Exhibit 10.41
EXECUTION COPY
FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Lender)
and
Command Security Corporation
(as Borrower)
Dated: As of December 12, 2003
Table of Contents
Page
SECTION 1. Definitions................................................1
SECTION 2. Conditions Precedent......................................10
SECTION 3. Revolving Loans...........................................14
SECTION 4. Intentionally Omitted.....................................17
SECTION 5. Intentionally Omitted.....................................17
SECTION 6. Collateral................................................17
SECTION 7. Representations, Warranties and Covenants.................20
SECTION 8. Interest, Fees and Expenses...............................26
SECTION 9. Powers....................................................28
SECTION 10. Events of Default and Remedies............................29
SECTION 11. Termination...............................................32
SECTION 12. Miscellaneous.............................................33
SCHEDULES
Schedule 1 - Collateral Information
i
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with
offices located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(hereinafter "CIT"), is pleased to confirm the terms and conditions under
which CIT shall make revolving loans and other financial accommodations to
COMMAND SECURITY CORPORATION, a New York corporation with a principal place
of business at Xxxxx 00, Xxxxxxxxx Xxxx, XxXxxxxxxxxxx, Xxx Xxxx (herein the
"Company").
SECTION 1. Definitions
"Accounts" shall mean all of the Company's now existing and future: (a)
accounts (as defined in the UCC), and any and all other receivables (whether
or not specifically listed on schedules furnished to CIT), including, without
limitation, the TBV Receivables and all accounts created by, or arising from,
all of the Company's sales, leases, rentals of goods or renditions of
services to its customers, including but not limited to, those accounts
arising under any of the Company's trade names or styles, or through any of
the Company's divisions; (b) any and all instruments, documents, chattel
paper (including electronic chattel paper) (all as defined in the UCC); (c)
unpaid seller's or lessor's rights (including rescission, replevin,
reclamation, repossession and stoppage in transit) relating to the foregoing
or arising therefrom; (d) rights to any goods represented by any of the
foregoing, including rights to returned, reclaimed or repossessed goods; (e)
reserves and credit balances arising in connection with or pursuant hereto;
(f) guarantees, supporting obligations, payment intangibles and letter of
credit rights (all as defined in the UCC); (g) insurance policies or rights
relating to any of the foregoing; (h) general intangibles pertaining to any
and all of the foregoing (including all rights to payment, including those
arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Company; and (j) cash and non cash proceeds (as
defined in the UCC) of any and all of the foregoing.
"Administrative Management Fee" shall mean the sum of $37,500.00 which
shall be paid to CIT in accordance with Section 8, paragraph 8.5 hereof to
offset the expenses and costs (excluding Out-of-Pocket Expenses and auditor
fees) of CIT in connection with administration, record keeping, analyzing and
evaluating the Collateral.
"Anniversary Date" shall mean the date occurring three (3) years from
the Closing Date and the same date in every year thereafter.
"Availability" shall mean at any time the amount by which: (a) the
Borrowing Base exceeds (b) the outstanding aggregate amount of all
Obligations, including without limitation, all Obligations with respect to
Revolving Loans.
- 1 -
"Availability Reserve" shall mean the sum of: (a) (i) three (3) months
rental payments or similar charges for any of the Company's leased premises
or other Collateral locations for which the Company has not delivered to CIT
a landlord's waiver in form and substance reasonably satisfactory to CIT,
plus (ii) three (3) months estimated payments plus any other fees or charges
owing by the Company to any applicable warehousemen or third party processor
(as determined by CIT in its reasonable business judgment), provided that any
of the foregoing amounts shall be adjusted from time to time hereafter upon:
(x) delivery to CIT of any such acceptable waiver, (y) the opening or closing
of a Collateral location and/or (z) any change in the amount of rental,
storage or processor payments or similar charges; (b) any reserve which CIT
may reasonably require from time to time pursuant to this Financing Agreement
(including, without limitation, with respect to accrued and unpaid Payroll
Items); and (c) such other reserves as CIT deems necessary in its reasonable
judgment as a result of (i) negative forecasts and/or trends in the Company's
business, industry, prospects, profits, operations or financial condition or
(ii) other issues, circumstances or facts that could otherwise negatively
impact the Company, its business, prospects, profits, operations, industry,
financial condition or assets. For purposes hereof "Payroll Items" shall mean
the sum of the following: (A) the book overdraft with respect to the
Company's payroll account, currently number 032267 held at JPMorgan Chase
Bank, plus (B) the book overdraft with respect to the Company's non-employee
of record payroll account, currently number 032275 held at JPMorgan Chase
Bank, plus (C) the Company's gross payroll due from the week ending the
previous Sunday, plus (D) the Company's gross non-employee of record payroll
due from the week ending the previous Sunday, plus (v) FICA, Medicare and
other taxes at the current prevailing rate calculated on the total of clauses
(C) and (D). Any Revolving Loans made by CIT to fund Payroll Items will
reduce, dollar-for dollar, any Availability Reserve being maintained in
respect thereof.
"Borrowing Base" shall mean (without duplication) (a) the sum of
eighty-five percent (85%) of the Company's aggregate outstanding Eligible
Accounts Receivable, provided, however, that if the then Dilution Percentage
is greater than five percent (5%), then the rate of advance herein shall be
reduced by the amount of such excess Dilution Percentage, plus the lesser of
(b) (i) 75% of the Company's aggregate outstanding Eligible Unbilled Accounts
Receivable or (ii) $2,500,000.00, less (c) any applicable Availability
Reserves. For purposes of calculating the Borrowing Base, no Trade Accounts
Receivable of the Company may constitute at the same time both Eligible
Accounts Receivable and Eligible Unbilled Accounts Receivable.
"Business Day" shall mean any day on which CIT and JPMorgan Chase Bank
are open for business.
"Capital Expenditures" shall mean, for any period, the aggregate
expenditures of the Company during such period on account of, property,
plant, equipment or similar fixed assets that in conformity with GAAP, are
required to be reflected in the balance sheet of the Company.
"Capital Improvements" shall mean operating Equipment and facilities
(other than land) acquired or installed for use in the Company's business
operations.
"Capital Lease" shall mean any lease of property (whether real, personal
or mixed) which, in conformity with GAAP, is accounted for as a capital lease
or a Capital Expenditure in the balance sheet of the Company.
"Chase Bank Rate" shall mean the rate of interest per annum announced by
JPMorgan Chase Bank from time to time as its prime rate in effect at its
principal office in New York City. (The prime rate is not intended to be the
lowest rate of interest charged by JPMorgan Chase Bank to its borrowers.)
- 2 -
"Chase Bank Rate Loans" shall mean any loans or advances pursuant to
this Financing Agreement made or maintained at a rate of interest based upon
the Chase Bank Rate.
"CIT Commitment Letter" shall mean the Commitment Letter, dated November
19, 2003, issued by CIT to, and accepted by, the Company.
"Closing Date" shall mean the date that this Financing Agreement has
been duly executed by the parties hereto and delivered to CIT.
"Collateral" shall mean all present and future Accounts, Equipment,
Documents of Title, General Intangibles, Real Estate, the TBV Service
Agreement, the TBV Receivables. Inventory, Pledged Stock of the Company's
subsidiaries and Other Collateral.
"Collection Days" shall mean two (2) Business Days to provide for the
deposit, clearance and collection of checks or other instruments representing
the proceeds of Collateral, the amount of which has been credited to the
Company's Revolving Loan Account, and for which interest may be charged on
the aggregate amount of such deposits, at the rate provided for in Paragraph
8.1 of Section 8 of this Financing Agreement.
"Consolidated Balance Sheet" shall mean a consolidated or compiled, as
applicable, balance sheet for the Company and its consolidated subsidiaries,
eliminating all intercompany transactions and prepared in accordance with
GAAP.
"Consolidating Balance Sheet" shall mean a Consolidated Balance
Sheet plus individual balance sheets for the Company and its consolidated
subsidiaries, showing all eliminations of intercompany transactions,
including a balance sheet for the Company exclusively, all prepared in
accordance with GAAP.
"Copyrights" shall mean all present and hereafter acquired copyrights,
copyright registrations, recordings, applications, designs, styles, licenses,
marks, prints and labels bearing any of the foregoing, goodwill, any and all
general intangibles, intellectual property and rights pertaining thereto, and
all cash and non-cash proceeds thereof.
"Default" shall mean any event specified in Section 10 hereof, whether
or not any requirement for the giving of notice, the lapse of time, or both,
or any other condition, event or act, has been satisfied.
"Default Rate of Interest" shall mean a rate of interest per annum on
any Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b)
the applicable increment over the Chase Bank Rate (as set forth in paragraph
8.1 hereof) plus the Chase Bank Rate, which CIT shall be entitled to charge
the Company on all Obligations due CIT by the Company, as further set forth
in Paragraph 10.2 of Section 10 of this Financing Agreement.
"Depository Accounts" shall mean the collection accounts, which are
subject to CIT's instructions, as specified in Paragraph 3.4 of Section 3 of
this Financing Agreement.
"Dilution Percentage" shall mean, as of anytime of calculation, the
then sum of the Borrower's credits, claims, allowances, discounts,
write-offs, contras, off-sets and deductions divided by the then sum of gross
sales of the Company, all calculated on a rolling ninety (90) day average, as
determined and calculated by CIT from time to time.
- 3 -
"Documentation Fee" shall mean CIT's standard fees relating to any and
all modifications, waivers, releases, amendments or additional collateral
with respect to this Financing Agreement, the Collateral and/or the
Obligations.
"Documents of Title" shall mean all present and future documents (as
defined in the UCC), and any and all warehouse receipts, bills of lading,
shipping documents, chattel paper, instruments and similar documents, all
whether negotiable or not and all goods relating thereto and all cash and non
cash proceeds of the foregoing.
"Early Termination Date" shall mean the date on which the Company
terminates this Financing Agreement or the Revolving Line of Credit which
date is prior to an Anniversary Date.
"Early Termination Fee" shall: (a) mean the fee CIT is entitled to
charge the Company in the event the Company terminates the Revolving Line of
Credit or this Financing Agreement on a date prior to an Anniversary Date;
and (b) be determined by multiplying the Revolving Line of Credit by (x) two
percent (2%) if the Early Termination Date occurs on or before one (1) year
from the Closing Date, (y) one and one-half percent (1.5%) if the Early
Termination Date occurs after one (1) year from the Closing Date but on or
before two (2) years from the Closing Date; and (z) one percent (1%) if the
Early Termination Date occurs after two (2) years from the Closing Date but
prior to an Anniversary Date.
"EBIT" shall mean, in any period, all earnings of the Company for
said period before all interest and tax obligations of the Company for said
period, determined in accordance with GAAP on a consistent basis with the
latest audited financial statements of the Company, but excluding the effect
of extraordinary or non-reoccurring gains or losses for such period.
