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EXHIBIT 10.3
[FINOVA LOGO]
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
DIGITAL SOLUTIONS, INC.
DSI CONTRACT STAFFING, INC.
DSI STAFF CONNXIONS NORTHEAST, INC.
DSI STAFF CONNXIONS-SOUTHWEST, INC.
DSI STAFF RX, INC.
THE TEAMSTAFF COMPANIES, INC.
TEAMSTAFF, INC.
TEAMSTAFF II, INC.
TEAMSTAFF III, INC.
TEAMSTAFF IV, INC.
TEAMSTAFF V, INC.
TEAMSTAFF U.S.A., INC.
TEAMSTAFF INSURANCE SERVICES, INC.
TEAMSTAFF HOLDING COMPANY, INC.
EMPLOYER SUPPORT SERVICES, INC.
CO-BORROWERS
000 XXXXXX XXXXX, XXXXXXXX, XXX XXXXXX 00000
$8,250,000
CREDIT LIMIT
JANUARY 25, 1999
CORPORATE FINANCE
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THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (collectively
with the Schedule to Loan Agreement (the "SCHEDULE") attached hereto, the
"AGREEMENT") dated the date set forth on the cover page, is entered into by and
between the borrowers named on the cover page (each individually, a "Borrower",
and, collectively, the "Borrowers"), whose address is set forth on the cover
page and FINOVA CAPITAL CORPORATION ("FINOVA"), whose address is 000 Xxxxx Xxxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 in order to amend and restate the Original
Agreement (as hereinafter defined) to provide increased and additional credit
facilities to the Borrowers on the terms and conditions set forth herein.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(aa) hereof.
"Additional Sums" has the meaning set forth in Section 2.9(a) hereof.
"Affiliate" means any Person controlling, controlled by or under common
control with any Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of any Person, whether through ownership of common
or preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer or director of any Borrower, any subsidiary of any
Borrower, any other Person with whom or which any Borrower has common officers
or directors, any Person that owns more than five percent (5%) of the voting
stock of any Borrower (an "affiliate stockholder"), and any Person in which an
affiliate stockholder owns more than five percent (5%) of the voting stock.
"Agreement" has the meaning set forth in the preamble.
"Amendment Closing Date" means January 25, 1999.
"Applicable Usury Law" has the meaning set forth in Section 2.9(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.10(c) hereof.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one year
and including, without limitation, those arising in connection with Capital
Leases.
"Capital Lease" means any lease of property by a Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of such Borrower.
"Cash Dominion Event" means (i) with respect to a Blocked Account
containing proceeds of Receivables attributable to the PEO Business, the
occurrence and continuation of an Event of Default described in Section 7.1(a),
7.1(b) (with respect to a breach of Section 2.10, 3.8, 6.1.13, 6.2.1, 6.2.2,
6.2.3, 6.2.5, 6.2.8, 6.2.11, 6.2.12, or 9.1 (b)), or 7.1(c) through 7.1(j) or
(ii) with respect to a Blocked Account not containing proceeds of Receivables
attributable to the PEO Business, either (A) the occurrence and continuation of
an Event of Default or (B) the passage of five (5) days after FINOVA gives
written notice to DSI that FINOVA has determined, in its Permitted Discretion,
that the transfer of Receivables collections to FINOVA is advisable to protect
FINOVA's rights and remedies and FINOVA intends to instruct the bank maintaining
the Blocked Account to transfer funds in the Blocked Account only to FINOVA.
"Change of Control" means (i) a "person" or a "group" (within the
meaning of Sections 13(d) and 14(d)(ii) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 30% of the total
voting power of the voting stock of DSI on a fully diluted basis or (ii) a
majority of the Board of Directors of DSI then in office shall not consist of
individuals who on the Closing Date constitute the Board of Directors of DSI, or
new directors whose election, or whose nomination for election by stockholders,
was approved by at least two thirds of the members of the Board of Directors
then in office who were either members of the Board of Directors on the Closing
Date or whose election or nomination was previously so approved
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to the Original Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
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"Collateral" has the meaning set forth in Section 3.1 hereof.
"Current Assets" at any date means the amount at which the current
assets of DSI and its subsidiaries would be shown on a consolidated balance
sheet of DSI and its subsidiaries as at such date, prepared in accordance with
GAAP, provided that amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of DSI and its subsidiaries would be shown on a consolidated balance
sheet of DSI and its subsidiaries as at such date, prepared in accordance with
GAAP.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.10(c) hereof.
"DSI" means Digital Solutions, Inc., a New Jersey corporation.
"Eligible Receivables" of a Borrower means Receivables of such Borrower
arising in the ordinary course of such Borrower's business from the sale of
goods or rendition of services, which FINOVA, in its Permitted Discretion, shall
deem eligible based on such considerations as FINOVA may from time to time deem
appropriate. Without limiting the foregoing, a Receivable shall not be deemed to
be an Eligible Receivable if (i) the account debtor has failed to pay the
Receivable within a period of sixty (60) days after invoice date, to the extent
of any amount remaining unpaid after such period; (ii) the account debtor has
failed to pay more than 25% of all outstanding Receivables owed by it to any
Borrower within sixty (60) days after invoice date; (iii) the account debtor is
an Affiliate of any Borrower; (iv) the services relating thereto are sold on
terms pursuant to which payment by the account debtor may be conditional; (v)
the account debtor is not located in the United States, unless the Receivable is
supported by a letter of credit or other form of guaranty or security, in each
case in form and substance satisfactory to FINOVA; (vi) the account debtor is
the United States or any department, agency or instrumentality thereof, unless
the applicable Borrower has complied with the Federal Assignment of Claims Act
with respect to such Receivable, or the account debtor is any state, city or
municipality of the United States, or any department, agency, or
instrumentability thereof, if any action other than pursuant to the Uniform
Commercial Code is required to perfect FINOVA's security interest in such
Receivable, unless such action has been taken to the satisfaction of FINOVA;
(vii) any Borrower is or may become liable to the account debtor for goods sold
or services rendered by the account debtor to any Borrower; (viii) the account
debtor's total obligations to any Borrower exceed 15% of all Eligible
Receivables of such Borrower, to the extent of such excess; (ix) the account
debtor disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more than
sixty (60) days past due; (xii) the face amount thereof exceeds $20,000, unless
accompanied by evidence of the performance of the services relating thereto
satisfactory to FINOVA in its Permitted Discretion; (xiii) the invoice
constitutes a progress billing on a project not yet completed, except that the
final billing at such time as the matter has been completed may be deemed an
Eligible Receivable; (xiv) the amount thereof is not yet represented by an
invoice or xxxx issued in the name of the applicable account debtor; (xv) the
Receivable relates to or arises from the PEO Business; or (xiv) the Receivable
represents amounts subject to any lien, security interest or other encumbrance
(except solely in favor of FINOVA), any trust or fiduciary obligation, or any
claim of beneficial right or interest of any third party, to the extent of the
amount so subject, as determined by FINOVA in its Permitted Discretion.
"Equipment" means all of a Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in such Borrower's operations (to the extent of such Borrower's
interest therein) or owned by such Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which any Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
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"Excess Availability" means, as of the date of determination thereof,
the amount by which the average daily total principal balance of the Revolving
Credit Loans facility which Borrower would be permitted to have outstanding over
the prior 30 days, based on the formulas and reserves set forth in the Schedule,
plus cash on hand (determined in a manner acceptable to FINOVA) exceeds the sum
of the Revolving Credit Loans then actually outstanding, such excess then being
reduced by an amount necessary to provide for the payment of all accounts
payable of Borrower which are more than 30 days past due date and all book
overdrafts (excluding overdrafts attributable to the PEO Business which are
expected to be funded by customer transfers or payments within three (3) days
after such overdraft is created).
"Excess Cash Flow" means Operating Cash Flow/Permitted less Total
Contractual Debt Service.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
"General Intangibles" means all general intangibles of a Borrower,
whether now owned or hereafter created or acquired by such Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against FINOVA, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance) tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Guarantor(s)" has the meaning set forth in the Schedule.
"Indebtedness for Borrowed Money" means all of a Borrower's present and
future obligations, liabilities, debts, claims and indebtedness, contingent,
fixed or otherwise, however evidenced, created, incurred, acquired, owing or
arising, whether under written or oral agreement, operation of law or otherwise:
(i) in respect of borrowed money (including, without limitation, pursuant to the
Loan Documents or Capital Leases); (ii) evidenced by a note, debenture, or
similar instrument (including, without limitation, all interest on the
Obligations); (iii) for the deferred purchase price of property (other than
trade payables arising in the ordinary course of business); or (iv) in respect
of obligations under conditional sales or other title retention agreements; and
all guaranties of any or all of the foregoing; provided, however, that
Indebtedness for Borrowed Money shall not include leases that are not Capital
Leases.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of a Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower's business
or used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise or other personal property, and
all documents of title or other documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"L/C Fee" has the meaning set forth in Section 2.4 hereof.
"Letters of Credit" has the meaning set forth in Section 2.4. hereof.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by any Borrower and payable to FINOVA, and any other present or future
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals,
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replacements, restatements, or supplements, of or to any of the foregoing.
"Loan Party" means each Borrower, each Guarantor, and each other party
(other than FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts as
FINOVA may from time to time establish and revise in good faith reducing the
amount of the facility for Revolving Credit Loans which would otherwise be
available to Borrower under the lending formula(s) provided in the Schedule: (a)
to reflect events, conditions, contingencies or risks which, as determined by
FINOVA in good faith, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of any Borrower or any Guarantor or (iii) the security
interests and other rights of FINOVA in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect FINOVA's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Guarantor to FINOVA is or may have been
incomplete, inaccurate or misleading in any material respect or (c) in respect
of any state of facts which FINOVA determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both, constitute an Event
of Default.
"Maximum Interest Rate" has the meaning set forth in Section 2.9(c)
hereof.
