any Receivable which was included in the
Borrowing Base but which the Lender determines fails to meet the criteria
applicable from time to time for Eligible Receivables.
If at any time the total of the aggregate principal amount of the
Revolving Loan and Outstanding Letter of Credit Obligations exceed the
Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency")
shall exist. Each time a Borrowing Base Deficiency exists, the Borrowers at
the sole and absolute discretion of the Lender exercised from time to time
shall pay the Borrowing Base Deficiency ON DEMAND to the Lender from time to
time.
Without implying any limitation on the Lender's discretion with respect
to the Borrowing Base, the criteria for Eligible Receivables contained in the
definition of Eligible Receivables are in part based upon the business
operations of the Borrowers existing on or about the Closing
15
Date and upon information and records furnished to the Lender by the
Borrowers. If at any time or from time to time hereafter, the business
operations of the Borrowers change or such information and records furnished
to the Lender is incorrect or misleading, the Lender in its discretion, may
at any time and from time to time during the duration of this Agreement
change such criteria or add new criteria. The Lender may communicate such
changed or additional criteria to the Borrowers from time to time either
orally or in writing.
2.1.4 Borrowing Base Report. The Borrowers will furnish to the
Lender no less frequently than thirty two (32) days after the end of each
month and at such other times as may be requested by the Lender a report of
the Borrowing Base (each a "Borrowing Base Report"; collectively, the
"Borrowing Base Reports") in the form required from time to time by the
Lender, appropriately completed and duly signed. The Borrowing Base Report
shall contain the amount and payments on the Receivables, and the
calculations of the Borrowing Base, all in such detail, and accompanied by
such supporting and other information, as the Lender may from time to time
reasonably request. The items to be provided under this subsection shall be
in form satisfactory to the Lender, and certified as true and correct by a
Responsible Officer, and delivered to the Lender from time to time solely for
the Lender's convenience in maintaining records of the Collateral. The
Borrowers' failure to deliver any of such items to the Lender shall not
affect, terminate, modify, or otherwise limit the Lender's security interests
in the Collateral.
2.1.5 Revolving Credit Note. The joint and several obligation of
the Borrowers to pay the Revolving Loan with interest shall be evidenced by a
promissory note (as from time to time extended, amended, restated,
supplemented or otherwise modified, the "Revolving Credit Note")
substantially in the form of EXHIBIT "A" attached hereto and made a part
hereof, with appropriate insertions. The Revolving Credit Note shall be dated
as of the Closing Date, shall be payable to the order of the Lender at the
times provided in the Revolving Credit Note, and shall be in the principal
amount of the Revolving Credit Committed Amount. The Borrowers acknowledge
and agree that, if outstanding principal balance of the Revolving Loan
outstanding from time to time exceeds the face amount of the Revolving Credit
Note, the excess shall bear interest at the rates provided from time to time
for advances under Revolving Loan evidenced by the Revolving Credit Note and
shall be payable, with accrued interest, ON DEMAND. The Revolving Credit Note
shall not operate as a novation of any of the Obligations or nullify,
discharge, or release any such Obligations or the continuing contractual
relationship of the parties hereto in accordance with the provisions of this
Agreement.
2.1.6 Mandatory Prepayments of Revolving Loan. The Borrowers shall
make the mandatory prepayments (each a "Revolving Loan Mandatory Prepayment"
and collectively, the "Revolving Loan Mandatory Prepayments") of the
Revolving Loan at any time and from time to time in such amounts requested by
the Lender pursuant to Section 2.1.3 and 5.2.2 (Borrowing Base) of this
Agreement in order to cover any Borrowing Base Deficiency.
2.1.7 Revolving Credit Unused Line Fee. The Borrowers shall pay to
the Lender a quarterly revolving credit facility fee (collectively, the
"Revolving Credit Unused Line Fees" and individually, a "Revolving Credit
Unused Line Fee") in an amount equal to one
16
quarter of one percent (.25%) per annum on the average daily unused and
undisbursed portion of the Revolving Credit Committed Amount in effect from
time to time accruing during each calendar quarter. The accrued and unpaid
portion of the Revolving Credit Unused Line Fee shall be paid by the
Borrowers to the Lender on March 31, 1998 and on the last day of each
calendar quarter thereafter, and on the Revolving Credit Termination Date.
2.1.8 Early Termination Fee. In the event of the termination by, or
on behalf of, the Borrowers, of the Revolving Credit Commitment, the
Borrowers shall pay a fee (the "Early Termination Fee") equal to following
amount at the following times:
Period EARLY TERMINATION FEE
Closing Date, through and
including, February 2, 1999 $125,000; and
February 3, 1999 through
and including February 3, 2000 $75,000.
The Lender will not assess the Early Termination Fee, if the Revolving Credit
Commitment is terminated by reason of a refinancing from the Lender or any
Affiliate of the Lender, or by virtue of a syndicated loan where the Lender
was asked to participate.
Section 2.2 The Letters of Credit.
2.2.1 Letters of Credit. Subject to and upon the provisions of this
Agreement, and as a part of the Revolving Credit Commitment, the Borrowers
may, upon the prior approval of the Lender, obtain standby letters of credit
(as the same may from time to time be amended, supplemented or otherwise
modified, each a "Letter of Credit" and collectively the "Letters of Credit")
from the Lender from time to time from the Closing Date until the Business
Day preceding the Revolving Credit Termination Date. The Borrowers will not
be entitled to obtain a Letter of Credit hereunder unless (a) the Borrowers
are then able to obtain a Revolving Loan from the Lender in an amount not
less than the amount of the Letter of Credit requested by the Borrowers, and
(b) the sum of the then Outstanding Letter of Credit Obligations (including
the amount of the requested Letter of Credit) does not exceed Five Million
Dollars ($5,000,000).
2.2.2 Letter of Credit Fees. Prior to or simultaneously with the
opening of each Letter of Credit, the Borrowers shall pay to the Lender, a
letter of credit fee (each a "Letter of Credit Fee" and collectively the
"Letter of Credit Fees") in an amount equal to three quarters of one percent
(3/4%) per annum of the amount of the Letter of Credit. Such Letter of
Credit Fees shall be paid upon the opening of the Letter of Credit and upon
each anniversary thereof, if any.
2.2.3 Terms of Letters of Credit. Each Letter of Credit shall (a)
be opened pursuant to a Letter of Credit Agreement, and (b) expire on a date
not later than six (6) months after the Revolving Credit Expiration Date;
provided, however, if any Letter of Credit
17
does have an expiration date later than the Revolving Credit Termination
Date, as of the Business Day preceding the Revolving Credit Termination Date
an advance of the Revolving Loan Credit Facility shall be made by the Lender
in the face amount of such Letter of Credit (or Letters of Credit) and the
proceeds thereof shall be deposited in an account titled in the name of the
Lender as trustee for the Borrowers. The proceeds of the trustee account
referred to in the immediately preceding sentence shall be held as collateral
for the Letter of Credit (or Letters of Credit) and in the event of a draw
under the Letter of Credit (or Letters of Credit), used to pay any such draw.
The aggregate face amount of all Letters of Credit at any one time
outstanding and issued by the Lender pursuant to the provisions of this
Agreement, plus the amount of any unpaid Letter of Credit Fees accrued or
scheduled to accrue thereon, and less the aggregate amount of all drafts
issued under or purporting to have been issued under such Letters of Credit
that have been paid by the Lender, is herein called the "Outstanding Letter
of Credit Obligations".
2.2.4 Procedure for Letters of Credit. The Borrowers shall give the
Lender written notice at least three (3) Business Days prior to the date on
which a Letter of Credit is requested to be opened of their request for a
Letter of Credit. Such notice shall be accompanied by a duly executed and
delivered Letter of Credit Agreement. Upon receipt of the Letter of Credit
Agreement and the Letter of Credit Fee, the Lender shall process such Letter
of Credit Agreement in accordance with its customary procedures and open such
Letter of Credit on the Business Day specified in such notice.
SECTION 2.3 General Financing Provisions.
2.3.1 BORROWERS' REPRESENTATIONS. Each of the Borrowers hereby
represents and warrants to the Lender that each of them will derive benefits,
directly and indirectly, from each Letter of Credit and from the Loan, both
in their separate capacity and as a member of the integrated group to which
each of the Borrowers belongs and because the successful operation of the
integrated group is dependent upon the continued successful performance of
the functions of the integrated group as a whole, because (a) the terms of
the consolidated financing provided under this Agreement are more favorable
than would otherwise would be obtainable by the Borrowers individually, and
(b) the Borrowers' additional administrative and other costs and reduced
flexibility associated with individual financing agreements which would
otherwise be required if obtainable would substantially reduce the value to
the Borrowers of the financing. The Borrowers in the discretion of their
respective managements are to agree among themselves as to the allocation of
the benefits of Letters of Credit and the proceeds of Loan, provided,
however, that the Borrowers shall be deemed to have represented and warranted
to the Lender at the time of allocation that each benefit and use of proceeds
is a Permitted Use.
For administrative convenience, each Borrower hereby irrevocably
appoints the Company as each Borrower's attorney-in-fact, with power of
substitution (with the prior written consent of the Lender in the exercise of
its sole and absolute discretion), in the name of the Company or in the name
of the respective Borrower or otherwise to take any and all actions with
respect to this Agreement, the other Financing Documents, the Obligations
and/or the Collateral
18
(including, without limitation, the proceeds thereof) as the Company may so
elect from time to time, including, without limitations, actions to (i)
request advances under the Loan, apply for and direct the benefits of Letters
of Credits, and direct the Lender to disburse or credit the proceeds of the
Loan directly to an account of the Company, and one or more of the Borrowers
or otherwise, which direction shall evidence the making of such Loan and
shall constitute the acknowledgment by each of the Borrowers of the receipt
of the proceeds of such Loan or the benefit of such Letter of Credit, (ii)
enter into, execute, deliver, amend, modify, restate, substitute, extend
and/or renew this Agreement, any other Financing Documents, security
agreements, mortgages, deposit account agreements, instruments, certificates,
waivers, letter of credit applications, releases, documents and agreements
from time to time, and (iii) endorse any Item of Payment in the name of the
respective Borrower or in the name of the Company. The foregoing appointment
is coupled with an interest, cannot be revokes without the prior written
consent of the Lender, and may be exercised from time to time, through the
Company's duly authorized officer, officers or other Person or Persons
designated by the Company to act from time to time on behalf of the Company.
Each of the Borrowers hereby irrevocably authorizes the Lender to make
Loans to any one or all of the Borrowers, and hereby irrevocably authorizes
the Lender to issue or cause to be issued Letters of Credit for the account
of any or all of the Borrowers, pursuant to the provisions of this Agreement
upon the written, oral or telephone request of any one or more of the Persons
who is from time to time a Responsible Officer of a Borrower under the
provisions of the most recent certificate of corporate resolutions and/or
incumbency of the Borrowers on file with the Lender and also upon the
written, oral or telephone request of any one of the Persons who is from time
to time a Responsible Officer of the Company under the provisions of the most
recent certificate of corporate resolutions and/or incumbency for the Company
on file with the Lender.