- 4 -
"Eligible Accounts Receivable" shall mean the gross amount of the
Company's Trade Accounts Receivable, other than Eligible Unbilled Accounts
Receivable, that are subject to a valid, exclusive, first priority and fully
perfected security interest in favor of CIT, which conform to the warranties
contained herein and which, at all times, continue to be acceptable to CIT in
the exercise of its reasonable judgment, less, without duplication, the sum
of: (a) any returns, discounts, claims, credits and allowances of any nature
(whether issued, owing, granted, claimed or outstanding), and (b) reserves
for any such Trade Accounts Receivable that arise from or are subject to or
include: (i) sales to the United States of America, any state or other
governmental entity or to any agency, department or division thereof, except
for any such sales as to which the Company has complied with the Assignment
of Claims Act of 1940 or any other applicable statute, rules or regulation,
to CIT's satisfaction in the exercise of its reasonable business judgment;
(ii) foreign sales, other than sales which otherwise comply with all of the
other criteria for eligibility hereunder and are (x) secured by letters of
credit (in form and substance satisfactory to CIT) issued or confirmed by,
and payable at, banks having a place of business in the United States of
America, or (y) to customers residing in Canada (iii) Accounts that remain
unpaid more than ninety (90) days from invoice date or sixty (60) days from
due date; (iv) contra accounts; (v) sales to any subsidiary, or to any
company affiliated with the Company or TBV in any way; (vi) xxxx and hold
(deferred shipment) or consignment sales; (vii) sales to any customer which
is: (A) insolvent, (B) the debtor in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or
state law (unless otherwise approved by CIT), (C) negotiating, or has called
a meeting of its creditors for purposes of negotiating, a compromise of its
debts, or (D) financially unacceptable to CIT or has a credit rating
unacceptable to CIT; (viii) all sales to any customer if fifty percent (50%)
or more of the aggregate dollar amount of all outstanding invoices to such
customer are unpaid more than ninety (90) days from invoice date; (ix) sales
to any customer and/or its affiliates to the extent such sales exceed at any
one time twenty percent (20%) or more of all Eligible Accounts Receivable;
(x) pre-billed receivables and receivables arising from progress billing;
(xi) an amount representing, historically, returns, discounts, claims,
credits, allowances and applicable terms; (xii) sales not payable in United
States currency; (xiii) any other reasons deemed necessary by CIT in its
reasonable judgment, including without limitation those which are customary
either in the commercial finance industry or in the lending practices of CIT:
and (xiv) with respect to the TBV Receivables, the TBV Service Agreement and
the TBV Assignment Agreement shall be in full force and effect. Without
limiting the foregoing, all Trade Accounts Receivable of any airline or the
United States of America, any state or other governmental entity, agency,
department or division thereof shall be acceptable to CIT in the exercise of
its reasonable credit judgment.
"Eligible Unbilled Accounts Receivable" shall mean the gross amount of
the Company's Trade Accounts Receivable (other than TBV Receivables) that
constitute Eligible Accounts Receivable except that such Trade Accounts
Receivable are either (a) evidenced only by a preliminary invoice, not
delivered to the relevant customer, or (b) are reflected on the Company's
Billing Cumulative Report, in each case in sufficient detail and with back-up
that is acceptable to CIT. None of the Company's Trade Accounts Receivable
shall constitute Eligible Unbilled Accounts Receivable on any date more than
forty (40) days past the applicable date service was rendered in respect
thereof. All Eligible Unbilled Accounts Receivable of any airline or the
United States of America, any state or other governmental entity, agency,
department or division thereof shall be acceptable to CIT in the exercise of
its reasonable credit judgment.
"Equipment" shall mean all present and hereafter acquired equipment (as
defined in the UCC) including, without limitation, all machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all
proceeds thereof of whatever sort.
"ERISA" shall mean the Employee Retirement Income Security Act or 1974,
as amended from time to time and the rules and regulations promulgated
thereunder from time to time.
"Event(s) of Default" shall have the meaning provided for in Section
10 of this Financing Agreement.
- 5 -
"Executive Officers" shall mean the Chairman, President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, Executive Vice
President(s), Senior Vice President(s), Treasurer, Controller and Secretary
of the Company.
"Fiscal Quarter" shall mean, with respect to the Company, each three (3)
month period ending on March 31, June30, September 30, and December 31 of
each Fiscal Year.
"Fiscal Year" shall mean each twelve (12) month period commencing on
April 1 of each year and ending on the following March 31.
"Fixed Charge Coverage Ratio" shall mean the ratio for the relevant
period of (a) (i) EBIT plus (ii) amortization and depreciation of the Company
to (b) the sum of (i) all federal, state and local tax obligations of the
Company and its subsidiaries, plus (ii) interest obligations paid or due by
the Company and its subsidiaries, plus (iii) all payment of indebtedness of
the Company and its subsidiaries plus (iv) all Capital Expenditures of the
Company, plus (v) dividends paid pursuant to Paragraph 7.9(f) of Section 7.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time and for the period as to
which such accounting principles are to apply, provided that in the event the
Company modifies its accounting principles and procedures as applied as of
the Closing Date, the Company shall provide such statements of reconciliation
as shall be in form and substance acceptable to CIT.
"General Intangibles" shall mean all present and hereafter acquired
general intangibles (as defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a)
all Trademarks, tradenames, corporate names, business names, logos and any
other designs or sources of business identities, (b) Patents, together with
any improvements on said Patents, utility models, industrial models, and
designs, (c) Copyrights, (d) trade secrets, (e) licenses, permits and
franchises, (f) all applications with respect to the foregoing, (g) all
right, title and interest in and to any and all extensions and renewals, (h)
goodwill with respect to any of the foregoing, (i) any other forms of similar
intellectual property, (j) all customer lists, distribution agreements,
supply agreements, blueprints, indemnification rights and tax refunds,
together with all monies and claims for monies now or hereafter due and
payable in connection with any of the foregoing or otherwise, and all cash
and non cash proceeds thereof, including, without limitation, the proceeds or
royalties of any licensing agreements between the Company and any licensee of
any of the Company's General Intangibles.
"Guaranties" shall mean the guaranty documents executed and delivered by
the Guarantors guaranteeing the Obligations.
"Guarantors" shall mean each subsidiary, from time to time, of the
Company.
"Indebtedness" shall mean, without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of borrowed money or for the deferred purchase price of property,
services or assets, or (b) lease obligations which, in accordance with GAAP,
have been, or which should be capitalized.
- 6 -
"Insurance Proceeds" shall mean proceeds or payments from an insurance
carrier with respect to any loss, casualty or damage to Collateral.
"Inventory" shall mean all of the Company's present and hereafter
acquired inventory (as defined in the UCC) and including, without limitation,
all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in
all stages of production from raw materials through work-in-process to
finished goods and all proceeds thereof of whatever sort.
"Investment Property" shall mean all now owned and hereafter acquired
investment property (as defined in the UCC) and all proceeds thereof.
"Loan Documents" shall mean this Financing Agreement, the other
closing documents and any other ancillary loan and security agreements
executed from time to time in connection with this Financing Agreement, all
as may be renewed, amended, extended, increased or supplemented from time to
time.
"Loan Facility Fee" shall mean the fee payable to CIT in accordance
with, and pursuant to, the provisions of Paragraph 8.4 of Section 8 of this
Financing Agreement.
"Obligations" shall mean all loans, advances and extensions of credit
made or to be made by CIT to the Company or to others for the Company's
account (including, without limitation, all Revolving Loans); any and all
indebtedness and obligations which may at any time be owing by the Company to
CIT howsoever arising, whether now in existence or incurred by the Company
from time to time hereafter; whether principal, interest, fees, costs,
expenses or otherwise; whether secured by pledge, lien upon or security
interest in any of the Company's Collateral, assets or property or the assets
or property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or
unmatured, direct or indirect and whether the Company is liable to CIT for
such indebtedness as principal, surety, endorser, guarantor or otherwise.
Obligations shall also include indebtedness owing to CIT by the Company under
any Loan Document or under any other agreement or arrangement now or
hereafter entered into between the Company and CIT; indebtedness or
obligations incurred by, or imposed on, CIT as a result of environmental
claims arising out of the Company's operations, premises or waste disposal
practices or sites in accordance with paragraph 7.7 hereof; the Company's
liability to CIT as maker or endorser of any promissory note or other
instrument for the payment of money; the Company's liability to CIT under any
instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which CIT may make or issue to others for the
Company's account, CIT's acceptance of drafts or CIT's endorsement of notes
or other instruments for the Company's account and benefit; and any and all
indebtedness, liabilities or obligations of every kind, nature and
description owing by the Company to any affiliate of CIT.
"Operating Leases" shall mean all leases of property (whether real,
personal or mixed) other than Capital Leases.
- 7 -
"Other Collateral" shall mean all now owned and hereafter acquired
lockbox, blocked account and any other deposit accounts maintained with any
bank or financial institutions into which the proceeds of Collateral are or
may be deposited; all other deposit accounts and all Investment Property; all
cash and other monies and property in the possession or control of CIT; all
books, records, ledger cards, disks and related data processing software at
any time evidencing or containing information relating to any of the
Collateral described herein or otherwise necessary or helpful in the
collection thereof or realization thereon; and all cash and non-cash proceeds
of the foregoing.
"Out-of-Pocket-Expenses" shall mean all of CIT's present and future
expenses incurred relative to this Financing Agreement or any other Loan
Documents, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to: the cost of record searches, all costs and
expenses incurred by CIT in opening bank accounts, depositing checks,
receiving and transferring funds, and wire transfer charges, any charges
imposed on CIT due to returned items and "insufficient funds" of deposited
checks and CIT's standard fees relating thereto, travel, lodging and similar
expenses of CIT's personnel in connection with inspecting and monitoring the
Collateral from time to time hereunder, any applicable counsel fees and
disbursements, fees and taxes relative to the filing of financing statements,
and all expenses, costs and fees set forth in Paragraph 10.3 of Section 10 of
this Financing Agreement.
"Overadvance Rate" shall mean a rate equal to one-half of one percent
(1/2%) per annum in excess of the applicable contract rate of interest
determined in accordance with Section 8, Paragraph 8.1(a) of this Financing
Agreement.
"Overadvances" shall mean the amount by which (a) the sum of all
outstanding Revolving Loans and advances made hereunder exceed (b) the
Borrowing Base.
"Patents" shall mean all of the Company's present and hereafter acquired
patents, patent applications, registrations, any reissues or renewals
thereof, licenses, any inventions and improvements claimed thereunder, and
all general intangible, intellectual property and patent rights with respect
thereto of the Company, and all income, royalties, cash and non-cash proceeds
thereof.
- 8 -
"Permitted Encumbrances" shall mean: (a) liens identified in Schedule 1
hereto existing on the date hereof on specific items of Equipment and other
liens expressly permitted, or consented to in writing by CIT; (b) Purchase
Money Liens; (c) liens of local or state authorities for franchise or other
like Taxes, provided that the aggregate amounts of such liens shall not
exceed $100,000.00 in the aggregate at any one time; (d) statutory liens of
landlords and liens of carriers, warehousemen, bailees, mechanics,
materialmen and other like liens imposed by law, created in the ordinary
course of business and for amounts not yet due (or which are being contested
in good faith, by appropriate proceedings or other appropriate actions which
are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained by the Company in accordance with GAAP; (e) deposits made (and the
liens thereon) in the ordinary course of business of the Company (including,
without limitation, security deposits for leases, indemnity bonds, surety
bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to
secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; (f) easements (including,
without limitation, reciprocal easement agreements and utility agreements),
encroachments, minor defects or irregularities in title, variation and other
restrictions, charges or encumbrances (whether or not recorded) affecting the
Real Estate, if applicable, and which in the aggregate (A) do not materially
interfere with the occupation, use or enjoyment by the Company of its
business or property so encumbered and (B) in the reasonable business
judgment of CIT do not materially and adversely affect the value of such Real
Estate; and (g) liens granted CIT by the Company (including the liens granted
in favor of the Company pursuant to the TBV Service Agreement that have been
assigned by the Company to CIT); (h) liens of judgment creditors provided
such liens do not exceed, in the aggregate, at any time, $50,000.00 (other
than liens bonded or insured to the reasonable satisfaction of CIT); and (i)
tax liens which are not yet due and payable or which are being diligently
contested in good faith by the Company by appropriate proceedings, and which
liens are not (x) filed on any public records, (y) other than with respect to
Real Estate, senior to the liens of CIT or (z) for Taxes due the United
States of America or any state thereof having similar priority statutes, as
further set forth in paragraph 7.6 hereof.
