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EXHIBIT 10.1
AGREEMENT
This Agreement (the "Agreement") is dated as of January 22, 1999 (the
"Agreement Effective Date") and is made and entered into by and among First
Union National Bank, successor by merger to First Fidelity Bank, N.A. (the
"Bank"), ECC International Corp., a Delaware corporation ("ECCI"), ECC
Simulation Limited, a company incorporated under the laws of England and Wales
("Simulation"), ECC International, Inc., a U.S. Virgin Islands corporation
("ECC, Inc.") and Educational Computer Corporation International, a Delaware
corporation ("E Computer"). ECCI and Simulation are referred to collectively
herein as the "Borrowers." ECCI, Simulation, ECC, Inc. and E Computer are
sometimes collectively referred to as the "ECC Group" and, when used herein, the
term "ECC Group" shall mean the members of the ECC Group collectively, jointly
and severally, each of them, any of them, and/or all of them. In their
respective capacities as guarantors of the Obligations (hereafter defined),
ECCI, Simulation, ECC, Inc. and E Computer are referred to collectively herein
as the "Guarantors" or individually as a "Guarantor."
BACKGROUND
A. Pursuant to various loan agreements and documents, including
that certain Term Loan and Revolving Credit Agreement dated as of September 20,
1994, the Bank has extended a term loan and revolving credit loan to ECCI.
B. Pursuant to various loan agreements and documents, including
that certain Revolving Credit Agreement dated as of September 20, 1994, the Bank
has extended a revolving credit loan to Simulation.
C. The ECC Group and the Bank are parties to that certain
Forbearance Agreement and Amendment dated as of October 8, 1998, as amended by a
letter agreement dated January 12, 1999 (as amended, the "Forbearance
Agreement"). All capitalized terms contained herein which are not otherwise
defined shall have the definitions set forth in the Forbearance Agreement and/or
the Existing Loan Documents (as defined in the Forbearance Agreement). Pursuant
to the Forbearance Agreement, the Bank agreed to forbear from exercising its
rights and remedies under the Existing Loan Documents until no later than
January 22, 1999, notwithstanding the Existing Events of Default.
D. The ECC Group has requested that the Bank extend the
Expiration Date under each of the Existing Loan Documents to the earlier to
occur of: (i) October 12, 1999, or (ii) the occurrence of an Event of Default
(other than the Existing Events of Default) under the Forbearance Agreement. The
Bank has agreed to these requests upon the terms and conditions hereinafter set
forth.
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NOW THEREFORE, incorporating the Background herein, and for good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the Bank and the ECC
Group agree as follows:
ARTICLE I - ACKNOWLEDGMENTS
1.1 ACKNOWLEDGMENT OF EXISTING EVENTS OF DEFAULT; EXISTING LOAN
DOCUMENTS; WAIVER OF DEFENSES. The ECC Group acknowledges that: (a) the Existing
Events of Default enumerated in the Background Section of the Forbearance
Agreement continue to exist; (b) the Existing Events of Default are material in
nature; and (c) the Existing Loan Documents are valid and enforceable against
the ECC Group in every respect, and all of the terms and conditions thereof are
binding upon the ECC Group. The ECC Group further acknowledges and agrees that,
as a result of the Existing Events of Default, and but for the Forbearance
Agreement and this Agreement, the Bank would be entitled immediately, and
without further notice or declaration to the ECC Group or anyone else, to
accelerate the Obligations and to exercise its rights and remedies under the
Existing Loan Documents or otherwise. To the extent that any of the Existing
Loan Documents require notification by the Bank to the ECC Group of the
existence of a default and an opportunity for the ECC Group to cure such a
default, such notice and period for cure have been properly given by the Bank or
are hereby waived by the ECC Group. To the extent that the ECC Group has any
defenses, setoffs, claims, or counterclaims to repayment of the Obligations or
against the Bank, such defenses, setoffs, claims, or counterclaims are hereby
waived.