"Merger Agreements" means (i) the Plan and Agreement of Merger and
Reorganization, dated as of October 29, 1998, among Digital Solutions, Inc.,
DGAC I, Inc., DGAC II, Inc., DGAC III, Inc., DGAC IV, Inc., DGAC V, Inc., DGAC
VI, Inc., DGAC VII, Inc., DGAC VIII, Inc., DGAC IX, Inc., DGAC X, Inc., and
Teamstaff, Inc., Teamstaff II, Inc., Teamstaff III, Inc., Teamstaff IV, Inc.,
The Teamstaff Companies, Inc., Teamstaff Holding Company, Inc., Employer Support
Services, Inc., Teamstaff U.S.A., Inc., Teamstaff Insurance Services, Inc., and
Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, Xxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx, as
Trustee, Xxxxxx X. Xxxxx, Xx., as Trustee, and (ii) the Plan and Agreement of
Merger and Reorganization, dated as of October 29, 1998, among Digital
Solutions, Inc., DGAC V, Inc., and Teamstaff V, Inc., and Xxxxxx X. Xxxxx,
Xxxxxxx X. Xxxxx, Xxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx, as Trustee, Xxxxxx X.
Xxxxx, Xx., as Trustee.
"Merger Documents" has the meaning set forth in Section 4.2(v) hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of any
Borrower or any ERISA Affiliate.
"Net Worth" at any date means the net worth of DSI and its subsidiaries
as determined on a consolidated basis in accordance with GAAP.
"New Borrower" means each of The Teamstaff Companies, Inc., Teamstaff,
Inc., Teamstaff II, Inc., Teamstaff III, Inc., Teamstaff IV, Inc., Teamstaff V,
Inc., Teamstaff U.S.A., Inc., Teamstaff Insurance Services, Inc., Teamstaff
Holding Company, Inc., and Employer Support Services, Inc. (collectively the
"New Borrowers")
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by any Borrower to FINOVA, whether evidenced by this Agreement, any note or
other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by FINOVA in any
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, Examination Fee, letter of credit fees, Closing Fee,
Termination Fee, Success Fee, and any other sums chargeable to Borrower
hereunder or under any other agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period net income or loss
of DSI and its subsidiaries (excluding the effect of any gains or losses
classified as extraordinary under GAAP), determined on a consolidated basis in
accordance with GAAP, plus or minus each of the following items, to the extent
deducted from or added to the revenues in the calculation of such net income or
loss: (i) depreciation; (ii) amortization and other non-cash charges; (iii)
interest expense and financing fees (including, without limitation, the Success
Fee, the Unused Line Fee, the L/C Fee, and the Examination Fee) paid or accrued;
and (iv) total federal and state income tax expense determined as the accrued
liability of DSI and its subsidiaries in respect of such period, regardless of
what portion of such expense has actually been paid by any of DSI and its
subsidiaries during such period; and after deduction for each of (a) federal and
state income taxes, to the extent actually paid during such period; (b) any
non-cash income; and (c) all actual Capital Expenditures made during such period
and not financed.
"Operating Cash Flow/Permitted" means, for any period, net income or
loss of DSI and its subsidiaries (excluding the effect of any gains or losses
classified as extraordinary under GAAP), determined on a consolidated basis in
accordance with GAAP, plus or minus each of the following items, to the extent
deducted from or added to the revenues of DSI and its subsidiaries in the
calculation of net
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income or loss: (i) depreciation; (ii) amortization and other non-cash charges;
(iii) interest expense and financing fees (including, without limitation, the
Success Fee, the Unused Line Fee, the L/C Fee, and the Examination Fee) paid or
accrued; and (iv) total federal and state income tax expense determined as the
accrued liability of DSI and its subsidiaries in respect of such period,
regardless of what portion of such expense has actually been paid by any of DSI
and its subsidiaries during such period; and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income; and (c) all Capital Expenditures permitted hereunder
(without regard to any waiver given by FINOVA with respect to any limitation on
such Capital Expenditures) actually made during such period and not financed.
"Original Agreement" means the Loan and Security Agreement, dated April
28, 1998, between FINOVA and the borrowers party thereto, which is amended and
restated hereby.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"PEO Business" means the professional employer organization, or
"employee leasing", line of business of Borrowers pursuant to which Borrowers
assume the employer responsibilities and obligations with respect a customer's
workforce and provide the services of such workforce to the customer on a
contractual basis.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could materially, adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of any Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving any Borrower, any other
Loan Party or any of the Collateral, or (iv) creates or reasonably could be
expected to create an Event of Default. In exercising such judgment, FINOVA may
consider such factors already included in or tested by the definition of
Eligible Receivables as well as any of the following: (i) the financial and
business climate of the Borrowers' industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Receivables, (iii) changes in demand for, and pricing of, Borrowers' services,
(iv) changes in any concentration of risk with respect to Receivables, and (v)
any other factors that change the credit risk of lending to the Borrowers on the
security of the Receivables or on the basis of the Borrowers' cash flow. The
burden of establishing lack of good faith hereunder shall be on the Borrowers.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of any Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Prepared Financials" means the consolidated balance sheets of DSI and
its subsidiaries of the date set forth in the Schedule in the section entitled
'Reporting Requirements' , and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and changes in
cash flow for the periods ended on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in Section 406
of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Receivables" means all of a Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), proceeds of any
letters of credit naming such Borrower as beneficiary, contract rights, chattel
paper, instruments, documents and all other forms of obligations at any time
owing to such Borrower, all guaranties and other security therefor, whether
secured or unsecured, all merchandise returned to or repossessed by such
Borrower, and all rights of stoppage in transit and all other rights or remedies
of an unpaid vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
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"Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"Revolving Credit Limit" has the meaning set forth in the Schedule.
"Revolving Interest Rate" has the meaning set forth in the Schedule.
"Schedule" has the meaning set forth in the preamble.
"Start Date" has the meaning set forth in the Schedule.
"Success Fee" has the meaning set forth in the Schedule.
"Term Loans" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d) hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by the Borrowers during such period for (i)
interest and scheduled principal payments due on the Term Loans (excluding
voluntary prepayment and payments made from Excess Cash Flow, as required
pursuant to the Schedule), (ii) interest payments due on the Revolving Credit
Loans plus the Unused Line Fee, the Success Fee, the L/C Fee, and the
Examination Fee, and any other fees due to FINOVA, and (iii) interest and
scheduled principal payments due or any other Indebtedness for Borrowed Money of
Borrower.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of a
Borrower's right, title and interest in and to, whether now owned or hereafter
acquired: (i) trademarks, trademark registrations, trade names, trade name
registrations, and trademark or trade name applications, including without
limitation such as are listed on the Schedule, as the same may be amended from
time to time, and (a) renewals thereof, (b) all income, royalties, damages and
payments now and hereafter due and/or payable with respect thereto, including
without limitation, damages and payments for past or future infringements
thereof, (c) the right to xxx for past, present and future infringements
thereof, (d) all rights corresponding thereto throughout the world, and (e) the
goodwill of the businesses operated by any or all of the Borrowers connected
with and symbolized by any trademarks or trade names; (ii) copyrights, copyright
registrations and copyright applications, including without limitation such as
are listed on the Schedule, as the same may be amended from time to time, and
(a) renewals thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including without limitation,
damages and payments for past or future infringements thereof, (c) the right to
xxx for past, present and future infringements thereof, and (d) all rights
corresponding thereto throughout the world; (iii) license agreements, including
without limitation such as are listed on the Schedule, and the right to prepare
for sale, sell and advertise for sale any services or any Inventory now or
hereafter owned by any Borrower and now or hereafter covered by such licenses;
and (iv) patents and patent applications, registered or pending, including
without limitation such as are listed on the Schedule, together with all income,
royalties, shop rights, damages and payments thereto, the right to xxx for
infringements thereof, and all rights thereto throughout the world and all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon DSI's request on behalf of the
Borrowers, make advances to Borrowers from time to time in an aggregate
outstanding principal amount not to exceed the Total Facility amount (the "TOTAL
FACILITY") set forth on the Schedule hereto, subject to deduction of reserves
for accrued interest and such other reserves as FINOVA deems proper from time to
time, and less amounts FINOVA may be obligated to pay in the future on behalf of
any Borrower. The Schedule is an integral part of this Agreement and all
references to "herein", "herewith" and words of similar import shall for all
purposes be deemed to include the Schedule.
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2.2 Loans. Advances under the Total Facility ("LOANS" and individually,
a "LOAN") shall be comprised of the amounts shown on the Schedule.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances (including all Letters of Credit) extended or
issued pursuant hereto exceeds any of the dollar limitations ("OVERLINE") or
percentage limitations ("OVERADVANCE") in the Schedule, then the Borrowers
shall, jointly and severally, upon FINOVA's demand, immediately pay to FINOVA,
in cash, the full amount of such Overline or Overadvance which, at FINOVA's
option, may be applied to reduce the outstanding principal balance of the Loans
and/or cash collateralize all or any part of any outstanding Letters of Credit.
Without limiting Borrowers' obligation to repay to FINOVA on demand the amount
of any Overline or Overadvance, each Borrower jointly and severally agrees to
pay FINOVA interest on the outstanding principal amount of any Overline or
Overadvance, on demand, at the rate set forth on the Schedule and applicable to
the Revolving Credit Loans.
