Exhibit 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AGREEMENT is entered into as of September 2, 2002, by and between
XXXXXXX BUSINESS SERVICES, INC., a Maryland corporation ("Borrower"), and XXXXX
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
A. Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain letter agreement between Borrower and Bank dated as
of May 31, 2000 ("Prior Agreement").
B. Pursuant to the Prior Agreement, Borrower remains indebted to Bank
under a line of credit in the maximum principal amount of Twelve Million Dollars
($12,000,000.00) (the "Prior Line of Credit"), which is evidenced by that
certain Revolving Line of Credit Note dated July 1, 2002 (the "Prior Line of
Credit Note"). The Prior Line of Credit Note will mature and become due and
payable in full on September 2, 2002 and as of the date hereof, the outstanding
principal balance under the Prior Line of Credit is $2,684,020.85, plus accrued
but unpaid interest.
C. Pursuant to the Prior Agreement, Borrower remains indebted to
Bank under a term loan in the original principal amount of Six Hundred
Ninety-three Thousand Seven Hundred Fifty Dollars ($693,750.00) (the "Term
Loan"), which is evidenced by that certain Promissory Note dated August 12, 1993
(the "Term Note"). The Term Note will mature and become due and payable in full
on August 1, 2003 and as of the date hereof, the outstanding principal balance
under the Term Loan is $363,762.49, plus accrued but unpaid interest.
D. Borrower has requested and Bank has agreed to restructure the Prior
Line of Credit, subject to the terms and conditions set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree that all the
terms and conditions of the Prior Agreement and Prior Line of Credit Note shall
be and hereby are amended, restated and superseded by the terms and conditions
of this Agreement; provided, however, that nothing herein shall terminate any
security interest, or other documents in favor of Bank and such security
interests shall continue in full force and effect; and Bank and Borrower further
agree as follows:
ARTICLE I
CREDIT TERMS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including April 30, 2003, not to exceed at any time the aggregate
principal amount of Eleven Million Dollars ($11,000.000.00) ("Line of Credit"),
the proceeds of which shall be used to pay-off the existing principal balance of
Prior Line of Credit Note and to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note
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substantially in the form of Exhibit A attached hereto ("Line of Credit Note"),
all terms of which are incorporated herein by this reference.
(b) Limitation on Borrowings. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of (i) eighty-five percent (85%) of Borrower's eligible
billed accounts receivable, plus (ii) sixty-five percent (65%) of Borrower's
eligible unbilled accounts receivable (not to exceed $2,500,000.00), plus (iii)
seventy-five percent (75%) of the appraised value of Borrower's real property
collateral granted to Bank (in Section 1.5 Collateral below) minus amount of
outstanding Term Loan. All of the foregoing shall be determined by Bank upon
receipt and review of all collateral reports required hereunder and such other
documents and collateral information as Bank may from time to time require.
Borrower acknowledges that said borrowing base was established by Bank with the
understanding that, among other items, the aggregate of all returns, rebates,
discounts, credits and allowances for the immediately preceding three (3) months
at all times shall be less than five percent (5%) of Borrower's gross sales for
said period. If such dilution of Borrower's accounts for the immediately
preceding three (3) months at any time exceeds five percent (5%) of Borrower's
gross sales for said period, or if there at any time exists any other matters,
events, conditions or contingencies which Bank reasonably believes may affect
payment of any portion of Borrower's accounts, Bank, in its sole discretion, may
reduce the foregoing advance rate against eligible accounts receivable to a
percentage appropriate to reflect such additional dilution and/or establish
additional reserves against Borrower's eligible accounts receivable.
As used herein, "eligible accounts receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is past due more than twice Borrower's
standard selling terms, (exceeding 90 days from date of invoice, or for
professional employer organization ("PEO") accounts, exceeding 30 days
from date of invoice).