"Permitted Indebtedness" shall mean: (a) current Indebtedness
maturing in less than one year and incurred in the ordinary course of
business for raw materials, supplies, equipment, services, Taxes or labor;
(b) the Indebtedness secured by Purchase Money Liens; (c) Indebtedness
arising under this Financing Agreement; (d) deferred Taxes and other expenses
incurred in the ordinary course of business; and (e) other Indebtedness
existing on the date of execution of this Financing Agreement and listed in
the most recent financial statement delivered to CIT or otherwise disclosed
to CIT in writing prior to the Closing Date.
"Purchase Money Liens" shall mean liens on any item of Equipment
acquired after the date of this Financing Agreement provided that (a) each
such lien shall attach only to the property to be acquired, (b) a description
of the Equipment so acquired is furnished to CIT, and (c) the debt incurred
in connection with such acquisitions shall not exceed, in the aggregate, $
100,000.00 in any Fiscal Year.
"Real Estate" shall mean the Company's fee and/or leasehold interests in
real property.
"Revolving Line of Credit" shall mean the aggregate commitment of CIT to
make loans and advances pursuant to Section 3 of this Financing Agreement, in
the aggregate amount equal to the sum of $15,000,000.00.
"Revolving Line of Credit Fee" shall mean the fee due CIT at the end of
each month for the Revolving Line of Credit, and shall be determined by
multiplying the difference between (i) the Revolving Line of Credit and (ii)
the average daily balance of Revolving Loans for said month, by one-half of
one percent (0.50 %) per annum for the number of days in said month.
"Revolving Loan Account" shall mean the account on CIT's books,
in the Company's name, in which the Company will be charged with all
Obligations under this Financing Agreement.
- 9 -
"Revolving Loans" shall mean the loans and advances made, from time to
time, to or for the account of the Company by CIT pursuant to Section 3 of
this Financing Agreement.
"Taxes" shall mean all federal, state, municipal and other governmental
taxes, levies, charges, claims and assessments which are or may be due by the
Company with respect to its business, operations, Collateral or otherwise.
"TBV" shall mean T.B.V. Enterprises Incorporated, an Arizona
corporation.
"TBV Assignment Agreement" shall mean the Assignment of Service
Agreement Non-Employer of Record, dated as of the date hereof, among TBV, the
Company and CIT.
"TBV Receivables" shall mean the Trade Accounts Receivable of TBV that
are subject to the TBV Service Agreement and to which the Company has a
valid, first priority security interest which it has, in turn, assigned to
CIT.
"TBV Service Agreement" shall mean the Service Agreement Non-Employer of
Record, dated October 3, 1994, as amended, among the Company, TBV, Xxxxxx X.
Xxxxxxxxx and Xxxxxxxxx X. Xxxxxxxxx.
"Trade Accounts Receivable" shall mean (a) that portion of the Company's
Accounts which arises from the rendition of services in the ordinary course
of the Company's business and (b) the TBV Receivables.
"Trademarks" shall mean all present and hereafter acquired trademarks,
trademark registrations, recordings, applications, tradenames, trade styles,
service marks, prints and labels (on which any of the foregoing may appear),
licenses, reissues, renewals, and any other intellectual property and
trademark rights pertaining to any of the foregoing, together with the
goodwill associated therewith, and all cash and non-cash proceeds thereof.
"UCC" shall mean the Uniform Commercial Code as the same may be amended
and in effect from time to time in the state of New York.
"Working Day" shall mean any Business Day on which dealings in foreign
currencies and exchanges between banks may be transacted.
SECTION 2. Conditions Precedent
The obligation of CIT to make the initial loans hereunder is subject to
the satisfaction of, extension of or waiver of in writing, on or prior to,
the Closing Date, the following conditions precedent:
(a) Lien Searches. CIT shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CIT for all locations
presently occupied or used by the Company or TBV.
- 10 -
(b) Casualty Insurance. The Company shall have delivered to CIT
evidence satisfactory to CIT that casualty insurance policies
listing CIT as additional insured, loss payee or mortgagee, as the
case may be, are in full force and effect, all as set forth in
Paragraph 7.5 of Section 7 of this Financing Agreement.
(c) UCC Filings. Any financing statements required to be filed in order
to create, in favor of CIT, a first perfected security interest in
the Collateral, subject only to the Permitted Encumbrances, shall
have been properly filed in each office in each jurisdiction
required in order to create in favor of CIT a perfected lien on the
Collateral. CIT shall have received acknowledgment copies of all
such filings (or, in lieu thereof, CIT shall have received other
evidence satisfactory to CIT that all such filings have been made)
and CIT shall have received evidence that all necessary filing fees
and all taxes or other expenses related to such filings have been
paid in full.
(d) Board Resolution. CIT shall have received a copy of the resolutions
of the Board of Directors of each of the Company and the Guarantors
(as the case may be) authorizing the execution, delivery and
performance of (i) this Financing Agreement, (ii) the Guaranties,
and (iii) any related agreements, in each case certified by the
Secretary or Assistant Secretary of the Company and the Guarantors
(as the case may be) as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Company
and the Guarantors (as the case may be) as to the incumbency and
signature of the officers of the Company and/or the Guarantors
executing such Loan Documents and any certificate or other
documents to be delivered by them pursuant hereto, together with
evidence of the incumbency of such Secretary or Assistant
Secretary. In addition, CIT shall have received a copy of the
resolutions of the Board of Directors of TBV authorizing the
execution, delivery and performance of the TBV Assignment
Agreement, which resolutions shall have been certified by the
Secretary or Assistant Secretary of TBV as of the date hereof,
together with a certificate of the Secretary or Assistant Secretary
of TBV as to the incumbency and signatures of the officers of TBV
executing the TBV Assignment Agreement.
(e) Corporate Organization. CIT shall have received (i) a copy of the
Certificate of Incorporation of the Company and the Guarantors
certified by the Secretary of State of the state of its
incorporation, and (ii) a copy of the By Laws of the Company
certified by the Secretary or Assistant Secretary thereof, all as
amended through the date hereof.
(f) Officer's Certificate. CIT shall have received an executed
Officer's Certificate of the Company, satisfactory in form and
substance to CIT, certifying that (i) the representations and
warranties contained herein are true and correct in all material
respects on and as of the Closing Date; (ii) the Company is in
compliance with all of the terms and provisions set forth herein;
and (iii) no Default or Event of Default has occurred
- 11 -
(g) Opinions. Counsel for the Company and the Guarantors shall have
delivered to CIT opinions satisfactory to CIT opining, inter alia,
that, subject to the (i) filing, priority and remedies provisions
of the Uniform Commercial Code, (ii) the provisions of the
Bankruptcy Code, insolvency statutes or other like laws, (iii) the
equity powers of a court of law and (iv) such other matters as may
be agreed upon with CIT: this Financing Agreement, the Guaranty and
all other Loan Documents of the Company and the Guarantors are (A)
valid, binding and enforceable according to their terms, (B) are
duly authorized, executed and delivered, and (C) do not violate any
terms, provisions, representations or covenants in the charter or
by laws of the Company or the Guarantors or, to the best knowledge
of such counsel, of any loan agreement, mortgage, deed of trust,
note, security or pledge agreement, indenture or other contract to
which the Company or the Guarantors are signatories or by which the
Company or the Guarantors or their assets are bound.
(h) Absence of Default. No Default or Event of Default shall have
occurred and no material adverse change shall have occurred in the
financial condition, business, prospects, profits, operations or
assets of the Company, the Guarantors or the Company's
subsidiaries.
(i) Legal Restraints/Litigation. As of the Closing Date, there shall be
no: (x) litigation, investigation or proceeding (judicial or
administrative) pending or threatened against the Company or the
Guarantors or their assets, by any agency, division or department
of any county, city, state or federal government arising out of
this Financing Agreement; (y) injunction, writ or restraining order
restraining or prohibiting the financing arrangements contemplated
under this Financing Agreement; or (z) suit, action, investigation
or proceeding (judicial or administrative) pending against the
Company or the Guarantors or their assets, which, in the opinion of
CIT, if adversely determined, could have a material adverse effect
on the business, operation, assets, financial condition or
Collateral of the Company and/or the Guarantors.
(j) Guaranties. The Guarantors shall have executed and delivered to CIT
guaranties, in form acceptable to CIT, guaranteeing all present and
future Obligations of the Company.
(k) Cash Budget Projections. CIT shall have received, reviewed and been
satisfied with the cash budget projections prepared by the Company,
on the form provided by CIT for the remainder of the current Fiscal
Year and the Fiscal Year ending March 31, 2005.
(l) Pledge Agreement. The Company shall (i) execute and deliver to CIT
a pledge and security agreement pledging to CIT as additional
collateral for the Obligations of the Company not less than 100% of
the stock of all subsidiaries of the Company and, (ii) deliver to
CIT the stock certificates evidencing such stock together with duly
executed stock powers (undated and in-blank) with respect thereto,
all in form and substance satisfactory to CIT.
(m) Additional Documents. The Company shall have executed and delivered
to CIT all Loan Documents necessary to consummate the lending
arrangement contemplated between the Company and CIT.
(n) Disbursement Authorization. The Company shall have delivered to CIT
all information necessary for CIT to issue wire transfer
instructions on behalf of the Company for the initial and
subsequent loans and/or advances to be made under this Financing
Agreement including, but not limited to, disbursement
authorizations in form acceptable to CIT.
- 12 -
(o) Examination & Verification. CIT shall have completed, to CIT's
satisfaction, an examination and verification of the Company's
Accounts (including reporting relating to unbilled Accounts),
financial statements, Billing Cumulative Report and books and
records, which examination shall indicate that, after giving effect
to all Revolving Loans, advances and extensions of credit to be
made at closing, the Company shall have an opening additional
Availability of at least $500,000.00, as evidenced by a Borrowing
Base certificate delivered by the Company to CIT as of the Closing
Date, all as more fully required by the CIT Commitment Letter. It
is understood that such requirement contemplates that all debts and
obligations are current, and that all payables are being handled in
the normal course of the Company's business and consistent with its
past practice.
(p) Satisfactory Due Diligence, etc. The Company shall have delivered
to CIT, and CIT shall be in form and substance satisfied with, (i)
all customer service contracts and material contracts of the
Company and its subsidiaries; (ii) the results of NCO Financial
Systems background checks and credit references from vendors and
LaSalle Business Credit; (iii) the August 28, 2003 Stipulation of
Settlement and Order with the State of New York (Office of General
Services Settlement); and (iv) documentation relating to the
Company's dispute with the Federal Aviation Administration
regarding certain prior xxxxxxxx.
