1
EXHIBIT 10.2
LOAN AND SECURITY AGREEMENT
BETWEEN
XXXXXXXXXX.XXX, INC.
AND
WACHOVIA CAPITAL INVESTMENTS, INC.
CLOSING DATE: MAY 10, 2001
2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS, TERMS AND REFERENCES .......................................... 1
Section 1.1 Certain Definitions ........................................... 1
Section 1.2 Use of Defined Terms .......................................... 9
Section 1.3 Accounting Terms .............................................. 9
Section 1.4 UCC Terms ..................................................... 9
Section 1.5 Terminology ................................................... 9
Section 1.6 Exhibits ...................................................... 10
ARTICLE II THE FINANCING ............................................................. 10
Section 2.1 Extensions of Credit .......................................... 10
Section 2.2 Interest and Other Charges .................................... 11
Section 2.3. General Provisions as to Payments ............................. 13
ARTICLE III SECURITY INTEREST ........................................................ 13
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
ACCOUNTS RECEIVABLE COLLATERAL ...................................... 13
Section 4.1 Bona Fide Accounts ............................................ 13
Section 4.2 Good Title .................................................... 14
Section 4.3 Right to Assign ............................................... 14
Section 4.4 Collateral Reserve Account .................................... 14
Section 4.5 [Reserved] .................................................... 14
Section 4.6 Power of Attorney ............................................. 14
ARTICLE V [RESERVED] ................................................................. 14
ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
EQUIPMENT COLLATERAL ................................................ 15
Section 6.1 Sale of Equipment Collateral .................................. 15
Section 6.2 Insurance ..................................................... 15
Section 6.3 Good Title .................................................... 15
Section 6.4 Right to Grant Security Interest .............................. 15
Section 6.5 Location ...................................................... 15
ARTICLE VII REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE
TO BALANCES COLLATERAL .............................................. 16
Section 7.1 Ownership ..................................................... 16
Section 7.2 Remedies ...................................................... 16
Section 7.3 Liens ......................................................... 16
ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO INTANGIBLES
COLLATERAL .......................................................... 16
Section 8.1 Ownership ..................................................... 16
Section 8.2 Liens ......................................................... 17
Section 8.3 Preservation .................................................. 17
ARTICLE IX GENERAL REPRESENTATIONS AND WARRANTIES .................................... 17
Section 9.1 Corporate Existence and Qualification ......................... 17
Section 9.2 Corporate Authority; Validity and Binding Effect .............. 18
Section 9.3 Incumbency and Authority of Signing Officers .................. 18
Section 9.4 No Material Litigation ........................................ 18
i
3
Section 9.5 Taxes ......................................................... 18
Section 9.6 Capital Stock ................................................. 18
Section 9.7 Corporate Organization ........................................ 18
Section 9.8 Insolvency .................................................... 18
Section 9.9 Title ......................................................... 19
Section 9.10 Margin Stock .................................................. 19
Section 9.11 No Violations ................................................. 19
Section 9.12 Financial Statements .......................................... 19
Section 9.13 Purchase of Collateral ........................................ 19
Section 9.14 Pollution and Environmental Control ........................... 20
Section 9.15 Possession of Permits ......................................... 20
Section 9.16. Subsidiaries .................................................. 20
Section 9.17. Federal Taxpayer Identification Number ........................ 20
Section 9.18 Employee Benefit Plans ........................................ 20
Section 9.19 Guarantor Information ......................................... 20
Section 9.20 Private Offering .............................................. 20
Section 9.21 Real Property Interests ....................................... 20
ARTICLE X AFFIRMATIVE COVENANTS ...................................................... 21
Section 10.1 Records Respecting Collateral ................................. 21