2.4 Letters of Credit. At the request of DSI on behalf of Borrowers,
FINOVA may, in its Permitted Discretion, arrange for the issuance of letter of
credit for the account of Borrowers and guarantees of payment of such letters of
credit, in each case in form and substance satisfactory to FINOVA in its sole
discretion (collectively, "LETTERS OF CREDIT"). The aggregate face amount of all
outstanding Letters of Credit from time to time shall not exceed the amount
shown on the Schedule, and shall be reserved against the availability of
Revolving Credit Loans. Borrowers shall jointly and severally pay all bank
charges for the issuance of Letters of Credit, together with an additional fee
to FINOVA equal to the percentage set forth on the Schedule of the aggregate
face amount of each Letter of Credit outstanding from time to time during the
term of this Agreement (the "L/C FEE"). The L/C Fee shall be deemed to be fully
earned upon the issuance of each Letter of Credit and shall be due and payable
on the first Business Day of each month following a month during which any
Letter of Credit is outstanding. Any advance by FINOVA under or in connection
with a Letter of Credit shall constitute an Obligation hereunder. Each Letter of
Credit shall have an expiry date no later than thirty (30) days prior to the
last day of the Initial Term or, if issued during any Renewal Term no later than
thirty (30) days prior to the last day of such Renewal Term. Immediately upon
any termination of this Agreement, Borrowers shall either: (i) provide cash
collateral to FINOVA in an amount equal to 105% of the maximum amount of
FINOVA's obligations under or in connection with all then outstanding Letters of
Credit, or (ii) cause to be delivered to FINOVA releases of all FINOVA's
obligations under outstanding Letters of Credit. At FINOVA's discretion, any
proceeds of Collateral received by FINOVA may be held as the cash collateral
required by this Section 2.4. Each Borrower hereby agrees jointly and severally
to indemnify, save, and hold FINOVA harmless from any loss, cost, expense, or
liability, including payments made by FINOVA, expenses, and reasonable
attorneys' fees incurred by FINOVA arising out of or in connection with any
Letters of Credit. Each Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any Letters of Credit guarantied by FINOVA
and opened for a Borrower's account or by FINOVA's interpretations of any Letter
of Credit issued by FINOVA for a Borrower's account, and each Borrower
understands and agrees that FINOVA shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following any
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that FINOVA may indemnify the bank issuing a Letter of Credit for certain costs
or liabilities arising out of claims by a Borrower against such issuing bank.
Each Borrower hereby agrees jointly and severally to indemnify and hold FINOVA
harmless with respect to any loss, cost, expense, or liability incurred by
FINOVA under any such indemnification by FINOVA to any issuing bank.
2.5 Loan Account. All advances made hereunder (including without
limitation all advances made by FINOVA under or in connection with any Letter of
Credit) shall be added to and deemed part of the Obligations when made. FINOVA
may from time to time charge all Obligations of Borrower to such Borrower's loan
account with FINOVA.
2.6 Interest; Fees. Borrower shall jointly and severally pay FINOVA
interest on the daily outstanding balance of the Obligations at the per annum
rates set forth on the Schedule. Borrowers shall also jointly and severally pay
FINOVA the fees set forth on the Schedule.
2.7 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrowers shall jointly and severally pay
FINOVA interest on the daily outstanding balance of the Obligations and any L/C
Fee at a rate per annum which is two percent (2%) in excess of the rate which
would otherwise be applicable thereto pursuant to the Schedule.
2.8 Examination Fee. Borrowers agrees to pay jointly and severally to
FINOVA the Examination Fee in the amount set forth on the Schedule in connection
with each audit or examination of Borrowers performed by FINOVA prior to or
after the date hereof. Without limiting the generality of the foregoing,
Borrowers shall jointly and severally pay to FINOVA an initial Examination Fee
in an amount equal to the amount set forth on the Schedule. Such initial
Examination Fee shall be deemed fully earned at the time of payment and due and
payable upon the closing of this transaction, and shall be deducted from any
good faith deposit
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paid by Borrowers to FINOVA prior to the date of this Agreement.
2.9 Excess Interest.
(a) The contracted for rates of interest of the loans contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rates set forth on the Schedule, calculated and applied to the principal balance
of the Obligations in accordance with the provisions of this Agreement; (ii)
interest after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Each Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The Examination Fee, attorneys fees, expert witness fees, letter of
credit fees, Closing Fee, Termination Fee, Success Fee, other charges, goods,
things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "ADDITIONAL SUMS"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrowers as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed
that notwithstanding any provisions to the contrary in this Agreement, or in any
of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "MAXIMUM INTEREST RATE"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrowers or otherwise in connection with the loans evidenced hereby, or (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, charged or received in
connection with the loans evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither the Borrowers nor any other Person now or hereafter
liable for the payment of the Obligations shall be obligated to pay the amount
of such interest to the extent that it is in excess of the Maximum Interest
Rate, (3) any such excess which may have been collected shall be either applied
as a credit against the then unpaid principal amount of the Obligations or
refunded to Borrowers, at FINOVA's option, and (4) the effective rate of
interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loans evidenced
hereby, all interest at any time contracted for, charged or received from
Borrowers or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that interest
paid to the date of calculation does not exceed the Maximum Interest Rate, until
the entire amount of interest which would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law has been paid in full.
Each Borrower further agrees that should the Maximum Interest Rate be increased
at any time hereafter because of a change in the Applicable Usury Law, then to
the extent not prohibited by the Applicable Usury Law, such increases shall
apply to all indebtedness evidenced hereby regardless of when incurred; but,
again to the extent not prohibited by the Applicable Usury Law, should the
Maximum Interest Rate be decreased because of a change in the Applicable Usury
Law, such decreases shall not apply to the indebtedness evidenced hereby
regardless of when incurred.
2.10 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by a Borrower to FINOVA specifically containing
payment provisions which are in conflict with this Section 2.10 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable jointly and severally by Borrowers to FINOVA
immediately upon the earliest of (i) the receipt by FINOVA or Borrowers of any
proceeds of any of the Collateral, to the extent of said proceeds during any
period when funds in a Blocked Account or Dominion Account are being transferred
to FINOVA in accordance with subsections (b) and (c) below, (ii) the occurrence
of an Event of Default in consequence of which FINOVA elects to accelerate the
maturity and payment of such loans, or (iii) any termination of this Agreement
pursuant to Section 9.2 hereof; provided, however, that any Overadvance or
Overline shall be payable on demand pursuant to the provisions of Section 2.3
hereof.
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(b) Collections. Until FINOVA notifies Borrowers to the contrary,
Borrowers may make collection of all Receivables for FINOVA and shall receive
all such payments or sums as trustee of FINOVA and immediately cause all such
payments or sums to be deposited into a Blocked Account. No borrower shall
commingle collections of Receivables attributable to the PEO Business with
collections of any other Collateral. Whenever an Event of Default has occurred
and is continuing, FINOVA or its designee may, at any time, notify account
debtors that the Receivables have been assigned to FINOVA and of FINOVA's
security interest therein, and may collect the Receivables directly and charge
the collection costs and expenses to Borrowers' loan accounts. Each Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by FINOVA on account of the Obligations on the Business
Day of receipt by FINOVA of good funds which have been finally credited to
FINOVA's account, whether such funds are received directly from a Borrower or
from the Blocked Account bank, pursuant to Section 2.10(c) hereof, and this
provision shall apply regardless of the amount of the Obligations outstanding or
whether any Obligations are outstanding; provided, that if any such good funds
are received after 12:00 p.m. noon (Los Angeles time) on any Business Day or at
any time on any day not constituting a Business Day, such funds shall be deemed
received on the immediately following Business Day. FINOVA is not, however,
required to credit any Borrower's account for the amount of any item of payment
which is unsatisfactory to FINOVA in its Permitted Discretion and FINOVA may
charge the applicable Borrower's loan account for the amount of any item of
payment which is returned to FINOVA unpaid.
(c) Establishment of a Blocked Account or Dominion Account. Unless each
Borrower shall be otherwise directed by FINOVA in writing, each Borrower shall
cause all proceeds of Collateral to be deposited into or such "blocked accounts"
as FINOVA may require (each, a "BLOCKED ACCOUNT") pursuant to an arrangement
with such bank as may be selected by Borrowers and be acceptable to FINOVA.
Unless otherwise provided herein, all proceeds in the Blocked Accounts shall be
available to Borrowers in accordance with the regulations of such bank for use
in the ordinary course of business. If a Cash Dominion Event has occurred and is
continuing, then upon written notice from FINOVA to the bank maintaining a
Blocked Account all proceeds in such Blocked Account shall be transferred on a
regular basis in immediately available funds only to FINOVA or for its account
as FINOVA may direct, and applied in payment of the Obligations in such order as
FINOVA determines in its sole discretion. Each Borrower shall issue to any such
bank an irrevocable letter of instruction directing said bank to make available
or transfer such funds so deposited as provided in the immediately preceding
sentence. All funds deposited in a Blocked Account shall be at all times subject
to FINOVA's security interest and Borrowers shall obtain the agreement by such
bank to waive any offset rights against the funds so deposited. FINOVA assumes
no responsibility for any Blocked Account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, if a Cash Dominion
Event described in clause (i) or (ii) (A) of the definition thereof has occurred
and is continuing, FINOVA may establish depository accounts in the name of
FINOVA at a bank or banks for the deposit of such funds (each, a "DOMINION
ACCOUNT") and each Borrower shall deposit all proceeds of Receivables and all
cash proceeds of any sale, to the extent permitted herein, of Equipment or cause
same to be deposited, in kind, in such Dominion Accounts of FINOVA in lieu of
depositing same to Blocked Accounts, and, unless otherwise provided herein, all
such funds shall be applied by FINOVA to the Obligations in such order as FINOVA
determines in its sole discretion.
(d) Payments Without Deductions. Each Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event any Borrower repays
the Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to such Borrower's loan account on
the Business Day of FINOVA's receipt thereof, determined in accordance with
Section 2.10(b).
(f) Monthly Accountings. FINOVA shall provide Borrowers monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrowers and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless DSI
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
2.11 Application of Collateral. Except as otherwise provided herein,
FINOVA shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations in such order
and manner as FINOVA shall determine in its sole discretion; provided, however,
that so long as no Event of Default has occurred and is continuing, any payment
designated by Borrowers as being made in respect of principal of or interest on
the Term Loans shall be applied as designated by Borrowers. To the extent that a
Borrower makes a payment or FINOVA receives any payment or proceeds of the
Collateral for any Borrower's benefit which is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required
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to be repaid to a trustee, debtor in possession, receiver or any other party
under any bankruptcy law, common law or equitable cause, or otherwise, then, to
such extent, all Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
FINOVA.
