Exhibit 10.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT") is entered into as of December
29, 2000, by and among ZENGINE, INC., a Delaware corporation ("LENDER"), MCSi,
INC., a Maryland corporation ("BORROWER") and WEST LAKE ACQUISITION CORPORATION,
a Maryland corporation, AGOURA HILLS CORPORATION, a Maryland corporation and
MCSi-IG-PV, INC., a Texas corporation (together, the "SUBSIDIARIES").
RECITALS
A. On October 11, 2000, Intellisys Group, Inc. and certain of its
wholly-owned subsidiaries (collectively, "SELLERS") filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code.
B. Borrower entered into that certain Asset Purchase Agreement (the
"PURCHASE AGREEMENT") dated October 6, 2000 (and amended on November 13, 2000,
November 24, 2000 and December 29, 2000) between Borrower and the Sellers,
pursuant to which Sellers have agreed to sell to Borrower, and Borrower has
agreed to purchase from Sellers, the "Assets" as defined in the Purchase
Agreement. Borrower has executed an assignment of substantially all of its
rights and obligations under the Purchase Agreement to its three wholly-owned
subsidiaries, West Lake Acquisition Corporation, Agoura Hills Corporation and
MCSi-IG-PV, Inc.
C. Borrower has requested that Lender provide it a term loan to
facilitate the acquisition of the Sellers' assets by the Subsidiaries (the
"Loan").
D. Lender is willing to make the Loan to Borrower, and Borrower is
willing to accept and borrow the Loan from Lender, on the terms and subject to
the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Lender agree as follows:
I. THE LOAN
1.1 INCORPORATION OF RECITALS. The recitals at the beginning of this
Agreement are incorporated herein as matters agreed to by Lender and Borrower;
provided, however, that the incorporation herein of factual matters recited
above shall not imply that Lender has any independent knowledge of such matters
and shall not impair, qualify, or negate any representation, warranty, or
covenant of Borrower contained in the "LOAN DOCUMENTS" (as defined in SECTION
1.4).
5.23 AGREEMENT TO BORROW AND LEND. In reliance on the representations
and warranties contained in this Agreement and the other Loan Documents and
subject to the terms and conditions of this Agreement, Lender agrees to accept
from the Borrower a promissory note executed by Borrower and payable to the
order of Lender in the stated maximum principal amount of $8,500,000.00 (the
"Original Principal Amount"), evidencing the Loan (the "TERM
1
NOTE") and Borrower hereby agrees to issue the Term Note to Lender in form and
substance satisfactory to Lender. As used in this Agreement, the term "SECURED
OBLIGATIONS" shall mean all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to Lender under this Agreement, any note or other instrument or
document, whether arising therefrom, absolute or contingent, due or to become
due, including, without limitation, all interest, charges, expenses, fees,
attorney's fees, expert witness fees and any other sums chargeable to Borrower
hereunder.
5.24 LOAN STRUCTURE. The Loan shall consist of a term loan in an
original principal amount equal to $8,500,000.00. Any sums borrowed under this
term loan facility, once repaid, may not be reborrowed.
5.25 LOAN DOCUMENTS. The Loan and the related indebtedness, covenants,
representations, warranties and other liabilities and obligations of Borrower,
shall be evidenced, secured by, and otherwise set forth in, this Agreement and
certain additional instruments, security agreements, agreements, assignments,
guaranties, certificates, statements, and documents (collectively, the "LOAN
DOCUMENTS"), each of which shall be in form and content satisfactory to Lender
in its discretion reasonably exercised. In addition to this Agreement, the Loan
Documents include, but are not limited to, the following:
(a) the Term Note;
(b) a guaranty from each of the Subsidiaries (collectively, the
"GUARANTIES");
(c) a security agreement encumbering all of each of the Subsidiaries'
personal property assets (the "SECURITY AGREEMENT") as security for the Secured
Obligations and such UCC-1 Financing Statements pertaining thereto as Lender
shall require; and
(d) an intercreditor agreement between Lender and Fleet Business Credit
Corporation in form and substance satisfactory to Lender in its sole discretion.
5.26 INTEREST RATE, PRINCIPAL REPAYMENT AND MATURITY. (a) As more fully
set forth in the Term Note, and without qualifying the provisions thereof: the
outstanding principal balance of the Loan shall bear interest, payable monthly
in arrears, at an annual rate equal to the Prime Rate (on the last day of each
calendar month for each month the Original Principal Amount (or any portion
thereof) remains outstanding as published in the "Money Rates" box in the WALL
STREET JOURNAL, or if that publication is not available, the prime rate as
quoted by PNC Bank, N.A. on such dates) with the full amount of all outstanding
accrued but unpaid interest for the Loan due and payable on the last day of the
Term (as defined in Section 1.7(a) hereof).
(b) The rate of interest shall increase or decrease by an amount equal
to any increase or decrease in the Prime Rate, effective as of the opening of
business on the day that any such change in the Prime Rate occurs on the date
the Prime Rate is calculated, as set forth above.
(c) Upon the occurrence of an Event of Default (as defined below) and
during the continuation thereof, the principal amount of the Loan shall bear
interest at a fluctuating rate per annum equal to 2.0% per annum in excess of
the otherwise applicable interest rate (as applicable, the "DEFAULT RATE").
