WELLS FARGO BUSINESS CREDIT CREDIT AND SECURITY AGREEMENT
XXXXX
FARGO BUSINESS CREDIT
THIS CREDIT AND SECURITY
AGREEMENT (the “Agreement”) is dated February 12, 2009, and is entered
into among Command Security
Corporation, a New York corporation (“CSC”), Command Security Services,
Inc., a New York corporation (“CSS”), Strategic Security Services,
Inc., a California corporation (“SSS”), Xxxxxxx Police Patrol, Inc., a
California corporation (“RPP”; RPP, CSC, CSS and SSS, individually and
collectively, jointly and severally, are referred to herein as “Borrower”), and
Xxxxx Fargo Bank, National
Association (as more fully defined in Exhibit A, “Xxxxx Fargo”), acting
through its Xxxxx Fargo Business Credit operating
division.
RECITALS
Borrower
has asked Xxxxx Fargo to provide it with a $20,000,000 revolving line of credit
(the “Line of Credit”) for working capital purposes (including the repayment of
certain of Borrower’s existing indebtedness) and to facilitate the issuance of
letters of credit. Xxxxx Fargo is agreeable
to meeting Borrower’s request, provided that Borrower agrees to the terms and
conditions of this Agreement.
For
purposes of this Agreement, capitalized terms not otherwise defined in the
Agreement shall have the meaning given them in Exhibit A.
|
1.
|
AMOUNT
AND TERMS OF THE LINE OF CREDIT
|
|
1.1
|
Line
of Credit; Limitations on Borrowings; Termination Date; Use of
Proceeds.
|
|
(a)
|
Line of Credit and
Limitations on Borrowing. Xxxxx Fargo shall make
Advances to Borrower under the Line of Credit that, together with the L/C
Amount, shall not at any time exceed in the aggregate the lesser of (i)
$20,000,000 (the “Maximum Line Amount”), or (ii) the Borrowing Base
limitations described in Section 1.2. Within these limits,
Borrower may periodically borrow, prepay in whole or in part, and
re-borrow. Xxxxx Fargo has no obligation
to make an Advance during a Default Period or at any time Xxxxx Fargo
reasonably believes that the making of an Advance would result in an Event
of Default.
|
|
(b)
|
Maturity and
Termination Dates. Lead Borrower may request Advances
from the date that the conditions set forth in Section 3 are satisfied
until the earlier of: (i) February 12, 2012 (the “Maturity Date”), (ii)
the date Lead Borrower terminates the Line of Credit, or (iii) the date
Xxxxx Fargo terminates the Line of Credit following an Event of Default
(The earliest of these dates is the “Termination
Date”).
|
|
(c)
|
Use of Line of Credit
Proceeds. Borrower shall use the proceeds of each
Advance and each Letter of Credit to refinance certain existing
indebtedness and for ongoing working capital
purposes.
|
|
(d)
|
Revolving
Note. Borrower’s obligation to repay Advances,
regardless of how initiated under Section 1.3, shall be evidenced by a
revolving promissory note (as renewed, amended or replaced from time to
time, the “Revolving Note”).
|
|
1.2
|
Borrowing Base; Mandatory
Prepayment.
|
|
(a)
|
Borrowing
Base. The borrowing base (the “Borrowing Base”) is an
amount equal to:
|
(i)
85% or
such lesser percentage of Eligible Billed Accounts as Xxxxx Fargo in its
reasonable commercial judgment may deem appropriate, including, without
limitation, in the event Dilution on the date of determination is in excess of
four percent (4.0%), plus
(ii) 75% or
such lesser percentage of Eligible Unbilled Accounts as Xxxxx Fargo in its
reasonable commercial judgment may deem appropriate, including, without
limitation, in the event Dilution on the date of determination is in excess of
four percent (4.0%), less
(iii) the
Borrowing Base Reserve, less
(iv) the
outstanding amount of any Indebtedness of Borrower that is not otherwise
described in this Section 1 and that is then due and owing to Xxxxx Fargo,
including Indebtedness that Xxxxx Fargo in its sole discretion finds on the date
of determination to be equal to Xxxxx Fargo’s net credit exposure with respect
to any swap, derivative, foreign exchange, hedge, deposit, treasury management
or similar transaction or arrangement extended to Borrower by Xxxxx Fargo, and
any Indebtedness owed by Borrower to Xxxxx Fargo Merchant Services, L.L.C., but
excluding Indebtedness incurred by Borrower under any credit card arrangements
between Borrower and Xxxxx Fargo or any Affiliates.
|
|
Notwithstanding
the foregoing, at no time shall (A) the outstanding balances of all
Eligible Foreign Accounts included in the Borrowing Base exceed
$3,500,000, or (B) the outstanding Advances supported by Eligible Foreign
Accounts exceed $2,975,000.
|
|
(b)
|
Mandatory Prepayment;
Overadvances. If unreimbursed Advances evidenced by the
Revolving Note plus the L/C Amount exceed the Borrowing Base or the
Maximum Line Amount at any time, then Borrower shall immediately prepay
the Revolving Note in an amount sufficient to eliminate the excess, and if
payment in full of the Revolving Note is insufficient to eliminate this
excess and the L/C Amount continues to exceed the Borrowing Base, then
Borrower shall deliver cash to Xxxxx Fargo in an amount equal to the
remaining excess for deposit to the Special Account, unless in each case,
Xxxxx Fargo has delivered to Borrower an Authenticated Record consenting
to the Overadvance prior to its
occurrence, in which event the Overadvance shall be temporarily permitted
on such terms and conditions as Xxxxx Fargo in its sole discretion may
deem appropriate, including the payment of additional fees or interest, or
both.
|
|
1.3
|
Procedures
for Line of Credit Advances.
|
|
(a)
|
Advances to Operating
Account. Advances shall be credited to Lead Borrower’s
demand deposit account maintained with Xxxxx Fargo (the “Operating
Account”), unless the parties agree in a Record Authenticated by both of
them to disburse to another
account.
|
(i) Advances upon Borrower’s
Request. Advances may be funded upon Lead Borrower’s
request. No request will be deemed received until Xxxxx Fargo
acknowledges receipt, and Lead Borrower, if requested by Xxxxx Fargo, confirms
the request in an Authenticated Record. Borrower shall repay all
Advances to Borrower, even if the Person requesting the Advance on behalf of
Borrower lacked authorization.
-2-
(A) Base Rate
Advances. If Borrower wants a Base Rate Advance, Lead Borrower
shall make the request no later than 11:59 a.m. Eastern Time on the Business Day
on which it wants the Base Rate Advance to be funded, which request shall
specify the principal Advance amount being requested.
(B) LIBOR
Advances. If Borrower wants a LIBOR Advance, Lead Borrower
shall make the request no later than 11:59 a.m. Eastern Time on the Business Day
on which Borrower wants the LIBOR Advance to be funded, which request shall
specify both the principal Advance amount and Interest Period being
requested. No more than 3 separate LIBOR Advance Interest Periods may
be outstanding at any time. Each LIBOR Advance shall be in multiples
of $500,000 and in the minimum amount of at least $500,000. LIBOR
Advances are not available for Advances made through the Loan Manager Service,
and shall not be available during Default Periods.
|
(b)
|
Advances to Pay Costs
and Expenses or Indebtedness Due. Xxxxx Fargo may
initiate a Base Rate Advance on the Line of Credit and apply the proceeds
of such Base Rate Advance (i) to reimburse Xxxxx Fargo for any costs or
expenses incurred by Xxxxx Fargo pursuant to Section 5.27 or Section 7.7
or (ii) to repay any Indebtedness then due and payable to Xxxxx Fargo
under the Loan Documents or (iii) to reimburse Xxxxx Fargo for any
indemnity amounts paid by Xxxxx Fargo under the CIT Payoff
Letter.
|
|
1.3A
|
LIBOR
Advances.
|
|
(a)
|
Funding Advances as
LIBOR Advances for Fixed Interest
Periods. Borrower may obtain an Advance as a
LIBOR Advance for three or six periods (each period an “Interest Period”,
as more fully defined in Exhibit
A).
|
|
(b)
|
Procedure for
Converting Base Rate Advances to LIBOR Advances. Lead
Borrower may request that all or any part of an outstanding Base Rate
Advance be converted to a LIBOR Advance, provided that no Default Period
is in effect, and that Xxxxx Fargo receives the request no later than
11:59 a.m. Eastern Time on the Business Day on which Borrower wishes the
conversion to become effective. Each request shall (i) specify
the principal amount of the Base Rate Advance to be converted, (ii) the
Business Day of conversion, and (iii) the Interest Period desired. The
request shall be confirmed in an Authenticated Record if requested by
Xxxxx Fargo. Each conversion to a LIBOR Advance shall be
in multiples of $500,000 and in the minimum amount of at least
$500,000.
|
|
(c)
|
Expiring LIBOR Advance
Interest Periods. Unless Lead Borrower requests a new
LIBOR Advance, or prepays an outstanding LIBOR Advance at the expiration
of an Interest Period, Xxxxx Fargo shall convert each LIBOR Advance to a
Base Rate Advance on the last day of the expiring Interest
Period. If no Default Period is in effect, Lead Borrower may
request that all or part of any expiring LIBOR Advance be renewed as a new
LIBOR Advance, provided that Xxxxx Fargo receives the request no later
than 11:59 a.m. Eastern Time on the Business Day immediately preceding the
Business Day that constitutes the first day of the new Interest
Period. Each request shall specify the principal amount of the
expiring LIBOR Advance to be continued and Interest Period desired, and
shall be confirmed in an Authenticated Record if requested by Xxxxx
Fargo. Each renewal of a LIBOR Advance shall be in multiples of
$500,000 and in the minimum amount of at least
$500,000.
|
-3-
|
(d)
|
Quotation of LIBOR
Advance Interest Rates. Xxxxx Fargo shall, with respect
to any request for a new or renewal LIBOR Advance, or the conversion of a
Base Rate Advance to a LIBOR Advance, provide Lead Borrower with a LIBOR
quote for each Interest Period identified by Lead Borrower on the Business
Day on which the request was made, if the request is received by Xxxxx
Fargo no later than 11:59 a.m. Eastern Time of the Business Day on which
Lead Borrower has requested that the LIBOR Advance be made effective. If
Lead Borrower does not immediately accept a LIBOR quote, the quoted rate
shall expire and any subsequent request for a LIBOR quote shall be subject
to redetermination by Xxxxx Fargo.
|
|
(e)
|
Taxes and Regulatory
Costs. Borrower shall also pay Xxxxx Fargo with respect
to any LIBOR Advance all (i) withholdings, interest equalization taxes,
stamp taxes or other taxes (except income and franchise taxes) imposed by
any domestic or foreign governmental authority that are related to LIBOR,
and (ii) future, supplemental, emergency or other changes in the LIBOR
Reserve Percentage, the assessment rates imposed by the Federal Deposit
Insurance Corporation, or similar costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Xxxxx Fargo with
any request or directive (whether or not having the force of law) from any
central bank or other governmental authority that are related to LIBOR but
not otherwise included in the calculation of LIBOR. In
determining which of these amounts are attributable to an existing LIBOR
Advance, any reasonable allocation made by Xxxxx Fargo among its
operations shall be deemed conclusive and
binding.
|
|
1.4
|
Collection
of Accounts and Application to Revolving
Note.
|
|
(a)
|
The Collection
Account. Borrower has granted a security interest to
Xxxxx Fargo in the Collateral, including all of Borrower’s Accounts.
Except as otherwise agreed by Borrower and Xxxxx Fargo in an Authenticated
Record, all Proceeds of Accounts and other Collateral, upon receipt or
collection (including, for a period of ninety (90) days after the closing,
funds received in the CIT Collection Account) shall be deposited each
Business Day into the Collection Account. Funds so deposited (“Account
Funds”) are the property of Xxxxx Fargo, and may only be withdrawn from
the Collection Account by Xxxxx
Fargo.
|
|
(b)
|
Payment of Accounts by
Borrower’s Account Debtors. Borrower shall instruct all
account debtors to make payments either directly to the Lockbox for
deposit by Xxxxx Fargo directly to the Collection Account, or instruct
them to deliver such payments to Xxxxx Fargo by wire transfer, ACH, or
other means as Xxxxx Fargo may direct for deposit to the Collection
Account or for direct application to the Line of Credit. If Borrower
receives a payment or the Proceeds of Collateral directly, Borrower will
promptly deposit the payment or Proceeds into the Collection Account.
Until deposited, it will hold all such payments and Proceeds in trust for
Xxxxx Fargo without commingling with other funds or
property. All deposits held in the Collection Account shall
constitute Proceeds of Collateral and shall not constitute the payment of
Indebtedness.
|
|
(c)
|
Application of
Payments to Revolving Note. Xxxxx Fargo will withdraw
Account Funds deposited to the Collection Account and pay down borrowings
on the Line of Credit by applying them to the Revolving Note on the first
Business Day following the Business Day of deposit to the Collection
Account, or, if payments are received by Xxxxx Fargo that are not first
deposited to the Collection Account pursuant to any treasury management
service provided to Borrower by Xxxxx Fargo, such payments shall be
applied to the Revolving Note as provided in the Master Agreement for
Treasury Management Services and the relevant service
description. Provided that no Default Period exists, Xxxxx
Fargo shall apply such payments to the Base Rate Advances with any excess
being applied as directed by Lead Borrower. During a Default
Period, such payments shall be applied as determined by Xxxxx Fargo in its
sole discretion.
|
-4-
|
1.5
|
Interest
and Interest Related Matters.
|
|
(a)
|
Interest Rates
Applicable to Line of Credit. Except as otherwise
provided in this Agreement, the unpaid principal amount of each Advance
evidenced by the Revolving Note shall accrue interest at an annual
interest rate calculated as
follows:
|
Base
Rate
Advances
= the Base Rate plus the Prime Rate Applicable Margin, which interest rate
shall change whenever the Base Rate changes
LIBOR
Advance Rate for Three or Six Month Interest Periods
Advances
= LIBOR plus the LIBOR Advance Rate Applicable Margin (the “LIBOR Advance
Rate”)
Multiple
Advances under the Line of Credit may simultaneously accrue interest at both the
Base Rate and at the LIBOR Advance Rate, subject to the limitations of Section
1.3(a)(i).
The Prime
Rate Applicable Margin and the LIBOR Advance Rate Applicable Margin each shall
be reduced by one-quarter of one percent (0.25%) effective on April 1, 2009 (the
“Interest Rate Reduction Effective Date”). If (i) Borrower’s audited
consolidated annual financial statements for Borrower’s 2009 fiscal year in
accordance with Section 5.1(a) hereof indicate that Borrower failed to achieve
consolidated Net Income in Borrower’s 2009 fiscal year of at least 75% of the
Net Income for Borrower’s 2009 fiscal year projected in the financial
projections delivered to Xxxxx Fargo pursuant to Section G(3) of Exhibit C
hereto prior to the funding of the initial Advance, (ii) Borrower fails to
timely deliver Borrower’s audited consolidated annual financial statements for
Borrower’s 2009 fiscal year in accordance with Section 5.1(a) hereof or (iii)
Xxxxx Fargo determines that Borrower’s audited consolidated annual financial
statements for Borrower’s 2009 fiscal year have materially misstated Borrower’s
financial condition, then Xxxxx Fargo may retroactively increase the Prime Rate
Applicable Margin and the LIBOR Advance Rate Applicable Margin by one-quarter of
one percent (0.25%) effective from the Interest Rate Reduction Effective Date
and charge Borrower such additional interest.
|
(b)
|
[Reserved].
|
|
(c)
|
Default Interest
Rate. Commencing on the day an Event of Default occurs,
through and including the date confirmed by Xxxxx Fargo in a Record as the
date that the Event of Default has been cured or waived (each such period
a “Default Period”), or at any time following the Termination Date, in
Xxxxx Fargo’s sole discretion and without waiving any of its other rights
or remedies, the principal amount of the Revolving Note shall bear
interest at a rate that is three percent (3.00%) above the
contractual rate set forth in Section 1.5(a) (the “Default Rate”), or any
lesser rate that Xxxxx Fargo may deem appropriate, starting on the first
day of the month in which the Default Period begins through the last day
of that Default Period, or any shorter time period to which Xxxxx Fargo
may agree in an Authenticated
Record.
|
|
(d)
|
Interest Accrual on
Payments Applied to Revolving Note. Payments received by
Xxxxx Fargo shall be applied to the Revolving Note as provided in Section
1.4(c), but the principal amount paid down shall continue to accrue
interest through the end of the first Business Day following the Business
Day that the payment was applied to the Revolving
Note.
|
-5-
|
(e)
|
Usury. No
interest rate shall be effective which would result in a rate greater than
the highest rate permitted by law and Borrower is and shall be liable only
for the payment of such highest rate as allowed by law.Payments in the
nature of interest and other charges made under any Loan Documents or any
other document or agreement described in or related to this Agreement that
are later determined to be in excess of the limits imposed by applicable
usury law will be deemed to be a payment of principal, and the
Indebtedness shall be reduced by that amount so that such payments will
not be deemed usurious.
|
|
1.6
|
Fees.
|
|
(a)
|
Closing
Fee. Borrower shall pay Xxxxx Fargo a one-time closing
fee of $100,000, which shall be fully earned and payable upon the
execution of this Agreement.
|
|
(b)
|
Unused Line
Fee. Borrower shall pay
Xxxxx Fargo an annual unused line fee of fifteen one-hundredths of one
percent (0.15%) of the daily
average of the Maximum Line Amount reduced by outstanding Advances and the
L/C Amount (the “Unused Amount”), from the date of this Agreement to and
including the Termination Date, which unused line fee shall be payable
quarterly in arrears on the first day of each fiscal quarter and on the
Termination Date.
|
|
(c)
|
Collateral Exam
Fees. Borrower shall pay Xxxxx Fargo fees in connection
with any collateral exams, audits or inspections (“Field Exams”) conducted
by or on behalf of Xxxxx Fargo (including Field Exams conducted prior to
the initial Advance hereunder), at the current rates established from time
to time by Xxxxx Fargo for its customers generally as its collateral exam
fees (which fees are currently $1,000.00 per each 8 hour day per
collateral examiner (whether the Field Exam shall have been conducted by a
Xxxxx Fargo employee or a third party contractor), together with all
actual out-of-pocket costs and expenses (which may include the expenses,
but no fees of any third party contractor other than the foregoing
$1,000.00 daily fee) incurred in conducting any Field Exam; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, Borrower shall not be obligated to reimburse Xxxxx Fargo for
more than four (4) Field Exams during any calendar year; and provided
further that in the event that during the period commencing on the date of
this Agreement and ending on the first anniversary thereof (i) no Event of
Default has occurred and (ii) each of the collateral exams received by
Xxxxx Fargo during such period has been in all material respects in form
and substance reasonably satisfactory to Xxxxx Fargo, then from and after
the first anniversary date of this Agreement, provided no Event
of Default shall have occurred and be continuing, Borrower shall not be
obligated to reimburse Xxxxx Fargo for more than three (3) Field Exams
during any calendar year.
|
(d) [Reserved].
|
(e)
|
Collateral Monitoring
Service Fees. Borrower shall pay Xxxxx Fargo fees in
connection with any service conducted by or on behalf of Xxxxx Fargo for
purposes of identifying ineligible Collateral, calculating the Borrowing
Base, and performing related collateral monitoring services at the rates
established from time to time by Xxxxx Fargo for its customers generally
(which fees currently include a one-time initial set-up fee of $800 for each
receivable aging that is being monitored (which fee shall also be payable
in the event Borrower changes the format of its aging reporting), and a
monthly fee of $125 for each such
aging), which fees shall be due and payable monthly in arrears on the
first day of the month and on the Termination
Date.