2.12 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loans shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment, including any Default Interest; (ii) then, to any late fees,
overdue risk assessments, Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loans; provided however, while an Event of Default exists under this Agreement,
or under any other Loan Document, each payment hereunder shall be (x) held as
cash collateral to secure Obligations relating to any Letters of Credit or other
contingent obligations arising under the Loan Documents and/or (y) applied to
amounts owed to FINOVA by Borrowers as FINOVA in its sole discretion may
determine. In calculating interest and applying payments as set forth above: (a)
interest shall be calculated and collected through the date a payment is
actually applied by FINOVA under the terms of this Agreement; (b) interest on
the outstanding balance shall be charged during any grace period permitted
hereunder; (c) at the end of each month, all accrued and unpaid interest and
other charges provided for hereunder shall be added to the principal balance of
the Loan; and (d) to the extent that any Borrower makes a payment or FINOVA
receives any payment or proceeds of the Collateral for such Borrower's benefit
that is subsequently invalidated, set aside or required to be repaid to any
other Person, then, to such extent, all Obligations to which such payment or
proceeds were applied or intended to be applied shall be revived and continue as
if such payment or proceeds had not been received by FINOVA, and FINOVA may
adjust the Loan balances as FINOVA, in its reasonable judgment, deems
appropriate under the circumstances to reverse the effect of such application.
2.13 Notification of Closing. DSI shall provide FINOVA with at least
forty-eight (48) hours prior written notice of the Amendment Closing Date, to
enable FINOVA to arrange for the availability of funds. In the event the closing
does not take place on the date specified in DSI's notice to FINOVA, other than
through the fault of FINOVA, each Borrower agrees jointly and severally to
reimburse FINOVA for FINOVA's costs to maintain the necessary funds available
for the closing, at the respective Term Interest Rates with respect to the
corresponding amounts of the Term Loans, and at the Revolving Interest Rate with
respect to an amount equal to the initial advance under the Revolving Credit
Loans facility which is to be made on the Amendment Closing Date, for the number
of days which elapse between the date specified in DSI's notice and the date
upon which the closing actually occurs (which number of days shall not include
the date specified in DSI's notice, but shall include the Amendment Closing
Date).
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, each Borrower hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in all
of such Borrower's now owned or hereafter acquired or arising Inventory,
Equipment, Receivables, life insurance policies and the proceeds thereof,
Trademarks, Copyrights, Licenses and Patents, Investment Property (as defined in
Section 9-115 of the Code) and General Intangibles, including, without
limitation, all of such Borrower's Deposit Accounts, money, any and all property
now or at any time hereafter in FINOVA's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records and computer data related to any of the foregoing (all of the
foregoing, together with all other property in which FINOVA may be granted a
lien or security interest, is referred to herein, collectively, as the
"COLLATERAL").
3.2 Perfection and Protection of Security Interest. Each Borrower
shall, at its expense, take all actions requested by FINOVA at any time to
perfect, maintain, protect and enforce FINOVA's first priority security interest
and other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles as FINOVA shall require,
all in form and substance satisfactory to FINOVA, (ii) maintaining a perpetual
inventory and complete and accurate stock records, (iii) delivering to FINOVA
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued, and transferring Inventory to
warehouses designated by FINOVA, (iv) placing notations on such Borrower's books
of account to disclose FINOVA's security interest therein and (v) delivering to
FINOVA all letters of credit on which such Borrower is named beneficiary. FINOVA
may file, without any Borrower's signature, one or more financing statements
disclosing FINOVA's security interest under this Agreement. Each Borrower agrees
that a carbon, photographic, photostatic or other reproduction of this Agreement
or of a financing statement is sufficient as a financing statement. If any
Collateral is at any time in the possession or control of any warehouseman,
bailee or any of a Borrower's agents or processors, the applicable Borrower
shall notify such Person of FINOVA's security interest in such Collateral and,
upon FINOVA's request, instruct them to hold all such Collateral
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for FINOVA's account subject to FINOVA's instructions. From time to time, each
Borrower shall, upon FINOVA's request, execute and deliver confirmatory written
instruments pledging the Collateral to FINOVA, but any Borrower's failure to do
so shall not affect or limit FINOVA's security interest or other rights in and
to the Collateral. Until the Obligations have been fully satisfied and FINOVA's
obligation to make further advances hereunder has terminated, FINOVA's security
interest in the Collateral shall continue in full force and effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the Collateral or
bond the same, pay any insurance, maintain guards, pay any service bureau,
obtain any record or take any other action to preserve the Collateral and charge
the cost thereof to the applicable Borrower's loan account as an Obligation.
3.4 Insurance. Each Borrower will maintain and deliver evidence to
FINOVA of such insurance as is required by FINOVA, written by insurers, in
amounts, and with lender's loss payee, additional insured, and other
endorsements, satisfactory to FINOVA. All premiums with respect to such
insurance shall be paid by each Borrowers as and when due. Accurate and
certified copies of the policies shall be delivered by each Borrower to FINOVA.
If a Borrower fails to comply with this Section, FINOVA may (but shall not be
required to) procure such insurance and endorsements at the Borrowers' expense
and charge the cost thereof to the Borrowers' loan accounts as an Obligation.
3.5 Collateral Reporting; Inventory.
(a) Invoices. No Borrower shall re-date any invoice or sale from the
original date thereof or make sales on extended terms beyond those customary in
Borrowers' industry, or otherwise extend or modify the term of any Receivable.
If a Borrower becomes aware of any matter materially affecting any Receivable,
including information affecting the credit of the account debtor thereon, such
Borrower shall promptly notify FINOVA in writing.
(b) Instruments. In the event any Receivable is or becomes evidenced by
a promissory note, trade acceptance or any other instrument for the payment of
money, the applicable Borrower shall immediately deliver such instrument to
FINOVA appropriately endorsed to FINOVA and, regardless of the form of any
presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, such Borrower shall remain liable thereon until such instrument
is paid in full.
3.6 Receivables.
(a) Eligibility. (i) Each Borrower represents and warrants that each of
its Receivables covers and shall cover a bona fide sale or lease and delivery by
it of goods or the rendition by it of services in the ordinary course of its
business, and shall be for a liquidated amount and FINOVA's security interest
shall not be subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition. If any representation or warranty herein
is breached as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA may, in
addition to its other rights hereunder, designate any and all Receivables owing
by that account debtor as not Eligible Receivables; provided, that FINOVA shall
in any such event retain its security interest in all Receivables, whether or
not Eligible Receivables, until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder has terminated.
(ii) FINOVA at any time shall be entitled to (i) establish and increase
or decrease reserves against Eligible Receivables, (ii) reduce the advance rates
in the Schedule or restore such advance rates to any level equal to or below the
advance rates set forth in the Schedule or (iii) impose additional restrictions
(or eliminate the same) to the standards of eligibility set forth in the
definitions of "Eligible Receivables", in the exercise of its Permitted
Discretion. FINOVA may but shall not be required to rely on the schedules and/or
reports delivered to FINOVA in connection herewith in determining the then
eligibility of Receivables. Reliance thereon by FINOVA from time to time shall
not be deemed to limit the right of FINOVA to revise advance rates or standards
of eligibility as provided above.
(b) Disputes. Each Borrower shall notify FINOVA promptly of all
material disputes or claims and settle or adjust such disputes or claims at no
expense to FINOVA, but no discount, credit or allowance shall be granted to any
account debtor without FINOVA's consent, except for discounts, credits and
allowances made or given in the ordinary course of a Borrower's business. FINOVA
may, at any time after the occurrence of an Event of Default, settle or adjust
disputes or claims directly with account debtors for amounts and upon terms
which FINOVA considers advisable in its reasonable credit judgment and, in all
cases, FINOVA shall credit Borrowers' loan accounts with only the net amounts
received by FINOVA in payment of any Receivables.
3.7 Equipment. Each Borrower shall keep and maintain the Equipment in
good operating condition and repair and make all necessary replacements thereto
to maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrowers' past practice, ordinary wear and tear excepted. No
Borrower shall permit any item of Equipment to become a fixture (other than a
trade fixture) to real estate or an accession to other property.
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3.8 Other Liens; No Disposition of Collateral. Each Borrower
represents, warrants and covenants that except for FINOVA's security interest,
Permitted Encumbrances, and such other liens, claims and encumbrances as may be
permitted by FINOVA in its sole discretion from time to time in writing, (a) all
Collateral is and shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) no Borrower shall, without FINOVA's
prior written approval, sell, encumber or dispose of or permit the sale,
encumbrance or disposal of any Collateral or all or any substantial part of any
of its other assets (or any interest of a Borrower therein). In the event FINOVA
gives any such prior written approval with respect to any such sale of
Collateral, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to FINOVA. The proceeds of any such sales of
Collateral shall be remitted to FINOVA pursuant to this Agreement for
application to the Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, in accordance
with the Loan Documents and applicable law, (i) exchange, enforce, waive or
release any of the Collateral, (ii) apply Collateral and direct the order or
manner of sale thereof as it may determine, and (iii) settle, compromise,
collect or otherwise liquidate any Collateral in any manner without affecting
its right to take any other action with respect to any other Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial
advance under the Original Agreement or to issue or arrange for the issuance of
the initial Letter of Credit under the Original Agreement is subject to the
fulfillment, to the satisfaction of FINOVA and its counsel, of each of the
following conditions on or prior to the date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
a promissory note in such amounts and on such terms and conditions as FINOVA
shall specify, executed by Borrower; (iii) Guaranties executed by each of the
Guarantors and Support Agreement executed by the applicable parties; (iv) such
security agreements, intellectual property assignments, pledge agreements,
mortgages and deeds of trust as FINOVA may require with respect to this
Agreement and any Guaranties, executed by each of the parties thereto and, if
applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (v) such Blocked Account agreements as it shall reasonably
determine; and (vi) such other documents, instruments and agreements in
connection herewith as FINOVA shall require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrowers shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the initial advance and
the initial Letter of Credit hereunder and after giving effect to any applicable
Loan Reserves against borrowing availability under the Revolving Credit Loans.