(q) Depository Accounts. The Company shall have established a system of
lockbox and bank accounts with respect to the collection of
Accounts and the deposit of proceeds of Collateral as shall be
acceptable to CIT in all respects. Such accounts shall be subject
to three party agreements (between the Company, CIT and the
depository bank), which shall be in form and substance satisfactory
to CIT.
(r) Existing Revolving Credit Agreement. The Company's existing credit
agreement with LaSalle Business Credit (the "Existing Lender")
shall be: (i) terminated; (ii) all loans and obligations of the
Company and/or the Guarantors thereunder shall be paid or satisfied
in full, including through utilization of the proceeds of the
initial Revolving Loans to be made under this Financing Agreement;
and (iii) all liens or security interests in favor of the Existing
Lender on the Collateral and otherwise in connection therewith
shall be terminated and/or released upon such payment.
(s) Schedules. Without limiting Paragraph 7.1 of Section 7, the Company
shall have identified on Schedule 1 hereto with respect to itself
and its subsidiaries (a) the identity of each of their
subsidiaries; (b) any tradenames; (c) monthly rental payments for
any leased premises or any other premises where any Collateral may
be stored or processed; and (d) Permitted Encumbrances, all of the
foregoing in form and substance satisfactory to CIT.
(t) Intellectual Property Security Agreement. The Company and the
Guarantors shall have executed and delivered to CIT an intellectual
property security agreement with respect to each of their patents,
trademarks and copyrights. In addition, there shall have been
delivered to CIT satisfactory search results with respect to such
intellectual property from the United States Patent and Trademark
Office and United States Copyright Office.
(u) CIT Commitment Letter. the Company shall have fully complied, to
the reasonable satisfaction of CIT, with all of the terms and
conditions of the CIT Commitment Letter.
- 13 -
(v) Landlord Waiver. The Company shall have delivered to CIT a
satisfactory landlord waiver with respect to its chief executive
office, which waiver shall have been duly executed by the landlord
of such premises.
(w) Control Agreements. The Company shall have delivered to CIT
satisfactory control agreements evidencing CIT's first priority
security interest in all the Investment Property of the Company and
its subsidiaries.
(x) TBV Agreements, etc.. The Company shall have delivered to CIT true
and complete copies of the TBV Service Agreement, together with all
other agreements and documents that it may reasonably request in
connection therewith, and the same shall be satisfactory to CIT. In
addition CIT shall have received duly executed counterparts of the
TBV Assignment Agreement.
2.2. Conditions to Each Extension of Credit
Except to the extent expressly set forth in this Financing Agreement,
the agreement of CIT to make any extension of credit requested to be made by
it to the Company on any date (including without limitation, the initial
extension of credit) is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in or pursuant to this Financing
Agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extension
of credit requested to be made on such date.
(c) Borrowing Base. Except as may be otherwise agreed to from time to
time by CIT and the Company in writing, after giving effect to the
extension of credit requested to be made by the Company on such
date, the aggregate outstanding balance of the Revolving Loans will
not exceed the lesser of (i) the Revolving Line of Credit or (ii)
the Borrowing Base.
Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company as of the date of such loan or advance that each of
the representations, warranties and covenants contained in the Financing
Agreement have been satisfied and are true and correct, except as the Company
and CIT shall otherwise agree herein or in a separate writing.
SECTION 3. Revolving Loans
3.1. CIT agrees, subject to the terms and conditions of this Financing
Agreement, from time to time (but subject to CIT's right to make
"Overadvances"), to make loans and advances to the Company on a revolving
basis (i.e., subject to the limitations set forth herein, the Company may
borrow, repay and re borrow Revolving Loans). Such requests for loans and
advances shall be in amounts not to exceed the lesser of (a) the Availability
or (b) the Revolving Line of Credit. All requests for loans and advances must
be received by an officer of CIT no later than 1:00 p.m., New York time, of
the Business Day on which any such Chase Bank Rate Loans and advances are
required. Should CIT for any reason honor requests for Overadvances, any such
Overadvances shall be made in CIT's sole discretion and subject to any
additional terms CIT deems necessary.
- 14 -
3.2. In furtherance of the continuing assignment and security interest
in the Company's Accounts, the Company will, upon the creation of Accounts,
execute and deliver to CIT in such form and manner as CIT may reasonably
require, solely for CIT's convenience in maintaining records of Collateral,
such confirmatory schedules of Accounts as CIT may reasonably request,
including, without limitation, a daily schedule of Accounts and by the 15th
of each month, a monthly schedule of Accounts, in form and substance
satisfactory to CIT, and such other appropriate reports designating,
identifying and describing the Accounts as CIT may reasonably request, and
provided further that CIT may request any such information more frequently,
from time to time, upon its reasonable prior request. In addition, the
Company shall provide to CIT a daily Borrowing Base certificate in form and
substance satisfactory to CIT, copies of agreements with, or purchase orders
from, the Company's or TBV's customers, copies of invoices to customers,
proof of shipment or delivery, access to its computers, electronic media and
software programs associated therewith (including any electronic records,
contracts and signatures) and such other documentation and information
relating to said Accounts and other Collateral as CIT may reasonably require.
Failure to provide CIT with any of the foregoing shall in no way affect,
diminish, modify or otherwise limit the security interests granted herein.
The Company hereby authorizes CIT to regard the Company's printed name or
rubber stamp signature on assignment schedules or invoices as the equivalent
of a manual signature by one of the Company's authorized officers or agents.
3.3. The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide rendition of services to
customers, made by the Company (in all cases, other than in respect of the
TBV Receivables) and TBV (in the case of the TBV Receivables), in each in the
ordinary course of its business; the Trade Accounts Receivable created, are
the exclusive property of the Company and are not and shall not be subject to
any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; the
invoices evidencing such Trade Accounts Receivable are in the name of the
Company; and the customers of the Company have accepted the services, owe and
are obligated to pay the full amounts stated in the invoices according to
their terms, without dispute, offset, defense, counterclaim or contra, except
for disputes and other matters arising in the ordinary course of business
with respect to which the Company has complied with the notification
requirements of Paragraph 3.5 of this Section 3. The Company confirms to CIT
that any and all Taxes or fees relating to its business, its sales, the
Accounts relating thereto, are its sole responsibility and that same will be
paid by the Company when due, subject to Paragraph 7.6 of Section 7 of this
Financing Agreement, and that none of said Taxes or fees represent a lien on
or claim against the Accounts. The Company also warrants and represents that
it is a duly and validly existing corporation and is qualified in all states
where the failure to so qualify would have an adverse effect on the business
of the Company or the ability of the Company to enforce collection of
Accounts due from customers residing in that state. The Company agrees to
maintain such books and records regarding Accounts as CIT may reasonably
require and agrees that the books and records of the Company will reflect
CIT's interest in the Accounts. All of the books and records of the Company
will be available to CIT at normal business hours, including any records
handled or maintained for the Company by any other company or entity.
- 15 -
3.4. (a) Until CIT has advised the Company to the contrary after the
occurrence of an Event of Default, the Company, at its expense, will enforce,
collect and receive all amounts owing on the Accounts in the ordinary course
of its business and any proceeds it so receives shall be subject to the terms
hereof, and held on behalf of and in trust for CIT. Such privilege shall
terminate at the election of CIT, upon the occurrence of an Event of Default.
Any checks, cash, credit card sales and receipts, notes or other instruments
or property received by the Company with respect to any Collateral, including
Accounts, shall be held by the Company in trust for CIT, separate from the
Company's own property and funds, and promptly turned over to CIT with proper
assignments or endorsements by deposit to the Depository Accounts. The
Company shall: (i) indicate on all of its invoices that funds should be
delivered to and deposited in a Depository Account; (ii) direct all of its
account debtors to deposit any and all proceeds of Collateral into the
Depository Accounts; (iii) irrevocably authorize and direct any banks which
maintain the Company's initial receipt of cash, checks and other items to
promptly wire transfer all available funds to a Depository Account; and (iv)
advise all such banks of CIT's security interest in such funds. The Company
shall provide CIT with prior written notice of any and all deposit accounts
opened or to be opened subsequent to the Closing Date. Subject to Collection
Days, all amounts received by CIT in payment of Accounts will be credited to
the Revolving Loan Account when CIT is advised by its bank of its receipt of
"collected funds" at CIT's bank account in New York, New York on the Business
Day of such advise if advised no later than 1:00 p.m. EST or on the next
succeeding Business Day if so advised after 1:00 PM EST. No checks, drafts or
other instrument received by CIT shall constitute final payment to CIT unless
and until such instruments have actually been collected.
(b) The Company shall establish and maintain, in its name and at its
expense, deposit accounts with such banks as are acceptable to CIT (the
"Blocked Accounts") into which the Company shall promptly cause to be
deposited: (i) all proceeds of Collateral received by the Company, including
all amounts payable to the Company from credit card issuers and credit card
processors, and (ii) all amounts on deposit in deposit accounts used by the
Company at each of its locations, all as further provided in Paragraph 3.4(a)
above. The banks at which the Blocked Accounts are established shall enter
into an agreement, in form and substance satisfactory to CIT (the "Blocked
Account Agreements"), providing that all cash, checks and items received or
deposited in the Blocked Accounts are the property of CIT, that the
depository bank has no lien upon, or right of set off against, the Blocked
Accounts and any cash, checks, items, wires or other funds from time to time
on deposit therein, except as otherwise provided in the Blocked Account
Agreements, and that automatically, on a daily basis the depository bank will
wire, or otherwise transfer, in immediately available funds, all funds
received or deposited into the Blocked Accounts to such bank account as CIT
may from time to time designate for such purpose. The Company hereby confirms
and agrees that all amounts deposited in such Blocked Accounts and any other
funds received and collected by CIT, whether as proceeds of Collateral or
otherwise, shall be the property of CIT.
- 16 -
3.5. The Company agrees to notify CIT: (a) of any matters affecting the
value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods in its daily, weekly and
monthly collateral reports (as applicable) provided to CIT hereunder, in such
detail and format as CIT may reasonably require from time to time; and (b)
promptly of any such matters which (i) are material, as a whole, to the
Accounts, or (ii) which adversely affect the value of any Account in an
amount of $25,000.00 or more. The Company agrees to issue credit memoranda
promptly (with duplicates to be immediately forwarded to CIT) upon accepting
returns or granting allowances. Upon the occurrence of an Event of Default
(which is not waived in writing by CIT) and on notice from CIT, the Company
agrees that all returned, reclaimed or repossessed merchandise or goods shall
be set aside by the Company, marked with CIT's name (as secured party) and
held by the Company for CIT's account.
3.6. CIT shall maintain a Revolving Loan Account on its books in which
the Company will be charged with all loans and advances made by CIT to it or
for its account, and with any other Obligations, including any and all costs,
expenses and reasonable attorney's fees which CIT may incur in connection
with the exercise by or for CIT of any of the rights or powers herein
conferred upon CIT, or in the prosecution or defense of any action or
proceeding to enforce or protect any rights of CIT in connection with this
Financing Agreement, the other Loan Documents or the Collateral assigned
hereunder, or any Obligations owing by the Company. The Company will be
credited with all amounts received by CIT from the Company or from others for
the Company's account, including, as above set forth, all amounts received by
CIT in payment of Accounts, and such amounts will be applied to payment of
the Obligations as set forth herein. In no event shall prior recourse to any
Accounts or other security granted to or by the Company be a prerequisite to
CIT's right to demand payment of any Obligation. Further, it is understood
that CIT shall have no obligation whatsoever to perform in any respect any of
the Company's contracts or obligations relating to the Accounts.