|
-6-
|
(f)
|
Line of Credit
Termination and/or Reduction Fees. If (i) Xxxxx Fargo
terminates the Line of Credit during a Default Period, or if (ii) Lead
Borrower terminates the Line of Credit on a date prior to the Maturity
Date, or if (iii) Borrower and Xxxxx Fargo agree to reduce the Maximum
Line Amount, then Borrower shall pay Xxxxx Fargo as liquidated damages a
termination or reduction fee in an amount equal to a percentage of the
Maximum Line Amount (or the reduction of the Maximum Line Amount, as the
case may be) calculated as follows: (A) three percent (3.00%) if the
termination or reduction occurs on or before the first anniversary of the
date of this Agreement; (B) one percent (1.00%) if the termination or
reduction occurs after the first anniversary of the date of this
Agreement, but on or before the second anniversary of the date of this
Agreement; and (C) one-half of one percent (0.50%) if the
termination or reduction occurs after the second anniversary of the date
of this Agreement. Notwithstanding the foregoing, if Borrower
refinances the Line of Credit with financing provided by Xxxxx Fargo or
its Affiliates after the date which 18 months from the date of this
Agreement, Borrower’s obligation to pay the fee required hereby shall be
waived.
|
|
(g)
|
Overadvance
Fees. Borrower shall pay a $500 Overadvance fee for each
day that an Overadvance exists which was not agreed to by Xxxxx Fargo in
an Authenticated Record prior to its occurrence; provided that Xxxxx
Fargo’s acceptance of the payment of such fees shall not constitute either
consent to the Overadvance or waiver of the resulting Event of Default;
and provided further that Borrower shall not be obligated to pay such
Overadvance fee if the Indebtedness is accruing interest at the Default
Rate due to the occurrence of an Event of Default arising under Section
6.1(c) and no other Event of Default then exists and is
continuing. Borrower shall pay additional Overadvance fees and
interest in such amounts and on such terms as Xxxxx Fargo in its sole
discretion may consider appropriate for any Overadvance to which Xxxxx
Fargo has specifically consented in an Authenticated Record prior to its
occurrence.
|
|
(h)
|
Treasury Management
Fees. Borrower will pay service fees to Xxxxx Fargo for
treasury management services provided pursuant to the Master Agreement for
Treasury Management Services or any other agreement entered into by the
parties, in the amount prescribed in Xxxxx Fargo’s current service fee
schedule.
|
|
(i)
|
Letter of Credit
Fees. Borrower shall pay a fee with respect to each
Letter of Credit issued by Xxxxx Fargo of one and three-quarters percent
(1.75%) of the Aggregate Face Amount of such Letter of Credit accruing
daily from and including the date the Letter of Credit is issued until the
date that it either expires or is returned, which shall be payable monthly
in arrears on the first day of each month and on the date that the Letter
of Credit either expires or is returned; and following an Event of
Default, this fee shall increase to four and three-quarters percent
(4.75%) of the Aggregate Face Amount, commencing on the first day of the
fiscal month in which the Default Period begins and continuing through the
last day of such Default Period, or any shorter time period that Xxxxx
Fargo in its sole discretion may deem appropriate, without waiving any of
its other rights and remedies.
|
|
(j)
|
Letter of Credit
Administrative Fees. Borrower shall pay all
administrative fees charged by Xxxxx Fargo in connection with the honoring
of drafts under any Letter of Credit, and any amendments to or transfers
of any Letter of Credit, and any other activity with respect to the
Letters of Credit at the then current rates published by Xxxxx Fargo for
such services rendered on behalf of its customers
generally.
|
-7-
|
(k)
|
ACH Fees.
Borrower agrees to pay to the Lender all fees charged to Xxxxx Fargo by
ACH in connection with the transfer of funds in the Collateral Account
and/or the Lockbox at the rates charged to its customers generally.
Such fees are currently in the amount of Twenty ($20.00) Dollars for each
ACH initiated by or for the account of Borrower to a third
party. There shall be no such ACH fee on internal transfers
within Xxxxx Fargo.
|
|
(l)
|
Wire Transfer
Fees.
Twenty ($20.00) Dollars for each wire transfer initiated by or for
the account of Borrower to a third party. Prior to the date on
which the Collection Account and Borrower’s operating account have been
established at Xxxxx Fargo, Twenty ($20.00) Dollars for each wire transfer
initiated by or for the account of Borrower within Xxxxx
Fargo. After the date on which the Collection Account and
Borrower’s operating account have been established at Xxxxx Fargo, there
shall be no such wire transfer fees on internal transfers within Xxxxx
Fargo.
|
|
(m)
|
ADP.
Borrower agrees to
pay to the Lender all fees charged to Xxxxx Fargo by ADP in connection
with the transfer of funds in the Collateral Account and/or the
Lockbox. Such fees are currently in the amount of Two Hundred
($200.00) Dollars per month.
|
|
(n)
|
Other Fees and
Charges. Xxxxx Fargo may impose additional fees and
charges during a Default Period for waiving an Event of
Default. All such fees and charges shall be imposed at Xxxxx
Fargo’s sole discretion following oral notice to Lead Borrower on either
an hourly, periodic, or flat fee basis, and in lieu of or in addition to
imposing interest at the Default Rate, and Borrower’s request for an
Advance following such notice shall constitute Borrower’s agreement to pay
such fees and charges.
|
|
(o)
|
LIBOR Advance Breakage
Fees. Borrower may prepay any LIBOR Advance at any time
in any amount, whether voluntarily or by acceleration; provided, however, that
if the LIBOR Advance is prepaid, Borrower shall pay Xxxxx Fargo upon
demand a LIBOR Advance breakage fee equal to the sum of the discounted
monthly differences for each month from the month of prepayment through
the month in which such Interest Period matures, calculated as follows for
each such month:
|
|
(i)
|
Determine the
amount of interest which would have accrued each month on the amount
prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the applicable Interest
Period.
|
|
(ii)
|
Subtract from
the amount determined in (i) above the amount of interest which would have
accrued for the same month on the amount prepaid for the remaining term of
such Interest Period at LIBOR in effect on the date of prepayment for new
loans made for such term in a principal amount equal to the amount
prepaid.
|
|
(iii)
|
If
the result obtained in (ii) for any month is greater than zero, discount
that difference by LIBOR used in (ii)
above.
|
Borrower
acknowledges that prepayment of the Revolving Note may result in Xxxxx Fargo
incurring additional costs, expenses or liabilities, and that it is difficult to
ascertain the full extent of such costs, expenses or
liabilities. Borrower agrees to pay the above-described LIBOR Advance
breakage fee and agrees that this amount represents a reasonable estimate of the
LIBOR Advance breakage costs, expenses and/or liabilities of Xxxxx
Fargo.
-8-
|
1.7
|
Interest
Accrual; Principal and Interest Payments;
Computation.
|
|
(a)
|
Interest Payments and
Interest Accrual. Accrued and unpaid interest under the
Revolving Note on Base Rate Advances shall be due and payable on the first
day of each month (each an "Interest Payment Date") and on the Termination
Date, and shall be paid in the manner provided in Section
1.4(c). Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the
date of Advance to the Interest Payment Date. Interest accruing
on any LIBOR Advance shall be due and payable on the last day of the
applicable Interest Period and on the Termination Date; provided, however,
for Interest Periods in excess of one month, interest shall nevertheless
be due and payable monthly on the last day of each month, and on the last
day of the Interest Period.
|
|
(b)
|
Payment of Revolving
Note Principal. The principal amount of the Revolving
Note shall be paid from time to time as provided in this Agreement, and
shall be fully due and payable on the Termination
Date.
|
|
(c)
|
Payments Due on
Non-Business Days. If an Interest Payment Date or the
Termination Date falls on a day which is not a Business Day, payment shall
be made on the next Business Day, and interest shall continue to accrue
during that time period.
|
|
(d)
|
Computation of
Interest and Fees. Interest accruing on the unpaid
principal amount of the Revolving Note and fees payable under this
Agreement shall be computed on the basis of the actual number of days
elapsed in a year of 360 days.
|
|
(e)
|
Liability
Records. Xxxxx Fargo shall maintain accounting and
bookkeeping records of all Advances and payments under the Line of Credit
and all other Indebtedness due to Xxxxx Fargo in such form and content as
Xxxxx Fargo in its sole discretion deems appropriate. Xxxxx
Fargo’s calculation of current Indebtedness shall be presumed correct
unless proven otherwise by Borrower. Upon Xxxxx Fargo’s
request, Lead Borrower will admit and certify in a Record the exact
principal balance of the Indebtedness that Borrower then believes to be
outstanding. Any billing statement or accounting provided by
Xxxxx Fargo shall be conclusive and binding unless Lead Borrower notifies
Xxxxx Fargo in a detailed Record of Borrower’s intention to dispute the
billing statement or accounting within 45 days of
receipt.
|
|
1.8
|
Termination,
Reduction or Non-Renewal of Line of Credit by Borrower;
Notice.
|
|
(a)
|
Termination by
Borrower. Borrower may terminate or reduce the Line of
Credit at any time prior to the Maturity Date, if Lead Borrower
(i) delivers an Authenticated Record notifying Xxxxx Fargo of its
intentions at least 30 days prior to the proposed effective date of such
termination or reduction, (ii) pays to Xxxxx Fargo the termination or
reduction fee set forth in Section 1.6(f), and (iii) pays the Indebtedness
in full or down to the reduced Maximum Line Amount. Any
reduction in the Maximum Line Amount shall be in multiples of
$1,000,000.
|
|
(b)
|
Termination by
Borrower without Advance Notice. If Lead Borrower fails
to deliver Xxxxx Fargo timely notice of its intention to terminate the
Line of Credit or reduce the Maximum Line Amount as provided in Section
1.8(a), Borrower may nevertheless terminate the Line of Credit or reduce
the Maximum Line Amount and pay the Indebtedness in full or down to the
reduced Maximum Line Amount if it (i) pays the termination or reduction
fee set forth in Section 1.6(f), and (ii) pays interest calculated at the
Default Rate on the Revolving Note commencing on the 30th
day prior to the proposed Termination Date or reduction date and
continuing through the date that Xxxxx Fargo receives delivery of an
Authenticated Record giving it actual notice of Borrower’s intention to
terminate or reduce the Line of
Credit.
|
-9-
|
1.9
|
Letters of
Credit
|
|
(a)
|
Issuance of Letters of
Credit; Amount. Xxxxx Fargo, subject to the terms and
conditions of this Agreement, shall issue, on or after the date that Xxxxx
Fargo is obligated to make its first Advance under this Agreement and
prior to the Termination Date, one or more irrevocable standby or
documentary letters of credit (each, a “Letter of Credit”, and
collectively, “Letters of Credit”) for Borrower’s
account. Xxxxx Fargo will not issue any Letter of Credit if the
face amount of the Letter of Credit would exceed the lesser of: (i)
$3,000,000 less the L/C Amount, or (ii) the Borrowing Base, less an amount
equal to aggregate unreimbursed Advances plus the L/C
Amount.
|
|
(b)
|
Additional Letter of
Credit Documentation. Prior to requesting issuance of a
Letter of Credit, Borrower shall first execute and deliver to Xxxxx Fargo
a Standby Letter of Credit Agreement or a Commercial Letter of Credit
Agreement, as applicable, an L/C Application, and any other documents that
Xxxxx Fargo may reasonably request, which shall govern the issuance of the
Letter of Credit and Borrower’s obligation to reimburse Xxxxx Fargo for
any related Letter of Credit draws (the “Obligation of
Reimbursement”).
|
|
(c)
|
Expiration. No
Letter of Credit shall be issued that has an expiry date that is later
than one (1) year from the date of issuance, or the Maturity Date in
effect on the date of issuance, whichever is
earlier.
|
|
(d)
|
Obligation of
Reimbursement During Default Periods. If Borrower is
unable, due to the existence of a Default Period or for any other reason,
to obtain an Advance to pay any Obligation of Reimbursement, Borrower
shall pay Xxxxx Fargo on demand and in immediately available funds, the
amount of the Obligation of Reimbursement together with interest, accrued
from the date presentment of the underlying draft until reimbursement in
full at the Default Rate. Xxxxx Fargo is authorized,
alternatively and in its sole discretion, to make an Advance in an amount
sufficient to discharge the Obligation of Reimbursement and pay all
accrued but unpaid interest and fees with respect to the Obligation of
Reimbursement.
|
|
1.10
|
Special
Account. If the Line of Credit is terminated for any
reason while a Letter of Credit is outstanding, or if after prepayment of
the Revolving Note the L/C Amount exceeds the Borrowing Base, then
Borrower shall promptly pay Xxxxx Fargo in immediately available funds for
deposit to the Special Account, an amount equal, as the case may be, to
either (a) the L/C Amount plus any anticipated fees and costs payable
pursuant to Sections 1.6(i) and 1.6(j) hereof or the other Loan Documents,
or (b) the amount by which the L/C Amount exceeds the Borrowing
Base. If Borrower fails to pay these amounts promptly, then,
notwithstanding that an Event of Default may then exist or may arise
therefrom, Xxxxx Fargo may in its sole discretion make an Advance to pay
these amounts and deposit the proceeds to the Special
Account. The Special Account shall be an interest bearing
account maintained with Xxxxx Fargo or any other financial institution
acceptable to Xxxxx Fargo. For as long as the L/C Amount
continues to exceed the Borrowing Base after prepayment of the Revolving
Note and/or after the termination of the Line of Credit, Xxxxx Fargo may
in its sole discretion apply amounts on deposit in the Special Account to
the Indebtedness. Borrower may not withdraw amounts deposited
to the Special Account until the Line of Credit has been terminated and
all outstanding Letters of Credit have either been returned to Xxxxx Fargo
or have expired and the Indebtedness has been fully paid, provided Xxxxx
Fargo shall promptly remit amounts on deposit in the Special Account at
the direction of Borrower following the date on which the L/C Amount no
longer exceeds the Borrowing Base, provided no Event of Default has
occurred and is continuing and provided that the Line of Credit has not
been terminated.
|
-10-
|
1.11
|
Designation of Lead Borrower as
Borrower’s Agent.
|
|
|
(a) Each
Borrower hereby irrevocably designates and appoints Command Security
Corporation as that Borrower’s agent (Command Security Corporation, in
such capacity, is referred to herein as the “Lead Borrower”) to obtain
Advances and Letters of Credit hereunder, the proceeds of which shall be
available for those uses as those set forth herein. As the disclosed
principal for its agent, each Borrower shall be obligated to Xxxxx Fargo
on account of Advances so made and Letters of Credit so issued hereunder
as if made directly by Xxxxx Fargo to that Borrower, notwithstanding the
manner by which such Advance and Letters of Credit are recorded on the
books and records of the Lead Borrower and of any
Borrower.
|
|
|
(b) The
Lead Borrower shall act as a conduit for each Borrower (including itself,
as “Borrower”) on whose behalf the Lead Borrower has requested an Advance.
The Lead Borrower shall cause the transfer of the proceeds of each Advance
to the Person(s) constituting Borrower on whose behalf such Advance was
obtained. Xxxxx Fargo shall have no obligation to see to the
application of such proceeds.
|
|
|
(c) If,
for any reason, and at any time during the term of this Agreement,
Borrower, including the Lead Borrower, as agent, shall be unable to, or
prohibited from carrying out the terms and conditions of this Agreement
(as determined by Xxxxx Fargo in Xxxxx Fargo’s sole and absolute
discretion), then Xxxxx Fargo may make Advances directly to, and cause the
issuance of Letters of Credit directly for the account of such of the
Persons constituting Borrower as Xxxxx Fargo determines to be expedient,
which Advances may be made without regard to the procedures otherwise
included herein.
|
|
|
(d) Each
Borrower shall remain liable to Xxxxx Fargo for the payment and
performance of all Obligations (which payment and performance shall
continue to be secured by all Collateral granted by each Borrower)
notwithstanding any determination by Xxxxx Fargo to cease
making Advances or causing Letters of Credit to be issued to or
for the benefit of any Borrower.
|
|
|
(e) The
authority of the Lead Borrower to request Advances on behalf of, and to
bind, Borrower, shall continue unless and until Xxxxx Fargo acts as
provided in subparagraph (c), above, or Xxxxx Fargo actually receives
written notice of: (i) the termination of such authority, and (ii) the
subsequent appointment of a successor Lead Borrower, which notice is
signed by the respective Presidents of each Borrower (other than the
President of the Lead Borrower being replaced) then eligible for borrowing
under this Agreement; and written notice from such successive Lead
Borrower (i) accepting such appointment; (ii) acknowledging that such
removal and appointment has been effected by the respective Presidents of
Borrower eligible for borrowing under this Agreement; and (iii)
acknowledging that from and after the date of such appointment, the newly
appointed Lead Borrower shall be bound by the terms hereof, and that as
used herein, the term “Lead Borrower” shall mean and include the newly
appointed Lead Borrower.
|
-11-
|
2.
|
SECURITY
INTEREST AND OCCUPANCY OF BORROWER’S
PREMISES
|
|
2.1
|
Grant of Security
Interest. Borrower hereby pledges, assigns and grants to Xxxxx
Fargo, for the benefit of Xxxxx Fargo and as agent for Xxxxx Fargo
Merchant Services, L.L.C., a Lien and security interest (collectively
referred to as the “Security Interest”) in the Collateral, as security for
the payment and performance of all Indebtedness. Following request by
Xxxxx Fargo, Borrower shall xxxxx Xxxxx Fargo, for the benefit of Xxxxx
Fargo and as agent for Xxxxx Fargo Merchant Services, L.L.C., a Lien and
security interest in all commercial tort claims that it may have against
any Person.
|
|
2.2
|
Notifying Account Debtors and
Other Obligors; Collection of Collateral. Xxxxx Fargo
may at any time (whether or not a Default Period then exists) deliver a
Record giving an account debtor or other Person obligated to pay an
Account, a General Intangible, or other amount due, notice that the
Account, General Intangible, or other amount due has been assigned to
Xxxxx Fargo for security and must be paid directly to Xxxxx
Fargo. Borrower shall join in giving such notice and shall
Authenticate any Record giving such notice upon Xxxxx Fargo’s
request. After Borrower or Xxxxx Fargo gives such notice, and
upon the occurrence and during the continuance of an Event of Default, (i)
Xxxxx Fargo may, but need not, in Xxxxx Fargo’s or in Borrower’s name,
demand, xxx for, collect or receive any money or property at any time
payable or receivable on account of, or securing, such Account, General
Intangible, or other amount due, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend
or change the obligations (including collateral obligations) of any
account debtor or other obligor and (ii) Xxxxx Fargo may, in Xxxxx Fargo’s
name or in Borrower’s name, as Borrower’s agent and attorney-in-fact,
notify the United States Postal Service to change the address for delivery
of Borrower’s mail to any address designated by Xxxxx Fargo, otherwise
intercept Borrower’s mail, and receive, open and dispose of Borrower’s
mail, applying all Collateral as permitted under this Agreement and
holding all other mail for Borrower’s account or forwarding such mail to
Borrower’s last known address.
|
|
2.3
|
Assignment of
Insurance. As additional security for the Indebtedness,
Borrower hereby assigns to Xxxxx Fargo and to Xxxxx Fargo Merchant
Services, L.L.C., all rights of Borrower under every policy of insurance
covering the Collateral and all business records and other documents
relating to it, and all monies (including proceeds and refunds) that may
be payable under any policy, and Borrower hereby directs the issuer of
each policy to pay all such monies directly to Xxxxx
Fargo. During any Default Period, Xxxxx Fargo may (but need
not), in Xxxxx Fargo’s or Borrower’s name, execute and deliver proofs of
claim, receive payment of proceeds and endorse checks and other
instruments representing payment of the policy of insurance, and adjust,
litigate, compromise or release claims against the issuer of any
policy. Any monies received under any insurance policy assigned
to Xxxxx Fargo, other than liability or workers’ compensation insurance
policies, or received as payment of any award or compensation for
condemnation or taking by eminent domain, shall be paid to Xxxxx Fargo
and, as determined by Xxxxx Fargo in its sole discretion, either be
applied to prepayment of the Indebtedness or disbursed to
Borrower.
