LOAN AND SECURITY AGREEMENT
DATED AS OF DECEMBER 8, 1995
among
UNIFORCE SERVICES, INC. ,
as Guarantor,
THE SUBSIDIARIES OF UNIFORCE SERVICES, INC. NAMED HEREIN,
as Borrowers and Cross-Guarantors,
THE LENDERS NAMED HEREIN,
as Lenders
and
XXXXXX FINANCIAL, INC.,
as Agent and as Lender
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS...........................................................................................1
1.1 Certain Defined Terms...............................................................................1
1.2 Accounting Terms...................................................................................14
1.3 Other Definitional Provisions......................................................................14
SECTION 2. LOANS AND COLLATERAL.................................................................................15
2.1 Loans..............................................................................................15
(A) Term Loan..................................................................................15
(B) Revolving Loan.............................................................................15
(C) Eligible Accounts..........................................................................16
(D) Borrowing Mechanics........................................................................18
(E) Notes......................................................................................19
(F) Evidence of Revolving Loan Obligations.....................................................19
(G) Letters of Credit..........................................................................19
(1) Maximum Amount....................................................................20
(2) Reimbursement.....................................................................20
(3) Conditions of Issuance............................................................20
(4) Request for Letters of Credit.....................................................20
(H) Other Letter of Credit Provisions..........................................................20
(1) Obligations Absolute..............................................................20
(2) Nature of Lender's Duties.........................................................21
(3) Liability.........................................................................22
(I) Appointment of Borrower Representative........................................................22
2.2 Interest. ........................................................................................22
(A) Rate of Interest...........................................................................22
(B) Interest Periods...........................................................................23
(C) Computation and Payment of Interest........................................................23
(D) Interest Laws..............................................................................24
(E) Conversion or Continuation.................................................................24
2.3 Fees...............................................................................................25
(A) Closing Fee................................................................................25
(B) Unused Line Fee............................................................................25
(C) Letter of Credit Fees......................................................................25
(D) Prepayment Fees............................................................................25
(E) Collateral Monitoring Fee..................................................................26
(F) Audit Fees.................................................................................26
(G) Other Fees and Expenses....................................................................26
2.4 Payments and Prepayments...........................................................................26
(A) Manner and Time of Payment.................................................................26
(B) Mandatory Prepayments......................................................................26
(1) Overadvance.......................................................................26
(2) Proceeds of Asset Dispositions....................................................27
(3) Prepayments from Excess Cash Flow.................................................27
(C) Voluntary Prepayments and Repayments.......................................................27
(D) Payments on Business Days..................................................................28
2.5 Term of this Agreement.............................................................................28
2.6 Statements.........................................................................................28
2.7 Grant of Security Interest.........................................................................28
2.8 Capital Adequacy and Other Adjustments.............................................................29
2.9 Taxes..............................................................................................29
(A) No Deductions..............................................................................29
(B) Changes in Tax Laws........................................................................29
(C) Foreign Lenders............................................................................30
2.10 Required Termination and Prepayment................................................................30
2.11 Optional Prepayment/Replacement of Agent
or Lenders in Respect of Increased Costs..........................................31
2.12 Compensation.......................................................................................31
2.13 Booking of LIBOR Rate Loans........................................................................32
2.14 Assumptions Concerning Funding of LIBOR Rate Loans.................................................32
SECTION 3. CONDITIONS TO LOANS..................................................................................32
3.1 Conditions to Loans................................................................................32
(A) Closing Deliveries.........................................................................32
(B) Security Interests.........................................................................32
(C) Closing Date Availability..................................................................32
(D) Representations and Warranties.............................................................32
(E) Fees.......................................................................................33
(F) No Default.................................................................................33
(G) Performance of Agreements..................................................................33
(H) No Prohibition.............................................................................33
(I) No Litigation..............................................................................33
3.2 Additional Conditions to Loans to Fund Tender Offer................................................33
3.3 Additional Conditions to Loans to Fund Permitted Acquisitions......................................33
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES............................................................33
4.1 Organization, Powers, Capitalization...............................................................33
(A) Organization and Powers....................................................................33
(B) Capitalization.............................................................................34
4.2 Authorization of Borrowing, No Conflict............................................................34
4.3 Financial Condition................................................................................34
4.4 Indebtedness and Liabilities.......................................................................35
4.5 Account Warranties.................................................................................35
4.6 Names..............................................................................................35
4.7 Locations; FEIN....................................................................................35
4.8 Title to Properties; Liens.........................................................................35
4.9 Litigation; Adverse Facts..........................................................................36
4.10 Payment of Taxes...................................................................................36
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4.11 Performance of Agreements..........................................................................36
4.12 Employee Benefit Plans.............................................................................36
4.13 Intellectual Property..............................................................................36
4.14 Broker's Fees......................................................................................36
4.15 Environmental Compliance...........................................................................36
4.16 Solvency...........................................................................................37
4.17 Disclosure.........................................................................................37
4.18 Insurance..........................................................................................37
4.19 Compliance with Laws...............................................................................37
4.20 Bank Accounts......................................................................................38
4.21 Subsidiaries.......................................................................................38
4.22 Employee Matters...................................................................................38
4.23 Governmental Regulation............................................................................38
SECTION 5. AFFIRMATIVE COVENANTS................................................................................38
5.1 Financial Statements and Other Reports.............................................................38
(A) Monthly Financials.........................................................................39
(B) Year-End Financials........................................................................39
(C) Public Filings.............................................................................39
(D) Accountants' Certification and Reports.....................................................39
(E) Compliance Certificate.....................................................................40
(F) Borrowing Base Certificates, Registers and Journals........................................40
(G) Reconciliation Reports, Listings and Agings...............................................40
(H) Management Report..........................................................................40
(I) Government Notices.........................................................................41
(J) Events of Default, etc.....................................................................41
(K) Trade Names................................................................................41
(L) Locations..................................................................................41
(M) Bank Accounts..............................................................................41
(N) Litigation.................................................................................41
(O) Projections................................................................................41
(P) Indebtedness Notices.......................................................................42
(Q) Other Information..........................................................................42
5.2 Access to Accountants..............................................................................42
5.3 Inspection.........................................................................................42
5.4 Collateral Records.................................................................................42
5.5 Account Covenants; Verification....................................................................42
5.6 Collection of Accounts and Payments................................................................43
5.7 Endorsement........................................................................................43
5.8 Corporate Existence................................................................................44
5.9 Payment of Taxes...................................................................................44
5.10 Maintenance of Properties; Insurance...............................................................44
5.11 Compliance with Laws...............................................................................44
5.12 Further Assurances.................................................................................44
5.13 Collateral Locations...............................................................................45
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5.14 Instruments; Chattel Paper.........................................................................45
5.15 Account Agreements.................................................................................45
5.16 Use of Proceeds and Margin Security................................................................45
SECTION 6. FINANCIAL COVENANTS..................................................................................45
6.1 Tangible Net Worth.................................................................................45
6.2 Minimum EBITDA.....................................................................................46
6.3 Minimum Net Income.................................................................................46
6.4 Capital Expenditure Limits.........................................................................46
6.5 Fixed Charge Coverage..............................................................................46
SECTION 7. NEGATIVE COVENANTS...................................................................................47
7.1 Indebtedness and Liabilities.......................................................................47
7.2 Guaranties.........................................................................................47
7.3 Transfers, Liens and Related Matters...............................................................47
(A) Transfers..................................................................................47
(B) Liens......................................................................................48
(C) No Negative Pledges........................................................................48
(D) No Restrictions on Subsidiary
Distributions to Holdings or any Borrower..................................................48
7.4 Investments and Loans..............................................................................48
7.5 Restricted Junior Payments.........................................................................49
7.6 Restriction on Fundamental Changes.................................................................50
7.7 Transactions with Affiliates.......................................................................53
7.8 Environmental Liabilities..........................................................................53
7.9 Conduct of Business................................................................................53
7.10 Compliance with ERISA..............................................................................53
7.11 Tax Consolidations.................................................................................53
7.12 Subsidiaries.......................................................................................53
7.13 Fiscal Year........................................................................................53
7.14 Press Release; Public Offering Materials...........................................................54
7.15 Bank Accounts......................................................................................54
SECTION 8. DEFAULT, RIGHTS AND REMEDIES.........................................................................54
8.1 Event of Default...................................................................................54
(A) Payment....................................................................................54
(B) Default in Other Agreements................................................................54
(C) Breach of Certain Provisions...............................................................54
(D) Breach of Warranty.........................................................................54
(E) Other Defaults Under Loan Documents........................................................54
(F) Involuntary Bankruptcy; Appointment of Receiver, etc.......................................54
(G) Voluntary Bankruptcy; Appointment of Receiver, etc.........................................55
(H) Liens......................................................................................55
(I) Judgment and Attachments...................................................................55
(J) Dissolution................................................................................55
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(K) Solvency...................................................................................55
(L) Injunction.................................................................................56
(M) Invalidity of Loan Documents...............................................................56
(N) Failure of Security........................................................................56
(O) Damage, Strike, Casualty...................................................................56
(P) Licenses and Permits.......................................................................56
(Q) Forfeiture.................................................................................56
8.2 Suspension of Commitments..........................................................................56
8.3 Acceleration.......................................................................................56
8.4 Remedies...........................................................................................57
8.5 Appointment of Attorney-in-Fact....................................................................57
8.6 Limitation on Duty of Agent with Respect to Collateral.............................................58
8.7 Application of Proceeds............................................................................58
8.8 License of Intellectual Property...................................................................58
8.9 Waivers, Non-Exclusive Remedies....................................................................58
SECTION 9. ASSIGNMENT AND PARTICIPATION.........................................................................59
9.1 Assignments and Participations in Loans............................................................59
9.2 Agent..............................................................................................60
(A) Appointment................................................................................60
(B) Nature of Duties...........................................................................60
(C) Rights, Exculpation, Etc...................................................................61
(D) Reliance...................................................................................61
(E) Indemnification............................................................................61
(F) Xxxxxx Individually........................................................................62
(G) Successor Agent............................................................................62
(1) Resignation.......................................................................62
(2) Appointment of Successor..........................................................62
(3) Successor Agent...................................................................62
(H) Collateral Matters.........................................................................62
(1) Release of Collateral.............................................................62
(2) Confirmation of Authority; Execution of Releases..................................63
(3) Absence of Duty...................................................................63
(I) Agency for Perfection......................................................................64
(J) Exercise of Remedies.......................................................................64
9.3 Consents...........................................................................................64
9.4 Set Off and Sharing of Payments....................................................................64
9.5 Disbursement of Funds..............................................................................65
9.6 Settlements, Payments and Information..............................................................65
(A) Revolving Loan Advances and Payments; Fee Payments.........................................65
(B) Availability of Lender's Pro Rata Share....................................................66
(C) Return of Payments.........................................................................66
9.7 Dissemination of Information.......................................................................67
9.8 Discretionary Advances.............................................................................67
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SECTION 10. MISCELLANEOUS.......................................................................................67
10.1 Expenses and Attorneys' Fees.......................................................................67
10.2 Indemnity..........................................................................................67
10.3 Amendments and Waivers.............................................................................68
10.4 Notices............................................................................................69
10.5 Survival of Warranties and Certain Agreements......................................................70
10.6 Indulgence Not Waiver..............................................................................70
10.7 Marshaling; Payments Set Aside.....................................................................70
10.8 Entire Agreement...................................................................................70
10.9 Independence of Covenants..........................................................................70
10.10 Severability.......................................................................................70
10.11 Lenders' Obligations Several; Independent Nature of Lenders' Rights................................71
10.12 Headings...........................................................................................71
10.13 APPLICABLE LAW.....................................................................................71
10.14 Successors and Assigns.............................................................................71
10.15 No Fiduciary Relationship; Limitation of Liabilities...............................................71
10.16 CONSENT TO JURISDICTION............................................................................72
10.17 WAIVER OF JURY TRIAL...............................................................................72
10.18 Construction.......................................................................................72
10.19 Counterparts; Effectiveness........................................................................72
10.20 No Duty............................................................................................72
10.21 Confidentiality....................................................................................73
SECTION 11. GUARANTIES..........................................................................................73
11.1 Guaranty...........................................................................................73
11.2 Contribution with Respect to Guaranty Obligations..................................................73
11.3 Obligations Absolute...............................................................................74
11.4 WAIVER.............................................................................................75
11.5 Recovery...........................................................................................75
11.6 Liability Cumulative...............................................................................75
vi
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of December 8, 1995 and
entered into among UNIFORCE SERVICES, INC., a New York corporation ("Holdings"),
each of BRENTWOOD SERVICE GROUP, INC., a New York corporation ("Brentwood"),
COMPUTER CONSULTANTS FUNDING & SUPPORT, INC., a New York corporation, LABFORCE
OF AMERICA, INC., a New York corporation, PRO UNLIMITED, INC., a New York
corporation, TEMPORARY HELP INDUSTRY SERVICING COMPANY, INC., a New York
corporation ("THISCO"), UNIFORCE MIS SERVICES OF GEORGIA, INC., a Georgia
corporation, and UNIFORCE STAFFING SERVICES, INC., a New York corporation
("USS") (each of the foregoing other than Holdings referred to herein
individually as a "Borrower" and collectively as "Borrowers"), XXXXXX FINANCIAL,
INC., a Delaware corporation (in its individual capacity, "Xxxxxx"), with
offices at 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 for itself as a
Lender and as Agent, and the other Lenders from time to time signatory hereto.
All capitalized terms used herein are defined in Section 1 of this Agreement.
WHEREAS, Holdings and Borrowers desire that Lenders extend a credit
facility to Borrowers to refinance certain indebtedness of Holdings and
Borrowers, to provide funds for the Tender Offer, to provide working capital
financing and to provide funds for Permitted Acquisitions; and
to Agent, for benefit of Lenders, a security interest in and lien upon certain
of their property; and
WHEREAS, Holdings and each of its Subsidiaries which are not Borrowers
hereunder are willing to guaranty all of the obligations of Borrowers to Agent
and Lenders under the Loan Documents and to grant to Agent, for benefit of
Lenders, a security interest and lien upon certain of their property to secure
such guaranties;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holdings, Borrowers, Agent and
Lenders agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement shall
have the following meanings:
"Account Agreements" means all agreements pursuant to which Purchased
Accounts are purchased or Service Fee Accounts are generated.
"Account Seller" means, in the case of any Purchased Account, the Person
from whom such Purchased Account was purchased and, in the case of any Service
Fee Account, means the independent supplemental staffing firm which provided the
services creating such Service Fee Account.
"Accounts" means, all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by any Borrower arising
or resulting from the sale of goods or the rendering of services.
"Affiliate" means any Person (other than Agent or Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, Holdings or
any Borrower; (b) directly or indirectly owning or holding five percent (5%) or
more of any equity interest in Holdings or any Borrower; or (c) five percent
(5%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by Holdings or any Borrower. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or by contract or otherwise.
"Agent" means Xxxxxx in its capacity as agent for the Lenders under the
Loan Documents and any successor in such capacity appointed pursuant to
subsection 9.2.
"Agent's Account" means ABA No. 0000-0000-0, Account No. 55-35158 at First
National Bank of Chicago, Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, XX 00000,
Reference: Xxxxxx Business Credit for the benefit of Uniforce Services, Inc.
"Agreement" means this Loan and Security Agreement as it may be amended,
supplemented or otherwise modified from time to time.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of any Borrower or any other Subsidiary of Holdings.
"Bank Letters of Credit" means letters of credit issued by a bank for the
account of any Borrower and supported by a Risk Participation Agreement.
"Base Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve System
ceases to publish a Bank Prime Loan rate or its equivalent, the term "Base Rate"
shall mean a variable rate of interest per annum equal to the highest of the
"prime rate", "reference rate", "base rate", or other similar rate announced
from time to time by any of Bankers Trust Company, The Chase Manhattan Bank,
National Association or Chemical Bank, or their successors (with the
understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by any such bank).
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate.
"Blocked Accounts" has the meaning assigned to that term in subsection 5.6.
2
"Blocked Account Agreements" has the meaning assigned to that term in
subsection 5.6.
"Borrower" and "Borrowers" have the meanings assigned to such terms in the
preamble to this Agreement.
"Borrower Representative" has the meaning assigned to that term in
subsection 2.1(I).
"Borrowing Base" has the meaning assigned to that term in subsection
2.1(B).
"Borrowing Base Certificate" means a certificate and assignment schedule
duly executed by an authorized officer of Borrower Representative appropriately
completed and in substantially the form of Exhibit 1.1(A).
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Illinois, Pennsylvania or New
York or, for the purposes of LIBOR Rate Loans only, London, England or is a day
on which banking institutions located in any such state or city are closed.
"Capital Expenditures" means, without duplication, all expenditures
(including deposits) for, or contracts for expenditures (excluding contracts for
expenditures under or with respect to Capital Leases, but including cash down
payments for assets acquired under Capital Leases) with respect to any fixed
assets or improvements, or for replacements, substitutions or additions thereto,
which have a useful life of more than one year, including the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise.
"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Xxxxx'x Investors Service, Inc.; (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank and (d) compensating balances with and
deposits in banks to the extent required to maintain payroll accounts with such
banks.
"Closing Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of each Borrower in a form
reasonably acceptable to Agent.
"Closing Date" means December 8, 1995.
3
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Collecting Banks" has the meaning assigned to that term in subsection 5.6.
"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsections 2.1(A) and/or 2.1(B) and to
provide Lender Letters of Credit as set forth in subsection 2.1(G).
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Holdings and Borrowers
appropriately completed and in substantially the form of Exhibit 1.1(B).
"Default" means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"EBITDA" means, for any period, without duplication, the total of the
following for Holdings and its Subsidiaries on a consolidated basis, each
calculated for such period: (1) Net Income; plus, to the extent included in the
calculation of Net Income, (2) the sum of (a) income, franchise and other
income-based taxes paid or accrued; (b) Interest Expenses, net of interest
income (excluding service revenues and fees), paid or accrued; (c) interest paid
in kind; (d) amortization and depreciation and (e) other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of business).
"Eligible Accounts" has the meaning assigned to that term in subsection
2.1(C).
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
4
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.
"Event of Default" means each of the events set forth in subsection 8.1.
"Excess Cash Flow" means, for any period, the greater of (A) zero (0); or
(B) without duplication, the total of the following for Holdings and its
Subsidiaries on a consolidated basis, each calculated for such period: (1)
EBITDA; plus (2) tax refunds actually received; less (3) Capital Expenditures
(to the extent actually made in cash and/or due to be made in cash within such
period but in no event more than the amount permitted by subsection 6.5 hereof);
less (4) income and franchise taxes paid or accrued excluding any provision for
deferred taxes included in the determination of net income; less (5) decreases
in deferred income taxes resulting from payments of deferred taxes accrued in
prior periods; less (6) Interest Expenses paid or accrued; less (7) scheduled
amortization of Indebtedness actually paid and/or due to be paid within such
period and permitted under subsection 7.5.
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Fixed Charge Coverage" means, for any period, Operating Cash Flow divided
by Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such period
(without duplication), (a) Interest Expenses paid or accrued by Holdings and its
Subsidiaries; plus (b) scheduled payments of principal with respect to all
Indebtedness of Holdings and its Subsidiaries; plus (c) any provision for (to
the extent it is greater than zero) income or franchise taxes included in the
determination of Net Income, excluding any provision for deferred taxes; plus
(d) Restricted Junior Payments made in cash to the extent permitted under
subsection 7.5(C); plus (e) payment of deferred taxes accrued in any prior
period; plus (f) amounts paid to induce Persons to enter into, or otherwise paid
pursuant to or in contemplation of, Account Agreements or Licensing Agreements
which amounts have been, or in accordance with GAAP should have been,
capitalized on the financial statements of Holdings and its Subsidiaries.
"Funding Date" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit.
5
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"Guarantor Security Agreement" means the security agreement to be executed
and delivered by each Subsidiary Guarantor, in a form reasonably acceptable to
Agent, as such agreement may hereafter be amended, restated, supplemented or
otherwise modified from time to time.
"Guaranty" means the continuing guaranty to be executed and delivered by
each Subsidiary Guarantor in a form reasonably acceptable to Agent, as such
agreement may hereafter be amended, restated, supplemented or otherwise modified
from time to time.
"Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"Inactive Subsidiary" means any of Xxxxxxx & Xxxxx, Inc., a Georgia
corporation, E.O. Operations Corp, a New York corporation, E.O. Servicing Co.,
Inc., a New York corporation, Professional Staffing Funding & Support, Inc., a
New York corporation, Staffing Industry Funding & Support, Inc., a New York
corporation, Tempfunds International, Inc., a New York corporation, THISCO of
Canada, Inc., a New York corporation, Uniforce Information Services, Inc., a New
York corporation, Uniforce Medical Office Support, Inc., a New York corporation,
USI Inc. of California, a California corporation, and UTS Corp. of Minnesota, a
Minnesota corporation; provided, that no such Subsidiary shall constitute an
Inactive Subsidiary if such Subsidiary at any time holds any assets, incurs any
liabilities (other than corporate franchise taxes and other similar charges
incidental to the maintenance of its corporate existence and intercompany loans
incurred in accordance with subsection 7.1(b)(ii) solely for the purpose of
paying such taxes and charges) or engages in any business activity.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless
6
of whether the indebtedness secured thereby shall have been assumed by that
Person or is non recourse to the credit of that Person.
"Intangible Assets" means all intangible assets (determined in conformity
with GAAP) including, without limitation, goodwill, trademarks, trade names,
licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"Intellectual Property Assignment" means the intellectual property
assignment to be executed and delivered by each Loan Party, in a form reasonably
acceptable to Agent, as such agreement may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"Intercompany Indebtedness" means, with respect to Holdings or any of its
Subsidiaries, all assets and liabilities howsoever arising, which are due to
such Person from, or which are due from such Person to, or which may otherwise
arise from any transactions by such Person with, Holdings or any Subsidiary of
Holdings.