1.2 ACKNOWLEDGMENT OF CURRENT OUTSTANDING OBLIGATIONS. As of the
date hereof, the ECC Group is indebted to the Bank in an aggregate amount equal
to the principal sum (including outstanding letters of credit) of $8,754,192.80,
plus (pound)300,000, plus accrued but unpaid interest, plus the Bank's costs and
expenses associated with the Existing Credit Facilities, including, without
limitation, the Bank's attorneys' fees incurred in the negotiation and
preparation of this Agreement and the documents related hereto (the foregoing
amounts are hereafter collectively referred to as the "Current Outstanding
Obligations"), all without offset, counterclaims or defenses of any kind.
1.3 ACKNOWLEDGMENT AND REAFFIRMATION OF GUARANTOR OBLIGATIONS. As
of the date hereof, the Guarantors are jointly and severally liable to the Bank
for the Obligations pursuant to their respective guaranties executed prior to
the date hereof (collectively, the "Guaranties").
1.4 ACKNOWLEDGMENT OF LIENS AND PRIORITY. Pursuant to the Existing
Loan Documents, the Bank holds first priority, perfected security interests in,
liens upon and charges against all of the ECC Group's assets, wherever located,
now owned or hereafter acquired, and as more specifically described in the
Existing Loan Documents. Such
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security interests, liens and charges secure all of the Obligations including,
without limitation, all amounts owed under the Existing Loan Documents.
1.5 REAFFIRMATION OF SECURITY INTERESTS; CROSS-COLLATERALIZATION.
All of the assets of the ECC Group pledged, assigned, conveyed, mortgaged,
hypothecated or transferred to the Bank pursuant to the Existing Loan Documents
including, without limitation, all real property, all accounts receivable,
inventory, equipment, general intangibles, contracts, contract rights,
instruments, letters of credit, deposits, documents of title, and proceeds
constitute security for all of the Obligations. The ECC Group hereby grants to
the Bank and reaffirms its prior conveyance to the Bank of a continuing security
interest in, lien on and charge against all of the collateral described herein
as well as a security interest in, lien on and charge against any and all funds
and/or monies contained in accounts located at the Bank or at any of the Bank's
subsidiaries or affiliates. The ECC Group agrees to execute and deliver to the
Bank such additional documentation deemed necessary or appropriate by the Bank,
in its sole and absolute discretion, to achieve the purpose of this Section of
this Agreement.
1.6 REAFFIRMATION OF GUARANTY. In consideration of the
undertakings of the Bank pursuant to this Agreement, the Guarantors hereby
reaffirm their respective Guaranties and all of their respective obligations to
the Bank thereunder. The Guarantors further agree that any and all warrants to
confess judgment contained in their respective guaranties are valid and fully
enforceable against them. Each of the Guarantors hereby consents to the
execution and delivery by the ECC Group of this Agreement and all other
documents and instruments to be executed pursuant to or in connection herewith.
Each Guarantor waives any right it may have to contest the validity or
enforceability of its guaranties by virtue of the ECC Group's execution of this
Agreement and the other documents entered into or delivered pursuant to or in
connection herewith.
ARTICLE II - WAIVER OF EXISTING DEFAULTS
Notwithstanding anything to the contrary contained in the Existing Loan
Documents or the Forbearance Agreement, the Bank hereby waives the Existing
Events of Default and agrees that the Expiration Date, as defined in each of the
Existing Loan Documents, shall be extended until October 12, 1999; provided,
however, that all terms and conditions contained in the Forbearance Agreement
and this Agreement shall be deemed additional terms and conditions of the
Existing Loan Documents and, additional covenants by the ECC Group under the
Existing Loan Documents.
ARTICLE III - AMENDMENTS TO EXISTING LOAN DOCUMENTS
3.1 MAXIMUM PRINCIPAL AMOUNT OF ECC REVOLVING CREDIT FACILITY. As
of the Agreement Effective Date, and notwithstanding Section A.2.b. or any other
provision of the Existing ECCI Loan Agreement or any provision of the
Forbearance Agreement to
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the contrary, the maximum aggregate principal amount of advances, including the
face amount of Letters of Credit (as defined in the Existing ECCI Loan
Agreement), to be outstanding at any time under the ECCI Revolving Credit
Facility (the "Maximum Principal Amount") shall be an amount which is not
greater than $6,000,000. The maximum aggregate principal amount outstanding
under both the ECCI Credit Facilities and the Simulation Revolving Credit
Facility shall not exceed $8,754,192.80, plus (pound)300,000. No further
advances shall be made available after the Agreement Effective Date. All
payments and other amounts received by the Bank after the Agreement Effective
Date shall be applied by the Bank, in the sole and absolute discretion of the
Bank, to permanently reduce the Obligations.