3.7. After the end of each month, CIT shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CIT and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and CIT unless CIT
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.
3.8. In the event that any requested advance exceeds Availability or
that the outstanding balance of Revolving Loans exceeds (x) the Borrowing
Base or (y) the Revolving Line of Credit, any such nonconsensual Overadvance
shall be due and payable to CIT immediately upon CIT's demand therefor.
SECTION 4. Intentionally Omitted.
SECTION 5. Intentionally Omitted.
SECTION 6. Collateral
6.1. As security for the prompt payment in full of all Obligations, the
Company hereby pledges and grants to CIT a continuing general lien upon, and
security interest in, all of its:
(a) Accounts;
- 17 -
(b) Inventory;
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral;
(f) Equipment; and
(g) TBV Receivables and the TBV Service Agreement.
6.2. The security interests granted hereunder shall extend and attach
to:
(a) All Collateral which is owned by the Company or in which the
Company has any interest, whether held by the Company or others for
its account, and, if any Collateral is Equipment, whether the
Company's interest in such Equipment is as owner, finance lessee or
conditional vendee;
(b) All Equipment, whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the
foregoing, all dies, jigs, tools, benches, molds, tables,
accretions, component parts thereof and additions thereto, as well
as all accessories, motors, engines and auxiliary parts used in
connection with, or attached to, the Equipment; and
6.3. The Company hereby agrees to immediately forward any and all
proceeds of Collateral to the Depository Account, and to hold any such
proceeds (including any notes and instruments), in trust for CIT pending
delivery to CIT.
6.4. The Company agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now
or at the time the lien and security interest granted herein shall attach
thereto, reasonable wear and tear excepted, making any and all repairs and
replacements when and where necessary. The Company also agrees to safeguard,
protect and hold all Equipment in accordance with the terms hereof and
subject to CIT's security interest. Any sale, exchange or other disposition
of any Equipment shall be made by the Company only with CIT's prior written
consent Upon the sale, exchange, or other disposition of the Equipment, as
herein provided, the security interest provided for herein shall, without
break in continuity and without further formality or act, continue in, and
attach to, all proceeds, including any instruments for the payment of money,
Accounts, documents of title, shipping documents, chattel paper and all other
cash and non cash proceeds of such sales, exchange or disposition. As to any
such sale, exchange or other disposition, CIT shall have all of the rights of
an unpaid seller, including stoppage in transit, replevin, rescission and
reclamation.
6.5. The rights and security interests granted to CIT hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time
to time be temporarily in a credit position, until the final payment in full
to CIT of all Obligations and the termination of this Financing Agreement.
Any delay, or omission by CIT to exercise any right hereunder shall not be
deemed a waiver thereof, or be deemed a waiver of any other right, unless
such waiver shall be in writing and signed by CIT. A waiver on any one
occasion shall not be construed as a bar to, or waiver of, any right or
remedy on any future occasion.
- 18 -
6.6. Notwithstanding CIT's security interest in the Collateral and to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets
or property of any other person, CIT shall have the right in its sole
discretion to determine which rights, liens, security interests or remedies
CIT shall at any time pursue, foreclose upon, relinquish, subordinate, modify
or take any other action with respect to, without in any way modifying or
affecting any of them, or any of CIT's rights hereunder.
6.7. Any balances to the credit of the Company and any other property or
assets of the Company in the possession or control of CIT may be held by CIT
as security for any Obligations and applied in whole or partial satisfaction
of such Obligations when due. The liens and security interests granted
herein, and any other lien or security interest CIT may have in any other
assets of the Company, shall secure payment and performance of all now
existing and future Obligations. CIT may in its discretion charge any or all
of the Obligations to the Revolving Loan Account when due.
6.8. The Company possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date and the
Company shall maintain its rights in, and the value of, the foregoing in the
ordinary course of its business, including, without limitation, by making
timely payment with respect to any applicable licensed rights. The Company
shall deliver to CIT, and/or shall cause the appropriate party to deliver to
CIT, from time to time such pledge or security agreements with respect to
General Intangibles (now or hereafter acquired) of the Company and its
subsidiaries as CIT shall require to obtain valid first liens thereon. In
furtherance of the foregoing, the Company shall provide timely notice to CIT
of any additional Patents, Trademarks, tradenames, service marks, Copyrights,
brand names, trade names, logos and other trade designations acquired or
applied for subsequent to the Closing Date and the Company shall execute such
documentation as CIT may reasonably require to obtain and perfect its lien
thereon. The Company hereby confirms that it shall deliver, or cause to be
delivered, any pledged stock issued subsequent to the Closing Date to CIT in
accordance with the applicable terms of the Pledge Agreement and prior to
such delivery, shall hold any such stock in trust for CIT. As additional
Collateral hereunder, the Company hereby irrevocably grants to CIT a
royalty-free, non-exclusive license in the General Intangibles, including
tradenames, Trademarks, Copyrights, Patents, licenses, and any other
proprietary and intellectual property rights and any and all right, title and
interest in any of the foregoing.
6.9. The Company agrees to deliver to CIT, promptly following its
request therefore, possession of all originals of all negotiable documents,
instruments and chattel paper (duly endorsed in blank, if requested by CIT).
6.10. The Company shall not amend, otherwise modify or waive any of its
rights under the TBV Service Agreement without the prior written consent of
CIT. In addition, the Company shall deliver to CIT, (a) concurrently upon the
receipt or delivery thereof, copies of all notices, agreements or documents
delivered pursuant to the TBV Service Agreement, and (b) notice of the breach
of any warranty, representation or covenant contained therein by the Company,
TBV or any other party thereto.
- 19 -
SECTION 7. Representations, Warranties and Covenants
7.1. The Company warrants and represents that (i) Schedule 1 hereto
correctly and completely sets forth the Company's (A) chief executive office,
(B) Collateral locations, (C) tradenames, and (D) all the other information
listed on said Schedule; (ii) except for the Permitted Encumbrances, after
filing of financing statements in the applicable filing clerks office at the
locations set forth in Schedule 1, this Financing Agreement creates a valid,
perfected and first priority security interest in the Collateral and the
security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral; (iii) except for the
Permitted Encumbrances, the Company is, or will be, at the time additional
Collateral is acquired by it, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest
therein, free and clear of any and all claims or liens in favor of others;
(iv) the Company will, at its expense, forever warrant and, at CIT's request,
defend the same from any and all claims and demands of any other person other
than a holder of a Permitted Encumbrance; (v) the Company will not grant,
create or permit to exist, any lien upon, or security interest in, the
Collateral, or any proceeds thereof, in favor of any other person other than
the holders of the Permitted Encumbrances; and (vi) the Equipment is and will
only be used by the Company in its business and will not be held for sale or
lease, or removed from its premises, or otherwise disposed of by the Company
except as otherwise permitted in this Financing Agreement.
7.2. The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and
scope as CIT shall reasonably require. The Company agrees that CIT or its
agents may enter upon the Company's premises at any time during normal
business hours, and from time to time in its reasonable business judgment,
for the purpose of inspecting the Collateral and any and all records
pertaining thereto. The Company irrevocably authorizes all accountants and
third parties to disclose and deliver directly to CIT, at the Company's
expense, all financial statements and information, books, records, work
papers, management reports and other information generated by them or in
their possession regarding the Company and/or the Collateral. The Company
agrees to afford CIT thirty (30) days prior written notice of any change in
the location of any Collateral, other than to locations, that as of the
Closing Date, are known to CIT and at which CIT has filed financing
statements and otherwise fully perfected its liens thereon. The Company is
also to advise CIT promptly, in sufficient detail, of any material adverse
change relating to the type, quantity or quality of the Collateral or on the
security interests granted to CIT therein.
7.3. The Company agrees to: (a) execute and deliver to CIT, from time to
time, solely for CIT's convenience in maintaining a record of the Collateral,
such written statements, and schedules as CIT may reasonably require,
designating, identifying or describing the Collateral; and (b) provide CIT,
on request, but no more frequently than semi-annually, an environmental audit
report on its leasehold and fee interests, and its waste disposal practices,
which report shall be (i) at the Company's expense and otherwise acceptable
to CIT and (ii) not disclose or indicate any material liability (real or
potential) stemming from the Company's premises, its operations, its waste
disposal practices or waste disposal sites used by the Company. The Company's
failure, however, to promptly give CIT such statements, or schedules shall
not affect, diminish, modify or otherwise limit CIT's security interests in
the Collateral.
- 20 -
7.4. The Company agrees to comply with the requirements of all state and
federal laws in order to grant to CIT valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CIT
is hereby authorized by the Company to file (including pursuant to the
applicable terms of the UCC) from time to time any financing statements,
continuations or amendments covering the Collateral. The Company hereby
consents to and ratifies any and all execution and/or filing of financing
statements on or prior to the Closing Date by CIT. The Company agrees to do
whatever CIT may reasonably request, from time to time, by way of: (a) filing
notices of liens, financing statements, amendments, renewals and
continuations thereof; (b) cooperating with CIT's agents and employees; (c)
keeping Collateral records; (d) transferring proceeds of Collateral to CIT's
possession; and (e) performing such further acts as CIT may reasonably
require in order to effect the purposes of this Financing Agreement,
including but not limited to obtaining control agreements with respect to
deposit accounts and/or Investment Property.
7.5. (a) The Company agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as
are at all times reasonably satisfactory to CIT. All policies covering the
Real Estate, Equipment and Inventory are, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to CIT, to be made
payable to CIT, in case of loss, under a standard non contributory
"mortgagee", "lender" or "secured party" clause and are to contain such other
provisions as CIT may require to fully protect CIT's interest in the Real
Estate, Inventory and Equipment and to any payments to be made under such
policies. All original policies or true copies thereof are to be delivered to
CIT, premium prepaid, with the loss payable endorsement in CIT's favor, and
shall provide for not less than thirty (30) days prior written notice to CIT
of the exercise of any right of cancellation. At the Company's request, or if
the Company fails to maintain such insurance, CIT may arrange for such
insurance, but at the Company's expense and without any responsibility on
CIT's part for: (i) obtaining the insurance; (ii) the solvency of the
insurance companies; (iii) the adequacy of the coverage; or (iv) the
collection of claims. Upon the occurrence of an Event of Default which is not
waived in writing by CIT, CIT shall, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CIT, have the sole right, in
the name of CIT or the Company, to file claims under any insurance policies,
to receive, receipt and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such
insurance policies.
(b) (i) In the event any part of the Company's Real Estate or Equipment
is damaged by fire or other casualty and the Insurance Proceeds for such
damage or other casualty is less than or equal to $100,000.00, CIT shall
promptly apply such Proceeds to reduce the Company's outstanding balance in
the Revolving Loan Account. Upon the occurrence of a Default or Event of
Default, CIT may apply Insurance Proceeds to the Obligations in such manner
as it may deem advisable in its sole discretion; and
- 21 -
(ii) In the event any part of the Company's Real Estate or Equipment is
damaged by fire or other casualty, and the Insurance Proceeds is greater than
$100,000.00, CIT may, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to CIT, apply the Insurance Proceeds to
the payment of the Obligations in such manner and in such order as CIT may
reasonably elect.