2
(d) Interest hereunder shall be calculated daily and shall be computed
on the actual number of days elapsed over a year of 360 days. For the purpose of
computing interest hereunder, all items of payment received by Lender shall be
deemed applied by Lender on account of the Secured Obligations (subject to final
payment of such items) on the date of receipt by the Lender or one Business Day
after receipt by Lender of such items in Lender's account (if received after
2:00 p.m., Fremont, California time).
(e) In no contingency or event whatsoever shall the rate or amount of
interest paid by Borrower under this Agreement, the Term Note or any of the
other Loan Documents exceed the maximum rate or amount permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto or thereto. If such a court determines that Lender has
received interest hereunder, under the Term Note or under any other Loan
Document in excess of the maximum amount permitted by such law, (i) Lender shall
apply such excess to any unpaid principal owed by Borrower to Lender or, if the
amount of such excess exceeds the unpaid balance of such principal, Lender shall
promptly refund such excess interest to Borrower and (ii) the provisions hereof
shall be deemed amended to provide for such permissible rate. All sums paid, or
agreed to be paid, by Borrower which are, or hereafter may be construed to be,
compensation for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, spread and allocated
throughout the full term of all such indebtedness until the indebtedness is paid
in full.
(f) Borrower hereby irrevocably authorizes Lender, in Lender's sole
discretion, to advance to Borrower, and to charge to Borrower, a sum sufficient
to pay all interest accrued on the Secured Obligations during the immediately
preceding month and to pay all costs, fees and expenses at any time owed by
Borrower to Lender hereunder.
5.27 PERSONAL PROPERTY SECURITY INTEREST. The Subsidiaries hereby grant
to Lender a security interest in all of the Subsidiaries' personal property of
every kind and nature, whether now existing or hereafter created, acquired or
arising and all products and proceeds thereof, all as more fully set forth in
the Security Agreement.
5.28 TERM; TERMINATION.
(a) TERM. The term of this Agreement shall be from the Effective Date
until March 30, 2001 (the "TERM"), unless earlier terminated as provided herein.
(b) PAYMENT IN FULL. Upon the effective date of termination, the
Secured Obligations shall become immediately due and payable in full in cash.
Borrower may prepay, in part or in whole, from time to time during the Term, the
Secured Obligations without penalty.
(c) PAYMENTS WITHOUT DEDUCTIONS. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any related
agreement, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
3
II. CLOSING
2.1 EFFECTIVE DATE. This Agreement shall be effective on the date above
written and each of the conditions set forth below in this SECTION 2.1 shall be
satisfied unless waived by Lender in writing (the "EFFECTIVE DATE").
(a) LOAN DOCUMENTS. Each Loan Document shall have been executed (and,
in the case of each Loan Document to be recorded, acknowledged) by all parties
thereto other than Lender and delivered to Lender in form and substance approved
by Lender.
(b) OTHER DOCUMENTS. Borrower shall have obtained and delivered to
Lender, and Lender shall have approved, all other instruments, agreements,
certificates and documents required by Lender in connection with the Loan,
including each of the following if required by Lender: (i) a complete and
correct copy of the Purchase Agreement and of each instrument, agreement, or
document to be delivered in connection with the Purchase Agreement; (ii) a copy
of each Borrower's Articles of Incorporation as filed with, and certified by,
the Secretary of State or equivalent of such Borrower's state of incorporation;
(iii) a certificate of each Borrower's good standing, issued by the Secretary of
State or equivalent of such Borrower's state of incorporation as of a date not
more than 30 days before the Effective Date; and (iv) any other organizational,
authorizing, or related documents of Borrower requested by Lender, with
certification as to the name, title, signature, incumbency and authority of each
agent (other than Lender) who is authorized to sign and deliver this Agreement
and the other Loan Documents.
(c) PERSONAL PROPERTY SECURITY. The personal property security
interests granted to Lender in the Loan Documents shall have been or be capable
of being duly perfected in a first lien position on all of the Subsidiaries'
accounts receivable and a second lien on all other assets of the Subsidiaries
immediately after the Effective Date. The priority lien on the Subsidiaries'
accounts receivable by the Lender and the first lien on all other assets by
Fleet Business Credit Corporation ("Fleet") are more fully described in the
Intercreditor Agreement by and between Lender and Fleet. The lien obtained by
Fleet in the assets of the Subsidiaries shall be referred to as the "Fleet
Lien."
(d) FINANCIAL INFORMATION. If requested by Lender, Borrower shall have
obtained and delivered to Lender, and Lender shall have approved, such financial
statements, income tax returns (including the related schedules and exhibits),
and other information concerning the financial condition, credit standing, and
business affairs of Borrower as Lender may reasonably require. Lender is
authorized to disclose such information and documents to Lender's attorneys,
accountants, auditors, examiners, and regulatory agencies. Lender also is
authorized to disclose such information and documents to any insurance company
or insurance agent in connection with any application for insurance or any claim
made under an insurance policy.
(e) NO INSOLVENCY. Borrower shall not have (a) instituted any
proceedings under any chapter of the United States Bankruptcy Code or under any
other law relating to the estates of insolvents, (b) instituted any action or
proceeding for the purpose of determining obligations to its creditors or
procuring a settlement or distribution of any of its assets to creditors or
otherwise, (c) initiated any proceedings for its liquidation, reorganization or
4
readjustment, (d) involuntarily become the subject of any of the foregoing
actions or proceedings or become obligated to do any of the foregoing if such
action or proceeding is not discharged or stayed within sixty (60) days, or (e)
become unable to pay its debts as they mature.