(c) Terminations by Existing Lender. Borrowers' existing lender shall
have executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests in the assets of
Borrowers;
(d) Charter Documents. FINOVA shall have received copies of each
Borrower's By-laws and Articles or Certificate of Incorporation, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of the
applicable Borrower;
(e) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to each Borrower, dated within ten (10) days of
the Closing Date, by the Secretary of State of the state of incorporation of
such Borrower, which certificate shall indicate that such Borrower is in good
standing in such state;
(f) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to each Borrower and each other Loan Party, each
dated within ten (10) days of the Closing Date, issued by the Secretary of State
of each state in which such party's failure to be duly qualified or licensed
would have a material adverse effect on its financial condition or assets,
indicating that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of each Borrower attesting to (i) the adoption
of resolutions of such Borrower's Board of Directors, and shareholders or
members if necessary, authorizing the borrowing of money from FINOVA and
execution and delivery of this Agreement and the other Loan Documents to which
such Borrower is a party, and authorizing specific officers of such Borrower to
execute same, and (ii) the authenticity of original specimen signatures of such
officers;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to FINOVA and its counsel, together with an additional
insured endorsement in favor of FINOVA with respect to all liability policies
and a lender's loss payable endorsement in favor of FINOVA with respect to all
casualty and business interruption
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policies, each in form and substance acceptable to FINOVA and its counsel;
(i) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests granted
to FINOVA;
(j) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any Collateral is located;
(k) Fees. Borrowers shall have paid all fees payable by them on the
Closing Date pursuant to this Agreement;
(l) Opinion of Counsel. FINOVA shall have received an opinion of
Borrowers' counsel covering such matters as FINOVA shall determine in its sole
discretion;
(m) Officer Certificate. FINOVA shall have received a certificate of
the President and the Chief Financial Officer or similar officer of DSI,
attesting to the accuracy of each of the representations and warranties of
Borrowers set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. If requested, FINOVA shall have received a
signed certificate of the DSI's duly elected Chief Financial Officer concerning
the solvency and financial condition of Borrowers, on FINOVA's standard form;
(o) Blocked Account. The Blocked Accounts referred to in Section
2.10(c) hereof shall have been established to the satisfaction of FINOVA in its
sole discretion;
(p) [Intentionally Omitted]
(q) Environmental Certificate. FINOVA shall have received an
Environmental Certificate from Borrowers, in form and substance satisfactory to
FINOVA in its discretion, with respect to all locations of Collateral;
(r) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding Borrowers, and members of the senior management of Borrowers, and
shall have received satisfactory customer, vendor and credit reference checks on
Borrowers.
(s) No Material Adverse Changes. Prior to the Closing Date, there shall
have occurred no material adverse change in the financial condition of any
Borrower, or in the condition of the assets of any Borrower, from that shown on
the Prepared Financials. At the closing, Borrowers shall deliver to FINOVA an
officer's certification confirming that Borrowers are unaware of the existence
of any such material adverse change.
(t) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which any Borrower shall be a party.
(u) Projections. Borrowers shall submit cash flow projections and pro
forma balance sheet with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrowers' projected working
capital needs, and (ii) showing: (1) that the Borrowers will have reasonably
sufficient capital for the conduct of business following the initial funding,
and (2) that no Borrower will incur debts beyond its ability to pay such debts
as they mature.
(v) Opinions. To the extent any Person other than Borrowers shall be
parties to the Loan Documents, FINOVA reserves the right to require satisfactory
opinions of counsel for each such Person concerning the proper organization of
such Person and the due authorization, execution, delivery, enforceability,
validity and binding effect of the Loan Documents to which such Person is a
party. Each such opinion of counsel shall confirm, to the satisfaction of
FINOVA, that the opinion is being delivered to FINOVA at the instruction of the
party represented by such counsel, that FINOVA is entitled to rely on such
opinion and that for purposes of such reliance, FINOVA is deemed to be in
privity with the opining counsel.
(w) ADA Compliance. If necessary, as of the Closing Date, each Borrower
shall be in compliance with the Americans with Disabilities Act of 1990 ("ADA"),
or, if any renovations of a Borrower's facilities or modifications of a
Borrower's employment practices shall be required to bring them into compliance
with the ADA, review and approval by FINOVA of such Borrower's proposed plan to
come into such compliance. Each Borrower shall deliver representations and
warranties to FINOVA concerning such Borrower's compliance with the ADA, and no
evidence shall have come to the attention of FINOVA indicating that any Borrower
is not in compliance with the ADA (except to the extent that FINOVA has reviewed
and approved such Borrower's plan to come into compliance).
(x) Transaction Costs. Borrowers shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loans, which transaction costs shall not
exceed the amount set forth in the Schedule, as well as appropriate
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documentation evidencing such costs and the payment thereof. All such
information must be acceptable to FINOVA, in FINOVA's sole discretion, exercised
in good faith.
(y) Schedule Conditions. Borrowers shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(z) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance reasonably satisfactory
to FINOVA and its counsel including, without limitation, each of the items
listed on the Closing Checklist attached as EXHIBIT A hereto.
4.2 Amendment and Restatement; Initial Advances Subsequent to
Amendment. The effectiveness of the amendments to the Original Agreement
effectuated by this Agreement and the obligation of FINOVA to make Term Loan B
and Term Loan C (as defined in the Schedule) is subject to the fulfillment, to
the satisfaction of FINOVA and its counsel, of each of the following conditions
on or prior to the date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Amended and Restated Loan and Security Agreement fully
and properly executed by each Borrower; (ii) a promissory note for each of the
Term Loans, in such amounts and on such terms and conditions as FINOVA shall
specify, executed by Borrower; (iii) an affirmation of the Support Agreement of
Xxxxxx X. Xxxxx, dated the Amendment Closing Date, executed by Xxxxxx X. Xxxxx;
(iv) such security agreements, intellectual property assignments, pledge
agreements, mortgages and deeds of trust as FINOVA may require with respect to
this Agreement and any Guaranties, executed by each of the parties thereto and,
if applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (v) such other documents, instruments and agreements in
connection herewith as FINOVA shall require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrowers shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the amendments to the
Original Agreement effectuated by this Agreement and after giving effect to any
applicable Loan Reserves against borrowing availability under the Revolving
Credit Loans.
(c) Charter Documents. FINOVA shall have received copies of each
Borrower's By-laws and Articles or Certificate of Incorporation, as amended,
modified, or supplemented to the Amendment Closing Date, certified by the
Secretary of the applicable Borrower;
(d) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to each Borrower, dated within ten (10) days of
the Amendment Closing Date, by the Secretary of State of the state of
incorporation of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such state;
(e) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to each Borrower, each dated within ten (10) days
of the Amendment Closing Date, issued by the Secretary of State of each state in
which such party's failure to be duly qualified or licensed would have a
material adverse effect on its financial condition or assets, indicating that
such party is in good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of each Borrower attesting to (i) the adoption
of resolutions of such Borrower's Board of Directors, and shareholders or
members if necessary, authorizing the borrowing of money from FINOVA and
execution and delivery of this Agreement and the other Loan Documents to which
such Borrower is a party, and authorizing specific officers of such Borrower to
execute same, and (ii) the authenticity of original specimen signatures of such
officers;
(g) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests granted
to FINOVA;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof with respect to
the New Borrowers, in form and substance satisfactory to FINOVA and its counsel,
together with an additional insured endorsement in favor of FINOVA with respect
to all liability policies of the New Borrowers and a lender's loss payable
endorsement in favor of FINOVA with respect to all casualty and business
interruption policies, each in form and substance acceptable to FINOVA and its
counsel;
(i) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any Collateral of each New Borrower is
located;
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(j) Fees. Borrowers shall have paid all fees payable by them on or
prior to the Amendment Closing Date pursuant to this Agreement;
(k) Opinion of Counsel. FINOVA shall have received an opinion of
Borrowers' counsel covering such matters as FINOVA shall determine in its sole
discretion;
(l) Solvency Certificate. FINOVA shall have received a signed
certificate of DSI's duly elected Chief Financial Officer concerning the
solvency and financial condition of Borrowers after giving effect to this
Agreement and the transactions contemplated by the Merger Documents, on FINOVA's
standard form;
(m) Environmental Certificate. FINOVA shall have received an
Environmental Certificate from New Borrowers, in form and substance to FINOVA in
its discretion, with respect to all location of Collateral of New Borrowers;
(n) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding the New Borrowers, and members of the senior management of the New
Borrowers, and shall have received satisfactory customer, vendor and credit
reference checks on the New Borrowers.
(o) No Material Adverse Changes. Prior to the Amendment Closing Date,
there shall have occurred no material adverse change in the financial condition
of any Borrower, or in the condition of the assets of any Borrower, from that
shown on the Prepared Financials. At the closing, Borrowers shall deliver to
FINOVA an officer's certification confirming that Borrowers are unaware of the
existence of any such material adverse change.
(p) Material Agreements. FINOVA shall have received, reviewed and
found satisfactory all material agreements to which any New Borrower shall be a
party.
(q) Projections. Borrowers shall submit cash flow projections and pro
forma balance sheets with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrowers' projected working
capital needs after giving effect to the transactions contemplated by the Merger
Documents, and (ii) showing: (1) that the Borrowers will have reasonably
sufficient capital for the conduct of business following the effectiveness of
this Agreement and the consummation of the financing contemplated hereby and (2)
that no Borrower will incur debts beyond its ability to pay such debts as they
mature;
(r) ADA Compliance. If necessary, as of the Amendment Closing Date,
each New Borrower shall be in compliance with the Americans with Disabilities
Act of 1990 ("ADA"), or, if any renovations of a New Borrower's facilities or
modifications of a New Borrower's employment practices shall be required to
bring them into compliance with the ADA, FINOVA shall have reviewed and found
satisfactory such New Borrower's proposed plan to come into such compliance.
Each New Borrower shall deliver representations and warranties to FINOVA
concerning such New Borrower's compliance with the ADA, and no evidence shall
have come to the attention of FINOVA indicating that any New Borrower is not in
compliance with the ADA (except to the extent that FINOVA has reviewed and found
satisfactory such New Borrower's plan to come into compliance).
(s) Transaction Costs. Borrowers shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loans, which transaction costs shall not
exceed the amount set forth in the Schedule, as well as appropriate
documentation evidencing such costs and the payment thereof. All such
information must be acceptable to FINOVA, in FINOVA's sole discretion, exercised
in good faith.