7.6. The Company agrees to pay, when due, all Taxes, including sales
taxes, assessments, claims and other charges lawfully levied or assessed upon
the Company or the Collateral unless such Taxes are being diligently
contested in good faith by the Company or TBV (in respect of the TBV
Receivables) by appropriate proceedings and adequate reserves are established
in accordance with GAAP. Notwithstanding the foregoing, if any lien shall be
filed or claimed thereunder (a) for Taxes due the United States of America,
or (b) which in CIT's opinion might create a valid obligation having priority
over the rights granted to CIT herein (exclusive of Real Estate), such lien
shall not be deemed to be a Permitted Encumbrance hereunder and the Company
shall immediately pay or cause to be paid such tax and remove the lien of
record. If the Company fails to do so promptly, then at CIT's election, CIT
may (i) create an Availability Reserve in such amount as it may deem
appropriate in its business judgment, or (ii) upon the occurrence of a
Default or Event of Default, imminent risk of seizure, filing of any priority
lien, forfeiture, or sale of the Collateral, pay Taxes on the Company's
behalf, and the amount thereof shall be an Obligation secured hereby and due
on demand.
7.7. The Company: (a) agrees to comply with all acts, rules, regulations
and orders of any legislative, administrative or judicial body or official,
which the failure to comply with would have a material and adverse impact on
the Collateral, or any material part thereof, or on the business or
operations of the Company, provided that the Company may contest any acts,
rules, regulations, orders and directions of such bodies or officials in any
reasonable manner which will not, in CIT's reasonable opinion, materially and
adversely effect CIT's rights or priority in the Collateral; (b) agrees to
comply with all environmental statutes, acts, rules, regulations or orders as
presently existing or as adopted or amended in the future, applicable to the
Collateral, the ownership and/or use of its real property and operation of
its business, which the failure to comply with would have a material and
adverse impact on the Collateral, or any material part thereof, or on the
operation of the business of the Company; and (c) shall not be deemed to have
breached any provision of this Paragraph 7.7 if (i) the failure to comply
with the requirements of this Paragraph 7.7 resulted from good faith error or
innocent omission, (ii) the Company promptly commences and diligently pursues
a cure of such breach, and (iii) such failure is cured within (30) days
following the Company's receipt of notice of such failure, or if such cannot
in good faith be cured within thirty (30) days, then such breach is cured
within a reasonable time frame based upon the extent and nature of the breach
and the necessary remediation, and in conformity with any applicable consent
order, consensual agreement and applicable law.
- 22 -
7.8. Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that,
unless CIT shall have otherwise consented in writing, the Company will
furnish to CIT: (a) within ninety (90) days after the end of each Fiscal Year
of the Company, (i) an audited Consolidated Balance Sheet, with a
Consolidating Balance Sheet attached thereto, as at the close of such year,
and statements of profit and loss, cash flow and reconciliation of surplus of
the Company and its consolidated subsidiaries for such year, audited by
independent public accountants selected by the Company and satisfactory to
CIT, (ii) comparable information adjusted to reflect changes from the prior
Fiscal Year and with the projections delivered pursuant to this Paragraph, in
each case certified by an authorized financial or accounting officer of the
Company; and (iii) a management discussion and analysis regarding the
Company's actual results versus the prior Fiscal Year results and the
projections provided pursuant to this Paragraph; (b) within forty-five (45)
days after the end of each Fiscal Quarter a Consolidated Balance Sheet and
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss, cash flow and surplus of the Company and its consolidated
subsidiaries, together with comparable information adjusted to reflect any
changes for the corresponding period of the previous Fiscal Year and with the
projections delivered pursuant to this Paragraph, in each case certified by
an authorized financial or accounting officer of the Company; (c) within
thirty (30) days after the end of each month a Consolidated Balance Sheet as
at the end of such period and statements of profit and loss, cash flow and
surplus of the Company and all subsidiaries for such period, certified by an
authorized financial or accounting officer of the Company; (d) concurrently
after the filing or sending thereof, all reports, financial statements and
registration statements filed by the Company or any of its subsidiaries with
the Securities and Exchange Commission or any securities exchange and (e)
from time to time, such further information regarding the business affairs
and financial condition of the Company and its consolidated subsidiaries as
CIT may reasonably request, including, without limitation (i) the
accountant's management practice letter and (ii) within thirty (30) days
prior to the end of each Fiscal Year annual income statement, balance sheet,
cash flow and Availability projections for the next following Fiscal Year, on
a monthly basis, together with the assumptions (in reasonable detail)
relating thereto, all in a form satisfactory to CIT. Each financial statement
which the Company is required to submit hereunder must be accompanied by an
officer's certificate, signed by the President, Vice President, Controller,
or Treasurer, pursuant to which any one such officer must certify that: (w)
the financial statement(s) fairly and accurately represent(s) the Company's
financial condition at the end of the particular accounting period, as well
as the Company's operating results during such accounting period, subject to
year end audit adjustments; (x) during the particular accounting period: (A)
there has been no Default or Event of Default under this Financing Agreement,
provided, however, that if any such officer has knowledge that any such
Default or Event of Default, has occurred during such period, the existence
of and a detailed description of same shall be set forth in such officer's
certificate; (B) the Company has not received any notice of cancellation with
respect to its property insurance policies; (C) the Company has not received
any notice that could result in a material adverse effect on the value of the
Collateral taken as a whole; and (D) the exhibits attached to such financial
statement(s) constitute detailed calculations showing compliance with all
financial covenants contained in this Financing Agreement and; (y) the
Company has paid, as and when due, all monthly premium payments and quarterly
lost fund payments as required by its insurance carrier in respect of
workers' compensation claims; and (z) the Company and, to his best knowledge,
the other parties to the TBV Service Assignment have complied with all the
terms of the TBV Service Agreement (and, if such non-compliance has occurred,
provide a reasonably detailed explanation regarding the same and the steps
taken to address such non-compliance).
7.9. Until termination of this Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that, without
the prior written consent of CIT, except as otherwise herein provided, the
Company will not:
- 23 -
(a) Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or other
security interest, or otherwise) to exist on any of the Company's
Collateral or any other assets, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement, or (ii) either all or substantially all of the
Company's assets, which do not constitute Collateral;
(d) Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, or existence,
re-incorporate or re-organize, or enter into or engage in any
operation or activity materially different from that presently
being conducted by the Company, except that the Company may change
its corporate name or address; provided that: (i) the Company shall
give CIT thirty (30) days prior written notice thereof, and (ii)
the Company shall execute and deliver, prior to or simultaneously
with any such action, any and all documents and agreements
requested by CIT to confirm the continuation and preservation of
all security interests and liens granted to CIT hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by
the endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;
(f) Declare or pay any dividend or distributions of any kind on, or
purchase, acquire, redeem or retire, any of the capital stock or
equity interest, of any class whatsoever, whether now or hereafter
outstanding, except that the Company may declare and pay dividends
in the ordinary course of its business with respect to its Series A
Convertible Preferred Stock, provided that (i) the aggregate amount
of such dividends does not exceed in any Fiscal Quarter $41,000 and
(ii) immediately before and after giving effect to the making of
any such dividend (A) no Default or Event of Default shall have
occurred, (B) the Company shall be in compliance with Paragraph
7.10 of Section 7 and (c) the Company shall have at least
$500,000.00 in Availability immediately before and after giving
effect to the making of each such dividend;
(g) Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, or purchase or acquire all or
substantially all of the stock or assets of any entity, person or
corporation, except that the Company may make loans to TBV,
pursuant to the terms of the TBV Service Agreement, on terms and in
an amount satisfactory to CIT; or
(h) Pay any management, consulting or other similar fees to any person,
corporation or other entity affiliated with the Company.
7.10. Until termination of this Financing Agreement and payment and
satisfaction in full of all the Obligations hereunder, the Company will, as
of the last day of each month, maintain a Fixed Charge Coverage Ratio of not
less than 1.10:1:00. The Fixed Charge Coverage Ratio shall be calculated, as
of any date of determination, based upon the preceding twelve (12) months,
provided that prior to the completion of the first twelve (12) months
following the Closing Date such calculation shall be based on the number of
full calendar months since the Closing Date, with such results to be
cumulative for such period.
- 24 -
7.11. The Company agrees to advise CIT in writing of: (a) all
expenditures (actual or anticipated) in excess of $150,000.00 from the
budgeted amount therefor in any Fiscal Year for (i) environmental clean up,
(ii) environmental compliance or (iii) environmental testing and the impact
of said expenses on the Company's Working Capital; and (b) any notices the
Company receives from any local, state or federal authority advising the
Company of any environmental liability (real or potential) stemming from the
Company's operations, its premises, its waste disposal practices, or waste
disposal sites used by the Company and to provide CIT with copies of all such
notices if so required.
7.12. The Company hereby agrees to indemnify and hold harmless CIT and
its officers, directors, employees, attorneys and agents (each an
"Indemnified Party") from, and holds each of them harmless against, any and
all losses, liabilities, obligations, claims, actions, damages, costs and
expenses (including attorney's fees) and any payments made by CIT pursuant to
any indemnity provided by CIT with respect to or to which any Indemnified
Party could be subject insofar as such losses, liabilities, obligations,
claims, actions, damages, costs, fees or expenses with respect to the Loan
Documents, including without limitation those which may arise from or relate
to: (a) the Depository Account, the Blocked Accounts, the lockbox and/or any
other depository account and/or the agreements executed in connection
therewith; and (b) any and all claims or expenses asserted against CIT as a
result of any environmental pollution, hazardous material or environmental
clean up relating to the Real Estate; or any claim or expense which results
from the Company's operations (including, but not limited to, the Company's
off site disposal practices) and use of the Real Estate, which CIT may
sustain or incur (other than solely as a result of the physical actions of
CIT on the Company's premises which are determined to constitute gross
negligence or willful misconduct by a court of competent jurisdiction), all
whether through the alleged or actual negligence of such person or otherwise,
except and to the extent that the same results solely and directly from the
gross negligence or willful misconduct of such Indemnified Party as finally
determined by a court of competent jurisdiction. The Company hereby agrees
that this indemnity shall survive termination of this Financing Agreement, as
well as payments of Obligations which may be due hereunder. CIT may, in its
sole business judgment, establish such Availability Reserves with respect
thereto as it may deem advisable under the circumstances and, upon any
termination hereof, hold such reserves as cash reserves for any such
contingent liabilities.
7.13. Without the prior written consent of CIT, the Company agrees that
it will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any subsidiary or
affiliate of the Company, provided that, except as otherwise set forth in
this Financing Agreement, the Company may enter into sale and service
transactions in the ordinary course of its business and pursuant to the
reasonable requirements of the Company, and upon standard terms and
conditions and fair and reasonable terms, no less favorable to the Company
than the Company could obtain in a comparable arms length transaction with an
unrelated third party, provided further that no Default or Event of Default
exists or will occur hereunder prior to and after giving effect to any such
transaction.
- 25 -
7.14. Any replacement of Xxxxxx Xxxxxx as Chief Financial Officer of the
Company shall be reasonably satisfactory to CIT. In addition, each person
purchasing shares of the Company that are owned, directly or indirectly, by
Reliance Security Group plc shall be reasonably satisfactory to CIT, such
consent not to be unreasonably withheld.