|
|
2.4
|
Borrower’s
Premises
|
|
(a)
|
Xxxxx Fargo’s Right to
Occupy Borrower’s Premises. Borrower hereby grants to
Xxxxx Fargo the right, at any time during a Default Period and without
notice or consent, to take exclusive possession of all locations where
Borrower conducts its business or has any rights of possession, including
the locations described on Exhibit B (the “Premises”), until the earlier
of (i) payment in full and discharge of all Indebtedness and
termination of the Line of Credit, or (ii) final sale or disposition
of all items constituting Collateral and delivery of those items to
purchasers.
|
-12-
|
(b)
|
Xxxxx Fargo’s Use of
Borrower’s Premises. During a Default Period, Xxxxx
Fargo may use the Premises to store, process, manufacture, sell, use, and
liquidate or otherwise dispose of items that are Collateral, and for any
other incidental purposes deemed appropriate by Xxxxx Fargo in good
faith.
|
|
(c)
|
Borrower’s Obligation
to Reimburse Xxxxx Fargo. Xxxxx Fargo shall not be
obligated to pay rent or other compensation for the possession or use of
any Premises during a Default Period, but if Xxxxx Fargo elects to pay
rent or other compensation, during a Default Period, to the owner of any
Premises in order to have access to the Premises during a Default Period,
then Borrower shall promptly reimburse Xxxxx Fargo all such amounts, as
well as all taxes, fees, charges and other expenses at any time payable by
Xxxxx Fargo with respect to the Premises by reason of the execution,
delivery, recordation, performance or enforcement of any terms of this
Agreement.
|
|
2.5
|
License. Without
limiting the generality of any other Security Document, Borrower hereby
grants to Xxxxx Fargo a non-exclusive, worldwide and royalty-free license
to use or otherwise exploit all Intellectual Property Rights of Borrower
for the purpose of: (a) completing the manufacture of any in-process
materials during any Default Period so that such materials become saleable
Inventory, all in accordance with the same quality standards previously
adopted by Borrower for its own manufacturing and subject to Borrower’s
reasonable exercise of quality control; and (b) selling, leasing or
otherwise disposing of any or all Collateral during any Default
Period.
|
|
2.6
|
Financing
Statements.
|
|
(a)
|
Authorization to
File. Borrower authorizes Xxxxx Fargo to file financing
statements describing Collateral to perfect Xxxxx Fargo’s Security
Interest in the Collateral, and Xxxxx Fargo may describe the Collateral as
“all personal property” or “all assets” or describe specific items of
Collateral including commercial tort claims as Xxxxx Fargo may consider
necessary or useful to perfect the Security Interest. All
financing statements filed before the date of this Agreement to perfect
the Security Interest were authorized by Borrower and are hereby
re-authorized. Following the termination of the Line of Credit
and payment of all Indebtedness, Xxxxx Fargo shall, at Borrower’s expense
and within the time periods required under applicable law, release or
terminate any filings or other agreements that perfect the Security
Interest.
|
|
(b)
|
Termination. Xxxxx
Fargo shall, at Borrower’s expense, release or terminate any filings or
other agreements that perfect the Security Interest, provided that there
are no suits, actions, proceedings or claims pending or threatened against
any Indemnitee under this Agreement with respect to any Indemnified
Liabilities (in which event Xxxxx Fargo shall release the lien upon
receipt by Xxxxx Fargo of an indemnity reasonably satisfactory to Xxxxx
Fargo and reasonable security from Borrower in respect thereof (provided
no security shall be required with respect to threatened claims)), upon
Xxxxx Fargo’s receipt of the following, in form and content reasonably
satisfactory to Xxxxx Fargo: (i) cash payment in full of all Indebtedness
under the Loan Documents, (ii) evidence that the commitment of Xxxxx Fargo
to make Advances under the Line of Credit or under any other facility with
Borrower has been terminated, (iii) a release of all claims against Xxxxx
Fargo by Borrower relating to Xxxxx Fargo’s performance and obligations
under the Loan Documents, and (iv) an agreement by Borrower to indemnify
Xxxxx Fargo for any payments received by Xxxxx Fargo that are applied to
the Indebtedness as a final payoff that may subsequently be required as a
matter of law to be returned or otherwise not paid for any
reason.
|
-13-
|
2.7
|
Setoff. Xxxxx
Fargo may at any time, in its sole discretion and without demand or notice
to anyone, setoff any liability owed to Borrower by Xxxxx Fargo against
any Indebtedness, whether or not
due.
|
|
2.8
|
Collateral Related
Matters. This Agreement does not contemplate a sale of
Accounts or chattel paper, and, as provided by law, Borrower is entitled
to any surplus and shall remain liable for any
deficiency. Xxxxx Fargo’s duty of care with respect to
Collateral in its possession (as imposed by law) will be deemed fulfilled
if it exercises reasonable care in physically keeping such Collateral, or
in the case of Collateral in the custody or possession of a bailee or
other third Person, exercises reasonable care in the selection of the
bailee or third Person, and Xxxxx Fargo need not otherwise preserve,
protect, insure or care for such Collateral. Xxxxx Fargo shall
not be obligated to preserve rights Borrower may have against prior
parties, to liquidate the Collateral at all or in any particular manner or
order or apply the Proceeds of the Collateral in any particular order of
application. Xxxxx Fargo has no obligation to clean-up or
prepare Collateral for sale. Borrower waives any right it may
have to require Xxxxx Fargo to pursue any third Person for any of the
Indebtedness.
|
|
2.9
|
Notices Regarding Disposition
of Collateral. If notice to Borrower of any intended
disposition of Collateral or any other intended action is required by
applicable law in a particular situation, such notice will be deemed
commercially reasonable if given in the manner specified in Section 7.4 at
least ten calendar days before the date of intended disposition or other
action.
|
|
3.
|
CONDITIONS
PRECEDENT
|
|
3.1
|
Conditions Precedent to Initial
Advance and Issuance of Initial Letter of Credit. Xxxxx
Fargo’s obligation to make the initial Advance or issue the first Letter
of Credit shall be subject to the condition that Xxxxx Fargo shall have
received this Agreement and each of the Loan Documents, and any document,
agreement, or other item described in or related to this Agreement, and
all fees and information described in Exhibit C, executed and in form
satisfactory to Xxxxx Fargo.
|
|
3.2
|
Additional Conditions Precedent
to All Advances and Letters of Credit. Xxxxx Fargo’s
obligation to make any Advance (including the initial Advance) or issue
any Letter of Credit shall be subject to the further additional
conditions: (a) that the representations and warranties described in
Exhibit D are correct in all material respects on the date of the Advance
or the issuance of the Letter of Credit, except to the extent that such
representations and warranties relate solely to an earlier date; and (b)
that no event has occurred and is continuing, or would result from the
requested Advance or issuance of the Letter of Credit that would result in
or constitute an Event of Default.
|
|
4.
|
REPRESENTATIONS
AND WARRANTIES
|
To induce
Xxxxx Fargo to enter into this Agreement, Borrower makes the representations and
warranties described in Exhibit D. Any request for an Advance will be
deemed a representation by Borrower that all representations and warranties
described in Exhibit D are true, correct, and complete in all material respects
as of the time of the request, unless they relate exclusively to an earlier
date. Borrower shall be permitted to update the Pending Jurisdiction Schedule
(solely to remove jurisdictions from such Schedule), Schedule (i) of the
Employee Benefits Plan Schedule, the Labor Agreements Schedule and Schedule
(iii) and Schedule (iv) (with respect to clauses B and C thereof) of the
Environmental Matters Schedule, all as set forth on Exhibit D, the Intellectual
Property Disclosures Schedule and the Chief Executive Office/Principal Place of
Business Schedule, from time to time by promptly providing copies of such
updated Schedules to Xxxxx Fargo.
-14-
|
5.
|
COVENANTS
|
|
|
So
long as the Indebtedness remains unpaid, or the Line of Credit has not
been terminated, Borrower shall comply with each of the following
covenants, unless Xxxxx Fargo shall consent otherwise in an Authenticated
Record delivered to Lead Borrower.
|
|
5.1
|
Reporting
Requirements. Lead Borrower shall
deliver to Xxxxx Fargo the following information, compiled where
applicable using GAAP consistently applied, in form and content reasonably
acceptable to Xxxxx Fargo:
|
|
(a)
|
Annual Financial
Statements. As soon as available and in any event within
120 days after Borrower’s fiscal year end, Borrower’s audited
consolidated financial statements prepared and certified without
qualification by an independent certified public accountant acceptable to
Xxxxx Fargo, which shall include Borrower’s consolidated balance sheet,
income statement, and statement of retained earnings and cash flows
prepared, if requested by Xxxxx Fargo, on a consolidated and consolidating
basis to include Borrower’s Subsidiaries (it being understood that any
consolidating financial statements will not be certified by such
accountants). The annual financial statements shall be
accompanied by a certificate (the “Compliance Certificate”) in the form of
Exhibit E that is signed by Borrower’s chief financial
officer.
|
Each
Compliance Certificate that accompanies an annual financial statement shall also
be accompanied by copies of all management letters prepared by Borrower’s
accountants.
|
(b)
|
Monthly Financial
Statements. As soon as available and in any event within
30 days after
the end of each month, a Borrower prepared balance sheet, and income
statement prepared for that month and for the year–to-date period then
ended, prepared, if requested by Xxxxx Fargo, on a consolidated and
consolidating basis to include Borrower’s Subsidiaries in accordance with
GAAP, and stating in comparative form the figures for the corresponding
date and periods in the prior fiscal year, subject to year-end
adjustments. The financial statements shall be accompanied by a
Compliance Certificate in the form of Exhibit E that is signed by
Borrower’s chief financial officer.
|
|
(c)
|
Collateral
Reports. No later than 10 days after each
month end (or more frequently if Xxxxx Fargo shall request it), detailed
agings of Borrower’s accounts receivable and accounts payable and a
calculation of Borrower’s Accounts and Eligible Accounts as of the end of
that month. Accounts receivable agings shall be submitted by
Borrower to Xxxxx Fargo through Xxxxx Fargo’s Commercial Electronic
Office® (“CEO®”) and Borrower
shall pay Xxxxx Fargo all processing fees charged by Xxxxx Fargo in
connection with the processing of the accounts receivable agings reports
through the CEO®
portal at the current rates published by Xxxxx Fargo for such services
rendered on behalf of its customers
generally.
|
|
(d)
|
Projections. No
later than 30 days prior to each
fiscal year end, Borrower’s projected balance sheet and income statement
and statement of cash flows for each month of
the next fiscal year, certified as accurate by Borrower’s chief financial
officer and accompanied by a statement of assumptions and supporting
schedules and information.
|
-15-
|
(e)
|
Supplemental
Reports. Weekly, or more frequently if Xxxxx Fargo
requests, Xxxxx Fargo’s standard form of “daily collateral report”,
together with receivables schedules, collection reports, scheduling
activity reports, and, with respect to Eligible Accounts, daily, copies of
the new invoices having the two highest balances (of the invoices, if
any, which have balances of $20,000 or greater) and related
back-up information (provided the foregoing shall not restrict Xxxxx
Fargo’s general right to request, and Borrower’s obligation to deliver to
Xxxxx Fargo, copies of any invoice(s) with respect to Eligible Accounts),
as reasonably requested by Xxxxx
Fargo.
|
|
(f)
|
Litigation. No
later than three Business Days after discovery, a Record notifying Xxxxx
Fargo of any litigation or other proceeding before any court or
governmental agency which seeks a monetary recovery against Borrower in
excess of $150,000.
|
|
(g)
|
Intellectual
Property. (i) No later than 10 days before it acquires
material Intellectual Property Rights, a Record notifying Xxxxx Fargo of
Borrower’s intention to acquire such rights and promptly upon receipt,
copies of all registrations and filings with respect to Borrower’s
Intellectual Property Rights; (ii) except for transfers permitted under
Section 5.18, no later than 10 days before it disposes of material
Intellectual Property Rights, a Record notifying Xxxxx Fargo of Borrower’s
intention to dispose of such rights, along with copies of all proposed
documents and agreements concerning the disposal of such rights as
requested by Xxxxx Fargo; (iii) promptly upon discovery, a Record
notifying Xxxxx Fargo of (A) any Infringement of Borrower’s material
Intellectual Property Rights by any Person, (B) claims that Borrower is
Infringing another Person’s Intellectual Property Rights and (C) any
threatened cancellation, termination or material limitation of Borrower’s
material Intellectual Property
Rights.
|
|
(h)
|
Defaults. No
later than three Business Days after learning of the occurrence of any
Event of Default or an event which, with the passage of time or notice or
both, would constitute and Event of Default, a Record notifying Xxxxx
Fargo of the Event of Default and the steps being taken by Borrower to
cure the Event of Default.
|
|
(i)
|
Disputes. Promptly
upon discovery, a Record notifying Xxxxx Fargo of any disputes or claims
by Borrower’s customers exceeding $50,000 individually or $250,000 in the
aggregate during any fiscal year.
|
|
(j)
|
Changes in Officers
and Directors. Promptly following occurrence, a Record
notifying Xxxxx Fargo of any change in the persons constituting Borrower’s
Officers and Directors.
|
|
(k)
|
Commercial Tort
Claims. Other than those disclosed on Exhibit F,
promptly upon discovery, a Record notifying Xxxxx Fargo of any commercial
tort claims brought by Borrower against any Person, including the name and
address of each defendant, a summary of the facts, an estimate of
Borrower’s damages, copies of any complaint or demand letter submitted by
Borrower, and such other information as Xxxxx Fargo may reasonably
request.
|
|
(l)
|
Reports to
Owners. Promptly upon distribution, copies of all
financial statements, reports and proxy statements which Borrower shall
have sent to its Owners.
|
|
(m)
|
Violations of
Law. No later than three Business Days after discovery
of any violation, a Record notifying Xxxxx Fargo of Borrower’s violation
of any law, rule or regulation, the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on
Borrower.
|
-16-
|
(n)
|
Pension
Plans. (i) Promptly upon discovery, and in any event
within 30 days after Borrower knows or has reason to know that any
Reportable Event with respect to any Pension Plan has occurred, a Record
authenticated by Borrower’s chief financial officer notifying Xxxxx Fargo
of the Reportable Event in detail and the actions which Borrower proposes
to take to correct the deficiency, together with a copy of any related
notice sent to the Pension Benefit Guaranty Corporation; (ii) promptly
upon discovery, and in any event within 10 days after Borrower fails
to make a required quarterly Pension Plan contribution under Section
412(m) of the IRC, a Record authenticated by Borrower’s chief financial
officer notifying Xxxxx Fargo of the failure in detail and the actions
that Borrower will take to cure the failure, together with a copy of any
related notice sent to the Pension Benefit Guaranty Corporation; and (iii)
promptly upon discovery, and in any event within 10 days after Borrower
receives written notice from any Multiemployer Plan Sponsor concerning any
withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan under Sections 4201 or 4243 of ERISA, a Record
authenticated by Borrower’s chief financial officer notifying Xxxxx Fargo
of the details of the event and the actions that Borrower proposes to take
in response.
|
|
(o)
|
Other
Reports. From time to time, with reasonable promptness,
all customer lists, receivables schedules, collection reports, deposit
records, invoices to account debtors and back-up relating thereto, and
such other materials, reports, records or information as Xxxxx Fargo may
reasonably request, including copies of Borrower’s state and federal
income tax returns and all schedules and other information relating
thereto.
|
|
(p)
|
Late
Charges. In the event that Borrower fails to provide Xxxxx Fargo with any
of the information required by this Section 5.1 in accordance with the
provisions hereof, and without derogating Xxxxx Fargo’s rights upon the
occurrence of a Default or an Event of Default, Borrower shall pay to
Xxxxx Fargo a fee in the amount of $200.00 per day for each separate
item that Borrower has failed to provide to Xxxxx Fargo in accordance with
the provisions of this Section 5.1; provided, however, that Borrower shall
not be obligated to pay such late charges if the Indebtedness is accruing
interest at the Default Rate due to the occurrence of an Event of Default
arising under Section 6.1(b)(i) or Section 6.1(b)(ii) for failure to
deliver the applicable reports and no other Event of Default then exists
and is continuing.
|
|
5.2
|
Financial
Covenants. Borrower agrees to comply with the financial
covenants described below, which shall be calculated using GAAP
consistently applied, except as they may be otherwise modified by the
following capitalized definitions:
|
|
(a)
|
Minimum Debt Service
Coverage Ratio. Borrower shall maintain, as of each
fiscal quarter end calculated for the twelve (12) month period ending on
the last day of such fiscal quarter, a Debt Service Coverage Ratio of not
less than 1.20 to 1.00.
|
|
(b)
|
Maximum Debt to Book
Net Worth Ratio. Borrower shall maintain, as of each
fiscal quarter end, a ratio of its Debt to Book Net Worth of not greater
than 3.00 to 1.00.
|
|
(c)
|
Capital
Expenditures. Borrower shall not incur or contract to
incur Capital Expenditures of more than $750,000 in the aggregate during
any fiscal year (commencing with Borrower’s fiscal year commencing April
1, 2009), or more than $150,000 in any one
transaction.
|
-17-
|
5.3
|
Other
Liens and Permitted Liens.
|
|
(a)
|
Other Liens; Permitted
Liens. Borrower shall not
create, incur or suffer to exist any Lien upon any of its assets, now
owned or later acquired, as security for any indebtedness, with the
exception of the following (each a “Permitted Lien”; collectively,
“Permitted Liens”): (i) statutory liens of landlords (provided
that the landlords for Borrower’s Premises located at 0000 Xxxxxxxxxx
Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000 and 0000 Xxxxx 00, Xxxxx X,
Xxxxxxxxxxxxx, Xxx Xxxx 00000 shall have waived any such liens to the
satisfaction of Xxxxx Fargo) and liens of carriers, warehousemen, bailees,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are
being contested in good faith, by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure
of such liens) and with respect to which adequate reserves or other
appropriate provisions are being maintained by the Borrower in accordance
with GAAP; (ii) deposits made (and the liens thereon) in the ordinary
course of business of Borrower (including, without limitation, security
deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other
types of social security benefits or to secure the performance of tenders,
bids, contracts (other than for the repayment or guarantee of borrowed
money or purchase money obligations), statutory obligations and other
similar obligations arising as a result of progress payments under
government contracts; (iii) in the case of real property, covenants,
restrictions, rights, easements (including, without limitation, reciprocal
easement agreements and utility agreements) and minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) which, in the aggregate, do not
materially interfere with Borrower’s business or operations as presently
conducted; (iv) liens of judgment creditors provided such liens do not
exceed, in the aggregate, at any time, $250,000 (excluding judgments
bonded or insured to the reasonable satisfaction of Xxxxx Fargo); (v) tax
liens in respect of taxes which are not yet due and payable or which are
being diligently contested in good faith by the Borrower by appropriate
proceedings, and which liens are not (a) filed on any public records, (b)
senior to the liens of Xxxxx Fargo or (c) for taxes due the United States
of America or any state thereof having similar priority statutes; (vi)
Liens in existence on the date of this Agreement that are described in
Exhibit F; (vii) the Security Interest and Liens created by the Security
Documents; and (viii) purchase money Liens relating to the acquisition of
Equipment not exceeding the lesser of cost or fair market value, not
exceeding $75,000 for any one purchase or $200,000 in the aggregate during
any fiscal year, and so long as no
Default Period is then in existence and none would exist immediately after
such acquisition and provided that such Liens attach only to the assets
acquired with the proceeds of such purchase money
indebtedness.
|
|
(b)
|
Financing
Statements. Except with respect to Permitted Liens,
Borrower shall not authorize the filing of any financing statement by any
Person as Secured Party with respect to any of Borrower’s assets, other
than Xxxxx Fargo. Borrower shall not amend any financing
statement filed by Xxxxx Fargo as Secured Party except as permitted by
law.
|
|
5.4
|
Indebtedness. Borrower
shall not incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or letters of credit issued on Borrower’s
behalf, or advances or any indebtedness for borrowed money of any kind,
whether or not evidenced by an instrument, except: (a)
Indebtedness described in this Agreement; (b) indebtedness of Borrower
described in Exhibit F; (c) deferred taxes and trade payables incurred in
the ordinary course of business; and (d) intercompany loans among the
Persons constituting “Borrower” hereunder; and (e) indebtedness secured by
Permitted Liens relating to purchase money indebtedness described in
Section 5.3(a)(viii).
|
|
5.5
|
Guaranties. Borrower
shall not assume, guarantee, endorse or otherwise become directly or
contingently liable for the obligations of any Person, except: (a) the
endorsement of negotiable instruments by Borrower for deposit or
collection or similar transactions in the ordinary course of business; and
(b) guaranties, endorsements and other direct or contingent liabilities in
connection with the obligations of other Persons in existence on the date
of this Agreement and described in Exhibit
F.
|
-18-
|
5.6
|
Investments and Subsidiaries.