(f) NO ILLEGALITY. There shall not be in effect any foreign, federal,
state or local law, statute, ordinance, regulation, order, rule or requirement
that would render the making of the Loan or the enforcement of any of its
provisions in accordance with the Loan Documents illegal or that would cause
Lender to be in violation of any regulatory requirement to which Lender is then
subject.
(g) NO DEFAULT. No Event of Default (as defined in SECTION 4.1) shall
have occurred or be continuing, and no event shall have occurred which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default. If required by Lender, Borrower shall have provided Lender with
evidence satisfactory to Lender that Borrower's representations in this
Agreement are accurate.
(h) PURCHASE AGREEMENT. Other than the payment of the Consideration,
the transactions under the Purchase Agreement to occur at or before the closing
thereof shall been completed in accordance with its terms and in accordance with
applicable law.
2.2 WHEN LOAN PROCEEDS ARE DEEMED OUTSTANDING. The Loan shall be deemed
to be outstanding and shall commence earning interest on the Effective Date.
2.3 WAIVER OF CONDITIONS. Any waiver by Lender of any condition
hereunder must be expressly made in writing.
III. ADDITIONAL COVENANTS AND REPRESENTATIONS
3.1 TITLE TO THE ASSETS; LOCATION OF COLLATERAL. Borrower and each
Guarantor represents and warrants to Lender that the assets purchased from the
Sellers under the Purchase Agreement shall at all times be owned by Guarantors
except for inventory sold in the ordinary course of business and dispositions of
obsolete equipment. All Collateral (as defined in the Security Agreement) other
than inventory in transit, will at all times be kept by Guarantors at one or
more of the business locations set forth in EXHIBIT 3.1 hereto and shall not,
without the prior written approval of Lender, be moved therefrom except, prior
to an Event of Default and Lender's acceleration of the maturity of the Secured
Obligations in consequence thereof, for (i) sales of inventory in the ordinary
course of business; and (ii) movement of equipment and inventory from one
location of Guarantors that has been reported to Lender to another location of
Guarantors or Borrower that has been reported to Lender, and within a
jurisdiction in which Lender has taken all necessary action in order to protect
and perfect its security interest therein.
3.2 INSURANCE OF COLLATERAL. Borrower or Guarantors shall maintain and
pay for insurance upon all Collateral wherever located and with respect to
Guarantors' business, covering casualty, hazard, public liability and such other
risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Guarantors shall deliver copies of such policies to
Lender with satisfactory lender's loss payable endorsements, naming Lender as
5
sole loss payee, assignee or additional insured, as deemed appropriate by
Lender. Each policy of insurance or endorsement shall contain a clause requiring
the insurer to give not less than 30 days prior written notice to Lender in the
event of cancellation of the policy for any reason whatsoever and a BFU-438 or
similar endorsement specifying that the interest of Lender shall not be impaired
or invalidated by any act or neglect of Borrower or Guarantors or the owner of
the property or by the occupation of the premises for purposes more hazardous
than are permitted by said policy. If any Guarantor fails to provide and pay for
such insurance, Lender may, at its option, but shall not be required to, procure
the same and charge Borrower therefor. Each Guarantor agrees to deliver to
Lender, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies.
3.3 FURTHER ENCUMBRANCES. Neither Borrower nor Guarantors shall,
without the prior consent of Lender, create, incur, assume or suffer to exist
any lien, security interest, encumbrance on the Collateral (as defined in the
Security Agreement) or any portion thereof, except in favor of Lender and the
Fleet Lien.
3.4 BUSINESS LOCATIONS; AGENT FOR PROCESS. Each Guarantor's chief
executive office and other places of business are as listed on EXHIBIT 3.1
hereto. During the preceding one-year period, Guarantors have not had an office,
place of business or agent for service of process other than as listed on
EXHIBIT 3.1. Except as shown on EXHIBIT 3.1, no inventory is stored with a
bailee, warehouseman or similar party, nor is any inventory consigned to any
Person.
3.5 TITLE TO PROPERTIES; PRIORITY OF LIENS. Upon the closing of the
Purchase Agreement, Guarantors will have all of Sellers' right, title and
interest in and to all of the Collateral as the same shall exist on the closing
of the Purchase Agreement free and clear of Encumbrances (as defined in the
Purchase Agreement) other than Permitted Encumbrances (as defined in the
Purchase Agreement) and the Fleet Lien. As to all of Guarantors' other assets
other than those described in the preceding sentence, Guarantors have good,
indefeasible and marketable title to all of the Collateral and all of its other
property, in each case, free and clear of all liens except the liens in favor of
Lender and the Fleet Lien. After the Effective Date, Guarantors will pay or
discharge all lawful claims arising after the Effective Date which, if unpaid,
might become a lien against any of the Guarantors' property. The liens granted
to Lender pursuant to the Security Agreement are first priority liens as to the
accounts receivable and second priority liens as to all other assets.