(ii) that portion of any account for which there exists any
right of setoff, defense or discount, including but not limited to
accrued safety incentive rebates (to a maximum of the greater of
$150,000.00 or the immediately preceding 3 months' safety incentive
rebates paid), customer deposits, and internal xxxxxxxx (except regular
discounts allowed in the ordinary course of business to promote prompt
payment), or for which any defense or counterclaim has been asserted;
(iii) any account which represents an obligation of any state
or municipal government or of the United States government or any
political subdivision thereof (except accounts which represent
obligations of the United States government and for which the assignment
provisions of the Federal Assignment of Claims Act, as amended or
recodified from time to time, have been complied with to Bank's
satisfaction);
(iv) any account which represents an obligation of an account
debtor located in a foreign country, other than an account debtor
located in the Canadian provinces of Alberta, British Columbia,
Manitoba, Ontario, Saskatchewan or the Yukon Territory so long as, in
Banks determination, such Canadian jurisdictions recognize Bank's first
priority security interest in and right to collect such account as a
consequence of any security agreements and UCC filing in favor of Bank.
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(v) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an
employee, affiliate, partner, member, parent or subsidiary of Borrower;
(vi) that portion of any account, which represents interim or
progress xxxxxxxx or retention rights on the part of the account debtor;
(vii) any account which represents an obligation of any
account debtor when twenty percent (20%) or more of Borrower's accounts
from such account debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor
which represents the amount by which Borrower's total accounts from said
account debtor exceeds twenty-five percent (25%) of Borrower's total
accounts;
(ix) any account deemed ineligible by Bank when Bank, in its
sole discretion, deems the creditworthiness or financial condition of
the account debtor, or the industry in which the account debtor is
engaged, to be unsatisfactory.
(c) Letter of Credit Subfeature. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to issue or cause
an affiliate to issue standby letters of credit for the account of Borrower
(each, a "Letter of Credit" and collectively, "Letters of Credit"); provided
however, that the aggregate undrawn amount of all outstanding Letters of Credit
shall not at any time exceed Five Million Five Hundred Thousand Dollars
($5,500,000.00). The form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion. Each Letter of Credit shall
be issued for a term not to exceed three hundred sixty-five (365) days, as
designated by Borrower; provided however, that no Letter of Credit shall have an
expiration date more than ninety (90) days beyond the maturity date of the Line
of Credit. The undrawn amount of all Letters of Credit shall be reserved under
the Line of Credit and shall not be available for borrowings thereunder. Each
Letter of Credit shall be subject to the additional terms and conditions of the
Letter of Credit agreements, applications and any related documents required by
Bank in connection with the issuance thereof. Each draft paid under a Letter of
Credit shall be deemed an advance under the Line of Credit and shall be repaid
by Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the Line
of Credit are not available, for any reason, at the time any draft is paid, then
Borrower shall immediately pay to Bank the full amount of such draft, together
with interest thereon from the date such draft is paid to the date such amount
is fully repaid by Borrower, at the rate of interest applicable to advances
under the Line of Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank for the
amount of any such draft.
(d) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
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SECTION 1.2. TERM LOAN.
(a) Term Loan. Subject to the terms and conditions of this Agreement,
Bank has made a loan to Borrower in the original principal amount of Six Hundred
Ninety-three Thousand Seven Hundred Fifty Dollars ($693,750.00) ("Term Loan").
Borrower's obligation to repay Term Loan shall continue to be evidenced by a
promissory note substantially in the form of Exhibit B attached hereto ("Term
Note"), all terms of which are incorporated herein by this reference. In the
event of any conflict between this Agreement and Term Note, the terms of this
Agreement shall control.
(b) Repayment. Principal and interest on Term Loan shall be repaid in
accordance with the provisions of Term Note.
(c) Prepayment. Borrower may prepay principal on Term Loan solely in
accordance with the provisions of Term Note.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balance of each credit subject
hereto shall bear interest at the rate of interest set forth in each promissory
note or other instrument executed in connection therewith.
(b) Computation and Payment. Interest shall be computed on the basis of
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument required hereby.
(c) Restructuring Fee. Borrower shall pay to Bank a non-refundable
restructuring fee for the Line of Credit equal to Thirty-six Thousand Six
Hundred Sixty-seven Dollars ($36,667.00), which fee shall be due and payable in
full upon Borrower's execution and delivery to Bank of this Agreement (the
"Restructuring Fee").