The Lender assumes no responsibility or liability for any errors,
mistakes, and/or discrepancies in the oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations between
the Lender and the Borrowers in connection with the Credit Facility, the
Loan, any Letter of Credit or any other transaction in connection with the
provisions of this Agreement. Without implying any limitation on the joint
and several nature of the Obligations, the Lender agrees that,
notwithstanding any other provision of this Agreement, the Borrowers may
create reasonable inter-company indebtedness between or among the Borrowers
with respect to the allocation of the benefits and proceeds of the advances
and Credit Facility under this Agreement. The Borrowers agree among
themselves, and the Lender consents to that agreement that each Borrower
shall have rights of contribution from all of the other Borrowers to the
extent such Borrower incurs Obligations in excess of the proceeds of the
Loans received by, or allocated to purposes for the direct benefit of, such
Borrower. All such indebtedness and rights shall be, and are hereby agreed
by the Borrowers to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless the
Lender agrees in writing otherwise, shall not be exercised or repaid in whole
or in part until all of the Obligations have been indefeasibly paid in full
in cash. The Borrowers agree that all of the such inter-company indebtedness
and rights of contribution are part of the Collateral and secure the
19
Obligations. Each Borrower hereby waives all rights of counterclaim,
recoupment and offset between or among themselves arising on account of that
indebtedness and otherwise. Each Borrower shall not evidence the
inter-company indebtedness or rights of contributions by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any Lien or security.
2.3.2 Use of Proceeds of the Loan. The proceeds of each advance
under the Loan shall be used by the Borrowers for Permitted Uses, and for no
other purposes except as may otherwise be agreed by the Lender in writing.
2.3.3 Origination Fee. The Borrowers shall pay to the Lender on or
before the Closing Date a loan origination fee (the "Origination Fee") in the
amount of One Hundred Twenty Five Thousand Dollars ($125,000), which fee has
been fully earned and is non-refundable.
2.3.4 Field Examination Fees. The Borrowers shall pay to the Lender
all fees of the Lender in connection with any field examination of the
Borrowers (collectively, the "Field Examination Fees" and individually a
"Field Examination Fee"). Each Field Examination Fee shall be in the amount
customarily charged by the Lender for the type of field examination
conducted, but not to exceed $5,000 per exam, and prior to the occurrence of
any Event of Default, such examinations will not take place more frequently
than once before August 1, 1998 and thereafter not more frequently than once
every twelve (12) months.
2.3.5 Computation of Interest and Fees. All applicable Fees and
interest shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed.
2.3.6 Payments. All payments of the Obligations, including, without
limitation, principal, interest, and Fees, shall be paid by the Borrowers
without setoff, recoupment or counterclaim to the Lender at the Lender's
office specified in the promissory note evidencing the Obligations in
immediately available funds not later than 12:00 noon, Washington, time on
the due date of such payment. Alternatively, at its sole discretion, the
Lender may charge any deposit account of any Borrower at the Lender or any
affiliate thereof with all or any part of any amount due hereunder to the
extent that the Borrowers have not otherwise tendered payment to the Lender.
The Lender agrees to notify the Borrowers of any such charge to any deposit
account, provided, however, that the failure to provide any such notice shall
not give rise to any liability on the part of the Lender. All payments shall
be applied first to any unpaid Fees, second to any and all accrued and unpaid
late charges and Enforcement Costs, third to any and all accrued and unpaid
interest on the Obligations, and then to principal, all in such order and
manner as shall be determined by the Lender in its sole and absolute
discretion.
2.3.7 Liens; Setoff. The Borrowers hereby grant to the Lender
a continuing Lien for all of the Obligations of the Borrowers upon any and
all monies, securities, and other property of any Borrower and the proceeds
thereof, now or hereafter held or received by or in transit to, the Lender
from or for any Borrower, and also upon any and all deposit
20
accounts (general or special) and credits of any Borrower, if any, with the
Lender or any affiliate of the Lender, at any time existing, excluding any
deposit accounts held by any Borrower in its capacity as trustee for Persons
who are not Affiliates of any Borrower. Without implying any limitation on
any other rights the Lender may have under the Financing Documents or
applicable Laws, during the continuance of an Event of Default, the Lender is
hereby authorized by the Borrowers at any time and from time to time, without
notice to the Borrowers, to set off, appropriate and apply any or all items
hereinabove referred to against all Obligations then outstanding, all in such
order and manner as shall be determined by the Lender in its sole and
absolute discretion. The Lender agrees to notify the Borrowers of any such
charge to any deposit account, provided, however, that the failure to provide
any such notice shall not give rise to any liability on the part of the
Lender.
ARTICLE 3
THE COLLATERAL
SECTION 3.1 Debt and Obligations Secured. All property and Liens
assigned, pledged or otherwise granted under or in connection with this
Agreement (including, without limitation, those under Section 3.2 (Grant of
Liens) below) or any of the Financing Documents shall secure (a) the payment
of all of the Obligations, and (b) the performance, compliance with and
observance by the Borrowers of the provisions of this Agreement and all of
the other Financing Documents or otherwise under the Obligations.
SECTION 3.2 Grant of Liens. The Borrowers hereby assign, pledge and
grant to the Lender, and agrees that the Lender shall have a perfected and
continuing security interest in, and Lien on, (a) all of the Company's and
the Domestic Subsidiary's Accounts, Inventory, Chattel Paper, Documents,
Instruments, Equipment, Securities, and all of the Borrowers' General
Intangibles,, whether now owned or existing or hereafter acquired or arising,
(b) all returned, rejected or repossessed goods, the sale or lease of which
shall have given or shall give rise to an Account or Chattel Paper, (c) all
insurance policies relating to the foregoing, (d) all books and records in
whatever media (paper, electronic or otherwise) recorded or stored, with
respect to the foregoing and all equipment and general intangibles necessary
or beneficial to retain, access and/or process the information contained in
those books and records, and (e) all cash and non-cash proceeds and products
of the foregoing. The Borrowers further agree that the Lender shall have in
respect thereof all of the rights and remedies of a secured party under the
Uniform Commercial Code as well as those provided in this Agreement, under
each of the other Financing Documents and under applicable Laws.
SECTION 3.3 Collateral Disclosure List. On or prior to the Closing
Date, the Borrowers shall deliver to the Lender a list (the "Collateral
Disclosure List") which shall contain such information with respect to the
Borrowers' business and real and personal property as the Lender may require
and shall be certified by a Responsible Officer of the Company, all in the
form provided to the Borrowers by the Lender. Promptly after demand by the
Lender, the Borrowers
21
shall furnish to the Lender an update of the information contained in the
Collateral Disclosure List at any time and from time to time as may be
requested by the Lender.
SECTION 3.4 Personal Property. The Borrowers acknowledge and agree
that it is the intention of the parties to this Agreement that the Lender
shall have a first priority, perfected Lien, in form and substance
satisfactory to the Lender and its counsel, on all of the Borrowers' personal
property of any kind and nature whatsoever, whether now owned or hereafter
acquired, subject only to the Permitted Liens, if any. In furtherance of the
foregoing:
SECTION 3.4.1 Securities, Chattel Paper, Promissory Notes, etc. On the
Closing Date and without implying any limitation on the scope of Section 3.2
(Grant of Liens) above, the Company shall each execute and deliver to the
Lender separate Stock Pledge Agreements pursuant to which such party shall
assign, pledge and grant a first priority Lien to the Lender on all Stock of
the Domestic Subsidiaries and the Foreign Subsidiaries.
SECTION 3.5 Record Searches. As of the Closing Date and thereafter
at the time any Financing Document is executed and delivered by the Borrowers
pursuant to this Section, the Lender shall have received, in form and
substance satisfactory to the Lender, such Lien or record searches with
respect to the Borrowers and/or any other Person, as appropriate, and the
property covered by such Financing Document showing that the Lien of such
Financing Document will be a perfected first priority Lien on the property
covered by such Financing Document subject only to Permitted Liens or to such
other matters as the Lender may approve.
SECTION 3.6 Release. Upon the payment and performance of all
Obligations of the Borrowers and all obligations and liabilities of each
other Person, other than the Lender, under this Agreement and all other
Financing Documents, the termination and/or expiration of the Commitments
and Outstanding Letter of Credit Obligations, upon the Borrowers' request and
at the Borrowers' sole cost and expense, the Lender shall release and/or
terminate any Financing Document but only if and provided that there is no
commitment or obligation (whether or not conditional) of the Lender to
re-advance amounts which would be secured thereby.
SECTION 3.7 Inconsistent Provisions. In the event that the
provisions of any Financing Document directly conflict with any provision of
this Agreement, the provision of this Agreement governs.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties. The Borrowers represent
and warrant to the Lender and shall be deemed to represent and warrant at the
time of each request for an advance under the Loan or request for a Letter of
Credit under the terms of this Agreement and again at the time of the making
of any advance under the Loan or the issuance of any Letter of
22
Credit, as follows:
4.1.1 Subsidiaries. The Company has the Subsidiaries listed on the
Collateral Disclosure List attached hereto and made a part hereof and no
others. Each of the Subsidiaries is a Wholly Owned Subsidiary of the Company,
except as shown on the Collateral Disclosure List, which correctly indicates
the nature and amount of the Company's ownership interests therein.
4.1.2 Good Standing. Each of the Company and its Domestic
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 jurisdiction in which the character of the properties owned by it
therein or in which the transaction of its business makes such qualification
necessary.
4.1.3 Power and Authority. Each Borrower has full corporate power
and authority to execute and deliver this Agreement and the other Financing
Documents to which it is a party, to make the borrowings under this
Agreement, and to incur and perform the Obligations whether under this
Agreement, the other Financing Documents or otherwise, all of which have been
duly authorized by all proper and necessary corporate action. No consent or
approval of shareholders or any creditors of any Borrower, and no consent,
approval, filing or registration with or notice to any Governmental Authority
on the part of any Borrower, is required as a condition to the execution,
delivery, validity or enforceability of this Agreement or the other Financing
Documents or the performance by the Borrowers of the Obligations.
4.1.4 Binding Agreements. This Agreement and the other Financing
Documents executed and delivered by any Borrower have been properly executed
and delivered and constitute the valid and legally binding obligations of
such Borrower and are fully enforceable against each such Borrower in
accordance with their respective terms.