3.6 REPORTS AND RECORDS. Borrower shall furnish Lender, upon written
request, such information and statements as Lender shall request from time to
time regarding Borrower's business affairs, financial condition and the results
of its operations. Lender shall maintain the confidentiality of all information
provided by Borrower or Guarantors, shall not disclose any such information to
any third Person (other than Lender's attorneys, accountants, auditors,
examiners, and regulatory agencies or as otherwise required by law) and shall
not use such information for any purpose other than the purposes set forth
herein. Without limiting the generality of the foregoing, upon written request,
Borrower will provide Lender with: (i) reviewed annual financial statements,
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, as soon as available, and in any event within ninety (90)
days after the end of Borrower's fiscal years; (ii) a copy of Borrower's federal
income
6
tax return with respect to the corresponding year on the date when such tax
return is due or, if earlier, on the date when available; (iii) on or before the
15th day of each month, monthly agings and reconciliations of accounts payable
by invoice date and outstanding or held check registers and (iv) such
certificates of Borrower's officers relating to the foregoing as Lender may
reasonably request. Borrower shall keep and maintain at its and the Guarantors'
principal offices, or at such other place as Lender may approve in its
discretion reasonably exercised, true and complete books and records of accounts
and shall keep such books and records open and available at all times for
examination, inspection and copying by Lender and its representatives. Borrower
and Guarantors shall furnish to Lender, upon written request, such other
information as Lender may from time to time reasonably request.
3.7 PAYMENT OF EXPENSES. Borrower shall pay to Lender, or reimburse
Lender for having paid, any and all reasonable and documented out-of-pocket
costs and expenses incurred by Lender in connection with the exercise of any of
Lender's rights or remedies under this Agreement, including, without limitation,
filing fees and legal fees and disbursements. In addition, Borrower shall pay to
Lender an audit fee of $750 per person per day for all audits and inspections
conducted by Lender's employee or representatives subsequent to the Effective
Date. Lender shall have the right to conduct two audits at Borrower's expense
unless an Event of Default has occurred and is continuing. The provisions of
this Section shall survive the termination of this Agreement and the repayment
of the Loan for a period of one year provided that such one year limitation
shall not apply in the event Lender incurs out-of-pocket costs and expenses in
connection with any action or proceeding which has been commenced prior to the
end of such one year period and has continued beyond the end of such one year
period.
3.8 SALE OF LOAN OR PARTICIPATIONS. Borrower acknowledges that Lender
may, in Lender's sole discretion, sell its entire interest or participating
interests in the Loan to any Person but in no event to a competitor of Borrower.
Borrower agrees to provide Lender with all documentation and information
reasonably required by Lender in connection with any such sale or participation.
Borrower further authorizes Lender to release to any potential buyers or
participants any information Lender has concerning the Loan, the Collateral,
Borrower, the Guarantors or their principals, provided that such potential
buyers or participants agree in writing to maintain the confidentiality of such
information as set forth in Section 3.6.
3.9 FURTHER ASSURANCES. Borrower and Guarantors shall, at any time and
from time to time, on the written request of Lender, execute and deliver to
Lender such further documents and instruments and do such other acts and things
as Lender may reasonably request in order to effectuate fully the purpose and
intent of this Agreement. Without limiting the generality of the preceding
sentence, upon Lender's written request, Borrower and Guarantors shall execute
and deliver such further amendatory documents as may be required to correct
patent mistakes in the Loan Documents.
3.10 LOST INSTRUMENTS. In the event that the original of any Loan
Document is destroyed, lost or mutilated, upon receipt of an affidavit of loss
signed by an authorized officer of the Lender, Borrower and/or Guarantors shall
execute another copy of such Loan Document identical in form and content to the
destroyed, lost or mutilated Loan Document as a replacement thereof, and such
replacement shall have the same force and effect as the original of such Loan
7
Document. Lender indemnifies Borrower in the event any party other than Lender
attempts to enforce any purportedly destroyed, lost or mutilated Loan Document
which has been replaced pursuant to the preceding sentence.
3.11 PERFORMANCE OF OBLIGATIONS TO THIRD PARTIES. Borrower and
Guarantors shall perform when and as required all of their respective material
contractual obligations to third parties, unless they contest such obligations
in good faith and have instituted appropriate proceedings in connection with
such dispute.
3.12 ORGANIZATIONAL MATTERS. Borrower represents and warrants to Lender
that: (a) Borrower is a corporation duly formed and validly existing and in good
standing under the laws of the state of Maryland; (b) Borrower's execution and
delivery of the Loan Documents and Borrower's acceptance of the Loan and payment
and performance of the Secured Obligations have been authorized by all necessary
corporate actions duly and validly taken after any requisite notice and are in
compliance with all applicable laws and regulations affecting Borrower in effect
on the Effective Date; and (c) Borrower is the record owner of all of the issued
and outstanding capital stock of each Guarantor.
3.13 CORPORATE POWER AND AUTHORITY. Borrower is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and each of
the other Loan Documents to which it is a party. The execution, delivery and
performance of this Agreement and each of the other Loan Documents have been
duly authorized by all necessary corporate action and do not and will not (i)
require any consent or approval of the shareholders of Borrower; (ii) contravene
Borrower's articles of incorporation or bylaws; (iii) violate, or cause Borrower
to be in default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to the Borrower; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower is a party or by which it or its
Properties may be bound or affected; or (v) result in, or require, the creation
or imposition of any lien (other than the lien in favor of Lender and Fleet)
upon or with respect to any of the Properties now owned or hereafter acquired by
Guarantors.
3.14 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be, a legal, valid
and binding obligation of Borrower and Guarantors, enforceable against them in
accordance with its respective terms, except to the extent enforceability may be
limited by bankruptcy, reorganization, insolvency or others laws affecting the
enforcement of creditor's rights generally or the availability of equitable
remedies subject to the discretion of the court.
