EXHIBIT 10.4
LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 30, 2001
BY AND AMONG
SALESLINK CORPORATION, INSOLUTIONS INCORPORATED,
ON-DEMAND SOLUTIONS, INC., PACIFIC DIRECT
MARKETING CORP. AND SALESLINK MEXICO HOLDING CORP., AS BORROWERS,
THE LENDERS
AND
LASALLE BANK NATIONAL ASSOCIATION,
AS AGENT FOR THE LENDERS
TABLE OF CONTENTS
-----------------
1. DEFINITIONS AND INTERPRETATIONS.................................... 1
1.1 Definitions........................................................ 1
1.2 Accounting Terms................................................... 19
1.3 Other Terms........................................................ 19
1.4 Interpretation..................................................... 19
1.5 Multiple Borrowers................................................. 20
2. LOANS; GENERAL TERMS............................................... 20
2.1 Credit Facilities.................................................. 21
2.2 Evidence of Debt................................................... 21
2.3 Loan Accounts; Amount and Maintenance of Loans; Interest Rate Not
Determined........................................................ 21
2.4 Interest Rate...................................................... 22
2.5 Borrowing Procedures............................................... 23
2.6 General Provisions................................................. 24
2.7 Conversion Options; Continuance.................................... 24
2.8 Requirements of Law................................................ 25
2.9 Illegality......................................................... 27
2.10 Indemnity.......................................................... 27
2.11 Conditions Precedent............................................... 27
2.12 Fees............................................................... 30
2.13 Letters of Credit.................................................. 30
3. PAYMENTS........................................................... 35
3.1 Making of Payments................................................. 35
3.2 Payment Terms...................................................... 36
3.3 Lockbox; Collection of Accounts and Payments....................... 37
3.4 Application of Payments and Collections............................ 38
3.5 Records............................................................ 38
4. COLLATERAL; GENERAL TERMS.......................................... 38
4.1 Security Interest.................................................. 38
4.2 Disclosure of Security Interest.................................... 39
4.3 Special Collateral................................................. 39
4.4 Further Assurances................................................. 39
4.5 Inspection......................................................... 40
4.6 Location of Collateral............................................. 40
4.7 Agent's Payment of Claims Asserted Against Borrowers............... 40
4.8 Letter of Credit Rights............................................ 40
4.9 Commercial Tort Claims............................................. 41
4.10 Electronic Chattel Paper and Transferable Records.................. 41
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5. COLLATERAL; ACCOUNTS AND COLLATERAL MAINTENANCE.................... 41
5.1 Verification of Accounts and Inventory............................. 41
5.2 Assignments, Records and Accounts and Inventory Report............. 41
5.3 Notice Regarding Disputed Accounts................................. 41
5.4 Sale or Encumbrance of Accounts.................................... 42
5.5 Equipment.......................................................... 42
5.6 Notice of Loss; Prohibition on Sale or Disposition................. 42
5.7 Compliance with Buy Back Agreements................................ 42
6. WARRANTIES AND REPRESENTATIONS..................................... 42
6.1 General Warranties and Representations............................. 42
6.2 Account Warranties and Representations............................. 46
6.3 Automatic Warranty and Representations and Reaffirmation of
Warranties and Representations.................................... 47
6.4 Survival of Warranties and Representations......................... 47
7. COVENANTS AND CONTINUING AGREEMENTS................................ 47
7.1 Financial Covenants................................................ 47
7.2 Affirmative Covenants.............................................. 48
7.3 Negative Covenants................................................. 51
7.4 Contesting Charges................................................. 53
7.5 Payment of Charges................................................. 53
7.6 Insurance; Payment of Premiums..................................... 54
7.7 Survival of Obligations Upon Termination of Agreement.............. 54
8. EVENTS OF DEFAULT; RIGHTS OF REMEDIES.............................. 55
8.1 Event of Default................................................... 55
8.2 Effect of Event of Default......................................... 57
8.3 Remedies........................................................... 57
8.4 Notice............................................................. 58
8.5 Default Interest Rate.............................................. 58
8.6 Preservation of Rights............................................. 58
8.7 Distributions...................................................... 59
8.8 Method of Adjustment............................................... 59
9. AGENT.............................................................. 60
9.1 Appointment and Authorization...................................... 60
9.2 Delegation of Duties............................................... 60
9.3 Liability of Agent................................................. 60
9.4 Reliance by Agents................................................. 61
9.5 Notice of Default.................................................. 61
9.6 Credit Decision.................................................... 61
9.7 Indemnification.................................................... 62
9.8 Agent in Individual Capacity....................................... 63
9.9 Successor Agent.................................................... 63
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10. MISCELLANEOUS..................................................... 63
10.1 Appointment of Agent as Each Borrower's Lawful Attorney-In-Fact... 63
10.2 Modification of Agreement; Sale of Interest....................... 64
10.3 Attorneys' Fees and Expenses; Agent and Each Lender's
Out-of-Pocket Expenses.......................................... 65
10.4 No Offset; Right to Charge Accounts............................... 66
10.5 Severability...................................................... 66
10.6 Parties; Entire Agreement......................................... 66
10.7 Conflict of Terms................................................. 67
10.8 Waiver by Borrowers............................................... 67
10.9 Waiver and Governing Law.......................................... 67
10.10 Notice............................................................ 68
10.11 Section Titles, Etc............................................... 69
10.12 Mutilated, Destroyed, Lost and Stolen Notes....................... 69
11. CROSS-GUARANTY.................................................... 70
11.1 Cross-Guaranty.................................................... 70
11.2 Waivers by Borrowers.............................................. 70
11.3 Benefit of Guaranty............................................... 71
11.4 Subordination of Subrogation, Etc................................. 71
11.5 Election of Remedies.............................................. 71
11.6 Limitation........................................................ 72
11.7 Contribution with Respect to Guaranty Obligations................. 72
11.8 Liability Cumulative.............................................. 72
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LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") is made as of the
30th day of October, 2001 by and among SALESLINK CORPORATION, a Delaware
corporation, INSOLUTIONS INCORPORATED, a Delaware corporation, ON-DEMAND
SOLUTIONS, INC., a Massachusetts corporation, PACIFIC DIRECT MARKETING CORP., a
California corporation, SALESLINK MEXICO HOLDING CORP., a Delaware corporation
(each herein called a "BORROWER" and collectively, the "BORROWERS"), the lenders
party hereto (herein collectively called the "LENDERS" and each individually
called a "LENDER") and LASALLE BANK NATIONAL ASSOCIATION, as a Lender and as
Agent for the Lenders.
WHEREAS, Borrowers desire to borrow funds and obtain other financial
accommodations from Lenders, and Lenders are willing to make certain loans and
provide other financial accommodations to Borrowers upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extension of credit previously, now or to be made to
or for the benefit of Borrowers by Lenders, the parties agree as follows:
1. DEFINITIONS AND INTERPRETATIONS.
-------------------------------
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the following meanings:
"ACCOUNTS" shall mean all accounts (including without limitation all
right to payment for services rendered or goods sold or leased), contract
rights, leases, chattel paper, instruments, life insurance policies, notes
and documents, whether now owned or to be acquired by any Borrower.
"ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to any Borrower under, with respect to, or on account of an
Account.
"ACCOUNTS AND INVENTORY REPORT" shall mean a report delivered to Agent
by Borrowers, in accordance with Section 7.2(C)(vi), consisting of (i) a
trial balance of all Accounts existing as of the last day of the month
preceding the date of such Accounts and Inventory Report, specifying for
each Account Debtor obligated on the Accounts, such Account Debtor's name
and outstanding balance, (ii) an aging of such Accounts, (iii) a list of
all xxxxxxxx booked in advance as of such day, (iv) an inventory listing,
and (v) any other information reasonably required herein.
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"AFFILIATE" shall mean any and all Persons which, in the reasonable
judgment of Agent, directly or indirectly, own or control, are controlled
by or are under common control with a Borrower, and any and all Persons
from whom, in the reasonable judgment of Agent, a Borrower has not or is
not likely to exhibit independence of decision or action. For the purpose
of this definition and where otherwise applicable herein, "CONTROL" means
the possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. For purposes of
this Agreement, no Borrower shall be deemed to be an Affiliate of any other
Borrower.
"AGENT" shall mean LaSalle in its capacity as administrative,
collateral and documentation agent for all of the Lenders and not in its
individual capacity, and its successor appointed pursuant to Section 9.9.
"AGENT-RELATED PERSONS" shall mean Agent and any successor agent
arising under Section 9.9, together with their respective Affiliates and
the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean the combined
Revolving Credit Commitments of the Lenders, which shall initially be in
the amount of $13,000,000, as such amount may be reduced from time to time
pursuant to this Agreement.
"AGGREGATE TERM LOAN COMMITMENT" shall mean the combined Term Loan
Commitments of the Lenders, which shall initially be in the amount of
$12,000,000, as such amounts may be reduced from time to time pursuant to
this Agreement.
"ALLOCABLE AMOUNT" shall have the meaning ascribed to it in Section
11.7.
"AMORTIZATION COMMENCEMENT DATE" shall mean the earlier of (i) the
date on which the Aggregate Term Loan Commitment has been loaned to
Borrowers in its entirety or (ii) October 30, 2002.
"ANCILLARY AGREEMENTS" shall mean all Security Documents and all
agreements, instruments and documents, including without limitation, notes,
guaranties, mortgages, deeds of trust, chattel mortgages, pledges, powers
of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements, environmental indemnity
agreement, subordination agreements, trust account agreements and all other
written matter whether previously, now, or to be executed by or on behalf
of a Borrower or any other Person or delivered to Agent or any Lender with
respect to this Agreement.
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"APPLICABLE MARGIN" shall mean (i) with respect to the Revolving
Credit Facility, the percentage interest rate per annum, based upon the
Senior Leverage Ratio set forth in the most recent Compliance Certificate,
as indicated in the following chart:
SENIOR LEVERAGE RATIO PERCENTAGE RATE
------------------------- ---------------
Less than 0.50:1.00 1.25%
Greater than or equal to
0.50:1.00, but less than 1.50%
0.75:1.00
Greater than or equal to
0.75:1.00, but less than 1.75%
1.00:1.00
Greater than or equal to
1.00:1.00 2.00%
and (ii) with respect to the Term Loan, the percentage interest rate
per annum, based upon the Senior Leverage Ratio set forth in the most
recent Compliance Certificate, as indicated in the following chart:
SENIOR LEVERAGE RATIO PERCENTAGE RATE
------------------------- ---------------
Less than 0.50:1.00 1.75%
Greater than or equal to
0.50:1.00, but less than 2.00%
0.75:1.00
Greater than or equal to
0.75:1.00, but less than 2.25%
1.00:1.00
Greater than or equal to 1.00:1.00 2.50%
"AVAILABILITY" shall mean at any time, the lesser of (i) the Aggregate
Revolving Credit Commitment and (ii) the Borrowing Base, as determined on
the basis of the most recent Borrowing Base Certificate.
"BORROWING BASE" shall have the meaning ascribed to it in Section 2.1.
"BORROWING BASE CERTIFICATE" shall have the meaning ascribed to it in
Section 7.2(C)(v).
"BUSINESS DAY" shall mean any day that is not a Saturday, Sunday or
other day on which (i) commercial banks in the State of Illinois or the
Commonwealth of Massachusetts or (ii) the New York Stock Exchange, are
required or authorized by law to remain closed; provided that, when used in
connection with a LIBOR Loan, the term
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"Business Day" shall also exclude any day on which banks are not open for
dealings in Dollars in the London interbank market.
"BUY BACK AGREEMENT" shall mean an agreement between a Borrower(s) and
a customer of such Borrower pursuant to which such customer agrees to
purchase from such Borrower any Inventory that is in excess of such
Borrower's then current requirements or which is obsolete, at a price that
is not less than 100% of the original purchase price of such Inventory.
"CASH FLOW LEVERAGE RATIO" shall mean as of any day the ratio of the
then current amount of the consolidated Liabilities (excluding any
Subordinated Debt) to consolidated EBITDA as of the end of the most recent
fiscal quarter of Borrowers multiplied by four.
"CAPITAL EXPENDITURES" shall mean for any period, the sum of all
expenditures during that period that are or are to be included in
"additions to property, plant or equipment" or a comparable item in the
statement of cash flows of each Borrower, net of the amount of any
reimbursement payments made to any Borrower by any third party in
connection with any such expenditures.
"CAPITALIZED LEASE OBLIGATIONS" shall mean for any period the amounts
payable with respect to leases of tangible or intangible property of any
character, however denoted, which is required by generally accepted
accounting principles to be reflected as a liability on the face of the
balance sheet.
"CHARGES" shall mean all national, federal, state, county, city,
municipal, or other governmental (including, without limitation, the
Pension Benefit Guaranty Corporation) taxes, levies, assessments, charges,
Liens, claims or encumbrances upon or relating to (i) the Collateral, (ii)
the Liabilities, (iii) Borrowers' employees, payroll, income or gross
receipts, (iv) Borrowers' ownership or use of any of its assets, or (v) any
other aspect of Borrowers' respective businesses.
"CLOSING" shall have the meaning ascribed to it in Section 2.11(A).
"COLLATERAL" shall mean all of the Property and interests in Property
described in Section 4.1 and all other Property and interests in Property
which shall, from time to time, secure any part of the Liabilities.
"COMMERCIAL TORT CLAIMS" shall mean commercial tort claims of any
Borrower, including those specifically identified on Schedule T to this
Agreement, as it may be amended from time to time.
"COMMITMENT" means, for each Lender, the sum of its Revolving Loan
Commitment and Term Loan Commitment.
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"COMPLIANCE CERTIFICATE" shall have the meaning ascribed to it in
Section 2.11(A)(x).
"DEBT SERVICE" shall mean, with reference to any period, the sum
(without duplication) of (i) the aggregate amount of payments required to
be made by Borrowers and their respective Subsidiaries during such period
in respect of principal on all Indebtedness for Borrowed Money (whether at
maturity, as a result of mandatory sinking fund redemption, mandatory
prepayment, acceleration or otherwise), plus (ii) all Interest Expense paid
in cash for such period determined in accordance with generally accepted
accounting principles.
"DEBT SERVICE COVERAGE RATIO" shall mean as at any date of measurement
thereof, the ratio of consolidated EBITDA for the period of the most
recently ended four consecutive quarters of Borrowers prior to such date
minus any decreases in Working Capital for such period plus any increase in
Working Capital for such period minus Capital Expenditures not financed
with the proceeds of Long Term Debt for such period minus any dividends or
distributions made by SalesLink to its shareholders for such period minus
any Taxes due for such period to Debt Service with respect to the period
commencing on the first day of Borrowers' fiscal year in which such day
occurs and ending on such day.
"DEFAULT" shall mean any event or condition which, with the passage of
time or the giving of notice or both, would constitute an Event of Default.
"DOLLARS" and the symbol "$" shall mean the lawful currency of the
United States of America.
"EBITDA" shall mean with reference to any period (i) consolidated net
income (or net deficit) of Borrowers and their respective Subsidiaries for
such period as computed in accordance with generally accepted accounting
principles consistently applied, plus (ii) (a) Interest Expense without
duplication, Interest Expense shall not include interest that is paid in
kind for such period, (b) all amounts deducted in arriving at such net
income (net deficit) in respect of federal, state and local income taxes
for such period and (c) all amounts properly charged for depreciation of
fixed assets and amortization of intangible assets during such period on
the books of such Persons.
"ELIGIBLE COLLATERAL LOCATION" shall mean the locations identified on
Exhibit G attached hereto, together with such other locations as to which
Agent may, from time to time, agree, subject to Section 4.6 and such
reasonable conditions as Agent may determine appropriate, including the
execution and filing of appropriate financing statements and the obtaining
of any lien waivers from any bailee, warehouseman, landlord, mortgagee or
similarly situated Person who may have a Lien in or upon any Inventory at
such location.
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"ELIGIBLE INVENTORY" means the aggregate amount of all Inventory
(including raw materials) of Borrowers and their Subsidiaries that is
subject to a Buy Back Agreement, valued on the first-in, first-out method
of inventory valuation, less any inventory:
(i) which is damaged, or not of merchantable quality, or has any
defects that would affect the market value of such inventory; or
(ii) which is located in Minnesota or New Jersey, unless a
Borrower has qualified to do business in such State and has filed
appropriate notices of business activities reports (or other
appropriate filings) with the appropriate state authorities for the
then current year; or
(iii) which is consigned, in transit or the subject of a xxxx in
lading or other title document; or
(iv) which is not located at an Eligible Collateral Location; or
(v) which Agent in its reasonable discretion determines not to
treat as Eligible Inventory, including without limitation due to age,
type, category or quantity (Agent shall notify Borrowers of any such
determination within a reasonable time after it has been made); or
(vi) which fails to meet or violates any warranty, representation
or covenant contained in this Agreement or any related document or
instrument relating to such Inventory; or
(vii) which is subject to any Lien or security interest except in
favor of Agent; or
(viii) which is produced in violation of the Fair Labor Standards
Act or is packaging or shipping material or general supplies; or
(ix) which is not in good condition or does not meet in all
material respects all material standards imposed by any Person having
regulatory authority over such goods or their use and/or sale, is
damaged or slow moving, is not currently saleable in the normal course
of business or is saleable but requires repairs, repackaging or other
cost and expense (other than normal and customary stocking costs).
Borrowers agree that work in process inventory shall not be included
in Eligible Inventory. Notwithstanding anything to the contrary herein, no
Inventory owned by any Borrower or Subsidiary located outside of the United
States shall be Eligible Inventory until such time as Agent shall have
received evidence satisfactory to it, in its reasonable discretion, of the
creation, perfection and the relative priority of a security interest in
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such Inventory in favor of Agent including an opinion of counsel to that
effect acceptable to Agent in its reasonable discretion.
"ELIGIBLE RECEIVABLES" means the aggregate amount of all accounts of
each Borrower and its Subsidiaries arising in the ordinary course of such
Borrower's or Subsidiary's business as presently conducted, valued at the
lowest of invoice (adjusted for credits, returns or the like), book value
or the amount reasonably expected by such Borrower or Subsidiary to be
collected from the particular Account Debtor(s), less any accounts and
related amounts:
(i) which remain fully or partially unpaid for more than 90 days
after their respective invoice dates; or
(ii) which are not due and payable in full in accordance with such
Borrower's credit and collection policy as disclosed by such Borrower
to Agent; provided, however, that regardless of the terms of such
credit and collection policy, no Eligible Receivable shall have a
payment term which is greater than forty-five (45) days from the date
of its related invoice; or
(iii) which are owed by a particular Account Debtor if fifty
percent (50%) or more of the balance owing by such Account Debtor has
not been paid within 90 days of the invoice date; or
(iv) with respect to which the Account Debtor is another Borrower
or is a partner, shareholder, director, officer, employee, or agent of
any such Borrower or is a Subsidiary or other Affiliate, except with
respect to uBid, Inc.; or
(v) with respect to which payment by the Account Debtor is or may
be conditional, and accounts commonly known as "xxxx and hold" or
accounts with a similar or like arrangement; or
(vi) with respect to which the Account Debtor is not a resident or
citizen of or otherwise located in the United States of America, or
with respect to which the Account Debtor is not subject to service of
process in the United States of America, unless such Borrower has
furnished Agent with a letter of credit or account receivable
insurance in at least the amount of the account acceptable as to form,
substance and issuer to Agent in its sole discretion; or
(vii) with respect to which the Account Debtor is the United
States of America or any department, agency or instrumentality
thereof, unless all necessary steps are taken to comply with the
Assignment of Claims Act of 1940, as amended, and all other necessary
steps to perfect Agent's security interest in such account have been
completed to Agent's satisfaction; or
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(viii) with respect to which such Borrower is or may become liable
to the Account Debtor for goods sold or services rendered by such
Account Debtor to Borrower; or
(ix) with respect to which the goods giving rise thereto have not
been shipped and delivered to and accepted as satisfactory by the
Account Debtor thereof or with respect to which the services performed
giving rise thereto have not been completed and accepted as
satisfactory by the Account Debtor; or
(x) arising from a "sale on approval" or "sale or return"; or
(xi) which are subject to any Lien or security interest except in
favor of Agent, or are "bonded" or similar accounts; or
(xii) which are owed by an Account Debtor which has a dispute with
such Borrower, or as to which any adverse claim, dispute or litigation
relates (including without limitation any claim that any amounts are
not owed to such Borrower), but only in the amount of such adverse
claim, dispute or litigation; or
(xiii) which are owed by an Account Debtor which is located in
Minnesota or New Jersey, unless such Borrower has qualified to do
business in such State and has filed appropriate notices of business
activities reports (or other appropriate filings) with the appropriate
state authorities for the then current year; or
(xiv) which are owed by an Account Debtor which (a) has filed a
petition or (b) is subject to an involuntary petition under any
section or chapter of the United States Bankruptcy Code or any similar
law or regulation or has made a general assignment for the benefit of
its creditors; or
(xv) which fails to meet or violates any warranty, representation
or covenant contained in this Agreement or any related document or
instrument relating directly to Accounts; or
(xvi) which the Agent deems, in its reasonable discretion, to be
doubtful in their collection.
Notwithstanding anything to the contrary herein, no Accounts which are
owed to any Subsidiary that is not a resident of the United States shall be
Eligible Receivables until such time as Agent shall have received evidence
satisfactory to it, in its reasonable discretion, of the creation,
perfection and the relative priority of a security interest in such
Accounts in favor of Agent including an opinion of counsel to that effect
acceptable to Agent in its reasonable discretion.