Except as otherwise expressly permitted by Sections 5.4, 5.5, 5.18
and 5.19, Borrower shall not make or permit to exist any loans or advances
to, or make any investment or acquire any interest whatsoever in, any
Person or Subsidiary, including any partnership or joint venture, nor
purchase or hold beneficially any stock or other securities or evidence of
indebtedness of any Person or Subsidiary, except:
|
|
(a)
|
Investments
in direct obligations of the United States of America or any of its
political subdivisions whose obligations constitute the full faith and
credit obligations of the United States of America and have a maturity of
one year or less, commercial paper issued by U.S. corporations rated “A-1”
or “A-2” by Standard & Poor’s Ratings Services or “P-1” or “P-2”
by Xxxxx’x Investors Service or certificates of deposit or bankers’
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers’ acceptances are fully insured by the
Federal Deposit Insurance
Corporation);
|
|
(b)
|
Intercompany
loans among the Persons constituting “Borrower”
hereunder.
|
|
(c)
|
Travel
advances or loans to Borrower’s Officers and employees not exceeding an
aggregate of $50,000 during any fiscal
year;
|
|
(d)
|
Prepaid
rent not exceeding three (3) months or security deposits in the ordinary
course of business; and
|
|
(e)
|
Current
investments in those Subsidiaries in existence on the date of this
Agreement which are identified on Exhibit
D.
|
|
5.7
|
Dividends and
Distributions. Borrower shall not declare or pay any
dividends (other than dividends payable solely in stock of Borrower) on
any class of its stock, or make any payment on account of the purchase,
redemption or retirement of any shares of its stock, or other securities
or evidence of its indebtedness or make any distribution regarding its
stock, either directly or indirectly, except that CSC may declare and pay
dividends in the ordinary course of its business with respect to its
Series A Convertible Preferred Stock, provided that (i) the aggregate
amount of such dividends does not exceed in any fiscal quarter $41,000 and
(ii) immediately before and after giving effect to the making of such
dividend (A) no Event of Default shall have occurred and be continuing,
and (B) Borrower shall have at least $500,000 in availability immediately
before and after giving effect to the making of each such
dividend.
|
|
5.8
|
Salaries. Borrower
shall not pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other
compensation.
|
|
5.9
|
Key
Person. Borrower shall retain at least two of the three
Key Persons in their respective positions with Borrower unless a
replacement reasonably satisfactory to Xxxxx Fargo is made for each
departing Key Person within 120 days after the departure from Borrower of
the second departing Key
Person.
|
-19-
|
5.10
|
Books
and Records; Collateral Examination; Inspection and
Appraisals.
|
|
(a)
|
Books and Records;
Inspection. Borrower shall keep complete and accurate
books and records with respect to the Collateral and Borrower’s business
and financial condition and any other matters that Xxxxx Fargo may
reasonably request, in accordance with GAAP. Borrower shall permit any
employee, attorney, accountant or other agent of Xxxxx Fargo, upon
reasonable notice, to audit, review, make extracts from and copy any of
its books and records at any time during ordinary business hours, and to
discuss Borrower’s affairs with any of its Directors, Officers, employees,
or agents.
|
|
(b)
|
Authorization to
Borrower’s Agents to Make Disclosures to Xxxxx
Fargo. Borrower authorizes all accountants and other
Persons acting as its agent to disclose and deliver, if requested by Xxxxx
Fargo, to Xxxxx Fargo’s employees, accountants, attorneys and other
Persons acting as its agent, at Borrower’s reasonable expense, all
financial information, books and records, work papers, management reports
and other information in their possession regarding
Borrower.
|
|
(c)
|
Collateral Exams and
Inspections. Borrower shall permit Xxxxx Fargo’s
employees, accountants, attorneys or other Persons acting as its agent,
upon reasonable notice, to examine and inspect any Collateral or any other
property of Borrower at any time on Premises of Borrower during ordinary
business hours subject to Section
1.6(c).
|
|
(d)
|
Collateral
Appraisals. Xxxxx Fargo may also obtain, from time to
time, an appraisal
of Borrower’s Collateral by an appraiser acceptable to Xxxxx Fargo in its
sole discretion. Notwithstanding the foregoing, so long as no Default
Period exists, Borrower shall only be obligated to reimburse Xxxxx Fargo
for the reasonable costs of one such appraisal during any one fiscal
year.
|
|
5.11
|
Account
Verification; Payment of Permitted
Liens.
|
|
(a)
|
Account
Verification. Xxxxx Fargo or its agents may (i) contact
account debtors and other obligors at any time to verify Borrower’s
Accounts; (ii) require Borrower to send requests for verification of
Accounts or send notices of assignment of Accounts to account debtors and
other obligors and (iii) upon the occurrence and continuance of an Event
of Default, xxxx or invoice any account debtor of Borrower’s unbilled
Accounts.
|
|
(b)
|
Covenant to Pay
Permitted Liens. Borrower shall pay in the ordinary
course of business each account payable due to any Person holding a
Permitted Lien (as a result of such payable) on any
Collateral.
|
|
5.12
|
Compliance
with Laws.
|
|
(a)
|
General Compliance
with Applicable Law; Use of Collateral. Borrower shall
(i) comply, and cause each Subsidiary to comply, with the
requirements of applicable laws and regulations, the non-compliance with
which would have a Material Adverse Effect on its business or its
financial condition and (ii) use and keep the Collateral, and require
that others use and keep the Collateral, only for lawful purposes, without
violation of any federal, state or local law, statute or ordinance, the
violation of which could reasonably be expected to have a Material Adverse
Effect on the Collateral; provided that the Borrower may contest any acts,
rules, regulations, orders and directions of such bodies or officials in
any reasonable manner which will not, in Xxxxx Fargo’s reasonable opinion,
materially and adversely affect Xxxxx Fargo’s rights or priority in the
Collateral.
|
-20-
|
(b)
|
Compliance with
Federal Regulatory Laws. Borrower shall (i) prohibit,
and cause each Subsidiary to prohibit, any Person that is an Officer from
being listed on the Specially Designated Nationals and Blocked Person List
or other similar lists maintained by the Office of Foreign Assets Control
("OFAC"), the Department of the Treasury or included in any Executive
Orders, (ii) not use the proceeds of the Line of Credit or any other
financial accommodation extended by Xxxxx Fargo in any way that violates
any foreign asset control regulations of OFAC or other applicable law,
(iii) provide such information to Xxxxx Fargo in regard to Borrower as
Xxxxx Fargo shall reasonably request from time to time in order for Xxxxx
Fargo to comply with all its obligations under applicable Bank Secrecy Act
laws and regulations, as amended from time to time, the USA Patriot Act
and Xxxxx Fargo’s related policies and
procedures.
|
|
(c)
|
Compliance with
Environmental Laws. Borrower shall (i) comply, and cause
each Subsidiary to comply, with the requirements of applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by them, the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on the operation
and business of Borrower and (ii) not generate, use, transport, treat,
store or dispose of any Hazardous Substances in such a manner as to create
any material liability under any Environmental
Law.
|
|
(d)
|
Borrower
shall not be deemed to have breached any provision of this Section 5.12 or
paragraph (p) of Exhibit D if (i) the failure to comply with the
requirements of this Section 5.12 resulted from good faith error or
innocent omission, (ii) the Borrower promptly commences and diligently
pursues a cure of such breach, and (iii) such failure is cured within
thirty (30) days following the Borrower’s receipt of notice of such
failure, or if such breach cannot in good faith be cured within thirty
(30) days, then such breach is cured within a reasonable time frame based
upon the extent and nature of the breach and the necessary remediation
(but not to exceed ninety (90) days) and in conformity with any applicable
consent order, consensual agreement and applicable
law.
|
|
5.13
|
Payment of Taxes and Other
Claims. Borrower shall pay or discharge, when due,
(including after any extension period) and cause each Subsidiary to pay or
discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including the
Collateral) or upon or against the creation, perfection or continuance of
the Security Interest, prior to the date on which penalties attach,
(b) all federal, state and local taxes required to be withheld by it,
and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon any properties of Borrower,
although Borrower shall not be required to pay any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested
in good faith by appropriate proceedings and for which proper reserves
have been made.
|
|
5.14
|
Maintenance
of Collateral and Properties.
|
|
(a)
|
Borrower
shall keep and maintain the Collateral and all of its other properties
necessary or useful in its business in good condition, repair and working
order (normal wear and tear excepted), although Borrower may discontinue
the operation and maintenance of any properties if Borrower believes that
such discontinuance is desirable to the conduct of its
business. Borrower shall take all commercially reasonable steps
necessary to protect and maintain its material Intellectual Property
Rights if failure to do so could reasonably be expected to have a Material
Adverse Effect on Borrower.
|
|
(b)
|
Borrower
shall defend
the Collateral against all Liens, claims and demands of all third Persons
claiming any interest in the Collateral. Borrower shall keep all
Collateral free and clear of all Liens except Permitted Liens. Borrower
shall take all commercially reasonable steps necessary to prosecute any
Person Infringing its material Intellectual Property Rights and to defend
itself against any Person accusing it of Infringing any Person’s
Intellectual Property Rights if failure to do so could reasonably be
expected to have a Material Adverse Effect on Borrower.
|
-21-
|
5.15
|
Insurance. Borrower
shall at all times maintain insurance with insurers reasonably acceptable
to Xxxxx Fargo, in such reasonable amounts and on such terms (including
deductibles) as are at all times reasonably satisfactory to Xxxxx Fargo
including, as applicable and without limitation, hazard coverage on an
“all risks” basis for all tangible Collateral, and theft and physical
damage coverage for Collateral consisting of motor
vehicles. All insurance policies must contain an appropriate
lender’s interest endorsement or clause, and name Xxxxx Fargo as an
additional insured and are subject to the rights of any holders of
Permitted Liens holding claims senior to Xxxxx
Fargo.
|
|
5.16
|
Preservation of
Existence. Borrower shall preserve and maintain its
existence and all of its rights, privileges and franchises necessary in
the normal conduct of its business.
|
|
5.17
|
Delivery of Instruments,
etc. Upon request by Xxxxx Fargo, Borrower shall
promptly deliver to Xxxxx Fargo in pledge all instruments, documents and
chattel paper constituting Collateral, endorsed or assigned by
Borrower.
|
|
5.18
|
Sale or Transfer of Assets;
Suspension of Business Operations. Except as otherwise
expressly permitted in Section 5.19, Borrower shall not sell, lease,
assign, transfer or otherwise dispose of (a) the stock of any
Subsidiary, (b) all or a substantial part of its assets, or
(c) any Collateral or any interest in Collateral (whether in one
transaction or in a series of transactions) to any other Person other than
the sale or other disposition of Inventory or other non-material assets
not constituting Accounts in the ordinary course of business and shall not
liquidate, dissolve or suspend any material business
operations. Borrower shall not transfer any part of its
ownership interest in any material Intellectual Property Rights and shall
not permit its rights as licensee of material Licensed Intellectual
Property to lapse, except that Borrower may transfer such rights or permit
them to lapse if it has reasonably determined that such Intellectual
Property Rights are no longer useful in its business. If
Borrower transfers any material Intellectual Property Rights for value,
Borrower shall pay the Proceeds to Xxxxx Fargo for application to the
Indebtedness. Borrower shall not license any other Person to
use any of Borrower’s material Intellectual Property Rights, except that
Borrower may grant licenses in the ordinary course of its business in
connection with sales of Inventory or other non-material assets not
constituting Accounts or the provision of services to its
customers.
|
|
5.19
|
Consolidation and Merger; Asset
Acquisitions. Borrower shall not consolidate with or
merge into any other entity, or permit any other entity to merge into it,
or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all of the assets of any
other entity, except consolidation or merger of any Subsidiary into
another Subsidiary or into the Borrower is permitted, provided the
surviving entity is a “Borrower”
hereunder.
|
|
5.20
|
Sale and
Leaseback. Borrower shall not enter into any
arrangement, directly or indirectly, with any other Person pursuant to
which Borrower shall sell or transfer any real or personal property,
whether owned now or acquired in the future, and then rent or lease all or
part of such property or any other property which Borrower intends to use
for substantially the same purpose or purposes as the property being sold
or transferred.
|
|
5.21
|
Restrictions on Nature of
Business. Borrower will not engage in any line of
business materially different from that presently engaged in by Borrower,
and will not purchase, lease or otherwise acquire assets not related to
its business.
|
-22-
|
5.22
|
Accounting. Borrower
will not adopt any material change in accounting principles except as
required by GAAP, consistently applied. Borrower will not
change its fiscal year unless it has given Xxxxx Fargo at least sixty (60)
days prior written notice.
|
|
5.23
|
[Reserved]
|
|
5.24
|
Pension
Plans. Except as disclosed to Xxxxx Fargo in a Record
prior to the date of this Agreement, neither Borrower nor any ERISA
Affiliate will (a) adopt, create, assume or become party to any Pension
Plan, (b) become obligated to contribute to any Multiemployer Plan, (c)
incur any obligation to provide post-retirement medical or insurance
benefits with respect to employees or former employees (other than
benefits required by law) or (d) amend any Plan in a manner that would
materially increase its funding
obligations.
|
|
5.25
|
Place of Business;
Name. Borrower will not (i) transfer its chief executive
office or principal place of business, or move, relocate, close or sell
any business Premises, (ii) permit any tangible Collateral or any records
relating to the Collateral to be located in any state or area in which, in
the event of such location, a financing statement covering such Collateral
would be required to be, but has not in fact been, filed in order to
perfect the Security Interest, or (iii) change its name or jurisdiction of
organization, unless (a) Borrower provides Xxxxx Fargo thirty (30) days
prior written notice thereof, and (b) Borrower executes and delivers,
prior to or simultaneously with any such actions, any and all documents
and agreements required to maintain the perfection and priority of all
security interests and liens granted by Xxxxx Fargo
hereunder.
|
|
5.26
|
Constituent Documents;
Borrower will not amend its Constituent Documents in a manner
adverse to Xxxxx Fargo without Xxxxx Fargo’s prior written
consent.
|
|
5.27
|
Performance by Xxxxx
Fargo. If Borrower fails to perform or observe any of
its obligations under this Agreement at any time, Xxxxx Fargo may, upon
reasonable notice to Borrower, but need not, perform or observe them on
behalf of Borrower and may, but need not, take any other actions which
Xxxxx Fargo may reasonably deem necessary to cure or correct this failure;
and Borrower shall pay Xxxxx Fargo upon demand the amount of all costs and
expenses (including reasonable attorneys’ fees and legal expense) incurred
by Xxxxx Fargo in performing these obligations, together with interest on
these amounts at the Default Rate.
|
|
5.28
|
Xxxxx Fargo Appointed as
Borrower’s Attorney in Fact. To facilitate Xxxxx Fargo’s
performance or observance of Borrower’s obligations under this Agreement,
Borrower hereby irrevocably appoints Xxxxx Fargo and Xxxxx Fargo’s agents,
as Borrower’s attorney in fact (which appointment is coupled with an
interest), effective upon the occurrence of an Event of Default, with the
right (but not the duty) to create, prepare, complete, execute, deliver,
endorse or file on behalf of Borrower any instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and any other agreements or any Record required to be obtained,
executed, delivered or endorsed by Borrower in accordance with the terms
of this Agreement.
|
|
5.29
|
Maintenance of Deposit and
Securities Accounts at Xxxxx Fargo. Borrower shall maintain each of
its deposit accounts, securities accounts and other investment accounts
with Xxxxx Fargo; provided, however, that Borrower may maintain the
accounts listed on Exhibit G hereto for up to sixty (60) days after the
date of this Agreement provided that the amount on deposit in each
particular account does not exceed the amount specified for such account
on Exhibit G hereto; and provided, further that Borrower may maintain the
CIT Collection Account for a period of ninety (90) days after the date of
this Agreement.
|
-23-
|
6.
|
EVENTS
OF DEFAULT AND REMEDIES
|
|
6.1
|
Events of
Default. An “Event of Default” means any of the
following:
|
|
(a)
|
Borrower
fails to pay any the amount of any Indebtedness on the date that it
becomes due and payable;
|
|
(b)
|
Borrower
fails to (i) observe or perform any covenant or agreement of
Borrower set forth in Sections 5.1(a), (b) or (h), 5.2, 5.3, 5.4, 5.5,
5.6, 5.7, 5.8, 5.10, 5.15, 5.16, 5.18, 5.19, 5.20, 5.21, 5.22, 5.24 or
5.25, (ii) observe or perform any covenant or agreement of Borrower set
forth in Section 5.1 (c) or (d) and such failure continues for a period of
three (3) Business Days from the date of such failure; or (iii) observe or
perform any covenant or agreement of Borrower set forth in this Agreement
(other than a section that is expressly dealt with elsewhere in this
Section 6.1 or in this Agreement) hereof and such failure
continues for a period of 15 days from the date of such
failure;
|
|
(c)
|
An
Overadvance arises and continues for a period of three (3) Business Days
as the result of any reduction in the Borrowing Base, or arises in any
manner or on terms not otherwise approved of in advance by Xxxxx Fargo in
a Record that it has Authenticated;
|
|
(d)
|
An
event of default or termination event (however defined) (after giving
effect to any applicable grace or cure periods) occurs under any swap,
derivative, foreign exchange, hedge or any similar transaction or
arrangement entered into between Borrower and Xxxxx
Fargo;
|
|
(e)
|
A
Change of Control shall occur;
|
|
(f)
|
Borrower
becomes insolvent or admits in a Record an inability to pay debts as they
mature, or Borrower makes an assignment for the benefit of creditors; or
Borrower applies for or consents to the appointment of any receiver,
trustee, or similar officer for the benefit of Borrower, or for any of
their properties;
|
|
(g)
|
Borrower
files a petition under any chapter of the United States Bankruptcy Code or
under the laws of any other jurisdiction naming Borrower as debtor; or any
such petition is instituted against Borrower; or Borrower institutes (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, debt arrangement, dissolution, liquidation or
similar proceeding under the laws of any jurisdiction; or any such
proceeding is instituted (by petition, application or otherwise) against
Borrower; or any receiver, trustee or similar officer is appointed without
the application or consent of Borrower provided that a proceeding
instituted against Borrower or such appointment shall not constitute an
Event of Default if such proceeding or appointment is dismissed,
terminated or vacated within thirty (30) days of
commencement;
|
|
(h)
|
Any
representation or warranty made by Borrower in this Agreement, or by
Borrower (or any of its Officers) in any agreement, certificate,
instrument or financial statement or other statement delivered to Xxxxx
Fargo in connection with this Agreement is untrue or misleading in any
material respect when delivered to Xxxxx
Fargo;
|
-24-
|
(i)
|
A
final, non-appealable arbitration award, judgment, or decree or order for
the payment of money in an amount in excess of $250,000 which is not
insured or subject to indemnity, is entered against Borrower and which is
unstayed for more than ten (10) Business Days; or any judgment, writ,
warrant of attachment or execution or similar process is issued or levied
against a substantial part of the property of Borrower and such judgment,
writ or warrant is not released or is unstayed for more than ten (10)
Business Days;
|
|
(k)
|
Borrower
is in default with respect to any bond, debenture, note or other evidence
of material indebtedness issued by Borrower, having a principal amount in
excess of $250,000 that is held by any third Person other than Xxxxx
Fargo, or under any instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any
material lease or other contract, and the applicable grace period, if any,
has expired;
|
|
(l)
|
Borrower
liquidates, dissolves, terminates or suspends its business operations or
otherwise fails to operate its business in the ordinary course, or unless
permitted pursuant to Section 5.19 hereof, merges with another Person; or
sells or attempts to sell all or substantially all of its
assets;
|
|
(m)
|
Borrower
fails to pay any indebtedness or obligation owed to Xxxxx Fargo which is
unrelated to the Line of Credit or this Agreement as it becomes due and
payable;
|
|
(n)
|
Any
Director or Officer of Borrower is indicted for a felony offense under
state or federal law, unless, with respect to felonies other than felonies
involving fraud, such Director is removed from Borrower’s Board of
Directors or such Officer’s employment with Borrower is terminated, in
each case within one hundred twenty (120) days of the date of the related
indictment, or Borrower hires an Officer or appoints a Director who has
been convicted of any felony offense under state or federal law;
and
|
|
(o)
|
Any
Reportable Event, which Xxxxx Fargo in good faith believes to constitute
sufficient grounds for termination of any Pension Plan or for the
appointment of a trustee to administer any Pension Plan, has occurred and
is continuing 30 days after Borrower gives Xxxxx Fargo a Record
notifying it of the Reportable Event; or a trustee is appointed by an
appropriate court to administer any Pension Plan; or the Pension Benefit
Guaranty Corporation institutes proceedings to terminate or appoint a
trustee to administer any Pension Plan; or Borrower or any ERISA Affiliate
files for a distress termination of any Pension Plan under Title IV of
ERISA; or Borrower or any ERISA Affiliate fails to make any quarterly
Pension Plan contribution required under Section 412(m) of the IRC, which
Xxxxx Fargo in good faith believes may, either by itself or in combination
with other failures, result in the imposition of a Lien on Borrower’s
assets in favor of the Pension Plan; or any withdrawal, partial
withdrawal, reorganization or other event occurs with respect to a
Multiemployer Plan which could reasonably be expected to result in a
material liability by Borrower to the Multiemployer Plan under Title IV of
ERISA.