(t) Schedule Conditions. Borrowers shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(u) Merger Documents. FINOVA must review and find satisfactory the
Merger Agreements, including copies of all exhibits and schedules thereto, and
all other documents referred to therein, and all other instruments to be
executed between the Borrowers and the sellers named in the Merger Agreements
(the "SELLERS") in connection with the merger contemplated by the Merger
Agreements; all such documents and instruments being referred to herein
collectively as the "MERGER DOCUMENTS"). The Merger Documents must contain
specific representations and warranties, in form and substance satisfactory to
FINOVA, with respect to the accuracy of the financial information submitted by
the Sellers, and shall further contain indemnity provisions acceptable to FINOVA
which shall address, among other items, liability for environmental
contamination and clean up, if any. The transaction contemplated by the Merger
Documents shall have been, or are being simultaneously consummated, in
accordance with the terms and conditions reviewed and approved by FINOVA;
(v) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance reasonably satisfactory
to FINOVA and its counsel.
4.3 Subsequent Advances. The obligation of FINOVA to make any advance
or issue or cause any Letter of
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Credit to be issued hereunder (including the initial advance or Letter of
Credit) shall be subject to the further conditions precedent that, on and as of
the date of such advance or Letter of Credit issuance: (a) the representations
and warranties of Borrowers set forth in this Agreement shall be accurate,
before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default has
occurred and is continuing, or would result from such advance or issuance or
from the application of any proceeds thereof; (c) no material adverse change has
occurred in any Borrower's business, operations, financial condition, in the
condition of the Collateral or other assets of any Borrower or in the prospect
of repayment of the Obligations; and (d) FINOVA shall have received such other
approvals, opinions or documents as FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth on the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite power
and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder, and has not taken any steps
to wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Except as set forth on the Schedule, it has not,
during the preceding five (5) years, been known by or used any other corporate
or fictitious name except as set forth on the Schedule, nor has it been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during such time;
5.3 Due Authorization. The execution, delivery and performance by it of
the Loan Documents to which it is a party have been authorized by all necessary
corporate action and do not and shall not constitute a violation of any
applicable law or of its Articles or Certificate of Incorporation or By-Laws or,
after giving effect to the application of the proceeds of the initial Loans, any
other document, agreement or instrument to which any Borrower is a party or by
which any Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which it is a
party is its legal, valid and binding obligation, enforceable against it in
accordance with its terms;
5.5 Intangible Property. It possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future conduct of its business without
any known conflict with the rights of others;
5.6 Capital. It has capital sufficient to conduct its business, is able
to pay its debts as they mature, and owns property having a fair salable value
greater than the amount required to pay all of its debts (including contingent
debts);
5.7 Material Litigation. It has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
5.8 Title; Security Interests of FINOVA. It has good, indefeasible and
merchantable title to the Collateral and, upon the execution and delivery of the
Loan Documents, the filing of UCC-1 Financing Statements, delivery of the
certificate(s) evidencing any pledged securities, the filing of any collateral
assignments or security agreements regarding Trademarks, Copyrights, Licenses
and Patents, if any, with the appropriate governmental offices, in each case in
the appropriate offices, this Agreement and such documents shall create valid
and perfected first priority liens in the Collateral, subject only to Permitted
Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. It is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during the
Initial Term of this Agreement, except as disclosed to FINOVA in writing prior
to the date hereof;
5.10 Laws. It is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise. It
has all licenses, permits, registrations, and governmental approvals necessary
to conduct its business, and a complete and accurate list thereof is set forth
on the Schedule;
5.11 Consents. It has obtained or caused to be obtained or issued any
required consent of a governmental agency or other Person in connection with the
financing contemplated hereby;
5.12 Defaults. It is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its
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assets are bound, nor has any event occurred which, with the giving of notice or
the lapse of time, or both, would cause such a default;
5.13 Financial Condition. The Prepared Financials fairly present the
financial condition and results of operations of DSI and its subsidiaries as of
the date and for the periods thereof in accordance with GAAP; there are no
material omissions from the Prepared Financials or other facts or circumstances
not reflected in the Prepared Financials; and there has been no material and
adverse change in such financial condition or operations since the date of the
initial Prepared Financials delivered to FINOVA hereunder;
5.14 ERISA. None of Borrowers, any ERISA Affiliate, or any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has any Borrower or any ERISA Affiliate received
any notice to such effect. No notice of intent to terminate a Plan has been
filed under Section 4041 of ERISA, nor has any Plan been terminated under ERISA.
The PBGC has not instituted proceedings to terminate, or appointed a trustee to
administer, a Plan. No lien upon the assets of any Borrower has arisen with
respect to a Plan. No prohibited transaction or Reportable Event has occurred
with respect to a Plan. Neither any Borrower nor any ERISA Affiliate has
incurred any withdrawal liability with respect to any Multiemployer Plan. Each
Borrower and each ERISA Affiliate have made all contributions required to be
made by them to any Plan or Multiemployer Plan when due. There is no accumulated
funding deficiency in any Plan, whether or not waived;
5.15 Taxes. It has filed all tax returns and such other reports as it
is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
5.16 Locations; Federal Tax ID No. Its chief executive office and the
offices and locations where it keeps the Collateral (except for Inventory in
transit) are at the locations set forth on the Schedule, except to the extent
that such locations may have been changed after notice to FINOVA in accordance
with Section 6.4 hereof. Its federal tax identification number is as shown on
the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between it and any customer or any group of customers
whose purchases individually or in the aggregate are material to the business of
Borrowers, or with any material supplier, and there exists no present condition
or state of facts or circumstances which would materially and adversely affect
it or prevent it from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted;
5.18 Year 2000. It has taken all action necessary to assure that there
will be no material adverse change to such Borrower's business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999, except as set forth on
Borrowers' annual report on Form 10-K for the fiscal year ended September 30,
1998;
5.19 Closing of Merger. The transactions contemplated by the Merger
Documents, in the form reviewed and approved by FINOVA, have been consummated
and no party thereto has waived compliance with any of the conditions to its
obligations to consummate such transactions; and
5.20 Reaffirmations. Each request for a loan made by a Borrower
pursuant to this Agreement shall constitute (i) an automatic representation and
warranty by each Borrower to FINOVA that there does not then exist any Event of
Default and (ii) a reaffirmation as of the date of said request of all of the
representations and warranties of each Borrower contained in this Agreement and
the other Loan Documents.
6. COVENANTS.
6.1 AFFIRMATIVE COVENANTS. Each Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate provision
for the payment of all taxes, assessments and other charges on or prior to the
date when due;
6.1.2 Notice of Litigation. Promptly notify FINOVA in writing of
any litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or its business, assets, operations, prospects
or condition, financial or otherwise, whether or not the claim is covered by
insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon the
occurrence of any event described in Paragraph 4043 of ERISA, other than a
termination, partial termination or merger of a Plan or a transfer of a Plan's
assets and (ii) prior to any termination, partial termination or merger of a
Plan or a transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-five (45)
days prior to any change in the location of its chief executive office or the
location of any Collateral, or its opening or closing of any other place of
business;
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6.1.5 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain adequate
assets, licenses, permits, registrations, governmental approvals, patents,
copyrights, trademarks and trade names for the conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of any material
labor dispute to which it is or may become subject and the expiration of any
labor contract to which it is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing of any
violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to it which may materially and
adversely affect the Collateral or its business, assets, prospects, operations
or condition, financial or otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5) Business Days
of its default under any note, indenture, loan agreement, or mortgage, or under
any lease or other agreement material to its business, to which it is a party or
by which it is bound, or of any other default under any of its Indebtedness;
6.1.9 Capital Expenditures. Promptly notify FINOVA in writing of the
making of any Capital Expenditure materially affecting its business, assets,
prospects, operations or condition, financial or otherwise, except to the extent
permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of
all agreements between it and any landlord, warehouseman or bailee which owns
any premises at which any Collateral may, from time to time, be located (whether
for processing, storage or otherwise), and (ii) without limiting the landlord,
bailee and/or mortgagee waivers to be provided pursuant to Section 4.1(j)
hereof, additional landlord, bailee and/or mortgagee waivers in form acceptable
to FINOVA with respect to all locations where any Collateral is hereafter
located;
6.1.13 Additional Documents. At FINOVA's request, promptly execute or
cause to be executed and delivered to FINOVA any and all documents, instruments
or agreements deemed necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents. Without
limiting the generality of the foregoing, if any of the Receivables with a face
value in excess of $10,000 arises out of a contract with the United States of
America or any department, agency, subdivision or instrumentality thereof, it
shall promptly notify FINOVA of such fact in writing and shall execute any
instruments and take any other action required or requested by FINOVA to comply
with the provisions of the Federal Assignment of Claims Act; and
6.1.14 Financial Covenants. Comply with the financial covenants set
forth on the Schedule.
6.1.15 Year 2000. Take all action necessary to assure that there will
be no material adverse change to such Borrower's business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999. At FINOVA's request, each
Borrower shall provide to FINOVA assurance reasonably acceptable to FINOVA that
such Borrower's computer-based systems, embedded microchips and other processing
capabilities are year 2000 compatible.