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"ENVIRONMENTAL LAWS" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public
health and safety and protection of the environment.
"EQUIPMENT" shall mean all of Borrowers' and their respective
Subsidiaries' now owned and to be acquired equipment and fixtures,
including without limitation, furniture, machinery, vehicles and trade
fixtures, together with any and all accessories, parts, appurtenances,
substitutions and replacements.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF DEFAULT" shall mean the occurrence or existence of any one
or more of the events described in Section 8.1.
"FINANCIALS" shall mean those financial statements of Borrowers and
their respective Subsidiaries described on Exhibit A or delivered to Agent
pursuant to Section 7.2(C).
"GENERAL INTANGIBLES" shall mean all contract rights, choses in
action, general intangibles, causes of action and all other intangible
personal property of Borrowers and their respective Subsidiaries of every
kind and nature (other than Accounts) now owned or to be acquired by
Borrowers and their respective Subsidiaries. Without in any way limiting
the generality of the foregoing, General Intangibles specifically includes,
without limitation, all corporate or other business records, deposit
accounts, inventions, designs, patents, patent applications, trademarks,
trademark applications, service marks, service xxxx applications, trade
names, trade secrets, goodwill, copyrights, registrations, licenses,
leasehold interests, franchises and tax refund claims owned by a Borrower
or its Subsidiaries and all letters of credit, banker's acceptances,
guarantee claims, security interests or other security held by or granted
to a Borrower or its Subsidiaries to secure payment by an Account Debtor of
any Accounts, letter of credit rights, payment intangibles, supporting
obligations, Commercial Tort Claims, software and such other assets as
Agent determines to be intangible in its sole and absolute discretion.
"GUARANTOR PAYMENT" shall have the meaning ascribed to it in Section
11.7.
"INDEBTEDNESS" shall mean all of Borrowers' or their respective
Subsidiaries' liabilities, obligations and indebtedness to all Persons of
any and every kind and nature, whether primary, secondary, direct,
indirect, absolute, contingent, fixed, or otherwise, previously, now or to
be owing, due, or payable, however evidenced, created, incurred, acquired
or owing and however arising, whether under written or oral agreement, by
operation of law, or otherwise. Without in any way limiting the generality
of the foregoing, Indebtedness specifically includes (i) the Liabilities,
(ii) all obligations or liabilities of any Person that are secured by any
Lien, claim, encumbrance, or security
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interest upon property owned by a Borrower or a Subsidiary, even though
such Borrower or such Subsidiary has not assumed or become liable for the
payment thereof, (iii) all obligations or liabilities created or arising
under any lease of real or personal property (including Capitalized Lease
Obligations, but excluding operating leases), or conditional sale or other
title retention agreement with respect to property used or acquired by a
Borrower or a Subsidiary, even though the rights and remedies of the
lessor, seller or lender, thereunder are limited to repossession of such
property, (iv) all unfunded pension fund obligations and liabilities and
(v) deferred Taxes.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean for any Person (without
duplication) (i) all Indebtedness created, assumed or incurred in any
manner by such Person representing money borrowed (including but not
limited to the issuance of debt securities), (ii) all Indebtedness for the
deferred purchase price of property or services (other than trade accounts
payable arising in the ordinary course of business which are not more than
sixty (60) days past due), (iii) all Indebtedness secured by any Lien upon
property of such Person, whether or not such Person has assumed or become
liable for the payment of such indebtedness, (iv) all Capitalized Lease
Obligations of such Person and (v) all obligations of such Person on or
with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for borrowed
money.
"INDEBTEDNESS TO TANGIBLE NET WORTH RATIO" shall mean as of any day
the ratio of consolidated Indebtedness to consolidated Tangible Net Worth.
"INDEMNIFIED LIABILITIES" shall have the meaning ascribed to it in
Section 9.7.
"INTEREST EXPENSE" shall mean for any period the sum of all interest
charges on Indebtedness (including imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and
expense) of Borrowers and their respective Subsidiaries for such period
determined in accordance with generally accepted accounting principles.
"INTEREST PAYMENT DATE" shall mean: (i) (a) with respect to any Prime
Rate Loan, the first Business Day of each calendar month and the date of
any conversion of such Prime Rate Loan into a LIBOR Loan and (b) with
respect to any LIBOR Loan, the last day of the applicable Interest Period;
provided, however, that for any LIBOR Loan having an Interest Period longer
than three months, accrued interest shall also be payable on the last day
of each three-month interval during such Interest Period; and (ii) for
Prime Rate Loans and LIBOR Loans accrued interest shall be payable upon (a)
the Revolving Credit Termination Date and the Term Loan Maturity Date, as
applicable and (b) the date on which each such Loan is paid in full or
otherwise satisfied.
"INTEREST PERIOD" shall mean with respect to any LIBOR Loan (a)
initially, the period commencing on the initial date of borrowing as set
forth in the Notice of Borrowing or the conversion date, as the case may
be, with respect to such LIBOR Loan
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and ending one, two, three or six months thereafter, as selected by
Borrowers in the Notice of Borrowing or Notice of Conversion, and (b)
thereafter, each period commencing on and including the first day of the
next Interest Period applicable to such LIBOR Loan and ending one, two,
three, or six months thereafter, as selected by Borrowers in the Notice of
Continuance described in Section 2.7(B); provided that the foregoing
provisions relating to Interest Periods are subject to the following:
(i) If any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day except if the result of such extension would
be for such Interest Period to end in another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period of a LIBOR Loan made pursuant to the
Revolving Credit Facility that would otherwise extend beyond the
Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date ;
(iii) if Borrowers fail to give notice of the length of the
Interest Period it requests with respect to the LIBOR Loan, it shall
be deemed to have selected a LIBOR Loan of one month; and
(iv) any Interest Period pertaining to a LIBOR Loan that begins on
the last Business Day of a calendar month (or a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a calendar
month.
"INTEREST RATE" shall mean the interest rate determined in accordance
with Section 2.4.
"INVENTORY" shall mean all goods, inventory, merchandise, finished
goods, component goods, packaging materials and other personal property
including, without limitation, goods in transit, wherever located and
whether now owned or to be acquired by any Borrower or any Subsidiary which
is or may at any time be held for sale or lease, furnished under any
contract of service or held as raw materials, work in process, supplies or
materials used or consumed in Borrowers' and their respective Subsidiaries'
business, and all such property the sale or other disposition of which has
given rise to Accounts and which has been returned to or repossessed or
stopped in transit by a Borrower.
"ISSUANCE REQUEST" shall have the meaning ascribed to it in Section
2.13(D)
"ISSUING LENDER" shall mean LaSalle in its capacity as issuer of any
Letter of Credit.
"LASALLE" shall mean LaSalle Bank National Association.
14
"LETTER OF CREDIT" shall mean any letter of credit issued by the
Issuing Lender for the account of a Borrower in accordance with Section
2.13.
"LETTER OF CREDIT EXPIRY DATE" shall mean, with respect to any Letter
of Credit, the date which is the earlier of (i) one (1) year after the date
of issuance thereof or (ii) five (5) Business Days prior to the Revolving
Credit Termination Date.
"LETTER OF CREDIT FEES" shall have the meaning ascribed to it in
Section 2.13(F).
"LETTER OF CREDIT OBLIGATIONS" shall mean, as at the time of
determination thereof, the sum of (a) the Reimbursement Obligations then
outstanding and (b) the aggregate then undrawn face amount of the then
outstanding Letters of Credit.
"LETTER OF CREDIT SUBLIMIT" shall mean an aggregate amount of
$4,000,000.
"LIABILITIES" shall mean all of Borrowers' and their respective
Subsidiaries' liabilities, obligations and indebtedness to Agent or any
Lender of any and every kind and nature, whether primary, secondary,
direct, absolute, contingent, fixed, or otherwise (including, without
limitation, interest, charges, expenses, attorneys' fees and other sums
chargeable to a Borrower or its Subsidiaries by Agent or any Lender, future
advances made to or for the benefit of a Borrower and obligations of
performance), whether arising under this Agreement, under any of the
Ancillary Agreements or acquired by Agent or any Lender from any other
source, whether previously, now or to be owing, arising, due, or payable
from a Borrower or its Subsidiaries to Agent or any Lender, however
evidenced, created, incurred, acquired or owing and however arising,
whether under written or oral agreement, operation of law, or otherwise.
"LIBOR LOAN" shall mean any Loan (or portion thereof) bearing interest
at the LIBOR Rate, as designated by Borrowers in a Notice of Borrowing,
Notice of Conversion or Notice of Continuance.
"LIBOR RATE" shall mean with respect to each Interest Period for any
LIBOR Loan the rate of interest per annum equal to the quotient of (i) the
rate of interest per annum (expressed as a whole number) at which deposits
in Dollars in immediately available funds are offered to Agent at
approximately 11:00 a.m. (London, England time) two Business Days prior to
the beginning of such Interest Period in the London interbank eurodollar
market for a period equal to such Interest Period and in a Dollar amount
equal or comparable to the principal amount of such LIBOR Loan, divided by
(ii) a number equal to 1.0 minus the daily average for the applicable
Interest Period of the maximum rate (expressed as a decimal) at which
reserves (including, without limitation, basic, supplemental, marginal and
emergency reserves) are imposed during such Interest Period by the Board
(or any successor) under Regulation D on "eurocurrency liabilities" as
defined in such Board's Regulation D (or in respect of any other category
of liabilities that includes deposits by reference to which the interest
rate
15
on the LIBOR Loans is determined by any category of extension of credit or
other assets that includes loans by non-United States offices of any lender
to United States residents) subject to any amendments of such reserve
requirement by such Board or its successor, taking into account any
transitional adjustments thereto (such LIBOR Rate to be adjusted to the
next higher 1/16 of one percent). For purposes of this definition, the
LIBOR Loans shall be deemed to be "eurocurrency liabilities" as defined in
Regulation D.
"LIEN" means any mortgage, pledge or lease of, security interest in or
lien, charge, restriction or encumbrance on any Property of the Person
involved in favor of or which secures any obligation to, any other Person.
"LOAN" shall mean any advance made by Lenders to Borrowers under the
Revolving Credit Facility or the Term Loan.
"LONG TERM DEBT" shall mean any Indebtedness with a maturity of over
one year from any date of determination.
"NON-FUNDING LENDER" shall have the meaning ascribed to it in Section
3.1(B).
"NOTES" shall mean, collectively, each Revolving Credit Note and each
Term Note to be executed and delivered by Borrowers to each Lender on the
Closing and which are described in Section 2.2.
"NOTICE OF BORROWING" shall mean a Notice of Borrowing described in
Section 2.5.
"NOTICE OF CONTINUANCE" shall mean a Notice of Continuance described
in Section 2.7(B).
"NOTICE OF CONVERSION" shall mean a Notice of Conversion described in
Section 2.7(A).
"PARENT INTERCREDITOR AGREEMENT" shall mean the Parent Intercreditor
Agreement described in Section 2.11(A)(xxi).
"PARTICIPANT" shall mean any Person, now or at any time or times to
be, participating with any Lender in the Loans made by such Lender to
Borrowers pursuant to this Agreement and the Ancillary Agreements.
"PERCENTAGE" shall mean, as to any Lender, the percentage which such
Lender's Revolving Credit Commitment plus such Lender's Term Loan
Commitment is of the Aggregate Revolving Credit Commitments plus the
Aggregate Term Loan Commitment, as reflected in the records of the Agent.
If the Term Loan Commitments have terminated, such Lender's "Percentage" of
the Term Loan Commitments shall be deemed to be the percentage which the
aggregate amount of such Lender's outstanding
16
Term Loans to Borrowers is of the aggregate amount of all of the Lenders'
outstanding Term Loans to Borrowers. If the Revolving Credit Commitments
have terminated, such Lender's "Percentage" of the Revolving Credit
Commitments shall be deemed to be the percentage which the aggregate amount
of such Lender's outstanding Revolving Credit Loans to Borrowers plus all
Reimbursement Obligations of Borrowers to such Lender is of the aggregate
amount of all of the Lenders' outstanding Revolving Credit Loans to
Borrowers plus the aggregate amount of all Reimbursement Obligations of
Borrowers to all of the Lenders.
"PERMITTED ACQUISITION" shall mean an acquisition of certain assets of
Software Logistics Corporation and/or Adatsa; provided, that (a) Borrowers
shall give Agent ten (10) Business Days prior notice of the closing of such
acquisition, (b) the Borrower or a Subsidiary is the acquiror, (c)
provisions limiting any break-up fee payable by the Borrower or Subsidiary
that is party thereto on account of a breach of the acquisition agreement
(the "Acquisition Agreement") setting forth the terms and conditions of
such acquisition by the Borrower or Subsidiary party thereto prior to
closing of such acquisition to 5% of the gross consideration payable by the
Borrower or Subsidiary party to the Acquisition Agreement, (d) the
aggregate consideration (regardless of the form thereof) payable by the
Borrower or Subsidiary party to the acquisition agreement for such
acquisition does not exceed $8,000,000, (e) in the case of an acquisition
through a Subsidiary, and such Subsidiary is a Person organized under the
laws of any State of the United States such Subsidiary shall become a
Borrower contemporaneous with the closing of such acquisition, (f) in the
case of an acquisition through a Subsidiary and such Subsidiary is a Person
not organized under the laws of any State of the United States, Borrowers
shall cause the pledge of 66% of the outstanding capital stock to Agent,
for its benefit and for the benefit of the Lenders and (g) the Borrower or
Subsidiary party to the Acquisition Agreement shall cause the acquisition
agreement to be collaterally assigned to Agent, for its benefit and the
benefit of the Lenders, each in a form satisfactory to Agent.
"PERMITTED DEBT" shall mean:
--------------
(i) the Liabilities;
(ii) current unsecured Indebtedness arising in the ordinary
course of business of Borrowers and their respective Subsidiaries,
including trade payables, utility costs, payroll and benefit
obligations, accrued tax liabilities and other non-extraordinary
accounts payable but excluding Indebtedness for Borrowed Money;
(iii) the Subordinated Debt;
(iv) Indebtedness incurred by Borrowers to any Person at a time
no Default or Event of Default exists constituting Capitalized Lease
Obligations provided that the aggregate amount of rent owed during the
term of such leases at
17
any time does not exceed $300,000.00 per fiscal year (the "EQUIPMENT
DEBT"); and
(v) such other Indebtedness outstanding on the date hereof and
described on EXHIBIT B-1 attached hereto.
"PERMITTED LIENS" shall mean:
-----------------
(i) Liens and encumbrances in favor of Agent, whether granted
under or established by this Agreement, the Ancillary Agreements, or
otherwise;
(ii) subject to Section 7.4, Liens for taxes, assessments or other
governmental charges incurred by a Borrower or its Subsidiaries in the
ordinary course of business and for which no interest, late charge or
penalty is attaching or which are being contested in good faith by
appropriate proceedings diligently pursued and for which adequate
reserves in accordance with generally accepted accounting principles
shall have been set aside on its books;
(iii) Liens, not delinquent, incurred by a Borrower or its
Subsidiaries in the ordinary course of business created by statute in
connection with worker's compensation, unemployment insurance, social
security, old age pensions (subject to the applicable provisions of
this Agreement) and similar statutory obligations;
(iv) Liens incurred by a Borrower or its Subsidiaries in favor of
mechanics, materialmen, carriers, warehousemen, landlords or repairmen
or other like statutory or common law Liens securing obligations
incurred in good faith in the ordinary course of business that are not
overdue for a period of more than 15 days or which are being contested
in good faith;
(v) Liens and encumbrances filed in favor of any lessor with
respect to Equipment Debt;
(vi) pledges and deposits to secure the performance of bids,
tenders, trade contracts (other than for borrowed money), leases
(other than capital leases), utility purchase obligations, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(vii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of property or minor imperfections in title
thereto which, in the aggregate, are not material in amount, and which
do not, in the aggregate, materially detract from
18
the value of the property of any Borrower or Subsidiary or materially
interfere with the ordinary conduct of the business of any Borrower or
Subsidiary; and
(viii) any existing Liens and encumbrances identified in EXHIBIT
B-2 hereto to secure Indebtedness outstanding as of the date hereof.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, limited liability company, unincorporated
organization, association, corporation, institution, entity, party, or
government (whether national, federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department).
"PRIME RATE" shall mean the rate per annum equal to the prime rate of
interest announced by LaSalle from time to time as its "PRIME RATE."
Changes in interest charged under this Agreement on Prime Rate Loans, shall
take effect on the date of each change in the Prime Rate, without further
notice from LaSalle. The Prime Rate is not necessarily the lowest rate of
interest charged by LaSalle in connection with extensions of credit.
"PRIME RATE LOAN" shall mean any Loan (or portion thereof) bearing
interest at the Prime Rate, as designated by Borrowers in the Notice of
Borrowing, Notice of Conversion or Notice of Continuance.
"PROPERTY" means any and all rights, titles and interests in and to
any and all property whether real or personal, tangible (including cash) or
intangible, and wherever situated and whether now owned or hereafter
acquired.
"REIMBURSEMENT AGREEMENT" shall mean a Master Letter of Credit
Agreement substantially in the form of Exhibit Q hereto as such form may be
amended by LaSalle from time to time and a letter of credit application and
reimbursement agreement in such form as the Issuing Lender may from time to
time employ in the ordinary course of business.
"REIMBURSEMENT OBLIGATIONS" shall mean all amounts owed by any
Borrower to the Issuing Lender or any other Lender (whether or not
evidenced by any note or instrument), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
representing the principal of and interest on payments made by the Issuing
Lender or any other Lender under or in connection with any Letter of
Credit, including but not limited to, all unpaid drawings, fees, premiums,
expenses, attorneys' fees, accountants' fees, capital adequacy charges,
increased costs and similar costs and expenses owed or payable under this
Agreement or any Letters of Credit, including but not limited to, the fees
set forth in Section 2.13 hereof.
"REPORTABLE EVENT" shall have the meaning ascribed to it in Section
6.1(O).
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"REQUIRED LENDERS" shall mean Lenders (other than Non-Funding Lenders)
having aggregate percentages of 66-2/3% or more, or if the Commitments have
been terminated 66-2/3% the aggregate outstanding principal amount of the
outstanding Loans and Reimbursement Obligations.
"REVOLVING CREDIT COMMITMENT" shall have the meaning ascribed to it in
Section 2.1.
"REVOLVING CREDIT FACILITY" shall have the meaning ascribed to it in
Section 2.1.
"REVOLVING CREDIT TERMINATION DATE" shall mean October 30, 2004.
"SALESLINK" shall mean SalesLink Corporation, a Delaware corporation.
"SALESLINK MEXICO" shall mean SalesLink Mexico Holding Corp., a
Delaware corporation.
"SALESLINK MEXICO PLEDGE AGREEMENT" shall have the meaning ascribed to
it in Section 2.11(A)(xx).
"SALESLINK PLEDGE AGREEMENT" shall mean the SalesLink Pledge Agreement
described in Section 2.11(A)(xix).
"SECURITY DOCUMENTS" shall mean this Agreement and all other
agreements, instruments, documents, financing statements, warehouse
receipts, bills of lading, notices of assignment, schedules, assignments,
mortgages and other written matter necessary or requested by Agent to
create, perfect and maintain perfected Agent's security interest in the
Collateral.
"SENIOR LEVERAGE RATIO" shall mean as of any day the ratio of (i) the
consolidated Liabilities plus consolidated Capitalized Lease Obligations
which are not satisfactorily subordinated, in the reasonable opinion of
Agent, to the Liabilities to (ii) consolidated EBITDA as of the end of the
most recent fiscal quarter of Borrowers multiplied by four.
"SOLVENT" shall mean with respect to any Person on a particular date,
that on such date (a) the fair salable value of its property is greater
than the fair present value of its liabilities (including for purposes of
this definition all liabilities whether reflected on a balance sheet
prepared or otherwise and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) the present fair salable
value of its assets is not less than the amount that will be required to
pay the probable liability on its debts as they become absolute and
matured; (c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (d) such Person is not engaged in a
business or transaction, and is not about to engage in a business or
transaction, for which such
20
Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities (such as litigation, guarantees and
pension plan liabilities) at any time shall be computed as the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can be reasonably be expected to become an
actual or matured liability.
"SUBORDINATED DEBT" shall mean all Indebtedness which is expressly
subordinated to Agent, including without limitation, Indebtedness
subordinated by the Parent Intercreditor Agreement, containing
subordination provisions which are satisfactory to Agent in its sole
discretion.
"SPECIAL COLLATERAL" shall have the meaning ascribed to it in
Section 4.3.
"SUBSIDIARY" shall mean any corporation, partnership, limited
liability company or other legal entity of which a Borrower owns directly
or indirectly 50% or more of the outstanding voting stock or interests, or
of which a Borrower has effective control by contract or otherwise.
"TANGIBLE NET WORTH" shall mean the excess of total assets of
Borrowers and their respective Subsidiaries over Indebtedness of Borrowers
and their respective Subsidiaries (other than Subordinated Debt and any
accrued interest thereon), total assets and Indebtedness each to be
determined on a consolidated basis in accordance with generally accepted
accounting principals consistently applied, excluding, however, from the
determination of total assets (i) all notes receivable from officers and
employees of Borrowers and their respective Subsidiaries, (ii) all assets
which would be classified as intangible assets under generally accepted
accounting principals, including, without limitation, goodwill, patents,
trademarks, trade names, copyrights, franchises and deferred charges
(including, without limitation, unamortized debt discount and expense,
organization costs and deferred research and development expense) and
similar assets and (iii) the write-up of assets above cost.