(d) Letter of Credit Fees. Borrower shall pay to Bank fees upon the
issuance of each Letter of Credit, upon the payment or negotiation of each draft
under any Letter of Credit and upon the occurrence of any other activity with
respect to any Letter of Credit (including without limitation, the transfer,
amendment or cancellation of any Letter of Credit) determined in accordance with
Bank's standard fees and charges then in effect for such activity but in any
event not more than 1.25% per annum for any Letter of Credit issued or renewed,
without prior notice.
SECTION 1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each credit subject hereto by
charging Borrower's deposit account number 4159583848 with Bank, or any other
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.5. COLLATERAL.
As security for all indebtedness of Borrower to Bank under the Line of
Credit, Borrower hereby grants to Bank a lien of not less than first priority in
all its rights to payment from customers and accounts receivable arising from
services rendered or to be rendered, whether
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or not the same has been earned by performance, and all rights under any
contracts it has or may have with its customers, and proceeds of all of the
foregoing, general intangibles and equipment and a lien of not less than first
priority on that certain real property located at 0000 XX Xxxxx Xxxxxx,
Xxxxxxxx, XX 00000.
As security for all indebtedness of Borrower to Bank under the Term
Loan, Borrower hereby reaffirms its grant and continues to grant to Bank a lien
of not less than first priority on that certain real property located at 0000 XX
Xxxxxxx Xxxxxx, Xxxxxxxx, XX 00000.
Additionally, as security for all indebtedness of Borrower to Bank under
the Line of Credit, Borrower hereby grants to Bank a lien of not less than
second priority on that certain real property located at 0000 XX Xxxxxxx Xxxxxx,
Xxxxxxxx, XX 00000.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds of trust and other
documents, as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
appraisals, audits and title insurance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Maryland, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material
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adverse effect on the financial condition or operation of Borrower other than
those disclosed by Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated June 30, 2002, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material
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expenditure is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or substance into
the environment.
SECTION 2.12. REAL PROPERTY COLLATERAL. Except as disclosed by Borrower
to Bank in writing prior to the date hereof, with respect to any real property
collateral required hereby:
(a) All taxes, governmental assessments, insurance premiums, and water,
sewer and municipal charges, and rents (if any) which previously became due and
owing in respect thereof have been paid as of the date hereof.
(b) There are no construction or similar liens or claims which have been
filed for work, labor or material (and no rights are outstanding that under law
could give rise to any such lien) which affect all or any interest in any such
real property and which are or may be prior to or equal to the lien thereon in
favor of Bank.
(c) None of the improvements which were included for purpose of
determining the appraised value of any such real property lies outside of the
boundaries and/or building restriction lines thereof, and no improvements on
adjoining properties materially encroach upon any such real property.
(d) There is no pending, or to the best of Borrower's knowledge
threatened, proceeding for the total or partial condemnation of all or any
portion of any such real property, and all such real property is in good repair
and free and clear of any damage that would materially and adversely affect the
value thereof as security and/or the intended use thereof.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions on or
before September 2, 2002:
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement
(ii) The Line of Credit Note.
(iii) Two Deeds of Trust and Assignment of Rent and Leases.
(iv) Security Agreement: Rights to Payment.
(v) Security Agreement: Equipment.
(vi) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Restructuring Fee. Bank shall have received the Restructuring Fee in
immediately available funds.
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(d) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
(e) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank, including without
limitation, policies of fire and extended coverage insurance covering all real
property collateral required hereby, with replacement cost and mortgagee loss
payable endorsements, and such policies of insurance against specific hazards
affecting any such real property as may be required by governmental regulation
or Bank.
(f) Interest. Interest under the Prior Line of Credit Note shall have
been paid current.
(g) Interest and Principal. Interest and principal under the Term Note
shall have been paid current.
(h) Appraisals. Bank shall have obtained, at Borrower's cost, an
appraisal of all real property collateral required hereby, and all improvements
thereon, issued by an appraiser acceptable to Bank and in form, substance and
reflecting values satisfactory to Bank, in its discretion.
(i) Title Insurance. Bank shall have received an ALTA Policy of Title
Insurance, with such endorsements as Bank may require, issued by a company and
in form and substance satisfactory to Bank, in such amount as Bank shall
require, insuring Bank's lien on the real property collateral required hereby to
be of the priority set forth in Section 1.5 hereof, subject only to such
exceptions as Bank shall approve in its discretion, with all costs thereof to be
paid by Borrower.