3.2 MAXIMUM PRINCIPAL AMOUNT OF SIMULATION REVOLVING CREDIT
FACILITY. As of the Agreement Effective Date, and notwithstanding Section A.1.b.
or any other provision of the Existing Simulation Loan Agreement or the
Forbearance Agreement to the contrary, the Maximum Principal Amount (as defined
in the Simulation Credit Agreement) of advances, including the face amount of
letters of credit, to be outstanding at any time under the Simulation Revolver
shall be an amount which is not greater than $2,754,192.80, plus (pound)300,000.
The maximum principal amount outstanding under both the ECCI Credit Facilities
and the Simulation Revolving Credit Facility shall not exceed $8,754,192.80,
plus (pound)300,000. No further advances shall be made available after the
Agreement Effective Date. All payments and other amounts received by the Bank
after the Agreement Effective Date shall be applied by the Bank, in the sole and
absolute discretion of the Bank, to permanently reduce the Obligations.
3.3 NON-DEFAULT INTEREST RATE. As of the Agreement Effective Date,
and notwithstanding any other provision of the Existing ECCI Loan Agreement
(including, without limitation, section A.1.c., A.2.c., and D.2. thereof), the
Existing Simulation Loan Agreement (including, without limitation, section
A.1.c., and D.2. thereof), the other Existing Loan Documents or the Forbearance
Agreement to the contrary, all Loans shall be converted to and/or remain Base
Rate Loans and, prior to the occurrence of an Event of Default (as defined in
the Forbearance Agreement), interest on the outstanding principal balance
outstanding under the Existing Credit Facilities shall accrue at the Bank's Base
Rate plus two and three-quarters percent (2.75%).
3.4 DEFAULT INTEREST RATE. As of the Agreement Effective Date, and
notwithstanding any provision of the Existing Loan Documents or the Forbearance
Agreement to the contrary, upon and at all times following the occurrence of an
Event of Default under the Forbearance Agreement, including following the entry
of any judgment against the Borrowers or any other member of the ECC Group,
interest on the outstanding principal balance outstanding under the Existing
Credit Facilities shall accrue at the Bank's Base Rate plus five percent (5%).
3.5 LETTERS OF CREDIT; CASH COLLATERAL. As to any letter of credit
issued for the account of Simulation in connection with lease payments due for
Simulation's leased space in England (the "England L/C"), for which Simulation
maintains pound sterling cash collateral with the Bank to secure such letter of
credit, upon termination of such
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letter of credit and the return of the same to the Bank, such cash collateral
shall be converted by the Bank to US dollars and applied by the Bank to
permanently reduce the Obligations. Such payment shall be in addition to all
other payments required hereunder.
3.6 AMENDED AND RESTATED FIXED CHARGE COVENANT. Section P.13 of
the Existing ECCI Loan Agreement and Section M.13 of the Existing Simulation
Loan Agreement shall remain in full force and effect but the Bank shall forbear
from declaring an Event of Default on account of any violation of Section P.13
of the Existing ECCI Loan Agreement or Section M.13 of the Existing Simulation
Loan Agreement if each of ECCI and Simulation meet minimum Fixed Charge
Covenants as follows:
"Fixed Charge Covenant. As of each of the following designated dates
and for each of the designated time periods, permit the Fixed Charge
Ratio to be less than the value corresponding to such date as follows:
October 30, 1998 [6.2] to 1.00 monthly
November 30, 1998 [1.36] to 1.00 monthly
December 31, 1998 2.43 to 1.00 monthly
March 31, 1999 1.20 to 1.00 quarterly
June 30, 1999 3.54 to 1.00 quarterly
September 30, 1999 3.75 to 1.00 quarterly
As used herein, "Fixed Charge Ratio" means, as of any date, the ratio
of (i) Consolidated net income (excluding non-recurring charges) PLUS
depreciation, interest expense and taxes (or minus any tax benefit) for
the applicable period ending on such date, to (ii) Fixed Charges of the
Borrower and all Consolidated Persons for such period, and "Fixed
Charges" means the sum of dividends, payments on capital leases,
interest expense and principal payments ("Principal on Long Term Debt")
on indebtedness for borrowed money which matures more than one year
from the date of such principal payment."