3.15 OTHER AFFIRMATIVE COVENANTS. During the term of this Agreement,
and thereafter for so long as there are any unpaid Secured Obligations to
Lender, Borrower and Guarantors covenant that, unless otherwise consented to by
Lender in writing, they shall:
(a) VISITS AND INSPECTIONS. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours and upon at least 24 hours prior verbal notice (unless an Event
of Default exists), to visit and inspect
8
the Properties of Borrower and/or Guarantors, inspect, audit and make extracts
from their books and records, and discuss with their officers and their
independent accountants, Borrower's or Guarantors' business, assets,
liabilities, financial condition, business prospects and results of operations.
(b) NOTICES. Promptly notify Lender in writing of the occurrence
of any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading in any material respect.
(c) LANDLORD AND STORAGE AGREEMENTS. If requested by Lender,
provide Lender with copies of all agreements between Guarantors and any landlord
or warehouseman which owns any premises at which any inventory may, from time to
time, be kept.
3.18 OTHER NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any unpaid Secured Obligations to Lender,
Borrower and Guarantors covenant that, unless Lender has first consented thereto
in writing, they will not:
(a) MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate with
any Person; nor acquire all or any substantial part of the properties of any
Person.
(b) LOANS. Make any loans or other advances of money (other than for
salary, travel advances, advances against commissions and other similar advances
in the ordinary course of business, consistent with the past practice of Parent)
to any Person.
(c) TRANSFERS OF MONEY. Transfer any money or assets to Borrower,
subsidiaries or Affiliates of Borrower, and subsidiaries of Guarantors except as
permitted by Section 3.18(e).
(d) TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to exist any
indebtedness, except:
(i) the Borrower's currently outstanding debt to PNC Bank, N.A. and
the loan syndicate thereto ("PNC");
(ii) Secured Obligations owing to Lender;
(iii) Guarantor's secured obligations owing to Fleet;
(iv) accounts payable to trade creditors and current operating
expenses which are not aged more than 90 days from billing date or more than 30
days from the due date, in each case incurred in the ordinary course of business
and paid within such time period, unless the same are being actively contested
in good faith and by appropriate and lawful proceedings; and Borrower and
Guarantors shall have set aside such reserves, if any, with respect thereto as
9
are required by GAAP and deemed adequate by Borrower and Guarantors and their
independent accountants;
(v) contingent liabilities arising out of endorsements of checks
and other negotiable instruments for deposit or collection in the ordinary
course of business;
(vi) wages, salaries, taxes, assessments and governmental charges
or levies which are not delinquent or which are being contested in good faith
and for which, in accordance with GAAP, adequate reserves have been set aside on
the books of Borrower and Guarantors.
(e) AFFILIATE TRANSACTIONS. Enter into, or be a party to, any
transaction with any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of Borrower's business and upon fair and reasonable
terms which are fully disclosed to Lender and are no less favorable to Borrower
than would obtain in a comparable arm's length transaction with a Person not the
Affiliate.
(f) LIMITATION ON LIENS. Except for liens disclosed in the Purchase
Agreement, create or suffer to exist any lien upon any of their property, income
or profits, whether now owned or hereafter acquired, except:
(i) Liens in favor of PNC;
(ii) Liens at any time granted in favor of Lender;
(iii) The Fleet Lien;
(iv) Liens for taxes not yet due;
(v) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in respect of
any such lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property of Borrower or
materially impair the use thereof in the operation of Borrower's business; and
(vi) such other liens as Lender may hereafter approve in
writing.
(g) DISTRIBUTIONS. Declare or make any Distribution. "DISTRIBUTION"
means (i) the payment of any dividends or other distributions on capital stock
of the corporation (except distributions in such stock) and (ii) the redemption
or acquisition of Securities (as defined in Section 2(1) of the Securities Act
of 1933, as amended) unless made contemporaneously from the net proceeds of the
sale of Securities or unless made for purposes of providing shares to an
employee benefit plan or pursuant to a repurchase resolution of the Board of
Directors.
(h) DISPOSITION OF ASSETS. Sell, lease or otherwise transfer or
dispose of any of its property, including any disposition of property as part of
a sale and leaseback transaction,
10
to or in favor of any Person, except (i) sales of inventory in the ordinary
course of business for so long as no Event of Default exists hereunder which by
reason thereof Lender has accelerated the Secured Obligations and (ii) other
dispositions expressly authorized by this Agreement.
IV. DEFAULT AND REMEDIES
4.1 EVENTS OF DEFAULT. Any of the following shall constitute an "Event
of Default":
(a) Borrower's failure to make or cause to be made any payment in
accordance with the terms of this Agreement or any other Loan Document when and
as required by the terms hereof or thereof; or
(b) The failure of Borrower or Guarantors to take any other action or
fulfill any other requirement in any material respect set forth in this
Agreement or any other Loan Document when and as required by the terms hereof or
thereof; or
(c) Any determination by Lender that any representation or warranty
made by Borrower or Guarantors in connection with the Loan or any information,
statement, or certificate at any time given in writing to Lender pursuant to or
in connection with the Loan or any Loan Document was untrue or misleading when
made in any material respect;
(d) Any other act, event, omission or circumstance that constitutes an
Event of Default under the Term Note or the Security Agreement.