|
|
6.2
|
Rights and
Remedies. During any Default Period, Xxxxx Fargo may in
its discretion exercise any or all of the following rights and
remedies:
|
|
(a)
|
Xxxxx
Fargo may terminate the Line of Credit and decline to make Advances, and
terminate any services extended to Borrower under the Master Agreement for
Treasury Management Services;
|
|
(b)
|
Xxxxx
Fargo may declare the Indebtedness to be immediately due and payable and
accelerate payment of the Revolving Note, and all Indebtedness shall
immediately become due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which Borrower
hereby expressly waives;
|
-25-
|
(c)
|
Xxxxx
Fargo may, without notice to Borrower, apply any money owing by Xxxxx
Fargo to Borrower to payment of the
Indebtedness;
|
|
(d)
|
Xxxxx
Fargo may exercise and enforce any rights and remedies available upon
default to a secured party under the UCC, including the right to take
possession of Collateral, proceeding with or without judicial process
(without a prior hearing or notice of hearing, which Borrower hereby
expressly waives) and sell, lease or otherwise dispose of Collateral for
cash or on credit (with or without giving warranties as to condition,
fitness, merchantability or title to Collateral, and in the event of a
credit sale, Indebtedness shall be reduced only to the extent that
payments are actually received), and Borrower will upon Xxxxx Fargo’s
demand assemble the Collateral and make it available to Xxxxx Fargo at any
place designated by Xxxxx Fargo which is reasonably convenient to both
parties;
|
|
(e)
|
Xxxxx
Fargo may exercise and enforce its rights and remedies under any of the
Loan Documents and any other document or agreement described in or related
to this Agreement, including, without limitation, billing or invoicing any
account debtor in respect of Borrower’s unbilled
Accounts;
|
|
(f)
|
Borrower
will pay Xxxxx Fargo upon demand in immediately available funds an amount
equal to the Aggregate Face Amount plus any anticipated costs and fees
under Sections 1.6(i) and 1.6(j) hereof or any other Loan Document for
deposit to the Special Account pursuant to Section 1.10;
and
|
|
(g)
|
Xxxxx
Fargo may exercise any other rights and remedies available to it by law or
agreement.
|
|
6.3
|
Immediate Default and
Acceleration. Following the occurrence of an Event of
Default described in Section 6.1(f) or (g), the Line of Credit shall
immediately terminate and all of Borrower’s Indebtedness shall immediately
become due and payable without presentment, demand, protest or notice of
any kind.
|
|
7.
|
MISCELLANEOUS
|
|
7.1
|
No Waiver; Cumulative
Remedies. No delay or any single or partial exercise by
Xxxxx Fargo of any right, power or remedy under the Loan Documents, or
under any other document or agreement described in or related to this
Agreement, shall constitute a waiver of any other right, power or remedy
under the Loan Documents or granted by Borrower to Xxxxx Fargo under other
agreements or documents that are unrelated to the Loan
Documents. No notice to or demand on Borrower in any
circumstance shall entitle Borrower to any additional notice or demand in
any other circumstances. The remedies provided in the Loan
Documents or in any other document or agreement described in or related to
this Agreement are cumulative and not exclusive of any remedies provided
by law. Xxxxx Fargo shall comply with applicable law in
connection with a disposition of Collateral, and such compliance will not
be considered to adversely affect the commercial reasonableness of any
sale of the Collateral.
|
-26-
|
7.2
|
Amendment; Consents and
Waivers; Authentication. No amendment or modification of
any Loan Documents, or any other document or agreement described in or
related to this Agreement, or consent to or waiver of any Event of
Default, or consent to or waiver of the application of any covenant or
representation set forth in any of the Loan Documents, or any other
document or agreement described in or related to this Agreement, or any
release of Xxxxx Fargo’s Security Interest in any Collateral, shall be
effective unless it has
been agreed to by Xxxxx Fargo and Borrower and memorialized in a Record
that: (a) specifically states that it is intended to amend or modify
specific Loan Documents, or any other document or agreement described in
or related to this Agreement, or waive any Event of Default or the
application of any covenant or representation of any terms of specific
Loan Documents, or any other document or agreement described in or related
to this Agreement, or is intended to release Xxxxx Fargo’s Security
Interest in specific Collateral; and (b) is Authenticated by the signature
of an authorized employee of both parties, or by an authorized employee of
Xxxxx Fargo with respect to a consent or waiver. The terms of
an amendment, consent or waiver memorialized in any Record shall be
effective only to the extent, and in the specific instance, and for the
limited purpose to which Xxxxx Fargo and Borrower have
agreed.
|
|
7.3
|
Execution in Counterparts;
Delivery of Counterparts. This Agreement and all other
Loan Documents, or any other document or agreement described in or related
to this Agreement, and any amendment or modification to them may be
Authenticated by the parties in any number of counterparts, each of which,
once authenticated and delivered in accordance with the terms of this
Section 7.3, will be deemed an original, and all such counterparts, taken
together, shall constitute one and the same
instrument. Delivery by fax or by encrypted e-mail or e-mail
file attachment of any counterpart to any Loan Document Authenticated by
an authorized signature will be deemed the equivalent of the delivery of
the original Authenticated instrument. Borrower shall send the
original Authenticated counterpart to Xxxxx Fargo by first class U.S. mail
or by overnight courier, but Borrower’s failure to deliver a Record in
this form shall not affect the validity, enforceability, and binding
effect of this Agreement or the other Loan Documents, or any other
document or agreement described in or related to this
Agreement.
|
|
7.4
|
Notices, Requests, and
Communications; Confidentiality. Except as otherwise
expressly provided in this
Agreement:
|
|
(a)
|
Delivery of Notices,
Requests and Communications. (1) Any notice, request,
demand, or other communication by either party that is required under the
Loan Documents, or any other document or agreement described in or related
to this Agreement, to be in the form of a Record (but excluding any Record
containing information Borrower must report to Xxxxx Fargo under Section
5.1) may be delivered (i) in person, (ii) by first class U.S. mail,
(iii) by overnight courier of national reputation, or (iv) by fax, or
the Record may be sent as an Electronic Record and delivered (v) by an
encrypted e-mail, or (vi) through Xxxxx Fargo’s CEO® portal or other
secure electronic channel to which the parties have agreed. (2)
Pursuant to Section 5.1, any information that Borrower is required to
deliver under Section 5.1 in the form of a Record may be delivered to
Xxxxx Fargo (i) in person, or by (ii) first class U.S. mail,
(iii) overnight courier, or (iv) fax, or the Record may be sent
as an Electronic Record (v) by encrypted e-mail, or (vi) through the file
upload service of Xxxxx Fargo’s CEO® portal or other
secure electronic channel to which the parties have
agreed.
|
|
(b)
|
Addresses for
Delivery. Delivery of any Record under the Loan
Documents shall be made to the appropriate address set forth on the last
page of this Agreement (which either party may modify by a Record sent to
the other party), or through Xxxxx Fargo’s CEO® portal or other
secure electronic channel to which the parties have
agreed.
|
|
(c)
|
Date of
Receipt. Each Record sent
pursuant to the terms of this Section 7.4 will be deemed to have been
received on (i) the date of delivery if delivered in person,
(ii) the date deposited in the mail if sent by mail, (iii) the
date delivered to the courier if sent by overnight courier, (iv) the date
of transmission if sent by fax, or (v) the date of transmission, if
sent as an Electronic Record by electronic mail or through Xxxxx Fargo’s
CEO® portal or similar
secure electronic channel to which the parties have agreed; except that any
request for an Advance or any other notice, request, demand or other
communication from Borrower required under Section 1, and any request for
an accounting under Section 9-210 of the UCC, will not be deemed to have
been received until actual receipt by Xxxxx Fargo on a Business Day in
accordance with the terms of this
Agreement.
|
-27-
|
(d)
|
Authentication of
Borrower Information Records. Borrower shall
Authenticate any Record delivered (i) in person, or by U.S. mail,
overnight courier, or fax, by the signature of the Officer or employee of
Borrower who prepared the Record; (ii) as an Electronic Record sent via
encrypted e-mail, by the signature of the Officer or employee of Borrower
who prepared the Record by any file format signature that is reasonably
acceptable to Xxxxx Fargo, or by a separate certification signed and sent
by fax; or (iii) as an Electronic Record via the file upload service of
Xxxxx Fargo’s CEO® portal or similar
secure electronic channel to which the parties have agreed, through such
credentialing process as Xxxxx Fargo and Borrower may agree to under the
CEO® agreement.
|
|
(e)
|
Certification of
Borrower Information Records. Any Record
(including any Electronic Record) Authenticated and delivered to Xxxxx
Fargo under this Section 7.5 will be deemed to have been certified as
materially true, correct, and complete by Borrower and each Officer or
employee of Borrower who prepared and Authenticated the Record on behalf
of Borrower, and may be legally relied upon by Xxxxx Fargo without regard
to method of delivery or
transmission.
|
|
(f)
|
Confidentiality of
Borrower Information Records Sent by Unencrypted
E-mail. Borrower acknowledges that if it sends an
Electronic Record to Xxxxx Fargo without encryption by e-mail or as an
e-mail file attachment, there is a risk that the Electronic Record may be
received by unauthorized Persons, and that by so doing it will be deemed
to have accepted this risk and the consequences of any such unauthorized
disclosure. Borrower acknowledges that it may deliver
Electronic Records containing Borrower information to Xxxxx Fargo by
e-mail pursuant to any encryption tool acceptable to Xxxxx Fargo and
Borrower, or through Xxxxx Fargo’s CEO® portal file upload
service without risk of unauthorized
disclosure.
|
|
7.5
|
[Reserved].
|
|
7.6
|
Further
Documents. Borrower will from time to time execute,
deliver, endorse and authorize the filing of any instruments, documents,
conveyances, assignments, security agreements, financing statements,
control agreements and other agreements that Xxxxx Fargo may reasonably
request in order to secure, protect, perfect or enforce the Security
Interest or Xxxxx Fargo’s rights under the Loan Documents, or any other
document or agreement described in or related to this Agreement (but any
failure to request or assure that Borrower executes, delivers, endorses or
authorizes the filing of any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents, or any
other document or agreement described in or related to this Agreement, and
the Security Interest, regardless of whether any such item was or was not
executed, delivered or endorsed in a similar context or on a prior
occasion).
|
|
7.7
|
Costs and
Expenses. Borrower shall pay on demand all costs and
expenses, including, without limitation, reasonable attorneys’ fees,
incurred by Xxxxx Fargo in connection with the Indebtedness, this
Agreement, the Loan Documents, or any other document or agreement
described in or related to this Agreement, and the transactions
contemplated by this Agreement, including all such costs, expenses and
fees incurred in connection with the negotiation, preparation, execution,
delivery, amendment, administration, performance, collection and
enforcement of the Indebtedness and all such documents and agreements and
the creation, perfection, protection, satisfaction, foreclosure or
enforcement of the Security
Interest.
|
-28-
|
7.8
|
Indemnity. In
addition to its obligation to pay Xxxxx Fargo’s expenses under the terms
of this Agreement, Borrower shall indemnify, defend and hold harmless
Xxxxx Fargo, its parent Xxxxx Fargo & Borrower, and any of its
affiliates and successors, and all of their present and future Officers,
Directors, employees, attorneys and agents (each an “Indemnitee”) from and
against any of the following (collectively, “Indemnified
Liabilities”):
|
|
(a)
|
Any
and all transfer taxes, documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of the
Loan Documents, or any other document or agreement described in or related
to this Agreement or the making of the
Advances;
|
|
(b)
|
Any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Exhibit D proves to be incorrect
in any respect or as a result of any violation of the covenants contained
in Section 5.12; and
|
|
(c)
|
Any
and all other liabilities, losses, damages, penalties, judgments, suits,
claims, costs and expenses of any kind or nature whatsoever (including the
reasonable fees and disbursements of counsel) in connection with this
Agreement and any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party to
such proceedings, which may be imposed on, incurred by or asserted against
any such Indemnitee, to the extent any of the foregoing is related to or
arising out of or in connection with the Loan Documents and/or the making
of the Advances, or the use or intended use of the proceeds of the
Advances, with the exception of any Indemnified Liability caused by the
gross negligence or willful misconduct of an
Indemnitee.
|
|
(d)
|
If
any investigative, judicial or administrative proceeding described in this
Section is brought against any Indemnitee, Xxxxx Fargo shall promptly
notify Borrower in writing, and upon the Indemnitee’s request, Borrower,
or counsel designated by Borrower and satisfactory to the Indemnitee, will
resist and defend the action, suit or proceeding to the extent and in the
manner directed by the Indemnitee, at Borrower’s sole cost and
expense. Each Indemnitee will use its best efforts to cooperate
in the defense of any such action, suit or proceeding. If this
agreement to indemnify is held to be unenforceable because it violates any
law or public policy, Borrower shall nevertheless make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities to the extent permissible under applicable
law. Borrower’s obligations under this Section shall survive
the termination of this Agreement and the discharge of Borrower’s other
obligations under this Agreement.
|
|
7.9
|
Retention of Borrower’s
Records. Xxxxx Fargo shall have no obligation to
maintain Electronic Records or retain any documents, schedules, invoices,
agings, or other Records delivered to Xxxxx Fargo by Borrower in
connection with the Loan Documents, or any other document or agreement
described in or related to this Agreement for more than 30 days after
receipt by Xxxxx Fargo. If there is a special need to retain
specific Records, Borrower must notify Xxxxx Fargo of its need to retain
or return such Records with particularity, which notice must be delivered
to Xxxxx Fargo in accordance with the terms of this Agreement at the time
of the initial delivery of the Record to Xxxxx
Fargo.
|
-29-
|
7.10
|
Binding Effect; Assignment;
Complete Agreement. The Loan Documents, or any other
document or agreement described in or related to this Agreement, shall be
binding upon and inure to the benefit of Borrower and Xxxxx Fargo and
their respective successors and assigns, except that Borrower shall not
have the right to assign its rights under this Agreement or any interest
in this Agreement without Xxxxx Fargo’s prior consent, which must be
confirmed in a Record Authenticated by Xxxxx Fargo. To the extent
permitted by law, Borrower waives and will not assert against any assignee
any claims, defenses or set-offs which Borrower could assert against Xxxxx
Fargo. This Agreement shall also bind all Persons who become a party to
this Agreement as a borrower. This Agreement, together with the
Loan Documents, or any other document or agreement described in or related
to this Agreement, comprises the complete and integrated agreement of the
parties on the subject matter of this Agreement and supersedes all prior
agreements, whether oral or evidenced in a Record. To the
extent that any provision of this Agreement contradicts other provisions
of the Loan Documents other than this Agreement, or any other document or
agreement described in or related to this Agreement, this Agreement shall
control.
|
|
7.11
|
Confidentiality. Xxxxx
Fargo agrees that material, non-public information regarding Borrower and
its Subsidiaries, their operations, assets and existing and contemplated
business plans shall be treated by Xxxxx Fargo in a confidential manner,
shall not be used for the purpose of competing with Borrower, and shall
not be disclosed by Xxxxx Fargo to Persons who are not parties to this
Agreement, except (i) to its accountants, lawyers, and other
advisors, and with each business unit and line of business within Xxxxx
Fargo and each direct and indirect subsidiary of Xxxxx Fargo, who shall be
advised of the confidential nature of such information; (ii) as may be
required by statute, decision, or judicial or administrative order, rule
or regulation; and (iii) as requested or required by any governmental
authority pursuant to any subpoena or other legal
process.
|
|
7.12
|
Severability of
Provisions. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining terms
of this Agreement.
|
|
7.13
|
Headings. Section
and subsection headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any
other purpose.
|
|
7.14
|
Governing Law; Jurisdiction,
Venue; Waiver of Jury Trial. The Loan Documents (other
than real estate related documents, if any) shall be governed by and
construed in accordance with the substantive laws (other than conflict
laws) of the Commonwealth of Massachusetts. The parties to this Agreement
(a) consent to the personal jurisdiction of the state and federal
courts located in the Commonwealth of Massachusetts in connection with any
controversy related to this Agreement; (b) waive any argument that
venue in any such forum is not convenient; (c) agree that any
litigation initiated by Xxxxx Fargo or Borrower in connection with this
Agreement or the other Loan Documents may be venued in either the state or
federal courts located in the City of Boston, County of
Suffolk, Commonwealth
of Massachusetts; and (d) agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law.
|
-30-
|
7.15
|
Joint and Several
Liability.
|
|
(a)
|
Borrower
is defined collectively to include all Persons named as “Borrower” herein;
provided, however, that any references herein to “any Borrower”, “each
Borrower” or similar references, shall be construed as a reference to each
individual Person named as Borrower herein. Each Person so
named shall be jointly and severally liable for all of the obligations of
the other Persons named as “Borrower” under this Agreement and the other
Loan Documents. Each Borrower, individually, expressly
understands, agrees and acknowledges that the Advances and Letters of
Credit would not be made available on the terms herein in the absence of
the collective credit of all of the Persons named as Borrower herein, the
joint and several liability of all such Persons, and the
cross-collateralization of the collateral of all such
Persons. Accordingly, each Borrower, individually, acknowledges
that the benefit to each of the Persons named as Borrower as a whole
constitutes reasonably equivalent value, regardless of the amount of the
Advances and/or Letters of Credit actually borrowed by, advanced to, or
the amount of collateral provided by, any individual
Borrower. In addition, each Person named as Borrower herein
hereby acknowledges and agrees that all of the representations,
warranties, covenants, obligations, conditions, agreements and other terms
contained in this Agreement shall be applicable to and shall be binding
upon and measured and enforceable individually against each Person named
as Borrower herein as well as all such Persons when taken
together. By way of illustration, but without limiting the
generality of the foregoing, the terms of Section 6 of this Agreement are
to be applied to each individual Person named as Borrower herein (as well
as to all such Persons taken as a whole), such that the occurrence of any
of the events described in Section 6 of this Agreement as to
any Person named as Borrower herein shall constitute an Event of Default
even if such event has not occurred as to any other Persons named as
Borrower or as to all such Persons taken as a
whole.
|
|
(b)
|
Notwithstanding
any provisions of this Agreement to the contrary, it is intended that the
joint and several nature of the liability of each Borrower for the payment
of the Indebtedness evidenced by the Loan Documents and the performance of
the obligations pursuant to the Loan Documents (collectively, the
“Obligations”) and the Liens granted by Borrower to secure the
Obligations, not constitute a Fraudulent Conveyance (as defined below).