ECCI and Simulation, respectively, will report to the Bank the minimum
Fixed Charge Covenants specified in this Section monthly or quarterly,
as applicable, by the date on which ECCI and Simulation make their
other reports to the Bank. All reports shall be certified to be true,
correct and complete by the chief financial officer of ECCI and
Simulation respectively.
ARTICLE IV - AMENDMENTS TO FORBEARANCE AGREEMENT
4.1 Section 3.3 of the Forbearance Agreement is deleted in its
entirety.
4.2 Section 3.4 of the Forbearance Agreement is amended and
restated in its entirety to read as follows:
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MINIMUM DAILY AVAILABLE CASH BALANCES IN OPERATING ACCOUNT.
The Borrowers shall maintain minimum consolidated available
cash balances (not to include cash collateral) in bank
accounts at the Bank: (i) prior to the application to the
Obligations of not less than $1,500,000 of tax refunds owed to
the Borrower, $2,000,000 and (ii) thereafter, $1,000,000
(provided, however that in the event that the Bank fails to
deposit in the ECC Group's bank accounts tax refunds received
by the Bank in excess of $1,500,000, and such failure to
deposit such refunds results in a violation of this Section
3.4, then no event of default shall be deemed to exist as a
result of the ECC Group's failure to comply with this Section
3.4).
4.3 Section 3.9 of the Forbearance Agreement is amended and
restated in its entirety to read as follows:
(a) FEDERAL TAX REFUND PROCEDURE. Within five (5)
Business Days of the Forbearance Effective Date, the
ECC Group will execute and deliver an original
assignment of United States Tax refunds together with
powers of attorney and other assignment documents as
provided by the Bank (collectively, the "Tax Refund
Assignment Documents"). On or before January 29,
1999, the ECC Group will finalize and provide to the
Bank for filing simultaneously with the Tax Refund
Assignment Documents the ECC Group's federal tax
return. This provision shall survive termination of
the Forbearance Agreement unless the termination is
due to payment in full to the Bank of all Obligations
on or before October 12, 1999. Upon payment in full
to the Bank of all Obligations on or before October
12, 1999, this Section shall terminate and the Bank
will return the Tax Refund Assignments to ECCI within
five (5) Business Days.
(b) PAYMENTS FROM FEDERAL TAX REFUNDS. Upon the Bank's
receipt of any and all tax refunds with respect to
the ECC Group (or upon any ECC Group member's receipt
of the same, in which case such ECC Group member
shall immediately turn over such amount to the Bank),
the first $1,500,000 of such tax refunds shall be
applied at the sole and absolute discretion of the
Bank to permanently reduce the Obligations and all
additional amounts shall be deposited in the ECC
Group's accounts at the Bank and may be used for
general working capital purposes; provided, however,
that after an Event of Default hereunder, all tax
refunds shall be applied to permanently reduce the
Obligations.
4.4 Article III of the Forbearance Agreement is hereby
supplemented by adding the following Sections 3.10 through 3.14.
3.10 MONTHLY PAYMENTS. The ECC Group shall pay to the
Bank, on the 1st day of each month, commencing
February 1, 1999, through and
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including October 1, 1999, $100,000, which amount
shall be applied by the Bank in its sole and absolute
discretion to permanently reduce the Obligations,
plus all accrued and unpaid interest with respect to
the Obligations.
3.11 LIQUIDITY RATIO. ECCI, on a consolidated basis, shall
maintain a ratio of cash, cash equivalents, and
accounts receivable (billed only) to current
liabilities (including all Obligations of the ECC
Group to the Bank) of not less than 0.30:1.00 as of
each calendar month-end.