"TAXES" shall mean for any fiscal year the federal, state, local and
foreign taxes payable by each Borrower and their Subsidiaries.
"TERM LOAN" shall have the meaning ascribed to it in Section 2.1.
"TERM LOAN COMMITMENT" shall have the meaning ascribed to it in
Section 2.1.
"TERM LOAN MATURITY DATE" shall mean October 30, 2005.
"UBID COLLATERAL ASSIGNMENT" shall have the meaning ascribed to it in
Section 2.11(A)(xxii).
"UCC" shall have the meaning ascribed to it in Section 1.3.
21
"UNDERCOLLATERALIZED TERM LOAN BORROWINGS" shall mean (i) the total
amount of Term Loan(s) then outstanding minus (ii) the appraised value of
any assets of the Borrowers, as determined by an appraiser reasonably
satisfactory to the Borrowers and the Agent. Any assets that have not been
appraised shall be deemed to have no appraised value for the purposes of
determining the calculation in the prior sentence.
"WORKING CAPITAL" shall mean the excess of current assets of Borrowers
and their respective Subsidiaries over current liabilities of Borrowers and
their respective Subsidiaries, all as determined on a consolidated basis,
but subject nevertheless to the expressed limitations and restrictions
hereinafter set forth. There should be excluded from current assets all
deferred assets, prepaid expenses and the surrender value of insurance.
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement which
are not specifically defined shall have the meanings customarily given them in
accordance with generally accepted accounting principles.
1.3 OTHER TERMS. All other terms, whether or not capitalized, contained
in this Agreement which are not otherwise defined in this Agreement shall,
unless the context indicates otherwise, have the meanings provided for by the
Uniform Commercial Code of the State of Illinois (the "UCC") in effect from time
to time, to the extent the same are used or defined therein.
1.4 INTERPRETATION. In this Agreement and each Ancillary Agreement,
unless a clear contrary intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by such documents, and reference to a Person in a particular
capacity excludes such Person in any other capacity;
(iii) reference to either gender includes the other gender;
(iv) reference to any agreement (including this Agreement and the
Schedules and Exhibits and the Ancillary Agreements) documents or
instruments means such agreement, document or instrument as amended,
modified, supplemented or replaced from time to time in accordance
with the terms thereof and, if applicable, the terms hereof and the
Ancillary Agreements, and reference to any promissory note includes
any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor;
(v) reference to any law, rule, regulation, order, decree,
requirement, policy, guideline, directive or interpretation means as
amended, modified, codified, replaced or
22
reenacted, in whole or in part, and in effect on the determination date,
including rules and regulations promulgated thereunder;
(vi) reference to any Article, Section, paragraph, clause, other
subdivision, Schedule or Exhibit means such Article, Section,
paragraph, clause or other subdivision of this Agreement or Schedule
or Exhibit to this Agreement;
(vii) "hereunder," "hereof," "hereto" and words of similar import
shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding
such term;
(ix) relative to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding"; and
(x) references herein to any Subsidiary shall apply only during
such times as a Borrower has any Subsidiary.
1.5 MULTIPLE BORROWERS. The term "Borrowers" refers to more than one
corporation. The Borrowers hereby designate SalesLink to act on behalf of the
Borrowers for all purposes under this Agreement, including, without limitation,
the requesting of Loans hereunder, and reduction of any Commitment. Notice when
given to SalesLink shall be sufficient notice to the Borrowers. Any document
delivered to SalesLink shall be considered delivered to each of the Borrowers.
2. LOANS; GENERAL TERMS.
---------------------
2.1 CREDIT FACILITIES.
(A) Revolving Line of Credit. Each Lender with a Revolving Loan
Commitment severally and not jointly agrees, on the terms and conditions
hereinafter set forth, to make available for Borrowers' use, from time to
time until the Revolving Credit Termination Date, upon request of the
Borrowers in accordance with Section 2.5(A), certain Loans under a
revolving line of credit (the "REVOLVING CREDIT FACILITY") in an aggregate
amount not to exceed at any time outstanding the amount set forth opposite
the Lender's name in Schedule 2.1(A) under the heading "REVOLVING CREDIT
COMMITMENTS" (such amount as the same may be reduced from time to time,
being referred to as such Lender's "REVOLVING CREDIT COMMITMENT"; provided,
however, that the aggregate amount of Loans under the Revolving Credit
Facility outstanding at any one time shall not exceed the lesser of:
(i) the Aggregate Revolving Credit Commitment then in effect; and
23
(ii) (A) (1) 80% of Eligible Receivables plus (2) 50% of Eligible
Inventory minus (B) any Undercollateralized Term Loan Borrowings each
as determined on the basis of the most recent Borrowing Base
Certificate (such amount referred to herein as the "BORROWING BASE").
During such period and subject to Section 3.2(C), the Revolving Credit
Facility may be utilized by borrowing, repaying and reborrowing the Loans
thereunder.
(B) Term Loan. Each Lender with a Term Loan Commitment severally and
not jointly agrees, on the terms and conditions hereinafter set forth, to
make available for Borrowers' use, from time to time until the Amortization
Commencement Date, upon request of the Borrowers in accordance with Section
2.5(B), a term loan (the "TERM LOAN") in the amount set forth opposite such
Lender's name in Schedule 2.1(B) under the heading "TERM LOAN COMMITMENTS"
(such amount being referred to herein as such Lender's "TERM LOAN
COMMITMENT"). In the event borrowings under the Term Loan are less than
the Aggregate Term Loan Commitment on October __, 2002, no additional
borrowings under the Term Loan shall be available. Repayments and
prepayments of the Term Loan shall not be subject to reborrowing.
2.2 EVIDENCE OF DEBT. The Revolving Credit Facility and the Loans made by
each Lender to Borrowers thereunder shall be evidenced by a Revolving Credit
Note payable to the order of such Lender, which note shall be in the form
attached hereto as Exhibit C-1 in an amount equal to such Lender's Revolving
Credit Commitment. The Term Loan and the Loans made by each Lender to Borrowers
thereunder shall be evidenced by a Term Note payable to the order of such
Lender, which note shall be in the form attached hereto as Exhibit C-2 in an
amount equal to such Lender's Term Loan Commitment.
2.3 LOAN ACCOUNTS; AMOUNT AND MAINTENANCE OF LOANS; INTEREST RATE NOT
DETERMINED.
(A) The Agent, on behalf of the Lenders, shall record on its books and
records the amount of each Loan made, the interest rate applicable, all
payments of principal and interest thereon and the principal balance
thereof from time to time outstanding, and such record shall, absent
demonstrable error be conclusive evidence of the amount of the Loans made
by the Lenders to Borrowers and the interest and payments thereon. Any
failure to record or any error in doing so shall, however, limit or
otherwise affect the obligation of Borrowers hereunder (and under any Note)
to pay any amount owing with respect to the Loans.
(B) Amount and Maintenance of Loans. The Loans under the Revolving
Credit Facility may be made and maintained as (i) Prime Rate Loans, (ii)
LIBOR Loans, or (iii) a combination of Prime Rate Loans and LIBOR Loans.
The Term Loans may be made and maintained as (i) Prime Rate Loans, (ii)
LIBOR Loans or (iii) a combination of Prime Rate Loans and LIBOR Loans.
The aggregate principal amount of each LIBOR Loan, whether new, converted
or continued, shall not be less than $500,000. More than
24
one borrowing may occur on the same date, but at no time shall there be
outstanding more than five LIBOR Loans in the aggregate under the Revolving
Credit Facility and five LIBOR Loans in the aggregate under the Term Loan.
The amount of any Loan is also subject to the limits contained in Section
2.1. No LIBOR Loan shall be made at any time a Default or Event of Default
shall exist.
(C) Inability to Determine Interest Rate. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a LIBOR Loan, Agent shall have determined in good
faith (which determination shall be conclusive and binding upon Borrowers)
that currency deposits in the amount of such LIBOR Loan are not generally
available in the London Interbank market, or that the rate at which such
currency deposits are being offered will not adequately and fairly reflect
the cost to Agent of maintaining the principal amount of such LIBOR Loan
during such Interest Period, Agent shall promptly, after such determination
shall have been made, give facsimile notice of such determination to
Borrowers and the Lenders, and, until Agent shall notify Borrowers and
Lenders that the circumstances giving rise to such notice no longer exist,
any request by Borrowers for the making of, conversion to or continuation
of a LIBOR Loan shall be deemed to be a request for a Prime Rate Loan.
Agent shall use its reasonable efforts to notify Borrowers of a change in
the circumstances causing the LIBOR Loan to be unavailable but shall not
incur any liability for any failure so to notify Borrowers.
2.4 INTEREST RATE. Unless otherwise provided in a writing evidencing such
Liabilities, Borrowers agree, jointly and severally, to pay Agent, for the
benefit of each Lender interest on the outstanding principal balance of the
Loans from time to time at a rate equal to (i) with respect to Prime Rate Loans,
the Prime Rate and (ii) with respect to LIBOR Loans, the LIBOR Rate plus the
Applicable Margin. The records of Agent as to the interest rate applicable to a
particular advance shall be binding and conclusive absent manifest error.
Interest shall be payable from the date of such advance of the Loan to the day
of repayment of such advance. Interest shall be computed on the basis of a year
of 360 days and actual days elapsed and shall be payable as provided in Section
3.2. Agent, for the ratable benefit of each Lender, reserves the right to
charge Borrowers' checking account(s) for accrued interest on the applicable
Interest Payment Date. In no contingency or event whatsoever shall the rate or
amount of interest paid by Borrowers under this Agreement or any of the
Ancillary Agreements exceed the maximum amount permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable. In the event that such a court determines that Agent or any Lender
has received interest under this Agreement or under any Ancillary Agreement in
excess of the maximum amount permitted by such law, (i) Agent or such Lender
shall apply such excess to any unpaid principal owed by Borrowers to such Lender
first, under the Revolving Credit Facility and second under the Term Loan or, if
the amount of such excess exceeds the unpaid balance of such principal on both
the Revolving Credit Facility and the Term Loan, such Lender shall promptly
refund such excess interest to Borrowers and (ii) the provisions of this
Agreement shall be deemed amended to provide for such permissible rate. All
sums paid, or agreed to be paid, by Borrowers which are, or to be may be
construed to be, compensation for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be
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amortized, prorated, spread and allocated throughout the term of all such
indebtedness until the indebtedness is paid in full.
2.5 BORROWING PROCEDURES.
(A) In order to effect a Loan under the Revolving Credit Facility, an
authorized officer of each of the Borrowers shall give Agent irrevocable
written notice (in form and substance acceptable to Agent) or irrevocable
telephone notice (immediately confirmed by such written notice by
facsimile) not later than 11:00 a.m., Chicago time, on (i) the proposed
borrowing date in the case of Prime Rate Loans, and (ii) the second
Business Day prior to the proposed borrowing date in the case of LIBOR
Loans (the "NOTICE OF BORROWING"). Borrowers hereby authorize Agent and
each Lender to extend advances and make Loans to Borrowers based on written
or telephone notice from an authorized officer of Borrowers. Each Notice
of Borrowing shall specify the principal amount of the Loan to be made
pursuant to such borrowing and the date of such borrowing (which shall be a
Business Day), that the Loans are under the Revolving Credit Facility,
whether the Loans being made pursuant to such borrowing are to be
maintained as Prime Rate Loans or LIBOR Loans and, if LIBOR Loans, the
initial Interest Period to be applicable thereto. Promptly after receipt
of such request, the Agent shall advise each Lender thereof. Not later
than 2:30 p.m., Chicago time, on the date of a proposed borrowing, each
Lender shall provide Agent, at the principal office of Agent in Chicago,
with immediately available funds equal to such Lender's pro rata share of
the borrowing, and subject to receipt by the Agent of the documents
required under Section 2.11(B) with respect to such borrowing, if any are
required, Agent shall pay over such funds received by it to Borrowers on
the requested borrowing date.
(B) In order to effect a Term Loan at any time prior to the
Amortization Commencement Date, an authorized officer of each of the
Borrowers shall give Agent a Notice of Borrowing not later than 11:00 a.m.,
Chicago time, on (i) the proposed borrowing date in the case of Prime Rate
Loans, and (ii) the second Business Day prior to the proposed borrowing
date in the case of LIBOR Loans. Borrowers hereby authorize Agent and each
Lender to extend advances and make Loans to Borrowers based on written or
telephone notice from an authorized officer of Borrowers. Each Notice of
Borrowing shall specify the principal amount of the Loan to be made
pursuant to such borrowing and the date of such borrowing (which shall be a
Business Day), that the Loans are a Term Loan, whether the Loans being made
pursuant to such borrowing are to be maintained as Prime Rate Loans or
LIBOR Loans and, if LIBOR Loans, the initial Interest Period to be
applicable thereto. Promptly after receipt of such request, the Agent
shall advise each Lender thereof. Not later than 2:30 p.m., Chicago time,
on the date of a proposed borrowing, each Lender shall provide Agent, at
the principal office of Agent in Chicago, with immediately available funds
equal to such Lender's pro rata share of the borrowing, and subject to
receipt by the Agent of the documents required under Section 2.11(B) with
respect to such borrowing, if any are required, Agent shall pay over such
funds received by it to Borrowers on the requested borrowing date. The
Term Loan shall only be subject to borrowing on or prior to the
Amortization Commencement Date
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and the commitment of each Lender with respect to such term loan facilities
shall expire and terminate as of the Amortization Commencement Date.
2.6 GENERAL PROVISIONS.
(A) One Loan. All Loans and advances by each Lender to Borrowers
under this Agreement and the Ancillary Agreements (whether made under the
Revolving Credit Facility or the Term Loan) shall constitute one loan and
all indebtedness and obligations of Borrowers to all of the Lenders under
this Agreement and the Ancillary Agreements shall constitute one general
obligation secured by the Collateral.
(B) Events of Default. Each Lender may, in its sole discretion,
refrain from making any Loans or extensions of credit to Borrowers under
this Agreement or any Ancillary Agreement after the occurrence and during
the continuation of an Event of Default.
2.7 CONVERSION OPTIONS; CONTINUANCE.
(A) Conversion Requirements. Provided that no Default or Event of
Default has occurred and is continuing and subject to the terms and
conditions of this Agreement, Borrowers may elect from time to time to
convert a Prime Rate Loan, or any portion thereof, to a LIBOR Loan by
Borrowers giving Agent at least two Business Days' prior irrevocable
written notice of conversion, which notice must be in form and substance
acceptable to Agent and received by Agent prior to 11:00 a.m. (Chicago
time) (the "NOTICE OF CONVERSION"). If the date on which a Prime Rate Loan
is to be converted to a LIBOR Loan is not a Business Day, then such
conversion shall be made on the next succeeding Business Day, and during
the period from such date to such succeeding Business Day, such Prime Rate
Loan shall bear interest as if it were a Prime Rate Loan. All or any part
of outstanding borrowings may be converted as provided herein. Subject to
the terms and conditions of this Agreement, Borrowers may convert a LIBOR
Loan into a Prime Rate Loan by Borrowers giving Agent a Notice of
Conversion not later than 11:00 a.m. (Chicago time) on the desired
conversion date. Promptly upon receipt of each Notice of Conversion, the
Agent shall advise each Lender thereof.
(B) Continuance. Any LIBOR Loan may be continued as such, in whole or
in part, upon the expiration of an Interest Period with respect thereto if
Borrowers gives Agent irrevocable written notice of continuance which
notice must be in form and substance acceptable to Agent and received by
Agent prior to 11:00 a.m. (Chicago time), at least two Business Days prior
to the date of expiration of the Interest Period expiring with respect to
the LIBOR Loan which is requested to be continued, specifying (i) the LIBOR
Loan, or portion thereof, requested to be continued; (ii) the date of
expiration of the Interest Period expiring with respect to the LIBOR Loan,
or portion thereof, which is requested to be continued; and (iii) the
length of the Interest Period with respect to such LIBOR Loan, or portion
thereof, after the continuation thereof (the "NOTICE OF CONTINUANCE");
provided, that no LIBOR Loans may be continued as such when any
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Default or Event of Default has occurred and is continuing, but shall be
automatically converted to a Prime Rate Loan on the last day of the
Interest Period for such Loan. If Borrowers do not comply with the notice
provisions of this clause (B), such LIBOR Loan shall be automatically
converted to a Prime Rate Loan upon the expiration of the Interest Period
with respect thereto. Promptly upon receipt of each Notice of Continuance,
the Agent shall advise each Lender thereof.
(C) Restatement of Representations and Warranties. Any Notice of
Conversion or Notice of Continuance delivered pursuant to this Section 2.7
shall be deemed to be a representation that all of the representations and
warranties of Borrowers contained in this Agreement shall then be true and
correct as if made on such date, except to the extent that such
representations and warranties expressly relate to an earlier date, and
that no Default or Event of Default shall have occurred and be continuing.
2.8 REQUIREMENTS OF LAW.
(A) Increased Costs. Notwithstanding any other provisions herein, in
the event that the introduction of or any change in any law, rule,
regulation, treaty or directive or in the interpretation or application
thereof, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other governmental
authority, agency or instrumentality or regulatory body:
(i) subjects such Lender to any tax of any kind whatsoever with
respect to this Agreement, the Notes, the Ancillary Agreement or the
Loans made hereunder, or changes the basis of taxation of payments to
such Lender of principal, interest or any other amount payable
hereunder (except for changes in the rate of tax imposed on the
overall net income of such Lender by the United States, any state or
subdivision thereof);
(ii) imposes, modifies, holds applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (which is not
otherwise included in the determination of the LIBOR Rate hereunder);
or
(iii) imposes on any Lender or the London interbank market any
other condition affecting this Agreement or the LIBOR Loans made by
such Lender;
and the result of any of the foregoing is to increase the cost to such
Lender of agreeing to make, making, continuing or maintaining or
participating in LIBOR Loans, or to reduce any amount receivable thereunder
or to increase the withholding taxes payable then, in any such case,
Borrowers agree, jointly and severally, to pay such Lender, within 15 days
after demand by such Lender, any additional amounts necessary to compensate
such Lender on an after-tax basis for such additional cost or reduced
amount receivable or increased withholding taxes payable which such Lender
deems to be material as
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determined by such Lender with respect to this Agreement, the Notes, the
other Ancillary Agreements or the Loans made hereunder.
(B) Capital Adequacy. In the event that any Lender shall have
determined that the adoption of any law, rule, regulation, treaty or
guideline regarding capital adequacy, or any change in any of the foregoing
or in the interpretation or application of any of the foregoing or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
other governmental authority, agency or instrumentality or regulatory body,
does or shall have the effect of reducing the rate of return on such
Lender's or its parent's capital as a consequence of its obligations under
this Agreement to a level below that which such Lender or such parent could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such parent's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then
from time to time, after submission by such Lender to Borrowers of a
written request therefor, Borrowers agree, jointly and severally, to pay to
such Lender, within 15 days after its demand, such additional amount or
amounts as will compensate such Lender or such parent on an after-tax basis
for such reduction; provided that such Lender is charging such amounts to
similarly situated borrowers.
(C) Certificate for Claim. If any Lender or its parent becomes
entitled to claim any additional amounts pursuant to this Section 2.8, it
shall promptly notify Borrowers, Agent and the other Lenders of the event
by reason of which it has become so entitled. A certificate setting forth
in reasonable detail any additional amounts payable pursuant to the
foregoing sentence submitted by such Lender or its parent shall be
conclusive and binding on Borrowers in the absence of manifest error. The
provisions of this Section 2.8 shall survive the repayment of the Loans and
the termination of this Agreement.
(D) No Waiver. Failure on the part of any Lender or its parent to
demand compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital with respect to
any period shall not constitute a waiver of such party's right to demand
compensation with respect to such period or any other period. The
protection of this Section 2.8 shall be available to such party regardless
of any possible contention of the invalidity or inapplicability of the law,
rule, regulation, guideline or other change or condition which shall have
occurred or been imposed; provided, however, that if such party shall have
recouped any amount therefore paid to it by Borrowers under this Section
2.8, such Lender shall pay to Borrowers an amount equal to the net
recoupment so received by such party, as determined in good faith by such
party.
(E) Replacement of Lenders. If any Lender determines in accordance
with Section 2.9 that, due to illegality, it is unable to make or maintain
a LIBOR Loan or requests compensation under this Section 2.8, or if any
Lender becomes a Non-Funding Lender, then Borrowers may, at their sole
expense and effort, upon notice to such Lender
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and Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 10.2),
all its interests, rights and obligations under this Agreement to an
assignee that shall assume such obligations (which assignee may be another
Lender, if such Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of Agent, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans (and unpaid Reimbursement Obligations), accrued
interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or Borrowers (in the case of all other
amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under this Section 2.8 such assignment will result
in a reduction of such compensation.
2.9 ILLEGALITY. Any Lender may make or maintain LIBOR Loans at or for the
credit of any branch, subsidiary or affiliate office inside or outside the
United States or any international banking facility within the United States, as
such Lender may elect from time to time. Notwithstanding any other provisions
herein, if any law, rule, regulation, treaty or directive or any change therein
or in the interpretation or application thereof, shall make it unlawful for such
Lender to maintain LIBOR Loans as contemplated by this Agreement, the agreement
of such Lender to make or maintain LIBOR Loans shall terminate and all
outstanding LIBOR Loans shall be converted automatically to Prime Rate Loans, on
the last day of the then current Interest Period or within such earlier period
as required by law.