(j) Other Costs and Fees. Borrower shall pay Bank the costs and fees
described in Section 7.3 hereof.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
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ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 95 days after and as of the end of each fiscal year,
an audited financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include a balance sheet, income statement and
statement of cash flow, and a copy of Borrower's Form 10-K report filed with the
Securities and Exchange Commission;
(b) not later than 50 days after and as of the end of each fiscal
quarter, a copy of Borrower's Form 10-Q report filed with the Securities and
Exchange Commission;
(c) not later than 26 days after and as of the end of each first and
second month of each fiscal quarter and 35 days after and as of the end of each
fiscal quarter, a financial statement of borrower to include balance sheet and
income statement;
(d) not later than 20 days after and as of the end of each month, a
borrowing base certificate, an aged listing of accounts receivable and accounts
payable, and a reconciliation of accounts, and not later than June 30 and
December 31 of each year, a list of the names and addresses of all Borrower's
account debtors;
(e) not later than each Tuesday and as of the prior Thursday, a
borrowing base certificate, an aged listing of accounts receivable, and a report
showing proof of payment of all currently due payroll taxes and health insurance
premiums;
(f) from time to time such other information as Bank may reasonably
request, including without limitation, copies of rent rolls and other
information with respect to any real property collateral required hereby.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is
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organized and/or which govern Borrower's continued existence and with the
requirements of all laws, rules, regulations and orders of any governmental
authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Current Ratio not less than 1.10 to 1.0 prior to December 31, 2002,
and not less than 1.15 to 1.0 as of December 31, 2002 and thereafter, with
"Current Ratio" defined as total current assets divided by total current
liabilities.
(b) EBITDA not less than negative $2,750,000.00 as of fiscal quarter
ending September 30, 2002, not less than $850,000.00 as of fiscal quarter ending
December 31, 2002, and not less than $1,500,000.00 as of the fiscal quarter
ending March 31, 2003, measured on a trailing four-quarter basis, with "EBITDA"
defined as net profit before tax plus interest expense (net of capitalized
interest expense), depreciation expense and amortization expense.
(c) Funded Debt to EBITDA Ratio not more than 7.0 to 1.0 as of December
31, 2002 and not more than 3.25 to 1.0 as of March 31, 2003, with "Funded Debt"
defined as all borrowed funds plus the amount of all capitalized lease
obligations of Borrower, "EBITDA" as defined above and "Funded Debt to EBITDA
Ratio" defined as Funded Debt divided by EBITDA.
(d) EBITDA Coverage Ratio not less than 0.75 to 1.0 as of December 31,
2002 and not less than 1.50 to 1.0 as of March 31, 2003, with "EBITDA" defined
as net profit before tax plus interest expense (net of capitalized interest
expense), depreciation expense and amortization expense, and with "EBITDA
Coverage Ratio" defined as EBITDA divided by the aggregate of total interest
expense plus the prior period current maturity of long-term debt and the prior
period current maturity of subordinated debt.
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SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
(b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof; (c) unsecured liabilities of Borrower to sellers of
companies acquired by Borrower, the total which shall not exceed an aggregate of
$3,500,000.00, and (d) purchase money indebtedness for equipment or real estate.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity in any transaction involving
a purchase price of $5,000,000.00 or more without the prior written approval of
Bank, which approval shall not be unreasonably withheld; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity, except any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof, and additional loans or
advances to Xxxxxxx X. Xxxxxxxx in amounts not to exceed an aggregate of
$110,000.00 outstanding at any one time.
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SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except (a) any of the foregoing in favor
of Bank or which are existing as of, and disclosed to Bank in writing prior to,
the date hereof, (b) purchase money security interests securing purchase money
indebtedness permitted hereunder, and (c) other security interests for the
purchase or lease of tangible assets securing an aggregate principal amount not
to exceed $25,000.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower; or the entry of a judgment against Borrower.
(f) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be
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entered against Borrower by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower; or Borrower, or any of
its directors, stockholders or members shall take action seeking to effect the
dissolution or liquidation of Borrower.
(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Borrower.