3.12 LIABILITIES TO EQUITY. ECCI, on a consolidated basis,
shall maintain a ratio of liabilities to
shareholders' equity of not more than 1.1:1.0 as of
each calendar month-end.
3.13 TANGIBLE STOCKHOLDERS' EQUITY. ECCI, on a
consolidated basis, shall maintain a Tangible
Stockholders' Equity of not less than: (i)
$28,750,000 as of each calendar month-end through and
including March 31, 1999; (ii) $28,000,000 as of
April 30, 1999 and May 31, 1999; (iii) $28,750,000 as
of June 30, 1999, July 31, 1999 and August 31, 1999;
and (iv) $29,750,000 as of September 30, 1999.
"Tangible Stockholders Equity" shall mean, at any
time, ECCI's aggregate stockholders' equity (on a
consolidated basis), less all intangible assets of
ECCI (on a consolidated basis), including, without
limitation, organization costs, securities issuance
costs, unamortized debt discount and expense,
goodwill, excess of purchase costs over net assets
acquired, patents, trademarks, trade names,
copyrights, trade secrets, knowhow, licenses,
franchises, capitalized research and development
expenses, amounts owing from officers and/or
affiliates and any amount reflected as treasury
stock.
3.14 NON-RECURRING CHARGES. All remaining non-recurring
charges of ECCI, which consist only of charges
associated with the closing of the Xxxxx office and
the winddown of the UK operations (Simulation) for
the period of January 1, 1999 through June 30, 1999
shall: (i) be recognized on or before June 30, 1999;
and (ii) not exceed $3,300,000.
4.5 Section 7.3 of the Forbearance Agreement is amended and
restated in its entirety to read as follows:
DEFAULTS IN OTHER MATERIAL AGREEMENTS. There shall occur any
default under, or as defined in, any other material agreement
or the Lockheed Xxxxxx Agreements (whether or not such
Agreements are deemed material) applicable to the ECC Group or
by which the ECC Group is bound which shall not be remedied
within the period of time (if any) within which such other
agreement permits such default to be remedied, unless such
default
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is waived by the other party thereto or excused as a matter of
law. For purposes hereof, the "Lockheed Xxxxxx Agreements"
shall mean: (i) that certain Novation Agreement, dated
December 10, 1998 between Lockheed Xxxxxx ASIC ("Lockheed
Xxxxxx") and Simulation; (ii) that certain Settlement
Agreement, dated December 10, 1998 between Lockheed Xxxxxx and
Simulation; and (iii) that certain letter dated December 10,
1998 by ECCI to Lockheed Xxxxxx pursuant to which ECCI
executed a payment guarantee in favor of Lockheed Xxxxxx.
ARTICLE V - CONDITIONS PRECEDENT
The effectiveness of this Agreement and the Bank's obligations
hereunder are conditioned upon the fulfillment by the ECC Group of all of the
following conditions precedent:
5.1 DOCUMENTS TO BE DELIVERED TO THE BANK. On the Agreement
Effective Date, or on the date otherwise noted below, the ECC Group shall
deliver or cause to be delivered to the Bank, in form and substance reasonably
mutually satisfactory to the Bank and the ECC Group, the following
(collectively, the "Additional Agreement Documents"), which shall be deemed
"Additional Forbearance Documents":
(a) Such Assignment of Government Contracts as the Bank
shall require;
(b) an Amendment to the Assignment of Tax Refunds and, on
or before three business days after the Agreement
Effective Date, such powers of attorney as the Bank
shall require;
(c) A Certification of Authority executed by the
Secretary of each member of the ECC Group, dated as
of the date of this Agreement, certifying the
incumbency and signature of the officers of the ECC
Group executing this Agreement and all other
documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such
Secretary and corporate resolutions for each of the
ECC Group, certified by their respective secretaries,
authorizing and approving this Agreement and the
documents and payments specified in this Article V;
and
(d) such other documents as may be required by the Bank.