2.10 INDEMNITY. Borrowers agree, jointly and severally, to indemnify any
Lender and to hold such Lender harmless from any cost, loss or expense which
such Lender may sustain or incur as a consequence of (i) Borrowers making a
payment or prepayment of principal or interest on any LIBOR Loan (including,
without limitation, through a conversion to the same or a different type of Loan
or pursuant to Sections 2.3(B) and 2.9 above) on a day which is not the last day
of an Interest Period with respect thereto (other than interest paid on the last
day of a three month interval in respect of a LIBOR Loan having an Interest
Period longer than three months), (ii) any failure by Borrowers to borrow or
convert any Loan hereunder after a Notice of Borrowing or Notice of Conversion
has been given (in the case of LIBOR Loans), (iii) default by Borrowers in
making any prepayment after Borrowers have given a notice of prepayment and (iv)
any acceleration of the maturity of the Loans in accordance with the terms of
this Agreement, including, but not limited to, any such reasonable cost, loss or
expense arising in liquidating the Loans and from interest or fees payable by
such Lender to lenders of funds obtained by it in order to maintain the Loans
hereunder. The provisions of this Section 2.10 shall survive the repayment of
the Loans and the termination of this Agreement.
2.11 CONDITIONS PRECEDENT. The obligations of each Lender to make Loans
hereunder is subject to the following conditions precedent:
(A) Initial Loan. On or prior to the date of the disbursement of the
initial Loans (hereinafter called the "CLOSING"), Borrowers shall have
delivered or caused to be delivered to Agent, each in form and substance
satisfactory to Agent, the following:
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(i) The Notes, which shall be duly executed by each Borrower;
(ii) Certified (as of the date of the Closing) copies of
resolutions of each Borrower authorizing the execution, delivery and
performance of this Agreement, the Notes, and each other document to
be delivered pursuant hereto;
(iii) A certificate (dated the date of the Closing) of each
Borrower's corporate secretary as to the incumbency and signatures of
the officers of such Borrower signing this Agreement, the Notes, and
each other document to be delivered by such Borrower pursuant to this
Agreement.
(iv) A copy of each Borrower's charter and by-laws, together with
a certificate (dated the date of the Closing) of such Borrower's
corporate secretary, as applicable, to the effect that such charter
and by-laws have not been amended since the date each document became
effective;
(v) For each Borrower, certificates, as of the most recent dates
practicable, of the Secretary of State of such Borrower's state of
organization and the Secretary of State of each state in which each
Borrower is qualified as a foreign corporation, or in which it intends
to do business following the receipt of proceeds of the Loans, as to
the good standing of such Borrower;
(vi) Pay-off letter from Fleet Bank (the "SENIOR LIENHOLDER"),
indicating the amount necessary to retire the existing indebtedness of
Borrowers to the senior lienholder and evidence, satisfactory to
Agent, of the release of any and all Collateral in which the senior
lienholder has a security interest;
(vii) Financing statements regarding all Collateral, and filed
in any and all offices and jurisdictions deemed appropriate by Agent
in Agent's sole discretion;
(viii) Uniform Commercial Code, tax lien, bankruptcy and
judgment searches concerning each Borrower from all offices and
jurisdictions deemed appropriate by Agent in Agent's sole discretion,
showing no other filing of record with respect to the Collateral
granted hereunder other than any financing statement filed by Agent;
(ix) An opinion of counsel to Borrowers in substantially the form
of Exhibit D attached hereto together with an opinion of special
California counsel to Borrowers regarding certain matters relating to
Pacific Direct Marketing Corp., a California corporation;
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(x) A Financial Condition and Compliance Certificate (a
"COMPLIANCE CERTIFICATE") in the form of Exhibit E attached hereto
dated the date of the Closing, signed by an authorized officer of each
Borrower;
(xi) A loss payable endorsement respecting each Borrower's
casualty insurance in the form of Exhibit F attached hereto;
(xii) Evidence of insurance in the form set forth in Section 7.6
or otherwise acceptable to Agent;
(xiii) An initial Notice of Borrowing duly executed by each
Borrower;
(xiv) Payment of the Closing Fee referenced in Section 2.12(A);
(xv) The initial Borrowing Base Certificate duly executed by each
Borrower;
(xvii) An authorization to pay proceeds letter executed by each
Borrower in a form acceptable to Agent;
(xviii) A field audit report relating to an inspection of the
Collateral, acceptable to Agent in all respects;
(xix) A SalesLink Pledge Agreement (a "SALESLINK PLEDGE
AGREEMENT") in the form of Exhibit L attached hereto;
(xx) A SalesLink Mexico Pledge Agreement (a "SALESLINK MEXICO
PLEDGE AGREEMENT") in the form of Exhibit M attached hereto together
with a consent of SalesLink Corporation;
(xxi) A Parent Intercreditor Agreement (a "PARENT INTERCREDITOR
AGREEMENT") in the form of Exhibit N attached hereto;
(xxii) A uBid Collateral Assignment (a "UBID COLLATERAL
ASSIGNMENT") in the form of Exhibit O attached hereto; and
(xxiii) Such other documents as Agent shall reasonably determine
to be necessary or desirable.
(B) Additional Advances. At the time of (1) the Closing and (2) of
each disbursement under the Revolving Credit Facility or the Term Loan
(prior to the Amortization Commencement Date) after the Closing:
32
(i) Each Borrower must be in full compliance with all of the
terms and conditions of this Agreement and the Ancillary Agreements,
and no Default or Event of Default shall have occurred and be
continuing;
(ii) No material adverse change shall have occurred in the
business, assets, operations, financial or other condition of any
Borrower or in Borrowers collective ability to pay the Loans since the
date of this Agreement or since the Closing, as applicable;
(iii) Each Borrower shall have good and marketable title to and
ownership of the Collateral owned by it. The Collateral shall be free
from any security interest, Lien or encumbrance except the Permitted
Liens and no financing statement concerning the Collateral, excepting
any filed on behalf of Agent and those listed on Exhibit B-2, is on
file in any public office;
(iv) Each of the representations and warranties set forth in
Section 6 shall be true and correct as of such time; and
(v) After giving effect to the requested advance, the aggregate
principal amount of all Loans outstanding under the Revolving Credit
Facility shall not exceed the then current Availability.
2.12 FEES.
(A) Closing Fee. Borrowers agree, jointly and severally, to pay to
Agent, for the ratable benefit of the Lenders at Closing a non-refundable
closing fee in the amount of $75,000.
(B) Non-Use Fee. Borrowers agree, jointly and severally, to pay to
Agent, for the ratable benefit of the Lenders, (i) with respect to the
Revolving Credit Facility, for the period commencing on the date hereof and
continuing through the Revolving Credit Termination Date, a non-use fee at
the rate of one-half of one percent (0.50%) per annum on the amount of the
average daily unused portion of the Aggregate Revolving Credit Commitment
and (ii) with respect to the Term Loan, for the period commencing on the
date hereof and continuing through the Amortization Commencement Date, a
non-use fee at the rate of one-half of one percent (0.50%) per annum on the
amount of the average daily unused portion of the Aggregate Term Loan
Commitment. Such non-use fees shall be payable by Borrowers, jointly and
severally, in arrears on the last Business Day of each calendar month and
on the Revolving Credit Termination Date and the Amortization Commencement
Date. The non-use fee shall be computed on the basis of the actual number
of days elapsed in a year of 360 days.
SECTION 2.13 LETTERS OF CREDIT.
(A) Issuance of Letters of Credit.
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(i) From and after the date hereof, the Issuing Lender agrees,
upon the terms and conditions set forth in this Agreement, to issue at
the request and for the account of Borrowers, one or more Letters of
Credit; provided, however, that the Issuing Lender shall not be under
any obligation to issue, and shall not issue, any Letter of Credit if
(a) any order, judgment or decree of any governmental authority with
jurisdiction over the Issuing Lender shall purport by its terms to
enjoin or restrain such Issuing Lender from issuing such Letter of
Credit, or any law or governmental rule, regulation, policy, guideline
or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over the Issuing Lender shall
prohibit, or request that the Issuing Lender refrain from, the
issuance of Letters of Credit in particular or shall impose upon the
Issuing Lender with respect to any Letter of Credit any restriction or
reserve or capital requirement (for which the Issuing Lender is not
otherwise compensated) or any unreimbursed loss, cost or expense which
was not applicable, in effect and known to the Issuing Lender as of
the date of this Agreement and which the Issuing Lender in good xxxxx
xxxxx material to it (the Issuing Lender shall promptly notify
Borrowers of any event which, in the judgment of the Issuing Lender,
would preclude the issuance of a Letter of Credit pursuant to this
clause); (b) one or more of the conditions to such issuance contained
in Section 2.11 is not then satisfied; or (c) after giving effect to
such issuance, the aggregate outstanding amount of the Letter of
Credit Obligations would exceed the Letter of Credit Sublimit.
(ii) In no event shall: (a) the aggregate amount of the Letter of
Credit Obligations at any time exceed the Letter of Credit Sublimit;
(b) the sum at any time of (1) the aggregate amount of Letter of
Credit Obligations and (2) the aggregate principal balance of all
outstanding Loans issued pursuant to the Revolving Credit Facility
exceed the lesser of the then current Availability and the Borrowing
Base; or (c) the expiration date of any Letter of Credit (including,
without limitation, Letters of Credit issued with an automatic
"evergreen" provision providing for renewal absent advance notice by
Borrowers or the Issuing Lender), or the date for payment of any draft
presented thereunder and accepted by the Issuing Lender, be later than
the Letter of Credit Expiry Date.
(B) Participating Interests. Immediately upon the issuance by the
Issuing Lender of a Letter of Credit in accordance with Section 2.13(A),
each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the Issuing Lender, without recourse,
representation or warranty, an undivided participation interest equal to its
Percentage of the face amount of such Letter of Credit and each draw paid by
the Issuing Lender thereunder. Each Lender's obligation to pay its
proportionate share of all draws under the Letters of Credit, absent gross
negligence or willful misconduct by the Issuing Lender in honoring any such
draw, shall be absolute, unconditional and irrevocable and in each case
shall be made without counterclaim or set-off by such Lender.
(C) Letter of Credit Reimbursement Obligations.
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(i) (a) Borrowers agree to pay to the Issuing Lender (1) on each
date that any amount is drawn under each Letter of Credit a sum (and
interest on such sum as provided in clause (2) below) equal to the
amount so drawn plus all other charges and expenses with respect
thereto or in the applicable Reimbursement Agreement and (2) interest
on any and all amounts remaining unpaid under this Section 2.13 until
payment in full at the Prime Rate plus 2.00% per annum. Borrowers
agree to pay to the Issuing Lender the amount of all Reimbursement
Obligations owing in respect of any Letter of Credit immediately when
due, under all circumstances, including, without limitation, any of
the following circumstances: (w) any lack of validity or
enforceability of this Agreement or any Ancillary Agreements executed
pursuant hereto; (x) the existence of any claim, set-off, defense or
other right which Borrowers may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting), any Lender
or any other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transaction between
the Borrowers and the beneficiary named in any Letter of Credit); (y)
the validity, sufficiency or genuineness of any document which the
Issuing Lender has determined in good faith complies on its face with
the terms of the applicable Letter of Credit, even if such document
should later prove to have been forged, fraudulent, invalid or
insufficient in any respect or any statement therein shall have been
untrue or inaccurate in any respect; or (z) the surrender or material
impairment of any security for the performance or observance of any of
the terms hereof.
(ii) Notwithstanding any provisions to the contrary in any
Reimbursement Agreement, Borrowers agree to reimburse the Issuing
Lender for amounts which the Issuing Lender pays under such Letter of
Credit no later than the time specified in this Agreement. If the
Borrowers do not pay any such Reimbursement Obligations when due, the
Borrowers shall be deemed to have immediately requested that the Banks
make a Prime Rate Loan under this Agreement in a principal amount
equal to such unreimbursed Reimbursement Obligations. The Agent shall
promptly notify the Lenders of such deemed request and, without the
necessity of compliance with the requirements of Sections 2.1 and
2.11, each Lender shall make available to the Agent its Loan in the
manner prescribed for Prime Rate Loans. The proceeds of such Loans
shall be paid over by the Agent to the Issuing Lender for the account
of Borrowers in satisfaction of such unreimbursed Reimbursement
Obligations, which shall thereupon be deemed satisfied by the proceeds
of, and replaced by, such Prime Rate Loan.
(iii) If the Issuing Lender makes a payment on account of any
Letter of Credit and is not concurrently reimbursed therefore by
Borrowers and if for any reason a Prime Rate Loan may not be made
pursuant to Section 2.13(C)(ii), then as promptly as practical during
normal banking hours on the date of its receipt of such notice or, if
not practicable on such date, not later than noon (Chicago time)
35
on the Business Day immediately succeeding such date of notification,
each Lender shall deliver to the Agent for the account of the Issuing
Lender, in immediately available funds, the purchase price for such
Lender's interest in such unreimbursed Reimbursement Obligations,
which shall be an amount equal to such Lender's pro-rata share of such
payment. Each Lender shall, upon demand by the Issuing Lender, pay the
Issuing Lender interest on such Lender's pro-rata share of such draw
from the date of payment by the Issuing Lender on account of such
Letter of Credit until the date of delivery of such funds to the
Issuing Lender by such Lender at a rate per annum, computed for actual
days elapsed based on a 360-day year, equal to the federal funds rate
for such period; provided, that such payments shall be made by such
Lender only in the event and to the extent that the Issuing Lender is
not reimbursed in full by Borrowers for interest on the amount of any
draw on the Letters of Credit.
(iv) At any time after the Issuing Lender has made a payment on
account of any Letter of Credit and has received from any other Lender
such Lender's pro-rata share of such payment, the Issuing Lender
shall, forthwith upon its receipt of any reimbursement (in whole or in
part) by Borrowers for such payment, or of any other amount from
Borrowers or any other Person in respect of such payment (including,
without limitation, any payment of interest or penalty fees and any
payment under any collateral account agreement of the Borrowers or any
Ancillary Agreements executed pursuant hereto but excluding any
transfer of funds from any other Lender pursuant to Section
2.13(C)(ii)), transfer to such other Lender such other Lender's
ratable share of such reimbursement or other amount; provided, that
interest shall accrue for the benefit of such Lender from the time the
Issuing Lender has made a payment on account of any Letter of Credit;
provided, further, that in the event that the receipt by the Issuing
Lender of such reimbursement or other amount is found to have been a
transfer in fraud of creditors or a preferential payment under the
Bankruptcy Code or is otherwise required to be returned, such Lender
shall promptly return to the Issuing Lender any portion thereof
previously transferred by the Issuing Lender to such Lender, but
without interest to the extent that interest is not payable by the
Issuing Lender in connection therewith.
(D) Procedure for Issuance. Prior to the issuance of each Letter of
Credit, and as a condition of such issuance, Borrowers shall deliver to the
Issuing Lender (with a copy to the Agent) a Reimbursement Agreement signed
by the Borrowers, together with such other documents or items as may be
required pursuant to the terms thereof, and the proposed form and content
of such Letter of Credit shall be reasonably satisfactory to the Issuing
Lender. Each Letter of Credit shall be issued no earlier than two (2)
Business Days after delivery of the foregoing documents, which delivery may
be by Borrowers to the Issuing Lender by facsimile transmission, telex or
other electronic means followed by delivery of executed originals within
five days thereafter. The documents so delivered shall be in compliance
with the requirements set forth in Section 2.13(A), and shall specify
therein (i) the stated amount of the Letter of Credit requested, (ii) the
effective date of issuance of such requested Letter of Credit, which shall
be a Business
36
Day, (iii) the date on which such requested Letter of Credit is to expire,
(iv) the entity for whose benefit the requested Letter of Credit is to be
issued, which shall be a Borrower and (v) the aggregate amount of Letter of
Credit Obligations which are outstanding and which will be outstanding
after giving effect to the requested Letter of Credit issuance. The
delivery of the foregoing documents and information shall constitute an
"ISSUANCE REQUEST" for purposes of this Agreement. Subject to the terms and
conditions of Section 2.13(A) and provided that the applicable conditions
set forth in Section 2.11 hereof have been satisfied, the Issuing Lender
shall, on the requested date, issue a Letter of Credit on behalf of
Borrowers in accordance with the Issuing Lender's usual and customary
business practices. In addition, any amendment of an existing Letter of
Credit shall be deemed to be an issuance of a new Letter of Credit and
shall be subject to the requirements set forth above. The Issuing Lender
shall give the Agent prompt written notice of the issuance of any Letter of
Credit.
(E) Nature of the Lenders' Obligations.
(i) As between Borrowers and the Lenders, Borrowers assume all
risks of the acts and omissions of, or misuse of the Letters of Credit
by, the respective beneficiaries of the Letters of Credit. In
furtherance and not in limitation of the foregoing, the Lenders shall
not be responsible for (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for an issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (iii) the failure of the
beneficiary of a Letter of Credit to comply fully with conditions
required to be satisfied by any Person other than the Issuing Lender
in order to draw upon such Letter of Credit (other than a failure to
satisfy documentary conditions to drawing where payment of the Letter
of Credit despite such failure would constitute gross negligence or
willful misconduct of the Issuing Lender); (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, facsimile transmission, telex or otherwise;
(v) the misapplication by the beneficiary of a Letter of Credit of the
proceeds of any drawing under such Letter of Credit; or (vi) any
consequences arising from causes beyond control of the Issuing Lender.
(ii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth (including in Section
2.13(C)), any action taken or omitted by the Issuing Lender under or
in connection with the Letters of Credit or any related certificates,
if taken or omitted in good faith, shall not put the Agent or any
Lender under any resulting liability to Borrowers or relieve Borrowers
of any of its obligations hereunder to the Issuing Lender or any such
Person.
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(F) Compensation for Letters of Credit. Borrowers shall pay to Agent
(for the benefit of the Issuing Lender and the other Lenders) on the first
Business Day of each calendar quarter, in arrears, a letter of credit fee
at a rate per annum (the "LETTER OF CREDIT FEES") equal to the Applicable
Margin for Loans made under the Revolving Credit Facility per annum of the
stated amount of each Letter of Credit. In addition, the Borrower shall
pay to the Agent (for the benefit of the Issuing Lender and the other
Lenders) any other processing, issuance, amendment or other similar fees
customarily charged in connection with Letters of Credit, together with the
Issuing Lender's out-of-pocket costs of issuing and servicing letters of
credit. All Letter of Credit Fees shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
3. PAYMENTS.
--------
3.1 MAKING OF PAYMENTS.
(A) All payments and prepayments of principal of, or interest on, the
Notes shall be made by Borrowers to the Agent in immediately available
funds for the account of the holders of the Notes pro rata according to the
respective unpaid amounts of principal or interest, as the case may be,
owed to such holders. All payments of non-use fees shall be made by
Borrowers to the Agent for the account of the Lenders pro rata according to
their respective Percentages. All such payments shall be made to the Agent
at its office in Chicago, not later than 12:30 p.m. Chicago time, on the
date due, and funds received after that hour shall be deemed to have been
received by the Agent on the next following Business Day. The Agent shall,
on the Business Day a payment is deemed to be received in collected funds
by it, remit to each Lender or other holder of a Note its share of such
payment.
(B) Unless Borrowers or a Lender, as the case may be, notify the Agent
prior to the date on which it is scheduled to make payment to the Agent of
(i) in the case of a Lender, the proceeds of a Loan under the Revolving
Credit Facility or a Term Loan, or (ii) in the case of Borrowers, a payment
of principal, interest or fees to the Agent for the account of the Lenders,
that it does not intend to make such payment, the Agent may assume that
such payment has been made. The Agent may, but shall not be obligated to,
make the amount of such payment available to the intended recipient in
reliance upon such assumption. If Borrowers have not in fact made such
payment to the Agent, the Lenders shall, on demand by the Agent, repay to
the Agent the amount so made available together with interest thereon in
respect of each day during the period commencing on the date such amount
was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to the federal funds rate for such day.
If any Lender has not in fact made such payment to the Agent (such a Lender
herein called a "NON-FUNDING LENDER"), such Non-Funding Lender or Borrowers
shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Agent until the date the Agent recovers such amount at a
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rate per annum equal to (i) in the case of payment by a Non-Funding Lender,
an amount equal to $200 plus the federal funds effective rate for such day
or (ii) in the case of payment by Borrowers, the interest rate applicable
to the relevant Revolving Loan or Term Loan (it being understood and agreed
that prior to making a request pursuant to this clause (ii) the Agent will
use its best efforts to request the Lenders (other than a Non-Funding
Lender) to reallocate such amount among the Lenders (other than a Non-
Funding Lender) subject to Sections 2.1(A) or (B), as applicable.
3.2 PAYMENT TERMS.
(A) General. All of the Liabilities shall be paid to Agent at the
address set forth in Section 10.10. Subject to the remainder of this
Section 3.2 and Section 8.2, the Liabilities will be payable as follows:
(i) accrued interest shall be payable in arrears on the
applicable Interest Payment Date;
(ii) fees, costs, expenses and similar charges shall be payable
as and when provided for in this Agreement or the Ancillary
Agreements;
(iii) the then outstanding principal balance of the Revolving
Credit Facility shall be payable in full on the Revolving Credit
Termination Date; and
(iv) the then outstanding principal balance of the Term Loan
shall be payable in full on the Term Loan Maturity Date.