"Interest Expenses" means, without duplication, for any period, the
following, for Holdings and its Subsidiaries on a consolidated basis each
calculated for such period: interest expenses deducted in the determination of
net income (excluding (i) the amortization of fees and costs with respect to the
transactions contemplated hereunder on the Closing Date which have been
capitalized as transaction costs; and (ii) interest paid in kind).
"Interest Period" has the meaning assigned to that term in subsection
2.2(B).
"Interest Rate" has the meaning assigned to that term in subsection 2.2(A).
"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" or "Lenders" means each lender listed on the signature page hereto
together with its respective successors and assigns pursuant to subsection 9.1.
7
"Lender Addition Agreement" means an agreement among Agent, a Lender and
such Lender's assignee regarding their respective rights and obligations with
respect to assignments of the Loans, the Commitments and other interests under
this Agreement and the other Loan Documents, in form and substance acceptable to
Agent and such Lender.
"Lender Letter of Credit" has the meaning assigned to that term in
subsection 2.1(G).
"Letter of Credit Liability" means, all reimbursement and other liabilities
of Borrowers with respect to each Lender Letter of Credit, whether contingent or
otherwise, including: (a) the amount available to be drawn or which may become
available to be drawn; (b) all amounts which have been paid or made available by
the issuing bank to the extent not reimbursed; and (c) all unpaid interest, fees
and expenses.
"Letter of Credit Reserve" means, at any time, an amount equal to (a) the
aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus (b) the aggregate amount
theretofore paid by Agent or any Lender under Lender Letters of Credit and not
debited to the Loan Account pursuant to subsection 2.1(G)(2) or otherwise
reimbursed by Borrowers.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"LIBOR Rate" means, for each Interest Period, a rate of interest equal to:
(a) the rate of interest determined by Agent at which deposits in Dollars
for the relevant Interest Period are offered based on information presented on
the Reuters Screen LIBOR Page as of 11:00 A.M. (London time) on the day which is
two (2) Business Days prior to the first day of such Interest Period; provided
that if at least two such offered rates appear on the Reuters Screen LIBOR Page
in respect of such Interest Period, the arithmetic mean of all such rates (as
determined by Agent) will be the rate used; provided further that if Reuters
ceases to provide LIBOR quotations, such rate shall be the average rate of
interest determined by Agent at which deposits in Dollars are offered for the
relevant Interest Period by Bankers Trust Company, Chase Manhattan Bank, N.A.
and Chemical Bank, or their successors, (or their respective successors) to
prime banks in the London interbank market as of 11:00 A.M. (London time) on the
applicable interest rate determination date, divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two (2) Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the Federal
Reserve System:
8
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of
1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%), to
the next higher one sixteenth of one percent (1/16 of 1%).
"LIBOR Rate Loans" means at any time that portion of the Loans bearing
interest at rates determined by reference to the LIBOR Rate.
"Licensing Agreements" means agreements entered into by Borrowers in the
ordinary course of business with individuals or firms pursuant to which
Borrowers grant licenses to operate and maintain offices for the conduct of
supplemental staffing services businesses on behalf of Borrowers and, in certain
circumstances, provide financial and/or other services to such individuals or
firms.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Term Loan
Commitment or the Revolving Loan Commitment.
"Loan Documents" means this Agreement, the Notes, the Guaranty, the
Guarantor Security Agreement, the Intellectual Property Assignment, the Pledge
Agreement, and all other instruments, documents and agreements executed by or on
behalf of any Loan Party and delivered concurrently herewith or at any time
hereafter to or for Agent or any Lender in connection with the Loans and other
transactions contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time.
"Loan Party" means, collectively, Holdings, Borrowers and Holdings' other
Subsidiaries.
"Loan Year" means each period of twelve (12) consecutive months commencing
on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of the Loan Parties taken as a whole or (b) the ability of any Loan
Party to perform its obligations under any Loan Document to which it is a party
or of Agent or any Lender to enforce or collect any of the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(B).
"Net Income" means, for any period, without duplication, the total of the
following for Holdings and its Subsidiaries on a consolidated basis, each
calculated for such period: (1) net income determined in accordance with GAAP;
less, to the extent included in the calculation of net income, (2) the sum of
(a) the income of any Person (other than wholly-owned Subsidiaries of Holdings)
in which Holdings or a wholly owned Subsidiary of Holdings has an ownership
interest unless such income is received by Holdings or such wholly-owned
Subsidiary in a cash distribution; (b) gains or losses from sales or other
dispositions of assets (other than Inventory in the normal course of
9
business); and (c) extraordinary or non-recurring gains, but not net of
extraordinary or non-recurring "cash" losses.
"Net Worth" means, as of any date, the sum of the capital stock (other than
treasury shares) and additional paid-in capital (excluding treasury stock and
additional paid-in capital related thereto) plus retained earnings (or minus
accumulated deficit) of Holdings calculated in conformity with GAAP.
"New Hyde Park P.O. Box" means, collectively, each of those certain post
office boxes maintained by (a) USS as of the Closing Date with the New Hyde
Park, New York branch of the United States Post Office and (b) Brentwood with
the Cleveland, Tennessee branch of the United Stated Post Office.
"Notes" means the Revolving Notes and the Term Note.
"Notice of Borrowing" has the meaning assigned to that term in subsection
2.1(D).
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or to any Lender under
the Loan Documents including the principal amount of all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable.
"Offer to Purchase" means the Offer to Purchase to be delivered by Holdings
to the holders of its common stock, a true and correct copy of which has been
provided to Agent and Lenders.
"Operating Cash Flow" means, for any period, (a) EBITDA; less (b) Capital
Expenditures.
"Permitted Acquisition" has the meaning given such term in subsection
7.6(B).
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves therefor have been established in accordance with GAAP; (c) Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, trade contracts, performance
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money); (d) easements, rights-of-way,
restrictions, and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of any Loan Party or
any of its Subsidiaries; (e) Liens securing purchase money obligations
(including capital leases), provided that (i) the purchase of the asset subject
to any such Lien is permitted under subsection 6.4, (ii) the Indebtedness
secured
10
by any such Lien is permitted under subsection 7.1, and (iii) such Lien
encumbers only the asset so purchased; (f) Liens in favor of Agent, on behalf of
Lenders; and (g) Liens set forth on Schedule 1.1(A).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pledge Agreement" means the stock pledge agreement to be executed and
delivered by each of Holdings, USS and THISCO, in favor of Agent, on behalf of
Lenders, in form and substance satisfactory to Agent.
"Pro Forma" means the unaudited consolidated balance sheet of Holdings and
its Subsidiaries as of September 30, 1995 after giving effect to the
transactions contemplated by this Agreement. The Pro Forma is annexed hereto as
Schedule 1.1(B).
"Pro Rata Share" means (a) with respect to matters relating to a particular
Commitment of a Lender, the percentage obtained by dividing (i) such Commitment
of that Lender by (ii) all such Commitments of all Lenders and (b) with respect
to all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all Lenders, in
either case as such percentage may be adjusted by assignments permitted pursuant
to subsection 9.1; provided, however, if any Commitment is terminated pursuant
to the terms hereof, then "Pro Rata Share" means the percentage obtained by
dividing (x) the aggregate amount of such Lender's outstanding Loans related to
such Commitment by (y) the aggregate amount of all outstanding Loans related to
such Commitment.
"Projections" means Holdings' forecasted consolidated and, for item (b)
below only, consolidating (in the form provided to Agent prior to the Closing
Date): (a) balance sheets; (b) profit and loss statements; and (c) cash flow
statements, all prepared consistent with Holdings' historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"Purchased Accounts" means those Accounts of Persons engaged in the
business of providing temporary employment personnel to clients, which Accounts
have been purchased by Borrowers from such Persons in the ordinary course of
Borrowers' business.
"Reconciliation Report" means a report duly executed by the chief executive
officer or chief financial officer of Borrower Representative appropriately
completed and in substantially the form of Exhibit 1.1(C)
"Requisite Lenders" means Lenders holding or being responsible for
sixty-six and two-thirds percent (66 2/3%) or more of the sum of (a) outstanding
Loans, (b) outstanding Letter of Credit Liability and (c) unutilized
Commitments; provided, that at any time during which there are two (2) or more
Lenders, Requisite Lenders shall include at least (2) Lenders.
11
"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Holdings
or any of its Subsidiaries now or hereafter outstanding, except a stock
dividend; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Indebtedness subordinated in right of payment to the
Obligations or any shares of any class of stock of Holdings or any of its
Subsidiaries now or hereafter outstanding; (c) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Holdings or any of its Subsidiaries now
or hereafter outstanding; and (d) any payment by Holdings or any of its
Subsidiaries of any management fees or similar fees to any Affiliate, whether
pursuant to a management agreement or otherwise.
"Revolving Loan" means all advances made by Lenders pursuant to subsection
2.1(B) and any amounts added to the principal balance of the Revolving Loan
pursuant to this Agreement.
"Revolving Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make the Revolving Loan and to purchase participations in Lender
Letters of Credit pursuant to subsection 2.1(G) as set forth on the signature
page of this Agreement opposite such Lender's signature or in the most recent
Lender Addition Agreement, if any, executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make Revolving Loans and to
purchase participations in Lender Letters of Credit pursuant to subsection
2.1(G).
"Revolving Notes" or "Revolving Note" means the promissory notes of
Borrowers in the form reasonably acceptable to Agent, issued pursuant to
subsection 2.1(E).
"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(G).
"Scheduled Installment" has the meaning assigned to that term in subsection
2.1(A).
"Service Fee Accounts" means those Accounts of Borrowers arising under
service agreements entered into by Borrowers with independent supplemental
staffing firms in the ordinary course of business.
"Settlement Date" has the meanings assigned to that term in subsection
9.6(A)(2).
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantors" means each Subsidiary which is an Inactive
Subsidiary as of the Closing Date, each of Uniforce Payrolling Services, Inc., a
New York corporation, UTS of Delaware, Inc.,
12
a Delaware corporation, and each other Subsidiary of Holdings which hereafter
becomes a party to the Guaranty.
"Tangible Net Worth" means, as of any date, the following, for Holdings and
its Subsidiaries on a consolidated basis: (a) Net Worth; less (b) Intangible
Assets; less (c) all obligations owed to such Persons by any Affiliate of such
Persons; and less (d) all loans by such Persons to their officers, stockholders
or employees.
"Target" means, with respect to any Permitted Acquisition, any Person whose
assets and business are being acquired pursuant to such Permitted Acquisition.
"Tender Offer" means the offering by Holdings to purchase shares of its
outstanding common stock on the terms set forth in the Offer to Purchase.
"Term Loan" means the advance made pursuant to subsection 2.1(A).
"Term Loan Commitment" means (a) as to any Lender, the commitment of such
Lender to make a portion of the Term Loan in the amount set forth on the
signature page of this Agreement opposite such Lender's signature or in the most
recent Lender Addition Agreement, if any, executed by such Lender and (b) as to
all Lenders, the aggregate commitment of all Lenders to make the Term Loan.
"Term Loan Reserve" means, at any date, an amount equal to the lesser of
(a) the aggregate cash dividends paid by Holdings on its common stock following
the Closing Date and through such date and (b) the outstanding principal balance
of the Term Loan on such date.
"Term Note" or "Term Notes" means each promissory note of Borrower in a
form reasonably acceptable to Agent, issued pursuant to subsection 2.1(E).
"Termination Date" has the meaning assigned to such term in subsection 2.5.
"Total Loan Commitment" means the aggregate commitments of any Lender with
respect to the Revolving Loan Commitment and the Term Loan Commitment.
"Unused Availability" means, as of any date, the amount (if any) by which
the Maximum Revolving Loan Amount exceeds the principal balance of the Revolving
Loans.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York, as amended from time to time, and any successor statute;
provided, that if by reason of mandatory provisions of law, the perfection or
the effect of perfection or non-perfection of any security interest granted
pursuant hereto in any Collateral or the availability of any remedy hereunder is
governed by the Uniform Commercial Code as in effect on or after the date hereof
in any other jurisdiction, "UCC" means the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or non-perfection or availability of
such remedy.
13
1.2 Accounting Terms. For purposes of this Agreement, all accounting terms
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP. Financial statements and other information furnished to
Agent or any Lender pursuant to subsection 5.1 shall be prepared in accordance
with GAAP (as in effect at the time of such preparation) on a consistent basis.
In the event any "Accounting Changes" (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Holdings, Borrowers and Lenders agree to enter into negotiations in order to
amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Holdings and its Subsidiaries shall be the same after
such Accounting Changes as if such Accounting Changes had not been made, and
until such time as such an amendment shall have been executed and delivered by
Holdings, Borrowers and Requisite Lenders, (A) all financial covenants,
standards and terms in this Agreement shall be calculated and/or construed as if
such Accounting Changes had not been made, and (B) Borrowers shall prepare
footnotes to each Compliance Certificate and the financial statements required
to be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes). "Accounting Changes" means: (a) changes in accounting principles
required by GAAP and implemented by Holdings and its Subsidiaries; (b) changes
in accounting principles recommended by Holdings' certified public accountants;
and (c) changes in carrying value of Holdings' or any of its Subsidiaries'
assets, liabilities or equity accounts resulting from (i) the application of
purchase accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109)
to any Permitted Acquisition or (ii) any other adjustments that, in each case,
were applicable to, but not included in, the Pro Forma. All such adjustments
resulting from expenditures made subsequent to the Closing Date (including, but
not limited to, capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period.
1.3 Other Definitional Provisions. References to "Sections", "subsections",
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
14
SECTION 2. LOANS AND COLLATERAL
2.1 Loans.
(A) Term Loan. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Holdings and Borrowers
herein set forth, each Lender, severally, agrees to lend, on the Closing Date,
to Borrowers, its Pro Rata Share of the Term Loan which is in the aggregate
amount of $3,000,000. The Term Loan shall be funded in one drawing and shall be
a joint and several obligation of Borrowers. Amounts borrowed under this
subsection 2.1(A) and repaid may not be reborrowed. Borrowers shall make
principal payments in the amount of the applicable Scheduled Installment (or
such lesser principal amount as shall then be outstanding) on the dates and in
the amounts set forth below.
"Scheduled Installment means, for each date set forth below, the amount set
forth opposite such date.
Date Scheduled Installment
The first day of each month (and including) $62,500
January 1996 through (and including) December, 1996
The first day of each month (and including) $83,333
January, 1997 through (and including) December, 1997
The first day of each month (and including) $104,167
January, 1998 through (and including) November, 1998
The first day of December, 1998 $104,167 or, if different,
the then remaining balance
of the Term Loan.
(B) Revolving Loan. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Holdings and
Borrowers herein set forth, each Lender, severally, agrees to lend to Borrowers
from time to time its Pro Rata Share of the Revolving Loan. The aggregate amount
of all Revolving Loan Commitments shall not exceed at any time $32,000,000 in
the aggregate to all Borrowers. Notwithstanding, the foregoing, the sum of the
Revolving Loan outstanding to any Borrower at any time plus the Letter of Credit
Liability of such Borrower at such time (together with the aggregate amount
theretofore paid by Agent or any Lender in respect of any Letter of Credit
issued on behalf of such Borrower and not debited to the Loan Account or
otherwise reimbursed by such Borrower) shall not exceed that portion of the
Borrowing Base attributable to such Borrower. Amounts borrowed under this
subsection 2.1(B) may be repaid and reborrowed at any time prior to the earlier
of (i) the termination of the Revolving Loan Commitment pursuant to subsection
8.3 or (ii) the Termination Date. Except as otherwise provided herein, no Lender
shall have any obligation to make advances under this subsection 2.1(B) to the
extent any requested advance would cause the balance of the Revolving Loan then
outstanding (after
15
giving effect to any immediate application of the proceeds thereof) to exceed
the Maximum Revolving Loan Amount.
(1) "Maximum Revolving Loan Amount" means, as of any date of determination,
the lesser of (a) the Revolving Loan Commitment minus the sum of the Letter of
Credit Reserve, the Term Loan Reserve and any other reserve established by Agent
in accordance with this Agreement and (b) the Borrowing Base minus the sum of
the Letter of Credit Reserve and the Term Loan Reserve.
(2) "Borrowing Base" means, as of any date of determination, an amount
equal eighty-five percent (85%) of Eligible Accounts less such reserves as Agent
in its reasonable discretion elects to establish and such other reserves as are
provided for in this Agreement.
(C) Eligible Accounts.
"Eligible Accounts" means, as at any date of determination, the aggregate
of all Accounts that Agent, in its reasonable judgment, deems to be eligible for
borrowing purposes (provided, that Agent shall give Borrower Representative
reasonably prompt notice following any determination by Agent to exclude any
Accounts from Eligible Accounts based on criteria other than those set forth
below, which notice shall include, subject to confidentiality constraints as
determined by Agent in its sole discretion, the basis for such determination by
Agent). Without limiting the generality of the foregoing, unless otherwise
agreed by Agent, the following Accounts are not Eligible Accounts:
(1) Accounts which, at the date of issuance of the respective invoice
therefor, were payable more than forty-five (45) days after the date of issuance
of such invoice;
(2) Accounts which (x) in the case of Accounts other than Accounts owing by
those account debtors identified on Schedule 2.1(C), remain unpaid for more than
ninety (90) days after the date of issuance of the original invoice, and (y) in
the case of Accounts identified on Schedule 2.1(C), remain unpaid for more than
one hundred twenty (120) days after the date of issuance of the original
invoice; it being understood that Agent may, in its sole discretion, add account
debtors requested by Borrower Representative to or delete account debtors from,
Schedule 2.1(C);
(3) Accounts which are otherwise eligible with respect to which the account
debtor is owed a credit by any Borrower, but only to the extent of such credit;
(4) Accounts due from a customer whose principal place of business is
located outside the United States of America or Canada unless such Account is
backed by a letter of credit, in form and substance acceptable to Agent and
issued or confirmed by a bank that is organized under the laws of the United
States of America or a State thereof, that is acceptable to Agent; provided that
such letter of credit has been delivered to Agent as additional collateral;
(5) Accounts due from an account debtor which Agent has notified Borrower
Representative does not have a satisfactory credit standing;
16
(6) Accounts with respect to which an account debtor is an Affiliate of any
Borrower or a director, officer, agent, stockholder or employee of any Borrower
or any of its Affiliates;
(7) Accounts due from an account debtor if (x) in the case of any account
debtor other than those account debtors identified on Schedule 2.1(C), more than
fifty percent (50%) of the aggregate amount of the Accounts of such account
debtor owing to any Borrower or in the aggregate to all Borrowers have at the
time remained unpaid for more than ninety (90) days after the date of issuance
of the original invoice and (y) in the case of those account debtors identified
on Schedule 2.1(C), more than twenty-five percent (25%) of the aggregate amount
of the Accounts of such account debtor owing to any Borrower or in the aggregate
to all Borrowers have at the time remained unpaid for more than one hundred
twenty (120) days after the date of issuance of the original invoice;
(8) Accounts with respect to which there is any unresolved dispute with the
respective account debtor (but only to the extent of such dispute);
(9) Accounts evidenced by an "instrument" or "chattel paper" (as defined in
the UCC) not in the possession of Agent, on behalf of Lenders;
(10) Accounts with respect to which Agent, on behalf of Lenders, does not
have a valid, first priority and fully perfected security interest;
(11) Accounts subject to any Lien except those in favor of Agent, on behalf
of Lenders;
(12) Accounts with respect to which Holdings or any Borrower has received
notice that the customer is the subject of any bankruptcy or other insolvency
proceeding;
(13) Accounts due from (i) an account debtor (other than MCI
Communications, Inc.) to the extent that such Accounts exceed in the aggregate
an amount equal to twenty percent (20%) of the aggregate of all Accounts at said
date and (ii) MCI Communications, Inc. to the extent that such Accounts exceed
in the aggregate an amount equal to twenty-five percent (25%) of the aggregate
of all Accounts at said date;
(14) Accounts with respect to which the account debtor's obligation to pay
is conditional or subject to a repurchase obligation or right to return or with
respect to which the goods or services giving rise to such Account have not been
delivered (or performed, as applicable) and accepted by such account debtor,
including progress xxxxxxxx, xxxx and hold sales, guarantied sales, sale or
return transactions, sales on approval or consignment sales;
(15) Accounts with respect to which the customer is located in New Jersey,
Minnesota, or, following written notice from Agent to Borrower Representative,
any other state denying creditors access to its courts in the absence of a
Notice of Business Activities Report or other similar filing, unless the
applicable Borrower has either qualified as a foreign corporation authorized
17
to transact business in such state or has filed a Notice of Business Activities
Report or similar filing with the applicable state agency for the then current
year;
(16) Accounts with respect to which the account debtor is a creditor of any
Borrower; provided, however, that any such Account shall only be ineligible as
to that portion of such Account which is less than or equal to the amount owed
by Borrowers to such Person;
(17) Purchased Accounts and Service Fee Accounts in which a first priority
perfected security interest has not been obtained (and continuously maintained)
by any Borrower to evidence and perfect its ownership of such Accounts;
(18) Purchased Accounts and Service Fee Accounts with respect to which any
portion thereof has been charged back to the applicable Account Seller;
provided, that if the applicable Borrower has financed such charge-back and
scheduled such Account as a "financed charge-back Account" in accordance with
subsection 5.1(F), then fifty percent (50%) of such Account shall not be deemed
ineligible solely by virtue of this clause (18);
(19) Purchase Accounts and Service Fee Accounts with respect to which Agent
has not received copies of lien search results indicating the applicable
Borrower as having a first priority perfected ownership interest in each such
Account, subject to no Liens except those in favor of Agent, on behalf of
Lenders; provided, that for the period from the date hereof and expiring on
December 29, 1995, no such Account shall be deemed ineligible solely by virtue
of this clause (19) if Agent has received satisfactory lien search results
indicating that such Account was not subject to any Lien prior to execution of
the applicable Account Agreement; and
(20) Accounts arising as a result of any Permitted Acquisiton to the extent
Agent has not determined whether such Accounts satisfy the criteria for Eligible
Accounts.