7.15. The Company agrees to notify CIT of all worker's compensation
claims in an amount of $25,000.00 or more (whether or not covered by
insurance).
SECTION 8. Interest, Fees and Expenses
8.1. (a) Interest shall be payable monthly as of the end of each month
in an amount equal to the Chase Bank Rate plus one and one-quarter percent
(1.25%) per annum on the greater of (i) $5,000,000.00 or (ii) on the average
of the net balances owing by the Company to CIT in the Revolving Loan Account
at the close of each day during such month. In the event of any change in
said Chase Bank Rate, the rate hereunder for Chase Bank Rate Loans shall
change, as of the date of such change, so as to remain one and one-quarter
percent (1.25%) above the Chase Bank Rate. The rate hereunder shall be
calculated based on a 360 day year. CIT shall be entitled to charge the
Revolving Loan Account at the rate provided for herein when due until all
Obligations have been paid in full.
(b) Notwithstanding any provision to the contrary contained in this
Section 8, in the event that the outstanding Revolving Loans exceed the
Revolving Line of Credit: (i) as a result of Revolving Loans advanced by CIT
at the request of the Company (herein "Requested Overadvances"), for any one
(1) or more days in any month, or (ii) for any other reason whatsoever
(herein "Other Overadvances") and such Other Overadvances continue for five
(5) or more days in any month , the average net balance of all Revolving
Loans for such month shall bear interest at the Overadvance Rate.
(c) Upon and after the occurrence of an Event of Default and the giving
of any required notice by CIT in accordance with the provisions of Section
10, Paragraph 10.2 hereof, all Obligations shall bear interest at the Default
Rate of Interest.
8.2. The Company shall reimburse or pay CIT, as the case may be, for:
(a) all Out of Pocket Expenses; (b) any applicable Documentation Fee; and (c)
without the payment of such constituting a waiver by CIT of a Default or
Event of Default hereunder, a non-refundable fee of $250.00 for each document
or report requested by, but not promptly delivered, to CIT.
8.3. Upon the last Business Day of each month, commencing on December
31, 2003, the Company shall pay to CIT (i) the Revolving Line of Credit Fee,
and (ii) interest on the Collection Days. Interest will be computed at the
rate, and in the manner, set forth in Paragraph 8.1 of this Financing
Agreement.
8.4. To induce CIT to enter into this Financing Agreement and to extend
to the Company the Revolving Loan, the Company shall pay to CIT a Loan
Facility Fee in the amount of $150,000.00,(a) fifty percent (50%) of such fee
having been earned and paid by the Company to CIT upon execution of the CIT
Commitment Letter and (b) the remaining fifty percent (50%) of such fee to be
earned and payable upon execution of this Financing Agreement, provided that
there shall be credited against such amount the Expense Deposit (as defined
in the CIT Commitment Letter) minus all out-of-pocket expenses and field
examination fees incurred by CIT in connection with the CIT Commitment Letter
and this Financing Agreement;
- 26 -
8.5. (a) On each anniversary of the Closing Date the Company shall pay
to CIT the Administrative Management Fee in the amount of $37,500.00, which
shall be deemed fully earned on the Closing Date.
(b) On the Closing Date and on the first Business Day of each month
thereafter, the Company shall pay to CIT a Collateral Management Fee in an
amount equal to $3,000.00.
8.6. The Company shall pay CIT's standard charges and fees for CIT's
personnel used by CIT for reviewing the books and records of the Company and
for verifying, testing, protecting, safeguarding, preserving or disposing of
all or any part of the Collateral (which fees shall be in addition to the
Administrative Management Fee and any Out-of-Pocket Expenses, and are
currently billed at the rate of $850.00 per examiner per day).
8.7. The Company hereby authorizes CIT to charge the Revolving Loan
Account with the amount of all payments due hereunder as such payments become
due. The Company confirms that any charges which CIT may so make to the
Revolving Loan Account as herein provided will be made as an accommodation to
the Company and solely at CIT's discretion.
8.8. In the event that CIT or any participant hereunder (or any
financial institution which may from time to time become a participant or
lender hereunder) shall have determined in the exercise of its reasonable
business judgment that, subsequent to the Closing Date, any change in
applicable law, rule, regulation or guideline regarding capital adequacy, or
any change in the interpretation or administration thereof, or compliance by
CIT or such participant with any new request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on CIT's or such participant's capital as a consequence of
its obligations hereunder to a level below that which CIT or such participant
could have achieved but for such adoption, change or compliance (taking into
consideration CIT or such participant's policies with respect to capital
adequacy) by an amount reasonably deemed by CIT or such participant to be
material, then, from time to time, the Company shall pay no later than five
(5) days following demand to CIT or such participant such additional amount
or amounts as will compensate CIT's or such participant's for such reduction.
In determining such amount or amounts, CIT or such participant may use any
reasonable averaging or attribution methods. The protection of this Paragraph
8.8 shall be available to CIT or such participant regardless of any possible
contention of invalidity or inapplicability with respect to the applicable
law, regulation or condition. A certificate of CIT or such participant
setting forth such amount or amounts as shall be necessary to compensate CIT
or such participant with respect to this Section 8 and the calculation
thereof when delivered to the Company shall be conclusive on the Company
absent manifest error. Notwithstanding anything in this paragraph to the
contrary, in the event CIT or such participant has exercised its rights
pursuant to this paragraph, and subsequent thereto determines that the
additional amounts paid by the Company in whole or in part exceed the amount
which CIT or such participant actually required to be made whole, the excess,
if any, shall be returned to the Company by CIT or such participant.
- 27 -
8.9. In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by CIT or such participant with any request or
directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:
(a) subject CIT or such participant to any tax of any kind whatsoever
with respect to this Financing Agreement or change the basis of
taxation of payments to CIT or such participant of principal, fees,
interest or any other amount payable hereunder or under any other
documents (except for changes in the rate of tax on the overall net
income of CIT or such participant by the federal government or the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other
credit extended by CIT or such participant by reason of or in
respect to this Financing Agreement and the Loan Documents,
including (without limitation) pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or
(c) impose on CIT or such participant any other condition with respect
to this Financing Agreement or any other document, and the result
of any of the foregoing is to increase the cost to CIT or such
participant of making, renewing or maintaining its loans hereunder
by an amount that CIT or such participant deems to be material in
the exercise of its reasonable business judgment or to reduce the
amount of any payment (whether of principal, interest or otherwise)
in respect of any of the loans by an amount that CIT or such
participant deems to be material in the exercise of its reasonable
business judgment, then, in any case the Company shall pay CIT or
such participant, within five (5) days following its demand, such
additional cost or such reduction, as the case may be. CIT or such
participant shall certify the amount of such additional cost or
reduced amount to the Company and the calculation thereof and such
certification shall be conclusive upon the Company absent manifest
error.
8.10. For purposes of this Financing Agreement and Section 8 thereof,
any reference to CIT shall include any financial institution which may become
a participant or co-lender subsequent to the Closing Date.
SECTION 9. Powers
The Company hereby constitutes CIT, or any person or agent CIT may
designate, as its attorney in fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to CIT have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the
name of CIT or the Company, any and all checks, notes, drafts, and
other documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Company
and to notify postal authorities to change the address for delivery
thereof to such address as CIT may designate;
- 28 -
(c) To request from customers indebted on Accounts at any time, in the
name of CIT information concerning the amounts owing on the
Accounts;
(d) To request from customers indebted on Accounts at any time, in the
name of the Company, in the name of certified public accountant
designated by CIT or in the name of CIT's designee, information
concerning the amounts owing on the Accounts;
(e) To transmit to customers indebted on Accounts notice of CIT's
interest therein and to notify customers indebted on Accounts to
make payment directly to CIT for the Company's account; and
(f) To take or bring, in the name of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable
to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b) and (f) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of
Default is waived in writing by CIT.
SECTION 10. Events of Default and Remedies
10.1. Notwithstanding anything hereinabove to the contrary, CIT may
terminate this Financing Agreement immediately upon the occurrence of any of
the following Events of Default:
(a) cessation of the business of the Company or any Guarantor, or the
calling of a meeting of the creditors of the Company or any
Guarantor, for purposes of compromising the debts and obligations
of the Company or any Guarantor;
(b) the failure of the Company or any Guarantor to generally meet its
debts as they mature;
(c) (i) the commencement by the Company or any Guarantor of any
bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceedings under any federal or state law; (ii) the
commencement against the Company or any Guarantor of any
bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceeding under any federal or state law by creditors
of the Company or any Guarantor, provided that such Default shall
not be deemed an Event of Default if such proceeding is
controverted within ten (10) days and dismissed and vacated within
thirty (30) days of commencement except, in the event that any of
the actions sought in any such proceeding shall occur or the
Company or any Guarantor shall take action to authorize or effect
any of the actions in any such proceeding; or (iii) the
commencement (x) by the Company's or any Guarantor's subsidiaries,
or any one of them, of any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceeding under any
applicable state law, or (y) against the Company's or any
Guarantor's subsidiaries, or any one of them, of any involuntary
bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceeding under applicable law, provided that such
Default shall not be deemed an Event of Default if such proceeding
is controverted within ten (10) days and dismissed or vacated
within thirty (30) days of commencement, except in the event that
any of the actions sought in any such proceeding shall occur or the
Company's or any Guarantor's subsidiaries, or any one of them,
shall take action to authorize or effect any of the actions in any
such proceeding;
- 29 -
(d) breach by the Company of any warranty, representation or covenant
contained herein (other than those referred to in sub paragraph (e)
below) or in any other written agreement between the Company or
CIT, provided that such Default by the Company of any of the
warranties, representations or covenants referred in this clause
(d) shall not be deemed to be an Event of Default unless and until
such Default shall remain unremedied to CIT's satisfaction for a
period of ten (10) days from the date of such breach;
(e) breach by the Company of any warranty, representation or covenant
of Paragraphs 3.3 (other than the fourth sentence of Paragraph 3.3)
and 3.4 of Section 3 hereof; Paragraphs 6.3, 6.4 (other than the
first sentence of Paragraph 6.4), and 6.10 of Section 6 hereof;
Paragraphs 7.1, 7.5, 7.6, and 7.8 through 7.14 hereof;
(f) failure of the Company to pay any of the Obligations within five
(5) Business Days of the due date thereof, provided that nothing
contained herein shall prohibit CIT from charging such amounts to
the Revolving Loan Account on the due date thereof;
(g) the Company shall (i) engage in any "prohibited transaction" as
defined in ERISA, (ii) have any "accumulated funding deficiency" as
defined in ERISA, (iii) have any "reportable event" as defined in
ERISA, (iv) terminate any "plan", as defined in ERISA or (v) be
engaged in any proceeding in which the Pension Benefit Guaranty
Corporation shall seek appointment, or is appointed, as trustee or
administrator of any "plan", as defined in ERISA, and with respect
to this sub paragraph (h) such event or condition (x) remains
uncured for a period of thirty (30) days from date of occurrence
and (y) could, in the reasonable opinion of CIT, subject the
Company to any tax, penalty or other liability material to the
business, operations or financial condition of the Company;
(h) the occurrence of any default or event of default (after giving
effect to any applicable grace or cure periods) under any
instrument or agreement evidencing any Indebtedness of the Company
having a principal amount in excess of $250,000.00;
(i) the failure of Xxxxxxx Xxxxxxx for any reason whatsoever to be the
Chairman of the Board of Directors and Chief Executive Officer of
the Company or to be actively engaged in the management of the
Company;
(j) Reliance Security Group plc shall have sold any of its shares in
the Company without obtaining the prior written consent of CIT,
such consent not to be unreasonably withheld; or Xxxxxxx Xxxxxxx
shall fail to own, at any time that he is employed by the Company,
at least 500,000 shares of voting common stock of the Company:
(k) if any Guarantor dies or terminates its respective Guaranty or
otherwise fails to perform any of the terms of the Guaranty, all
prior to termination of this Financing Agreement and payment in
full of all Obligations;
- 30 -
(l) any judgment or judgments aggregating in excess of $100,000.00 or
any injunction or attachment is obtained or enforced against the
Company or any Guarantor and which remains unstayed for more than
ten (10) Business Days; or
(m) at any time the TBV Receivables form a part of the Borrowing Base
the TBV Service Agreement or TBV Assignment Agreement shall be
terminated or not otherwise be in full force or effect, or TBV, the
Company or any other party thereto (other than CIT) shall breach
any warranty, representation or covenant contained therein.