5.2 PAYMENT OF BANK'S LEGAL FEES. Within three business days of
the Agreement Effective Date, the ECC Group shall pay to the Bank the amount of
the Bank's reasonable legal fees and expenses incurred in connection with this
Agreement, and all documents executed and negotiations undertaken in connection
herewith. Payment may, at the option of the Bank, be accomplished by automatic
debit specified in Section 3.7 of the Forbearance Agreement.
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5.3 PAYMENT OF BANK'S COSTS. Within three business days of the
Bank requesting payment from the Borrower, the ECC Group shall pay to the Bank
the amount of the Bank's reasonable costs incurred in connection with this
Agreement and the other Loan Documents, including, without limitation, the
Bank's equipment appraisal fees. Payment may, at the option of the Bank, be
accomplished by the automatic debit specified in Section 3.7 of the Forbearance
Agreement.
5.4 PERMANENT PAYDOWN. On or before the Agreement Effective Date,
the ECC Group shall pay to the Bank $1,100,000, as a permanent paydown of the
Existing Credit Facilities to be applied by the Bank in its sole and absolute
discretion. The Bank acknowledges that such payment was made by the ECC Group on
January 12, 1999.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and as partial
consideration for the terms and conditions contained herein, the ECC Group makes
the following representations and warranties to the Bank, each and all of which
shall survive the execution and delivery of this Agreement and all of the other
documents executed in connection herewith:
6.1 ORGANIZATION AND LOCATION.
(a) The members of the ECC Group are corporations duly
incorporated, organized, validly existing and in good standing under the laws of
their respective states or countries of incorporation, and are duly authorized
to do business and are duly qualified as foreign corporations in all
jurisdictions wherein the nature of their businesses or properties make such
qualification necessary, and have the corporate power to own their respective
properties and to carry on their respective businesses as now conducted;
(b) The members of the ECC Group have the requisite
corporate power and authority to deliver and perform this Agreement and all of
the documents executed by them in connection herewith; and
(c) Every fictitious name, trade name, division or style
under which the ECC Group conducts any business has been previously disclosed to
the Bank in writing together with the names of each and every jurisdiction in
which the same are utilized.
6.2 AUTHORIZATION; VALID AND BINDING AGREEMENT. All corporate
action required to be taken by the ECC Group and their respective officers,
directors and stockholders and all actions required to be taken by the
principals of the ECC Group for the authorization, execution, delivery and
performance of this Agreement and other documents contemplated hereby have been
taken. Each person executing this Agreement on behalf of any member of the ECC
Group is an authorized officer of such
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member. This Agreement is, and each of the documents executed pursuant hereto
will be, legal, valid, and binding obligations of the party or parties thereto,
enforceable against each such party in accordance with their respective terms,
subject only to bankruptcy, insolvency, reorganization, moratorium and other
laws or equitable principles affecting creditors' rights generally.
6.3 LOCATION OF ASSETS OF ECC GROUP. The locations of all of the
ECC Group's inventory, equipment, warehouses, sales offices, main offices, and
product distribution centers have been previously disclosed in writing to the
Bank. All of the real property owned by the ECC Group has been previously
disclosed in writing to the Bank.
6.4 COMPLIANCE WITH LAWS. Each of the members of the ECC Group is
in compliance in all material respects with all laws, regulations and
requirements applicable to its business, and has not received, and has no
knowledge of, any order or notice of any governmental investigation or of any
violations or claims of violation of any law, regulation or any governmental
requirement.
6.5 NO CONFLICT; GOVERNMENT APPROVALS. The execution, delivery and
performance by the ECC Group of this Agreement and the other documents executed
in connection herewith will not:
(a) conflict with, violate or result in the breach of any
provisions of any applicable law, rule, regulation or order; or
(b) conflict with or result in the breach of any
provision of their respective Articles of Incorporation, operating agreements,
charters, and/or by-laws. No authorization, consent or approval of, or other
action by, and no notice of or filing with, any governmental authority or
regulatory body is required to be obtained or made by the ECC Group for the due
execution, delivery and performance of this Agreement.