(D) Borrowing Mechanics. (1) LIBOR Rate Loans made on any Funding Date
shall be in an aggregate minimum amount of $500,000 and integral multiples of
$100,000 in excess of such amount. (2) On any day when any Borrower desires to
borrow under this subsection 2.1, Borrower Representative shall give Agent
telephonic notice of the proposed borrowing by 11:00 a.m. Central time on the
Funding Date of a Base Rate Loan and two (2) Business Days in advance of the
Funding Date of a LIBOR Rate Loan, which notice (a "Notice of Borrowing") must
also specify the proposed Funding Date (which shall be a Business Day), whether
such Loans shall consist of Base Rate Loans or LIBOR Rate Loans and for LIBOR
Rate Loans the Interest Period applicable thereto, and the name(s) of the
Borrower(s) on whose behalf such Loans are being requested. Any such telephonic
notice shall be confirmed in writing on the same day. Neither Agent nor any
Lender shall incur any liability to any Borrower for acting upon any telephonic
notice Agent believes in good faith to have been given by any of the Persons
identified on Schedule 2.1(D) or for otherwise acting in good faith under this
subsection 2.1(D). Neither Agent nor any Lender will make any advance pursuant
to any telephonic notice unless Agent has also received the most recent
Borrowing Base Certificate and all other documents then required to have been
delivered under subsection 5.1 by 11:00 a.m. Central time. Each advance made to
Borrowers under the Revolving Loan shall be deposited by wire transfer in
immediately available funds in such account as Borrower Representative may from
time to time
18
designate to Agent in writing. Unless payment is otherwise timely made by
Borrowers, the becoming due of any amount required to be paid under this
Agreement or any of the other Loan Documents as principal, accrued interest and
fees shall be deemed irrevocably to be a request by Borrowers or Borrower
Representative for a Base Rate Revolving Loan on the due date of, and in the
amount required to pay, such principal, accrued interest and fees, and the
proceeds of each such Revolving Loan if made by Agent or any Lender shall be
disbursed by Agent or such Lender by way of direct payment of the relevant
obligation.
(E) Notes. (i) Borrowers shall jointly execute and deliver to each Lender a
Term Note to evidence such Lender's portion of the Term Loan, such Term Note to
be in the principal amount of the Term Loan of such Lender and with other
appropriate insertions and (ii) each Borrower shall execute and deliver to each
Lender a Revolving Note to evidence such Lender's portion of the Revolving Loan
to such Borrower, such Revolving Note to be in the principal amount of the
Revolving Loan Commitment of such Lender and with other appropriate insertions.
In the event of an assignment under subsection 9.1, each Borrower shall, upon
surrender of the assigning Lender's Notes, issue new Notes to reflect the new
Commitments of the assigning Lender and its assignee (or in the case of the Term
Note, the outstanding principal amount of the assigning Lender's and its
assignee's portions of the Term Loan.)
(F) Evidence of Revolving Loan Obligations. The advances constituting the
Revolving Loan shall be evidenced by this Agreement, the Revolving Note and
notations made from time to time by Agent in its books and records, including
computer records. Agent shall record in its books and records, including
computer records, the principal amount of the Revolving Loans owing to each
Lender from time to time. Agent's books and records shall constitute presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein. Failure by Agent to make any such notation or record shall not affect
the obligations of Borrowers to Lenders with respect to the Revolving Loans.
(G) Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Holdings
and Borrowers herein set forth, the Revolving Loan Commitments may, in addition
to advances under the Revolving Loan, be utilized, upon the request of Borrower
Representative, for (i) the issuance of letters of credit by Agent or with
Agent's consent any Lender, or (ii) the issuance by Xxxxxx of risk
participations (a "Risk Participation Agreement") to banks to induce such banks
to issue letters of credit for the account of any Borrower (each of (i) and (ii)
above a "Lender Letter of Credit"). Each Lender shall be deemed to have
purchased a participation in each Lender Letter of Credit issued on behalf of
any Borrower in an amount equal to its Pro Rata Share thereof. In no event shall
any Lender Letter of Credit be issued to the extent that the issuance of such
Lender Letter of Credit would cause the Letter of Credit Reserve (after giving
effect to such issuance) plus the sum of the Term Loan Reserve, any other
reserves established by Agent in accordance with this Agreement and the
outstanding principal balance of the Revolving Loan to exceed the lesser of (x)
the Borrowing Base and (y) the Revolving Loan Commitment. Notwithstanding the
foregoing, in no event shall any Lender Letter of Credit be issued on behalf of
any Borrower to the extent that the issuance of such Lender Letter of Credit
would cause the sum of the Revolving Loan outstanding to such Borrower plus the
Letter of Credit Liability of such Borrower (together with the aggregate amount
theretofore paid by Agent or any
19
Lender in respect of any Letter of Credit issued on behalf of such Borrower and
not debited to the Loan Account or otherwise reimbursed by such Borrower) to
exceed that portion of the Borrowing Base attributable to such Borrower.
(1) Maximum Amount. The aggregate amount of Letter of Credit Liability with
respect to all Lender Letters of Credit outstanding at any time shall not exceed
$2,500,000.
(2) Reimbursement. Borrowers shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other formalities of
any kind, to reimburse Agent or the issuer for any amounts paid with respect to
a Lender Letter of Credit including all fees, costs and expenses paid to any
bank that issues Bank Letters of Credit. Borrowers hereby authorize and direct
Agent, at Agent's option, to debit each Borrower's Loan Account (by increasing
the principal balance of the Revolving Loan) in the amount of any payment made
with respect to any Lender Letter of Credit issued for the account of such
Borrower. All amounts paid with respect to any Lender Letter of Credit that are
not immediately repaid by Borrowers with the proceeds of a Revolving Loan or
otherwise shall bear interest at the Default Rate applicable to Revolving Loans.
In the event that Borrowers shall fail to reimburse Agent on the date of any
payment under a Lender Letter of Credit in an amount equal to the amount of such
payment, Agent shall promptly notify each Lender of the unreimbursed amount of
such payment together with accrued interest thereon and each Lender, on the next
Business Day, shall deliver to Agent an amount equal to its respective
participation in same day funds. The obligation of each Lender to deliver to
Agent an amount equal to its respective participation pursuant to the foregoing
sentence shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or Default
or the failure to satisfy any condition set forth in Section 3. In the event any
Lender fails to make available to Agent the amount of such Lender's
participation in such Lender Letter of Credit, Agent shall be entitled to
recover such amount on demand from such Lender together with interest at the
Base Rate.
(3) Conditions of Issuance. In addition to all other terms and conditions
set forth in this Agreement, the issuance of any Lender Letter of Credit shall
be in such form and on such terms as are reasonably satisfactory to Agent. The
expiration date of each Lender Letter of Credit shall be on a date which is at
least thirty (30) days prior to the Termination Date.
(4) Request for Letters of Credit. Borrower Representative shall give Agent
at least three (3) Business Days prior notice specifying the date a Lender
Letter of Credit is to be issued, identifying the beneficiary and describing the
nature of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the letter of credit being requested.
(H) Other Letter of Credit Provisions.
(1) Obligations Absolute. The obligation of Borrowers to reimburse Agent or
any Lender for payments made under any Lender Letter of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including the following
circumstances:
20
(a) any lack of validity or enforceability of any Lender Letter of Credit
or any other agreement;
(b) the existence of any claim, set-off, defense or other right which any
Borrower, any of its Affiliates, Agent or any Lender, on the one hand, may at
any time have against any beneficiary or transferee of any Lender Letter of
Credit or Bank Letter of Credit (or any Persons for whom any such transferee may
be acting), Agent, any Lender or any other Person, on the other hand, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between any Borrower
or any of its Affiliates and the beneficiary of the letter of credit);
(c) any draft, demand, certificate or any other document presented under
any Lender Letter of Credit or Bank Letter of Credit which is forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(d) payment under any Lender Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such letter of credit; provided that, in the case of any payment by
Lender under any Lender Letter of Credit, Lender has not acted in bad faith or
with gross negligence or willful misconduct (as determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Lender Letter of Credit complies on its face with any applicable requirements
for a demand for payment under such Lender Letter of Credit;
(e) any other circumstance or happening whatsoever, which is similar to any
of the foregoing; or
(f) the fact that a Default or an Event of Default shall have occurred and
be continuing.
(2) Nature of Lender's Duties. As between Agent and Lenders, on the one
hand, and Borrowers, on the other hand, Borrowers assume all risks of the acts
and omissions of, or misuse of any Lender Letter of Credit by the beneficiary
thereof. In furtherance and not in limitation of the foregoing, neither Agent
nor any Lender shall be responsible: (a) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document by any party in connection
with the application for and issuance of any Lender Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Lender Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (c) for failure of the beneficiary of any Lender Letter of Credit to
comply fully with conditions required in order to demand payment thereunder;
provided that, in the case of any payment by Agent or any Lender under any
Lender Letter of Credit, Agent or Lender has not acted in bad faith or with
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit complies on its face with any applicable requirements for a
demand for payment thereunder; (d) for errors, omissions, interruptions or
delays in transmission or delivery of
21
any messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (e) for errors in interpretation of technical terms; (f) for any
loss or delay in the transmission or otherwise of any document required in order
to make a payment under any Lender Letter of Credit; (g) for the credit of the
proceeds of any drawing under any Lender Letter of Credit; and (h) for any
consequences arising from causes beyond the control of Agent or any Lender as
the case may be. None of the above shall affect, impair, or prevent the vesting
of any of Agent's or any Lender's rights or powers hereunder.
(3) Liability. In furtherance and extension of and not in limitation of,
the specific provisions herein above set forth, any action taken or omitted by
Agent or any Lender under or in connection with any Lender Letter of Credit, if
taken or omitted in good faith, shall not put Agent or any Lender under any
resulting liability to any Borrower.
(I) Appointment of Borrower Representative. Each Borrower hereby designates
USS as its representative and agent ("Borrower Representative") for the purposes
of initiating borrowing requests, requesting Lender Letters of Credit, giving
instructions with respect to the disbursement of the proceeds of the Term Loan
on the Closing Date, selecting interest rate options and giving and receiving
notices and consents hereunder or under any of the other Loan Documents. Agent
and each Lender may regard any notice or other communication pursuant to any
Loan Document from Borrower Representative as a notice or communication from
Borrowers. Each Borrower hereby covenants and agrees that each representation
and warranty, covenant, agreement and undertaking made in its name or on its
behalf by Borrower Representative shall be deemed for all purposes to have been
made by such Borrower and shall be binding upon and enforceable against such
Borrower to the same extent as if the same had been made directly by such
Borrower.
2.2 Interest.
(A) Rate of Interest. The Loans and all other Obligations shall bear
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to (i) in the case of Base Rate
Loans, (a) the Base Rate with respect to the Revolving Loan, and (b) the Base
Rate plus one-quarter of one percent (.25 %) with respect to the Term Loan and
(ii) in the case of LIBOR Rate Loans, the LIBOR Rate plus (a) two and one-eighth
of one percent (2.125%) with respect to the Revolving Loan and (b) two and
one-quarter of one percent ( 2.25%) with respect to the Term Loan (the "Interest
Rate"). The applicable basis for determining the rate of interest shall be
selected by Borrower Representative initially at the time a notice of borrowing
is given pursuant to subsection 2.1(D). The basis for determining the interest
rate with respect to any Loan or a portion of any Loan may be changed from time
to time pursuant to subsection 2.2(E). If on any day a Loan or a portion of any
Loan is outstanding with respect to which notice has not been delivered to Agent
in accordance with the terms of this Agreement specifying the basis for
determining the rate of interest, then for that day that Loan or portion thereof
shall bear interest determined by reference to the Base Rate.
After the occurrence and during the continuance of an Event of Default (i)
the Loans and all other Obligations shall, at the option of Requisite Lenders,
bear interest at a rate per annum equal to two percent (2%) plus the applicable
Interest Rate (the "Default Rate"), (ii) each LIBOR Rate Loan shall
22
automatically convert to a Base Rate Loan at the end of any applicable Interest
Period and (iii) no Loans may be converted to LIBOR Rate Loans.
(B) Interest Periods. In connection with each LIBOR Rate Loan, Borrower
Representative shall elect an interest period (each an "Interest Period") to be
applicable to such Loan, which Interest Period shall be either a one, two, three
or six month period; provided that:
(1) the initial Interest Period for any Loan shall commence on the Funding
Date of such Loan;
(2) in the case of successive Interest Periods, each successive Interest
Period shall commence on the day on which the immediately preceding Interest
Period expires;
(3) if an Interest Period expiration date is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day; provided that
if any Interest Period expiration date is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such Interest
Period shall expire on the immediately preceding Business Day;
(4) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall, subject to part (5),
below, end on the last Business Day of a calendar month;
(5) no Interest Period shall extend beyond the Termination Date;
(6) no Interest Period may extend beyond a scheduled principal payment date
for the Loans unless (a) the aggregate principal amount of Loans consisting of
Base Rate Loans or Loans having Interest Periods expiring on or before such date
equals or exceeds the principal amount required to be paid on the Loans on such
date and (b) Unused Availability equals or exceeds the principal amount required
to be paid on the Loans on such date; and
(7) there shall be no more than ten (10) Interest Periods relating to LIBOR
Rate Loans outstanding at any time.
(C) Computation and Payment of Interest. Interest on the Loans and all
other Obligations shall be computed on the daily principal balance on the basis
of a 360 day year for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of funding of the
Loan or the first day of an Interest Period applicable to such Loan or, with
respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the date of
conversion of such LIBOR Rate Loan to such Base Rate Loan, shall be included and
the date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan, or with respect to a Base Rate Loan being converted to
a LIBOR Rate Loan, the date of conversion of such Base Rate Loan to such LIBOR
Rate Loan, shall be excluded; provided that if a Loan is repaid on the same day
on which it is made, one day's interest shall be paid on that Loan. Interest on
Base Rate Loans and all other Obligations other than LIBOR Rate Loans shall be
payable to Agent for benefit
23
of Lenders monthly in arrears on the first day of each month, on the date of any
prepayment of Loans and at maturity, whether by acceleration or otherwise.
Interest on LIBOR Rate Loans shall be payable to Agent for benefit of Lenders on
the last day of the applicable Interest Period for such Loan, on the date of any
prepayment of the Loans, and at maturity, whether by acceleration or otherwise.
In addition, for each LIBOR Rate Loan having an Interest Period longer than
three (3) months, interest accrued on such Loan shall also be payable on the
last day of each three (3) month interval during such Interest Period.
(D) Interest Laws. Notwithstanding any provision to the contrary contained
in this Agreement or any other Loan Document, Borrowers shall not be required to
pay, and neither Agent nor any Lender shall be permitted to collect, any amount
of interest in excess of the maximum amount of interest permitted by law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection 2.1(D) shall govern and control; (2) no Borrower nor any Loan Party
shall be obligated to pay any Excess Interest; (3) any Excess Interest that
Agent or any Lender may have received hereunder shall be, at such Lender's
option, (a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Agreement and the other Loan
Documents shall be deemed to have been and shall be, reformed and modified to
reflect such reduction; and (5) no Borrower nor any Loan Party shall have any
action against Agent or any Lender for any damages arising out of the payment or
collection of any Excess Interest. Notwithstanding the foregoing, if for any
period of time interest on any Obligations is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest payable
on such Obligations shall remain at the Maximum Rate until each Lender shall
have received the amount of interest which such Lender would have received
during such period on such Obligations had the rate of interest not been limited
to the Maximum Rate during such period.
(E) Conversion or Continuation. Subject to the provisions of subsection
2.2(A), Borrower Representative shall have the option to (1) convert at any time
all or any part of outstanding Loans equal to $500,000 and integral multiples of
$100,000 in excess of that amount from Base Rate Loans to LIBOR Rate Loans or
(2) upon the expiration of any Interest Period applicable to a LIBOR Rate Loan,
to (a) continue all or any portion of such Loan equal to $500,000 and integral
multiplies of $100,000 in excess of that amount as a LIBOR Rate Loan or (b)
convert all or any portion of such Loan to a Base Rate Loan. The succeeding
Interest Period(s) of such continued or converted Loan commence on the last day
of the Interest Period of the Loan to be continued or converted; provided that
no outstanding Loan may be continued as, or be converted into, a LIBOR Rate
Loan, when any Event of Default or Default has occurred and is continuing.
Borrower Representative shall deliver a notice of conversion/continuation
to Agent no later than noon (Chicago time) at least two (2) Business Days in
advance of the proposed conversion/ continuation date ("Notice of
Conversion/Continuation"). A Notice of Conversion/Continuation shall certify:
(1) the proposed conversion/continuation date (which shall be a Business Day);
(2) the
24
amount of the Loan to be converted/continued; (3) the nature of the proposed
conversion/continuation; (4) in the case of conversion to, or a continuation of,
a LIBOR Rate Loan, the requested Interest Period; and (5) that no Default or
Event of Default has occurred and is continuing or would result from the
proposed conversion/continuation.
In lieu of delivering the Notice of Conversion/Continuation, Borrower
Representative may give Agent telephonic notice by the required time of any
proposed conversion/continuation under this subsection 2.2(E); provided that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Agent on or before the proposed
conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to Borrowers in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Borrower Representative or for otherwise acting in good
faith under this subsection 2.2(E) and upon conversion/continuation by Lenders
in accordance with this Agreement pursuant to any telephonic notice, Borrower
shall have effected such conversion or continuation, as the case may be,
hereunder.
2.3 Fees.
(A) Closing Fee. Borrowers shall pay to Xxxxxx, individually, on the
Closing Date, a closing fee of $131,250.
(B) Unused Line Fee. Borrowers shall pay to Agent, for the benefit of
Lenders, a fee in an amount equal to (1) the Revolving Loan Commitment less the
sum of (i) the average daily balance of the Revolving Loan plus (ii) the average
daily face amount of the Lender Letter of Credit Reserve during the preceding
month, multiplied by (2) one-half of one percent (.50%) per annum, such fee to
be calculated on the basis of a 360 day year for the actual number of days
elapsed and to be payable monthly in arrears on the first day of the first month
following the Closing Date and the first day of each month thereafter.
(C) Letter of Credit Fees. Borrowers shall pay to Agent for the benefit of
Lenders, a fee with respect to the Lender Letters of Credit in the amount of the
average daily amount of Letter of Credit Liability outstanding during such month
multiplied by one and one-half of one percent (1.50%) per annum. Such fees will
be calculated on the basis of a 360 day year for the actual number of days
elapsed and will be payable monthly in arrears on the first day of each month.
Borrowers shall also reimburse Agent for any and all fees and expenses, if any,
paid by Agent or any Lender to the issuer of Bank Letters of Credit.
(D) Prepayment Fees. If Borrowers prepay the Obligations (other than
mandatory prepayments pursuant to subsections 2.4(B)(1) and 2.4(B)(3) and
voluntary prepayments of the Revolving Loan which do not terminate the Revolving
Loan Commitment), Borrowers at the time of prepayment shall pay to Agent, for
the benefit of Lenders, as compensation for the costs of being prepared to make
funds available to Borrowers under this Agreement, and not as a penalty, an
amount determined by multiplying the percentage set forth below by (1) in the
case of a prepayment in full of the Obligations, the sum of the outstanding
principal balance of the Term Loan at the date
25
of such prepayment plus the amount of the Revolving Loan Commitment, or (2) in
the case of a prepayment of the Term Loan only, in whole or in part, the amount
of such prepayment: one percent (1.0%) upon a prepayment during the period from
the Closing Date through September 8, 1996 (provided, that if such prepayment
results exclusively from Holdings' failure to consummate the Tender Offer with
proceeds of the Loans solely by virtue of clause (7) of subsection 7.5(B)
hereof, such percentage shall be reduced to one-half of one percent (.50%)); and
one-half of one percent (.50%) upon a prepayment during the period from
September 9, 1996 through June 8, 1997.
(E) Collateral Monitoring Fee. On the Closing Date and on the first day of
each calendar quarter thereafter Borrowers shall pay to Agent, for its own
account, a nonrefundable collateral monitoring fee of $6,250.
(F) Audit Fees. Borrowers agree to pay to Agent for its own account an
audit fee for each inspection equal to $650 per auditor per day or any portion
thereof, excluding all full days spent by Agent traveling to or from Borrower's
locations together with out of pocket expenses, and Borrowers agree to reimburse
Agent for all fees, costs and expenses paid by Agent to third party auditors;
provided, that prior to the occurrence of an Event of Default such fees, costs
and expenses shall not exceed $40,000 in the aggregate in any Fiscal Year.
(G) Other Fees and Expenses. Borrower shall pay to Agent, for its own
account, all charges for returned items and all other bank charges incurred by
Agent, as well as Agent's standard wire transfer charges for each wire transfer
made under this Agreement.
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. In its sole discretion, Agent may charge
interest and other amounts payable hereunder to the Revolving Loan, all as set
forth on Agent's books and records. If Agent elects to xxxx Borrowers for any
amount due hereunder, such amount shall be immediately due and payable with
interest thereon as provided herein. All payments made by Borrowers with respect
to the Obligations shall be made without deduction, defense, setoff or
counterclaim. All payments to Agent hereunder shall be made in same day funds
and shall, unless otherwise directed by Agent, be made by wire transfer to
Agent's Account or, in accordance with subsection 5.6 (if then applicable).
Proceeds remitted to Agent's Account by wire transfer shall be credited to the
Obligations on the Business Day received; provided, however, for the purpose of
calculating interest on the Obligations such funds shall be deemed received the
first Business Day thereafter if Agent shall have implemented the directions
pursuant to subsection 5.6 following the occurrence of an Event of Default.
(B) Mandatory Prepayments.