Except as otherwise set forth herein (including, but not limited to Section
2.10 hereof), Borrowers may prepay all or any portion of the Loans upon
notice from Borrowers to Agent at least one (1) day before the date of
prepayment, without penalty or premium, at any time and from time to time;
provided, that, all prepayments of principal shall include interest accrued
to the date of prepayment on the principal amount being prepaid. After
maturity (whether upon acceleration or otherwise) of any Liabilities,
accrued interest on such Liabilities shall be payable upon demand.
(B) Scheduled Reductions of Term Loan. The Term Loan shall be payable
in quarterly principal installments on the first Business Day of each of
Borrowers' fiscal quarters, commencing on the first such day occurring
after the Amortization Commencement Date such that the outstanding unpaid
principal balance of the Term Loan shall amortize in twenty (20) equal
quarterly installments of principal. The quarterly payment amount shall be
calculated by dividing the outstanding unpaid principal balance of the Term
Loan on the Amortization Commencement Date by 20. The principal amount of
the Term Loan outstanding, and all accrued and unpaid interest with respect
to the Term Loan, shall be due and payable on the Term Loan Maturity Date.
39
(C) Mandatory Prepayment. Borrowers shall not permit the aggregate
principal amount of Loans outstanding under the Revolving Credit Facility
at any time to exceed the Availability. Borrowers agree, jointly and
severally, to make such payments to Agent on such outstanding Loans which
are necessary to cure any such excess within two Business Days after the
occurrence thereof. No Lender shall be under an obligation to make Loans
under the Revolving Credit Facility during the period that any such excess
exists or would result from making a Loan. Any amount repaid under this
Section 3.2(C) may, subject to the terms and conditions of this Agreement,
be borrowed, repaid and borrowed again.
3.3 LOCKBOX; COLLECTION OF ACCOUNTS AND PAYMENTS.
(A) Lockbox. Borrowers shall establish a special account as a lockbox
in Borrowers' name with Agent, upon such terms as are required by Agent, to
which Borrowers and their respective Subsidiaries will cause all Account
Debtors to send all remittances on Accounts and all customers party to Buy
Back Agreements to send all remittances related to any purchases by such
customers pursuant to such Buy Back Agreements. If received directly by a
Borrower or a Subsidiary, such Borrower or Subsidiary will immediately
deposit in such special account all remittances and proceeds of the
Collateral in the identical form in which such payment was made, whether by
cash or check. Borrowers agree that upon the occurrence and during the
continuation of a Default or an Event of Default, all payments made to such
special account or otherwise received by Agent, whether on the Accounts, on
any Buy Back Agreement or as proceeds of other Collateral or otherwise,
will be the sole and exclusive property of Agent for the benefit of Agent
and the Lenders and will be applied on account of the Liabilities. So long
as no Default or an Event of Default has shall have occurred and be
continuing, Borrowers shall be entitled to direct the use of the funds
maintained in such special account in accordance with the terms of this
Agreement. Two (2) Business Days after Agent's receipt of good funds,
Agent will credit (conditional upon final collection) all payments received
through the special account to the Liabilities. Each Borrower, its
Subsidiaries and any Affiliates, shareholders, directors, officers,
employees, agents of such Borrower and its Subsidiaries and all Persons
acting for or in concert with such Borrower shall, acting as trustee for
Agent, receive, as the sole and exclusive property of Agent for the benefit
of Agent and the Lenders, any monies, checks, notes, drafts or any other
payments relating to or proceeds of Accounts, Buy Back Agreements or other
Collateral which come into their possession or under their control and
immediately upon receipt, shall remit the same or cause the same to be
remitted, in kind, to Agent, at Agent's address set forth in Section 10.10.
Borrowers agree, jointly and severally, to pay to Agent any and all
reasonable fees, costs and expenses (if any) which Agent incurs in
connection with opening and maintaining the special account and depositing
for collection by Agent any check or item of payment received or delivered
to Agent on account of the Liabilities.
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(B) Limitation of Liability.
(i) Agent shall have no liability to Borrowers other than that
imposed upon it by law for its failure to exercise ordinary care with
respect to the lockbox established hereunder. Establishment of and
substantial compliance with the procedures set forth herein or in
other documents related to the lockbox by Agent shall be deemed to
constitute the exercise of ordinary care. A mere inadvertence or
honest mistake of judgment will not constitute a failure to exercise
ordinary care, and in no case will be deemed wrongful. Agent shall
not be liable for consequential, indirect or special damages, even if
it has been advised of the possibility that they exist. Agent shall
have no liability for mail not bearing a complete and proper address.
(ii) Agent shall not be liable for failure to perform any
services under this Agreement within the time provided therefore in
the event and to the extent that such failure arises out of war, civil
commotion, an act of God, accident, interruption of power supplies or
other utility or service, strikes or lockouts, delay in
transportation, legislative action, government regulations or
interferences, or any other event beyond Agent's control.
(iii) In the event Agent becomes involved in controversies or
litigation with any third party or parties involving or relating to
the services provided for herein to Borrowers, Borrowers agree,
jointly and severally, to indemnify Agent against any claims, costs,
damages and liabilities, including reasonable attorneys' fees and
court costs incurred by or asserted against Agent to or by such third
party or parties, excluding claims, costs, damages and liabilities
resulting from Agent's gross negligence or willful misconduct. This
indemnity shall survive the termination of this Agreement.
3.4 APPLICATION OF PAYMENTS AND COLLECTIONS. Subject to the rights of the
Borrowers to direct funds under Section 3.3(A), Borrowers irrevocably waive the
right to direct the application of payments and collections received by Agent
and/or any Lender from or on behalf of Borrowers, and Borrowers agree that Agent
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections against the Liabilities in such manner as Agent may
deem appropriate, notwithstanding any entry by Agent upon any of its books and
records. To the extent that Borrowers make a payment or payments to Agent or
Agent receives any payment or proceeds of the Collateral for Borrowers' benefit,
which payment(s) or proceeds are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment or proceeds
received, the Liabilities intended to be satisfied shall be revived and shall
continue in full force and effect, as if such payments or proceeds had not been
received by Agent. Interest shall be payable out of the first collections
received with respect to any proceeds of Collateral.
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3.5 RECORDS. All advances to Borrowers, and all other debits and credits
provided for in this Agreement, shall be evidenced by entries made by Agent in
its internal data control systems showing the date, amount and reason for each
such debit or credit.
4. COLLATERAL; GENERAL TERMS.
-------------------------
4.1 SECURITY INTEREST. To secure the prompt payment to each Lender of the
Liabilities, each Borrower grants to Agent, for the benefit of the Agent and the
Lenders, a continuing security interest in and to all of such Borrower's
Property including the following Property and interest in Property of such
Borrower, whether now owned or existing or to be acquired or arising and
wherever located: (i) all Accounts, Inventory, Equipment, General Intangibles,
tax refunds, chattel paper, instruments, letters of credit, investment property,
including, without limitation, stocks, bonds, interests in limited liability
companies, partnership interests, securities, certificates of deposit, mutual
fund shares, securities entitlements, including, without limitation, all of each
Borrower's rights to any securities account, any free credit balance or other
money owing by any securities intermediary with respect to such account, all
securities and commodities held by Agent or any of its Affiliates, all commodity
contracts held by any Borrower and all commodity accounts held by any Borrower,
documents and documents of title evidencing or issued with respect to any of the
foregoing; (ii) all of such Borrower's deposit accounts (general or special)
with and credits and other claims against Agent or any Lender; (iii) all of such
Borrower's now owned or to be acquired monies, and any and all other property of
such Borrower now or to be coming into the actual possession, custody or control
of Agent, any Lender or any agent or affiliate of any Lender in any way or for
any purpose (whether for safekeeping, deposit, custody, pledge, transmission,
collection or otherwise); (iv) all insurance proceeds of or relating to any of
the foregoing; (v) all of such Borrower's books and records, including without
limitation customer lists, credit files, computer programs, printouts and other
materials, relating to any of the foregoing; and (vi) all accessions and
additions to, substitutions for, and replacements, products and proceeds of any
of the foregoing.
4.2 DISCLOSURE OF SECURITY INTEREST. Each Borrower shall make appropriate
entries upon its financial statements and books and records disclosing Agent's
security interest in the Collateral of such Borrower.
4.3 SPECIAL COLLATERAL. Immediately upon receipt by a Borrower of any
Collateral that is evidenced or secured by an agreement, chattel paper,
instrument or document, including, without limitation, promissory notes,
documents of title and warehouse receipts (the "SPECIAL COLLATERAL"), such
Borrower shall deliver the original thereof to Agent or to such agent of Agent
as Agent shall designate, together with appropriate endorsements, or other
specific evidence (in form and substance acceptable to Agent) of assignment
thereof to Agent.
4.4 FURTHER ASSURANCES. Each Borrower hereby irrevocably authorizes the
Agent at any time, and from time to time, to file in any jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of each such Borrower or words of similar effect,
regardless of whether any particular asset comprised in the Collateral
42
falls within the scope of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed, or (ii) as
being of an equal or lesser scope or within greater detail, and (b) contain any
other information required by Section 5 of Article 9 of the Uniform Commercial
Code of the jurisdiction wherein such financing statement or amendment is filed
regarding the sufficiency or filing office acceptance of any financing statement
or amendment, including (i) whether such Borrower is an organization, the type
of organization and any organization identification number issued to such
Borrower and (ii) in the case of a financing statement filed as a fixture filing
or indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. Each
Borrower agrees to furnish any such information to the Agent promptly upon
request. Each Borrower further ratifies and affirms its authorization for any
financing statements and/or amendments thereto, previously filed by the Agent in
any jurisdiction.
4.5 INSPECTION. Each Borrower agrees to permit Agent and its duly
authorized representatives and agents, upon prior notice, during normal business
hours, and if no Default or Event of Default has occurred and is continuing, no
more than once per calendar year, to visit and inspect any of the Collateral of
such Borrower, corporate books and financial records of such Borrower, to
examine and make copies of the books of accounts and other financial records of
such Borrower, and to discuss the affairs, finances and accounts of such
Borrower with, and to be advised as to the same by, its officers, employees and
independent public accounts (and by this provision such Borrower hereby
authorizes such accountants to discuss with Agent the finances and affairs of
such Borrower); provided that after the occurrence of and during the continuance
of an Event of Default, such inspections may occur during normal business hours
without notice and at such times and intervals as Agent may designate.
4.6 LOCATION OF COLLATERAL. Borrowers' chief executive office, principal
places of business and all other offices and locations of the Collateral and
books and records related thereto (including, without limitation, computer
programs, printouts and other computer materials and records concerning the
Collateral) are set forth on Exhibit G. Borrowers shall not remove their
respective books and records or the Collateral from any Eligible Collateral
Location (except to another Eligible Collateral Location and except for removal
of items of Inventory upon sale in accordance with Section 5.6) and shall not
change the location of their chief executive office, open any new offices
(provided however, that an employee of any Borrower working from such employee's
home shall not be deemed to be opening a new office) or relocate any of their
respective books and records or the Collateral except within the continental
United States of America with at least thirty (30) days' prior written notice
thereof to Agent.
4.7 AGENT'S PAYMENT OF CLAIMS ASSERTED AGAINST BORROWERS. Agent may, but
shall not be obligated to, at any time or times, in its sole discretion, and
without waiving any Event of Default or waiving or releasing any obligation,
liability or duty of Borrowers under this Agreement or the Ancillary Agreements,
pay, acquire or accept an assignment of any security interest, Lien, claim or
other encumbrance asserted by any Person against the Collateral. All sums paid
by Agent under this Section 4.7, including all costs, fees (including without
limitation reasonable attorney's and paralegals' fees and court costs), expenses
and other charges relating
43
thereto, shall be payable by Borrowers, jointly and severally, to Agent on
demand and shall be additional Liabilities secured by the Collateral.
4.8 LETTER OF CREDIT RIGHTS. If any Borrower at any time is a beneficiary
under a letter of credit now or hereafter issued in favor of such Borrower, such
Borrower shall promptly notify Agent thereof and, at the request and option of
Agent, such Borrower shall, pursuant to an agreement in form and substance
satisfactory to Agent, either (i) arrange for the issuer and any confirmer of
such letter of credit to consent to an assignment to the Agent of the proceeds
of any drawing under the letter of credit or (ii) arrange for the Agent to
become the transferee beneficiary of the letter of credit, with the Agent
agreeing, in each case, that the proceeds of any drawing under the letter of
credit are to be applied as provided in this Agreement.
4.9 COMMERCIAL TORT CLAIMS. If any Borrower shall at any time hold or
acquire a Commercial Tort Claim, the Borrower shall immediately notify the Agent
in writing signed by such Borrower of the details thereof and grant to Agent in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Agent.
4.10 ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If any Borrower
at any time holds or acquires an interest in any electronic chattel paper or any
"transferable record", as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in (S)16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
such Borrower shall promptly notify Agent thereof and, at the request of Agent,
shall take such action as Agent may reasonably request to vest in Agent control
under Section 9-105 of the UCC of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, (S)16 of the Uniform Electronic Transactions Act, as
so in effect in such jurisdiction, of such transferable record. The Agent
agrees with Borrowers that the Agent will arrange, pursuant to procedures
reasonably satisfactory to Agent and so long as such procedures will not result
in Agent's loss of control, for such Borrower to make alterations to the
electronic chattel paper or transferable record permitted under Section 9-105 of
the UCC or, as the case may be, Section 201 of the federal Electronic Signatures
in Global and National Commerce Act or (S)16 of the Uniform Electronic
Transactions Act for a party in control to make without loss of control, unless
an Event of Default has occurred and is continuing or would occur after taking
into account any action by such Borrower with respect to such electronic chattel
paper or transferable record.
5. COLLATERAL; ACCOUNTS AND COLLATERAL MAINTENANCE.
-----------------------------------------------
5.1 VERIFICATION OF ACCOUNTS AND INVENTORY. Any of Agent's officers,
employees or agents shall have the right, at any time or times following the
occurrence and during the continuation of a Default or an Event of Default, in
Agent's or Borrowers' name or in the name of a firm of independent certified
public accountants acceptable to Agent, during normal business hours, to verify
the validity, amount or any other matters relating to any Accounts and Inventory
by mail, telephone, telecopy or otherwise.
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5.2 ASSIGNMENTS, RECORDS AND ACCOUNTS AND INVENTORY REPORT. Each Borrower
shall keep accurate and complete records of its Accounts. Borrowers shall
deliver to Agent, upon demand a copy of (and after the occurrence of and during
the continuance of an Event of Default, the original of) all documents relating
to the Accounts and such other matters and information relating to the status of
then existing Accounts as Agent shall reasonably request.
5.3 NOTICE REGARDING DISPUTED ACCOUNTS. Borrowers shall give Agent prompt
notice of any dispute in excess of $100,000 in respect of any Account. Each
such notice shall identify any such disputed Account and disclose with respect
thereto, in reasonable detail, the reason for the dispute, all claims related
thereto and the amount in controversy. Agent shall promptly notify each Lender
of receipt of such a notice.
5.4 SALE OR ENCUMBRANCE OF ACCOUNTS. Each Borrower shall not, without the
prior written consent of the Agent, sell, transfer, grant a security interest in
or otherwise dispose of or encumber any of its Accounts to any Person other than
Agent, except for the Permitted Liens.
5.5 EQUIPMENT. Each Borrower shall keep and maintain in good operating
condition (normal wear and tear excepted), and repair and make all necessary
replacements and renewals to, the Equipment so that the value and operating
efficiency thereof shall at all times be maintained and preserved, and keep such
Collateral only at an Eligible Collateral Location.
5.6 NOTICE OF LOSS; PROHIBITION ON SALE OR DISPOSITION. Borrowers shall
immediately notify Agent of any material loss or depreciation in value of the
Collateral. Borrowers shall not sell, transfer or otherwise dispose of any
Collateral; provided, that, until notice is given by Agent to Borrowers,
Borrowers may sell Inventory in the ordinary course of business substantially in
the same manner as now conducted, but a sale in the ordinary course of business
shall not include any transfer or sale in satisfaction, partial or complete, of
a debt owed by a Borrower; provided further that Borrowers may transfer
Collateral other than Inventory so long as the aggregate sales price of such
Collateral sold during any 12 month period shall not exceed $100,000.
5.7 COMPLIANCE WITH BUY BACK AGREEMENTS. Each Borrower shall fully comply
with all terms and conditions of any Buy Back Agreements to which such Borrower
is a party.
6. WARRANTIES AND REPRESENTATIONS.
------------------------------
6.1 GENERAL WARRANTIES AND REPRESENTATIONS. Each Borrower warrants and
represents to Agent and the Lenders that:
(A) (i) SalesLink Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
its state issued organizational identification number is 2721217, (ii)
InSolutions, Incorporated, is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
its state issued organizational identification number is 2903046, (iii) On-
Demand Solutions Inc. is a corporation duly organized, validly existing and
in
45
good standing under the laws of the State of Massachusetts and its state
issued organizational identification number is 3328616, (iv) Pacific Direct
Marketing Corp. is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and its state
issued organizational identification number is 1585724 and (v) SalesLink
Mexico Holding Corp., is a corporation duly organized, existing and in good
standing under the laws of the state of Delaware and its state issued
organizational number is 3111152. Each Borrower is qualified or licensed as
a foreign corporation to do business in all other states in which the laws
thereof require such Borrower to be so qualified or licensed except where a
lack of such qualification or licensing will not have a material adverse
effect on the business, operations or financial condition of such Borrower;
(B) Such Borrower has not used, during the five (5) year period
preceding the date of this Agreement, and on the date hereof does not
intend to use, any other corporate or fictitious name, except as disclosed
in Exhibit H;
(C) Such Borrower has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and
the Ancillary Agreements;
(D) The execution, delivery and performance by such Borrower of this
Agreement and the Ancillary Agreements shall not, by its execution or
performance, the lapse of time, the giving of notice or otherwise,
constitute a violation of any applicable law, rule, regulation, judgment,
order or decree applicable to such Borrower or its assets or constitute a
breach of any provision contained in such Borrower's charter or by-laws or
contained in any material agreement, instrument, indenture or other
document to which such Borrower is now a party or by which it or any of its
property is bound;
(E) Such Borrower's use of the proceeds of any advances made by each
Lender hereunder are, and will continue to be, legal and proper corporate
uses (duly authorized by its board of directors, in accordance with any
applicable law, rule or regulation) and such uses are consistent with all
applicable laws, rules and regulations, as in effect as of the date hereof;
(F) Such Borrower has, and is current and in good standing with
respect to, all material governmental approvals, permits, certificates,
inspections, consents and franchises necessary to conduct and to continue
to conduct its business and its intended business and to own or lease and
operate its properties as now owned or leased and operated by it;
(G) None of such approvals, permits, certificates, consents or
franchises contains any term, provision, condition or limitation more
burdensome than such as are generally applicable to Persons engaged in the
same or similar business as such Borrower;
46
(H) Such Borrower now has capital sufficient to carry on its business
and transactions and all businesses and transactions in which it is about
to engage and is now able to pay its debts as they mature and such Borrower
now owns property the fair saleable value of which is greater than the
amount required to pay such Borrower's debts;
(I) Except as disclosed in the Financials, (i) there is no litigation,
suit, action, proceeding, inquiry or investigation pending or, to the best
of such Borrower's knowledge, threatened against such Borrower which if
unfavorably determined would materially adversely affect the transactions
contemplated hereby, or such Borrower's property, assets, operations or
condition (financial or otherwise) (except, in the case of Financials
delivered to Agent on or prior to the date of this Agreement, as shown on
Exhibit I), and (ii) such Borrower has no Indebtedness and has not
guaranteed the obligations of any other Person (except for Permitted Debt);
(J) (i) There are no strikes, work stoppages, labor disputes
decertification petitions, union organizing efforts, grievances or other
claims pending or, to such Borrower's knowledge, threatened in writing,
between such Borrower and any of its employees, other than employee
grievances arising in the ordinary course of business which, in the
aggregate, would not have a material adverse effect on such Borrower and
(ii) to the best of such Borrower's knowledge, such Borrower has no
obligation under any collective bargaining agreement or any employment
agreement. To such Borrower's knowledge, there is no organizing activity
pending or threatened in writing by any labor union or group of employees.