4.2 REMEDIES. Upon the occurrence and during the continuance of any
Event of Default, Lender may exercise any default right or remedy which it has
under this Agreement, the Term Note, the Security Agreement or the Guaranties,
or otherwise available at law, in equity or by statute, and at its option and,
unless otherwise specified below, without notice to Borrower or Guarantors, may
do any one or more of the following:
(a) Appoint a receiver in any action initiated by Lender pursuant to
this Agreement, Borrower hereby consenting to the jurisdiction and venue set
forth in SECTION 5.3, and waiving notice and posting of a bond in connection
therewith; or
(b) Make disbursements to discharge liens on the Collateral, to pay
costs incurred for Borrower's account pursuant to any Loan Document, and to pay
any other amounts owed by Borrower to Lender or any third party pursuant to any
Loan Document and such disbursements shall be added to the Secured Obligations;
or
(c) Declare all indebtedness secured by any of the Loan Documents
immediately due and payable and credit any sums theretofore or thereafter
received by Lender in connection herewith in such manner as Lender elects upon
such indebtedness; provided, however, that such application of sums so received
shall not serve to waive or cure any default existing under any of the Loan
Documents nor to invalidate any notice of default or any act done
11
pursuant to such notice and shall not prejudice any rights of Lender or any
trustee under the Loan Documents; or
(d) Exercise any or all other default rights and remedies available
under any of the Loan Documents or by law, in such order and manner as Lender
may determine in its sole discretion.
(e) POWER OF ATTORNEY. Effective upon the occurrence of an Event of
Default, Borrower appoints Lender and its designees as Borrower's attorney, with
the power to endorse the Borrower's name on any checks, notes, acceptances,
money orders or other forms of payment or security that come into Lender's
possession; to sign Borrower's name on any invoice or xxxx of lading relating to
any receivable of Borrower, on assignments of receivables of Borrower, on
notices of assignment, financing statements and other public records, on
verifications of accounts and on notices to customers or account debtors; to
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender and to open and dispose of
all mail addressed to Borrower; and to do all other things Lender deems
necessary or desirable to carry out the terms of this Agreement. Borrower hereby
ratifies and approves any and all acts of such attorney. Neither Lender nor any
of its designees will be liable for any acts or omissions nor for any error of
judgment or mistake of fact or law acting as Borrower's attorney unless such act
or omission arises out of Lender's gross negligence or willful misconduct. This
power, being coupled with an interest, is irrevocable until the Secured
Obligations have been fully satisfied.
4.3 NON-WAIVER OF REMEDIES. No waiver of any breach of or default under
any provision of this Agreement shall constitute or be constructed as a waiver
by Lender of any subsequent breach of or default under that or any other
provision of this Agreement.
4.4 REMEDIES NOT EXCLUSIVE. No remedy herein conferred upon Lender is
intended to be exclusive of any other remedy herein or in any other agreement
between the parties hereto or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity or by statute.
4.5 EFFECT OF TERMINATION. This Agreement may be terminated prior to
the end of the Term: (i) by Borrower by payment of the Secured Obligations; or
(ii) by Lender at any time after the occurrence of an Event of Default, without
notice, effective immediately. All of the Secured Obligations shall be
immediately due and payable on the earlier of (i) March 30, 2001 or (ii) the
date of any termination by Lender upon an Event of Default as indicated above.
All undertakings, agreements, covenants, warranties and representations of
Borrower and Guarantors contained in the Loan Documents shall survive any such
termination and Lender shall retain its liens in the Collateral and all of its
rights and remedies under the Loan Documents notwithstanding such termination
until the Secured Obligations then due have been paid (and provision has been
made for identified contingent obligations, if any, in form and substance
acceptable to Lender) to Lender, in full, in immediately available funds.
Notwithstanding the payment in full of the Secured Obligations then due (and the
provision for contingent obligations as provided above), Lender shall not be
required to terminate its security interests in the
12
Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrower or any account debtor and applied to the Secured Obligations, Lender
shall, at its option, (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Secured Obligations, indemnifying Lender from
any such loss or damage; or (ii) have retained such monetary reserves and liens
on the Collateral for such period of time as Lender, in its reasonable
discretion, may deem necessary to protect Lender from any such loss or damage.
Subject to the foregoing, upon payment in full of the Secured Obligations then
due (and provision for identified contingent obligations, if any, in form and
substance acceptable to Lender) and termination of this Agreement, Lender shall
promptly cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral, to or on the order of Guarantors, and Lender shall execute and
deliver to Guarantors upon such termination such Uniform Commercial Code
termination statements and such other documentation as shall be reasonably
requested by Guarantors to effect the termination and release of the liens
granted by this Agreement and the Security Agreement on the Collateral, all at
the cost and expense of Borrower.
V. MISCELLANEOUS PROVISIONS
5.1 LEGAL PROCEEDINGS. Lender shall have the right, but not the
obligation, to commence, appear in, and defend any action or proceeding
purporting to affect the Collateral, the rights or duties of the parties
hereunder, or the payment of any funds, and in connection therewith to pay
necessary expenses, employ counsel and other advisors, and pay their reasonable
fees. Borrower shall, upon written demand, reimburse Lender for all such
reasonable and documented costs and expenses.
5.2 SETOFF AND RELATED REMEDIES. Borrower agrees that all sums due to
Lender under the Loan Documents give rise to rights of counterclaim, setoff,
offset and banker's lien against any of Borrower's assets, now owned or
hereafter acquired, to reduce or discharge Borrower's obligations to Lender
under the Loan Documents.