4.1.5 No Conflicts. Neither the execution, delivery and performance
of the terms of this Agreement or of any of the other Financing Documents
executed and delivered by each Borrower nor the consummation of the
transactions contemplated by this Agreement will conflict with, violate or be
prevented by (a) any Borrower's charter or bylaws, (b) any existing mortgage,
indenture, contract or agreement binding on any Borrower or affecting its
property, or (c) any Laws.
4.1.6 No Defaults, Violations.
(a) No Default or Event of Default has occurred and is
continuing.
(b) Neither the Company nor any of its Subsidiaries is in
default under or with respect to any obligation under any existing mortgage,
indenture, contract
23
or agreement binding on it or affecting its property in any respect which
could be materially adverse to the business, operations, property or
financial condition of the Borrowers (taken as a whole), or which could
materially adversely affect the ability of the Borrowers to perform their
obligations under this Agreement or the other Financing Documents, to which
any Borrower is a party.
4.1.7 Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in violation of any applicable Laws (including, without
limitation, any Laws relating to employment practices, to environmental,
occupational and health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting any of the Borrowers or any of their respective properties, the
violation of which (taken as a whole), could materially adversely affect the
business, operations or properties of the Company and/or its Subsidiaries.
4.1.8 Margin Stock. None of the proceeds of the Loan will be used,
directly or indirectly, by the Company 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 or for any other purpose which might
make the transactions contemplated in this Agreement 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.
4.1.9 Investment Company Act; Margin Securities. Neither the
Company nor any of its Subsidiaries is an investment company within the
meaning of the Investment Company Act of 1940, as amended, nor is it,
directly or indirectly, controlled by or acting on behalf of any Person which
is an investment company within the meaning of said Act. Neither the Company
nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying "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.
4.1.10 Litigation. Except as otherwise disclosed in the Registration
Statement, there are no proceedings, actions or investigations pending or, so
far as any Borrower knows, threatened before or by any court, arbitrator any
Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of the Company or any Subsidiary,
would have a material adverse effect on the business, properties, condition
(financial or otherwise) or operations, present or prospective, of any
Borrower.
4.1.11 Financial Statements. The Company has furnished to the Lender
a
24
copy of the Registration Statement. The Registration Statement is correct and
complete, has been prepared in accordance with GAAP, and fairly presents the
consolidated financial condition of the Company and its Subsidiaries as of
such date.
4.1.12 Full Disclosure. The financial statements reports or
certificates furnished by any Borrower in connection with the Financing
Documents (a) do not contain any untrue statement of a material fact and (b)
when taken in their entirety, do not omit any material fact necessary to make
the statements contained therein not misleading. There is no fact known to
any Borrower which such Borrower has not disclosed to the Lender in writing
prior to the date of this Agreement with respect to the transactions
contemplated by the Financing Documents which materially and adversely
affects or in the future could, in the reasonable opinion of the Borrowers
materially adversely affect the condition, financial or otherwise, results of
operations, business, or assets of the Company or of any Subsidiary.
4.1.13 Indebtedness for Borrowed Money. Except for the Obligations
and except as set forth in EXHIBIT "E" attached to and made a part of this
Agreement, the Borrowers have no Indebtedness for Borrowed Money.
4.1.14 Taxes. Each of the Company and its Subsidiaries has filed all
returns, reports and forms for Taxes which, to the knowledge of the
Borrowers, are required to be filed, and has 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 such Borrower, such Taxes are not the subject of
any Liens other than Permitted Liens, and adequate reserves therefor have
been established as required under GAAP. No tax liability has been asserted
by the Internal Revenue Service or any state or local authority against any
Borrower for taxes in excess of those already paid.
4.1.15 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 any Borrower and/or by any commonly controlled entity: (a)
no "accumulated funding deficiency" as defined in Code Section 412 or ERISA
Section 302 has occurred, whether or not that accumulated funding deficiency
has been waived; (b) no Reportable Event has occurred; (c) no termination of
any plan subject to Title IV of ERISA has occurred; (d) neither any Borrower
nor any commonly controlled entity (as defined under ERISA) has incurred a
"complete withdrawal" within the meaning of ERISA Section 4203 from any
multiemployer plan; (e) neither any Borrower nor any commonly controlled
entity has incurred a "partial withdrawal" within the meaning of ERISA
Section 4205 with respect to any multiemployer plan; (f) no multiemployer
plan to which any Borrower or any commonly controlled entity has an
obligation to contribute is in "reorganization" within the meaning of ERISA
Section 4241 nor has notice been received by any Borrower or any commonly
controlled entity that such a multiemployer plan will be placed in
"reorganization".
4.1.16 Title to Properties. Each Borrower has good and marketable
title
25
to all of its properties, including, without limitation, the Collateral and
the properties and assets reflected in the balance sheets provided to the
Lender. Each Borrower has legal, enforceable and uncontested rights to use
freely such property and assets.
4.1.17 Patents, Trademarks, Etc. Each of the Company and its
Subsidiaries owns, possesses, or has the right to use all necessary
Collateral to own its properties conduct its business as now conducted,
without known conflict with the rights of any other Person. Any and all
obligations to pay royalties or other charges with respect to such Collateral
are properly reflected on the financial statements provided to the Lender.
Except for and upon the filing with the United States Patent and Trademark
Office with respect to the patents and trademarks and the Register of
Copyrights with respect to the copyrights necessary to perfect the security
interests created hereunder, and except as has been already made or obtained,
no authorization, approval or other action by, and no notice to or filing
with, any United States governmental authority or United States regulatory
body is required either (i) for the grant by the Borrowers of the security
interest granted hereby or for the execution, delivery or performance of
Financing Documents by the Borrowers in the United States or (ii) for the
perfection in the United States or the exercise by the Lender of its rights
and remedies hereunder.
4.1.18 Presence of Hazardous Materials or Hazardous Materials
Contamination. To the best of each Borrower's knowledge, (a) no Hazardous
Materials are located on any real property owned, controlled or operated by
any Borrower or for which any Borrower is responsible, except for reasonable
quantities of necessary supplies for use by such 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 any 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.
4.1.19 Perfection and Priority of Collateral. The Lender has, or
upon execution and recording of this Agreement and the Security Documents
will have, and will continue to have as security for the Obligations, a valid
and perfected Lien on and security interest in all Collateral (except for
such Collateral as may be perfected only by filings made outside of the
United States), free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens.
4.1.20 Places of Business and Location of Collateral. The
information contained in the Collateral Disclosure List is complete and
correct. The Collateral Disclosure List completely and accurately identifies
the address of (a) the Borrowers' chief executive offices, (b) any and each
other place of business of the Borrowers, (c) the location of all books and
records pertaining to the Collateral, and (d) each location, other than the
foregoing, where any of the Collateral is located. The proper and only places
to file financing statements with respect to the Collateral within the
meaning of the Uniform Commercial Code are the filing offices for those
jurisdictions in which the Borrowers maintain a place of business as
identified on the Collateral Disclosure List.
26
4.1.21 Business Names and Addresses. Except in conjunction with the
Purchase Transactions, in the five (5) years preceding the date hereof, the
Borrowers have not changed their names, identity or corporate structure, has
not conducted business under any name other than their current names, and has
not conducted their business in any jurisdiction other than those disclosed
on the Collateral Disclosure List.
4.1.22 Equipment. No material portion of the Equipment is affixed to
real estate in such manner as to become a fixture or part of such real estate
and from and after the Closing Date is not and will not be affixed to real
estate in such manner as to become a fixture or part of such real estate.
4.1.23 Accounts. With respect to all Accounts and to the best of
each 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 bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices, purchase orders and other contracts relating
thereto, and the underlying transaction therefor is in accordance with all
applicable Laws; (c) the amounts shown on the each Borrower's books and
records, with respect thereto are actually and absolutely owing to that
Borrower and are not contingent or subject to reduction for any reason other
than regular discounts, credits or adjustments allowed by any Borrower in the
ordinary course of its business; (d) no payments have been or shall be made
thereon except payments turned over to the Lender by the Borrowers; (e) all
Account Debtors thereon have the capacity to contract; and (f) the goods
sold, leased 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.
4.1.24 Compliance with Eligibility Standards. Each Account included
in the calculation of the Borrowing Base does and will at all times meet and
comply with all of the standards for Eligible Receivables. With respect to
those Accounts which the Lender has deemed Eligible Receivables (a) there are
no facts, events or occurrences which in any way impair the validity,
collectibility or enforceability thereof or tend to reduce the amount payable
thereunder; and (b) there are no proceedings or actions known to any Borrower
which are threatened or pending against any Account Debtor which might result
in any material adverse change in the Borrowing Base.
4.1.25 Purchase Agreement Transaction. On or before the Closing
Date, the Lender has received true and correct photocopies of the Purchase
Agreements and each of the Purchase Agreement Documents, executed, delivered
and/or furnished on or before the Closing Date in connection with the
Purchase Agreement Transaction. Neither the Purchase Agreements nor any of
the Purchase Agreement Documents have been modified, changed, supplemented,
canceled, amended or otherwise altered or affected in any material manner,
except as otherwise disclosed to the Lender in writing on or before the
Closing Date. The Purchase Agreement Transaction has been effected, closed
and consummated pursuant to, and in accordance with, the
27
terms and conditions of the Purchase Agreements.
4.1.26 Bulk Transfer. The Borrowers have either complied with any
and all Laws governing the transfer of all or substantially all of the
Sellers' assets, or the Borrowers have received satisfactory indemnifications
from the Sellers with respect to such Laws, including, without limitation,
any and all bulk transfer laws, so that as of the Closing Date, the assets
described in the Purchase Agreements shall be transferred by the Sellers to
the Borrowers free from all claims, Liens, encumbrances, and security
interests of any nature whatsoever, except as otherwise permitted by the
Purchase Agreements and as otherwise disclosed in writing to the Lender.
SECTION 4.2 Survival; Updates of Representations and Warranties. All
representations and warranties contained in or made under or in connection
with this Agreement and the other Financing Documents shall survive the
Closing Date, the making of any advance under the Loan and extension of
credit made hereunder, and the incurring of any other Obligations.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Initial Advance and Initial Letter of
Credit. The making of the initial advance under the Loans and the issuance
of the initial Letter of Credit is subject to the fulfillment of the
following conditions precedent in a manner satisfactory to the Lender on or
before the Closing Date:
5.1.1 Good Standing etc. The Lender shall have received a
certificate of good standing for each Borrower certified by the Secretary of
State, or other appropriate Governmental Authority, of the state of
incorporation for such Borrower.