(1) Overadvance. At any time that the principal balance of the Revolving
Loan exceeds the Maximum Revolving Loan Amount, Borrowers shall, upon demand by
Agent, immediately repay the Revolving Loan to the extent necessary to reduce
the principal balance to an amount that is equal to or less than the Maximum
Revolving Loan Amount. At any time that the sum of the Revolving Credit Loan
outstanding to any Borrower plus the Letter of Credit Liability of such
26
Borrower at such time (together with the aggregate amount therefore paid by
Agent or any Lender in respect of any Lender Letter of Credit issued on behalf
of such Borrower and not debited to the Loan Account or otherwise reimbursed by
such Borrower) exceeds that portion of the Borrowing Base attributable to such
Borrower, then such Borrower shall, upon demand by Agent, immediately repay the
Revolving Loan to eliminate such excess.
(2) Proceeds of Asset Dispositions. Immediately upon receipt by any
Borrower or any of its Subsidiaries of proceeds of any Asset Disposition (in one
or a series of related transactions), which proceeds exceed $50,000 (it being
understood that if the proceeds exceed $50,000, the entire amount and not just
the portion above $50,000 shall be subject to this subsection 2.4(B)(2)),
Borrowers shall prepay the Obligations in an amount equal to such proceeds. If
Borrowers reasonably expect the proceeds of any Asset Disposition to be
reinvested within 180 days to repair or replace such assets with like assets,
Borrowers shall deliver the proceeds to Agent to be applied to the Revolving
Loan, and Borrowers may, so long as no Default or Event of Default shall have
occurred and be continuing, reborrow such proceeds only for such repair or
replacement. If Borrowers fail to reinvest such proceeds within 180 days,
Borrowers hereby authorizes Lenders to make a Revolving Loan to repay the Term
Loan as required hereby. All such prepayments shall first be applied in payment
of Scheduled Installments in the inverse order of maturity and, at any time
after the Term Loan shall have been repaid in full, such payments shall be
applied as a permanent reduction of the Revolving Loan Commitment.
(3) Prepayments from Excess Cash Flow. Within ninety (90) days after the
end of each Fiscal Year, Borrowers shall prepay the Obligations in an amount
equal to fifty percent (50%) of Excess Cash Flow for such prior Fiscal Year
calculated on the basis of the audited financial statements for such Fiscal Year
delivered to Agent and Lenders pursuant to subsection 5.1(b); provided that such
prepayment shall be limited to $500,000 with respect to the Fiscal Year ending
December 31, 1996 and $250,000 with respect to each Fiscal Year thereafter. All
such prepayments from Excess Cash Flow shall be applied in payment of Scheduled
Installments of the Term Loan in inverse order of maturity. Concurrently with
the making of any such payment, Borrower Representative shall deliver to Agent
and Lenders a certificate of each Borrower's chief executive officer or chief
financial officer demonstrating its calculation of the amount required to be
paid.
(C) Voluntary Prepayments and Repayments. Except as provided in subsection
2.4(B) and in the following sentence, Borrowers' Obligations may only be prepaid
or repaid in full and not in part. Borrowers may, at any time upon not less than
three Business Days' prior notice to Agent, prepay the Term Loan in whole or in
part or terminate the Revolving Loan Commitment; provided, however, the
Revolving Loan Commitment may not be terminated by Borrower until the Term Loan
is paid in full. Upon termination of the Revolving Loan Commitment, Borrowers
shall cause Agent and each Lender to be released from all liability under any
Lender Letters of Credit or, at Agent's option, Borrowers will deposit cash
collateral with Agent in an amount equal to 105% of the Letter of Credit
Liability that will remain outstanding after prepayment or repayment. The
foregoing shall not prohibit repayments of the Revolving Loan (without reduction
of the Revolving Loan Commitment) in accordance with the terms hereof solely
with internally generated funds.
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(D) Payments on Business Days. Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest or fees due hereunder.
2.5 Term of this Agreement. This Agreement shall be effective until
December 1, 1998 (the "Termination Date"). The Commitments shall (unless earlier
terminated) terminate upon the earlier of (i) the occurrence of an event
specified in subsection 8.3 or (ii) the Termination Date. Upon termination in
accordance with subsection 8.3 or on the Termination Date, all Obligations shall
become immediately due and payable without notice or demand. Notwithstanding any
termination, until all Obligations have been fully paid and satisfied, Agent, on
behalf of Lenders, shall be entitled to retain security interests in and Liens
upon all Collateral (all of which shall be released at Borrowers' expense upon
termination of this Agreement and the Commitments and the payment and
satisfaction in full of all Obligations), and even after payment of all
Obligations hereunder, Holdings' and Borrowers' obligation to indemnify Agent
and each Lender in accordance with the terms hereof shall continue.
2.6 Statements. Agent shall render a monthly statement of account to
Borrower Representative within twenty (20) days after the end of each month.
Such statement of account shall constitute an account stated unless Borrower
Representative makes written objection thereto within thirty (30) days from the
date such statement is mailed to Borrower Representative. Borrowers promise to
pay all of their Obligations as such amounts become due or are declared due
pursuant to the terms of this Agreement.
2.7 Grant of Security Interest. To secure the payment and performance of
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, each Borrower hereby grants to
Agent, on behalf of Lenders, a continuing security interest, lien and mortgage
in and to all right, title and interest of such Borrower in the following
property of such Borrower, whether now owned or existing or hereafter acquired
or arising and regardless of where located (all being collectively referred to
as the "Collateral"): (A) Accounts, and all guaranties and security therefor,
and all goods and rights represented thereby or arising therefrom including the
right of stoppage in transit, replevin and reclamation; (B) Inventory; (C)
general intangibles (as defined in the UCC), including the Account Agreements;
(D) documents (as defined in the UCC) or other receipts covering, evidencing or
representing goods; (E) instruments (as defined in the UCC); (F) chattel paper
(as defined in the UCC); (G) Equipment; (H) Intellectual Property; (I) all
deposit accounts of such Borrower maintained with any bank or financial
institution; (J) all cash and other monies and property of such Borrower in the
possession or under the control of Agent, any Lender or any participant; (K) all
books, records, ledger cards, files, correspondence, computer programs, tapes,
disks and related data processing software that at any time evidence or contain
information relating to any of the property described above or are otherwise
necessary or helpful in the collection thereof or realization thereon; and (L)
proceeds of all or any of the property described above, including, without
limitation, the proceeds of any insurance policies covering any of the above
described property.
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2.8 Capital Adequacy and Other Adjustments. In the event Agent or any
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Agent or such Lender or any corporation controlling Agent or
such Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Agent or such Lender or any corporation controlling Agent or
such Lender and thereby reducing the rate of return on Agent's or such Lender's
or such corporation's capital as a consequence of this Agreement or its
obligations hereunder, then Borrowers shall from time to time within fifteen
(15) days after notice and demand from such Lender (with a copy to Agent) or
Agent (together with the certificate referred to in the next sentence) pay to
Agent or such Lender additional amounts sufficient to compensate Agent or such
Lender for the amount of such cost or reduction. A certificate as to the amount
of such cost or reduction to which Agent or any Lender is entitled to be
compensated pursuant to this subsection 2.8 and showing the basis of the
computation thereof submitted by Agent or such Lender to Borrower Representative
shall, absent manifest error, be final, conclusive and binding for all purposes.
2.9 Taxes.
(A) No Deductions. Any and all payments or reimbursements made hereunder or
under the Notes shall be made free and clear of and without deduction for any
and all taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto; excluding, however, the following: taxes
imposed on the net income of any Lender or Agent by the jurisdiction under the
laws of which Agent or such Lender is organized or doing business or any
political subdivision thereof and taxes imposed on its net income by the
jurisdiction of Agent's or such Lender's applicable lending office or any
political subdivision thereof (all such taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto excluding such
taxes imposed on net income, herein "Tax Liabilities"). If any Borrower shall be
required by law to deduct any such Tax Liabilities from or in respect of any sum
payable hereunder to Agent or any Lender, then the sum payable hereunder shall
be increased as may be necessary so that, after making all required deductions,
Agent or such Lender receives an amount equal to the sum it would have received
had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the Closing Date,
(i) any changes in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (ii) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality:
(1) does or shall subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made or Lender Letters of Credit issued hereunder, or change the basis of
taxation of payments to Agent or such Lender of principal, fees, interest or any
other amount payable hereunder (except for net income
29
taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest or
commitment or other fees payable hereunder or changes in the rate of tax on the
overall net income of Agent or such Lender); or
(2) does or shall impose on Agent or any Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Agent or such Lender of issuing any Lender Letter of Credit or making or
continuing any Loan hereunder, as the case may be, or to reduce any amount
receivable hereunder,
then, in any such case, Borrowers shall promptly pay to Agent or such Lender,
upon its demand, any additional amounts necessary to compensate Agent or such
Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Agent or such Lender with respect to this Agreement
or the other Loan Documents. If Agent or any Lender becomes entitled to claim
any additional amounts pursuant to this subsection 2.9(B)(2), it shall promptly
notify Borrower Representative of such amounts and the event by reason of which
Agent or such Lender has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent or any
Lender to Borrower Representative shall, absent manifest error, be final,
conclusive and binding for all purposes.
(C) Foreign Lenders. Each Lender organized under the laws of a jurisdiction
outside the United States (a "Foreign Lender") as to which payments to be made
under this Agreement or under the Notes are exempt from United States
withholding tax or are subject to United States withholding tax at a reduced
rate under an applicable statute or tax treaty shall provide to Borrower
Representative and Agent (i) a properly completed and executed Internal Revenue
Service Form 4224 or Form 1001 or other applicable form, certificate or document
prescribed by the Internal Revenue Service of the United States certifying as to
such Foreign Lender's entitlement to such exemption or reduced rate of
withholding with respect to payments to be made to such Foreign Lender under
this Agreement and under the Notes (a "Certificate of Exemption") or (ii) a
letter from any such Foreign Lender stating that it is not entitled to any such
exemption or reduced rate of withholding (a "Letter of Non-Exemption"). Prior to
becoming a Lender under this Agreement and within fifteen (15) days after a
reasonable written request of Borrower Representative or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement shall
provide a Certificate of Exemption or a Letter of Non-Exemption to Borrower
Representative and Agent.
If a Foreign Lender is entitled to an exemption with respect to payments to
be made to such Foreign Lender under this Agreement (or to a reduced rate of
withholding) and does not provide a Certificate of Exemption to Borrower
Representative and Agent within the time periods set forth in the preceding
paragraph, Borrowers shall withhold taxes from payments to such Foreign Lender
at the applicable statutory rates and Borrowers shall not be required to pay any
additional amounts as a result of such withholding; provided, however, that all
such withholding shall cease upon delivery by such Foreign Lender of a
Certificate of Exemption to Borrower Representative and Agent.
2.10 Required Termination and Prepayment. If on any date any Lender shall
have reasonably determined (which determination shall be final and conclusive
and binding upon all parties) that the
30
making or continuation of its LIBOR Rate Loans has become unlawful or impossible
by compliance by Lender in good faith with any law, governmental rule,
regulation or order (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then, and in any such event,
that Lender shall promptly give notice (by telephone confirmed in writing) to
Borrower Representative and Agent of that determination. Subject to prior
withdrawal of a Notice of Borrowing or a Notice of Conversion/Continuation or
prepayment of the LIBOR Rate Loans as contemplated by the subsection 2.11, the
obligation of Lender to make or maintain its LIBOR Rate Loans during any such
period shall be terminated at the earlier of the termination of the Interest
Period then in effect or when required by law and Borrowers shall no later than
the termination of the Interest Period in effect at the time any such
determination pursuant to this subsection 2.10 is made or, earlier when required
by law, repay or prepay the LIBOR Rate Loans together with all interest accrued
thereon or convert the LIBOR Rate Loans to Base Rate Loans.
2.11 Optional Prepayment/Replacement of Agent or Lenders in Respect of
Increased Costs. Within fifteen (15) days after receipt by Borrower
Representative from Agent or any Lender (an "Affected Lender") of (1) written
notice and demand for payment pursuant to subsections 2.8 or 2.9 or (2) written
notice of the inability to make or continue LIBOR Rate Loans pursuant to
subsection 2.10, Borrower may, at its option, notify Agent and such Affected
Lender of its intention to do one of the following:
(A) Borrowers may obtain, at Borrowers' expense, a replacement Lender
("Replacement Lender") for such Affected Lender, which Replacement Lender shall
be reasonably satisfactory to Agent. In the event Borrowers obtain a Replacement
Lender within ninety (90) days following notice of its intention to do so, the
Affected Lender shall sell and assign its Loans and Commitments to such
Replacement Lender provided, that Borrowers have reimbursed such Affected Lender
for its increased costs for which it is entitled to reimbursement under this
Agreement through the date of such sale and assignment.
(B) Borrowers may prepay in full all outstanding Obligations owed to such
Affected Lender and terminate such Affected Lender's Commitments. Borrowers
shall, within ninety (90) days following notice of their intention to do so,
prepay in full all outstanding Obligations owed to such Affected Lender
(including such Affected Lender's increased costs for which it is entitled to
reimbursement under this Agreement through the date of such prepayment but
excluding the prepayment fee referenced in subsection 2.3(D) and terminate such
Affected Lender's Commitments.
2.12 Compensation. Borrowers shall compensate any Lender, upon written
request by such Lender (which request shall set forth in reasonable detail the
basis for requesting such amounts and which shall, absent manifest error, be
conclusive and binding upon all parties hereto), for all reasonable losses,
expenses and liabilities (including, without limitation, any loss (including
interest paid) sustained by such Lender in connection with the re-employment of
such funds) such Lender may sustain: (i) if for any reason (other than a default
by Lender) a borrowing of any LIBOR Rate Loan does not occur on a date specified
therefor in a Notice of Borrowing, a Notice of Conversion/Continuation or a
telephonic request for borrowing or Conversion/Continuation; (ii) if any
prepayment of any of its LIBOR Rate Loans occurs on a date that is not the last
day of an Interest Period applicable to that Loan; (iii) if any prepayment of
any of its LIBOR Rate Loans is not
31
made on any date specified in a notice of prepayment given by Borrower
Representative; or (iv) as a consequence of any other default by Borrowers to
repay LIBOR Rate Loans when required by the terms of this Agreement; provided
that during the period while any such amounts have not been paid, Agent shall
reserve an equal amount from amounts otherwise available to be borrowed under
the Revolving Loan.
2.13 Booking of LIBOR Rate Loans. Any Lender may make, carry or transfer
LIBOR Rate Loans at, to, or for the account of, any of its branch offices or the
office of an Affiliate of Lender.
2.14 Assumptions Concerning Funding of LIBOR Rate Loans. Calculation of all
amounts payable to any Lender under subsection 2.12 shall be made as though such
Lender had actually funded its relevant LIBOR Rate Loan through the purchase of
a LIBOR deposit bearing interest at the LIBOR Rate in an amount equal to the
amount of that LIBOR Rate Loan and having maturity comparable to the relevant
Interest Period and through the transfer of such LIBOR deposit from an offshore
office to a domestic office in the United States of America; provided, however,
that each Lender may fund each of its LIBOR Rate Loans in any manner it sees fit
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under subsection 2.12.
SECTION 3. CONDITIONS TO LOANS
3.1 Conditions to Loans. The obligations of Agent and each Lender to make
Loans and the obligation of Agent or any Lender to issue Lender Letters of
Credit on the Closing Date and on each Funding Date are subject to satisfaction
of all of the conditions set forth below.
(A) Closing Deliveries. Agent shall have received, in form and substance
satisfactory to Agent, all documents, instruments and information identified on
Schedule 3.1(A).
(B) Security Interests. Agent shall have received satisfactory evidence
that all security interests and liens granted to Agent for the benefit of
Lenders pursuant to this Agreement or the other Loan Documents have been duly
perfected and constitute first priority liens on the Collateral, subject only to
Permitted Encumbrances.
(C) Closing Date Availability. After giving effect to the consummation of
the transactions contemplated hereunder on the Closing Date and the payment by
Borrowers of all costs, fees and expenses relating thereto, the Maximum
Revolving Loan Amount on the Closing Date shall exceed the principal balance of
the Revolving Loans plus the Letter of Credit Reserve by at least $20,000,000.
(D) Representations and Warranties. The representations and warranties
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except for any representation or warranty
limited by its terms to a specific date and taking into account any amendments
to the Schedules or Exhibits as a result of any disclosures made by Borrowers to
Agent after the Closing Date and approved by Agent.
32
(E) Fees. With respect to Loans or Lender Letters of Credit to be made or
issued on the Closing Date, Borrower shall have paid the fees payable on the
Closing Date referred to in subsection 2.3.
(F) No Default. No event shall have occurred and be continuing or would
result from the consummation of the requested borrowing or notice requesting
issuance of a Lender Letter of Credit that would constitute an Event of Default
or a Default.
(G) Performance of Agreements. Each Loan Party shall have performed in all
material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before that Funding Date.
(H) No Prohibition. No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain Agent or any
Lender from making any Loans or issuing any Lender Letters of Credit.
(I) No Litigation. There shall not be pending or, to the knowledge of
Holdings or Borrowers threatened, any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration by, against or
affecting any Loan Party or any property of any Loan Party that has not been
disclosed by Borrowers in writing, and there shall have occurred no development
in any such action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration that, in the opinion of Agent, would
reasonably be expected to have a Material Adverse Effect.
3.2 Additional Conditions to Loans to Fund Tender Offer. The obligations of
Agent and each Lender to make Loans to fund the Tender Offer are subject to
satisfaction of all of the conditions set forth in subsection 7.5, in addition
to the conditions set forth in subsection 3.1.
3.3 Additional Conditions to Loans to Fund Permitted Acquisitions. The
obligations of Agent and each Lender to make Loans to fund Permitted
Acquisitions are subject to satisfaction of all of the conditions set forth in
subsection 7.6, in addition to those conditions set forth in subsection 3.1.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Agent and each Lender to enter into this Agreement, and to make
Loans and to issue Lender Letters of Credit, Holdings and Borrowers represent
and warrant to Agent and each Lender that the following statements are and will
be true, correct and complete:
4.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and
33
qualified to do business in all states where such qualification is required
except where failure to be so qualified could not be reasonably expected to have
a Material Adverse Effect. Each of the Loan Parties has all requisite corporate
power and authority to own and operate its properties, to carry on its business
as now conducted and proposed to be conducted and to enter into each Loan
Document.
(B) Capitalization. The authorized capital stock of each of the Loan
Parties is as set forth on Schedule 4.1(B). All issued and outstanding shares of
capital stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, nonassessable, and, in the case of the issued and
outstanding shares of capital stock of each of the Loan Parties other than
Holdings, are free and clear of all Liens other than those in favor of Agent for
the benefit of Lenders, and all such shares were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. The
capital stock of each of the Loan Parties other than Holdings is owned by the
stockholders and in the amounts set forth on Schedule 4.1(B). Based solely on
filings made with the Securities and Exchange Commission, to the best knowledge
of Holdings each Person or group having beneficial ownership of more than five
percent (5%) of the capital stock of Holdings is identified on Schedule 4.1(B)
(the terms "group" and "beneficial ownership", as used herein, having the
meanings given in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 promulgated thereunder). No shares of the capital stock
of any Loan Party, other than those described above, are issued and outstanding.
There are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from any Loan Party, of any shares of capital stock or other
securities of any such entity.
4.2 Authorization of Borrowing, No Conflict. Each Borrower has the
corporate power and authority to incur the Obligations and to grant security
interests in the Collateral. On the Closing Date, the execution, delivery and
performance of the Loan Documents by each Loan Party signatory thereto will have
been duly authorized by all necessary corporate and shareholder action. The
execution, delivery and performance by each Loan Party of each Loan Document to
which it is a party and the consummation of the transactions contemplated by
this Agreement and the other Loan Documents by each Loan Party do not contravene
and will not be in contravention of any applicable law, the corporate charter or
bylaws of any Loan Party or any order or material agreement by which any Loan
Party or any Loan Party's property is bound. This Agreement is, and the other
Loan Documents, including the Notes, when executed and delivered will be, the
legally valid and binding obligations of the applicable Loan Parties
respectively, each enforceable against the Loan Parties, as applicable, in
accordance with their respective terms.
4.3 Financial Condition. All financial statements concerning Holdings and
its Subsidiaries which have been or will hereafter be furnished by Holdings and
Borrowers to Agent or any Lender pursuant to this Agreement have been or will be
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein) and do or will present fairly the
financial condition of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended. The Pro Forma
was prepared by Holdings and Borrowers based on the unaudited consolidated
balance sheet of Holdings and its Subsidiaries dated September 30, 1995 and,
during the period from such date through the Closing Date, there has been no
material change in the business, operations or financial condition of Holdings
and its Subsidiaries which would be required to be reflected on the consolidated
financial statements of Holdings and its Subsidiaries
34
on the Closing Date in accordance with GAAP. The Projections delivered and to be
delivered have been and will be prepared by Holdings and Borrowers in light of
the past operations of the business of Holdings and its Subsidiaries, and such
Projections represent and will represent the good faith estimate of Holdings and
Borrowers and their senior management concerning the most probable course of its
business as of the date such Projections are prepared and delivered.
4.4 Indebtedness and Liabilities. As of the Closing Date, neither Holdings
nor any of its Subsidiaries has (a) any Indebtedness except as reflected on
Schedule 4.4; or (b) any Liabilities other than as reflected on the Pro Forma or
as incurred in the ordinary course of business following the date of the Pro
Forma.