10.2. Upon the occurrence of a Default and/or an Event of Default, at
the option of CIT, all loans, advances and extensions of credit provided for
in Section 3 of this Financing Agreement shall be thereafter in CIT's sole
discretion and the obligation of CIT to make Revolving Loans shall cease
unless such Default is cured to CIT's satisfaction or Event of Default is
waived in writing by CIT , and at the option of CIT upon the occurrence of an
Event of Default: (a) all Obligations shall become immediately due and
payable; (b) CIT may charge the Company the Default Rate of Interest on all
then outstanding or thereafter incurred Obligations in lieu of the interest
provided for in Section 8 of this Financing Agreement, and (c) CIT may
immediately terminate this Financing Agreement upon notice to the Company;
provided, however, that, upon the occurrence of an Event of Default listed in
Paragraph 10.1(c) of this Section 10, this Financing Agreement shall
automatically terminate and all Obligations shall become due and payable,
without any action, declaration, notice or demand by CIT. The exercise of any
option is not exclusive of any other option, which may be exercised at any
time by CIT.
10.3. Immediately upon the occurrence of any Event of Default, CIT may,
to the extent permitted by law: (a) remove from any premises where same may
be located any and all books and records, computers, electronic media and
software programs associated with any Collateral (including any electronic
records, contracts and signatures pertaining thereto), documents,
instruments, files and records, and any receptacles or cabinets containing
same, relating to the Accounts, or CIT may use, at the Company's expense,
such of the Company's personnel, supplies or space at the Company's places of
business or otherwise, as may be necessary to properly administer and control
the Accounts or the handling of collections and realizations thereon; (b)
bring suit, in the name of the Company or CIT, and generally shall have all
other rights respecting said Accounts, including without limitation the right
to: accelerate or extend the time of payment, settle, compromise, release in
whole or in part any amounts owing on any Accounts and issue credits in the
name of the Company or CIT; (c) sell, assign and deliver the Collateral and
any returned, reclaimed or repossessed Inventory, with or without
advertisement, at public or private sale, for cash, on credit or otherwise,
at CIT's sole option and discretion, and CIT may bid or become a purchaser at
any such sale, free from any right of redemption, which right is hereby
expressly waived by the Company; (d) foreclose the security interests in the
Collateral created herein or by the Loan Documents by any available judicial
procedure, or to take possession of any or all of the Collateral, including
any Inventory, Equipment and/or Other Collateral without judicial process,
and to enter any premises where any Inventory, Equipment and/or Other
Collateral may be located for the purpose of taking possession of or removing
the same; and (e) exercise any other rights and remedies provided in law, in
equity, by contract or otherwise. CIT shall have the right, without notice or
advertisement, to sell, lease, or otherwise dispose of all or any part of the
Collateral, whether in its then condition or after further preparation or
processing, in the name of the Company or CIT, or in the name of such other
party as CIT may designate, either at public or private sale or at any
broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations (including but not limited to warranties of
title, possession, quiet enjoyment and the like), and upon such other terms
and conditions as CIT in its sole discretion may deem advisable, and CIT
shall have the right to purchase at any such sale. If any Inventory and
Equipment shall require rebuilding, repairing, maintenance or preparation,
CIT shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory and Equipment in such
saleable form as CIT shall deem appropriate and any such costs shall be
deemed an Obligation hereunder. Any action taken by CIT pursuant to this
paragraph shall not effect commercial reasonableness of the sale. The Company
agrees, at the request of CIT, to assemble the Inventory and Equipment and to
make it available to CIT at premises of the Company or elsewhere and to make
available to CIT the premises and facilities of the Company for the purpose
of CIT's taking possession of, removing or putting the Inventory and
Equipment in saleable form. If notice of intended disposition of any
Collateral is required by law, it is agreed that ten (10) days notice shall
constitute reasonable notification and full compliance with the law. The net
cash proceeds resulting from CIT's exercise of any of the foregoing rights,
(after deducting all charges, costs and expenses, including reasonable
attorneys' fees) shall be applied by CIT to the payment of the Obligations,
whether due or to become due, in such order as CIT may elect, and the Company
shall remain liable to CIT for any deficiencies, and CIT in turn agrees to
remit to the Company or its successors or assigns, any surplus resulting
therefrom. The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of
any other rights, all of which shall be cumulative. The Company hereby
indemnifies CIT and holds CIT harmless from any and all costs, expenses,
claims, liabilities, Out-of-Pocket Expenses or otherwise, incurred or imposed
on CIT by reason of the exercise of any of its rights, remedies and interests
hereunder, including, without limitation, from any sale or transfer of
Collateral, preserving, maintaining or securing the Collateral, defending its
interests in Collateral (including pursuant to any claims brought by the
Company, the Company as debtor-in-possession, any secured or unsecured
creditors of the Company, any trustee or receiver in bankruptcy, or
otherwise), and the Company hereby agrees to so indemnify and hold CIT
harmless, absent CIT's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. The foregoing
indemnification shall survive termination of this Financing Agreement until
such time as all Obligations (including the foregoing) have been finally and
indefeasibly paid in full. In furtherance thereof CIT, may establish such
reserves for Obligations hereunder (including any contingent Obligations) as
it may deem advisable in its reasonable business judgment. Any applicable
mortgage(s), deed(s) of trust or assignment(s) issued to CIT on the Real
Estate shall govern the rights and remedies of CIT thereto.
- 31 -
SECTION 11. Termination
Except as otherwise permitted herein, CIT may terminate this Financing
Agreement only as of the initial or any subsequent Anniversary Date and then
only by giving the Company at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing CIT may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default, provided,
however, that if the Event of Default is an event listed in Paragraph 10.1(c)
of Section 10 of this Financing Agreement, this Financing Agreement shall
terminate in accordance with paragraph 10.2 of Section 10. This Financing
Agreement, unless terminated as herein provided, shall automatically continue
from Anniversary Date to Anniversary Date. The Company may terminate this
Financing Agreement at any time upon sixty (60) days' prior written notice to
CIT, provided that the Company pays to CIT immediately on demand an Early
Termination Fee and/or the Prepayment Premium, if applicable. All Obligations
shall become due and payable as of any termination hereunder or under Section
10 hereof and, pending a final accounting, CIT may withhold any balances in
the Company's account (unless supplied with an indemnity satisfactory to CIT)
to cover all of the Obligations, whether absolute or contingent, including,
but not limited to, cash reserves for any contingent Obligations. All of
CIT's rights, liens and security interests shall continue after any
termination until all Obligations have been paid and satisfied in full.
- 32 -
SECTION 12. Miscellaneous
12.1. The Company hereby waives diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of nonpayment. No delay or omission of CIT
or the Company to exercise any right or remedy hereunder, whether before or
after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by CIT of any right or remedy
precludes any other or further exercise thereof, or precludes any other right
or remedy.
12.2. This Financing Agreement and the Loan Documents executed and
delivered in connection therewith constitute the entire agreement between the
Company and CIT; supersede any prior agreements; can be changed only by a
writing signed by both the Company and CIT; and shall bind and benefit the
Company and CIT and their respective successors and assigns.
12.3. In no event shall the Company, upon demand by CIT for payment of
any Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made
in connection herewith, CIT shall never be entitled to receive, charge or
apply, as interest on any indebtedness relating hereto, any amount in excess
of the maximum amount of interest permissible under applicable law. If CIT
ever receives, collects or applies any such excess, it shall be deemed a
partial repayment of principal and treated as such; and if principal is paid
in full, any remaining excess shall be refunded to the Company. This
paragraph shall control every other provision hereof, the Loan Documents and
of any other agreement made in connection herewith.
12.4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be
fully severable, and the remaining provisions of the applicable agreement
shall remain in full force and effect and shall not be affected by such
provision's severance. Furthermore, in lieu of any such provision, there
shall be added automatically as a part of the applicable agreement a legal
and enforceable provision as similar in terms to the severed provision as may
be possible.
12.5. THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL CIT BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
- 33 -
12.6. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (provided that, any
electronic communications from the Company with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Company for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Company from any other obligation hereunder to communicate
further in writing), and shall be deemed to have been validly served, given
or delivered when hand delivered or sent by facsimile, or three days after
deposit in the United State mails, with proper first class postage prepaid
and addressed to the party to be notified or to such other address as any
party hereto may designate for itself by like notice, as follows:
(A) if to CIT, at:
The CIT Group/Business Credit, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Regional Credit Manager
Fax No.: (000) 000-0000
(B) if to the Company at:
Xxxxx 00
Xxxxxxxxx Xxxx
XxXxxxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
With a courtesy copy of any material notice to the Company's counsel at:
Corbally, Xxxxxxxx and Rappleya, LLP
00 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Xx.
Fax No. (000) 000-0000
provided, however, that the failure of CIT to provide the Company's counsel
with a copy of such notice shall not invalidate any notice given to the
Company and shall not give the Company any rights, claims or defenses due to
the failure of CIT to provide such additional notice.
- 34 -
12.7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES
AN EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
12.8. The Company agrees to deliver to CIT (a) not later than ninety
(90) days after the Closing Date evidence of its good standing in the State
of Massachusetts, (b)( not later than ten (10) days after the Closing Date
the original letter from Xxxxxxx Xxxxx to Xxxxxx Xxxxx of JDR Capital
Corporation, dated December 9, 2003 (identified as closing item 23) and (c)
not later than five (5) days after the Closing Date the original TBV
promissory notes in favor of CIT (identified as closing item 25).
- 35 -
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be effective, executed, accepted and delivered as of December
12, 2003, by their proper and duly authorized officers as of the date set
forth above.
COMMAND SECURITY CORPORATION THE CIT GROUP/BUSINESS CREDIT, INC.
By: _______________________________ By: _______________________________
Title: Title: Vice President
- 36 -
Schedule 1 - Collateral Information
Exact Company Name in State of Organization:
State of Incorporation or Formation:
Federal Tax I.D. No. [and State Organization No.]
Chief Executive Office:
Collateral Locations:
Subsidiaries:
Trade Names:
Monthly Rental Payments for Leased Premises:
Location Monthly Rental
Existing Liens