Consequently, Xxxxx Fargo and each Borrower agree that if the liability of
a Borrower for the Obligations, or any Liens granted by such Borrower
securing the Obligations would, but for the application of this sentence,
constitute a Fraudulent Conveyance, the liability of such Borrower and the
Liens securing such liability shall be valid and enforceable only to the
maximum extent that would not cause such liability or such Lien to
constitute a Fraudulent Conveyance, and the liability of such Borrower and
this Agreement shall automatically be deemed to have been amended
accordingly. For purposes hereof, the term “Fraudulent
Conveyance” means a fraudulent conveyance under Section 548 of Chapter 11
of Title II of the Bankruptcy Code or a fraudulent conveyance or
fraudulent transfer under the applicable provisions of any fraudulent
conveyance or fraudulent transfer law or similar law of any State, as in
effect from time to time.
|
|
(c)
|
Xxxxx
Fargo is hereby authorized, without notice or demand (except as otherwise
specifically required under this Agreement) and without affecting the
liability of any Borrower hereunder, at any time and from time to time, to
(i) renew, extend or otherwise increase the time for payment of the
Obligations; (ii) with the written agreement of any Borrower, accelerate
or otherwise change the terms relating to the Obligations or otherwise
modify, amend or change the terms of this Agreement, the Revolving Note,
any Letter of Credit or any other Loan Document now or hereafter executed
by any Borrower and delivered to Xxxxx Fargo; (iii) accept partial
payments of the Obligations; (iv) take and hold any collateral for the
payment of the Obligations or for the payment of any guaranties of the
Obligations and exchange, enforce, waive and release any such collateral;
(v) after the occurrence and during the continuance of an Event of
Default, apply any such collateral and direct the order or manner of sale
thereof that Xxxxx Fargo, in its sole discretion, may determine; and (vi)
after the occurrence and during the continuance of an Event of Default,
settle, release, compromise, collect or otherwise liquidate the
Obligations and any collateral therefor in any manner, all surety defenses
being hereby waived by each
Borrower.
|
-31-
|
(d)
|
(1)
Each Borrower hereby agrees that, except as hereinafter provided, its
obligations hereunder shall be unconditional, irrespective of (i) the
absence of any attempt to collect the Obligations from any obligor or
other action to enforce the same; (ii) the waiver or consent by Xxxxx
Fargo with respect to any provision of any instrument evidencing the
Obligations, or any part thereof, or any other agreement heretofore, now
or hereafter executed by a Borrower and delivered to Xxxxx Fargo; (iii)
failure by Xxxxx Fargo to take any steps to perfect and maintain its
security interest in, or to preserve its rights to, any security or
collateral for the Obligations; (iv) the institution of any proceeding
under the Bankruptcy Code, or any similar proceeding, by or against a
Borrower or Xxxxx Fargo’s election in any such proceeding of the
application of Section 1111(b)(2) of the Bankruptcy Code; (v) any
borrowing or grant of a security interest by a Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any
portion of Xxxxx Fargo’s claim(s) for repayment of any of the Obligations;
or (vii) any other circumstance other than payment in full of the
Obligations which might otherwise constitute a legal or equitable
discharge or defense of a guarantor or
surety.
|
(2) The
Persons constituting Borrower hereby agree, as between themselves, that to the
extent that Xxxxx Fargo shall have received from any Borrower any Recovery
Amount (as defined below), then the paying Borrower shall have a right of
contribution against each other Borrower in an amount equal to such other
Borrower’s contributive share of such Recovery Amount; provided, however, that in
the event any Borrower suffers a Deficiency Amount (as defined below), then the
Borrower suffering the Deficiency Amount shall be entitled to seek and receive
contribution from and against the other Borrowers in an amount equal to the
Deficiency Amount; and provided further, that in no
event shall the aggregate amounts so reimbursed by reason of the contribution of
any Borrower equal or exceed an amount that would, if paid, constitute or result
in a Fraudulent Conveyance. Until all Obligations have been paid and
satisfied in full, after the occurrence and during the continuance of an Event
of Default, no payment made by or for the account of a Borrower including,
without limitation, a payment made by such Borrower on behalf of the liabilities
of any other Borrower, shall entitle such Borrower, by subrogation or otherwise,
to any payment from such other Borrower or from or out of such other Borrower’s
property. The right of each Borrower to receive any contribution
under this Section 7.15 or by subrogation or otherwise from any other Borrower
shall be subordinate in right of payment to the Obligations and such Borrower
shall not exercise any right or remedy against such other Borrower or any
property of such other Borrower by reason of any performance of such Borrower of
its joint and several obligations hereunder, until the Obligations have been
indefeasibly paid and satisfied in full, and no Borrower shall exercise any
right or remedy with respect to this Section 7.15 until the
Obligations have been indefeasibly paid and satisfied in full. As
used in this Section 7.15, the term “Recovery Amount” means the amount of
proceeds received by or credited to Xxxxx Fargo from the exercise of any remedy
of Xxxxx Fargo under this Agreement or the other Loan Documents, including,
without limitation, the sale of any collateral. As used in this
Section 7.15, the term “Deficiency Amount” means any amount that is less than
the entire amount a Borrower is entitled to receive by way of contribution or
subrogation from, but that has not been paid by, the other Persons constituting
Borrower in respect of any Recovery Amount attributable to the Borrower entitled
to contribution, until the Deficiency Amount has been reduced to zero through
contributions and reimbursements made under the terms of this Section 7.15 or
otherwise.
-32-
|
|
(3)
Each Borrower agrees to the provisions of the Loan Documents and hereby
waives notice of (i) any loans or advances or other financial
accommodations made by Xxxxx Fargo to any Borrower, (ii) acceptance
of the Loan Documents, (iii) any amendment or extension of the Revolving
Note, any Letter of Credit, this Agreement or any other Loan Document,
(iv) the execution and delivery by any Borrower and Xxxxx Fargo, of any
other loan or credit agreement or of any Borrower’s execution and delivery
of any promissory note or other document arising under the Loan Documents,
(v) the occurrence of (A) any breach by any Borrower of any of the terms
or conditions of this Agreement or any of the other Loan Documents, or (B)
an Event of Default, (vi) Xxxxx Fargo’s transfer or disposition of
any collateral for the Obligations, or any part thereof, (vii) the sale or
foreclosure (or the posting or advertising for the sale or foreclosure) of
any collateral for the Obligations, (viii) protest, proof of non-payment
or default by any Borrower, or (ix) any other action at any time taken or
omitted by Xxxxx Fargo and, generally, all demands and notices of every
kind in connection with this Agreement, the Loan Documents, any documents
or agreements evidencing, securing or relating to the
Obligations.
|
|
|
(4)
Subject to paragraph 7.15(d)(2) above, (a) for so long as any
Obligation of any Borrower to Xxxxx Fargo, including without limitation
any portion of the Loans remains outstanding, Borrower hereby
unconditionally and irrevocably waives, releases and abrogates, after the
occurrence and during the continuance of an Event of Default, any and all
rights it may now or hereafter have under any agreement, at law or in
equity (including, without limitation, any law subrogating such Borrower
to the rights of Xxxxx Fargo), to assert any claim against or seek
contribution, indemnification or any other form of reimbursement from any
other Borrower for the payment of any or all of the Obligations for any
payment made by any Borrower under or in connection with this Agreement or
otherwise and (b) for so long as any portion of the Obligations remains
outstanding, Borrower hereby unconditionally and irrevocably waives,
releases and abrogates, after the occurrence and during the continuance of
an Event of Default, any and all rights it may now or hereafter have under
any agreement, at law or in equity (including, without limitation, any law
subrogating such Borrower to the rights of Xxxxx Fargo), to assert any
claim against or seek contribution, indemnification or any other form of
reimbursement from any Borrower of any or all of the Obligations for any
payment made by such Borrower under or in connection with this Agreement,
the other Loan Documents, or
otherwise.
|
|
|
(5)
Without limiting the generality of the foregoing, or of any other waiver
or other provision set forth in this Agreement, each Borrower hereby
absolutely, knowingly, unconditionally, and expressly waives any and all
claim, defense or benefit arising directly or indirectly under any one or
more of Sections 2787 to 2855 inclusive of the California Civil Code or
any similar law of California.
|
8.1
BORROWER
AND XXXXX FARGO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN
EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAIING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT.
-33-
|
COMMAND
SECURITY
CORPORATION
|
XXXXX
FARGO BANK,
NATIONAL
ASSOCIATION
|
|||
|
By:
|
By:
|
|||
|
Its:
|
Its:
|
|||
|
COMMAND
SECURITY
SERVICES,
INC.
|
||||
|
By:
|
||||
|
Its:
|
||||
|
STRATEGIC
SECURITY
SERVICES,
INC.
|
||||
|
By:
|
||||
|
Its:
|
||||
|
XXXXXXX
POLICE PATROL, INC.
|
||||
|
By:
|
||||
|
Its:
|
||||
-34-
BORROWER AND XXXXX FARGO have
executed this Agreement as a sealed instrument under the laws of the
Commonwealth of Massachusetts through
their authorized officers as of the date set forth above.
|
XXXXX
FARGO BANK,
NATIONAL
ASSOCIATION
|
COMMAND
SECURITY CORPORATION
|
|||
|
|
|
|||
|
By:
|
By:
|
|||
|
|
||||
|
Its
|
||||
|
Its
Vice President
|
||||
|
By:
|
||||
|
Its
|
||||
|
Xxxxx
Fargo Bank, National Association
|
||||
|
MAC-
|
||||
|
Fax:
______________________________
|
||||
|
Attention:
______________________________
|
||||
|
Fax:
______________________________
|
e-mail:
_________________________________
|
|||
|
Attention: Xx.
Xxxx X. Xxxxx
|
Federal
Employer Identification No.
|
|||
|
e-mail: Xxxx.X.Xxxxx@xxxxxxxxxx.xxx
|
||||
|
Organizational
Identification No.
|
||||
|
COMMAND
SECURITY SERVICES, INC.
|
||||
|
By:
|
|
|||
|
Its
|
|
|||
| By: |
|
|||
|
Its
|
|
|||
|
Fax:
______________________________
|
||||
|
Attention:
______________________________
|
||||
|
e-mail:
_________________________________
|
||||
|
Federal
Employer Identification No.
|
||||
|
Organizational
Identification No.
|
||||
-35-
|
STRATEGIC
SECURITY SERVICES, INC.
|
||||
|
By:
|
|
|||
|
Its
|
|
|||
| By: |
|
|||
|
Its
|
|
|||
|
Fax:
______________________________
|
||||
|
Attention:
______________________________
|
||||
|
e-mail:
_________________________________
|
||||
|
Federal
Employer Identification No.
|
||||
|
Organizational
Identification No.
|
||||
|
XXXXXXX
POLICE PATROL, INC.
|
||||
|
By:
|
|
|||
|
Its
|
|
|||
| By: |
|
|||
|
Its
|
|
|||
|
Fax:
______________________________
|
||||
|
Attention:
______________________________
|
||||
|
e-mail:
_________________________________
|
||||
|
Federal
Employer Identification No.
|
||||
|
Organizational
Identification No.
|
||||
-36-
REVOLVING
NOTE
|
$20,000,000
|
February
12, 2009
|
FOR VALUE RECEIVED, the
undersigned, COMMAND SECURITY CORPORATION, a New York corporation (“CSC”),
COMMAND SECURITY SERVICES, INC., a New York corporation (“CSS”), STRATEGIC
SECURITY SERVICES, INC., a California corporation (“SSS”) and XXXXXXX POLICE
PATROL, INC., a California corporation (“RPP”; RPP, CSC, CSS and SSS,
individually and collectively, jointly and severally, are referred to herein
as “Borrower”), hereby promise to pay to the order of XXXXX FARGO
BANK, NATIONAL ASSOCIATION (“Xxxxx Fargo”), acting through its XXXXX FARGO
BUSINESS CREDIT operating division, on the Termination Date described in the
Credit and Security Agreement dated February 12, 2009 (as amended from time to
time, the “Agreement”) and entered into between Xxxxx Fargo and Borrower, at
Xxxxx Fargo’s office at 000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or
at any other place designated at any time by the holder, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Twenty Million Dollars ($20,000,000) or the aggregate unpaid principal amount
of all Advances under the Line of Credit made by Xxxxx Fargo to Borrower under
the terms of the Agreement, together with interest on the principal amount
computed on the basis of actual days elapsed in a 360-day year, from the date of
this Revolving Note until this Revolving Note is fully paid at the rate from
time to time in effect under the terms of the Agreement. Principal
and interest accruing on the unpaid principal balance amount of this Revolving
Note shall be due and payable as provided in the Agreement. This
Revolving Note may be prepaid only in accordance with the
Agreement.
This
Revolving Note is the Revolving Note referred to in the Agreement, and is
subject to the terms of the Agreement, which provides, among other things, for
the acceleration of this Revolving Note. This Revolving Note is
secured, among other things, by the Agreement and the Security Documents as
defined in the Agreement, and by any other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements that may subsequently
be given for good and valuable consideration as security for this Revolving
Note.
Borrower
shall pay all costs of collection, including reasonable attorneys’ fees and
legal expenses if this Revolving Note is not paid when due, whether or not legal
proceedings are commenced.
Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.
Borrower
has executed this Revolving Note as a sealed instrument under the laws of the
Commonwealth of Massachusetts through
its authorized officer as of the date set forth above
|
COMMAND
SECURITY CORPORATION
|
||
|
By:
|
||
|
Name:
|
||
|
Its:
|
||
|
COMMAND
SECURITY SERVICES, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Its:
|
||
|
STRATEGIC
SECURITY SERVICES, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Its:
|
||
|
XXXXXXX
POLICE PATROL, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Its:
|
||
A-2
Exhibit
A to Credit and Security Agreement
DEFINITIONS
“Account
Funds” is defined in Section 1.4(a).
“Accounts”
shall have the meaning given it under the UCC.
“Advance”
and “Advances” means an advance or advances under the Line of
Credit.
“Affiliate”
or “Affiliates” means any Person controlled by, controlling or under common
control with Borrower, including any Subsidiary of Borrower. For
purposes of this definition, “control,” when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
“Aggregate
Face Amount” means the aggregate amount that may then be drawn under each
outstanding Letter of Credit, assuming compliance with all conditions for
drawing.
“Agreement”
means this Credit and Security Agreement.
“Authenticated”
means (a) to have signed; or (b) to have executed or to have otherwise adopted a
symbol, or have encrypted or similarly processed a Record in whole or in part,
with the present intent of the authenticating Person to identify the Person and
adopt or accept a Record.
“Base
Rate” means, for any day, a fluctuating rate equal to the highest of: (a)
the Prime Rate in effect on such day and (b) a rate determined by Xxxxx
Fargo to be one and one-half percent (1.50%) above Daily Three Month
LIBOR.
“Base
Rate Advance” means an Advance bearing interest at the Base Rate.
“Book Net
Worth” means the aggregate of the Owners’ equity in Borrower, determined in
accordance with GAAP.
“Borrowing
Base” is defined in Section 1.2(a).
|
“Borrowing
Base Reserve” means, as of any date of determination, an amount or a
percent of a specified category or item that Xxxxx Fargo deems necessary
in its reasonable business judgment from time to time to reduce
availability under the Borrowing Base (a) to reflect events, conditions,
or risks which adversely affect the assets, business or prospects of
Borrower, or the Collateral or its value, or the enforceability,
perfection or priority of Xxxxx Fargo’s Security Interest in the
Collateral, as the term “Collateral” is defined in this Agreement, or (b)
to reflect Xxxxx Fargo’s reasonable judgment that any collateral report or
financial information relating to Borrower and furnished to Xxxxx Fargo
may be incomplete, inaccurate or misleading in any material
respect.
|
A-1
“Business
Day” means a day on which the Federal Reserve Bank of New York is open for
business and, if such day relates to a LIBOR Advance, a day on which dealings
are carried on in the London interbank eurodollar market.
“Capital
Expenditures” means for a period, any expenditure of money during such period
for the purchase or construction of assets, or for improvements or additions to
such assets, which are capitalized on Borrower’s balance sheet.
“CEO®” is defined in Section
5.1(c).
“Change
of Control” means the occurrence of any of the following
events:
|
(a)
|
Any
Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) who does not have an ownership interest
in Borrower on the date of the initial Advance is or becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that any such Person, entity or
group will be deemed to have “beneficial ownership” of all securities that
such Person, entity or group has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than forty-nine percent (49%) of the voting power of
all classes of ownership of
Borrower;
|
|
(b)
|
During
any consecutive two-year period, individuals who at the beginning of such
period constituted the board of Directors of Borrower (together with any
new Directors whose election to such board of Directors, or whose
nomination for election by the Owners of Borrower, was approved by a vote
of two thirds of the Directors then still in office who were either
Directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the board of Directors of Borrower then in
office.
|
“CIT”
means The CIT Group/Business Credit, Inc.
“CIT
Collection Account” means account #304181153 maintained by The CIT
Group/Business Credit, Inc. with JPMorgan Chase Bank, N.A.
“CIT
Payoff Letter” means the letter agreement dated February 12, 2009 between
Borrower, CIT and Xxxxx Fargo, in the form attached hereto as Exhibit
H.
“Collateral”
means all of Borrower’s Accounts, chattel paper and electronic chattel paper,
deposit accounts, documents, Equipment, General Intangibles, goods, instruments,
Inventory, Investment Property, letter-of-credit rights, letters of credit, all
sums on deposit in any Collection Account, and any items in any Lockbox;
together with (a) all substitutions and replacements for and products of
such property; (b) in the case of all goods, all accessions; (c) all
accessories, attachments, parts, Equipment and repairs now or subsequently
attached or affixed to or used in connection with any goods; (d) all
warehouse receipts, bills of lading and other documents of title that cover such
goods now or in the future; (e) all collateral subject to the Lien of any
of the Security Documents; (f) any money, or other assets of Borrower that
come into the possession, custody, or control of Xxxxx Fargo now or in the
future; (g) Proceeds of any of the above Collateral; (h) books and records
of Borrower, including all mail or e-mail addressed to Borrower; and (i) all of
the above Collateral, whether now owned or existing or acquired now or in the
future or in which Borrower has rights now or in the future. Collateral also
includes Borrower’s commercial tort claim in respect of the action captioned
Command Security
Corporation, Plaintiff, vs. Gemini Security Services, LLC; Xxxxxxx X. Xxxxx;
Xxxxxxx, Xxxxxxx & Associates d/b/a Gemini Security Services; an
unincorporated association; Xxxxxx X. Xxxxxxx, Xx. and Xxxxxxx Xxxxxxx,
Partners, d/b/a Xxxxxxx, Xxxxxxx & Associates; Xxxxxx X. Xxxxxxx, Xx
individually, and Xxxxxxx Xxxxxxx, individually, Defendants filed in the
Superior Court of New Jersey, Law Division, Union County, Docket No.
UNN-L-1267-08.