There are no representation proceedings pending or threatened with the
National Labor Relations Board or other applicable governmental authority,
and no labor organization or group of employees has made a pending demand
for recognition. There are no material complaints or charges pending or,
to such Borrower's knowledge, threatened to be filed with any governmental
authority or arbitrator based on, arising out of, in connection with or
otherwise relating to the employment or termination of employment by such
Borrower of any individual or group of individuals which, if decided
adversely to such Borrower, would have a material adverse effect on such
Borrower;
(K) Such Borrower has good, indefeasible and merchantable title to and
ownership of its Collateral, free and clear of all Liens, claims, security
interests and other encumbrances, except those of Agent and Permitted
Liens;
(L) Such Borrower is not in violation of any applicable statute, rule,
regulation or ordinance of any governmental entity, including, without
limitation, the United States of America, any state, city, town,
municipality, county or of any other jurisdiction, or of any agency
thereof, in any respect materially and adversely affecting the Collateral
or such Borrower's business, property, assets, operations or condition,
financial or other;
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(M) Such Borrower is not in default under any indenture, loan
agreement, mortgage, lease, trust deed, deed of trust or other similar
agreement relating to the borrowing of monies to which it is a party or by
which it or any of its property is bound;
(N) The Financials fairly present in all material respects the assets,
liabilities and financial condition and results of operations of such
Borrower and such other Persons as are described therein as of the stated
dates; there are no omissions or other facts or circumstances which are or
may be material and there (i) has been no material and adverse change in
the assets, liabilities or financial or other condition of such Borrower or
any such Person since the date of the Financials and (ii) exists no equity
or long term investments in or outstanding advances to any Person not
reflected in the Financials;
(O) Neither such Borrower nor any Subsidiary has received a notice to
the effect that it is not in full compliance with any of the requirements
of ERISA and the regulations promulgated thereunder and, to the best of its
knowledge, there exists no event described in Section 4043 of ERISA,
excluding subsections 4043(b)(2) and 4043(b)(3) ("REPORTABLE EVENT");
(P) Such Borrower has filed all federal, state and local tax returns
and other reports, or has been included in consolidated returns or reports
filed by an Affiliate, which such Borrower is required by law, rule or
regulation to file and all Charges that are due and payable have been paid,
except for Charges being contested in good faith and for which adequate
reserves are being maintained;
(Q) Such Borrower's execution and delivery of this Agreement and the
Ancillary Agreements do not directly or indirectly violate or result in any
violation of the Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto, including without limitation,
Regulation U, T or X of the Board of Governors of the Federal Reserve
System (12 CFR 221, 207, 220 and 224, respectively) and Borrower does not
own or intend to purchase or carry any "MARGIN SECURITY," as defined in
such Regulations;
(R) Except as set forth on Exhibit J, as of the date of this Agreement
such Borrower has no Subsidiaries and does not own an equity interest in
any other Person;
(S) Such Borrower has no knowledge of any fact or circumstance which
would impair the validity or collectibility of any material amount of its
Accounts or General Intangibles;
(T) None of such Borrower's Collateral has been pledged or sold to any
other Person or otherwise encumbered, such Borrower is the owner of its
Collateral free of all Liens and encumbrances except those of Agent and
except for the Permitted Liens and no financing statement concerning the
Collateral, except any filed on behalf of Agent and those relating to
Permitted Liens;
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(U) To the best of such Borrower's knowledge, each property (including
underlying ground water), operation and facility that such Borrower
operates or controls is in compliance with all statutes, judicial or
administrative orders, licenses, permits and governmental rules and
regulations applicable to them, including, without limitation,
Environmental Laws, the noncompliance with which is reasonably likely to
have a material adverse effect on the financial condition, continued
operations or Property of such Borrower;
(V) Such Borrower possesses adequate copyrights, patents, trademarks,
trade secrets and computer software to conduct its business and all such
intellectual property (other than computer software and trade secrets) in
the possession of such Borrower as of the date of this Agreement is listed
on Schedule 6.1(V); and
(W) Neither Pacific Direct Marketing Corp., a California corporation,
nor any other Borrower or Affiliate of any of them is in any way associated
with or related to The Lake Group, Inc., d/b/a Pacific Direct, Lake
Graphics and Elan Resources, which filed bankruptcy in the Northern
District of California Case No. 93-30351.
6.2 ACCOUNT WARRANTIES AND REPRESENTATIONS. Each Borrower warrants and
represents to Agent and each Lender that such Agent and such Lender may rely on
all statements, warranties and representations made by such Borrower on or with
respect to any Accounts and Inventory Report and, unless otherwise indicated in
writing by such Borrower, that:
(A) Such Borrower's Accounts are genuine, are in all respects what
they purport to be, are not reduced to a judgment and, if evidenced by any
instrument, item of chattel paper, agreement, contract or documents, are
evidenced by only one executed original instrument, item of chattel paper,
agreement, contract, or document, which original has been endorsed and
delivered to Agent;
(B) Such Borrower's Accounts represent undisputed, bona fide
transactions completed in accordance with the terms and provisions
contained in any related documents;
(C) The amounts shown on any Accounts and Inventory Report, and all
invoices and statements delivered to Agent with respect to any Account, are
actually and absolutely owing to such Borrower and are not contingent for
any reason;
(D) Except as may be disclosed on such Accounts and Inventory Report,
there are no setoffs, counterclaims or disputes existing or asserted with
respect to any Accounts included on an Accounts and Inventory Report, and
such Borrower has not made any agreement with any Account Debtor for any
deduction from such Account, except for discounts or allowances allowed by
such Borrower in the ordinary course of
49
its business for prompt payment, which discounts and allowances have been
disclosed to Agent and are reflected in the calculation of the invoice
related to such Account;
(E) To the best of such Borrower's knowledge, there are no facts,
events or occurrences which in any way impair the validity or enforcement
of any of the Accounts or tend to reduce the amount payable thereunder from
the amount of the invoice shown on any Accounts and Inventory Report, and
on all contracts, invoices and statements delivered to Agent with respect
thereto;
(F) To the best of such Borrower's knowledge, all Account Debtors are
Solvent and had the capacity to contract at the time any contract or other
document giving rise to or evidencing the Accounts was executed; and
(G) To the best of such Borrower's knowledge, there are no proceedings
or actions which are threatened in writing or pending against any Account
Debtor which might result in any material adverse change in such Account
Debtor's financial or other condition.
6.3 AUTOMATIC WARRANTY AND REPRESENTATION AND REAFFIRMATION OF WARRANTIES
AND REPRESENTATIONS. Each request for a Loan made by Borrowers pursuant to this
Agreement or the Ancillary Agreements shall constitute (i) an automatic warranty
and representation by Borrowers to Agent and each Lender that there does not
then exist a Default or an Event of Default and (ii) a reaffirmation as of the
date of such request of all of the warranties and representations of each
Borrower contained in this Agreement and in the Ancillary Agreements.
6.4 SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Each Borrower covenants,
warrants and represents to Agent and each Lender that all representations and
warranties of such Borrower contained in this Agreement and the Ancillary
Agreements shall be true at the time of such Borrower's execution of this
Agreement and the Ancillary Agreements, and shall survive the execution,
delivery and acceptance by the parties and the closing of the transactions
described in this Agreement. Each Borrower and Agent and each Lender expressly
agree that any misrepresentation or breach of any representation or warranty
whatsoever contained in this Agreement or in any of the Ancillary Agreements
shall be deemed material.
7. COVENANTS AND CONTINUING AGREEMENTS.
-----------------------------------
7.1 FINANCIAL COVENANTS.
(i) Cash Flow Leverage. Borrowers shall maintain, on the last day
of each fiscal quarter of Borrowers and their Subsidiaries, other than
Twin Solutions, LLC, through and including the date of termination of
this Agreement, a Cash Flow Leverage Ratio of not more than 1.5:1.0.
(ii) Indebtedness to Tangible Net Worth. Borrowers shall maintain,
on the last day of each fiscal quarter of Borrowers and their
Subsidiaries, other than Twin
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Solutions, LLC, through and including the date of termination of this
Agreement, an Indebtedness to Tangible Net Worth Ratio of not more
than 2.5:1.0.
(iii) Debt Service Coverage Ratio. Borrowers shall not permit the
Debt Service Coverage Ratio to be less than: (a) 1.5:1.0 on July 31, 2002,
(b) 1.5:1.0 on July 31, 2003 and (c) 1.75:1.0 of July 31, 2004 and on the
last day of each fiscal year of Borrowers and their Subsidiaries, other
than Twin Solutions, LLC, thereafter.
7.2 AFFIRMATIVE COVENANTS. Each Borrower covenants, unless at any time
the Required Lenders shall otherwise expressly consent in writing, it shall:
(A) Fees and Costs. Pay to Agent on demand, any and all reasonable
fees, costs or expenses which Agent or any Lender incurs arising out of or
in connection with (i) the forwarding to Borrowers or any other Person on
behalf of Borrowers, by Agent of proceeds of Loans made to Borrowers
pursuant to this Agreement and (ii) the depositing for collection by Agent,
of any check or item of payment received or delivered to Agent on account
of the Liabilities;
(B) Insurance. At its sole cost and expense, keep and maintain and
cause each Subsidiary to keep and maintain the Collateral, its other assets
and its business insured in such amounts and against loss or damage by
fire, theft, explosion, sprinklers and all other hazards and risks
(including business interruption) as is ordinarily insured against by other
owners or users of such properties in similar businesses and notify Agent
promptly of any event or occurrence causing a material loss or decline in
value of the Collateral and the estimated (or actual, if available) amount
of such loss or decline;
(C) Financial Reports. Keep books of account and prepare financial
statements and furnish to Agent and each Lender the following (all of the
foregoing and following to be kept and prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
the Financials, unless Borrowers' independent certified public accountants
concur in any changes therein and such changes are disclosed to Agent and
are consistent with then generally accepted accounting principles):
(i) as soon as available, but not later than ninety (90) days
after the close of each fiscal year of Borrowers, (a) financial
statements of Borrowers and Subsidiaries prepared on a consolidated
basis (including a balance sheet, statement of income and retained
earnings and cash flow, all with supporting footnotes) as at the end
of such year and for the year then ended, all in reasonable detail as
requested by Agent and audited by a firm of independent certified
public accountants of recognized standing selected by Borrowers and
approved by Agent, together with an unqualified opinion thereon from
such certified public accountants, (b) internally prepared financial
statements of Borrowers and Subsidiaries prepared on a consolidating
basis by business line and (c) a Compliance Certificate for the last
month of such fiscal year of Borrowers;
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(ii) as soon as available, but no later than forty-five (45) days
after the end of each fiscal quarter of Borrowers, a Compliance
Certificate for such period (except as required to be delivered in
Section 7.2(C)(i));
(iii) as soon as available, but no later than thirty (30) days
after the end of each month of each fiscal year of Borrowers,
internally prepared consolidated financial statements of Borrowers and
Subsidiaries (including a balance sheet, statement of income and
retained earnings and cash flow) as at the end of and for the portion
of Borrowers' fiscal year then elapsed, all in reasonable detail as
requested by Agent and certified by Borrowers' principal financial
officer as prepared in accordance with generally accepted accounting
principles and fairly presenting in all material respects the
financial position and results of operations of Borrowers and
Subsidiaries for such period (subject to normal year-end audit
adjustments and omission of footnotes);
(iv) such other data and information (financial and other) as
Agent or any Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral, Borrowers' or any
Affiliate's financial condition or results of its operations, or the
financial condition of any Person who is a guarantor of any of the
Liabilities;
(v) within 15 Business Days after the last day of each month of
each fiscal year of Borrowers, Borrowers shall furnish to Agent a
properly completed and executed certificate ("BORROWING BASE
CERTIFICATE"), in a form provided by Agent, setting forth a
calculation of the Borrowing Base as at the last day of such month;
and
(vi) within 15 Business Days after the last day of each month of
each fiscal year of Borrowers, an Accounts and Inventory Report;
provided, however, that in the event loans outstanding under the
Revolving Credit Facility are less than $5,000,000, Borrowers shall
not be required to provide the information set forth in (iv) of the
definition of "ACCOUNTS AND INVENTORY REPORT."
(D) Litigation and Other Events. Notify Agent and each Lender,
promptly upon such Borrower's learning of: (i) the institution or threat of
any litigation, suit, action, inquiry, investigation or administrative
proceeding which, if adversely determined, could reasonably be expected to
materially and adversely affect the operations, financial condition or
business of such Borrower or any Affiliate or which may affect Agent's
security interest in the Collateral; (ii) the occurrence of an Event of
Default or Default; (iii) any Borrowers use of any other corporate or
fictitious name other than as currently used; (iv) any Borrowers formation
of any Subsidiary; or (v) any Borrowers obtaining any copyrights, patents,
trademarks and similar intellectual property;
52
(E) Bank Accounts; Compensating Balances. Maintain all of its primary
bank accounts and its primary banking relationship with Agent. Without
affecting such obligation to maintain such balances, if such Borrower fails
to maintain such balances, then on the last day of such calendar quarter of
each year such Borrower shall pay to Agent in arrears, immediately upon
demand, a reasonable fee in lieu of balances as determined by Agent which
may be charged at Agent's option to any bank account of any Borrower with
Agent. Neither the maintenance of balances nor payment of any fees shall
obligate Agent or any Lender to make any advances under the Revolving
Credit Facility or the Term Loan. Any balances in bank accounts and fees
shall compensate, and be deemed to compensate, Agent for the cost incurred
by Agent in being prepared to respond to requests for credit under such
facility and for costs incurred by Agent in processing and servicing such
accounts;
(F) Reserve Costs. Upon demand by Agent or by any Lender, reimburse
Agent or such Lender for any reasonable additional costs incurred by Agent
or such Lender if at any time after the date of this Agreement any law,
regulation, treaty or any change in any law, regulation, treaty or the
interpretation thereof by any governmental agency, central bank or other
fiscal, monetary or other authority having jurisdiction of Agent or such
Lender shall impose, modify or deem applicable any reserve (except reserve
requirements taken into account by Agent or such Lender in calculating the
Interest Rate) and/or special deposit requirement against Agent or such
Lender or impose any other condition with respect to the loans or other
financial accommodations the result of which is to increase the cost to
Agent or such Lender in making or maintaining the Loans or to reduce the
amount of principal or interest received or receivable by Agent or such
Lender with respect to the Liabilities. Borrowers' reimbursement
obligation shall apply only to those costs which directly result from the
imposition of such requirement and shall begin as of the date of any such
change in law, treaty, rule or regulation. Notwithstanding the preceding,
such Borrower shall not be required to pay any such additional costs which
could be avoided by Agent or such Lender with the exercise of reasonable
conduct and diligence;
(G) Existence and Status. Maintain and preserve and cause each
Subsidiary to maintain and preserve its existence as a limited partnership,
limited liability company or corporation, as applicable, in its state of
formation and all rights, privileges, licenses, copyrights, trademarks,
trade names, franchises and other authority to the extent material and
necessary for the conduct of its business in the ordinary course as
conducted from time to time. Such Borrower shall not take any action or
suffer any action to be taken by others and will not permit any Subsidiary
to take any action or suffer any action which will alter, change or destroy
its status as a limited partnership, limited liability company or
corporation;
(H) Use of Proceeds. Use proceeds of the Loans as follows: (a) the
proceeds of Loans under the Revolving Credit Facility shall be used to
refinance certain existing debt and to finance working capital of Borrowers
and their Subsidiaries but in no event may proceeds of any Loan made under
the Revolving Credit Facility be (i) used to finance
53
operations of Borrowers or any of their Subsidiaries outside of the United
States or (ii) invested, lent or otherwise contributed to any Subsidiary of
any of the Borrowers, including, without limitation SalesLink de Mexico, S.
de X.X. de C.V., a Mexico corporation, in either case until such time as
Agent shall have received evidence satisfactory to it, in its reasonable
discretion, of the creation, perfection and the relative priority of a
security interest in the Property of such Borrower or Subsidiary located
outside of the United States including, such Borrower's or Subsidiary's
Inventory and Accounts located outside of the United States together with
an opinion of counsel to that effect acceptable to Agent in its reasonable
discretion and (b) the proceeds of Term Loan shall be used to refinance
certain existing debt and to recover Capital Expenditures made by
Borrowers; but in no event may proceeds of any Loan made under the Term
Loan be used to finance operations of Borrowers or any Subsidiaries outside
of the United States or invested, lent or otherwise contributed to any
Subsidiary of any of the Borrowers, including, without limitation SalesLink
de Mexico, S. de X.X. de C.V., a Mexico corporation. In no event may
proceeds of any Loan made either under the Revolving Credit Facility or the
Term Loan be invested, lent or otherwise contributed to Twin Solutions LLC;
and
(I) Environmental Covenant. (a) Use and operate and cause each
Subsidiary to use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all hazardous substances and waste in
material compliance with all applicable Environmental Laws; (b) immediately
notify Agent and each Lender and provide copies upon receipt of all written
claims, complaints, notices or inquiries relating to the condition of its
or any Subsidiary's facilities and properties or compliance with
Environmental Laws, and shall (i) promptly cure and have dismissed with
prejudice to the satisfaction of Agent any actions and proceedings relating
to compliance with Environmental Laws or (ii) contest any such actions or
proceedings in good faith by appropriate proceedings and establish adequate
reserves therefor; and (c) provide such information and certifications
which Agent may reasonably request from time to time to evidence compliance
with this subsection.
7.3 NEGATIVE COVENANTS. Each Borrower covenants that, unless at any time
the Required Lenders shall otherwise expressly consent in writing, it shall not:
(A) Capital Expenditures. Collectively with the other Borrowers, make
Capital Expenditures in an amount greater than $8,000,000 in any fiscal
year;
(B) Mergers and Acquisitions. (i) Liquidate, dissolve or merge or
consolidate with or acquire any Person, (ii) permit any Subsidiary to
liquidate, dissolve or merge or consolidate with or acquire any Person
other than an acquisition that is a Permitted Acquisition or (iii) lose
control (as such term is defined in the definition of "AFFILIATE") of any
Subsidiary, except that any Borrower may merge or consolidate with any
other Borrower;
54
(C) Investments. (i) Except in respect of other Borrowers and other
than in the ordinary course of its business, make any investment in the
securities of any Person other than to a Subsidiary as permitted under
Section 7.2(H); provided, however, that Borrowers may make the Permitted
Acquisition subject to the terms contained herein or (ii) use or permit any
proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying" any margin stock (such Borrower will furnish to Agent upon
request, a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in Regulation U of the Federal Reserve Board);
(D) Loans. Make any loans or other advances of money (other than
salary) to any other Borrower, or any Affiliate, officers, directors,
employees or agents of Affiliates or such Borrower or to any other Person,
except for such loans or advances to employees in the ordinary course of
business consistent with past practice and loans or advances to any other
Borrower that are subordinated to the Liabilities on terms satisfactory to
Agent;
(E) Capital Structure and Business. Make any material change in such
Borrower's capital structure or in any of its business objectives, purposes
and operations or permit any Subsidiary to make any material change in such
Subsidiary's capital structure or in any of its business objectives,
purposes and operations;
(F) Affiliate Transactions. Enter into, or be a party to, any
transaction with any Affiliate (other than Subordinated Debt and any arms-
length commercial transaction with xXxx.xxx, Inc.) or partner, shareholder,
director or officer of such Borrower or an Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of such
Borrower's business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to such Borrower than could be
obtained in a comparable arm's length transaction with a Person not an
Affiliate or partner, shareholder, director or officer of such Borrower or
an Affiliate;
(G) Adverse Transactions. (i) Enter or permit any Subsidiary to enter
into any transaction which materially and adversely affects the Collateral
or such Borrower's ability to repay the Agent or any Lender the Liabilities
or (ii) permit or agree to any extension, compromise or settlement or make
any change or modification of any kind or nature with respect to any
Account, including any of the terms relating thereto, except in accordance
with such Borrower's current credit collection policy as disclosed to Agent
and each Lender;
(H) Guarantees. Guarantee or otherwise, in any way, become liable or
permit any Subsidiary to become liable with respect to the obligations or
liabilities of any other Person, except by endorsement of instruments or
items of payment for deposit to the general account of such Borrower or for
delivery to Agent on account of the Liabilities;
55
(I) Other Liens; Transfer of Assets. Except for Permitted Liens and
as otherwise expressly permitted in this Agreement or in the Ancillary
Agreements, pledge, mortgage, grant a security interest in or permit to
exist a Lien on, encumber, assign, sell, lease, license or otherwise
dispose of or transfer, whether by sale, merger, consolidation,
liquidation, dissolution, or otherwise, any of such Borrower's assets or
permit any Subsidiary to pledge, mortgage, grant a security interest in or
permit to exist a Lien on, encumber, assign, sell or otherwise dispose of
or transfer, whether by sale, merger, consolidation, liquidation,
dissolution or otherwise, any of such Subsidiary's assets;
(J) Other Indebtedness. Incur or permit any Subsidiary to incur any
Indebtedness other than Permitted Debt;
(K) Asset Purchase. Purchase or otherwise acquire or permit any
Subsidiary to acquire all or substantially all or a substantial portion of
the assets of any Person (or any division or line of business of any
Person) other than a Permitted Acquisition;
(L) Organic Documents. Amend or otherwise modify or permit any
Subsidiary to amend or otherwise modify any material term of its
certificate of limited partnership or agreement of limited partnership or
charter and by-laws or other organic document, as applicable, in effect on
the date hereof or on the date of its later formation except for
amendments, modifications or waivers that are not adverse in any way to
Agent or Lenders;
(M) Restriction on Redemptions and Dividend Distributions. (a)
Directly or indirectly purchase, redeem or otherwise acquire or retire any
interest of any shareholder of such Borrower, (b) make or declare any
partial or full liquidating distributions to any shareholder of such
Borrower with respect to such shareholder's interest in such Borrower or
(c) make or declare any non-liquidating distributions to such Borrower's
shareholders; or
(N) Restrictions on Activities for SalesLink Mexico. Until such time
as SalesLink Mexico shall provide the Agent with evidence of insurance
required by Section 7.2(B) hereof, SalesLink Mexico shall conduct no
operations other than to hold the stock certificates of any Subsidiary of
SalesLink Mexico.
7.4 CONTESTING CHARGES. Notwithstanding anything to the contrary in this
Agreement, a Borrower may dispute any Charges without prior payment thereof, so
long as such non-payment will not cause a Lien except a Permitted Lien to attach
to such Borrower's assets, and provided that such Borrower shall give Agent and
each Lender prompt notice of such dispute and shall be diligently contesting the
same in good faith and by an appropriate proceeding and there is no danger of a
loss or forfeiture of any of the Collateral and provided further that, if such
disputed Charges are potentially or actually in excess of $10,000 in the
aggregate, such Borrower shall give Agents and each Lender such additional
collateral and assurances as Agent and such Lender, in their sole discretion,
deems necessary under the circumstances, immediately upon demand by Agent and
such Lender.