4.5 Account Warranties. Holdings and Borrowers represent, warrant and
covenant as to each Account that (a) at the time of its creation, the Account is
a valid, bona fide account, representing an undisputed indebtedness incurred by
the named account debtor for goods actually sold and delivered or for services
completely rendered; (b) except to the extent of Accounts not exceeding $50,000
outstanding at any time in the aggregate (which $50,000 amount shall be deducted
by Agent as a reserve from the Borrowing Base), to the best of each of their
knowledge there are no setoffs, offsets or counterclaims, genuine or otherwise,
against the Account; (c) the Account does not represent a sale to an Affiliate
or a consignment, sale or return or a xxxx and hold transaction; (d) no
agreement exists permitting any deduction or discount (other than the discount
stated on the invoice); (e) the Borrower which holds such Account is the lawful
owner of such Account and has the right to assign the same to Agent, for the
benefit of Lenders; (f) the Account is free of all security interests, liens and
encumbrances other than those in favor of Agent, on behalf of Lenders; (g) the
Account is due and payable in accordance with its terms; and (h) the applicable
Borrower holds indefeasible title to the Account.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious names
and business names under which any Loan Party currently conducts business or has
at any time during the five years prior to the Closing Date conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of each Loan
Party's principal place of business, the location of each Loan Party's books and
records, the location of all other offices of such Loan Party and all Collateral
locations, and such locations are such Loan Party's sole locations for its
business and the Collateral. Each Loan Party's federal employer identification
number is set forth on the signature page hereof.
4.8 Title to Properties; Liens. Holdings and each of its Subsidiaries has
good, sufficient and legal title, subject to Permitted Encumbrances, to all its
respective material properties and assets. Except for Permitted Encumbrances,
all such properties and assets are free and clear of Liens. To the best
knowledge of Holdings and Borrowers after due inquiry, there are no actual,
threatened or alleged defaults by Holdings or any of its Subsidiaries with
respect to any leases of real property under which Holdings or any of its
Subsidiaries is lessee or lessor which would have a Material Adverse Effect.
35
4.9 Litigation; Adverse Facts. There are no judgments outstanding against
any Loan Party or affecting any property of any Loan Party nor is there any
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Holdings
or any Borrower after due inquiry, threatened against or affecting any Loan
Party or any property of any Loan Party which could reasonably be expected to
result in any Material Adverse Effect.
4.10 Payment of Taxes. All material tax returns and reports of Holdings and
each of its Subsidiaries required to be filed by any of them have been timely
filed, and all taxes, assessments, fees and other governmental charges upon such
Persons and upon their respective properties, assets, income and franchises
which are shown on such returns as due and payable have been paid when due and
payable or are being contested in good faith by appropriate proceedings and
appropriate reserves therefor have been established in accordance with GAAP.
Except as set forth on Schedule 4.10, as of the Closing Date, none of the United
States income tax returns of Holdings or any of its Subsidiaries are under
audit. No tax liens have been filed and no claims (except as otherwise permitted
by subsection 5.9) are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of Holdings and each of its
Subsidiaries in respect of any taxes or other governmental charges are in
accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none of their
respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any material contractual obligation of any such Person, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default.
4.12 Employee Benefit Plans. Holdings, each of its Subsidiaries and each
ERISA Affiliate is in compliance in all material respects with all applicable
provisions of ERISA, the IRC and all other applicable laws and the regulations
and interpretations thereof with respect to all Employee Benefit Plans. No
material liability has been incurred by Holdings, any of its Subsidiaries or any
ERISA Affiliate which remains unsatisfied for any funding obligation, taxes or
penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Holdings and each of its Subsidiaries owns, is
licensed to use or otherwise has the right to use, all Intellectual Property
used in or necessary for the conduct of its business as currently conducted, and
all such Intellectual Property which is registered with the United Stated
Copyright Office or the United Stated Patent and Trademark Office is identified
on the Schedules to the Intellectual Property Assignment.
4.14 Broker's Fees. No broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is currently in
compliance in all material respects with all applicable Environmental Laws,
including obtaining and maintaining in effect all material permits, licenses or
other authorizations required by applicable Environmental Laws. There are no
claims, liabilities, investigations, litigation, administrative proceedings,
whether
36
pending or threatened, or judgments or orders relating to any Hazardous
Materials asserted or, to the best knowledge of each Loan Party, threatened
against any Loan Party or relating to any real property currently or formerly
owned, leased or operated by any Loan Party.
4.16 Solvency. As of and from and after the date of this Agreement, each
Borrower (after taking into consideration all rights of contribution and
indemnity such Borrower has against Holdings and its other Subsidiaries): (a)
owns and will own assets the fair salable value of which are (i) greater than
the total amount of its liabilities (including contingent liabilities) and (ii)
greater than the amount that will be required to pay the probable liabilities of
such Borrower as they mature; (b) has capital that is not unreasonably small in
relation to its business as presently conducted or any contemplated or
undertaken transaction; and (c) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due. There is no material fact known to Holdings or any Borrower that has or
could have a Material Adverse Effect and that has not been fully disclosed
herein or in such other documents, certificates and statements furnished to
Agent or Lenders for use in connection with the transactions contemplated
hereby.
4.17 Disclosure. No representation or warranty of Holdings, any of its
Subsidiaries or any other Loan Party contained in this Agreement, the financial
statements, the other Loan Documents, or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents, including, without
limitation, the Offer to Purchase and the other documents filed in connection
with the Tender Offer, contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Agent and Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results. There is no material fact known to Holdings or any Borrower that has
had or will have a Material Adverse Effect and that has not been disclosed
herein or in such other documents, certificates and statements furnished to
Agent or any Lender for use in connection with the transactions contemplated
hereby.
4.18 Insurance. Holdings and each of its Subsidiaries maintains such
insurance policies for public liability, property damage for its business and
properties, product liability, and business interruption in amounts customarily
carried or maintained by corporations of established reputation engaged in
similar businesses, no notice of cancellation has been received with respect to
such policies and Holdings and each of its Subsidiaries is in compliance with
all conditions contained in such policies.
4.19 Compliance with Laws. Neither Holdings nor any of its Subsidiaries is
in violation of any law, ordinance, rule, regulation, order, policy, guideline
or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would
37
subject Holdings or any of its Subsidiaries, or any of their respective
officers, to criminal liability or have a Material Adverse Effect.
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
locations of all bank accounts of Holdings and its Subsidiaries.
4.21 Subsidiaries. Neither Holdings nor any Borrower has any Subsidiaries
other than as set forth on Schedule 4.1(B).
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a) no Loan
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
Holdings or any Borrower after due inquiry, threatened between any Loan Party
and its respective employees, other than employee grievances arising in the
ordinary course of business which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 4.22, neither Holdings nor any of its Subsidiaries is subject to an
employment contract.
4.23 Governmental Regulation. None of the Loan Parties is, or after giving
effect to any loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
Borrowers may, at any time and from time to time and subject to subsection
5.13, amend any one or more of the Schedules referred in this Section 4 and any
representation or warranty contained herein which refers to any such Schedule
shall from and after the date of any such amendment refer to such Schedule as so
amended, provided, however, that in no event may Borrowers amend any such
Schedule if such amendment would reflect or evidence a Default or Event of
Default.
SECTION 5. AFFIRMATIVE COVENANTS
Holdings and Borrowers covenant and agree that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Requisite
Lenders shall otherwise give their prior written consent, Holdings and Borrowers
shall perform, and shall cause each of their Subsidiaries to perform, all
covenants in this Section 5 applicable to such Persons.
5.1 Financial Statements and Other Reports. Holdings and Borrowers will
maintain, and cause each of their Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity
38
with GAAP. Borrowers will deliver to Agent and each Lender (unless specified to
be delivered solely to Agent) the financial statements and other reports
described below.
(A) Monthly Financials. As soon as available and in any event within
forty-five (45) days after the end of each month, Borrowers will deliver (1) the
consolidated balance sheet of Holdings and its Subsidiaries as at the end of
such month and the related consolidated and consolidating statements of income
and the consolidated statement of cash flow for such month and for the period
from the beginning of the then current Fiscal Year to the end of such month, all
containing the information indicated on Exhibit 5.1(A) in the form provided to
Agent prior to the Closing Date, and (2) a schedule of the outstanding
Indebtedness for borrowed money of Holdings and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan.
(B) Year-End Financials. As soon as available and in any event within
ninety-one (91) days after the end of each Fiscal Year, Borrowers will deliver:
(1) the consolidated balance sheet of Holdings and its Subsidiaries as at the
end of such year and the related consolidated statements of income,
stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the
outstanding Indebtedness of Holdings and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan; and (3) a report with respect to the financial statements from
KPMG Peat Marwick, LLP or a firm of independent certified public accountants
selected by Holdings and acceptable to Agent, which report shall be unqualified
as to going concern and scope of audit of Holdings and its Subsidiaries and
shall state that (a) such consolidated financial statements present fairly the
consolidated financial position of Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in conformity with GAAP applied on a basis consistent with prior years
and (b) that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with generally
accepted auditing standards.
(C) Public Filings. Within one (1) Business Day after the filing or release
thereof, Borrowers will deliver a copy of each registration statement (and
amendment and supplement thereto), report, press release, prospectus, proxy
statement or other filing or disclosure made with any securities commission,
exchange or association or under the Securities Act of 1933, the Securities
Exchange Act of 1934, any related laws or regulations or any comparable state
acts, laws or regulations.
(D) Accountants' Certification and Reports. Together with each delivery of
consolidated financial statements of Holdings and its Subsidiaries pursuant to
subsection 5.1(B), Borrowers will deliver (1) a written statement by Holdings'
independent certified public accountants stating whether, in connection with the
examination, any condition or event that constitutes an Event of Default has
come to their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof and (2) a
letter addressed to such accountants from Holdings and Borrowers informing such
accountants that a primary intent of Holdings was to have the professional
services such accountants provided to Holdings in preparing their audit report
39
and the letter referred to in this subsection 5.1(D) benefit or influence Agent
and Lenders, and identifying Agent and Lenders as parties intending to rely on
such professional services provided to Holdings by such accountants. Promptly
upon receipt thereof, Borrowers will deliver copies of the comment letter
submitted by such accountants to management in connection with their annual
audit of the financial statements of Holdings and its Subsidiaries.
(E) Compliance Certificate. Together with the delivery of each set of
financial statements referenced in subparts (A) (on a quarterly basis only) and
(B) of this subsection 5.1, Borrowers will deliver a Compliance Certificate,
together with copies of the calculations and work-up employed to determine
Holdings' and Borrowers' compliance or noncompliance with the financial
covenants set forth in Section 6.
(F) Borrowing Base Certificates, Registers and Journals. On the first
Business Day of each week (or on each Business Day if requested by Agent
following the occurrence of an Event of Default or when Unused Availability is
less than $2,000,000) Borrowers shall deliver to Agent a Borrowing Base
Certificate updated to reflect the most recent sales and collections of each
Borrower through the immediately preceding week (or, if requested by Agent on a
daily basis pursuant hereto, on the immediately preceding business day) and an
assignment schedule of all Accounts created or acquired by each Borrower during
such week or, if applicable, on such day, together with a summary aging of all
such Accounts. Within five (5) Business Days after the end of each month,
Borrowers shall deliver to Agent (a) an invoice register or sales journal
describing all sales of each Borrower for that month, in form and substance
reasonably satisfactory to Agent, and, if Agent so requests, copies of invoices
evidencing such sales and proofs of delivery relating thereto, (b) a cash
receipts journal for such month, (c) a schedule of each account debtor which is
owed a credit or other amount in excess of $25,000 (which $25,000 amount shall
be deducted by Agent as a reserve from the Borrowing Base) by any Borrower and
listing each such amount (d) a schedule of all charge-backs relating to any
Purchased Account or Service Fee Account and listing each such amount.
(G) Reconciliation Reports, Listings and Agings. On the Closing Date and
within fifteen (15) Business Days after the last day of each month and from time
to time upon the request of Agent, Borrowers will deliver to Agent an aged trial
balance of all then existing Accounts of each Borrower. As soon as available and
in any event within fifteen (15) Business Days after the last day of each month,
and from time to time upon the request of Agent, Borrowers will deliver to Agent
an aged trial balance of all then existing accounts payable of each Borrower. As
soon as available and in any event within forty-five (45) Business Days after
the last day of each month, and from time to time upon the request of Agent,
Borrowers will deliver to Agent a Reconciliation Report as at the last day of
such period. All such reports shall be in form and substance reasonably
satisfactory to Agent.
(H) Management Report. Together with each delivery of financial statements
of Holdings and its Subsidiaries pursuant to subdivisions (A) (on a quarterly
basis only) and (B) of this subsection 5.1, Borrowers will deliver a copy of the
complete management's discussion and analysis of financial condition and results
of operations included in Holdings' Form 10-K or Form 10-Q, as applicable, filed
with the Securities and Exchange Commission for the period covered by such
financial statements. The information above shall be presented in reasonable
detail and shall be
40
certified by the chief financial officer of Holdings and each Borrower to the
effect that such information fairly presents the results of operations and
financial condition of Holdings and its Subsidiaries as at the dates and for the
periods indicated.
(I) Government Notices. Borrowers will deliver to Agent promptly after
receipt copies of all notices, requests, subpoenas, inquiries or other material
writings received from any governmental agency concerning any Employee Benefit
Plan, the violation or alleged violation of any Environmental Laws, the storage,
use or disposal of any Hazardous Material, the violation or alleged violation of
the Fair Labor Standards Act or Borrower's payment or non-payment of any taxes
including any tax audit.
(J) Events of Default, etc. Promptly upon any officer of Holdings or any
Borrower obtaining knowledge of any of the following events or conditions,
Borrowers shall deliver a certificate of each Borrower's chief executive officer
specifying the nature and period of existence of such condition or event and
what action Borrowers have taken, are taking and propose to take with respect
thereto: (1) any condition or event that constitutes an Event of Default or
Default; (2) any notice of default that any Person has given to any Loan Party
or any other action taken with respect to a claimed default; or (3) any Material
Adverse Effect.
(K) Trade Names. Borrowers will give Agent at least ten (10) Business Days
advance written notice of any change of name or of any new trade name or
fictitious business name by any Loan Party. Each Loan Party's use of any trade
name or fictitious business name will be in compliance in all material respects
with all laws regarding the use of such names.
(L) Locations. Borrowers will give Agent at least thirty (30) days advance
written notice of any change in the principal place of business of any Loan
Party or any change in the location of its books and records or the Collateral
or of any new location for its books and records or the Collateral.
(M) Bank Accounts. Borrowers will give Agent prompt notice of any new bank
accounts any Loan Party intends to establish prior to its opening same.
(N) Litigation. Promptly upon any officer of Holdings or any Borrower
obtaining knowledge of (1) the institution of any material action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrowers to Agent or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which is
reasonably likely to have a Material Adverse Effect, Borrowers will promptly
give notice thereof to Agent and provide such other information as may be
reasonably available to them to enable Agent and its counsel to evaluate such
matter.
(O) Projections. As soon as available and in any event no later than
fifteen (15) days after to the end of each Fiscal Year of Holdings, Borrowers
will deliver Projections of Holdings and its Subsidiaries for the forthcoming
three Fiscal Years, year by year, and for the forthcoming Fiscal Year, month by
month.
41
(P) Indebtedness Notices. Borrowers shall promptly deliver copies of all
notices given or received by any Loan Party with respect to noncompliance with
any term or condition related to any Indebtedness in excess of $50,000 either
individually or in the aggregate, and shall promptly notify Lenders and Agent of
any potential or actual event of default with respect to any such Indebtedness.
(Q) Other Information. With reasonable promptness, Borrowers will deliver
such other information and data with respect to any Loan Party, any Subsidiary
of any Loan Party or the Collateral as Agent or any Lender may reasonably
request from time to time.
5.2 Access to Accountants. Holdings and Borrowers authorize Agent and
Lenders to discuss the financial condition and financial statements of the Loan
Parties with Holdings' independent public accountants upon reasonable notice to
Borrower Representative of its intention to do so, and authorizes such
accountants to respond to all of Agent's and Lenders' inquiries. Borrower
Representative may be present at any such discussions.
5.3 Inspection. Holdings and Borrowers shall permit Agent and any
authorized representatives designated by Agent to visit and inspect any of the
properties of the Loan Parties, including their financial and accounting
records, and to make copies and take extracts therefrom, and to discuss its and
their affairs, finances and business with their officers and independent public
accountants, at such reasonable times during normal business hours and as often
as may be reasonably requested. Holdings and Borrowers acknowledge that Agent
intends to make such inspections on at least a semi-annual basis. Borrower and,
with the consent of Agent, which will not be unreasonably denied, each Lender
may accompany Agent on any such visit or inspection.
5.4 Collateral Records. Holdings and Borrowers shall keep full and accurate
books and records relating to the Collateral and shall xxxx such material books
and records to indicate Agent's security interests in the Collateral, for the
benefit of Lenders.
5.5 Account Covenants; Verification. Borrowers shall, at their own expense:
(a) cause all invoices evidencing Accounts and all copies thereof to bear a
notice that such invoices are payable to the lockboxes (or, if applicable, the
New Hyde Park P.O. Box) established in accordance with subsection 5.6 and (b)
use their best efforts to assure prompt payment of all amounts due or to become
due under the Accounts. No discounts, credits or allowances will be issued,
granted or allowed by any Borrower to customers and no returns will be accepted
without Agent's prior written consent; provided, that until Agent notifies
Borrower Representative to the contrary, Borrowers may presume consent.
Borrowers will immediately notify Agent in the event that a customer alleges any
dispute or claim with respect to an Account in excess of $10,000 or of any other
circumstances known to any Borrower that may impair the validity or
collectability of an Account in excess of $50,000. Agent shall have the right,
at any time or times hereafter, to verify the validity, amount or any other
matter relating to an Account, by mail, telephone or in person. After the
occurrence of an Event of Default, Borrowers shall not, without the prior
consent of Agent, adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereof, or allow
any credit or discount thereon.
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5.6 Collection of Accounts and Payments. On or prior to the Closing Date,
Borrowers shall establish lockboxes and blocked accounts (collectively, "Blocked
Accounts") in Borrowers' names with such banks ("Collecting Banks") as are
acceptable to Agent (subject to irrevocable instructions acceptable to Agent as
hereinafter set forth and contained in agreements in form and substance
acceptable to Agent among the applicable Borrowers and Collecting Banks and
Agent ("Blocked Account Agreements")) to which all account debtors shall
directly remit all payments on Accounts (other than those account debtors who,
in accordance with Borrowers' business practices as in effect on the Closing
Date, are now or hereafter directed by Borrowers to remit payments to the New
Hyde Park P.O. Box) and in which Borrowers will immediately deposit all payments
constituting proceeds of Collateral (including payments received into the New
Hyde Park P.O. Box) in the identical form in which such payment was made,
whether by cash or check. The Collecting Banks shall acknowledge and agree, in a
manner satisfactory to Agent, that all payments made to the Blocked Accounts are
the sole and exclusive property of Agent, for the benefit of Lenders, and that
the Collecting Banks have no right of setoff against the Blocked Accounts, and
that all such payments received will, upon written direction from Agent to the
Collecting Banks, be promptly transferred to Agent's Account. Borrowers hereby
agree that all payments received by Agent, whether by cash, check, wire transfer
or any other instrument, made to such Blocked Accounts or otherwise received by
Agent and whether on the Accounts or as proceeds of other Collateral or
otherwise will be the sole and exclusive property of Agent, for the benefit of
Lenders. Borrowers, and any of their Affiliates, employees, agents or other
Persons acting for or in concert with any Borrower, shall, acting as trustee for
Agent, receive, as the sole and exclusive property of Agent, any monies, checks,
notes, drafts or any other payments relating to and/or proceeds of Accounts or
other Collateral which come into the possession or under the control of any
Borrower or any of Borrower's Affiliates, employees, agents or other Persons
acting for or in concert with any Borrower, and immediately upon receipt
thereof, Borrowers or such Persons shall remit the same or cause the same to be
remitted, in kind, to the Blocked Accounts or, upon written direction from
Agent, to Agent at its address set forth in subsection 10.4.
Notwithstanding the foregoing, unless an Event of Default has occurred or
Unused Availability shall decrease below $2,500,000, Agent shall not direct the
Collecting Banks to transfer payments from the Blocked Accounts, or require
funds remitted to the P.O. Box to be transferred to, Agent's Accounts. If an
Event of Default shall occur or Unused Availability shall decrease below
$2,500,000, Agent may direct the Collecting Banks to transfer funds from the
Blocked Accounts to Agent's Account and Agent may assume ownership and control
of the New Hyde Park P.O. Box and may instruct Borrowers to direct all account
debtors who remit payments to the New Hyde Park P.O. Box to, instead, remit
payments directly to one or more of the Blocked Accounts.
5.7 Endorsement. Each Borrower hereby constitutes and appoints Agent and
all Persons designated by Agent for that purpose as such Borrower's true and
lawful attorney-in-fact, with power, upon the occurrence of an Event of Default
or if Unused Availability shall decrease below $2,500,000, to endorse such
Borrower's name to any of the items of payment or proceeds described in
subsection 5.6 above and all proceeds of Collateral that come into Agent's
possession or under Agent's control. Both the appointment of Agent as each
Borrower's attorney and Agent's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.
43
5.8 Corporate Existence. Except as permitted pursuant to subsection 7.6,
Holdings and each Borrower will, and will cause each of its Subsidiaries (other
than any Inactive Subsidiary) to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business. Holdings and each Borrower will promptly notify Agent of any change in
its or its subsidiaries' ownership or corporate structure.
5.9 Payment of Taxes. Holdings and each Borrower will, and will cause each
other Loan Party to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon
provided that no such tax need be paid if such Loan Party is contesting same in
good faith by appropriate proceedings and appropriate reserves therefor have
been established in accordance with GAAP.
5.10 Maintenance of Properties; Insurance. Holdings and Borrowers will
maintain or cause to be maintained in good repair, working order and condition
all material properties necessary to the conduct of the business of any Loan
Party and will make or cause to be made all appropriate repairs, renewals and
replacements thereof. Holdings and Borrowers will maintain or cause to be
maintained, with financially sound and reputable insurers, public liability and
property damage insurance with respect to each Loan Party's, Borrowers' business
and properties against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts acceptable to Agent in its reasonable credit
judgement. Holdings and Borrowers shall cause Agent, for the benefit of Lenders,
to be named as loss payee on all insurance policies relating to any Collateral
and as additional insured under all liability policies, in each case pursuant to
appropriate endorsements in form and substance satisfactory to Agent and shall
collaterally assign to Agent, for the benefit of Lenders, as security for the
payment of the Obligations all business interruption insurance of the Loan
Parties. Borrowers shall apply any proceeds received from any policies of
insurance relating to any Collateral to the Obligations as set forth in
subsection 2.4(B).