A-2
“Collection
Account” means “Collection Account” as defined in the Master Agreement for
Treasury Management Services and related Lockbox and Collection Account Service
Description or Collection Account Service Description, whichever is applicable.
..
“Compliance
Certificate” is defined in Section 5.1(a) and is in the form of Exhibit
E.
“Commercial
Letter of Credit Agreement” means an agreement governing the issuance of
documentary letters of credit entered into between Borrower as applicant and
Xxxxx Fargo as issuer.
“Constituent
Documents” means with respect to any Person, as applicable, that Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate of
formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person’s existence,
organization or management or concerning disposition of ownership interests of
such Person or voting rights among such Person’s owners.
“Current
Maturities of Long Term Debt” means as of each fiscal quarter end, the amount of
Borrower’s long-term debt and capitalized leases which become due during that
quarterly period.
“Daily
Three Month LIBOR" means, for any day, the rate of interest equal to LIBOR then
in effect for delivery for a three (3) month period.
“Debt” means of a Person
as of a given date, all items of indebtedness or liability which in accordance
with GAAP would be included in determining total liabilities as shown on the
liabilities side of a balance sheet for such Person and shall also include the
aggregate payments required to be made by such Person at any time under any
lease that is considered a capitalized lease under GAAP.
“Debt
Service Coverage Ratio” means (a) the sum of (i) Funds from Operations
and (ii) Interest Expense minus (iii) Unfinanced Capital Expenditures
divided by (b) the sum of (i) Current Maturities of Long Term Debt and
(ii) Interest Expense.
“Default
Period” is defined in Section 1.5(c).
“Default
Rate” is defined in Section 1.5(c).
“Dilution”
means, as of any date of determination, a percentage, based upon the prior six
(6) months, which is the result of dividing (a) actual bad debt write-downs,
discounts, advertising allowances, credits, and any other items with respect to
the Accounts determined to be dilutive by Xxxxx Fargo in its reasonable
discretion during this period, by (b) Borrower’s net sales during such period
(excluding extraordinary items) plus the amount of clause (a).
A-3
“Director”
means a director if Borrower is a corporation, or a governor or manager if
Borrower is a limited liability company.
“Earnings Before Taxes”
means pretax earnings from operations, excluding extraordinary gains, and
extraordinary losses.
“Electronic
Record” means a Record that is created, generated, sent, communicated, received,
or stored by electronic means, but does not include any
Record that is sent, communicated, or received by fax.
“Eligible
Accounts” means all Eligible Billed Accounts and Eligible Unbilled
Accounts.
“Eligible
Billed Accounts” means all unpaid Accounts of Borrower arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any Accounts that would otherwise qualify as Eligible Unbilled Accounts, and
excluding any Accounts having any of the following characteristics:
|
(a)
|
That
portion of Accounts unpaid 90 days or more after the invoice
date;
|
|
(b)
|
That
portion of Accounts related to goods or services with respect to which
Borrower has received notice of a claim or dispute, which are subject to a
claim of offset or a contra account, or which reflect a reasonable reserve
for warranty claims or returns;
|
|
(c)
|
That
portion of Accounts not yet earned by the final delivery of goods or that
portion of Accounts not yet earned by the final rendition of services by
Borrower to the account debtor, including with respect to both goods and
services, progress xxxxxxxx, and that portion of Accounts for which an
invoice has not been sent to the applicable account
debtor;
|
|
(d)
|
Accounts
constituting (i) Proceeds of copyrightable material unless such
copyrightable material shall have been registered with the United States
Copyright Office, or (ii) Proceeds of patentable inventions unless such
patentable inventions have been registered with the United States Patent
and Trademark Office;
|
|
(e)
|
Accounts
owed by any unit of government, whether foreign or domestic;
provided that there shall be included (subject, for the
avoidance of doubt, in each case, to Xxxxx Fargo’s right at any time to
deem any Account(s) ineligible in its sole discretion pursuant to
paragraph (o) below) in Eligible Accounts (i) Accounts owed by units of
U.S. state and local government unless the Borrower has failed to
provide, following request by Xxxxx Fargo, evidence satisfactory to Xxxxx
Fargo that (1) Xxxxx Fargo’s Security Interest constitutes a perfected
first priority Lien in such Accounts, and (2) such Accounts may be
enforced by Xxxxx Fargo directly against such unit of government under all
applicable laws and (ii) accounts owed by the United States federal
government or divisions thereof but only to the extent that the Borrower
has complied with the Assignment of Claims Act of 1940 with respect to
such Accounts;
|
|
(f)
|
Accounts
denominated in any currency other than United States
Dollars;
|
A-4
|
(g)
|
Accounts
owed by an account debtor located outside the United States or Canada
(other than Eligible Foreign
Accounts);
|
|
(h)
|
Accounts
owed by an account debtor (i) who is insolvent, (ii) who is the subject of
bankruptcy proceedings (which Accounts Xxxxx Fargo will consider on a
case-by-case basis) or (iii) who has gone out of
business;
|
|
(i)
|
Accounts
owed by an Owner, Subsidiary, Affiliate, Officer or employee of
Borrower;
|
|
(j)
|
Accounts
not subject to the Security Interest or which are subject to any Lien in
favor of any Person other than Xxxxx Fargo other than Permitted
Liens;
|
|
(k)
|
Accounts
which have been credited and re-billed or restructured, extended, amended
or modified due to credit or collection
considerations;
|
|
(l)
|
That
portion of Accounts that constitutes advertising, finance charges, service
charges or sales or excise taxes;
|
|
(m)
|
Accounts
owed by an account debtor, regardless of whether otherwise eligible, to
the extent that the aggregate balance of such Accounts exceeds 20% of the
aggregate amount of all Eligible Accounts provided
that in the event Delta and Northwest merge or otherwise consolidate into
one Person, the surviving Person of such merger or other consolidation may
owe up to 25% of the aggregate amount of all Eligible
Accounts;
|
|
(n)
|
Accounts
owed by an account debtor, regardless of whether otherwise eligible, if
33% or more of the total amount of Accounts due from such debtor is
ineligible under clauses (a), (b), or (k) above;
and
|
|
(o)
|
Accounts,
or portions of Accounts, otherwise deemed ineligible by Xxxxx Fargo in its
sole discretion.
|
“Eligible
Foreign Accounts” means all unpaid Accounts from the Borrower which would
otherwise qualify as Eligible Accounts (except for the fact that such Accounts
are owed by an account debtor located outside the United States or Canada),
provided that such Accounts are (i) billed by Borrower in the United States to
an address maintained by the applicable account debtor in the United States,
(ii) relate to services rendered to such account debtor in the United
States, (iii) paid from a bank account maintained by such account debtor in the
United States, and (iv) owed by an account debtor that is actively maintaining a
presence and conducting a substantial business in the United
States.
“Eligible
Unbilled Accounts” means all unpaid Accounts of Borrower arising from the
performance of services by Borrower, net of any credits, that would otherwise
qualify as Eligible Billed Accounts except invoices have not been rendered by
Borrower to the account debtors of such Accounts, but excluding any Account for
which an invoice has not been rendered to the account debtor within thirty (30)
days of Borrower having performed the services giving rise to such
Account.
“Environmental
Law” means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the
environment.
A-5
“Equipment”
shall have the meaning given it under the Uniform Commercial Code in effect in
the state whose laws govern this Agreement.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.
“ERISA
Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group which includes Borrower and which is treated as a single
employer under Section 414 of the IRC.
“Event of
Default” is defined in Section 6.1.
“Field
Exams” is defined in Section 1.6(c).
“Funds
from Operations” means for a given period, the sum of (a) Net Income,
(b) depreciation and amortization, (c) any increase (or decrease) in
deferred income taxes, (d) any increase (or decrease) in lifo reserves, and
(e) other non-cash items, each as determined for such period in accordance
with GAAP.
“GAAP”
means generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied in the financial statements described on
Exhibit D.
“General
Intangibles” shall have the meaning given it under the UCC.
“Hazardous
Substances” means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.
"Indebtedness"
means any Loans, advances, extensions of credit, debts, obligations and/or
liabilities of Borrower to Xxxxx Fargo arising under this Agreement or any other
Loan Document, whether now in existence or hereafter incurred, whether voluntary
or involuntary, and whether due or not due, absolute or contingent, liquidated
or unliquidated, and including without limitation all obligations arising under
any swap, derivative, foreign exchange, hedge, deposit, treasury management or
similar transaction or arrangement however described or defined that Borrower
may enter into at any time with Xxxxx Fargo or with Xxxxx Fargo Merchant
Services, L.L.C., whether or not Borrower may be liable individually or jointly
with others, or whether recovery upon such Indebtedness may subsequently become
unenforceable.
“Indemnified
Liabilities” is defined in Section 7.8.
“Indemnitee”
is defined in Section 7.8.
“Infringement”
or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.
“Intellectual
Property Rights” means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.
A-6
“Interest
Expense” means for a fiscal year-to-date period, Borrower’s total gross interest
expense during such period (excluding interest income), and shall in any event
include (a) interest expensed (whether or not paid) on all Debt,
(b) the amortization of debt discounts, (c) the amortization of all
fees payable in connection with the incurrence of Debt to the extent included in
interest expense, and (d) the portion of any capitalized lease obligation
allocable to interest expense.
“Interest
Payment Date” is defined in Section 1.7(a).
“Interest
Period” means the period that commences on (and includes) the Business Day on
which either a LIBOR Advance is made or continued or on which a Base Rate
Advance is converted to a LIBOR Advance, and ending on (but excluding) the
Business Day numerically corresponding to that date that falls the number of
months afterward as selected by Borrower pursuant to Section 1.3A, during which
period the outstanding principal amount of the LIBOR Advance shall bear interest
at the LIBOR Advance Rate; provided, however,
that:
|
(a)
|
If
an Interest Period would otherwise end on a day which is not a Business
Day, then it shall end on the next Business Day, unless that day is the
first Business Day of a month, in which case the Interest Period shall end
on the last Business Day of the preceding
month;
|
|
(b)
|
No
Interest Period applicable to an Advance may end later than the Maturity
Date; and
|
|
(c)
|
In
no event shall Lead Borrower select Interest Periods with respect to LIBOR
Advances which would result in the payment of a LIBOR Advance breakage fee
under this Agreement in order to make required principal
payments.
|
“Interest
Rate Reduction Effective Date” is defined in Section 1.5(a).
“Inventory”
shall have the meaning given it under the UCC.
“Investment
Property” shall have the meaning given it under the UCC.
“Key
Persons” means Xxxxx Xxxxxxxxxx, President and Chief Financial Officer, Xxxxxx
X. Xxxxxx, Chief Executive Officer, and Xxxxxx X. Xxxxx, Xx., Chief Operating
Officer of Borrower.
“Lead
Borrower” is defined in Section 1.11.
L/C
Amount” means the sum of (a) the Aggregate Face Amount of any outstanding
Letters of Credit, plus (b) the amount of each Obligation of Reimbursement
that either remains unreimbursed or has not been paid through an Advance on the
Line of Credit.
“L/C
Application” means an application for the issuance of standby or documentary
Letters of Credit pursuant to the terms of a Standby Letter of Credit Agreement
or Commercial Letter of Credit Agreement, in form acceptable to Xxxxx
Fargo.
“Letter
of Credit” and “Letters of Credit” are each defined in Section
1.9(a).
“Licensed
Intellectual Property” is defined in Exhibit D.
A-7
“LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8th of one
percent (1%)) determined pursuant to the following formula:
|
LIBOR
=
|
Base
LIBOR
|
|
|
100%
- LIBOR Reserve Percentage
|
|
(a)
|
"Base
LIBOR" means the rate per annum for United States dollar deposits quoted
by Xxxxx Fargo as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Xxxxx Fargo for the purpose of
calculating effective rates of interest for loans making reference to it,
on the first day of an Interest Period for delivery of funds on that date
for a period of time approximately equal to the number of days in that
Interest Period and in an amount approximately equal to the principal
amount to which that Interest Period applies. Borrower
understands and agrees that Xxxxx Fargo may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Xxxxx Fargo in its discretion deems
appropriate including the rate offered for U.S. dollar deposits on the
London Inter-Bank Market.
|
|
(b)
|
"LIBOR
Reserve Percentage" means the reserve percentage prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal
Reserve Board, as amended), adjusted by Xxxxx Fargo for expected changes
in such reserve percentage during the applicable Interest
Period.
|
“LIBOR
Advance” means an Advance bearing interest at the LIBOR Advance
Rate.
“LIBOR
Advance Rate” is defined in Section 1.5(a).
“LIBOR
Advance Rate Applicable Margin” means two and three-quarters percent (2.75%) per
annum, subject to the provisions of Section 1.5(a).
“Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on any
assets or properties of a Person, whether now owned or subsequently acquired and
whether arising by agreement or operation of law.
“Line
of Credit” is defined in the Recitals.
“Loan
Documents” means this Agreement, the Revolving Note, the Master Agreement for
Treasury Management Services, each Standby Letter of Credit Agreement, each
Commercial Letter of Credit Agreement, any L/C Applications, and the Security
Documents, together with every other agreement, note, document, contract or
instrument to which Borrower now or in the future may be a party and which may
be required by Xxxxx Fargo in connection with, or as a condition to, the
execution of this Agreement. Any documents or other agreements entered into
between Borrower and Xxxxx Fargo that relate to any swap, derivative, foreign
exchange, hedge, or similar product or transaction, or which are entered into
with an operating division of Xxxxx Fargo other than Xxxxx Fargo Business
Credit, shall not be included in this definition.
“Loan
Manager Service” means the treasury management service defined in the Master
Agreement for Treasury Management Services and related Loan Manager Service
Description.
A-8
“Lockbox”
means “Lockbox” as defined in the Master Agreement for Treasury Management
Services and related Lockbox and Collection Account Service
Description.
“Master
Agreement for Treasury Management Services” means the Master Agreement for
Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by
Borrower.
“Material
Adverse Effect” means any of the following:
|
(a)
|
A
material adverse effect on the business, operations, results of
operations, prospects, assets, liabilities or financial condition of
Borrower;
|
|
(b)
|
A
material adverse effect on the ability of Borrower to perform its
obligations under the Loan Documents;
or
|
|
(c)
|
A
material adverse effect on the ability of Xxxxx Fargo to enforce the
Indebtedness or to realize the intended benefits of the Security
Documents, including a material adverse effect on the validity or
enforceability of any Loan Document, or on the status, existence,
perfection, priority (subject to Permitted Liens) or enforceability of any
Lien securing payment or performance of the
Indebtedness.
|
“Maturity
Date” is defined in Section 1.1(b).
“Maximum
Line Amount” is defined in Section 1.1(a).
“Multiemployer
Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Borrower or any ERISA Affiliate contributes or is obligated to
contribute.
“Net
Income” means fiscal year-to-date after-tax net income from continuing
operations, excluding extraordinary losses and extraordinary gains and including
any tax benefit, all as determined in accordance with GAAP.
“Obligation
of Reimbursement” is defined in Section 1.9(b).
“OFAC” is
defined in Section 5.12(b).
“Officer”
means with respect to Borrower, an officer if Borrower is a corporation, a
manager if Borrower is a limited liability company, or a partner if Borrower is
a partnership.
“Operating
Account” is defined in Section 1.3(a), and maintained in accordance with the
terms of Xxxxx Fargo’s Commercial Account Agreement in effect for demand deposit
accounts.
"Overadvance"
means the amount, if any, by which the unpaid principal amount of the Revolving
Note, plus the L/C Amount, is in excess of the
then-existing Borrowing Base.
“Owned
Intellectual Property” is defined in Exhibit D.
“Owner”
means with respect to Borrower, each Person having legal or beneficial title to
an ownership interest in Borrower.
A-9
“Patent and Trademark
Security Agreement” means each Patent and Trademark Security Agreement entered
into between Borrower and Xxxxx Fargo.
“Pension
Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of Borrower or any ERISA Affiliate and covered by Title IV of
ERISA.
“Permitted
Lien” and “Permitted Liens” are defined in Section 5.3(a).
“Person”
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision of a governmental
entity.
“Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of Borrower or any ERISA Affiliate.
“Premises”
is defined in Section 2.4(a).
“Prime
Rate” means at any time the rate of interest most recently announced by Xxxxx
Fargo at its principal office as its Prime Rate, with the understanding that the
Prime Rate is one of Xxxxx Fargo's base rates, and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference to it, and is evidenced by its recording in such internal publication
or publications as Xxxxx Fargo may designate. Each change in the rate
of interest shall become effective on the date each Prime Rate change is
announced by Xxxxx Fargo.
“Prime
Rate Applicable Margin” means one and one-half percent (1.50%) per
annum, subject to the provisions of Section 1.5(a).
“Proceeds”
shall have the meaning given it under the UCC.
“Record”
means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes
all information that is required to be reported by Borrower to Xxxxx Fargo
pursuant to Section 5.1.
“Reportable
Event” means a reportable event (as defined in Section 4043 of ERISA), other
than an event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the Pension Benefit Guaranty
Corporation.
“Revolving
Note” is defined in Section 1.1(d).
“Security
Documents” means this Agreement, the Patent and Trademark Security
Agreement, and any
other document delivered to Xxxxx Fargo from time to time to secure the
Indebtedness.
“Security
Interest” is defined in Section 2.1.
“Special
Account” means a specified cash collateral account maintained with Xxxxx Fargo
or another financial institution acceptable to Xxxxx Fargo in connection with
each undrawn Letter of Credit issued by Xxxxx Fargo, as more fully described in
Section 1.10.
“Standby
Letter of Credit Agreement” means an agreement governing the issuance of standby
letters of credit by Xxxxx Fargo entered into between Borrower as applicant and
Xxxxx Fargo as issuer.
A-10
“Subsidiary”
means any Person of which more than 50% of the outstanding ownership interests
having general voting power under ordinary circumstances to elect a majority of
the board of directors or the equivalent of such Person, irrespective of whether
or not at the time ownership interests of any other class or classes shall have
or might have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by Borrower, by Borrower and one or more
other Subsidiaries, or by one or more other Subsidiaries.
“Termination
Date” is defined in Section 1.1(b).
“UCC”
means the Uniform Commercial Code in effect in the state designated in this
Agreement as the state whose laws shall govern this Agreement, or in any other
state whose laws are held to govern this Agreement or any portion of this
Agreement.
“Unfinanced Capital
Expenditures” means for a period, any expenditure of money during such period
for the purchase or construction of assets, or for improvements or additions to
such assets, which are not financed with borrowed funds and are not capitalized
on Borrower’s balance sheet.
“Unused
Amount” is defined in Section 1.6(b).
“Xxxxx
Fargo” means Xxxxx Fargo Bank, National Association in its broadest and most
comprehensive sense as a legal entity, and is not limited in its meaning to the
Xxxxx Fargo Business Credit operating division, or to any other operating
division of Xxxxx Fargo.
A-11
Exhibit
B to Credit and Security Agreement
PREMISES
The
Premises referred to in the Credit and Security Agreement have the following
addresses, and are legally described as follows:
0000
Xxxxxxxxxx Xxxxxx
Xxxxx
000
Xxx
Xxxxx, Xxxxxxxxxx 00000
0000
Xxxxx 00
Xxxxx
X
Xxxxxxxxxxxxx,
Xxx Xxxx 00000
In the
event of any conflict between the address and the legal description, the legal
description shall control.
B-1
Exhibit
C to Credit and Security Agreement
CONDITIONS
PRECEDENT
Xxxxx
Fargo’s obligation to make an initial Advance shall be subject to the condition
that Xxxxx Fargo shall have received the following, executed and in form and
content satisfactory to Xxxxx Fargo. The following descriptions are
limited descriptions for reference purposes only and should not be construed as
limiting in any way the subject matter that Xxxxx Fargo requires each document
to address.