5.1.2 Corporate Proceedings of the Borrowers. The Lender shall have
received a certificate dated as of the Closing Date by the Secretary or an
Assistant Secretary of each Borrower covering:
(a) true and complete copies of such Borrower's corporate charter,
bylaws, and all amendments thereto;
(b) true and complete copies of the resolutions (or Board Minutes, if
applicable)of its Board of Directors authorizing (i) the execution, delivery
and performance of the Financing Documents and the Purchase Agreement
Documents to which such Borrower is a party, (ii) the borrowings by such
Borrower hereunder, (iii) the granting of the Liens contemplated by this
Agreement and the Financing Documents to which such Borrower is a party;
28
(c) the incumbency, authority and signatures of the officers of such
Borrower authorized to sign this Agreement and the other Financing Documents
to which the Borrower is a party; and
(d) the identity of such Borrower's current directors, common stock
holders and other equity holders, as well as their respective percentage
ownership interests.
5.1.3 Consents, Licenses, Approvals, Etc. The Lender shall have
received copies of all consents, licenses and approvals, required in
connection with the execution, delivery, performance, validity and
enforceability of the Financing Documents and the Purchase Agreement
Documents, and such consents, licenses and approvals shall be in full force
and effect.
5.1.4 Collateral Disclosure List. The Borrowers shall have
delivered the Collateral Disclosure List required under the provisions of
Section 3.3 (Collateral Disclosure List) hereof duly executed by a
Responsible Officer of the Company.
5.1.5 Note. The Lender shall have received the Revolving Credit
Note conforming to the requirements hereof and executed by a Responsible
Officer of each Borrower and attested by a duly authorized representative of
each Borrower.
5.1.6 Financing Documents and Collateral. The Borrowers shall have
executed and delivered the Financing Documents to be executed by it, and
shall have delivered all opinions, and other documents contemplated by
Article 3 hereof, all the foregoing to be in form and substance satisfactory
to the Lender.
5.1.7 Recordings and Filings. The Borrowers shall have: (a)
executed and delivered all Financing Documents (including, without
limitation, UCC-1 and UCC-3 statements) required to be filed, registered or
recorded in order to create, in favor of the Lender, a perfected Lien in the
Collateral (subject only to the Permitted Liens) in form and in sufficient
number for filing, registration, and recording in each office in each
jurisdiction in which such filings, registrations and recordations are
required, and (b) delivered such evidence as the Lender may deem satisfactory
that all necessary filing fees and all recording and other similar fees, and
all Taxes and other expenses related to such filings, registrations and
recordings will be or have been paid in full.
5.1.8 Opinion of Borrowers' Counsel. The Lender shall have received
the favorable opinion of counsel for the Borrowers addressed to the Lender in
form satisfactory to the Lender.
5.1.9 Other Documents, Etc. The Lender shall have received such
other certificates, opinions, documents and instruments confirmatory of or
otherwise relating to the transactions contemplated hereby as may have been
reasonably requested by the Lender.
29
5.1.10 Payment of Fees. The Lender shall have received payment of
any Fees due on or before the Closing Date.
5.1.11 Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the other
Financing Documents shall be satisfactory in form and substance to the Lender
and its counsel.
5.1.12 Other Financing Documents. In addition to the Financing
Documents to be delivered by the Borrowers, the Lender shall have received
the Financing Documents duly executed and delivered by Persons other than the
Borrowers.
5.1.13 Field Examination. The Lender shall have completed a field
examination of the Borrowers' business, operations and income, the results of
which audit shall be in all respects acceptable to the Lender in its sole and
absolute discretion.
5.1.14 Proforma Balance Sheet. The Lender shall have received and
approved the Company's' Proforma Balance Sheet which Proforma Balance Sheet
must be in form and content acceptable to the Lender in its sole and absolute
discretion.
5.1.15 Public Offering and Liquid Assets. The Lender shall have
received a certificate signed by a Responsible Officer of the Company
certifying to the Lender that the Company: (a) has successfully completed the
Initial Public Offering resulting in gross proceeds of not less than
$75,000,000; and (b) has as of the Closing Date minimum liquid assets of not
less than Five Million Dollars ($5,000,000).
5.1.16 Stock Certificates and Stock Powers. The Lender shall have
received the fully executed Stock Pledge Agreements, together with all of the
original stock certificates of all of the Domestic Subsidiaries and the
Foreign Subsidiaries and fully executed irrevocable stock powers and share
transfer forms from the Company for each such stock certificate.
5.1.17 Purchase Agreement Transaction. The Purchase Agreement
Transaction shall have been completed and closed prior to or simultaneously
herewith upon terms and conditions satisfactory to the Lender. The Lender
shall have received a certificate signed by a Responsible Officer of the
Company certifying that the Purchase Agreement Transaction has been closed
and completed in accordance with the Purchase Agreement Documents furnished
to the Lender and in accordance with all applicable Laws.
SECTION 5.2. Conditions to all Extensions of Credit. The making of
all advances under the Loan and the issuance of all Letters of Credit is
subject to the fulfillment of the following conditions precedent in a manner
satisfactory to the Lender:
5.2.1 Compliance. The Borrowers shall have complied and shall then
be in compliance with all terms, covenants, conditions and provisions of this
Agreement and the other Financing Documents which are binding upon them.
30
5.2.2 Borrowing Base. The Company shall have furnished all
Borrowing Base Reports required by Section 2.1.3 (Borrowing Base Report) of
this Agreement, there shall exist no Borrowing Base Deficiency, and as
evidence thereof, the Company shall have furnished to the Lender such
reports, schedules, certificates, records and other papers as may be
requested by the Lender.
5.2.3 Default. There shall exist no Event of Default or Default
hereunder.
5.2.4 Representations and Warranties. The representations and
warranties of the Borrowers contained among the provisions of this Agreement
shall be true and with the same effect as though such representations and
warranties had been made at the time of the making of each of advance under
the Loan or the issuance of each Letter of Credit, except that the
representation and warranty pertaining to balance sheets, financial
statements and other financial condition information or data shall refer to
the latest balance sheets, financial statements, and financial condition
information and data furnished to the Lender pursuant to the provisions of
this Agreement.
5.2.5 Adverse Change. No adverse change shall have occurred in the
financial condition of any Borrower which would, in the good faith judgment
of the Lender, materially impair the ability of the Borrowers to pay or
perform any of the Obligations.
5.2.6 Legal Matters. All legal documents incident to each advance
under the Loan and each of the Letters of Credit shall be reasonably
satisfactory to counsel for the Lender.
SECTION 5.3. Conditions to all Extensions of Credit after March 2,
1998. In addition to the conditions precedent set forth in Section 5.2 of
this Agreement, the making of all advances under the Loan and the issuance of
all Letters of Credit after March 2, 1998 is subject to the fulfillment of
the following conditions precedent in a manner satisfactory to the Lender:
5.3.1 Merger of Certain Subsidiaries. The Lender shall have
received evidence satisfactory to the Lender that American Eagle Endeavors,
Inc., Clover Supply, Inc. and MLQ Express, Inc., have been merged into
Dispatch Management Services Acquisition Corp., or in the event such merger
has not been completed by such date, the Borrowers shall have provided the
Lender with a Stock Pledge Agreement, together with all of the original stock
certificates of all such companies and fully executed irrevocable stock
powers from the holders of each such stock certificate.
5.3.2 Insurance Certificate. The Lender shall have received and
approved an insurance certificate in accordance with the provisions of
Section 6.1.8 (Insurance)of this Agreement.
31
5.3.3 Qualification to Do Business. The Lender shall have received
a Certificate of Qualification to do business for each Borrower certified by
the Secretary of State or other Governmental Authority of each state in which
such Borrower conducts business.
ARTICLE 6
COVENANTS OF THE BORROWERS
SECTION 6.1 Affirmative Covenants. So long as any of the Obligations
(the Commitments therefor) shall be outstanding hereunder, the Borrowers
agree with the Lender as follows:
6.1.1 Financial Statements. The Company shall furnish to the Lender:
(a) Annual Statements and Certificates. The Company shall
furnish to the Lender as soon as available, but in no event more than one
hundred twenty five (125) days after the close of the Company's fiscal years,
(i) a copy of the consolidated annual financial statement in reasonable
detail satisfactory to the Lender relating to the Company and its
Subsidiaries, prepared in accordance with GAAP and examined and certified by
independent certified public accountants satisfactory to the Lender, which
financial statement shall include a consolidated and consolidating balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year
and consolidated and consolidating statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and (ii) a detailed
computation of each financial covenant in this Agreement which is applicable
for the period reported, and a cash flow projection report, each prepared by
a Responsible Officer of the Company in a format acceptable to the Lender and
(iii) a management letter in the form prepared by the independent certified
public accountants.
(b) Quarterly Statements and Certificates. The Company shall
furnish to the Lender as soon as available, but in no event more than sixty
(60) days after the close of the Company's fiscal quarters, consolidated and
consolidating financial statements of the Company, prepared and certified by
a Responsible Officer of the Company or in lien thereof, a 10-Q as filed with
the Securities Exchange Commission.
(c) Monthly Reports. The Company shall furnish to the Lender
within thirty two (32) days after the end of each calendar month, a report
signed by a Responsible Officer of the Company, containing the following
information:
(i) a summary of all aged Receivables, in such detail,
and accompanied by such supporting information, as the Lender may from time
to time reasonably request;
(ii) with respect to each Permitted Acquisition, among
other things: (a) a pro-forma post acquisition balance statement, income
statement, and cash flow
32
statement; (b) a listing of all assets to be acquired; (c) historical
financial statements on the Target; (d) the terms and conditions for the
Permitted Acquisition;
(iii) a listing of all liquid assets of the Company
and its Subsidiaries; and
(iv) such other information as the Lender may reasonably
request.
(d) Additional Reports and Information. The Company shall furnish
to the Lender promptly, such additional information, reports or statements as
the Lender may from time to time reasonably request.
6.1.2 Reports to SEC and to Stockholders. The Company will furnish
to the Lender, promptly upon the filing or making thereof, at least one (l)
copy of all financial statements, reports, notices and proxy statements sent
by the Company to its stockholders, and of all regular and other reports
filed by the Company with any securities exchange or with the Securities and
Exchange Commission.
6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc.
(a) The Company shall, and shall cause each of its
Subsidiaries to, maintain (i) a standard system of accounting in accordance
with GAAP, and (ii) proper books of record and account in which full, true
and correct entries are made of all dealings and transactions in relation to
its properties, business and activities.
(b) The Company shall, and shall cause each of its
Subsidiaries to, permit authorized representatives of the Lender to visit and
inspect the properties and the properties of the Company and its
Subsidiaries, to review, audit, check and inspect the Collateral at any time
with, if prior to an Event of Default, three (3) Business Days' notice, and
if on or after an Event of Defaut, without notice, to review, audit, check
and inspect the Company's other books of record at any time with or without
notice and to make abstracts and photocopies thereof, and to discuss the
affairs, finances and accounts of the Company and its Subsidiaries, with the
officers, directors, employees and other representatives of the Company and
its Subsidiaries and their respective accountants, all at such times during
normal business hours and other reasonable times and as often as the Lender
may reasonably request.