5.11 Compliance with Laws. Holdings and each Borrower will, and will cause
each other Loan Party to, comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority as now in effect and
which may be imposed in the future in all jurisdictions in which such Person's
now doing business or may hereafter be doing business, other than those laws the
noncompliance with which would not have a Material Adverse Effect.
5.12 Further Assurances. Holdings and Borrowers shall, and shall cause each
other Loan Party to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Agent such instruments, certificates of title or other
documents as Agent at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Agent's request, Holdings shall cause any
of its Subsidiaries promptly to guaranty the Obligations and to grant to Agent,
on behalf of Lenders, security interests in the real, personal and mixed
property of such Subsidiary to secure the Obligations.
44
5.13 Collateral Locations. Holdings and Borrowers will keep the Collateral
at the locations specified on Schedule 4.7. With respect to any new location
(which in any event shall be within the continental United States), Holdings and
Borrowers will execute such documents and take such actions as Agent deems
necessary to perfect and protect the security interests of the Agent, on behalf
of Lenders, in the Collateral prior to the transfer or removal of any Collateral
to such new location.
5.14 Instruments; Chattel Paper. Except to the extent Indebtedness
evidenced thereby does not exceed $50,000 outstanding at any time in the
aggregate, Holdings and Borrowers will deliver and pledge to Agent all notes and
instruments (as defined in the UCC) duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to Agent. Holdings and Borrowers will xxxx conspicuously all
chattel paper with a legend, in form and substance satisfactory to Agent,
indicating that such chattel paper is subject to the security interest of Agent,
for the benefit of itself and Lenders. Without limiting the generality of the
foregoing, Borrowers will xxxx conspicuously all Account Agreements with the
legend referred to in the preceding sentence.
5.15 Account Agreements. Borrower Representative will deliver to Agent a
copy of each Account Agreement, or material amendment to any Account Agreement,
entered into after the Closing Date, each certified as being a complete,
accurate and correct copy thereof by Borrower Representative's chief financial
officer, together with, in the case of any Account Agreement entered into after
the Closing Date, copies of lien search results indicating the applicable
Borrower as having a first priority perfected ownership interest in each
applicable Account, subject to no Liens except those in favor of Agent, on
behalf of Lenders.
5.16 Use of Proceeds and Margin Security. Borrowers shall use the proceeds
of all Loans for proper business purposes (as described in the recitals to this
Agreement) consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of any Loan shall be used by any Borrower or any of
its Subsidiaries for the purpose of purchasing (other than in compliance with
all applicable laws, statutes, rules and regulations pursuant to the Tender
Offer) or carrying margin stock within the meaning of Regulation G or Regulation
U, or in any manner that might cause the borrowing, the application of such
proceeds, or the transactions contemplated hereby or by the other Loan Documents
to violate Regulation T or Regulation X or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934 or the rules and regulations thereunder.
SECTION 6. FINANCIAL COVENANTS
Holdings and Borrowers covenant and agree that so long as any of the
Commitments remain in effect and until payment in full of all Obligations and
termination of all Lender Letters of Credit, unless Requisite Lenders shall
otherwise give their prior written consent, Holdings and Borrowers shall comply
with, and shall cause each of their Subsidiaries to comply with, all covenants
in this Section 6.
6.1 Tangible Net Worth. Holdings and its Subsidiaries shall at all times
maintain Tangible Net Worth of at least $2,000,000 and, in addition, shall
maintain Tangible Net Worth plus intangible
45
assets acquired pursuant to Permitted Acquisitions valued in accordance with
GAAP of at least the amounts set forth below as of the dates set forth below.
Date Amount
December 31, 1995 $3,000,000
March 31, 1996 $3,000,000
June 30, 1996 $3,000,000
September 30, 1996 $3,000,000
December 31, 1996 $4,000,000
March 31, 1997 $4,000,000
June 30, 1997 $4,000,000
September 30, 1997 $4,000,000
December 31, 1997 and the last day $6,000,000
of each fiscal quarter thereafter.
6.2 Minimum EBITDA. Holdings and its Subsidiaries shall maintain EBITDA of
at least $5,000,000 for the rolling four (4) fiscal quarter period ending on the
last day of each fiscal quarter during the term of this Agreement.
6.3 Minimum Net Income. Holdings and its Subsidiaries shall maintain Net
Income of at least $1,250,000 for the rolling four (4) fiscal quarter period
ending on the last day of each fiscal quarter during the term of this Agreement
6.4 Capital Expenditure Limits. The aggregate amount of all Capital
Expenditures of Holdings and its Subsidiaries (excluding trade-ins and excluding
Capital Expenditures in respect of replacement assets to the extent funded with
casualty insurance proceeds) will not exceed $1,250,000 for any Fiscal Year
during the term of this Agreement. In the event that Holdings or any of its
Subsidiaries enters into a Capital Lease or other contract with respect to fixed
assets, for purposes of calculating Capital Expenditures under this subsection
6.4 only, the amount of the Capital Lease or contract initially capitalized on
such Person's balance sheet prepared in accordance with GAAP shall be considered
expended in full on the date that such Person's enters into such Capital Lease
or contract.
6.5 Fixed Charge Coverage. Holdings and Borrowers shall not permit Fixed
Charge Coverage to be less than 1.10 for (a) the three (3) month period ending
March 31, 1996, the six (6) month period ending June 30, 1996 and the nine (9)
month period ending September 30, 1996 and (b) the rolling four (4) fiscal
quarter period ending on the last day of December 31, 1996 and on the last day
of each fiscal quarter thereafter during the term of this Agreement; provided,
that if Fixed Charge Coverage for any such period is less than 1.10, such
occurrence shall not be deemed an Event of Default so long as (i) Fixed Charge
Coverage for such period is at least 1.00 and (ii) average Unused Availability
for such period is at least equal to the average outstanding balance of the Term
Loan during such period.
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SECTION 7. NEGATIVE COVENANTS
Holdings and Borrowers covenant and agree that so long as any of the
Commitments remain in effect and until payment in full of all Obligations and
termination of all Lender Letters of Credit, unless Requisite Lenders shall
otherwise have given their prior written consent, Holdings and Borrowers shall
not, and shall not permit any of their Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) Intercompany Indebtedness (i) among Borrowers, (ii) owing by
the Subsidiary Guarantors to Borrowers not to exceed $10,000 outstanding at any
time in the aggregate or (iii) owing by Holdings to Borrowers and incurred by
Holdings to permit Holdings to pay expenses incurred in the ordinary course of
business and to make Restricted Junior Payments permitted under subsection 7.5;
provided that, in each case, such Indebtedness shall be unsecured and
subordinated in right of payment to the Obligations, and shall not be evidenced
by any note or other instrument, unless the same is pledged to Agent and Lenders
pursuant to subsection 5.14; (c) Indebtedness not to exceed $1,500,000
outstanding at any time in the aggregate under Capital Leases or secured by
purchase money liens; (d) Indebtedness existing on the Closing Date and
identified on Schedule 4.4; and (e) Indebtedness not to exceed $500,000
outstanding at any time in the aggregate owing by Borrowers to independent
supplemental staffing firms in the ordinary course of business consistent with
current practices at the Closing Date to induce such firms to enter into
Licensing Agreements or Account Agreements; provided that such Indebtedness is
unsecured and subordinated in right of payment to the Obligations. Except for
Indebtedness described permitted in the preceding sentence, Holdings and
Borrowers will not, and will not permit any of their Subsidiaries to, incur any
Liabilities except for trade payables and normal accruals in the ordinary course
of business not yet due and payable or with respect to which any Borrower or any
of its Subsidiaries is contesting in good faith the amount or validity thereof
by appropriate proceedings and then only to the extent that such Borrower or any
of its Subsidiaries has established appropriate reserves therefor in accordance
with GAAP.
7.2 Guaranties. Except for the guaranties of the Obligations provided
hereunder and under the other Loan Documents, and except for (a) endorsements of
instruments or items of payment for collection in the ordinary course of
business and (b) the agreements of THISCO and Brentwood in their respective
Account Agreements to fund the payroll of Account Sellers in respect of Service
Fee Accounts consistent with current practices at the Closing Date, guaranty,
endorse, or otherwise in any way become or be responsible for any obligations of
any other Person, whether directly or indirectly by agreement to purchase the
indebtedness of any other Person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging any indebtedness or obligation of such
other Person or otherwise.
7.3 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to any of the Collateral or the
assets of such Person, except that
47
Borrowers and their Subsidiaries may (i) sell inventory in the ordinary course
of business; and (ii) make Asset Dispositions if all of the following conditions
are met: (1) the market value of assets sold or otherwise disposed of in any
single transaction or series of related transactions does not exceed $50,000 and
the aggregate market value of assets sold or otherwise disposed of in any Fiscal
Year does not exceed $100,000; (2) the consideration received is at least equal
to the fair market value of such assets; (3) the sole consideration received is
cash; (4) the net proceeds of such Asset Disposition are applied as required by
subsection 2.4(B); (5) after giving effect to the sale or other disposition of
the assets included within the Asset Disposition and the repayment of the
Obligations with the proceeds thereof, Holdings and Borrowers are in compliance
on a pro forma basis with the covenants set forth in Section 6 recomputed for
the most recently ended month for which information is available and are in
compliance with all other terms and conditions contained in this Agreement; and
(6) no Default or Event of Default shall then exist or result from such sale or
other disposition.
(B) Liens. Except for Permitted Encumbrances, directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral or any proceeds, income or profits therefrom.
(C) No Negative Pledges. Enter into or assume any agreement (other than the
Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
(D) No Restrictions on Subsidiary Distributions to Holdings or any
Borrower. Except as provided herein, directly or indirectly create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Borrower or any Subsidiary of any
Borrower to: (1) pay dividends or make any other distribution on any of such
Person's capital stock; (2) subject to subordination provisions, pay any
indebtedness owed to Holdings, any Borrower or any other Subsidiary of Holdings;
(3) make loans or advances to Holdings, any Borrower or any other Subsidiary of
Holdings; or (4) transfer any of its property or assets to Holdings, any
Borrower or any other Subsidiary of Holdings.
7.4 Investments and Loans. Make or permit to exist investments in or loans
to any other Person, except: (a) Cash Equivalents; (b) loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an aggregate outstanding amount not in excess of
$100,000 at any time, (c) Intercompany Indebtedness permitted by subsection 7.1,
(d) Permitted Acquisitions permitted under subsection 7.6(B), (e) investments in
securities of the type maintained by Borrowers at any time from January 1, 1995
through the Closing Date not to exceed $100,000 outstanding at any time in the
aggregate; provided, that such investments are made solely with internally
generated funds, (f) advances made in the ordinary course of business consistent
with current practices at the Closing Date by THISCO and Brentwood to
independent supplemental staffing firms to induce such firms to enter into
Account Agreements; provided, that such advances are secured by a first priority
perfected security interest in the Accounts under such Account Agreements in
favor of THISCO or Brentwood, as the case may be, subject to no Liens other than
Permitted Encumbrances, (g) in addition to advances made pursuant to clause (f)
above, advances not to exceed $500,000 outstanding at any time in the aggregate
made by Borrowers in the ordinary course of business consistent with current
practices at the Closing Date
48
to Persons engaged in the business of providing temporary employment personnel
to clients to induce such Persons to enter into, or remain party to, Account
Agreements or Licensing Agreements, and (h) loans in an aggregate outstanding
amount not in excess of $500,000 at any time made to employees of Holdings or
Borrowers which are used solely to finance the purchase by such employees of
Holdings' capital stock offered pursuant to stock option plans of Holdings or
Borrowers; provided, that in no instance shall the amount of any such loan
exceed the price of the stock to be purchased pursuant thereto, nor shall any
such loan involve any net outlay of funds by Holdings or any Borrower or the use
of any Loan proceeds.
7.5 Restricted Junior Payments. Directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Junior Payment, except that:
(A) Any Subsidiary Guarantor may make Restricted Junior Payments on its
capital stock to the extent necessary to permit Borrowers to pay the
Obligations, to permit Holdings, any Borrower or any other Subsidiary of
Holdings to pay expenses incurred in the ordinary course of business and to
permit Holdings to make the Restricted Junior Payments permitted under clauses
(b) and (c) below;
(B) Holdings may consummate the Tender Offer on or before May 31, 1996 (the
date of such consummation being referred to as the "Tender Offer Date");
provided that:
(1) Borrower Representative shall give Agent not less than one (1) Business
Day prior written notice of the Tender Offer Date;
(2) the Tender Offer and the funding thereof shall be consummated in
accordance with the terms of the Offer to Purchase in the form delivered to
Agent prior to the Closing Date (subject to non-material changes) and the terms
hereof and in compliance with all applicable laws;
(3) the aggregate price paid by Holdings for all shares tendered shall not
exceed $15,000,000, inclusive of all related fees, commissions, and other costs
and expenses;
(4) immediately after giving effect to the Tender Offer and payment of the
amount referenced in clause (3) above, Unused Availability shall be equal to or
greater than $5,000,000;
(5) no Default or Event of Default shall have occurred and be continuing on
the Tender Offer Date or would result after giving effect thereto;
(6) immediately upon consummation of the Tender Offer Holdings shall be,
and be qualified to be, listed on the NASDAQ national market, and at all times
from and after consummation of the Tender Offer Holdings shall have no
reasonable basis for believing it would at any time fail to be, or fail to
remain qualified to be, listed on the NASDAQ national market;
49
(7) no claim, suit, proceeding, petition, governmental investigation,
injunction or any other litigation shall have commenced or been threatened
against any Loan Party or any Affiliate thereof with respect to the Tender Offer
or the funding thereof; and
(8) on or prior to the Tender Offer Date, Agent shall have received, in
form and substance satisfactory to Agent, all opinions and certificates
reasonably requested by Agent to evidence compliance with the foregoing
provisions of this subsection 7.5(B); and
(C) So long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, Holdings may pay quarterly cash dividends
to holders of its common stock in an amount per share not to exceed $.03 and in
an aggregate amount not to exceed $400,000.
7.6 Restriction on Fundamental Changes.
(A) (i) Enter into any transaction of merger or consolidation; (ii)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); or (iii) convey, sell, lease, sublease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; provided, however, that
(1) any Borrower may merge or consolidate with, or convey, sell or transfer all
or substantially all of its assets to, any Borrower and (2) any Inactive
Subsidiary may be liquidated, wound-up or dissolved into any other Subsidiary of
Holdings.
(B) Acquire, by purchase or otherwise, all or any substantial part of the
business or assets of, or stock or other evidence of beneficial ownership of,
any Person; provided, however, that so long as no Default or Event of Default
has occurred and is continuing before and after giving effect thereto, any
Borrower (or Holdings, so long as contemporaneously therewith, all assets so
acquired are transferred to one or more Borrowers), may acquire all or
substantially all of the assets of any Person (in each case, a "Permitted
Acquisition"); provided that each Permitted Acquisition shall be subject to the
satisfaction of each of the following conditions precedent:
(1) Agent shall receive not less than fifteen (15) Business Days' prior
written notice of such proposed Permitted Acquisition, which notice shall
include a reasonably detailed description of such proposed Permitted
Acquisition;
(2) such Permitted Acquisition shall only be of those assets of a Target
which are located solely in the United States and/or Canada and comprising a
business, or those assets of a business, of the type engaged in by Borrowers as
of the Closing Date, including, without limitation, the temporary personal
services business, the consulting placement business and the staffing services
business, and which business would not subject Agent or any Lender to regulatory
or third party approvals in connection with the exercise of its rights and
remedies under this Agreement or any other Loan Documents;
(3) such Permitted Acquisition shall be consensual and shall have been
approved by the Target's board of directors;
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(4) the sum of all amounts payable in connection with all Permitted
Acquisitions (including all transaction costs and all Indebtedness, liabilities
and contingent obligations incurred or assumed in connection therewith) during
any Fiscal Year shall not exceed $8,000,000 and the portion thereof allocable to
Intangible Assets for all such Permitted Acquisitions during any Fiscal Year
shall not exceed $4,500,000;
(5) the Target shall not have incurred an operating loss (adjusted to
exclude non-recurring (on a post-acquisition basis) compensation amounts paid to
the Target's owners and transaction costs paid by the Target in connection with
such Permitted Acquisition) for the trailing twelve-month period preceding the
date of the Permitted Acquisition, as determined based upon the Target's
financial statements for its most recently completed fiscal year and its most
recent interim financial period completed within sixty (60) days prior to the
date of consummation of such Permitted Acquisition;
(6) the business and assets of the Target acquired in such Permitted
Acquisition shall be acquired free and clear of all Liens (other than Permitted
Encumbrances);
(7) no Indebtedness, contingent obligations or other liabilities shall be
incurred or assumed in connection with such Permitted Acquisition, except (x)
Loan advances and (y) ordinary course trade payables, accrued expenses and
Indebtedness of Target assumed in connection therewith to the extent permitted
to be incurred by Borrowers pursuant to subsection 7.1;
(8) on or prior to the date thereof, Agent will be granted a first and
prior perfected security interest (subject to Permitted Encumbrances) in all
assets being acquired pursuant to such Permitted Acquisition, and Holdings and
Borrowers shall have executed such documents and taken such actions as may be
required by Agent in connection therewith;
(9) Borrowers shall have delivered to Agent, in form and substance
satisfactory to Agent:
(i) pro forma balance sheets of Holdings and its Subsidiaries (the
"Acquisition Pro Forma") on a consolidated basis, based on financial data as of
a recent date, which shall be complete and shall accurately and fairly represent
the assets, liabilities, financial condition and results of operations of
Holdings and its Subsidiaries in accordance with GAAP consistently applied, but
taking into account such Permitted Acquisition and the funding of all Loans in
connection therewith, and such Acquisition Pro Forma shall reflect that (x)
Holdings and its Subsidiaries have Tangible Net Worth of at least $2,000,000,
(y) average daily Unused Availability for the 90-day period preceding the
consummation of such Permitted Acquisition would have exceeded $2,500,000 on a
pro forma basis (giving effect to such Permitted Acquisition and all Loans
funded in connection therewith as if made on the first day of such period) and
the Acquisition Projections (as hereinafter defined) shall reflect that such
Unused Availability of $2,500,000 shall
51
continue for at least 90 days after the consummation of such Permitted
Acquisition and (z) on a pro forma basis (giving effect to such Permitted
Acquisition and all Loans funded in connection therewith as if made on the first
day of such period), Borrowers would have been in compliance with the financial
covenants set forth in Section 6 for the twelve (12) month period preceding the
consummation of such Permitted Acquisition;
(ii) updated versions of the most recently delivered projections covering
the one (1) year period commencing on the date of such Permitted Acquisition and
otherwise prepared in accordance with subsections 4.3 and 4.17 (the "Acquisition
Projections") and based upon historical financial data of a recent date
satisfactory to Agent, taking into account such Permitted Acquisition; provided,
that Acquisition Projections for any Permitted Acquisition for which the total
consideration therefor does not exceed $250,000 may be limited to projected
revenues and EBITDA for such one year period; and
(iii) a certificate of the chief financial officer of Holdings and each
Borrower to the effect that: (I) each Borrower (after taking into consideration
all rights of contribution and indemnity such Borrower has against Holdings and
each other Subsidiary of Holdings) will be solvent (as represented by Borrowers
in subsection 4.17) upon the consummation of the transaction contemplated by the
Permitted Acquisition; (II) the Acquisition Pro Forma fairly presents the
financial condition of Holdings and Borrowers (on a consolidated basis) as of
the date hereof after giving effect to the transactions contemplated by such
Permitted Acquisition; (III) the Acquisition Projections are reasonable
estimates of the future financial performance of Holdings and Borrowers
subsequent to the date hereof based upon the historical performance of Holdings
and Borrowers and show that Holdings and Borrowers shall continue to be in
compliance with the financial covenants set forth in Section 6 for the three (3)
year period thereafter; and (IV) Holdings and Borrowers have completed their due
diligence investigation with respect to the Target and such Permitted
Acquisition, which investigation was conducted in a manner similar to that which
would have been conducted by a prudent purchaser of a comparable business and
the results of which investigation were acceptable to Holdings and Borrowers;
and
(10) on or prior to the date of such Permitted Acquisition, Agent shall
have received, in form and substance satisfactory to Agent, all opinions,
certificates, lien search results and other documents reasonably requested by
Agent to evidence compliance with the foregoing provisions of this subsection
7.6(B).
(C) Should Borrower Representative request Agent's consent to an
acquisition which would not otherwise qualify as a Permitted Acquisition, Agent
agrees to use its best efforts to communicate its response to Borrower
Representative in a reasonably prompt manner, it being
52
understood that Agent shall have no obligation to consent to any such
acquisition and no failure or delay on the part of Agent in the delivery of such
response shall be construed to be a consent to such acquisition.
7.7 Transactions with Affiliates. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for transactions in the
ordinary course of and pursuant to the reasonable requirements of Borrowers'
business and upon fair and reasonable terms which, except for transactions which
are expressly permitted pursuant to the terms of this Agreement, are fully
disclosed to Agent and Lenders and which are no less favorable to Borrowers than
it would obtain in a comparable arm's length transaction with an unaffiliated
Person.
7.8 Environmental Liabilities. (a) Violate any applicable Environmental
Law; (b) dispose of any Hazardous Materials (except in accordance with
applicable law) into or onto or from, any real property owned, leased or
operated by any Loan Party; or (c) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by any Loan Party, if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect.
7.9 Conduct of Business. From and after the Closing Date, engage in any
business other than businesses of the type engaged in by Borrowers on the
Closing Date. Holdings shall not engage in any type of business activity other
than ownership of its Subsidiaries' capital stock and activities incidental to
the maintenance of its corporate existence.