6.2 Negative Covenants. Without FINOVA's prior written consent, which
consent FINOVA may withhold in its sole discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, it shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other
Person, or make any other material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to, or
invest in, any Person, except for loans or cash advances to employees which are
permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its stock
or distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which materially
and adversely affects the Collateral or its ability to repay the Obligations in
full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
continently liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit and except for the existing guarantees made by it prior
to the date hereof, if any, which are set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a xxxx-and-hold,
guaranteed sale, sale and return, sale on
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approval, consignment, or any other repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than its
corporate name as set forth in its Articles or Certificate of Incorporation on
the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade payables and
other than the Obligations;
6.2.9 Capital Expenditure. Make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures by
all Borrowers in any fiscal year would exceed the amount set forth on the
Schedule;
6.2.10 [Intentionally Omitted]
6.2.11 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness for Borrowed Money, (including in connection with Capital Leases)
in excess of the amount set forth on the Schedule, other than (i) the
Obligations, (ii) trade payables and other contractual obligations to suppliers
and customers incurred in the ordinary course of business, and (iii) other
Indebtedness for Borrowed Money existing on the date of this Agreement and
reflected in the Schedule;
6.2.12 Affiliate Transactions. Except as set forth below, sell,
transfer, distribute or pay any money or property to any Affiliate, or invest in
(by capital contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, or become liable on any
guaranty of the indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, it may pay compensation permitted by Section 6.23
to employees who are Affiliates and, if no Event of Default has occurred, it may
engage in transactions with Affiliates in the normal course of business, in
amounts and upon terms which are fully disclosed to FINOVA and which are no less
favorable to it than would be obtainable in a comparable arm's length
transaction with a Person who is not an Affiliate;
6.2.13 Nature of Business. Enter into any new business or make any
material change in any of its business objectives, purposes or operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection with any of
its business or activities, except in connection with internal business matters
or as required in dealings with governmental agencies and financial institutions
or with its trade creditors, solely for credit reference purposes;
6.2.15 Margin Security. It will not (and has not in the past) engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation G or Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Loan or other advance will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock, or in any manner which might
cause such Loan or other advance or the application of such proceeds to violate
(or require any regulatory filing under) Regulation G, Regulation T, Regulation
U, Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System, in each case as in effect on the date or dates of such Loan or
other advance and such use of proceeds. Further, no proceeds of any Loan or
other advance will be used to acquire any security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of 1934;
6.2.16 Real Property. Purchase or acquire any real property without
FINOVA's prior written consent, a condition of which consent shall include
delivery of appropriate environmental reports and analysis, in form and
substance satisfactory to FINOVA and its counsel; or
6.2.17 Business Activities of Subsidiaries. Permit any Guarantor to
engage in any business activity or own any material assets unless (i) it gives
FINOVA at least 30 days prior written notice thereof and (ii) causes such
Guarantor to execute and deliver such security agreement and other agreements
and instruments as FINOVA may reasonably request to create and perfect in favor
of FINOVA a security interest in the assets of such Guarantor of the type
constituting Collateral hereunder.
6.2.18 Insurance Structure. Change its insurance structure to any type
of non-guaranteed plan without FINOVA's prior written consent.
6 .2.19 Reserving for Insurance Losses. Change its current methods and
practices of reserving for potential insurance losses without FINOVA's prior
written consent.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Any Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
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(b) (i) any Borrower or any other Loan Party fails to perform any of
the covenants contained in Section 6.1.1, 6.1.2, 6.1.3, 6.1.6, 6.1.7, 6.1.9,
6.1.10, 6.1.11, and 6.1.13 of this Agreement and such failure shall continue for
ten (10) days; provided, however, that such ten (10) day period shall not apply
in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such ten (10) day period or which has
been the subject of a prior failure within a six (6) month period or (B) an
intentional breach of a Borrower or any other Loan Party of any such covenant;
or (ii) any Borrower or any other Loan Party fails or neglects to perform, keep,
or observe any Obligation including, but not limited to, any term, provision,
condition, covenant or agreement contained in any Loan Document to which
Borrower or such other Loan Party is a party, other than those described in
Section 7.1(a) or 7.1(b)(i);
(c) Any material adverse change occurs in any Borrower's business,
assets, operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any portion of any Borrower's assets is seized, attached, subjected
to a writ or distress warrant, is levied upon or comes into the possession of
any judicial officer;
(f) Any Borrower shall generally not pay its debts as they become due
or shall enter into any agreement (whether written or oral), or offer to enter
into any agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management or control of its business;
(g) Any bankruptcy or other insolvency proceeding is commenced by any
Borrower, or any such proceeding is commenced against any Borrower and remains
undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record with
respect to any of any Borrower's assets and is not discharged or bonded to
FINOVA's satisfaction within five (5) days after the filing thereof and prior to
any action to enforce or collect such lien, levy or assessment;
(i) Any judgments are entered against any Borrower in an aggregate
amount exceeding $100,000 in any fiscal year and are not vacated or discharged
within 30 days after entry or execution thereon is not effectively stayed;
(j) Any default shall occur under (i) any material agreement between
any Borrower and any third party including, without limitation, any default
which would result in a right by such third party to accelerate the maturity of
any Indebtedness of any Borrower to such third party, or (ii) any Subordinated
Debt;
(k) Any representation or warranty made or deemed to be made by any
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Guarantor terminates or attempts to terminate its Guaranty or
any security therefor or becomes subject to any bankruptcy or other insolvency
proceeding;
(m) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of any Borrower; any lien upon the assets of any Borrower in
connection with any Plan shall arise; any Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which any
Borrower or any of its ERISA Affiliates may be required to pay to any Plan or
any Multiemployer Plan as one or more contributions thereto; any Borrower or any
of its ERISA Affiliates creates or permits the creation of any accumulated
funding deficiency, whether or not waived
(n) Borrowers fails to satisfy any undertaking in the Conditions
Subsequent Agreement, if any, executed and delivered on the Closing Date;
(o) Xxxxxx X. Xxxxx shall cease to be employed by Borrowers, and his
successor, within thirty (30) days after being employed by Borrowers, shall not
have entered into a Support Agreement substantially identical to the Support
Agreement executed by Xxxxxx X. Xxxxx on the Closing Date; or
(p) Any Change of Control occurs; or any transfer occurs of any
percentage of shares of common stock or other evidence of ownership of any
Borrower other than DSI.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may,
at its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, cease making Loans, terminate this Agreement
and/or declare all of the Obligations to be immediately payable in full. Each
Borrower agrees that
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FINOVA shall also have all of its rights and remedies under applicable law,
including, without limitation, the default rights and remedies of a secured
party under the Code, and upon the occurrence of an Event of Default each
Borrower hereby consents to the appointment of a receiver by FINOVA in any
action initiated by FINOVA pursuant to this Agreement and to the jurisdiction
and venue set forth in Section 9.25 hereof, and each Borrower waives notice and
posting of a bond in connection therewith. Further, FINOVA may, at any time,
take possession of the Collateral and keep it on each Borrower's premises, at no
cost to FINOVA, or remove any part of it to such other place(s) as FINOVA may
desire, or each Borrower shall, upon FINOVA's demand, at Borrowers' sole cost,
assemble the Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Each Borrower agrees that FINOVA has
no obligation to preserve rights to the Collateral or xxxxxxxx any Collateral
for the benefit of any Person. FINOVA is hereby granted a license or other right
to use, without charge, each Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
each Borrower's rights under all licenses and all franchise agreements shall
inure to FINOVA's benefit. Any requirement of reasonable notice shall be met if
such notice is mailed postage prepaid to DSI at its address set forth in the
heading to this Agreement at least ten (10) days before sale or other
disposition. The proceeds of sale shall be applied, first, to all attorneys fees
and other expenses of sale, and second, to the Obligations in such order as
FINOVA shall elect, in its sole discretion. FINOVA shall return any excess to
the applicable Borrower and each Borrower shall remain jointly and severally
liable for any deficiency to the fullest extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Each Borrower
and FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the tenth
calendar day prior thereto written notice thereof is mailed or personally
delivered to DSI and, with respect to any public disposition, on no later than
the tenth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
any Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, each Borrower expressly agrees that, with respect to any disposition
of accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from the applicable Borrower any and all information concerning the
same, including, but not limited to, the terms of payment, aging and
delinquency, if any, the financial condition of any obligor or account debtor
thereon or guarantor thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES
8.1 Expenses. Each Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse FINOVA jointly and severally for all costs, fees and expenses incurred
by FINOVA in connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents, including, but not
limited to, the reasonable attorneys' and paralegals' fees of in-house and
outside counsel, expert witness fees, lien, title search and insurance fees,
appraisal fees, all charges and expenses incurred in connection with any and all
environmental reports and environmental remediation activities, and all other
costs, expenses, taxes and filing or recording fees payable in connection with
the transactions contemplated by this Agreement, including without limitation
all such costs, fees and expenses as FINOVA shall incur or for which FINOVA
shall become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and any Borrower or any third party,
(iv) enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed or the
issues are peculiar to federal bankruptcy or state insolvency laws. Each
Borrower shall also jointly and severally pay all FINOVA charges in connection
with bank wire transfers, forwarding of loan proceeds, deposits of checks and
other items of payment, returned checks, establishment and maintenance of
lockboxes and other Blocked Accounts,
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and all other bank and administrative matters, in accordance with FINOVA's
schedule of bank and administrative fees and charges in effect from time to
time.
8.2 Environmental Matters. The Environmental Certificate dated on or
about the date of this Agreement is incorporated herein for all purposes as if
fully stated in this Agreement.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times have full access
to and the right to examine, audit, make abstracts and copies from and inspect
each Borrower's records, files, books of account and all other documents,
instruments and agreements relating to the Collateral and the right to check,
test and appraise the Collateral. Each Borrower shall deliver to FINOVA any
instrument necessary for FINOVA to obtain records from any service bureau
maintaining records for any Borrower. All instruments and certificates prepared
by any Borrower showing the value of any of the Collateral shall be accompanied,
upon FINOVA's request, by copies of related purchase orders and invoices. FINOVA
may, at any time after the occurrence of an Event of Default, remove from each
Borrower's premises such Borrower's books and records (or copies thereof) or
require such Borrower to deliver such books and records or copies to FINOVA.
FINOVA may, without expense to FINOVA, use such of each Borrower's personnel,
supplies and premises as may be reasonably necessary for maintaining or
enforcing FINOVA's security interest.