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7.5 PAYMENT OF CHARGES. Subject to the provisions of Section 7.4, a
Borrower shall pay promptly when due all of the Charges. In the event such
Borrower, at any time or times, shall fail to pay the Charges or to promptly
obtain the satisfaction of such Charges, such Borrower shall promptly so notify
Agent and each Lender and Agent and such Lender may, without waiving or
releasing any obligation or liability of such Borrower under this Agreement or
any Event of Default, in its sole discretion, at any subsequent time or times,
make such payment or any part thereof (but shall not be obligated so to do), or
obtain such satisfaction and take any other action which Agent or such Lender
deems advisable. All sums so paid by Agent or any Lender and any expenses,
including reasonable attorneys' fees, court costs, expenses and other related
charges, shall be payable by such Borrower to Agent or such Lender upon demand
and shall be additional Liabilities.
7.6 INSURANCE; PAYMENT OF PREMIUMS. All policies of insurance on the
Collateral or otherwise required under this Agreement shall be in form and
amount satisfactory to Agent and with insurers reasonably recognized as adequate
by Agent. Borrowers shall deliver to Agent the original (or a certified copy)
of each policy of insurance, or, in lieu thereof, certificates of such policies
of insurance satisfactory to Agent, and evidence of payment of all premiums
therefor and shall deliver renewals of all such policies to Agent at least
thirty (30) days prior to their expiration dates. Such policies of insurance
shall contain an endorsement, in form and substance acceptable to Agent, showing
all losses payable to Agent for the benefit of each Lender. Such endorsement
shall provide that the insurance companies will give Agent at least thirty (30)
days' prior written notice before any such policy shall be altered or canceled
and that no act or default of Borrowers or any other Person shall affect the
right of Agent to recover under such policy in case of loss or damage. Each
Borrower hereby directs all insurers under such policies to pay all proceeds
directly to Agent after the occurrence of an Event of Default. Each Borrower
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent) as such Borrower's true and lawful attorney and
agent-in-fact for the purpose of making, settling and adjusting claims under
such policies (provided that Agent shall consult with such Borrower prior to
finally making, settling or adjusting claims under such policies), endorsing the
name of such Borrower in writing or by stamp on any check, draft, instrument or
other item of payment for the proceeds of such policies and for making all
determinations and decisions with respect to such policies. If such Borrower
shall fail to obtain or maintain any of the policies required by this Section
7.6 or to pay any premium relating thereto, then Agent or any Lender, without
waiving or releasing any obligation or Event of Default by such Borrower
hereunder, may (but shall be under no obligation to do so) obtain and maintain
such policies of insurance and pay such premiums and take any other action which
Agent or such Lender deems advisable. All sums so disbursed by Agent or any
Lender, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be payable by Borrowers to Agent or such Lender
upon demand and shall be additional Liabilities.
7.7 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT. Except as
otherwise expressly provided for in this Agreement and in the Ancillary
Agreements, no termination or cancellation (regardless of cause or procedure) of
this Agreement or the Ancillary
57
Agreements shall in any way affect or impair the powers, obligations, duties,
rights, and liabilities of Borrowers or Agent or any Lender in any way with
respect to (i) any transaction or event occurring prior to such termination or
cancellation, (ii) the Collateral, or (iii) any of the undertakings, agreements,
covenants, warranties and representations of Borrowers or Agent or any Lender
contained in this Agreement or the Ancillary Agreements. All such undertakings,
agreements, covenants, warranties and representations shall survive such
termination or cancellation.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.
--------------------------------------
8.1 EVENT OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an Event of Default under this Agreement:
(A) (i) Borrowers fail to pay, within three (3) days after the same
shall be due and payable or be declared due and payable, any part of the
Liabilities or (ii) a Borrower is in default in the payment of Indebtedness
in the aggregate in excess of $100,000 beyond any applicable cure period or
(iii) any Subsidiary is in default on its indebtedness in the aggregate in
excess of $100,000 beyond any applicable cure period; or
(B) Borrowers or any Subsidiary or any guarantor of the Liabilities
fails or neglects to perform, keep or observe (i) any term, provision,
condition or covenant contained in Sections 7.1, 7.2 or 7.3 of this
Agreement and such failure continues unremedied for a period of ten (10)
days or (ii) any other term, provision, condition or covenant contained in
this Agreement or in the Ancillary Agreements, which is required to be
performed, kept or observed by a Borrower or such Subsidiary or guarantor
and such failure continues unremedied for a period of ten (10) days; or
(C) The occurrence of any default (subject to any applicable cure
periods) under (i) any of the Ancillary Agreements or (ii) any document
evidencing or securing any Subordinated Debt with a principal amount in
excess of $100,000; or
(D) Any statement, warranty, representation, report, financial
statement, or certificate made or delivered by a Borrower, any of its
officers, employees or agents, to Agent or any Lender is not true and
correct in any material respect on the date it was made or delivered or
deemed re-made; or
(E) There shall occur any material uninsured damage to or loss, theft,
or destruction of any of the Collateral in excess of $65,000; or
(F) The Collateral or any of Borrowers' other assets or any assets of
any Subsidiary are attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and the same is not
cured within ten (10) days; or an application is made by any Person for the
appointment of a receiver, trustee, or custodian for any of the
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Collateral or any of Borrowers' other assets or any assets of any
Subsidiary and the same is not dismissed within sixty (60) days after such
application; or
(G) An application is made by a Borrower for the appointment of a
receiver, trustee or custodian for any of the Collateral or any of such
Borrower's other assets; or an application is made by any Subsidiary or any
guarantor of the Liabilities, for the appointment of a receiver, trustee or
custodian for any of such Subsidiary's or such guarantor's assets; or any
case or proceeding is filed by or against a Borrower, any Subsidiary or any
such guarantor for its dissolution, liquidation, or termination; or a
Borrower or any Subsidiary ceases to conduct its business as now conducted
or is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; or
(H) A notice of Lien, levy or assessment is filed of record with
respect to all or any substantial portion of a Borrower's assets or any
Subsidiary's assets by the United States, or any department, agency or
instrumentality, or by any state, county, municipal or other governmental
agency including, without limitation, the Pension Benefit Guaranty
Corporation, or any taxes or debts owing to any of the foregoing becomes a
Lien or encumbrance upon the Collateral or any of a Borrower's other assets
or upon any Subsidiary's assets and such Lien or encumbrance is not
released within sixty (60) days after its creation; or
(I) Judgment(s) is or are rendered against a Borrower or any
Subsidiary in the aggregate in excess of $100,000 and such Person fails to
either discharge the judgment or commence appropriate proceedings to appeal
such judgment(s) within the applicable appeal period or, after such appeal
is filed, such Person fails to diligently prosecute such appeal or such
appeal is denied; or
(J) A petition under any section or chapter of the United States
Bankruptcy Code or any similar law or regulation is filed by or against a
Borrower, any Subsidiary or any guarantor of the Liabilities, and, if filed
against a Borrower, any Subsidiary or any such guarantor, is not dismissed
within sixty (60) days after filing; or a Borrower, any Subsidiary or any
such guarantor makes an assignment for the benefit of its creditors; or a
Borrower or any Subsidiary becomes insolvent, fails generally to pay its
debts as they become due or admits its inability to pay its debts as they
become due; or
(K) A Borrower fails within fifteen (15) days after the occurrence of
any of the following events, to furnish Agent and each Lender with
appropriate notice thereof: (i) the happening of a Reportable Event with
respect to any profit sharing or pension plan governed by ERISA (such
notice shall contain the statement of the chief financial officer of a
Borrower setting forth details as to such Reportable Event and the action
which such Borrower or the applicable Subsidiary proposes to take with
respect thereto and a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation), (ii) the termination of any such
plan, (iii) the appointment of a trustee by an appropriate United States
District Court to administer any such plan, or (iv) the
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institution of any proceedings by the Pension Benefit Guaranty Corporation
to terminate any such plan or to appoint a trustee to administer any such
plan; or
(L) A Borrower fails to: (i) notify Agent and each Lender promptly
upon receipt by such Borrower or any Subsidiary of any notice of the
institution of any proceeding or other actions which may result in the
termination of any profit sharing or pension plan; or (ii) acquire and
maintain or cause any Subsidiary to acquire and maintain, when available,
the contingent employer liability coverage insurance provided for under
Section 4023 of ERISA in an amount satisfactory to the Required Lenders; or
(M) This Agreement or any Ancillary Agreement shall be repudiated or
become unenforceable or incapable of performance, in whole or in part; or
(N) Any Person(s) presently not in control of a Borrower shall obtain
control directly or indirectly of such Borrower.
8.2 EFFECT OF EVENT OF DEFAULT. If (a) any Event of Default described in
Section 8.1(J) shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and all Notes shall become immediately
due and payable, all without presentment, demand, protest or notice of any kind,
or any action by Agent or any of the Lenders; and (b) any other Event of Default
shall occur (other than an Event of Default described in Section 8.1(J)), the
Agent may (and upon written request of the Required Lenders, shall) declare the
Commitments (if they have not theretofore terminated) to be terminated and all
Notes to be due and payable, whereupon the Commitments (if they have not
theretofore terminated) shall immediately terminate and all Notes shall become
immediately due and payable, all without presentment, demand, protest or notice
of any kind. The Agent shall promptly advise Borrowers and each Lender of any
such declaration, but failure to do so shall not impair the effect of such
declaration.
8.3 REMEDIES. Upon and after the occurrence of an Event of Default, Agent
shall have all of the following rights and remedies:
(A) All of the rights and remedies of a secured party under the
Illinois Uniform Commercial Code or other applicable law, all of which
rights and remedies shall be cumulative and non-exclusive, to the greatest
extent permitted by law, and in addition to any other rights and remedies
contained in this Agreement and in any of the Ancillary Agreements;
(B) The right to (i) peacefully enter upon the premises of each
Borrower or any other place or places where the Collateral is located and
kept, without any obligation to pay rent to such Borrower or any other
person, through self-help and without judicial process or first obtaining a
final judgment or giving such Borrower notice and opportunity for a hearing
on the validity of Agent's and each Lender's claim, and remove the
Collateral from such premises and places, for such time as Agent and each
Lender
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may require to collect or liquidate the Collateral, and/or (ii) require
each Borrower to assemble and deliver the Collateral to Agent at a place to
be designated by Agent;
(C) The right to (i) open each Borrower's mail and collect any and all
amounts due from Account Debtors, (ii) notify Account Debtors that the
Accounts have been assigned to Agent and that Agent has a security interest
therein and (iii) direct such Account Debtors to make all payments due from
them upon the Accounts, including the Special Collateral, directly to Agent
or to a lock box designated by Agent. Agent shall promptly furnish each
Borrower with a copy of any such notice sent and each Borrower hereby
agrees that any such notice in Agent's sole discretion, may be sent on
Agent's stationery, in which event, each Borrower shall, upon demand, co-
sign such notice with Agent; and
(D) The right to sell, lease or to otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
provided in Section 8.4, in lots or in bulk, for cash or on credit, all as
Agent, in its sole discretion, may deem advisable. At any such sale or
sales of the Collateral, the Collateral need not be in view of those
present and attending the sale, nor at the same location at which the sale
is being conducted. Agent shall have the right to conduct such sales on
each Borrower's premises or elsewhere and shall have the right to use each
Borrower's premises without charge by Borrowers or their Affiliates for
such sales for such time or times as Agent may see fit, subject to the
rights of any landlord to such premises. Agent is granted a license or
other right to use, without charge, each Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in advertising for sale and selling any
Collateral and each Borrower's rights under all licenses and all franchise
agreements shall inure to Agent's benefit but Agent shall have no
obligations thereunder. Agent may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may setoff the amount of such price
against the Liabilities. The proceeds realized from the sale of any
Collateral shall be applied as set forth in Section 8.7. If any deficiency
shall arise, Borrowers shall remain liable to Agent and each Lender for the
amount of such deficiency.
8.4 NOTICE. Each Borrower agrees that any notice required to be given by
Agent or any Lender of a sale, lease, other disposition of any of the Collateral
or any other intended action by Agent or such Lender, which is personally
delivered to such Borrower or which is deposited in the United States mail,
postage prepaid and duly addressed to such Borrower at the address set forth in
Section 10.10, at least ten (10) days prior to any such public sale, lease or
other disposition or other action being taken, or prior to the time after which
any private sale of the Collateral is to be held, shall constitute commercially
reasonable and fair notice to such Borrower.
8.5 DEFAULT INTEREST RATE. To compensate Agent and each Lender for
additional unreimbursed costs resulting from the occurrence of an Event of
Default, including without
61
limitation, acts associated with the uncertainty of future funding and
additional supervisory and administrative efforts, upon the occurrence of and
during the continuance of an Event of Default and after notice thereof is given
to Borrowers at the direction of the Required Lenders, the Liabilities shall
continue to bear interest, calculated daily on the basis of a 360-day year at
the per annum rate set forth in Section 2.4 above, plus additional post-default
interest of two percent (2%) per year until the Liabilities are paid in full.
8.6 PRESERVATION OF RIGHTS. No delay or omission of the Agent or any
Lender to exercise any right under this Agreement or any Ancillary Agreement
shall impair such right or be construed to be a waiver of any Event of Default
or an acquiescence therein, and the making of a Loan notwithstanding the
existence of an Event of Default or the inability of Borrowers to satisfy the
conditions precedent to such Loan shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of this Agreement or any Ancillary Agreement whatsoever shall be
valid unless in writing signed by the Required Lenders, and then only to the
extent in such writing specifically set forth. All remedies contained in this
Agreement or any Ancillary Agreement or by law afforded shall be cumulative and
all shall be available to Agent and the Lenders until the Liabilities have been
paid in full.
8.7 DISTRIBUTIONS. The Agent shall distribute all proceeds and other
amounts received by it with respect to Collateral:
First, to the payment of any amounts owed to it under Section 10.3 or
under any Ancillary Agreement executed pursuant hereto and any expenses
incurred by the Agent in connection with the maintenance, preservation or
protection of any Collateral;
Second, to all Lenders pro rata according to the then outstanding
amount of Liabilities held by each such Lender; and
Third, if any balance remains after the Liabilities have been paid in
full, to Borrowers.
Each Lender shall apply any payment so received from the Agent,
First, to unpaid accrued interest, if any, on its Liabilities until
paid in full;
Second, to the unpaid premium, if any, on its Liabilities;
Third, to the unpaid principal of its Liabilities until paid in full;
and
Fourth, to its other Liabilities;
provided, however, that any Lender which receives any payment on account of
the Borrowers' contingent obligations under a Letter of Credit shall hold such
payment as cash
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collateral for such contingent obligation (and shall have no obligation to pay
interest thereon), and, following any reduction of the stated amount of such
Letter of Credit or termination thereof, shall return to the Agent for
distribution pursuant to this Section 8.7 any amounts in excess of the
Borrowers' contingent obligations not used to reimburse such Lender.
8.8 METHOD OF ADJUSTMENT. If any Lender shall obtain any payment with
respect to its Liabilities in excess of its (or their) pro rata share pursuant
to Section 8.7, it shall be deemed to have received such excess on behalf of all
Lenders and shall promptly deliver such excess to the Agent for distribution in
accordance with Section 8.7. If for any reason payments to the Agent in the
preceding sentence shall be determined by the Agent to be improper or not
advisable, then such Lender shall purchase from each Lender receiving less than
its pro rata share, such participation in its Liabilities as shall be necessary
for such purchasing Lender to share the excess payment received pro rata with
such other Lenders; provided, however, that if all or any portion of such excess
payment be thereafter recovered from such purchasing Lender, the purchase shall
be rescinded to the extent of such recovery, but without interest or premium;
and, provided, further, that the nonperformance by any Lender of its obligation
under this Section shall not excuse any other Lender hereunder.
9. AGENT.
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9.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
(subject to Section 9.9) appoints, designates and authorizes each Agent to take
such action on its behalf under the provisions of this Agreement and each other
Ancillary Agreement and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Ancillary
Agreement, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Ancillary Agreement, Agent shall not have any duties
or responsibilities except those expressly set forth herein, nor shall Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Ancillary Agreement
or otherwise exist against Agent.
9.2 DELEGATION OF DUTIES. Agent may execute any of its duties under this
Agreement or any other Ancillary Agreement by or through its agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.3 LIABILITY OF AGENT. No Agent-Related Persons shall (i) be liable for
any action taken or omitted to be taken by any of them under or in connection
with this Agreement or any other Ancillary Agreement or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct)
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrowers or any Subsidiary or
Affiliate of Borrowers, or any officer thereof, contained in this Agreement or
in any other Ancillary Agreement, or in any certificate, report, statement or
other document referred to or
63
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Ancillary Agreement, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Ancillary Agreement, or for any failure of the Borrowers or any other party to
any Ancillary Agreement to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Ancillary Agreement,
or to inspect the properties, books or records of Borrowers or any of Borrowers'
Subsidiaries or Affiliates.
9.4 RELIANCE BY AGENTS. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to
Borrowers), independent accountants and other experts selected by Agent. Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Ancillary Agreement unless it shall first receive such
advice or concurrence of the Required Lenders and, if it so requests,
confirmation from the Lenders of their obligation to indemnify Agent against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other
Ancillary Agreement in accordance with a request or consent of the Required
Lenders (unless the consent of all the Lenders is required in such case, in
which case unanimous consent of the Lenders) and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Lenders. For purposes of determining compliance with the conditions specified
in Section 2.11 or in any comparable provision of any amendment hereto, each
Lender that has executed this Agreement or such amendment shall be deemed to
have consented to, approved or accepted, or to be satisfied with, each document
or other matter either sent by an Agent to such Lender for consent, approval,
acceptance or satisfaction, or required thereunder to be consented to or
approved by or acceptable or satisfactory to the Lender.
9.5 NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to the Agent for the account of the Lenders, unless the Agent shall have
received written notice from a Lender or Borrowers referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Lenders of its receipt of any
such notice. Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
Section 8; provided, however, that unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable or in the best interest of the Lenders.
9.6 CREDIT DECISION. Each Lender acknowledges that none of the Agent-
Related Persons has made any representation or warranty to it, and that no act
by Agent hereinafter
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taken, including any review of the affairs of Borrowers and their Subsidiaries,
shall be deemed to constitute any representation or warranty by any Agent-
Related Person to any Lender. Each Lender represents to Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrowers and
their Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrowers hereunder. Each Lender also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the
Ancillary Agreements, and to make such investigations as it deems necessary to
inform itself as to the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrowers. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Agent, Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrowers which may come into the possession of any of the Agent-Related
Persons.
9.7 INDEMNIFICATION. The Lenders shall indemnify upon demand any Agent-
Related Persons (to the extent not reimbursed by or on behalf of Borrowers and
without limiting the obligation of Borrowers to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Lender
shall be liable for the payment to the Agent or any Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including reasonable fees of attorneys for Agent)
incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Ancillary Agreement,
or any document contemplated by or referred to herein, to the extent that Agent
is not reimbursed for such expenses by or on behalf of Borrowers. To the extent
that Agent or any Agent-Related Person shall thereafter be reimbursed by or on
behalf of Borrowers for any amount paid by the Banks pursuant to this Section
9.7, such Person shall reimburse each Lender for its ratable share of any such
amount. The undertaking in this Section shall survive the expiration or
termination of the Commitments and payment of the Loans and other liabilities of
Borrowers hereunder and the resignation or replacement of Agent. For the
purposes of this Section 9.7, "INDEMNIFIED LIABILITIES" shall mean: any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including reasonable fees of
attorneys for Agent) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the termination,
resignation or replacement of Agent or replacement of any Lender) be imposed on,
incurred by or asserted against any such Agent Related Person in any way
relating to or arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or any action
65
taken or omitted by any such Agent Related Person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including (i) any case, action or proceeding before any court or
other governmental authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors or (ii)
any general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code or appellate
proceeding) related to or arising out of this Agreement or the Loans or the use
of the proceeds thereof, whether or not any Agent-Related Person, any Lender or
any of their respective officers, directors, employees, counsel, agents or
attorneys-in-fact is a party thereto.
9.8 AGENT IN INDIVIDUAL CAPACITY. LaSalle and its Affiliates may make
loans to, issue Letters of Credit for the account of, accept deposits from and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with Borrowers and their Subsidiaries and Affiliates as though
it were not Agent hereunder and without notice to or consent of the Lenders.
The Lenders acknowledge that, pursuant to such activities, Agent or its
Affiliates may receive information regarding Borrowers or their Affiliates
(including information that may be subject to confidentiality obligations in
favor of Borrowers or such Subsidiaries) and acknowledge that Agent shall be
under no obligation to provide such information to them. With respect to their
Loans, Agent and its Affiliates shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though such Agent
were not an Agent, and the terms Lender and Lenders include Agent and its
Affiliates, to the extent applicable, in their individual capacities.
9.9 SUCCESSOR AGENT. Agent may resign as an Agent upon 30 days' notice to
the Lenders. If Agent resigns under this Agreement, the Required Lenders shall,
with the prior written consent of Borrowers, appoint from among the Lenders a
successor agent for the Lenders. If no successor agent is appointed prior to
the effective date of the resignation of Agent, Agent may appoint, after
consulting with the Lenders and with the prior written consent of Borrowers, a
successor agent from among the Lenders. Upon the acceptance of its appointment
as successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term Agent shall mean
such successor agent and the retiring Agent's appointment, powers and duties as
an Agent shall be terminated. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was an Agent under this
Agreement. If no successor agent has accepted appointment as an Agent by the
date which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of an Agent hereunder until such
time, if any, as the Required Lenders appoint a successor agent as provided for
above.