7.10 Compliance with ERISA. Establish any new Employee Benefit Plan or,
except to the extent expressly required by ERISA, the IRC or other applicable
law, amend any existing Employee Benefit Plan, if the liability or increased
liability resulting therefrom would exceed $500,000 in the aggregate in any
Fiscal Year. Neither Holdings nor any of its Subsidiaries shall fail to
establish, maintain and operate each Employee Benefit Plan in compliance in all
material respects with the provisions of ERISA, the IRC and all other applicable
laws and the regulations and interpretations thereof.
7.11 Tax Consolidations. File or consent to the filing of any consolidated
income tax return with any Person other than Holdings or its Subsidiaries.
7.12 Subsidiaries. Except to the extent permitted by subsection 7.6(B),
establish, create or acquire any new Subsidiaries.
7.13 Fiscal Year. Change its Fiscal Year.
7.14 Press Release; Public Offering Materials. Disclose the name of Agent
or any Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public offering
of the capital stock of any Loan Party except as may be required by law.
53
7.15 Bank Accounts. Establish any new bank accounts, or amend or terminate
any Blocked Account or lockbox agreement, or close or change the New Hyde Park
P.O. Box, without Agent's prior written consent; provided, that Borrowers may
establish additional bank accounts so long as in each case (a) Borrower
Representative provides Agent with at least ten (10) Business Days' prior
written notice thereof and (b) each such bank account which is a depository
account is subject to an effective Blocked Account Agreement prior to the
establishment thereof.
SECTION 8. DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the Obligations when due and
in the case of interest, such failure shall not be cured within five (5) days of
the applicable due date; or
(B) Default in Other Agreements. (1) Failure of any Loan Party to pay when
due any principal or interest on any Indebtedness (other than the Obligations)
or (2) breach or default of any Loan Party with respect to any Indebtedness
(other than the Obligations); if such failure to pay, breach or default entitles
the holder to cause such Indebtedness having an individual principal amount in
excess of $250,000 or having an aggregate principal amount in excess of $500,000
to become or be declared due prior to its stated maturity; or
(C) Breach of Certain Provisions. Failure of Holdings or any Borrower to
perform or comply with any term or condition contained in subsections 5.1(A) and
(B), 5.3, 5.5 or 5.6 or contained in Section 6 or Section 7; or
(D) Breach of Warranty. Any representation, warranty, certification or
other statement made by any Loan Party in any Loan Document or in any statement
or certificate at any time given by such Person in writing pursuant or in
connection with any Loan Document is false in any material respect on the date
made; or
(E) Other Defaults Under Loan Documents. Any Loan Party defaults in the
performance of or compliance with any term contained in this Agreement or the
other Loan Documents and such default is not remedied or waived within thirty
(30) days after receipt by Borrower Representative of notice from Agent, or
Requisite Lenders of such default (other than occurrences described in other
provisions of this subsection 8.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default); or
(F) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
enters a decree or order for relief with respect to any Loan Party (other than
an Inactive Subsidiary) in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed or other similar relief is not
granted under any applicable federal or state law; or (2) the continuance of any
of the following events for sixty (60) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against any Loan Party (other
than an Inactive Subsidiary), under any applicable bankruptcy, insolvency or
54
other similar law now or hereafter in effect; or (b) a decree or order of a
court for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over any Loan Party (other than
an Inactive Subsidiary), or over all or a substantial part of their respective
property, is entered; or (c) an interim receiver, trustee or other custodian is
appointed without the consent of any Loan Party (other than an Inactive
Subsidiary), for all or a substantial part of the property of any Loan Party
(other than an Inactive Subsidiary); or
(G) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An order for
relief is entered with respect to any Loan Party (other than an Inactive
Subsidiary) or any Loan Party (other than an Inactive Subsidiary) commences a
voluntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case or to the conversion of an
involuntary case to a voluntary case under any such law or consents to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or (2) or any Loan Party (other
than an Inactive Subsidiary) makes any assignment for the benefit of creditors;
or (3) the board of directors of any Loan Party (other than an Inactive
Subsidiary) adopts any resolution or otherwise authorizes action to approve any
of the actions referred to in this subsection 8.1(G); or
(H) Liens. Any lien, levy or assessment is filed or recorded with respect
to or otherwise imposed upon all or any part of (i) any assets of the Loan
Parties not constituting Collateral and having a value at any time in excess of
$100,000 in the aggregate or (ii) any Collateral, in any case by the United
States or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency (other than Permitted Encumbrances)
and such lien, levy or assessment is not stayed, vacated, paid or discharged
within thirty (30) days; or
(I) Judgment and Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving an amount in the aggregate at any time
in excess of $500,000 for all such judgments, writs, warrants or similar
processes (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against any
Loan Party or any of its respective assets and remains undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
(J) Dissolution. Any order, judgment or decree is entered against any Loan
Party (other than an Inactive Subsidiary) decreeing the dissolution or split up
of such Loan Party and such order remains undischarged or unstayed for a period
in excess of thirty (30) days; or
(K) Solvency. Holdings or any Borrower ceases to be solvent (as represented
by Holdings and Borrowers in subsection 4.17) or any Loan Party admits in
writing its present or prospective inability to pay its debts as they become
due; or
(L) Injunction. Any Loan Party is enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business and such order
continues for more than thirty (30) days, if any such event or circumstance
could reasonably be expected to have a Material Adverse Effect; or
55
(M) Invalidity of Loan Documents. Any of the Loan Documents for any reason,
other than a partial or full release or termination in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
(N) Failure of Security. Agent, on behalf of Lenders, does not have or
ceases to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Agent or any Lender to take any action within its
control; or
(O) Damage, Strike, Casualty. Any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than sixty (60) consecutive days, the cessation
or substantial curtailment of revenue producing activities at any facility of
any Loan Party if any such event or circumstance could reasonably be expected to
have a Material Adverse Effect.
(P) Licenses and Permits. The loss, suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired by any Loan
Party, if such loss, suspension, revocation or failure to renew could have a
Material Adverse Effect.
(Q) Forfeiture. There is filed against any Loan Party any criminal action,
criminal suit or criminal proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred twenty (120) days; and (2) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral.
8.2 Suspension of Commitments. Upon the occurrence of any Default or Event
of Default, notwithstanding any grace period or right to cure, Agent may or upon
demand by Requisite Lenders shall, without notice or demand, immediately cease
making additional Loans and the Commitments shall be suspended; provided that,
in the case of a Default, if the subject condition or event is waived or cured
within any applicable grace or cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described in
the foregoing subsections 8.1(F) or 8.1(G), all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Holdings and Borrowers, and the Commitments shall thereupon terminate. Upon the
occurrence and during the continuance of any other Event of Default, Agent may,
and upon demand by Requisite Lenders shall, by written notice to Borrower
Representative, (a) declare all or any portion of the Obligations to be, and the
same shall forthwith become, immediately due and payable and the Commitments
shall thereupon terminate and (b) demand that Borrowers immediately deposit with
Agent an amount equal to one hundred five percent (105%) of the Letter of Credit
Reserve to enable Lender to make payments under the Lender Letters of Credit
when required and such amount shall become immediately due and payable.
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8.4 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any other rights or remedies
available to Agent and Lenders at law or in equity, Agent may and shall upon the
request of Requisite Lenders exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral) and may also (a)
notify any or all obligors on the Accounts to make all payments directly to
Agent; (b) require Borrowers to, and Borrowers hereby agree that they will, at
their expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to both parties; (c) withdraw
all cash in the Blocked Accounts and apply such monies in payment of the
Obligations in the manner provided in subsection 8.7; (d) without notice or
demand or legal process, enter upon any premises of Borrowers and take
possession of the Collateral; and (e) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Agent's offices or elsewhere, at such time or times,
for cash, on credit or for future delivery, and at such price or prices and upon
such other terms as Agent may deem commercially reasonable. Holdings and
Borrowers agree that, to the extent notice of sale shall be required by law, at
least ten (10) days notice to Borrower Representative of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. At any sale of the Collateral, if permitted
by law, Agent or any Lender may bid (which bid may be, in whole or in part, in
the form of cancellation of indebtedness) for the purchase of the Collateral or
any portion thereof for the account of Agent or such Lender. Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Borrowers shall remain liable for any deficiency. Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. To the extent permitted by law,
Holdings and Borrowers hereby specifically waive all rights of redemption, stay
or appraisal which they have or may have under any law now existing or hereafter
enacted. Agent shall not be required to proceed against any Collateral but may
proceed against Borrowers directly.
8.5 Appointment of Attorney-in-Fact. Borrowers hereby constitutes and
appoints Agent as each Borrower's attorney-in-fact with full authority in the
place and stead of such Borrower and in the name of such Borrower, Agent or
otherwise, from time to time in Agent's discretion while an Event of Default is
continuing to take any action and to execute any instrument that Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including:
(a) to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral; (b) to adjust, settle or compromise the amount or payment
of any Account, or release wholly or partly any customer or obligor thereunder
or allow any credit or discount thereon; (c) to receive, endorse, and collect
any drafts or other instruments, documents and chattel paper, in connection with
clause (a) above; (d) to file any claims or take any action or institute any
proceedings that Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Agent and Lenders with
respect to any of the Collateral; and (e) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral. The appointment of Agent as each
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Borrower's attorney and Agent's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.
8.6 Limitation on Duty of Agent with Respect to Collateral. Beyond the safe
custody thereof, Agent and each Lender shall have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to any income thereon or the preservation of
rights against prior parties or any other rights pertaining thereto. Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Agent accords its own property. Neither Agent
nor any Lender shall be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Agent in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, (a) Borrowers irrevocably waive the right to direct the
application of any and all payments at any time or times thereafter received by
Agent from or on behalf of any Borrower, and Borrowers hereby irrevocably agrees
that Agent shall have the continuing exclusive right to apply and to reapply any
and all payments received at any time or times after the occurrence and during
the continuance of an Event of Default against the Obligations in such manner as
Agent may deem advisable notwithstanding any previous entry by Agent upon any
books and records and (b) the proceeds of any sale of, or other realization
upon, all or any part of the Collateral shall be applied: first, to all fees,
costs and expenses incurred by Agent or any Lender with respect to this
Agreement, the other Loan Documents or the Collateral; second, to all fees due
and owing to Agent and Lenders; third, to accrued and unpaid interest on the
Obligations; fourth, to the principal amounts of the Obligations outstanding;
and fifth, to any other indebtedness or obligations of Borrowers owing to Agent
or any Lender.
8.8 License of Intellectual Property. Each Borrower hereby assigns,
transfers and conveys to Agent, for the benefit Lenders, effective upon the
occurrence of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by such Borrower together
with any goodwill associated therewith, all to the extent necessary to enable
Agent to realize on the Collateral and any successor or assign to enjoy the
benefits of the Collateral. This right and license shall inure to the benefit of
all successors, assigns and transferees of Agent and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to any Borrower by Agent.
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of Agent or any
Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any other remedies provided by law.
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SECTION 9. ASSIGNMENT AND PARTICIPATION
9.1 Assignments and Participations in Loans.
(A) Each Lender may assign its rights and delegate its obligations under
this Agreement to another Person (other than any Person engaging in a business
which is in direct competition with a business of Borrowers); provided, that (a)
such Lender shall first obtain the written consent of Agent and Borrower
Representative, neither of which shall be unreasonably withheld, (b) the amount
of Commitments and Loans of the assigning Lender being assigned shall in no
event be less than the lesser of (i) $5,000,000 or (ii) the entire amount of the
Commitments and Loans of such assigning Lender and (c)(i) each such assignment
shall be of a pro rata portion of all such assigning Lender's Loans and
Commitments hereunder, and (ii) the parties to such assignment shall execute and
deliver to Agent for acceptance and recording a Lender Addition Agreement
together with (x) a processing and recording fee of $2,500 payable to Agent and
(y) the Term Notes originally delivered to the assigning Lender. Upon receipt of
all of the foregoing, Agent shall notify Borrower Representative of such
assignment and Borrowers shall comply with their obligations under the last
sentence of subsection 2.1(E). In the case of an assignment authorized under
this subsection 9.1, the assignee shall have, to the extent of such assignment,
the same rights, benefits and obligations as it would if it were a Lender
hereunder. The assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitment or assigned portion thereof. Holdings and
Borrowers hereby acknowledge and agree that any assignment will give rise to a
direct obligation of Borrower to the assignee and that the assignee shall be
considered to be a "Lender". As of the Closing Date, Xxxxxx intends to remain as
Agent hereunder and to maintain a Pro Rata Share of at least fifty percent (50%)
of the Total Loan Commitment, it being understood by the Loan Parties and the
other Lenders that Xxxxxx shall have no obligation to remain as Agent and shall
have no obligation to maintain, and shall have the right to dispose of, all or
any portion of its Pro Rata Share of any Commitment or Loan.
(B) Each Lender may sell participations in all or any part of any Loans
made by it to another Person (other than any Person engaging in a business which
is in direct competition with a business of Borrowers); provided, that any such
participation shall be in a minimum amount of $5,000,000, and provided, further,
that all amounts payable by Borrowers hereunder shall be determined as if that
Lender had not sold such participation and the holder of any such participation
shall not be entitled to require such Lender to take or omit to take any action
hereunder except action directly effecting (a) any reduction in the principal
amount, interest rate or fees payable with respect to any Loan in which such
holder participates; (b) any extension of the Termination Date or the date fixed
for any payment of principal, interest or fees payable with respect to any Loan
in which such holder participates; and (c) any release of substantially all of
the Collateral (other than in accordance with the terms of this Agreement or the
Loan Documents). Holdings and Borrowers hereby acknowledge and agree that any
participation will give rise to a direct obligation of Borrowers to the
participant, and the participant shall for purposes of subsections 2.8, 2.9,
2.10, 9.4 and 10.2 be considered to be a "Lender".
(C) Except as otherwise provided in this subsection 9.1 no Lender shall, as
between Borrowers and that Lender, be relieved of any of its obligations
hereunder as a result of any sale,
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assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans or other Obligations owed to such Lender. Each Lender may
furnish any information concerning Holdings and its Subsidiaries in the
possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants) provided that the Persons
obtaining such information agrees to maintain the confidentiality of such
information to the extent required by subsection 10.21.
(D) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Loans owing to
it and the Note held by it) in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal Reserve System).
9.2 Agent.
(A) Appointment. Each Lender hereby designates and appoints Xxxxxx as its
agent under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action or to refrain from taking such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto. Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsection 9.3. Agent agrees to act as such on the express
conditions contained in this subsection 9.2. The provisions of this subsection
9.2 are solely for the benefit of Agent and Lenders and neither Holdings, any
Borrower nor any other Loan Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, Agent shall act solely as an administrative
representative of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for
Lenders, Holdings, any Borrower or any other Loan Party. Agent may perform any
of its duties hereunder, or under the Loan Documents, by or through its agents
or employees.
(B) Nature of Duties. Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrowers in
connection with the extension of credit hereunder and shall make its own
appraisal of the credit worthiness of Borrowers, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the Closing Date or at any time or times thereafter. If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send notice thereof to each
Lender. Agent shall promptly notify each Lender any time that the applicable
percentage of Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
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(C) Rights, Exculpation, Etc. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectability, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Loan Documents until it shall have received such
instructions from the applicable percentage of the Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of the
applicable percentage of the Lenders and notwithstanding the instructions of
Lenders, Agent shall have no obligation to take any action if it, in good faith
believes that such action exposes Agent to any liability.
(D) Reliance. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message or
other communication (including any writing, telex, telecopy or telegram)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the Loan Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it. Agent shall be entitled to
rely upon the advice of legal counsel, independent accountants, and other
experts selected by Agent in its sole discretion.
(E) Indemnification. Each Lender, severally, agrees to reimburse and
indemnify Agent for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or any of the Loan Documents or any action taken or omitted by Agent
under this Agreement for any of the Loan Documents, in proportion to each
Lender's Pro Rata Share; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
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actions, judgments, suits, costs, expenses, advances or disbursements resulting
from Agent's gross negligence or willful misconduct. The obligations of Lenders
under this subsection 9.2(E) shall survive the payment in full of the
Obligations and the termination of this Agreement.
(F) Xxxxxx Individually. With respect to its Commitments and the Loans made
by it, and the Notes issued to it, Xxxxxx shall have and may exercise the same
rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. The
terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include Xxxxxx in its individual capacity
as a Lender or one of the Requisite Lenders. Xxxxxx may lend money to, and
generally engage in any kind of banking, trust or other business with any Loan
Party as if it were not acting as Agent pursuant hereto.
(G) Successor Agent.
(1) Resignation. Agent may resign from the performance of all its functions
and duties hereunder at any time by giving at least thirty (30) Business Days'
prior written notice to Borrower Representative and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) Appointment of Successor. Upon any such notice of resignation pursuant
to clause (G)(1) above, Requisite Lenders shall, upon receipt of Holdings' and
Borrowers' prior consent which shall not unreasonably be withheld, appoint a
successor Agent. If a successor Agent shall not have been so appointed within
said thirty (30) Business Day period, the retiring Agent, upon notice to
Borrower Representative, shall then appoint a successor Agent who shall serve as
Agent until such time, as Requisite Lenders, upon receipt of Holdings' and
Borrowers' prior written consent which shall not be unreasonably withheld,
appoint a successor Agent as provided above.
(3) Successor Agent. Upon the acceptance of any appointment as Agent under
the Loan Documents by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents. After any retiring Agent's
resignation as Agent under the Loan Documents, the provisions of this subsection
9.2 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under the Loan Documents.
(H) Collateral Matters.
(1) Release of Collateral. Lenders hereby irrevocably authorize Agent, at
its option and in its discretion, to release any Lien granted to or held by
Agent upon any property covered by this Agreement or the Loan Documents (i) upon
termination of the Commitments and payment and satisfaction of all Obligations;
(ii) constituting property being sold or disposed of if Borrower Representative
certifies to Agent that the sale or disposition is made in compliance with the
provisions of this Agreement or, as applicable, the other Loan Documents (and
Agent may rely in good faith conclusively on any such certificate, without
further inquiry); or (iii) constituting property leased to any Borrower under a
lease which has expired or been terminated in a transaction
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permitted under this Agreement or, as applicable, the other Loan Documents, or
is about to expire and which has not been, and is not intended by such Borrower
to be, renewed or extended. In addition during any Fiscal Year (x) Agent may
release Collateral having a book value of not more than 10% of the book value of
all Collateral, (y) Agent, with the consent of Requisite Lenders, may release
Collateral having a book value of not more than 25% of the book value of all
Collateral and (z) Agent, with the consent of Lenders having 90% of (i) the
Total Loan Commitments and (ii) Loans, may release all the Collateral.
(2) Confirmation of Authority; Execution of Releases. Without in any manner
limiting Agent's authority to act without any specific or further authorization
or consent by Lenders (as set forth in subsection 9.2(H)(1)), each Lender agrees
to confirm in writing, upon request by Agent, the authority to release any
property covered by this Agreement or the Loan Documents conferred upon Agent
under subsection 9.2(H)(1). So long as no Event of Default is then continuing,
upon receipt by Agent of confirmation from the requisite percentage of Lenders,
of its authority to release any particular item or types of property covered by
this Agreement or the Loan Documents, and upon at least five (5) Business Days
prior written request by Borrower Representative, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be necessary
to evidence the release of the Liens granted to Agent for the benefit of Lenders
herein or pursuant hereto upon such Collateral; provided, however, that (i)
Agent shall not be required to execute any such document on terms which, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Loan Party in
respect of), all interests retained by any Loan Party, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
(3) Absence of Duty. Agent shall have no obligation whatsoever to any
Lender or any other Person to assure that the property covered by this Agreement
or the Loan Documents exists or is owned by any Loan Party or is cared for,
protected or insured or has been encumbered or that the Liens granted to Agent
on behalf of Lenders herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent in this subsection 9.2(H) or in any of the Loan Documents, it being
understood and agreed that in respect of the property covered by this Agreement
or the Loan Documents or any act, omission or event related thereto, Agent may
act in any manner it may deem appropriate, in its discretion, given Agent's own
interest in property covered by this Agreement or the Loan Documents as one of
the Lenders and that Agent shall have no duty or liability whatsoever to any of
the other Lenders; provided, that Agent shall exercise the same care which it
would in dealing with loans for its own account.
(I) Agency for Perfection. Each Lender hereby appoints each other Lender as
agent for the purpose of perfecting Lenders' security interest in Collateral
which, in accordance with Article 9 of the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such Collateral, such
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Lender shall notify Agent thereof, and, promptly upon Agent's request therefor,
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
(J) Exercise of Remedies. Each Lender agrees that it will not have any
right individually to enforce or seek to enforce this Agreement or any Loan
Document or to realize upon any collateral security for the Loans, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.
9.3 Consents.
(A) In the event Agent requests the consent of a Lender and does not
receive a written denial thereof within five (5) Business Days after such
Lender's receipt of such request, then such Lender will be deemed to have given
such consent.
(B) In the event Agent requests the consent of a Lender and such consent is
denied, then Xxxxxx may, at its option, require such Lender to assign its
interest in the Loans to Xxxxxx for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due such
Lender, which interest and fees will be paid when collected from Borrowers. In
the event that Xxxxxx elects to require any Lender to assign its interest to
Xxxxxx, Xxxxxx will so notify such Lender in writing within forty-five (45) days
following such Lender's denial, and such Lender will assign its interest to
Xxxxxx no later than five (5) days following receipt of such notice.