(c) The Company hereby irrevocably authorizes and directs all
accountants and auditors employed by the Company and its Subsidiaries at any
time during the term of this Agreement to exhibit and deliver to the Lender
copies of any and all of the financial statements, trial balances, management
letters, or other accounting records of any nature of the Company and its
Subsidiaries in the accountant's or auditor's possession, and to disclose to
the Lender any information they may have concerning the financial status and
business operations of the Company's and its Subsidiaries.
33
(d) After the occurrence of an Event of Default, any and all
reasonable costs and expenses incurred by, or on behalf of, the Lender in
connection with the conduct of any of the foregoing shall be part of the
Enforcement Costs and shall be payable to the Lender upon demand. The Company
acknowledges and agrees that such expenses may include, but shall not be
limited to, any and all out-of-pocket costs and expenses of the Lender's
employees and agents in, and when, traveling to the Borrowers' facilities.
6.1.4 Corporate Existence. Subject to the provisions of Section
6.2.2 hereof, the Company shall 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 other jurisdiction where it is required
to register or qualify to do business if the failure to do so in such other
jurisdiction might have a material adverse effect on the ability of the
Borrowers taken as a whole to perform the Obligations, on the conduct of the
Borrowers' operations taken as a whole, on the Borrowers' financial condition
taken as a whole, or on the value of, or the ability of the Lender to realize
upon, the Collateral.
6.1.5 COMPLIANCE WITH LAWS. The Company shall comply, and cause
each of its Subsidiaries to comply, with all applicable Laws and observe the
valid requirements of Governmental Authorities, the noncompliance with or the
nonobservance of which might have a material adverse effect on the ability of
any of the Borrowers to perform the Obligations, on the conduct of any of the
Borrower's operations, on the Borrower's financial condition taken as a
whole, or on the value of, or the ability of the Lender to realize upon, the
Collateral.
6.1.6 Preservation of Properties. The Company will, and will cause
each of its Subsidiaries to, at all times (a) maintain, preserve, protect and
keep its properties, whether owned or leased, in good operating condition,
working order and repair (ordinary wear and tear excepted), and from time to
time will make all proper repairs, maintenance, replacements, additions and
improvements thereto needed to maintain such properties in good operating
condition, working order and repair, and (b) do or cause to be done all
things necessary to preserve and to keep in full force and effect its
material franchises, leases of real and personal property, trade names,
patents, trademarks and permits which are necessary for the orderly
continuance of its business.
6.1.7 Line of Business. The Borrowers will continue to engage
substantially only in the business of courier and delivery services.
6.1.8 Insurance. The Company will, and will cause each of its
Subsidiaries to, at all times maintain with A-rated insurance companies such
insurance as is required by applicable Laws and such other insurance, in such
amounts, of such types and against such risks, hazards, liabilities,
casualties and contingencies as are usually insured against in the same
geographic areas by business entities engaged in the same or similar
business. Without limiting the generality of the foregoing, the Company
will, and will cause each of its Subsidiaries to, keep adequately insured all
of its property against loss or damage resulting from
34
fire or other risks insured against by extended coverage and maintain public
liability insurance against claims for personal injury, death or property
damage occurring upon, in or about any properties occupied or controlled by
it, or arising in any manner out of the businesses carried on by it, all in
such amounts not less than the Lender shall reasonably determine from time to
time..
6.1.9 Taxes. Except to the extent that the validity or amount
thereof is being contested in good faith and by appropriate proceedings, the
Company will, and will cause each of its Subsidiaries to, pay and discharge
all Taxes prior to the date when any interest or penalty would accrue for the
nonpayment thereof. The Company shall furnish to the Lender at such times as
the Lender may require proof satisfactory to the Lender of the making of
payments or deposits required by applicable Laws.
6.1.10 ERISA. The Company will, and will cause each of its
Subsidiaries and Affiliates to, comply with the funding requirements of ERISA
with respect to employee pension benefit plans for its respective employees.
The Company will not permit with respect to any employee benefit plan or
plans covered by Title IV of ERISA (a) any prohibited transaction or
transactions under ERISA or the Internal Revenue Code, which results, or may
result, in any material liability of the Company and its Subsidiaries and
Affiliates, or (b) any Reportable Event if, upon termination of the plan or
plans with respect to which one or more such Reportable Events shall have
occurred, there is or would be any material liability of the Company and its
Subsidiaries and Affiliates to the PBGC. Upon the Lender's request, the
Company 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.
6.1.11 Notification of Events of Default and Adverse Developments.
The Borrowers shall promptly notify the Lender upon obtaining knowledge of
the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation against the Company or its Subsidiaries
which under GAAP or Securities Exchange Commission rules are required to be
disclosed, and of the entry of any judgment or Lien against any of the assets
or properties of the Company or any Subsidiary where the claims against the
Company or Subsidiary exceed One Hundred Thousand Dollars ($100,000) and are
not covered by insurance;
(d) 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 Company or its Subsidiaries;
(e) any judicial, administrative or arbitral proceeding pending
35
against the Company or any of its Subsidiaries and any judicial or
administrative proceeding known by the Company 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);
(f) the receipt by the Company or any Subsidiary of any
notice, claim or demand from any Governmental Authority which alleges that
the Company or any Subsidiary is in violation of any of the terms of, or has
failed to comply with any applicable Laws regulating its operation and
business, including, but not limited to, the Occupational Safety and Health
Act and the Environmental Protection Act; and
(g) any other development in the business or affairs of the
Company and any of its Subsidiaries which may be materially adverse;
in each case describing in detail satisfactory to the Lender the nature
thereof and the action the Company and/or its Subsidiaries proposes to take
with respect thereto.
6.1.12 Hazardous Materials; Contamination. The Borrowers agree to:
(a) give notice to the Lender immediately upon any of the
Borrower's acquiring knowledge of the presence of any Hazardous Materials on
any property owned or controlled by any Borrower or for which any Borrower is
responsible (provided that such notice shall not be required for Hazardous
Materials placed or stored on such property in accordance with applicable
Laws in the ordinary course (including, without limitation, quantity) of any
Borrower's line of business expressly described in this Agreement) or of any
Hazardous Materials Contamination with a full description thereof; and
(b) as part of the Obligations, 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 any Borrower for which any Borrower is responsible for any Hazardous
Materials Contamination. Each Borrower acknowledges and agrees that this
indemnification shall survive the termination of this Agreement and the
Commitments and the payment and performance of all of the other Obligations.
6.1.13 Funded Debt to EBITDA. The Borrowers will maintain on a
consolidated basis, tested as of the end of each of the Company's fiscal
quarters on an annualized year to date basis, a ratio of Funded Debt to
EBITDA so that it is not more 2.50 to 1.00.
6.1.14 Fixed Charge Coverage Ratio. The Borrowers will maintain,
tested as of the last day of each of the Company's fiscal quarters on an
annualized year to date basis, a Fixed Charge Coverage Ratio of not less than
1.50 to 1.00.
36
6.1.15 Collection of Receivables. Until the occurrence of any Event
of Default, the Company and each of the Subsidiaries shall at its own expense
have the privilege for the account of, and in trust for, the Lender of
collecting its Receivables and receiving in respect thereto all Items of
Payment and shall otherwise completely service all of the Receivables
including (a) the billing, posting and maintaining of complete records
applicable thereto, (b) the taking of such action with respect to the
Receivables as the Lender may request or in the absence of such request, as
the Company and each of the Subsidiaries may deem advisable; and (c) the
granting, in the ordinary course of business, to any Account Debtor, any
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 a Receivable and may take
such other actions relating to the settling of any Account Debtor's claim as
may be commercially reasonable. The Lender may, at its option, at any time
or from time to time after and during the continuance of a Default hereunder,
revoke the collection privilege given in this Agreement to the Company and
each of the Subsidiaries 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 Company. The Lender shall not have any duty to, and the
Borrowers hereby release the Lender from all claims of loss or damage caused
by the delay or failure to collect or enforce any of the Receivables or to
preserve any rights against any other party with an interest in the
Collateral.
6.1.16 Assignments of Receivables. The Borrowers will promptly, upon
request, execute and deliver to the Lender written assignments, in form and
content acceptable to the Lender, of specific Receivables or groups of
Receivables; 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 or exclusion of Receivables within such assignments. Receivables
so assigned 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.
6.1.17 Government Accounts. The Borrowers will if requested by the
Lender, execute any instruments and take any steps required by the Lender in
order that all moneys due and to become due under contracts with the United
States or with any other Governmental Authority to be assigned to the Lender
and notice thereof given to the Governmental Authority under the Federal
Assignment of Claims Act or any other applicable Laws.
6.1.18 Maintenance of the Collateral. The Borrowers will maintain
the Collateral in good working order, saving and excepting ordinary wear and
tear, and will 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 Company 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 the premises of the Company
and the Subsidiaries and when examining, auditing and/or inspecting the
Collateral. The Lender shall not have any duty to, and the Borrowers hereby
release the Lender from all claims of loss or damage caused by the delay or
failure to collect or enforce any of the Receivables or to, preserve any
rights against any other
37
party with an interest in the Collateral.
6.1.19 Equipment. The Borrowers shall (a) maintain all Equipment as
personalty, and (b) not affix any Equipment to any real estate in such manner
as to become a fixture or part of such real estate.
6.1.20 Defense of Title and Further Assurances. At their expense the
Borrowers will defend the title to the Collateral (and any part thereof), and
promptly upon request execute, acknowledge and deliver any financing
statement, renewal, affidavit,, assignment, continuation statement, security
agreement, certificate or other document the Lender may require in order to
perfect, preserve, maintain, continue, protect and/or extend the Lien or
security interest granted to the Lender under this Agreement, under any of
the other Financing Documents and its priority. The Borrowers will from time
to time do whatever the Lender may request by way of obtaining, executing,
delivering, and/or filing financing statements, landlords' or mortgagees'
waivers, and other notices and amendments and renewals thereof and the
Borrowers will take any and all steps and observe such formalities as the
Lender may request, in order to create and maintain a valid Lien upon, pledge
of, or paramount security interest in, the Collateral, subject to the
Permitted Liens. The Borrowers shall pay to the Lender on demand all taxes,
costs and expenses incurred by the Lender in connection with the preparation,
execution, recording and filing of any such document or instrument. The
Borrowers agree that a copy of a fully executed security agreement and/or
financing statement shall be sufficient to satisfy for all purposes the
requirements of a financing statement as set forth in Article 9 of the
applicable Uniform Commercial Code.
6.1.21 General Intangibles. The Borrowers shall execute and deliver
such additional instruments and documents from time to time as the Lender
shall reasonably request to perfect the Lender's security interest in the
General Intangibles. The Lender shall have the right, but not the
obligation, to take, at Borrowers' sole expense, any actions that the
Borrowers are required under this Section 6.1.21 to take but which the
Borrowers fail to take, after fifteen (15) days' notice to the Borrowers.