A. Loan
Documents to be Executed by Borrower:
(1) The
Revolving Note.
|
(2)
|
|
(3)
|
The
Master Agreement for Treasury Management Services, the Acceptance of
Services, and the related Service Description for each deposit or treasury
management related product or service that Borrower will subscribe to,
including without limitation the Loan Manager Service Description, and the
Lockbox and Collection Account Service Description, and Collection Account
Service Description.
|
(4) The
Patent and Trademark Security Agreement.
(5) A
Standby Letter of Credit Agreement or a Commercial Letter of Credit Agreement,
and a separate L/C Application for each Letter of Credit that Borrower has
requested that Xxxxx Fargo issue.
|
B.
|
Loan
Documents to be Executed by Third
Parties:
|
|
(1)
|
Certificates
of Insurance required under
this Agreement, with all hazard insurance containing a lender’s interest
endorsement in Xxxxx Fargo’s favor and with all liability insurance naming
Xxxxx Fargo as additional insured.
|
|
(2)
|
Control
agreements with each bank at which Borrower maintain deposit accounts
other than Xxxxx Fargo.
|
(3) The CIT
Payoff Letter executed by Borrower and CIT.
|
(4)
|
A
Landlord’s Disclaimer and Consent to each lease entered into by Borrower
and that Landlord with respect to the Premises located at 0000 Xxxxxxxxxx
Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000 and 0000 Xxxxx 00, Xxxxx X,
Xxxxxxxxxxxxx, Xxx Xxxx 00000, pursuant to which the Landlord waives its
Lien in any Collateral of Borrower located on the
Premises.
|
C-1
|
C.
|
Documents
Related to the Premises
|
|
(1)
|
Any
leases pursuant to which Borrower is leasing the Premises from a
lessor.
|
|
D.
|
Federal
Tax, State Tax, Judgment, UCC and Intellectual Property Lien
Searches
|
|
(1)
|
Current
searches of Borrower in appropriate filing offices showing that
(i) no Liens have been filed and remain in effect against Borrower
and Collateral except Permitted Liens or Liens held by Persons who have
agreed in an Authenticated Record that upon receipt of proceeds of the
initial Advances, they will satisfy, release or terminate such Liens in a
manner satisfactory to Xxxxx Fargo, and (ii) Xxxxx Fargo has filed
all UCC financing statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by
filing.
|
|
E.
|
Constituent
Documents:
|
|
(1)
|
The
Certificate of Authority of Borrower, which shall include as part of the
Certificate or as exhibits to the Certificate, (i) the Resolution of
Borrower’s Directors and, if required, Owners, authorizing the execution,
delivery and performance of those Loan Documents and other documents or
agreements described in or related to this Agreement to which Borrower is
a party, (ii) an Incumbency Certificate containing the signatures of
Borrower’s Officers or agents authorized to execute and deliver those
instruments, agreements and certificates referenced in (i) above, as well
as Advance requests, on Borrower’s behalf, (iii) Borrower’s Constituent
Documents, (iv) a current Certificate of Good Standing or Certificate of
Status issued by the secretary of state or other appropriate authority for
Borrower’s state of organization, certifying that Borrower is in good
standing and in compliance with all applicable organizational requirements
of the state of organization, and (v) a Secretary’s Certificate of
Borrower’s secretary or assistant secretary certifying that the
Certificate of Authority of Borrower is true, correct and
complete.
|
|
(2)
|
Evidence
that Borrower is licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the
nature of the business transacted by it makes such licensing or
qualification necessary.
|
|
(3)
|
An
Officer’s Certificate of an appropriate
Officer of Borrower confirming, in his or her personal capacity, the
representations and warranties set forth in this
Agreement.
|
|
(5)
|
A
Customer Identification Information Form and such other forms and
verification as Xxxxx Fargo may need to comply with the U.S.A. Patriot
Act.
|
|
(6)
|
An
Opinion of Counsel issued by Borrower’s counsel and addressed to Xxxxx
Fargo, that opines that (a) Borrower is organized and in good standing in
its state of organization; (b) Borrower is in good standing in each state
in which it does business; (c) Borrower has the power to execute and
deliver the Loan Documents and any other document or agreement described
in or related to this Agreement, and to borrow money and perform in
accordance with the terms of the Loan Documents, or any other document or
agreement described in or related to this Agreement; (d) all corporate
action and consent necessary to the validity of the Loan Documents and any
other document or agreement described in or related to this Agreement has
been obtained; (e) the Loan Documents and any other document or agreement
described in or related to this Agreement, have been signed and are the
valid and binding obligation of Borrower and enforceable in accordance
with their terms; and (f) to the best of counsel's knowledge, the Loan
Documents and any other document or agreement described in or related to
this Agreement, and the transactions they contemplate do not conflict
Borrower’s articles of incorporation or by-laws or any agreement binding
upon Borrower or its
properties.
|
C-2
F. Miscellaneous
Matters or Documents:
|
(1)
|
Payment
of fees and reimbursable costs and expenses due under this Agreement
through the date of initial Advance or issuance of a Letter of Credit,
including all legal expenses incurred through the date of the closing of
this Agreement.
|
|
(2)
|
Evidence
that after making the initial Advance and satisfying all obligations owed
to Borrower’s prior lender, paying all trade payables older than
60 days from invoice date, and paying all book overdrafts and closing
costs, availability under the Line of Credit is not less than
$2,000,000.
|
|
(3)
|
Any
documents or other agreements entered into by Borrower and Xxxxx Fargo
that relate to any swap, derivative, foreign exchange, hedge, deposit,
treasury management or similar product or transaction extended to Borrower
by Xxxxx Fargo not already provided pursuant to the requirements of
(A)-(F) above.
|
|
(4)
|
Such
other documents as Xxxxx Fargo in its sole discretion may
require.
|
C-3
Exhibit
D to Credit and Security Agreement
REPRESENTATIONS AND
WARRANTIES
Borrower
represents and warrants to Xxxxx Fargo as follows:
|
(a)
|
Existence and Power;
Name; Chief Executive Office; Inventory and Equipment Locations; Federal
Employer Identification Number and Organizational Identification
Number. Borrower is a corporation organized, validly
existing and in good standing under the laws of its state of
incorporation and is licensed or
qualified to transact business in all jurisdictions where the character of
the property owned or leased or the nature of the business transacted by
it makes such licensing or qualification necessary (excluding the
jurisdictions set forth below in which the Borrower is not in good
standing or the Borrower’s qualification to transact business in such
jurisdictions is pending), except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse
Effect. Borrower has all requisite power and authority to
conduct its business, to own its properties and to execute and deliver,
and to perform all of its obligations under, those Loan Documents and any
other documents or agreements that it has entered into with Xxxxx Fargo
related to this Agreement. During its existence, Borrower has
done business solely under the names set forth below in addition to its
correct legal name. Borrower’s chief executive office and
principal place of business is located at the address set forth below, and
all of Borrower’s records relating to its business or the Collateral are
kept at that location. All of Borrower’s books and records
relating to its Accounts are located at that location or at one of the
other locations set forth below. Borrower’s name, Federal
Employer Identification Number and Organization Identification Number are
correctly set forth at the end of the Agreement next to Borrower’s
signature.
|
(i)
Pending Jurisdictions
Command Security
Corporation
Colorado
- Pending
Washington,
D.C. - Pending
(ii)
Jurisdictions Not in Good Standing
None
(iii)
Trade Names
Aviation
Safeguards
CSC
Security Services
Chief
Executive Office / Principal Place of Business
X.X. Xxx
000
0000
Xxxxx 00, Xxxxx X
Xxxxxxxxxxxxx,
Xxx Xxxx 00000
D-1
|
(b)
|
Capitalization. Borrower
is a reporting company pursuant to the Securities Act of 1933, as amended,
and its ownership interests are held by in excess of [100]
holders. According to Borrower’s Form 10-Q filed November 14,
2008, as of November 6, 2008, there were [10,757,216] shares of issued and
outstanding common stock and [0] shares of issued and outstanding
preferred stock of Borrower. The Organizational Chart below
shows the ownership structure of all Subsidiaries of
Borrower.
|
Organizational
Chart
See
attached Exhibit D-2
|
(c)
|
Authorization of
Borrowing; No Conflict as to Law or Agreements. The
execution, delivery and performance by Borrower of the Loan Documents and
any other documents or agreements described in or related to this
Agreement, and all borrowing under the Line of Credit have been authorized
and do not (i) require the consent or approval of Borrower’s Owners;
(ii) require the authorization, consent or approval by, or
registration, or filing with, or notice to, any governmental agency or
instrumentality, whether domestic or foreign, or any other Person, except
to the extent obtained, accomplished or given on or prior to the date of
this Agreement; (iii) violate any provision of any law, rule or
regulation (including Regulation X of the Board of Governors of the
Federal Reserve System) applicable to Borrower or of any order, writ,
injunction, judgment or decree presently in effect having applicability to
Borrower or of Borrower’s Constituent Documents; (iv) result in a
breach of or constitute (with due notice or lapse of time or both) a
default or event of default under any material agreement to which Borrower
is a party or by which it or its properties may be bound or affected; or
(v) result in, or require, the creation or imposition of any Lien
(other than the Security Interest) upon or with respect to any of the
properties now owned or subsequently acquired by
Borrower.
|
|
(d)
|
Legal
Agreements. This Agreement and the other Loan Documents
to which Borrower is a party, and any other document or agreement
contemplated hereby and thereby, when executed and delivered by Borrower,
will constitute the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms,
except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors’ rights
generally.
|
|
(e)
|
Subsidiaries. Except
as disclosed below, Borrower has no
Subsidiaries.
|
Subsidiaries
D-2
Command
Security Services, Inc.
Strategic
Security Services, Inc.
Xxxxxxx
Police Patrol, Inc.
|
(f)
|
Financial Condition;
No Adverse Change. Borrower has furnished to Xxxxx Fargo
its audited financial statements for its fiscal year ended March 31,
2008 and
unaudited financial statements for the fiscal-year-to-date period ended
September 30, 2008 and those statements fairly present in all material
respects Borrower’s financial condition as of those dates and the results
of Borrower’s operations and cash flows for the periods then ended and
were prepared in accordance with GAAP. Since the date of the
most recent financial statements, there has been no Material Adverse
Effect in Borrower’s business, properties or condition (financial or
otherwise).
|
|
(g)
|
Litigation. There
are no actions, suits or proceedings pending or, to Borrower’s knowledge,
threatened against Borrower or any of its Subsidiaries or the properties
of Borrower or any of its Subsidiaries before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, which, if determined adversely to Borrower or any of its
Subsidiaries, would result in a final judgment or judgments against
Borrower or any of its Subsidiaries in an amount in excess of $250,000
(excluding judgments which are fully insured, bonded or subject to an
indemnity in favor of Borrower), apart from those matters specifically
disclosed below.
|
Litigation
Matters in Excess of $250,000
None
|
(h)
|
Intellectual Property
Rights.
|
(i) Owned Intellectual
Property. Borrower owns, or holds licenses in, all trademarks,
trade names, copyrights, patents, patent rights and licenses that are material
to the conduct of its business as currently conducted, and set forth below is a
complete list of all material patents, applications for patents, trademarks,
applications to register trademarks, service marks, applications to register
service marks, mask works, trade dress and copyrights for which Borrower is the
owner of record or is an exclusive licensee (the “Owned Intellectual Property”).
Except as set forth in any Record, copies of which have been given to Xxxxx
Fargo or where the failure of any of the following to be true would not have a
Material Adverse Effect, (A) Borrower owns the Owned Intellectual Property free
and clear of all restrictions (including covenants not to xxx any Person), court
orders, injunctions, decrees, writs or Liens, whether by agreement memorialized
in a Record Authenticated by Borrower or otherwise, (B) to Borrower’s knowledge,
no Person other than Borrower owns or has been granted any right in the Owned
Intellectual Property, (C) all Owned Intellectual Property is valid, subsisting
and enforceable, and (D) Borrower has taken all commercially reasonable action
necessary to maintain and protect the Owned Intellectual Property.
D-3
(ii) Intellectual Property Rights
Licensed from Others. Set forth below is a complete list of
all agreements under which Borrower has licensed Intellectual Property Rights
from another Person (“Licensed Intellectual Property”) other than readily
available, non-negotiated licenses of computer software and other intellectual
property used solely for performing accounting, word processing and similar
administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing
payments Borrower is obligated to make with respect thereto. Except
as set forth below or in any other Record, copies of which have been given to
Xxxxx Fargo, Borrower’s licenses to use the Licensed Intellectual Property are
free and clear of all restrictions, Liens, court orders, injunctions, decrees,
or writs, whether by agreed to in a Record Authenticated by Borrower or
otherwise, except where failure of the foregoing to be true would not have a
Material Adverse Effect. Except as set forth below or in any other
Record, copies of which have been given to Xxxxx Fargo, Borrower is not
contractually obligated to make royalty payments of a material nature, or pay
fees to any owner of, licensor of, or other claimant to, any Intellectual
Property Rights, where the failure to pay such payments would have a Material
Adverse Effect.
(iii) Other Intellectual Property
Needed for Business. Except for Off-the-shelf Software and as
disclosed below, the Owned Intellectual Property and the Licensed Intellectual
Property constitute all Intellectual Property Rights used or necessary to
conduct Borrower’s business as it is presently conducted or as Borrower
reasonably foresees conducting it, the loss of which would have a Material
Adverse Effect.
(iv) Infringement. Except
as disclosed below, Borrower has no knowledge of, and has not received notice in
a Record alleging, any Infringement of another Person’s Intellectual Property
Rights (including any claim set forth in a Record that Borrower must license or
refrain from using the Intellectual Property Rights of any Person) nor, to
Borrower’s knowledge, is there any threatened claim or any reasonable basis for
any such claim, which would have a Material Adverse Effect.
Intellectual Property
Disclosures
(i)
Command Security Corporation Logo – Registration No. 1823346
Smart
Wheel (words only) – Registration Xx. 0000000
(xx)
Xxxx
(xxx)
None
(iv)
None
D-4
|
(i)
|
Taxes. Borrower
and its Subsidiaries have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be
withheld by each of them. Borrower and its Subsidiaries have
filed all federal, state and local tax returns which to the knowledge of
the Officers of Borrower or any Subsidiary, as the case may be, are
required to be filed, and Borrower and its Subsidiaries have paid or
caused to be paid to the respective taxing authorities all taxes as shown
on these returns or on any assessment received by any of them to the
extent such taxes have become due, unless such taxes are being diligently
contested in good faith by Borrower by appropriate proceedings and
adequate reserves are established in accordance with
GAAP.
|
|
(j)
|
Titles and
Liens. Borrower has good and absolute title to all
Collateral free and clear of all Liens other than Permitted
Liens. To Borrower’s knowledge, no financing statement naming
Borrower as debtor is on file in any office except to perfect only
Permitted Liens.
|
|
(k)
|
No
Defaults. Borrower is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party
or by which it or its property is bound or affected, the breach or default
of which could reasonably be expected to have a Material Adverse Effect on
Borrower’s financial condition, properties or operations
.
|
|
(l)
|
Submissions to Xxxxx
Fargo. All financial and other information provided to
Xxxxx Fargo by or on behalf of Borrower in connection with Borrower’s
request for the credit facilities contemplated hereby (x) is, with respect
to information other than projections, valuations or pro forma financial
statements, (i) true and correct in all material respects, and
(ii) does not omit any material fact that would cause such
information to be materially misleading, and (y) as to projections,
valuations or pro forma financial statements, present a good faith opinion
as to such projections, valuations and pro forma condition and
results.
|
|
(m)
|
Financing
Statements. Borrower has previously authorized the
filing of financing statements sufficient when filed to perfect the
Security Interest and other Liens created by the Security
Documents. When such financing statements are filed, Xxxxx
Fargo will have a valid and perfected security interest in all Collateral
capable of being perfected by the filing of financing statements in the
offices where such financing statements are filed. None of the
Collateral is or will become a fixture on real estate, unless a sufficient
fixture filing has been filed with respect to such
Collateral.
|
|
(n)
|
Rights to
Payment. Each right to payment and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim of the account debtor or
other obligor named in that instrument, except for disputes and other
matters arising in the ordinary course of
business.
|
(o) Employee Benefit
Plans.
(i)
Maintenance and
Contributions to Plans. Except as disclosed below, neither
Borrower nor any ERISA Affiliate (A) maintains or has maintained any Pension
Plan, (B) contributes or has contributed to any Multiemployer Plan, or (C)
provides or has provided post-retirement medical or insurance benefits to
employees or former employees (other than benefits required under Section 601 of
ERISA, Section 4980B of the IRC, or applicable state
law).
D-5
(ii) Knowledge of Plan
Noncompliance with Applicable Law. Except as disclosed below,
neither Borrower nor any ERISA Affiliate has (A) knowledge that Borrower or the
ERISA Affiliate is not in compliance in all material respects with the
requirements of ERISA, the IRC, or applicable state law with respect to any
Plan, (B) knowledge that a Reportable Event occurred or continues to exist in
connection with any Pension Plan, or (C) during the six year period ending on
the date of this Agreement, sponsored a Plan that it intends to maintain as
qualified under the IRC that is not so qualified, and no fact or circumstance
exists which may have an adverse effect on such Plan’s tax-qualified
status.
(iii)
Funding Deficiencies and
Other Liabilities. Neither Borrower nor any ERISA Affiliate
has liability for any (A) accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the IRC) under any Plan, whether or not
waived, (B) withdrawal, partial withdrawal, reorganization or other event
under any Multiemployer Plan under Section 4201 or 4243 of ERISA, or
(C) event or circumstance which could result in financial obligation to the
Pension Benefit Guaranty Corporation, the Internal Revenue Service, the
Department of Labor or any participant in connection with any Plan (other than
routine claims for benefits under the Plan).
Employee
Benefit Plans
(i)
None
(ii)
None
(p) Environmental
Matters.
(i) Hazardous Substances on
Premises. Except as disclosed below, there are not present in,
on or under the Premises any Hazardous Substances in such form or quantity as to
create any material liability or obligation for either Borrower or Xxxxx Fargo
under the common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to create a
material liability.
(ii)
Disposal of Hazardous
Substances. Except as disclosed below, Borrower has not
disposed of Hazardous Substances in such a manner as to create any material
liability under any Environmental Law.
(iii)
Claims and Proceedings with
Respect to Environmental Law Compliance. Except as disclosed below, there
have not existed in the past, nor are there any threatened or impending
requests, claims, notices, investigations, demands, administrative proceedings,
hearings or litigation relating in any way to the Premises or Borrower, alleging
material liability under, violation of, or noncompliance with any Environmental
Law or any license, permit or other authorization issued pursuant
thereto.
(iv)
Compliance with
Environmental Law; Permits and Authorizations. Except as
disclosed below, Borrower (A) conducts its business at all times in compliance
with applicable Environmental Law, except where the failure to comply would not
reasonably be expected to have a Material Adverse Effect, (B) possesses valid
licenses, permits and other authorizations required under applicable
Environmental Law for the lawful and efficient operation of its business, none
of which are scheduled to expire, or withdrawal, or material limitation within
the next 12 months, and (C) has not been denied insurance on grounds related to
potential environmental liability.
D-6
(v)
Status of
Premises. To Borrower’s knowledge, except as disclosed below,
the Premises are not and never have been listed on the National Priorities List,
the Comprehensive Environmental Response, Compensation and Liability Information
System or any similar federal, state or local list, schedule, log, inventory or
database, except where such denial could reasonably be expected to have a
Material Adverse Effect.
Environmental
Matters
(i)
None
(ii)
None
(iii)
None
(iv)
None
(v)
None
(p) Labor
Relations. Except
as described below, neither Borrower nor any Subsidiary is party to or bound by
any collective bargaining agreement, management agreement or consulting
agreement (collectively, the “Labor Agreements”). There are no
material grievances, disputes or controversies with any union or other
organization of Borrower's or Subsidiary's employees, or, to Borrower’s
knowledge, any asserted or threatened strikes, work stoppages or demands for
collective bargaining.
Labor
Agreements
None
D-7