Section 10.2 Further Assurances ............................................ 21
Section 10.3 Right to Inspect .............................................. 21
Section 10.4 Reports ....................................................... 21
Section 10.5 Settlement Reports ............................................ 22
Section 10.6. Financial Statements and Other Information .................... 22
Section 10.7 Payment of Taxes .............................................. 23
Section 10.8 Maintenance of Insurance ...................................... 23
Section 10.9 Maintenance of Property ....................................... 23
Section 10.10 Certificate of No Default ..................................... 23
Section 10.11 Change of Principal Place of Business ......................... 24
Section 10.12 Waivers ....................................................... 24
Section 10.13 Preservation of Corporate Existence ........................... 24
Section 10.14 Compliance With Laws .......................................... 24
Section 10.15 Certain Required Notices ...................................... 24
ARTICLE XI NEGATIVE COVENANTS ........................................................ 24
Section 11.1 Encumbrances .................................................. 24
Section 11.2 Debt .......................................................... 25
Section 11.3 Contingent Liabilities ........................................ 25
Section 11.4 Restricted Payments ........................................... 25
Section 11.5 Restricted Investments ........................................ 26
Section 11.6 Mergers ....................................................... 26
Section 11.7 Business Locations ............................................ 26
Section 11.8 Affiliate Transactions ........................................ 27
Section 11.9 Subsidiaries .................................................. 27
Section 11.10 Fiscal Year/Corporate Name .................................... 27
Section 11.11 Disposition of Assets ......................................... 27
Section 11.12 Federal Taxpayer Identification Number ........................ 27
ii
4
Section 11.13 Employee Benefit Plans......................................... 27
Section 11.14 Amendments and Waivers......................................... 27
ARTICLE XII FINANCIAL COVENANTS ...................................................... 28
Section 12.1 Minimum Liquidity ............................................. 28
ARTICLE XIII EVENTS OF DEFAULT ....................................................... 28
Section 13.1 Obligations ................................................... 28
Section 13.2 Misrepresentations ............................................ 28
Section 13.3 Certain Covenants ............................................. 29
Section 13.4 Other Covenants ............................................... 29
Section 13.5 Other Debts ................................................... 29
Section 13.6 Voluntary Bankruptcy .......................................... 29
Section 13.7 Involuntary Bankruptcy ........................................ 29
Section 13.8 Damage, Loss, Theft or Destruction of Collateral, ............. 30
Section 13.9 Judgments ..................................................... 30
Section 13.10 Bankruptcy of Affiliate ....................................... 30
Section 13.11 Material Adverse Effect ....................................... 30
Section 13.12 Change of Control, Etc ........................................ 30
Section 13.13 Change in Management, Etc ..................................... 30
ARTICLE XIV REMEDIES ................................................................. 30
Section 14.1 Acceleration of the Obligations ............................... 31
Section 14.2 Interest Rate ................................................. 31
Section 14.3 Remedies of a Secured Party ................................... 31
Section 14.4 Repossession of the Collateral ................................ 31
Section 14.5 Other Remedies ................................................ 32
Section 14.6 Set Off ....................................................... 32
ARTICLE XV MISCELLANEOUS ............................................................. 32
Section 15.1 Waiver ........................................................ 32
Section 15.2 Governing Law ................................................. 32
Section 15.3 Survival ...................................................... 32
Section 15.4 No Assignment by Borrower ..................................... 32
Section 15.5 Counterparts .................................................. 33
Section 15.6 Reimbursements ................................................ 33
Section 15.7 Successors and Assigns ........................................ 33
Section 15.8 Severability .................................................. 33
Section 15.9 Notices ....................................................... 33