6.6 THIRD PARTY CONSENTS. The execution, delivery and performance
by the ECC Group of this Agreement and the documents related hereto will not:
(a) require any consent or approval of any person or
entity which has not been obtained prior to, and which is not in full force and
effect as of, the date of this Agreement;
(b) result in the breach of, default under, or cause the
acceleration of any obligation owed under any loan, credit agreement, note,
security agreement, lease indenture, mortgage, loan document or other agreement
by which any of them are bound or affected; or
(c) result in, or require the creation or imposition of,
any lien or encumbrance on any of their respective properties other than those
liens or security interests in favor of the Bank or the liens or security
interests disclosed to the Bank in the Loan Documents.
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6.7 FINANCIAL STATEMENTS; REPORTING.
(a) Except as otherwise disclosed in writing to the Bank
prior to the Agreement Effective Date, all balance sheets, reports, budgets,
reconciliations, accounts receivable reports, and other financial information
supplied to the Bank by the ECC Group with respect to the ECC Group have been
prepared in conformity with GAAP, and present fairly the financial condition and
results of operations for the period covered thereby of the ECC Group. Since
November 30, 1998, there has been no material adverse change in the financial
condition or results of operation except as disclosed to the Bank in writing
prior to the Agreement Effective Date.
(b) The ECC Group does not know of any facts, other than
those already disclosed in writing to the Bank, that materially adversely affect
or in so far as can be foreseen, will materially adversely affect their ability
to perform their respective obligations under this Agreement and other Loan
Documents.
6.8 EXCLUSIVE AND FIRST PRIORITY PERFECTED LIEN. The Bank has, as
of the date of this Agreement, and shall continue to have, until all of the
Obligations are paid in full, first priority, valid perfected liens upon and
security interests in all of the Collateral to secure the payment and
performance of all of the Obligations. Without limiting the foregoing, the ECC
Group shall take all steps that the Bank shall deem necessary to obtain all
required consents to the assignment by the ECC Group of the right to payment on
all U.S. government contracts to the Bank.
6.9 NO UNTRUE OR MISLEADING STATEMENTS. Neither this Agreement nor
any other document executed in connection herewith contains any untrue statement
of a material fact or omits any material fact necessary in order to make the
statement made, in light of the circumstances under which it was made, accurate.
6.10 NO EVENTS OF DEFAULT. Other than the Existing Events of
Default, no default(s) or Event(s) of Default has/have occurred as of the date
hereof under any of the Loan Documents.
ARTICLE VII - MISCELLANEOUS
7.1 CONTINUING EFFECT. Except as amended hereby, all terms and
conditions contained in the Loan Documents including without limitation, all
confessions of judgment and jury trial waivers, shall remain in full force and
effect and bind and inure to the benefit of the parties thereto and are hereby
ratified and confirmed.
7.2 COOPERATION; OTHER DOCUMENTS. At all times following the
execution of this Agreement, the ECC Group shall execute and deliver to the
Bank, or shall cause to be executed and delivered to the Bank, and shall do or
cause to be done all such other acts and things as the Bank may reasonably deem
to be necessary or desirable to assure the
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Bank of the benefit of this Agreement and the documents comprising or relating
to this Agreement.
7.3 REMEDIES CUMULATIVE; NO WAIVER. The rights, powers and
remedies of the Bank in this Agreement and in the other Loan Documents are
cumulative and not exclusive of any right, power or remedy provided in the Loan
Documents, by law or equity and no failure or delay on the part of the Bank in
the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or remedy preclude
any other or further exercise thereof, or the exercise of any other right, power
or remedy.
7.4 RELEASE. The ECC Group, on behalf of themselves, and all
persons and entities claiming by, through, or under any one or more of them,
hereby release, waive and forever discharge the Bank, and all of the Bank's
officers, directors, attorneys, agents, affiliates, and successors and assigns,
of, from, and with respect to any and all manner of action and actions, cause
and causes of actions, suits, disputes, claims, counterclaims and/or
liabilities, cross claims, defenses, and any claims for avoidance or other
remedies available to a debtor, its estate or any trustee or representatives
thereof, whether now known or unknown, suspected or unsuspected, past or
present, asserted or unasserted, contingent or liquidated, whether or not well
founded in fact or law, whether in contract, in tort or otherwise, at law or in
equity, which the ECC Group had or now have, claim to have had, now claim to
have or hereafter can, shall or may claim to have against the Bank, for or by
reason of any cause, matter, or thing whatsoever arising from the beginning of
the world through the date hereof, including any claims based upon, relating to
or arising out of any and all transactions, relationships or dealings with or
loans made to the Borrower prior to the Agreement Effective Date. This provision
shall survive any termination of this Agreement, the Forbearance Agreement
and/or the Existing Loan Documents.