(j) The sale, transfer, hypothecation, assignment or encumbrance,
whether voluntary, involuntary or by operation of law, without Bank's prior
written consent, of all or any part of or interest in any real property
collateral required hereby.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: XXXXXXX BUSINESS SERVICES, INC.
0000 XX Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
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BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
0000 XX 0XX Xxxxxx, Xxxxx, 00xx Xxxxx,
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Day
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
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SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon.
SECTION 7.11. ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Oregon selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any
similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected
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according to the Rules, and who shall not render an award of greater than
$5,000,000.00. Any dispute in which the amount in controversy exceeds
$5,000,000.00 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney licensed
in the State of Oregon or a neutral retired judge of the state or federal
judiciary of Oregon, in either case with a minimum of ten years experience in
the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of Oregon and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Oregon Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party's presentation and that no alternative means for obtaining information
is available.
(f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award
all costs and expenses of the arbitration proceeding.
(h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
SECTION 7.12. GENERAL RELEASE. In consideration of the benefits provided
to Borrower under the terms and provisions hereof, Borrower hereby agrees as
follows ("General Release"):
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(a) Borrower, for itself and on behalf of its successors and assigns,
does hereby release, acquit and forever discharge Bank, all of Bank's
predecessors in interest, and all of Bank's past and present officers,
directors, attorneys, affiliates, employees and agents, of and from any and all
claims, demands, obligations, liabilities, indebtedness, breaches of contract,
breaches of duty or of any relationship, acts, omissions, misfeasance,
malfeasance, causes of action, defenses, offsets, debts, sums of money,
accounts, compensation, contracts, controversies, promises, damages, costs,
losses and expenses, of every type, kind, nature, description or character,
whether known or unknown, suspected or unsuspected, liquidated or unliquidated,
each as though fully set forth herein at length (each, a "Released Claim" and
collectively, the "Released Claims"), that Borrower now has or may acquire as of
the later of: (i) the date this Agreement becomes effective through the
satisfaction (or waiver by Bank) of all conditions hereto; (ii) the date that
Borrower has executed and delivered this Agreement to Bank (hereafter, the
"Release Date"), including without limitation, those Released Claims in any way
arising out of, connected with or related to any and all prior credit
accommodations, if any, provided by Bank, or any of Bank's predecessors in
interest, to Borrower, and any agreements, notes or documents of any kind
related thereto or the transactions contemplated thereby or hereby, or any other
agreement or document referred to herein or therein.
(b) Borrower hereby acknowledges, represents and warrants to Bank that
it agrees to assume the risk of any and all unknown, unanticipated or
misunderstood defenses and Released Claims which are released by the provisions
of this General Release in favor of Bank, and Borrower hereby waives and
releases all rights and benefits which it might otherwise have under any state
or local laws or statutes with regard to the release of such unknown,
unanticipated or misunderstood defenses and Released Claims.
(c) Each person signing below on behalf of Borrower acknowledges that he
or she has read each of the provisions of this General Release. Each such person
fully understands that this General Release has important legal consequences,
and each such person realizes that they are releasing any and all Released
Claims that Borrower may have as of the Release Date. Borrower hereby
acknowledges that it has had an opportunity to obtain a lawyer's advice
concerning the legal consequences of each of the provisions of this General
Release.
(d) Borrower hereby specifically acknowledges and agrees that: (i) none
of the provisions of this General Release shall be construed as or constitute an
admission of any liability on the part of Bank; (ii) the provisions of this
General Release shall constitute an absolute bar to any Released Claim of any
kind, whether any such Released Claim is based on contract, tort, warranty,
mistake or any other theory, whether legal, statutory or equitable; and (iii)
any attempt to assert a Released Claim barred by the provisions of this General
Release shall subject Borrower to the provisions of applicable law setting forth
the remedies for the bringing of groundless, frivolous or baseless claims or
causes of action.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLDPURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO BANK,
XXXXXXX BUSINESS SERVICES, INC. NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx By: Xxxxxxx X. Day
--------------------------- ------------------------
Xxxxxxx X. Xxxxxxxxxx Xxxxxxx X. Day
Vice President-Finance Vice President
Exhibit A - Form of Revolving Line of Credit Note (Omitted)
Exhibit B - Form of Term Loan Note (Omitted)
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