5.3 GOVERNING LAW; VENUE. THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED
AND DELIVERED IN THE STATE OF CALIFORNIA AND SHALL BE INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA THAT GOVERN CONTRACTS TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE. BORROWER AND GUARANTORS HEREBY AGREE TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF ALAMOSA,
STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF LENDER, IN ANY OTHER JURISDICTION
IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND IN WHICH
BORROWER OR ANY GUARANTOR HAS AN OFFICE OR WHERE ANY COLLATERAL IS LOCATED. THE
PARTIES HERETO WAIVE ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE. THE
PARTIES HERETO FURTHER WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT.
13
5.4 WAIVER OF JURY TRIAL. BORROWER, GUARANTORS AND LENDER HEREBY
EXPRESSLY WAIVE ANY AND ALL RIGHTS, WHETHER ARISING UNDER THE CALIFORNIA
CONSTITUTION OR ANY APPLICABLE STATUTE OR COMMON LAW, TO DEMAND A TRIAL BY JURY
IN ANY ACTION, MATTER, CLAIM OR CAUSE OF ACTION WHATSOEVER ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT OR ANY DOCUMENT OR TRANSACTION CONTEMPLATED
HEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
5.5 COSTS OF LITIGATION. In the event of any litigation between
Borrower and/or Guarantors and Lender regarding the Loan or Loan Documents, the
prevailing party (meaning the party that obtains substantially the relief sought
by it) shall be entitled to payment by the other party of all costs and expenses
of the litigation, including attorneys' fees and witness fees, from the
commencement of the suit or action through the entry of judgment, as determined
by the court (including all attorneys' fees and other costs and expenses
incurred by Lender in connection with any insolvency, bankruptcy,
reorganization, arrangement or other similar proceedings involving Borrower or
Guarantors that in any way affect the exercise by Lender of the rights and
remedies of Lender hereunder).
5.6 SEVERABILITY. In case any provision of the Loan Documents shall be
invalid, illegal or unenforceable, such provision shall be severable from the
rest of the Loan Documents and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.7 NO BENEFIT TO THIRD PARTIES. This Agreement is made for the sole
protection of Borrower, Guarantors and Lender and their respective successors
and assigns. No other Person, firm or corporation shall have any right
hereunder.
5.8 TIME OF THE ESSENCE. Time is strictly of the essence in the
performance of this Agreement and the other Loan Documents.
5.9 SURVIVAL OF WARRANTIES. All covenants, representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and the other Loan Documents, and the Effective Date but shall not
survive the repayment of the Loan (other than Borrower's obligations under
Section 5.16 and Lender's obligations of confidentiality under Section 3.6).
5.10 ASSIGNABILITY. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither Borrower nor Guarantors may assign this
Agreement or any of their rights or obligations under this Agreement without the
prior written consent of Lender.
5.11 ATTORNEYS' FEES. Borrower agrees to pay, on written demand, all
reasonable attorneys' fees and costs incurred in connection with the
negotiation, documentation, and execution of this Agreement and the other Loan
Documents.
14
5.12 MODIFICATIONS. This Agreement cannot be changed, modified or
supplemented except in a writing signed by the party against whom enforcement of
such change, modification or supplement is sought.
5.13 LENDER'S APPROVALS, CONSENTS AND WAIVERS. ANY APPROVAL, CONSENT OR
WAIVER BY LENDER MUST BE EXPRESSLY SET FORTH IN A WRITTEN INSTRUMENT SIGNED BY
AN AUTHORIZED OFFICER OF LENDER IN ORDER TO BE BINDING ON LENDER. NO SUCH
APPROVAL, CONSENT OR WAIVER SHALL BE INFERRED FROM LENDER'S CONDUCT OR COURSE OF
ACTION.
5.14 NOTICES. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing (including telex,
telecopy and telegraphic communications) and shall be (as elected by the party
giving such notice) hand delivered by messenger or courier service,
telecommunicated with electronic confirmation or mailed by United States mail
(postage prepaid), registered or certified, return receipt requested, addressed
as follows:
To Borrower or Guarantors: MCSi, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxx Xxxxxxx
Telephone Number: 000-000-0000
Telecopier Number: 000-000-0000
With copies to: Elias, Matz, Xxxxxxx & Xxxxxxx, L.L.P
000 00xx Xxxxxx, X.X, 00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telephone Number: 000-000-0000
Telecopier Number: 000-000-0000
To Lender: Zengine, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Chief Financial Officer
Telephone Number: 000-000-0000
Telecopier No.: 000-000-0000
Each notice shall be deemed delivered (a) on the date delivered if by
personal delivery, (b) on the date of transmission with electronic confirmation
if by telecopier (so long as such transmission is received before 5:00 P.M.
local time on a Business Day; otherwise delivery shall be deemed to have
occurred on the next Business Day), or (c) on the date shown on the return
receipt as the date of delivery or first attempted delivery in the United States
mail (postage prepaid) by registered or certified mail. By giving to the other
parties at least 15 days' written notice, the parties to this Agreement and
their respective successors and assigns shall have the
15
right from time to time and at any time during the term of this Agreement to
change their respective addresses.
5.15 RELATIONSHIP. Nothing contained in this Agreement shall in any
manner be construed as creating any relationship between Lender and Borrower and
Guarantors other than as creditor and debtor and guarantors, respectively.
Borrower agrees to indemnify Lender and hold Lender harmless from any loss,
liability or expense resulting from any other construction of this Agreement.