(b) Reporting Requirements. Each Borrower shall furnish FINOVA, upon
request, such information and statements as FINOVA shall reasonably request from
time to time regarding such Borrower's business affairs, financial condition and
the results of its operations. Without limiting the generality of the foregoing,
DSI on behalf of all Borrowers shall provide FINOVA with: (i) FINOVA's standard
form collateral and loan report for all Borrowers, weekly, and upon FINOVA's
request, copies of sales journals, cash receipt journals, and deposit slips;
(ii) upon FINOVA's request, copies of sales invoices, customer statements and
credit memoranda issued, remittance advices and reports; (iii) copies of
shipping and delivery documents, upon request; (iv) on or prior to the date set
forth on the Schedule, monthly agings (aged from invoice date) and
reconciliations of all Borrowers' Receivables (with listings of concentrated
accounts), payables reports, compliance certificates and unaudited financial
statements with respect to the prior month prepared on a basis consistent with
such statements prepared in prior months and otherwise in accordance with GAAP;
(v) on or prior to the date set forth in the Schedule, audited annual
consolidated financial statements of DSI and its subsidiaries, prepared in
accordance with GAAP applied on a basis consistent with the most recent Prepared
Financials provided to FINOVA by Borrowers, including balance sheets, income and
cash flow statements, accompanied by the unqualified report thereon of
independent certified public accountants acceptable to FINOVA; and (vi) such
certificates relating to the foregoing as FINOVA may request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of DSI in the form of EXHIBIT B hereto, showing Borrowers' compliance
with each of the financial covenants set forth in this Agreement, and stating
whether any Event of Default has occurred or event which, with giving of notice
or the passage of time, or both, would constitute an Event of Default, and if
so, the steps being taken to prevent or cure such Event of Default. All reports
or financial statements submitted by Borrowers shall be in reasonable detail and
shall be certified by the principal financial officer of DSI or the applicable
Borrower as being complete and correct.
9.2 Term; Termination.
(a) Term. The Initial Term of the Revolving Credit Loans facility and
the obligation of FINOVA to made advances with respect thereto in accordance
with this Agreement shall be as set forth on the Schedule, and the Revolving
Credit Loans facility and this Agreement shall be renewed for one or more
Renewal Term(s) as set forth in the Schedule, unless earlier terminated as
provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60) days
prior to the effective date of such termination, by registered or certified
mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure
set forth in Section 9.2(b), Borrowers may terminate this Agreement as to all of
the Borrowers (and not less than all of the Borrowers) at any time but only upon
thirty (30) days' prior written notice and prepayment of the Obligations
(including, without limitation, the Term Loans). Upon any such early termination
by Borrowers or any termination of this Agreement by FINOVA upon the occurrence
of an Event of Default, then, and in any such event, Borrowers shall jointly and
severally pay to FINOVA upon the effective date of such termination the Success
Fee and a fee (the "TERMINATION FEE") in an amount equal to the amount shown on
the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrowers as provided for
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herein and, in full, at the termination of this Agreement; recourse to security
shall not be required at any time. Each Borrower waives presentment and protest
of any instrument and notice thereof, notice of default and, to the extent
permitted by applicable law, all other notices to which any Borrower might
otherwise be entitled.
9.4 No Waiver by FINOVA. Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and any Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
9.5 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and each Borrower's respective representatives, successors and assigns.
9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by each Borrower
and FINOVA. No Borrower may sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including, without
limitation, any of a Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder. Each Borrower hereby consents to FINOVA's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including, without limitation, FINOVA's rights,
title, interests, remedies, powers and duties hereunder or thereunder. In
connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to any Borrower or any Borrower's
business. To the extent that FINOVA assigns its rights and obligations hereunder
to a third party, FINOVA shall thereafter be released from such assigned
obligations to Borrowers and such assignment shall effect a novation between
Borrowers and such third party.
9.8 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding of
the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of each
Borrower contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this Agreement or
of any guaranty of the Obligations shall affect or impair the powers,
obligations, duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by one or
more Borrowers to FINOVA. If not so evidenced, such Obligation shall be
evidenced solely by entries upon FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a Loan by any
Person who purports to be any employee, officer or authorized agent of DSI shall
be made to FINOVA on or prior to 11:00 a.m., Eastern time on the Business Day on
which the proceeds thereof are requested to be paid to any Borrower and shall be
conclusively presumed to be made by a Person authorized by each Borrower to do
so and the crediting of a loan to a Borrower's operating account shall
conclusively establish each Borrower's obligation to repay such loan. Unless and
until DSI otherwise directs FINOVA in writing, all loans shall be wired to the
applicable Borrower's operating account set forth on the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the applicable Borrower and FINOVA at their addresses set forth at
the beginning of this Agreement. A copy of any notice to a Borrower shall be
sent to Xxxxxxxxx & XxXxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: Xxxxxx X. XxXxxxx. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Each Borrower represents and warrants to FINOVA
that, with respect to the financing transaction herein contemplated, no Person,
other than EJ Advisors, is entitled to any brokerage fee or other commission,
and Borrower agrees to indemnify and hold FINOVA harmless against any and all
such claims.
9.14 Disclosure. No representation or warranty made a Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to any
Borrower or which reasonably should be known to any Borrower which Borrowers has
not disclosed to FINOVA in writing with respect to the transactions contemplated
by this Agreement which materially and
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adversely affects the business, assets, operations, prospects or condition
(financial or otherwise), of any Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Each Borrower recognizes that, in the event a
Borrower fails to perform, observe or discharge any of its Obligations under
this Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall also
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments
or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
each Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Each Borrower agrees that any claim or
cause of action by such Borrower against FINOVA, or any of FINOVA's directors,
officers, employees, agents, accountants or attorneys, based upon, arising from,
or relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by such Borrower by the commencement of an action or proceeding in a
court of competent jurisdiction by the filing of a complaint within one year
after any Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based and service of a
summons and complaint on an officer of FINOVA or any other Person authorized to
accept service of process on behalf of FINOVA, within 30 days thereafter. Each
Borrower agrees that such one-year period of time is a reasonable and sufficient
time for Borrowers to investigate and act upon any such claim or cause of
action. The one-year period provided herein shall not be waived, tolled, or
extended except by a specific written agreement of FINOVA. This provision shall
survive any termination of this Loan Agreement or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement or
the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by a Borrower through the ordinary negligence of FINOVA, or
any FINOVA Affiliate. "FINOVA AFFILIATE" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.
9.23 Notice of Breach by FINOVA. Each Borrower agrees to give FINOVA
written notice of (i) any action or inaction by FINOVA or any attorney of FINOVA
in connection with any Loan Documents that may be actionable against FINOVA or
any attorney of FINOVA or (ii) any defense to the payment of the Obligations for
any reason, including, but not limited to, commission of a tort or violation of
any contractual duty or duty implied by law. Each Borrower agrees that unless
such notice is fully given as promptly as possible (and in any event within
thirty (30) days) after any Borrower has knowledge, or with the exercise of
reasonable diligence should have had knowledge, of any such action, inaction or
defense, no Borrower shall assert, and each Borrower shall be deemed to have
waived, any claim or defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to FINOVA, or toward payment of
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the Obligations. Any proceeds applied to the payment of Obligations shall be
applied in such manner as FINOVA may elect. In no event shall such application
relieve any Borrower from payment in full of all installments of principal and
interest which thereafter become due in the order of maturity thereof.
9.25 Power of Attorney. Each Borrower appoints FINOVA and its designees
as such Borrower's attorney, with the power to endorse such Borrower's name on
any checks, notes, acceptances, money orders or other forms of payment or
security that come into FINOVA's possession; to sign such Borrower's name on any
invoice or xxxx of lading relating to any Receivable, on drafts against
customers, on assignments of Receivables, on notices of assignment, financing
statements and other public records, on verifications of accounts and on notices
to customers or account debtors; to send requests for verification of
Receivables to customers or account debtors; after the occurrence of any Event
of Default, to notify the post office authorities to change the address for
delivery of such Borrower's mail to an address designated by FINOVA and to open
and dispose of all mail addressed to such Borrower; and to do all other things
FINOVA deems necessary or desirable to carry out the terms of this Agreement.
Each Borrower hereby ratifies and approves all acts of such attorney. Neither
FINOVA nor any of its designees shall be liable for any acts or omissions nor
for any error of judgment or mistake of fact or law while acting as such
Borrower's attorney. This power, being coupled with an interest, is irrevocable
until the Obligations have been fully satisfied and FINOVA's obligation to
provide loans hereunder shall have terminated.
9.26 GOVERNING LAW; WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. EACH
BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE
SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. EACH BORROWER WAIVES ANY OBJECTION OF FORUM NON
CONVENIENS AND VENUE. EACH BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN
THE MANNER SET FORTH IN SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE. EACH
BORROWER FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK
ANY JUDGMENT ENTERED AGAINST IT.
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND EACH BORROWER
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; (II) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND ANY BORROWER; OR
(III) ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR ANY BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH FINOVA OR ANY BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.28 Nonpublic Information. FINOVA agrees that if, in the course of the
transactions contemplated by this Agreement, it comes into possession of any
material non-public information regarding DSI and its subsidiaries, it will use
all reasonable efforts to maintain the confidentiality of such information and
will not disclose any of such information to any person except to its employees,
advisors, and agents as necessary or advisable in connection with the
negotiation, administration, and enforcement of the Loan Documents. The
foregoing undertaking will not apply to any such information after such time as
it becomes generally available to the public.
[SIGNATURES FOLLOW]
-25-
27
BORROWERS:
DIGITAL SOLUTIONS, INC., a New Jersey corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
DSI CONTRACT STAFFING, INC., a New York corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
DSI STAFF CONNXIONS NORTHEAST, INC., a New Jersey corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
DSI STAFF RX, INC., a Texas corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
DSI STAFF CONNXIONS-SOUTHWEST, INC., a Texas corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
[AMENDED AND RESTATED LOAN AGREEMENT]
28
THE TEAMSTAFF COMPANIES, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF II, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF III, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF IV, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
[AMENDED AND RESTATED LOAN AGREEMENT]
29
TEAMSTAFF V, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF U.S.A., INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF INSURANCE SERVICES, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
TEAMSTAFF HOLDING COMPANY, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
EMPLOYER SUPPORT SERVICES, INC., a Florida corporation
Fed. Tax ID #: 00-0000000
By: ______________________________
Name:
Title:
[AMENDED AND RESTATED LOAN AGREEMENT]
30
LENDER:
FINOVA CAPITAL CORPORATION
By: ______________________________
Name: Xxxxx Xxxxxx
Title: Vice President
[AMENDED AND RESTATED LOAN AGREEMENT]