7.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the ECC Group contained in the Forbearance
Agreement, this Agreement and in all other documents and instruments executed in
connection herewith or otherwise relating to the Forbearance Agreement or this
Agreement shall survive the execution of this Agreement and are material and
have been or will be relied upon by the Bank, notwithstanding any investigation
made by any person, entity or organization on the Bank's behalf. No implied
representations or warranties are created or arise as a result of this Agreement
or the documents comprising or relating to this Agreement. For purposes of the
foregoing, all statements in any certificate required by the Forbearance
Agreement to be delivered to the Bank on or after the execution of the
Forbearance Agreement by or on behalf of the ECC Group pursuant to and in
accordance with the Forbearance Agreement shall be deemed to be representations
and warranties contained in this Agreement.
7.6 HEADINGS. The headings and underscoring of articles, sections
and clauses have been included herein for convenience only and shall not be
considered in interpreting this Agreement.
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7.7 GOVERNING LAW. This Agreement and all documents and
instruments executed in connection herewith or otherwise relating to this
Agreement shall be construed in accordance with and governed by the internal
laws of the Commonwealth of Pennsylvania without reference to conflict of laws
principles.
7.8 INTEGRATION. This Agreement and all documents and instruments
executed in connection herewith or otherwise relating to this Agreement,
including, without limitation, the Loan Documents, constitute the sole agreement
of the parties with respect to the subject matter hereof and thereof and
supersede all oral negotiations and prior writings with respect to the subject
matter hereof and thereof.
7.9 AMENDMENT AND WAIVER. No amendment of this Agreement, and no
waiver, discharge or termination of any one or more of the provisions thereof,
shall be effective unless set forth in writing and signed by all of the parties
hereto.
7.10 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents: (i) shall be binding upon the Bank, the Borrowers, and the Guarantors
and upon their respective heirs, nominees, successors and assigns, and (ii)
shall inure to the benefit of the Bank and the ECC Group; provided, however,
that neither the Borrowers nor any of the Guarantors may assign any rights
hereunder or any interest herein without obtaining the prior written consent of
the Bank, and any such assignment or attempted assignment shall be void and of
no effect with respect to the Bank.
7.11 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
that is held to be inoperative, unenforceable, void or invalid in any
jurisdiction shall, as to that jurisdiction, be ineffective, unenforceable, void
or invalid without affecting the remaining provisions in that jurisdiction or
the operation, enforceability or validity of that provision in any other
jurisdiction, and to this end the provisions of this Agreement are declared to
be severable.
7.12 CONFLICTING PROVISIONS. To the extent that any of the terms in
this Agreement contradict any of the terms contained in any of the Loan
Documents, the terms of this Agreement shall control.
7.13 JOINT AND SEVERAL LIABILITY. The obligations and liabilities
of the Borrowers and the Guarantors hereunder are joint and several.
7.14 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
any number of counterparts and by the different parties on separate
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute one and the same Agreement. This
Agreement shall be deemed to have been executed and delivered when the Bank has
received counterparts hereof executed by all parties listed on the signature
pages hereto.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have caused this Agreement to be executed as of the date first above
written.
FIRST UNION NATIONAL BANK
By: /s/ Xxxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
ATTEST: ECC INTERNATIONAL CORP.
/s/ Xxxxxxxx Xxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
----------------------------- -------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
ATTEST: ECC SIMULATION LIMITED
/s/ Xxxxxxxx Xxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
----------------------------- -------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
ATTEST: ECC INTERNATIONAL, INC.
/s/ Xxxxxxxx Xxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
----------------------------- -------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
ATTEST: EDUCATIONAL COMPUTER
CORPORATION INTERNATIONAL
/s/ Xxxxxxxx Xxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
----------------------------- -------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