The Borrowers shall reimburse and indemnify the Lender for all reasonable
costs and reasonable expenses incurred in the reasonable exercise of its
rights under this Section.
6.1.22 Business Names; Locations. The Company will notify and cause
each of the Subsidiaries to notify the Lender not less than thirty (30) days
prior to (a) any change in the name under which the Company or the applicable
Subsidiary conducts its business, (b) any change of the location of the
chief executive office of the Company or the applicable Subsidiary, and (c)
the opening of any new place of business or the closing of any existing place
of business, and any change in the location of the places where the
Collateral, or any part thereof, or the books and records, or any part
thereof, are kept.
6.1.23 Protection of Collateral. The Borrowers agree that the Lender
may at any time take such steps as the Lender deems reasonably necessary to
protect the Lender's interest in, and to preserve the Collateral. The
Borrowers agree to cooperate fully with the
38
Lender's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as the Lender may reasonably direct. All of the
Lender's expenses of preserving the Collateral, including any reasonable
expenses relating to the compensation and bonding of a custodian, shall part
of the Enforcement Costs.
SECTION 6.2 Negative Covenants. So long as any of the Obligations
(or Commitments therefor) shall be outstanding hereunder, the Borrowers agree
with the Lender as follows:
6.2.1 Permitted Acquisitions. The Borrowers may, from time to time,
acquire all or substantially all the assets of any Person (such Person being
called a "Target" and such acquisition each being called a "Permitted
Acquisition" and collectively, the "Permitted Acquisitions"), provided, the
Borrower receives the Lender's prior written approval for any Permitted
Acquisition where the cash portion of the Purchase Price (whether or not
advanced under the Loan) exceeds $3,500,000, which approval may be given in
the Lender's sole, but reasonable, discretion.
Upon completion of each Permitted Acquisition, the Borrowers shall at
the Lender's request and at the Borrowers' expense, add each Target which is
not merged into an existing Borrower contemporaneously with any Permitted
Acquisition, as a co-obligor on this Agreement and on the Financing
Documents. All assets acquired shall be subject to the lien created by this
Agreement, and the Borrowers agree at their cost to execute and deliver to
the Lender such financing statements, lien searches and other documents as
the Lender may reasonably request to ensure the Lender's lien on such assets.
Notwithstanding anything set forth herein to the contrary and without
affecting the Lender's right to add any Target as a co-obligor on this
Agreement and the Financing Documents, the assets of a Target will not be
included in the calculation of the Borrowing Base until such time as the
Target is added as a co-obligor and such assets are approved by the Lender,
which approval may include, without limitation, the completion of a
satisfactory field examination of such assets. The Target's equipment may be
subject to certain existing liens in an amount satisfactory to the Lender.
6.2.2 CONVERSION OF SUBSIDIARIES. The Borrowers may after the
Closing Date convert one or more of the Second Tier Subsidiaries from
corporations to limited liability companies, provided that the members of
each such limited liability company and their respective ownership interests
remain substantially unchanged and at the time of such conversion, no Event
of Default has occurred and is continuing under any of the Financing
Documents.
6.2.3 Subsidiaries. Except as otherwise permitted under Sections
6.2.1 and 6.2.2 of this Agreement, the Company and each existing Subsidiary
will not create or acquire any Subsidiaries other than the Subsidiaries
identified on the Collateral Disclosure List.
6.2.4 Issuance of Stock. The Borrowers will not issue, or grant any
option or right to purchase, any of their capital stock.
39
6.2.5 Purchase or Redemption of Securities, Dividend Restrictions.
The Borrowers will not purchase, redeem or otherwise acquire any shares of
its capital stock or warrants now or hereafter outstanding, declare or pay
any dividends thereon (other than stock dividends), apply any of its property
or assets to the purchase, redemption or other retirement of, set apart any
sum for the payment of any dividends on, or for the purchase, redemption, or
other retirement of, make any distribution by reduction of capital or
otherwise in respect of, any shares of any class of capital stock of the
Company, or any warrants, permit any Subsidiary to purchase or acquire any
shares of any class of capital stock of, or warrants issued by, any Borrower,
make any distribution to stockholders or set aside any funds for any such
purpose, and not prepay, purchase or redeem any Indebtedness for Borrowed
Money other than the Obligations.
6.2.6 Indebtedness. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Indebtedness for
Borrowed Money, or permit any Subsidiary so to do, except:
(a) the Obligations;
(b) contingent liabilities (actual or potential) not to exceed
$500,000 in the aggregate;
(c) current accounts payable arising in the ordinary course;
(d) Indebtedness secured by Permitted Liens;
(e) Indebtedness (other than as permitted in Subsection (b) of
this Section), not to exceed $1,000,000 in the aggregate;
(f) Indebtedness of any Foreign Subsidiary, now or hereafter
arising, provided that for any such Indebtedness in excess of $1,000,000, the
Lender shall have reviewed and approved the material terms and conditions
relating to such Indebtedness to confirm and ensure that such terms and
conditions could not have a material adverse effect on the Borrowers ability
to perform their obligations under the Financing Documents or otherwise
impair the value of the Collateral; and
(g) Indebtedness of the Borrowers existing on the date hereof
and reflected on the financial statements furnished pursuant to the Lender
prior to the Closing Date.
6.2.7 Investments, Loans and Other Transactions. Except as
otherwise provided in this Agreement, the Company will not, and will not
permit any of its Subsidiaries to, (a) make, assume, acquire or continue to
hold any investment in any real property (unless used in connection with its
business and treated as a Fixed or Capital Asset of the Company or the
Subsidiary) or any Person, (b) guaranty or otherwise become contingently
liable for the indebtedness or obligations of any Person, or (c) make any
loans or advances, or otherwise
40
extend credit to any Person, including, but not limited to any Subsidiary
which is not a co-maker of the Note or a party to this Agreement, except:
(a) any advance to an officer of the Company or of any
Subsidiary for travel or other business expenses in the ordinary course of
business;
(b) any advance to a Subsidiary which is not a co-maker of
the Note or a party to this Agreement which is made to meet normal operating
expenses of such Subsidiary;
(c) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(d) any investment made in accordance with the Company's
internal investment guidelines; and
(e) trade credit extended to customers in the ordinary course
of business.
6.2.8 Stock of Subsidiaries. The Company will not sell or otherwise
dispose of any shares of capital stock of any Subsidiary (except in
connection with a merger or consolidation of a Wholly Owned Subsidiary into
the Company or another Wholly Owned Subsidiary or with the conversion of any
Second Tier Subsidiary from a corporation into a limited liability company in
accordance with Section 6.2.2 hereof) or permit any Subsidiary to issue any
additional shares of its capital stock.
6.2.9 Liens. The Borrowers will not create, incur, assume or suffer
to exist any Lien upon any of their properties or assets, whether now owned
or hereafter acquired, or permit any Subsidiary so to do, except for Liens
securing the Obligations and Permitted Liens.
6.2.10 Capital Structure, Merger, or Sale of Assets. The Borrowers
will not alter or amend their capital structure, authorize any additional
class of equity, issue any stock or equity of any class, enter into any
merger or consolidation or amalgamation, windup or dissolve (or suffer any
liquidation or dissolution).
6.2.11 ERISA Compliance. Neither the Company nor any Commonly
Controlled Entity shall: (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 any 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.
6.2.12 Prohibition on Hazardous Materials. The Borrowers shall not
41
place, manufacture or store or permit to be placed, manufactured or stored
any Hazardous Materials on any property owned or controlled by any Borrower
or for which any Borrower is responsible other than Hazardous Materials
placed or stored on such property in accordance with applicable Laws in the
ordinary course (including, without limitation, quantity) of any Borrower's
business expressly described in this Agreement.
6.2.13 Method of Accounting. The Company shall not change the method
of accounting employed in the preparation of the financial statements
furnished prior to the date of this Agreement to the Lender, unless required
to conform to GAAP and on the condition that the Company's accountants shall
furnish such information as the Lender may request to reconcile the changes
with the Company's prior financial statements.
6.2.14 Transfer of Collateral. The Company and the Subsidiaries will
not transfer, or permit the transfer of any of the Collateral, to another
location where the Lender does not at such time have a perfected Lien on such
Collateral (including, but not limited to any transfer of Collateral from the
Company or a Domestic Subsidiary to a Foreign Subsidiary), or transfer or
permit the transfer of the books and records related to any of the Collateral.
6.2.15 Sale and Leaseback. Neither the Company nor the Subsidiaries
will directly or indirectly enter into any arrangement to sell or transfer
all or any substantial part of its fixed assets and thereupon or within one
year thereafter rent or lease the assets so sold or transferred.
6.2.16 Disposition of Collateral. The Borrowers will not sell,
discount, allow credits or allowances, transfer, assign, extend the time for
payment on, convey, lease, assign, transfer or otherwise dispose of the
Collateral, except, prior to an Event of Default, dispositions expressly
permitted elsewhere in this Agreement, and the sale of unnecessary or
obsolete Equipment, but only if the proceeds of the sale of such Equipment
are (a) used to purchase similar Equipment to replace the unnecessary or
obsolete Equipment or (b) immediately turned over to the Lender for
application to the Obligations.
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 Events of Default. The occurrence of any one or more of
the following events shall constitute a "Default" under the provisions of
this Agreement:
7.1.1 Failure to Pay. The failure of the Borrowers to pay any of
the Obligations within five (5) days of as and when due and payable in
accordance with the provisions of this Agreement, the Note and/or any of the
other Financing Documents;
7.1.2 Breach of Representations and Warranties. Any representation or
42
warranty made in this Agreement or in any report, statement, schedule,
certificate, opinion (including any opinion of counsel for the Borrowers),
financial statement or other document furnished in connection with this
Agreement, any of the other Financing Documents, or the Obligations, shall
prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect.
7.1.3 Failure to Comply with Covenants. The failure of the
Borrowers to perform, observe or comply with any covenant, condition or
agreement contained in Sections 6.1.13, 6.1.14 and 6.2 of this Agreement.
7.1.4 Other Covenants. The failure of the Borrowers to perform,
observe or comply with any covenant, condition or agreement contained in this
Agreement, other than those set forth in Section 7.1.13 above, which default
shall remain unremedied for thirty (30) days after written notice thereof to
the Company by the Lender.
7.1.5 Default Under Other Financing Documents or Obligations. A
default shall occur under any of the other Financing Documents or under any
other Obligations, and such default is not cured within any applicable grace
period provided therein.