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10. MISCELLANEOUS.
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10.1 APPOINTMENT OF AGENT AS EACH BORROWER'S LAWFUL ATTORNEY-IN-FACT.
Each Borrower irrevocably designates, makes, constitutes and appoints Agent (and
all persons designated by Agent) as such Borrower's true and lawful attorney and
agent-in-fact and Agent, or Agent's agent, may, without notice to such Borrower:
(A) At any time after the occurrence of and during the continuance of
an Event of Default, endorse by writing or stamp each Borrower's name on
any checks, notes, drafts or any other payment relating to and/or proceeds
of the Collateral which come into the possession of Agent or under Agent's
control and deposit the same to the account of Agent for application to the
Liabilities;
(B) At any time after the occurrence of and during the continuance of
an Event of Default, in each Borrower's or Agent's name: (i) demand
payment of the Collateral; (ii) enforce payment of the Collateral, by legal
proceedings or otherwise; (iii) exercise all of each Borrower's rights and
remedies with respect to the collection of the Collateral; (iv) settle,
adjust, compromise, extend or renew the Accounts and the Special
Collateral; (v) settle, adjust or compromise any legal proceedings brought
to collect the Collateral; (vi) if permitted by applicable law, sell or
assign the Collateral upon such terms, for such amounts and at such time or
times as Agent deems advisable; (vii) satisfy and release the Accounts and
Special Collateral; (viii) take control, in any manner, of any item of
payment or proceeds referred to in Section 3.3; (ix) prepare, file and sign
each Borrower's name on any proof of claim in bankruptcy or similar
document against any Account Debtor; (x) prepare, file and sign each
Borrower's name on any notice of Lien, assignment or satisfaction of Lien
or similar document in connection with the Collateral; (xi) do all acts and
things necessary, in Agent's sole discretion, to fulfill each Borrower's
obligations under this Agreement; (xii) endorse by writing or stamp the
name of each Borrower upon any chattel paper, document, instrument,
invoice, freight xxxx, xxxx of lading or similar document or agreement
relating to the Collateral; and (xiii) use the information recorded on or
contained in any data processing equipment and computer hardware and
software relating to the Collateral to which each Borrower has access; and
(C) At any time after the occurrence of and during the continuance of
an Event of Default, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Agent
and receive, open and dispose of all mail addressed to each Borrower.
10.2 MODIFICATION OF AGREEMENT; SALE OF NOTES; PARTICIPATIONS. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or the Notes shall in any event be effective unless the same
shall be in writing and signed and delivered by Lenders having an aggregate
Percentage of not less than the aggregate Percentage expressly designated herein
with respect thereto or, in the absence of such designation as to any provision
of this Agreement or the Notes, by the Required Lenders, and then any such
67
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No amendment,
modification, waiver or consent shall extend or increase the amount of the
Commitments, extend the final maturity of the Notes, reduce the principal
thereof, reduce the fees hereunder or the rate of interest payable with respect
to the Notes (other than pursuant to Section 2.1), reduce the aggregate
Percentage required to effect an amendment, modification, waiver or consent,
reduce the amount of or extend the date for the mandatory payments on the Notes,
modify the definition of Borrowing Base, amend this Section 10.2 or permit any
assignment by Borrowers of their obligations or rights hereunder or amend any
covenants contained in Sections 7.1, 7.2 or 7.3, without the consent of the
Required Lenders in each instance. No provision of this Agreement relating to
the Agent shall be amended, modified or waived without the consent of Agent. No
provision of Section 2.13 shall be amended, modified or waived without the
consent of the Issuing Lender. No Borrower may not sell, assign, transfer or
otherwise dispose of all or any portion of this Agreement or the Ancillary
Agreements, including, without limitation, such Borrower's right, title,
interest, remedies, powers, or duties. Each Borrower consents to any Lender's
participation, sale, assignment, transfer or other disposition, at any time or
times, of this Agreement or the Ancillary Agreements, including, without
limitation, such Lender's right, title, interest, remedies, powers, or duties.
Each Borrower consents to any Lender's pledge of its rights under this
Agreement, any Note issued hereunder or any Ancillary Agreement to the Federal
Reserve Bank. Any Lender shall have the right to sell, assign or transfer all
or part of any Note to one or more banks or other financial institutions, or to
grant participations to one or more banks or other financial institutions, in or
to any Loan hereunder and any Note held by such Lender upon three (3) days prior
written notice to Borrowers (and if no Default or Event of Default has occurred
and is continuing with the prior written consent of Borrowers) and the Agent
together with, in the case of assignments only, execution and delivery to the
Agent and the Borrowers of an Assignment Agreement substantially in the form of
Exhibit P hereto and payment of a $5,000 fee to the Agent for processing such
assignment. Borrowers hereby consent to the disclosure of any information
obtained by the Agent or any Lender in connection herewith to any bank or other
financial institution to which any Lender now or hereafter has sold, assigned or
transferred, or sold or proposed to sell, assign or transfer, all or any part of
any Note or any participation interest in any Loan or Note. Upon the sale,
transfer or assignment of all or a portion of any Note pursuant to one or more
Assignment Agreements, Borrowers shall, upon the request of the assigning
Lender, execute a new note or notes in a form substantially similar to the Note
or Notes so replaced. Each such transferee shall be deemed to be a Lender under
this Agreement. Each transferee of any Note shall take such Note subject to the
provisions of this Agreement and to any request made, waiver or consent given or
other action taken hereunder prior to the receipt by Agent and Borrowers of
written notice of such transfer. Each Lender represents that it is the present
intention of such Lender to acquire each Note drawn to its order for its own
account and not with a view to the distribution or sale thereof, subject,
nevertheless, to the necessity that such Lender remain in control at all times
of the disposition of property held by it for its own account; it being
understood that the foregoing representation shall not affect the character of
the Loans as commercial lending transactions.
10.3 ATTORNEYS' FEES AND EXPENSES; AGENT AND EACH LENDER'S OUT-OF-POCKET
EXPENSES. If, at any time or times, whether prior or subsequent to the date of
this Agreement
68
and regardless of the existence of a Default or an Event of Default, Agent and
each Lender incurs reasonable legal or other costs and expenses or employs
counsel, accountants or other professionals for advice or other representation
or services in connection with:
(A) The preparation, negotiation and execution of this Agreement, all
Ancillary Agreements, any amendment of or modification of this Agreement or
the Ancillary Agreements;
(B) Any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, a Borrower or any other Person)
in any way relating to the Collateral, this Agreement, the Ancillary
Agreements or Borrowers' affairs;
(C) Any attempt to enforce any rights of Agent or any Lender against a
Borrower or any other Person which may be obligated to Agent or such Lender
by virtue of this Agreement or the Ancillary Agreements, including, without
limitation, the Account Debtors;
(D) Any attempt to inspect, verify, protect, collect, sell, liquidate
or otherwise dispose of any of the Collateral; or
(E) Any inspection, verification, protection, collection, sale,
liquidation or other disposition of any of the Collateral, including
without limitation, Agent's periodic field audits and audits of a
Borrower's books and records;
then, in any such event, the reasonable attorneys' and paralegals' fees and
expenses arising from such services and all reasonably incurred expenses, costs,
charges and other fees of or paid by Agent (or any Lender after the occurrence
of and during the continuation of an Event of Default) in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section 10.3 shall be payable by Borrowers, jointly and severally, to
Agent (or any Lender after the occurrence of and during the continuation of an
Event of Default) upon demand and shall be additional Liabilities. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include accountants' fees, costs and expenses; court costs, fees and
expenses; photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; courier charges; telegram and
telecopy charges.
10.4 NO OFFSET; RIGHT TO CHARGE ACCOUNTS. All payments due to Agent or
any Lender shall be made in immediately available funds, without setoff or
counterclaim. At Agent's or any Lender's sole discretion, Agent or such Lender
may charge against any demand account of a Borrower all or any part of the
Liabilities which are due and payable.
10.5 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be
69
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
10.6 PARTIES; ENTIRE AGREEMENT. This Agreement and the Ancillary
Agreements shall be binding upon and inure to the benefit of the respective
successors and assigns of each Borrower, Agent and each Lender. Each Borrower's
successors and assigns shall include, without limitation, a trustee, receiver or
debtor-in-possession of or for such Borrower. Nothing contained in this Section
10.6 shall be deemed to modify Section 10.2. This Agreement is the complete
statement of the agreement by and among Borrowers, Agent and each Lender and
supersedes all prior negotiations, understandings and representations between
them with respect to the subject matter of this Agreement.
10.7 CONFLICT OF TERMS. The provisions of the Ancillary Agreements are
incorporated in this Agreement by this reference. Except as otherwise provided
in this Agreement and except as otherwise provided in the Ancillary Agreement,
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in any Ancillary Agreement, the provision contained in this
Agreement shall govern and control.
10.8 WAIVER BY BORROWERS. Except as otherwise provided for in this
Agreement, each Borrower waives (i) presentment, demand and protest, notice of
protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent or any Lender on which such Borrower may in any way be
liable and hereby ratifies and confirms whatever Agent or such Lender may do in
this regard; (ii) all rights to notice and a hearing prior to Agent's or any
Lender's taking possession or control of, or Agent's or any Lender's replevy,
attachment or levy upon the Collateral or any bond or security which might be
required by any court prior to allowing Agent or any Lender to exercise any of
Agent's or any Lender's remedies; and (iii) the benefit of all valuation,
appraisement, extension and exemption laws. Each Borrower acknowledges that it
has been advised by its own counsel with respect to this Agreement and the
transactions evidenced by this Agreement.
10.9 WAIVER AND GOVERNING LAW. THE LOANS EVIDENCED HEREBY HAVE BEEN MADE,
AND THIS AGREEMENT HAS BEEN DELIVERED, AT CHICAGO, ILLINOIS, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD
TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS. EACH BORROWER
(I) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS; (II) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN XXXX COUNTY, ILLINOIS, OVER ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS;
70
(III) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT SUCH BORROWER MAY EFFECTIVELY DO
SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION
OR PROCEEDING; (IV) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (V) AGREES NOT
TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST AGENT, ANY LENDER OR ANY OF
AGENT'S OR LENDER'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS IN ANY COURT OTHER THAN ONE LOCATED IN XXXX COUNTY,
ILLINOIS. EACH BORROWER WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR
OTHER PROCESS OR PAPERS ISSUED IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
BORROWER AT THE ADDRESS SET FORTH IN SECTION 10.10. SHOULD SUCH BORROWER FAIL TO
APPEAR OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SERVED WITHIN THIRTY
(30) DAYS AFTER THE RECEIPT THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER
AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
IMPAIR LENDER'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR
LENDER'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST SUCH BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
10.10 NOTICE. Except as otherwise provided in this Agreement, any notice
required shall be in writing and shall be deemed to have been validly served,
given or delivered upon (i) delivery in person, by messenger or overnight
courier service, (ii) the day after transmission by facsimile, (iii) or five (5)
Business Days after deposit in the United States certified or registered mails,
with proper postage prepaid, addressed to the party to be notified as follows:
(a) If to Agent, at:
LaSalle Bank National Association
000 Xxxxx XxXxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
71
with a copy to:
Ungaretti & Xxxxxx
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
(b) If to Borrowers, at:
SalesLink Corporation
InSolutions, Incorporated
On-Demand Solutions, Inc.
Pacific Direct Marketing Corp.
SalesLink Mexico Holding Corp.
c/o SalesLink Corporation
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to:
(prior to November 5, 2001)
Xxxxxx & Dodge, LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxxxx
Fax: (000) 000-0000
(on or after November 5, 2001)
Xxxxxx & Dodge, LLP
000 Xxxxxxxxxx Xxxxxx
at Prudential Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxxxx
Fax: (000) 000-0000
(c) If to any Lender, addressed to such Lender at the address shown
below its signature as its domestic office address
or to such other address or facsimile number as each party may designate
for itself by like notice.
72
10.11 SECTION TITLES, ETC. The section titles and table of contents, if
any, contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto. All Exhibits and Schedules which are referred to herein or
attached hereto are incorporated by reference.
10.12 MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If any mutilated Note
is surrendered to the Borrowers, the Borrowers shall execute therefor a new Note
with the same principal amount, containing identical terms and provisions. If
there shall be delivered to the Borrowers (a) evidence to its satisfaction of
the destruction, loss or theft of any Note and (b) such security or indemnity as
may be required by them to hold the Borrowers and any agent of the Borrowers
harmless, then, in the absence of notice to the Borrowers that such Note has
been acquired by a bona fide purchaser, the Borrowers shall execute and deliver,
in lieu of any such destroyed, lost or stolen Note or in exchange for such Note,
a new Note with the same principal amount, containing identical terms and
provisions. Upon the issuance of any new Note under this Section, the Borrowers
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. Every new Note, issued pursuant to this Section
in lieu of any destroyed, lost or stolen Note, shall constitute an original
contractual obligation of the Borrowers, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Agreement.
11. CROSS-GUARANTY.
--------------
11.1 CROSS-GUARANTY. Each Borrower hereby agrees that such Borrower is
jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to the Agent and each Lender and their respective successors and
assigns, the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Liabilities owed or hereafter
owing to Agent and each Lender by each other Borrower. Each Borrower agrees
that its guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its obligations under this Section 11
shall not be discharged until payment and performance, in full, of the
Liabilities has occurred, and that its obligations under this Section 11 shall
be absolute and unconditional, irrespective of, and unaffected by, the
genuineness, validity, regularity, enforceability or any future amendment of, or
change in, this Agreement, any other Ancillary Agreement or any other agreement,
document or instrument to which any Borrower is or may become a party; the
absence of any action to enforce this Agreement (including this Section 11) or
any other Ancillary Agreement or the waiver or consent by Agent and each Lender
with respect to any of the provisions thereof; the existence, value or condition
of, or failure to perfect its Lien against, any security for the Liabilities or
any action, or the absence of any action, by Agent and each Lender in respect
thereof (including the release of any such security); the insolvency of any
Borrower; or any other action or circumstances that might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor. Each Borrower
shall be regarded, and shall be in the same position, as principal debtor with
respect to the Liabilities guaranteed hereunder.
73
11.2 WAIVERS BY BORROWERS. Each Borrower expressly waives all rights it
may have now or in the future under any statute, or at common law, or at law or
in equity, or otherwise, to compel Agent or any Lender to marshal assets or to
proceed in respect of the Liabilities guaranteed hereunder, against any other
party or against any security for the payment and performance of the Liabilities
before proceeding against, or as a condition to proceeding against, such
Borrower. It is agreed among each Borrower, Agent and each Lender that the
foregoing waivers are of the essence of the transaction contemplated by this
Agreement and the Ancillary Agreements and that, but for the provisions of this
Section 11.2 and such waivers, Agent and the Lenders would decline to enter into
this Agreement.
11.3 BENEFIT OF GUARANTY. Each Borrower agrees that the provisions of
this Section 11.3 are for the benefit of Agent and each Lender and their
respective successors, transferees, endorsees and assigns, and nothing herein
contained shall impair, as between any other Borrower and Agent or any Lender,
the obligations of such other Borrower under this Agreement and the Ancillary
Agreements.
11.4 SUBORDINATION OF SUBROGATION, ETC. Notwithstanding anything to the
contrary in this Agreement or in any Ancillary Agreement, and except as set
forth in Section 11.7, each Borrower hereby expressly and irrevocably
subordinates to payment of the Liabilities any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution, indemnification
or set off and any and all defenses available to a surety, guarantor or
accommodation co-obligor until the Liabilities are indefeasibly paid in full in
cash. Each Borrower acknowledges and agrees that this subordination is intended
to benefit Agent and each Lender and shall not limit or otherwise affect such
Borrower's liability hereunder or the enforceability of this Section 11, and
that Agent, each Lender and their respective successors and assigns are intended
third party beneficiaries of the waivers and agreements set forth in this
Section 11.4.
11.5 ELECTION OF REMEDIES. If Agent or any Bank may, under applicable
law, proceed to realize its benefits under this Agreement or any Ancillary
Agreement giving Agent or such Lender a Lien upon any Collateral, whether owned
by any Borrower or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this Section 11. If, in the exercise of any of
its rights and remedies, Agent or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, each Borrower hereby consents to such
action by Agent or such Lender and waives any claim based upon such action, even
if such action by Agent or such Lender shall result in a full or partial loss of
any rights of subrogation that each Borrower might otherwise have had but for
such action by Agent or such Lender. Any election of remedies that results in
the denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower's
obligation to pay the full amount of the Liabilities. In the event Agent or any
Lender shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or this Agreement or any Ancillary Agreements, Agent or such
Lender may bid all or less than the
74
amount of the Liabilities and the amount of such bid need not be paid by Agent
or such Lender but shall be credited against the Liabilities. The amount of the
successful bid at any such sale, whether Agent, such Lender or any other party
is the successful bidder, shall be conclusively deemed to be the fair market
value of the Collateral and the difference between such bid amount and the
remaining balance of the Liabilities shall be conclusively deemed to be the
amount of the Liabilities guaranteed under this Section 15, notwithstanding that
any present or future law or court decision or ruling may have the effect of
reducing the amount of any deficiency claim to which Agent or any Lender might
otherwise be entitled but for such bidding at any such sale.
11.6 LIMITATION. Notwithstanding any provision herein contained to the
contrary, each Borrower's liability under this Section 11 (which liability is in
any event in addition to amounts for which such Borrower is primarily liable
under Section 2) shall be limited to an amount not to exceed as of any date of
determination the greater of: (i) the net amount of all Loans advanced to any
other Borrower under this Agreement and then re-loaned or otherwise transferred
to, or for the benefit of, such Borrower; and (ii) the amount that could be
claimed by Agent and Lenders from such Borrower under this Section 11 without
rendering such claim voidable or avoidable under Section 548 of Chapter 11 of
the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law after
taking into account, among other things, such Borrower's right of contribution
and indemnification from each other Borrower under Section 11.7.
11.7 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS. To the extent
that any Borrower shall make a payment under this Section 11 of all or any of
the Liabilities (other than Loans made directly to that Borrower) (a "GUARANTOR
PAYMENT") that exceeds the amount such Borrower would otherwise have paid if
each Borrower had paid the aggregate Liabilities satisfied by such Guarantor
Payment in the same proportion that such Borrower's "Allocable Amount" (as
defined below) (as determined immediately prior to such Guarantor Payment) bore
to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Liabilities and termination of the
Commitments) such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Borrower for the
amount of such excess, pro rata based upon their respective Allocable Amounts in
effect immediately prior to such Guarantor Payment. As of any date of
determination, the "ALLOCABLE AMOUNT" of any Borrower shall be equal to the
maximum amount of the claim that could then be recovered from such Borrower
under this Section 11 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law. This Section 11.7 is intended only to define the
relative rights of Borrowers and nothing set forth in this Section 11.7 is
intended to or shall impair the obligations of Borrowers, jointly and severally,
to pay any amounts as and when the same shall become due and payable in
accordance with the terms of this Agreement, including Section 11.7. Nothing
contained in this Section 11.7 shall limit the liability of any Borrower to pay
the Loans made directly or indirectly to that Borrower and accrued interest,
fees and expenses with respect thereto for which such Borrower shall be
primarily liable. The parties hereto acknowledge that the rights of
contribution and
75
indemnification hereunder shall constitute assets of the Borrower to which such
contribution and indemnification is owing. The rights of the indemnifying
Borrowers against other Borrower under this Section 11.7 shall be exercisable
upon the full and indefeasible payment of the Liabilities and the termination of
the Commitments.
11.8 LIABILITY CUMULATIVE. The liability of Borrowers under this Section
11 is in addition to and shall be cumulative with all liabilities of each
Borrower to Agent and each Lender under this Agreement and the Ancillary
Agreements to which such Borrower is a party or in respect of any Liabilities or
obligation of the other Borrowers, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
[signature page follows]
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This Agreement has been duly executed as of the day and year first written
above.
BORROWERS:
---------
SALESLINK CORPORATION
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx Xx.
------------------------
Name: Xxxxx X. Xxxxxxx Xx.
--------------------
Title: CEO
INSOLUTIONS INCORPORATED
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx Xx.
------------------------
Name: Xxxxx X. Xxxxxxx Xx.
--------------------
Title: CEO
ON-DEMAND SOLUTIONS, INC.
a Massachusetts corporation
By: /s/ Xxxxx X. Xxxxxxx Xx.
------------------------
Name: Xxxxx X. Xxxxxxx Xx.
--------------------
Title: CEO
PACIFIC DIRECT MARKETING CORP.
a California corporation
By: /s/ Xxxxx X. Xxxxxxx Xx.
------------------------
Name: Xxxxx X. Xxxxxxx Xx.
--------------------
Title: CEO
SALESLINK MEXICO HOLDING CORP.
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx Xx.
------------------------
Name: Xxxxx X. Xxxxxxx Xx.
--------------------
Title: CEO
77
LENDERS:
-------
LASALLE BANK NATIONAL ASSOCIATION,
as a Lender and as Agent
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
----------------
Title: Vice President
Address
-------
LaSalle Bank National Association
000 Xxxxx XxXxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxx
Fax: (000) 000-0000
CITIZEN'S BANK OF MASSACHUSETTS,
as a Lender
By: /s/ Xxxxx Xxxxxx
----------------
Name: Xxxxx Xxxxxx
------------
Title: Vice President
Address
-------
Citizen's Bank of Massachusetts
00 Xxxxx Xxxxxx
0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Fax: (000) 000-0000
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