5.16 INDEMNITY. Borrower shall indemnify Lender and hold Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys'
fees and legal expenses) as the result of Borrower's failure to observe, perform
or discharge Borrower's duties hereunder. In addition, Borrower shall defend
Lender against and save it harmless from all claims of any Person with respect
to the Collateral. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any environmental laws or similar laws by reason of Guarantors' failure to
comply with laws applicable to solid or hazardous waste materials or other toxic
substances. Notwithstanding any contrary provision in this Agreement, the
obligation of Borrower under this Section 5.16 shall survive the payment in full
of the Secured Obligations and the termination of this Agreement. The indemnity
contained in this Section 5.16 shall not apply to the extent of any liability,
loss or damage is suffered as a result of Lender's gross negligence or willful
misconduct.
5.17 INTEGRATION. This Agreement (including all exhibits hereto and all
other written agreements referred to herein) (a) is intended by the parties to
be the final expression of their agreement with respect to the subject matter
hereof and as the complete and exclusive statement of the terms of such
agreement, and (b) supercedes any and all other understandings between the
parties concerning the subject matter hereof.
5.18 INCONSISTENCY BETWEEN LOAN DOCUMENTS. Any inconsistency or
conflict between the terms of one Loan Document and the terms of any other Loan
Document shall be governed by this Agreement.
5.19 HEADINGS; SECTION REFERENCES; EXHIBITS. Headings of the articles
and sections of this Agreement are inserted for convenience only and shall not
be deemed to constitute a part hereof. Unless otherwise specifically provided,
references in this Agreement to articles, sections and exhibits shall be to
articles, sections and exhibits of or to this Agreement. All exhibits hereto are
incorporated herein by the references thereto in this Agreement.
5.20 CONSTRUCTION OF AGREEMENT. This Agreement and the other Loan
Documents shall be construed as though drafted by both parties and shall not be
construed against or in favor of any party. Wherever used in this Agreement or
in any other Loan Document, the words "INCLUDE," "INCLUDES" and "INCLUDING"
shall be construed as if immediately followed by the words "without limitation"
and shall not limit the generality of any provision in which they are used. As
used in this Agreement, the term "DOLLARS" and the symbol "$" mean dollars in
lawful currency of the United States of America; the term "BUSINESS DAY" means
any
16
day on which Lender is open for business, and the term "day" means a calendar
day when not expressly stated to be a Business Day. If any period or deadline
specified in this Agreement ends or falls on a day that is not a Business Day,
such period or deadline shall be extended to end or fall on the next succeeding
Business Day. The term "PERSON" means an individual, partnership, corporation,
limited liability company, joint stock company, land trust, business trust,
unincorporated organization, government or agency or political subdivision
thereof, or any other entity. The term "AFFILIATE" means a Person: (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 20% or more of any class of the voting stock of a
Person (or in the case of a Person which is not a corporation, 20% or more of
the equity interest) or (iii) 20% or more of the voting stock (or in the case of
a Person which is not a corporation, 20% or more of the equity interest) of
which is beneficially owned or held by a Person or a subsidiary of a Person. All
times referred to in this Agreement are Fremont, California times.
5.21 COUNTERPARTS. This Agreement may be executed in one or more
counterparts or duplicate originals, each of which shall be deemed an original,
but all of which together shall constitute but one and the same instrument.
5.22 WHEN AGREEMENT BECOMES BINDING. This Agreement shall become
binding upon Borrower and Lender only upon Borrower's execution and Lender's
acceptance of this Agreement. Lender's acceptance of this Agreement shall be
effected by Lender's execution hereof and the delivery to Lender of the fully
executed Term Note.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
17
IN WITNESS WHEREOF, Lender, Borrower and Guarantors have executed this Agreement
as of the date first above written.
LENDER:
ZENGINE, INC.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
BORROWER:
MCSi, INC.
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
GUARANTORS:
WEST LAKE ACQUISITION CORPORATION
By: /s/ XXX X. XXXXXXX
-----------------------------------
Name: Xxx X. Xxxxxxx
Title: Vice President
AGOURA HILLS CORPORATION
By: /s/ XXX X. XXXXXXX
-----------------------------------
Name: Xxx X. Xxxxxxx
Title: Vice President
MCSi-IG-PV, INC.
By: /s/ XXX X. XXXXXXX
-----------------------------------
Name: Xxx X. Xxxxxxx
Title: Vice President
18
EXHIBIT 3.1
LOCATIONS
WEST LAKE ACQUISITION CORPORATION
---------------------------------
0000 Xxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
0000 000xx Xxxxxx, X.X. #000
Xxxxxxxx, Xxxxxxxxxx 00000
00000 Xxx Xxxxxxxxxxx Xxxx, #000
Xxxxxxxxxx, Xxxxxxxxxx 00000
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
000 Xxxx Xxxxxx, Xxxxx 0
Xxxxxxx, Xxxxxxx 00000
AGOURA HILLS CORPORATION
------------------------
00 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
MCSi-IG-PV, INC.
----------------
139688 Diplomat Drive, 180
Xxxxxx, Xxxxx 00000
0000 XxXxxx Xxxxx, #000
Xxxxxx, Xxxxx 00000
0000 X. Xxxx, X-000&0
Xx Xxxx, Xxxxx 00000
000 Xxxxx Xxxxxx
Xx. Xxxxx, Xxxxx 00000
0000 Xxxxxx, #000
Xxxxxxx, Xxxxx 00000
19