9.4 Set Off and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized by Holdings and Borrowers at any time or from
time to time, with reasonably prompt subsequent notice to Borrower
Representative (any prior or contemporaneous notice being hereby expressly
waived) to set off and to appropriate and to apply any and all (a) balances held
by such Lender or such holder at any of its offices for the account of any Loan
Party (regardless of whether such balances are then due to such Loan Party), and
(b) other property at any time held or owing by such Lender or such holder to or
for the credit or for the account of any Loan Party, against and on account of
any of the Obligations which are not paid when due; except that no Lender or any
such holder shall exercise any such right without the prior written consent of
Agent. Any Lender which has exercised its right to set off shall, to the extent
the amount of any such set off exceeds its Pro Rata Share of the Obligations,
purchase for cash (and the other Lenders or holders shall sell) participations
in each such other Lender's or holder's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share such excess with each other
Lender or holder in accordance with their respective Pro Rata Shares. Holdings
and Borrowers agree to the fullest extent permitted by law, that (a) any Lender
or holder may exercise its right to set off with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such excess
to other Lenders and holders, and (b) any Lender or holder so purchasing a
participation in the Loans made or other Obligations held by other Lenders or
holders may exercise all rights of set-off, bankers' lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of Loans and other Obligations in the amount of such
participation.
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9.5 Disbursement of Funds. Agent may, on behalf of Lenders, disburse funds
to Borrowers for Loans requested. Each Lender shall reimburse Agent on demand
for all funds disbursed on its behalf by Agent, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Loan before Agent disburses
same to Borrowers. If Agent elects to require that funds be made available prior
to disbursement to Borrowers, Agent shall advise each Lender by telephone, telex
or telecopy of the amount of such Lender's Pro Rata Share of such requested Loan
no later than (a) one (1) Business Day prior to the Funding Date applicable
thereto for LIBOR Rate Loans and (b) by 1:00 p.m. Central time on the Funding
Date for Base Rate Loans, and each such Lender shall pay Agent such Lender's Pro
Rata Share of such requested Loan, in same day funds, by wire transfer to
Agent's account not later than 10:00 a.m. Central time on such Funding Date for
LIBOR Rate Loans and 3:00 p.m. Central time for Base Rate Loans. If any Lender
fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand,
Agent shall promptly notify Borrower Representative, and Borrowers shall
immediately repay such amount to Agent. Any repayment required pursuant to this
subsection 9.5 shall be without premium or penalty. Nothing in this subsection
9.5 or elsewhere in this Agreement or the other Loan Documents, including
without limitation the provisions of subsection 9.6, shall be deemed to require
Agent to advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Agent or Borrowers may have against any Lender as a result of any default by
such Lender hereunder.
9.6 Settlements, Payments and Information.
(A) Revolving Loan Advances and Payments; Fee Payments.
(1) The Revolving Loan balance may fluctuate from day to day through
Agent's disbursement of funds to, and receipt of funds from, Borrowers. In order
to minimize the frequency of transfers of funds between Agent and each Lender
notwithstanding terms to the contrary set forth in Section 2 and subsection 9.5,
Revolving Loan advances and payments may be settled according to the procedures
described in subsection 9.6(A)(2) and 9.6(A)(3) of this Agreement. Payments of
principal, interest and fees in respect of the Term Loan will be settled on the
Business Day received in accordance with the provisions of Section 2.
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any advances made by Agent to Borrowers will commence on the date such
advances are made by Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(2) Once each week, or more frequently (including daily), if Agent so
elects (each such day being a "Settlement Date"), Agent will advise each Lender
by 1 p.m. Central time by telephone, telex, or telecopy of the amount of each
such Lender's Pro Rata Share of the Revolving Loan balance. In the event that
payments are necessary to adjust the amount of such Lender's share of the
Revolving Loan balance to such Lender's Pro Rata Share of the Revolving Loan,
the party from which such payment is due will pay the other, in same day funds,
by wire transfer to the other's account not later than 3:00 p.m. Central time on
the Business Day following the Settlement Date.
(3) On the first Business Day of each month ("Interest Settlement Date"),
Agent will advise each Lender by telephone, telefax or telecopy of the amount of
interest and fees charged to and collected from Borrowers for the proceeding
month. Provided that such Lender has
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made all payments required to be made by it under this Agreement, Agent will pay
to such Lender, by wire transfer to such Lender's account (as specified by such
Lender on the signature page of this Agreement as amended by such Lender from
time to time after the date hereof pursuant to the notice provisions contained
herein or in the applicable Lender Addition Agreement) not later than 3 p.m.
Central time on the next Business Day following the Interest Settlement Date
such Lender's share of such interest and fees.
(B) Availability of Lender's Pro Rata Share.
(1) Unless Agent has been notified by a Lender prior to a Funding Date of
such Lender's intention not to fund its Pro Rata Share of the Loan amount
requested by Borrower Representative, Agent may assume that such Lender will
make such amount available to Agent on the Funding Date or the Business Day
following the next Settlement Date, as applicable. If such amount is not, in
fact, made available to Agent by such Lender when due, Agent will be entitled to
recover such amount on demand from such Lender without set-off, counterclaim or
deduction of any kind.
(2) Nothing contained in this subsection 9.6(B) will be deemed to relieve a
Lender of its obligation to fulfill its Commitments or to prejudice any rights
Agent or Borrowers may have against such Lender as a result of any default by
such Lender under this Agreement.
(3) Without limiting the generality of the foregoing, each Lender shall be
obligated to fund its Pro Rata Share of any Revolving Loan made with respect to
any draw on a Lender Letter of Credit.
(C) Return of Payments
(1) If Agent pays an amount to a Lender under this Agreement in the belief
or expectation that a related payment has been or will be received by Agent from
Borrower and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender without set-off, counterclaim
or deduction of any kind.
(2) If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to Borrowers or paid to any other person
pursuant to any solvency law or otherwise, then, notwithstanding any other term
or condition of this Agreement, Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrowers or such other Person, without set-off, counterclaim or deduction of
any kind.
9.7 Dissemination of Information. Agent will provide Lenders with any
information received by Agent from Holdings and Borrowers which is required to
be provided to a Lender hereunder; provided, however, that Agent shall not be
liable to Lenders for any failure to do so, except to the extent that such
failure is attributable to Agent's gross negligence or willful misconduct.
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9.8 Discretionary Advances. Agent may, in its sole discretion, (i) provided
that no Event of Default exists, make Revolving Loans of up to 10% in excess of
the limitations set forth in subsection 2.1 (B)(1)(b) but not in excess of the
limitation set forth in subsection 2.1(B)(1)(a) for a period of not more than
thirty (30) consecutive days and (ii) during the continuance of an Event of
Default, make Revolving Loans in an aggregate amount of not more than $3,000,000
in excess of the limitations set forth in subsection 2.1(B)(1) for the purpose
of preserving or protection the Collateral.
SECTION 10. MISCELLANEOUS
10.1 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Holdings and Borrowers agree to
promptly pay all fees, costs and expenses incurred by Agent in connection with
any matters contemplated by or arising out of this Agreement or the other Loan
Documents including the following, and all such fees, costs and expenses shall
be part of the Obligations, payable on demand and secured by the Collateral: (a)
fees, costs and expenses (including attorneys' fees, allocated costs of internal
counsel and fees of accountants and other professionals retained by Agent)
incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (b) fees, costs and expenses (including attorneys' fees,
allocated costs of internal counsel and fees of accountants and other
professionals retained by Agent) incurred by Agent in connection with the
review, negotiation, preparation, documentation, execution and administration of
the Loan Documents, the Loans, and by Agent and Lenders in connection with any
amendments, waivers, consents, forbearances and other modifications relating
thereto or any subordination or intercreditor agreements; (c) fees, costs and
expenses incurred by Agent in creating, perfecting and maintaining perfection of
Liens in favor of Agent, on behalf of Lenders; (d) fees, costs and expenses
incurred by Agent in connection with forwarding to Borrowers the proceeds of
Loans including Agent's or any Lenders' standard wire transfer fee; (e) fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by Agent or any Lender in establishing, maintaining and handling lock
box accounts, blocked accounts or other accounts for collection of the
Collateral; (f) fees, costs, expenses (including attorneys' fees and allocated
costs of internal counsel) of Agent or any Lender and costs of settlement
incurred in collecting upon or enforcing rights against the Collateral or
incurred in any action to enforce this Agreement or the other Loan Documents or
to collect any payments due from Borrower or any other Loan Party under this
Agreement or any other Loan Document or incurred in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise.
10.2 Indemnity. In addition to the payment of expenses pursuant to
subsection 10.1, whether or not the transactions contemplated hereby shall be
consummated, Holdings and Borrowers agree to indemnify, pay and hold Agent and
each Lender and any holder of any of the Notes, and the officers, directors,
employees, agents, consultants, auditors, persons engaged by Agent or any Lender
and any holder of any of the Notes to evaluate or monitor the Collateral,
affiliates and attorneys of Agent, Lender and such holders (collectively called
the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
the fees and disbursements
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of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents, the consummation of
the transactions contemplated by this Agreement, the statements contained in the
commitment letters, if any, delivered by Agent or any Lender, Agent's and each
Lender's agreement to make the Loans hereunder, the use or intended use of the
proceeds of any of the Loans or the exercise of any right or remedy hereunder or
under the other Loan Documents (the "Indemnified Liabilities"); provided that
Holdings and Borrowers shall have no obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the bad faith, gross negligence
or willful misconduct of that Indemnitee as determined by a court of competent
jurisdiction.
10.3 Amendments and Waivers.
(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement, the Notes or any other
Loan Document, or consent to any departure by any Loan Party therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Requisite Lenders or Agent, as applicable; provided, that no amendment,
modification, termination or waiver shall, unless in writing and signed by all
Lenders, do any of the following: (i) increase the Commitment of any Lender;
(ii) reduce the principal of, rate of interest on or fees payable with respect
to any Loan; (iii) extend the scheduled due date of any installment of principal
of the Loans; (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans, or the percentage of Lenders which shall
be required for Lenders or any of them to take any action hereunder; (v) amend
or waive this subsection 10.3 or the definitions of the terms used in this
subsection 10.3 insofar as the definitions affect the substance of this
subsection 10.3; (vi) consent to the assignment or other transfer by any Loan
Party of any of its rights and obligations under any Loan Document; and (vii)
increase the percentages contained in the definition of Borrowing Base and
provided, further, that no amendment, modification, termination or waiver
affecting the rights or duties of Agent under any Loan Document shall in any
event be effective, unless in writing and signed by Agent, in addition to the
Lenders required herein above to take such action.
(B) Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given. No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document.
(C) No amendment, modification or waiver of any provision of any Lender
Letter of Credit shall be applicable without the written concurrence of the
issuer of such Lender Letter of Credit. No notice to or demand on Holdings, any
Borrower or any other Loan Party in any case shall entitle Holdings, any
Borrower or any other Loan Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.3 shall be binding
upon each holder of the Notes at the time outstanding, each future holder of the
Notes, and, if signed by a Loan Party, on such Loan Party.
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(D) In the event Agent waives (1) any Default arising under subsection
8.1(E) as a result of the breach of any of the provisions of Section 5 of this
Agreement (other than any such breach which constitutes an Event of Default) or
(2) any Default constituting a condition to the funding of any Revolving Loan or
issuance of any Lender Letter of Credit, such waiver shall expire on the date
upon which the Default which was the subject of such waiver matures into an
Event of Default pursuant to the terms of this Agreement.
10.4 Notices. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Central time or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four (4) Business Days after depositing in the United States mail, with postage
prepaid and properly addressed.
If to Holdings or UNIFORCE SERVICES, INC.
any Borrower: 0000 Xxxxxxx Xxxxxxxx
Xxx Xxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxxxx,
Vice President, Finance
Telecopy No.: (000) 000-0000
With a copy to: XXXXXX XXXXXXXX FROME & XXXXXXXXXX LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
If to Agent or Xxxxxx: XXXXXX FINANCIAL, INC.
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: HBC Portfolio Manager
Telecopy No.: (000) 000-0000
With a copy to: XXXXXX FINANCIAL, INC.
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Legal Department
Telecopy No.: (000) 000-0000
If to any Lender: Its address indicated on the signature page hereto, in a
Lender Addition Agreement or in a notice to Agent and Borrower Representative or
to such other address as the party addressed shall have previously designated by
written notice to the serving party, given in accordance with this subsection
10.4.
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10.5 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Holdings and Borrowers set forth in subsections 10.1 and 10.2
shall survive the payment of the Loans and the termination of this Agreement.
10.6 Indulgence Not Waiver. No failure or delay on the part of Agent, any
Lender or any holder of any Note in the exercise of any power, right or
privilege hereunder or under the Notes shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
10.7 Marshaling; Payments Set Aside. Neither Agent nor any Lender shall be
under any obligation to marshal any assets in favor of any Loan Party or any
other party or against or in payment of any or all of the Obligations. To the
extent that any Loan Party makes a payment or payments to Agent and/or any
Lender or Agent and/or any Lender enforces its security interests or exercise
its rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
10.8 Entire Agreement. This Agreement, the Notes, and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
10.9 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
10.10 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.11 Lenders' Obligations Several; Independent Nature of Lenders' Rights.
The obligation of each Lender hereunder is several and not joint and neither
Agent nor any Lender shall be responsible for the obligation or commitment of
any other Lender hereunder. In the event that any Lender at any
70
time should fail to make a Loan as herein provided, the Lenders, or any of them,
at their sole option, may make the Loan that was to have been made by the Lender
so failing to make such Loan. Nothing contained in any Loan Document and no
action taken by Agent or any Lender pursuant hereto or thereto shall be deemed
to constitute Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and, provided Agent fails or
refuses to exercise any remedies against Holdings or any Borrower after
receiving the direction of the Requisite Lenders, each Lender shall be entitled
to protect and enforce its rights arising out of this Agreement and it shall not
be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
10.12 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
10.13 APPLICABLE LAW. THIS AGREEMENT, INCLUDING PROVISIONS REGARDING THE
PAYMENT OF INTEREST, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
10.14 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that neither Holdings nor any Borrower may assign its rights or
obligations hereunder without the written consent of Lenders.
10.15 No Fiduciary Relationship; Limitation of Liabilities.
(A) No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty by Agent or any Lender to Holdings or any Borrower.
(B) Neither Agent nor any Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Agent or any Lender shall have any
liability with respect to, and Holdings and Borrowers hereby waive, release, and
agree not to xxx any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by Holdings or any
Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. Holdings and
Borrowers hereby waive, release, and agree not to xxx Agent or any Lender or any
of Agent's or any Lender's affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the transactions contemplated hereby.
10.16 CONSENT TO JURISDICTION. HOLDINGS AND EACH BORROWER HEREBY CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE BOROUGH OF MANHATTAN STATE OF NEW YORK
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AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. HOLDINGS AND EACH BORROWER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTES,
THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
10.17 WAIVER OF JURY TRIAL. HOLDINGS, EACH BORROWER, AGENT AND EACH LENDER
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS. HOLDINGS, EACH BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE NOTES AND
THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN
THEIR RELATED FUTURE DEALINGS. HOLDINGS, EACH BORROWER, AGENT AND EACH LENDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
10.18 Construction. Holdings, each Borrower, Agent and each Lender each
acknowledge that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by Holdings, each Borrower,
Agent and each Lender.
10.19 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
10.20 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Agent or any Lender shall have
the right to act exclusively in the interest of Agent or such Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any type or nature whatsoever to Holdings, any Borrower or any of
Holdings' shareholders or any other Person.
10.21 Confidentiality. Agent and Lenders shall hold all nonpublic
information obtained pursuant to the requirements hereof in accordance with such
Person's customary procedures for handling
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confidential information of this nature and in accordance with safe and sound
business practices and in any event may make disclosure reasonably required by a
bona fide offeree or assignee (or participation), or as required or requested by
any governmental authority or representative thereof, or pursuant to legal
process, or to its accountants, lawyers and other advisors, and shall require
any such offeree or assignee (or participant) to agree (and require any of its
offerees, assignees or participants to agree) to comply with this subsection
10.21. In no event shall the Agent or any Lender be obligated or required to
return any materials furnished by Borrowers; provided, however, each offeree
shall be required to agree that if it does not become a assignee (or
participant) it shall return all materials furnished to it by Borrowers in
connection herewith.
SECTION 11. GUARANTIES
11.1 Guaranty. Holdings hereby absolutely and unconditionally guaranties to
Agent and Lenders the full and prompt payment of all Obligations owed or
hereafter owing to Agent and Lenders by each Borrower. Each Borrower hereby
absolutely and unconditionally guarantees to Agent and Lenders the full and
prompt payment of all Obligations owed or hereafter owing to Agent and each
Lender by each other Borrower. Notwithstanding any provision herein contained to
the contrary, each Borrower's liability under this Section 11 (which liability
is in any event in addition to amounts for which such Borrower is primarily
liable under the other Sections of this Agreement and the other Loan Documents)
shall be limited to an amount not to exceed as of any date of determination the
greater of:
(A) the net amount of all Loans advanced to any other Borrower under this
Agreement and then re-loaned or otherwise transferred to such Borrower; or
(B) the amount which could be claimed by the Agent and Lenders from such
Borrower under this Section 11 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from the other
Borrowers under subsection 11.2 hereof.
11.2 Contribution with Respect to Guaranty Obligations.
(A) To the extent that any Borrower shall make a payment under this Section
11 of all or any of the Obligations for which such Borrower is not primarily
liable (a "Guarantor Payment") which, taking into account all other Guarantor
Payments then previously or concurrently made by the other Borrowers, exceeds
the amount which such Borrower would otherwise have paid if each Borrower had
paid the aggregate Obligations satisfied by such Guarantor Payment in the same
proportion that such Borrower's "Allocable Amount" (as defined below) (in effect
immediately prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of all Borrowers in effect immediately prior to the making of such
Guarantor Payment, then such Borrower shall be entitled to received contribution
and indemnification payments from, and be reimbursed by, each of the other
Borrowers for the amount of such excess, pro rata based upon their respective
Allocable Amounts in effect immediately prior to such Guarantor Payment.
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(B) As of any date of determination, the "Allocable Amount" of any Borrower
shall be equal to the maximum amount of the claim which could then be recovered
from such Borrower under this subsection 11 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(C) This subsection 11.2 is intended only to define the relative rights of
Borrowers and nothing set forth in this subsection 11.2 is intended to or shall
impair the obligations of Borrowers, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including, without limitation, Section 2 hereof, and nothing
contained in this subsection 11.2 shall limit the liability of any Borrower to
pay the Obligations for which it is primarily liable.
(D) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of any Borrower to which such
contribution and indemnification is owing.
11.3 Obligations Absolute. The liability of Holdings and each Borrower to
Agent and Lenders under this Section 11 shall not be affected or impaired by any
of the following acts by Agent or any Lender: (i) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all
Obligations; (ii) one or more extensions or renewals of any Obligations (whether
or not for longer than the original period) or any modification of the interest
rates, fees, maturities or principal amount of, or other contractual terms
applicable to, any Obligations; (iii) any waiver or indulgence granted to any
Borrower, any delay or lack of diligence in the enforcement of Obligations, or
any failure to institute proceedings, file a claim, give any required notices or
otherwise protect any Obligations; (iv) any full or partial release of,
compromise or settlement with, or agreement not to xxx any Borrower or any
guarantor or other person liable in respect of any Obligations; (v) the
acceptance of any instrument in renewal or substitution of any Obligation; (vi)
any failure to obtain collateral security (including rights of setoff) for any
Obligations, or to obtain or maintain the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to preserve,
protect, insure, care for, exercise or enforce any collateral security; or any
modification, alteration, substitution, exchange, surrender, cancellation,
termination, release or other change, impairment, limitation, loss or discharge
of any collateral security; (vii) any assignment, pledge or other transfer of
any Obligations or any evidence thereof; or (viii) any manner, order or method
of application of any payments or credits upon Obligations. Holdings and each
Borrower hereby waives any and all defenses and discharges available to a
surety, guarantor, or accommodation co-obligor, other than payment in full in
cash of the Obligations and termination of the Commitments pursuant thereto.
11.4 WAIVER. HOLDINGS AND EACH BORROWER HEREBY WAIVES PRESENTMENT, DEMAND
FOR PAYMENT, NOTICE OF DISHONOR OR NONPAYMENT, AND PROTEST OF ANY INSTRUMENT
EVIDENCING LIABILITIES.
11.5 Recovery. If any payment is applied by Agent or any Lender to the
Obligations and is hereafter set aside, recovered, rescinded or required to be
returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of any Borrower or any other obligor), the
74
Obligations to which such payment was applied shall for the purposes of this
Section 11 be deemed to have continued in existence, notwithstanding such
payment and application and this guaranty shall be enforceable as to such
Obligations as fully as if such payment and application had never been made.
11.6 Liability Cumulative. The liability of Holdings and Borrowers under
this Section 11 is in addition to and shall be cumulative with all liabilities
of Holdings and each Borrower to Agent or any Lender under this Agreement and
the other Loan Documents to which any such Borrower is a party or in respect of
any Obligations of the other Borrowers, without any limitation as to amount,
unless the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
[signature page follows]
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Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
XXXXXX FINANCIAL, INC.
By:_____________________________
Title: Vice President
Revolving Loan Commitment:
$32,000,000
Term Loan Commitment:
$3,000,000
BRENTWOOD SERVICE GROUP, INC.
By:_____________________________
Title: President
UNIFORCE SERVICES, INC
COMPUTER CONSULTANTS FUNDING
& SUPPORT, INC
LABFORCE OF AMERICA, INC.
PRO UNLIMITED, INC.
TEMPORARY HELP INDUSTRY SERVICING
COMPANY, INC.
UNIFORCE MIS SERVICES OF GEORGIA, INC.
UNIFORCE STAFFING SERVICES, INC.
For each of the foregoing:
By:_____________________________
Title: Vice President - Finance
EXHIBITS
1.1(A) Borrowing Base Certificate
1.1(B) Compliance Certificate
1.1(C) Reconciliation Report
5.1(A) Financial Information
SCHEDULES
1.1(A) Other Liens
1.1(B) Pro Forma
2.1(C) Account Debtors
2.1(D) Authorized Officers
3.1(A) List of Closing Documents
4.1(B) Capitalization of Loan Parties
4.4 Other Indebtedness
4.6 Trade Names (Present and Past Five Years)
4.7 Location of Principal Place of Business, Books and Records and Collateral; FEIN
4.10 Audits
4.20 Bank Accounts
4.22 Employee Matters
A-i