7.1.6 Receiver; Bankruptcy. The Company 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 or consenting to
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 take
corporate action 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, or (g) by any act
indicate its consent to, approval of or acquiescence in any order, judgment
or decree by any court of competent jurisdiction or any Governmental
Authority enjoining or otherwise prohibiting the operation of a material
portion of the Company's or any Subsidiary's business or the use or
disposition of a material portion of the Company's or any Subsidiary's assets.
7.1.7 Involuntary Bankruptcy, etc. (a) An order for relief shall be
entered in any involuntary case brought against the Company or any Subsidiary
under the Bankruptcy Code, or (b) any such case shall be commenced against
the Company or any Subsidiary and shall not be dismissed within sixty (60)
days after the filing of the petition, or (c) an order, judgment or decree
under any other Law is entered by any court of competent jurisdiction or by
any other Governmental Authority on the application of a Governmental
Authority or of a Person other than the Company or any Subsidiary (i)
adjudicating the Company, or any Subsidiary bankrupt or insolvent, or (ii)
appointing a receiver, trustee or liquidator of the
43
Company or of any Subsidiary, or of a material portion of the Company's or
any Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise
limiting the operation of a material portion of the Company's or any
Subsidiary's business or the use or disposition of a material portion of the
Company's or any Subsidiary's assets, and such order, judgment or decree
continues unstayed and in effect for a period of thirty (30) days from the
date entered.
7.1.8 Judgment. Unless adequately insured in the opinion of the
Lender, the entry of a final judgment for the payment of money involving more
than $100,000 against the Company or any Subsidiary, and the failure by the
Company 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.
7.1.9 Execution; Attachment. Any execution or attachment involving
more than $100,000 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.
7.1.10 Default Under Other Borrowings. Default shall be made with
respect to any Indebtedness for Borrowed Money in excess of $100,000 in the
aggregate (other than the Loan) if the effect of such default is to
accelerate the maturity of such evidence of the Indebtedness for Borrowed
Money or to permit the holder or obligee thereof or other party thereto to
cause any indebtedness to become due prior to its stated maturity.
7.1.11 Material Adverse Change. If a material adverse change has
occurred in the financial condition of any of the Borrowers as defined under
GAAP.
7.1.12 Impairment of Position. If the Lender in its sole but
reasonable 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.
7.1.13 Collateral Inadequacy. The determination in good faith by the
Lender that the security for the Obligations is inadequate.
7.1.14 Liquidation, Termination, Dissolution, Change in Management,
etc. If any Borrower shall liquidate, dissolve or terminate its existence or
shall suspend or terminate a substantial portion of its business operations
or any change occurs in the senior executive management team of the Company
such that any two (2) or more of Marko Bogoievski, Lever Xxxxxxx, Xxxxx
Xxxxxxxxx and Xxxxx Xxxxxx are no longer members thereof and replacement
management satisfactory to the Lender in its reasonable discretion is not
named within 120 days, or any change in control of any Borrower without the
prior written consent of the Lender.
SECTION 7.2 Remedies. Upon the occurrence of any Default or Event of
Default, the
44
Lender may at any time thereafter exercise any one or more of the following
rights, powers or remedies:
7.2.1 Acceleration. The Lender may declare the Obligations to be
immediately due and payable, notwithstanding anything contained in this
Agreement or in any of the other Financing Documents to the contrary, without
presentment, demand, protest, notice of protest or of dishonor, or other
notice of any kind, all of which the Borrowers hereby waive.
7.2.2 Further Advances. The Lender may from time to time without
notice to the Borrowers suspend, terminate or limit any further loans or
other extensions of credit under this Agreement and under any of the other
Financing Documents. Further, upon the occurrence of an Event of Default or
Default specified in Sections 7.1.6 (Receiver; Bankruptcy) or 7.1.7
(Involuntary Bankruptcy, etc.) above, the Revolving Credit Commitment and any
agreement in any of the Financing Documents to provide additional credit
shall immediately and automatically terminate and the unpaid principal amount
of the Note (with accrued interest thereon) and all other Obligations then
outstanding, shall immediately become due and payable without further action
of any kind and without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived by the Borrowers.
7.2.3 Uniform Commercial Code. The Lender shall have all of the
rights and remedies of a secured party under the applicable Uniform
Commercial Code and other applicable Laws. Upon demand by the Lender, the
Borrowers shall assemble the Collateral and make it available to the Lender,
at a place designated by the Lender. The Lender or its agents may without
notice from time to time enter upon each Borrower's premises to take
possession of the Collateral, to remove it, to render it unusable, to process
it or otherwise prepare it for sale, 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 Company at the address set forth in ARTICLE 8 of this
Agreement, or such other address of the Company 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 commercially reasonable notice
to the Borrowers. The Lender may alternatively or additionally give such
notice in any other commercially reasonable manner. Nothing in this Agreement
shall require the Lender to give any notice not required by applicable Laws.
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 Borrowers agree 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.
The Borrowers recognize that the Lender may be unable to effect a public
sale of all or a
45
part of the Collateral consisting of securities by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and other
applicable federal and state Laws. The Lender may, therefore, in its
discretion, take such steps as it may deem appropriate to comply with such
Laws and may, for example, at any sale of the Collateral consisting of
securities restrict the prospective bidders or purchasers as to their number,
nature of business and investment intention, including, without limitation, a
requirement that the Persons making such purchases represent and agree to the
satisfaction of the Lender that they are purchasing such securities for their
account, for investment, and not with a view to the distribution or resale of
any thereof. The Borrowers covenant and agree to do or cause to be done
promptly all such acts and things as the Lender may request from time to time
and as may be necessary to offer and/or sell the securities or any part
thereof in a manner which is valid and binding and in conformance with all
applicable Laws. Upon any such sale or disposition, the Lender shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral consisting of securities so sold.
7.2.4 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 (but shall be under no obligation
to), without notice to the Borrowers, and the Borrowers hereby irrevocably
appoints the Lender as its attorney-in-fact, with power of substitution, in
the name of the Lender or in the name of the Borrowers or otherwise, for the
use and benefit of the Lender, but at the cost and expense of the Borrowers
and without notice to the Borrowers:
(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) copy, transcribe, or remove from any place of business of
the Company or any Subsidiary 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
Company'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;
46
(g) institute and prosecute legal and equitable proceedings
to enforce collection of, or realize upon, any of the Collateral;
(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 or sign the name of each Borrower upon any items
of payment, certificates of title, instruments, securities, stock powers,
documents, documents of title, or other writing relating to or part of the
Collateral and on any Proof of Claim in Bankruptcy against an Account Debtor;
(j) notify the Post Office authorities to change the address
for the delivery of mail to each Borrower to such address or Post Office Box
as the Lender may designate and receive and open all mail addressed to each
Borrower; and
(k) take any other action necessary or beneficial to realize
upon or dispose of the Collateral.
7.2.5 APPLICATION OF PROCEEDS. Any proceeds of sale or other
disposition of the Collateral will be applied by the Lender to the payment of
the Enforcement Costs, 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 and
absolute discretion determine. If the sale or other disposition of the
Collateral fails to fully satisfy the Obligations, the Borrowers shall remain
jointly and severally liable to the Lender for any deficiency.
7.2.6 PERFORMANCE BY LENDER. After the occurrence of any Event of
Default, if the Borrowers 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
Borrowers and without waiving or releasing any of the Obligations or any
Default or 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 Borrowers, and may enter upon the premises of each
Borrower for that purpose and take all such action thereon as the Lender may
consider necessary or appropriate for such purpose and the Borrowers hereby
irrevocably appoint the Lender as each of their attorney-in-fact to do so,
with power of substitution, in the name of the Lender or in the name of each
Borrower or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrowers and without notice to the Borrowers. All sums
so paid or advanced by the Lender together with interest thereon from the
date of payment, advance or incurring until paid in full at the Default Rate
and all costs and expenses, shall be deemed part of the Enforcement Costs,
shall be paid by the Borrowers to the Lender on demand, and shall constitute
and become a part of the Obligations.
47
7.2.7 Other Remedies. The Lender may from time to time proceed to
protect or enforce its rights by an action or actions at law or in equity or
by any other appropriate proceeding, whether for the specific performance of
any of the covenants contained in this Agreement or in any of the other
Financing Documents, or for an injunction against the violation of any of the
terms of this Agreement or any of the other Financing Documents, or in aid of
the exercise or execution of any right, remedy or power granted in this
Agreement, the Financing Documents, and/or applicable Laws. 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 any 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.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests and demands to or upon
the parties to this Agreement shall be in writing and shall be deemed to have
been given or made when delivered by hand on a Business Day, or two (2) days
after the date when deposited in the mail, postage prepaid by registered or
certified mail, return receipt requested, or when sent by overnight courier,
on the Business Day next following the day on which the notice is delivered
to such overnight courier, addressed as follows:
Borrowers: c/o DISPATCH MANAGEMENT SERVICES CORP.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xx. Xxxxx Bogoievski
Lender: NATIONSBANK, N.A.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
with a copy to:
Xxxxxxx X. Xxxxxx, Esquire
Ober, Kaler, Xxxxxx & Xxxxxxx,
a Professional Corporation
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
By written notice, each party to this Agreement may change the address to
which notice is given to that party, provided that such changed notice shall
include a street address to which notices may be delivered by overnight
courier in the ordinary course on any Business Day.
48
SECTION 8.2 Amendments; Waivers. This Agreement and the other
Financing Documents may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Lender and the Borrowers. No
waiver of any provision of this Agreement or of any of the other Financing
Documents, nor consent to any departure by the Borrowers therefrom, shall in
any event be effective unless the same shall be in writing. No course of
dealing between the Borrowers and the Lender and no act or failure to act
from time to time on the part of the Lender shall constitute a waiver,
amendment or modification of any provision of this Agreement or any of the
other Financing Documents or any right or remedy under this Agreement, under
any of the other Financing Documents or under applicable Laws.
Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the specific
instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall extend to any
subsequent or other Default or Event of Default, or impair any right
consequent thereto.
(c) No notice to or demand on the Borrowers in any case shall entitle
the Borrowers to any other or further notice or demand in the same, similar
or other circumstance.
(d) 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,
amendment or modification 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 time or times.
(e) 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 8.3 Cumulative Remedies. The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are
cumulative, may be exercised concurrently or separately, may be exercised
from time to time and in such order as the Lender shall determine and are in
addition to, and not exclusive of, rights, powers and remedies provided by
existing or future applicable Laws. In order to entitle the Lender to
exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing,
the Lender may:
49
(a) proceed against the Borrowers or any other Person who may
be liable for all or any part of the Obligations;
(b) proceed against the Borrowers with or without proceeding
under any of the other Financing Documents or against any Collateral or other
collateral and security for all or any part of the Obligations;
(c) without reducing or impairing the obligation of the
Borrowers and without notice, release or compromise with any guarantor or
other Person liable for all or any part of the Obligations under the
Financing Documents or otherwise;
(d) without reducing or impairing the obligations of the
Borrowers and without notice thereof: (i) fail to perfect the Lien in any or
all Collateral or to release any or all the Collateral or to accept
substitute Collateral, (ii) approve the making of advances under the
Revolving Loan under this Agreement, (iii) waive any provision of this
Agreement or the other Financing Documents, (iv) exercise or fail to exercise
rights of set-off or other rights, or (v) accept partial payments or extend
from time to time the maturity of all or any part of the Obligations.
SECTION 8.4 Severability. In case one or more provisions, or part
thereof, contained in this Agreement or in the other Financing Documents
shall be invalid, illegal or unenforceable in any respect under any Law, then
without need for any further agreement, notice or action:
(a) the validity, legality and enforceability of the
remaining provisions shall remain effective and binding on the parties
thereto and shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) if such provision or part thereof pertains to repayment
of the Obligations, then, at the sole and absolute discretion of the Lender,
all of the Obligations of the Borrowers to the Lender shall become
immediately due and payable; and
(d) if affected provision or part thereof does not pertain to
repayment of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or part
thereof only shall be void, and the remainder of this Agreement shall remain
operative and in full force and effect.
SECTION 8.5 Assignments by Lender. The Lender may, without notice
to, or consent of, the Borrowers, sell, assign or transfer to or participate
with any Person or Persons all or any part of the Obligations, and each such
Person or Persons shall have the right to enforce the provisions of this
Agreement and any of the other Financing Documents as fully as the Lender,
50
provided that the Lender shall continue to have the unimpaired right to
enforce the provisions of this Agreement and any of the other Financing
Documents as to so much of the Obligations that the Lender has not sold,
assigned or transferred. In connection with the foregoing, the Lender shall
have the right to disclose to any such actual or potential purchaser,
assignee, transferee or participant all financial records, information,
reports, financial statements and documents obtained in connection with this
Agreement and any of the other Financing Documents or otherwise.
SECTION 8.6 Successors and Assigns. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrowers and the Lender and their respective successors and assigns, except
that the Borrowers shall not have the right to assign its rights hereunder or
any interest herein without the prior written consent of the Lender.
SECTION 8.7 Continuing Agreements. All covenants, agreements,
representations and warranties made by the Borrowers in this Agreement, in
any of the other Financing Documents, and in any certificate delivered
pursuant hereto or thereto shall survive the making by the Lender of the Loan
and the execution and delivery of the Note, shall be binding upon the
Borrowers regardless of how long before or after the date hereof any of the
Obligations were or are incurred, and shall continue in full force and effect
so long as any of the Obligations are outstanding and unpaid. From time to
time upon the Lender's request, and as a condition of the release of any one
or more of the Security Documents, the Borrowers and other Persons obligated
with respect to the Obligations shall provide the Lender with such
acknowledgments and agreements as the Lender may require to the effect that
there exists no defenses, rights of setoff or recoupment, claims,
counterclaims, actions or causes of action of any kind or nature whatsoever
against the Lender, its agents and others, or to the extent there are, the
same are waived and released.
SECTION 8.8 Enforcement Costs. The Borrowers agree after the
occurrence of any Event of Default to pay to the Lender on demand all
Enforcement Costs, together with interest thereon from the date incurred or
advanced until paid in full at a per annum rate of interest equal at all
times to the Default Rate. Enforcement Costs shall be immediately due and
payable at the time advanced or incurred, whichever is earlier. Without
implying any limitation on the foregoing, the Borrowers agree, as part of the
Enforcement Costs, to pay upon demand any and all stamp and other Taxes and
fees payable or determined to be payable in connection with the execution and
delivery of this Agreement and the other Financing Documents and to save the
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay any Taxes or fees
referred to in this Section. The provisions of this Section shall survive
the execution and delivery of this Agreement, the repayment of the other
Obligations and shall survive the termination of this Agreement.
SECTION 8.9 Applicable Law; Jurisdiction.
8.9.1 As a material inducement to the Lender to enter into this
Agreement, the Borrowers acknowledge and agree that the Financing Documents,
including, this Agreement, shall be governed by the Laws of the State, as if
each of the Financing Documents
51
and this Agreement had each been executed, delivered, administered and
performed solely within the State even though for the convenience and at the
request of the Borrowers, one or more of the Financing Documents may be
executed elsewhere. The Lender acknowledges, however, that remedies under
certain of the Financing Documents which relate to property outside the State
may be subject to the laws of the state in which the property is located.
8.9.2 Each Borrower irrevocably submits to the jurisdiction of any
state or federal court sitting in the State over any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Financing Documents. Each Borrower irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. Final judgment in
any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon each Borrower and may be enforced in any court in
which any Borrower is subject to jurisdiction, by a suit upon such judgment,
provided that service of process is effected upon the Borrowers in one of the
manners specified in this Section or as otherwise permitted by applicable
Laws.
8.9.3 Each Borrower hereby irrevocably designates and appoints The
Xxxxxxxx-Xxxx Corporation System, Maryland, 0000 X. Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000, as the Borrowers' authorized agent to receive on the
Borrowers' behalf service of any and all process that may be served in any
suit, action or proceeding of the nature referred to in this Section in any
state or federal court sitting in the State. If such agent shall cease so to
act, the Borrowers shall irrevocably designate and appoint without delay
another such agent in the State satisfactory to the Lender and shall promptly
deliver to the Lender evidence in writing of such other agent's acceptance of
such appointment and its agreement that such appointment shall be
irrevocable.
8.9.4 Each Borrower hereby consents to process being served in any
suit, action or proceeding of the nature referred to in this Section by (i)
the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the Borrowers at the address designated
in or pursuant to Section 8.1 hereof, and (ii) serving a copy thereof upon
the agent, if any, designated and appointed by the Borrowers as the
Borrowers' agent for service of process by or pursuant to this Section. Each
Borrower irrevocably agrees that such service (i) shall be deemed in every
respect effective service of process upon the Borrowers in any such suit,
action or proceeding, and (ii) shall, to the fullest extent permitted by law,
be taken and held to be valid personal service upon the Borrowers. Nothing
in this Section shall affect the right of the Lender to serve process in any
manner otherwise permitted by law or limit the right of the Lender otherwise
to bring proceedings against the Borrowers in the courts of any jurisdiction
or jurisdictions.
SECTION 8.10 Duplicate Originals and Counterparts. This Agreement may
be executed in any number of duplicate originals or counterparts, each of
such duplicate originals or counterparts shall be deemed to be an original
and all taken together shall constitute but one and
52
the same instrument.
SECTION 8.11 Headings. The headings in this Agreement are included
herein for convenience only, shall not constitute a part of this Agreement
for any other purpose, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
SECTION 8.12 No Agency. Nothing herein contained shall be construed
to constitute the Borrowers as the Lender's agent for any purpose whatsoever
or to permit the Borrowers to pledge any of the Lender's credit. The Lender
shall not be responsible nor liable for any shortage, discrepancy, damage,
loss or destruction of any part of the Collateral wherever the same may be
located and regardless of the cause thereof. The Lender shall not, by
anything herein or in any of the Financing Documents or otherwise, assume any
of the Borrowers' obligations under any contract or agreement assigned to the
Lender, and the Lender shall not be responsible in any way for the
performance by the Borrowers of any of the terms and conditions thereof.
SECTION 8.13 Date of Payment. Should the principal of or interest on
the Notes become due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and in the case
of principal, interest shall be payable thereon at the rate per annum
specified in the Notes during such extension.
SECTION 8.14 Entire Agreement. This Agreement is intended by the
Lender and the Borrowers to be a complete, exclusive and final expression of
the agreements contained herein. Neither the Lender nor the Borrowers shall
hereafter have any rights under any prior agreements pertaining to the
matters addressed by this Agreement but shall look solely to this Agreement
for definition and determination of all of their respective rights,
liabilities and responsibilities under this Agreement.
SECTION 8.15 Waiver of Trial by Jury. THE BORROWERS AND THE LENDER
HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO WHICH THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN
ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS,
OR (C) THE COLLATERAL. 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
Borrower and the Lender, and each Borrower and the Lender 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. Each Borrower and the Lender 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.
53
SECTION 8.16 Liability of the Lender. The Borrowers hereby agree 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 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.
By inspecting the Collateral or any other properties of any Borrower or
by accepting or approving anything required to be observed, performed or
fulfilled by any Borrower or to be given to the Lender pursuant to this
Agreement or any of the other Financing Documents, the Lender shall not be
deemed to have warranted or represented the condition, sufficiency, legality,
effectiveness or legal effect of the same, and such acceptance or approval
shall not constitute any warranty or representation with respect thereto by
the Lender.
SECTION 8.17 Arbitration. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF THIS
AGREEMENT ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE
FOR ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A
J.A.M.S./ENDISPUTE ("J.A.M.S.") AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF AN INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT
UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
ANY PARTY TO THIS AGREEMENT MAY BRING ANY ACTION, INCLUDING A SUMMARY OR
EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO
WHICH THIS AGREEMENT RELATES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN XXXXXXXXXX
COUNTY, MARYLAND AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR.
IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY
(60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED
TO: (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE
A WAIVER BY THE BANK OF THE PROTECTION
54
AFFORDED TO IT BY 12 U.S.C. Section 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE
LAW; OR (III) LIMIT THE RIGHT OF THE LENDER: (A) TO EXERCISE SELF HELP
REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY
REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THE
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF ANY
ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
[SIGNATURES ON NEXT PAGE]
55
IN WITNESS WHEREOF, each of the parties hereto have duly executed and
delivered this Agreement under their respective seals as of the date first
written above.
WITNESS/ATTEST: DISPATCH MANAGEMENT SERVICES CORP.
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
WITNESS/ATTEST: DISPATCH MANAGEMENT SERVICES SAN
FRANCISCO CORP.
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
WITNESS/ATTEST: DISPATCH MANAGEMENT SERVICES NEW
YORK CORP.
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
WITNESS/ATTEST: DISPATCH MANAGEMENT SERVICES
ACQUISITION CORP.
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
WITNESS/ATTEST: ROAD MANAGEMENT SERVICES
CORPORATION
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
56
WITNESS/ATTEST: BALMERINO HOLDINGS LIMITED
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
WITNESS/ATTEST: STATETIP LIMITED
------------------------------- By:-------------------------- (SEAL)
, Secretary Name:
Title:
WITNESS: NATIONSBANK, N.A.
------------------------------- By:-------------------------- (SEAL)
Xxxxxxxxx X. Xxxxx
Vice President
57
LIST OF EXHIBITS
A. Revolving Credit Note
B. Subsidiaries
C. Second Tier Subsidiaries
D. Liens
E. Other Indebtedness
F. Purchase Agreements