Section 15.10 Entire Agreement; Amendments .................................. 34
Section 15.11 Interpretation ................................................ 34
Section 15.12 Lender Not a Joint Venturer ................................... 34
Section 15.13 Jurisdiction .................................................. 34
Section 15.14 Acceptance .................................................... 34
Section 15.15 Payment on Non-Business Days .................................. 34
Section 15.16 Cure of Defaults by Lender .................................... 35
Section 15.17 Recitals ...................................................... 35
Section 15.18 Attorney-in-Fact .............................................. 35
Section 15.19 Sole Benefit .................................................. 35
Section 15.20 Indemnification ............................................... 35
iii
5
Section 15.21 JURY TRIAL WAIVER ........................................... 36
Section 15.22 Confidentiality ............................................. 36
Section 15.23 Accredited Investor ......................................... 36
ARTICLE XVI CONDITIONS PRECEDENT ................................................... 37
Section 16.1 Secretary's Certificate ..................................... 37
Section 16.2 Good Standing Certificates .................................. 37
Section 16.3 Articles/By-Laws ............................................ 37
Section 16.4 Loan Documents, Guaranty and Warrants ....................... 37
Section 16.5 Omnicom Intercreditor Agreement ............................. 37
Section 16.6 Insurance ................................................... 37
Section 16.7 Financing Statements ........................................ 38
Section 16.8 Opinion of Counsel .......................................... 38
Section 16.9 Landlord Agreements ......................................... 38
Section 16.10 No Default .................................................. 38
Section 16.11 Disbursements Letter ........................................ 38
Section 16.12 Minimum Liquidity ........................................... 38
Section 16.13 Settlement Report ........................................... 38
Section 16.14 Accounts .................................................... 38
Section 16.14 Fees ........................................................ 38
Section 16.15 Other ....................................................... 38
6
EXHIBITS
--------
EXHIBIT A Borrower Information
EXHIBIT B Master Note
EXHIBIT C Term Note
EXHIBIT D Certificate of No Default
EXHIBIT E Secretary's Certificate
EXHIBIT F Lender's Loss Payee Endorsement
EXHIBIT G Opinion of Counsel
EXHIBIT H Landlord's Agreement
EXHIBIT I Disbursements Letter
EXHIBIT J Settlement Report
EXHIBIT K Guarantor Information
EXHIBIT L Secretary's Certificate (Subsidiary Guarantors)
EXHIBIT M Pledge and Guaranty Agreement
v
7
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT, made, entered into and effective as of MAY 10, 2001, by
and between HeadHunter. NET, Inc. ("Borrower"); and WACHOVIA CAPITAL
INVESTMENTS, INC. ("Lender");
WITNESSETH:
WHEREAS, Borrower has applied to Lender for financing of the type or
types more particularly described hereinbelow; and
WHEREAS, Lender is willing to extend financing to Borrower in
accordance with the terms hereof upon the execution of this Agreement by
Borrower, compliance by Borrower with all of the terms and provisions of this
Agreement and fulfillment of all conditions precedent to Lender's obligations
herein contained;
NOW, THEREFORE, to induce Lender to extend the financing provided for
herein, and for other good and valuable consideration, the sufficiency and
receipt of all of which are acknowledged by Borrower, Lender and Borrower agree
as follows:
ARTICLE I
DEFINITIONS, TERMS AND REFERENCES
SECTION 1.1 CERTAIN DEFINITIONS.
In addition to such other terms as elsewhere defined herein, as used in
this Agreement and in any Exhibits, the following terms shall have the following
meanings:
"Accounts Receivable Collateral" shall mean and include all accounts,
instruments, chattel paper and general intangibles, including, without
limitation, all rights of Borrower and the Guarantors to payment for goods sold
or leased, or to be sold or to be leased, or for services rendered or to be
rendered, howsoever evidenced or incurred, and together with all returned or
repossessed goods and all books, records, computer tapes, programs and ledger
books arising therefrom or relating thereto, all whether now owned or hereafter
acquired or arising.
"Account Debtor" shall mean the Person who is obligated on any of the
Accounts Receivable Collateral.
"Advance" shall mean an advance of borrowed funds made by Lender to or
on behalf of Borrower under the Line of Credit.
"Affiliate" shall mean, with respect to any Person, any Person
Controlling, Controlled by or under common Control with such Person or any
director, officer or employee of such Person. For purposes hereof, the
Shareholder(s), the Principal and each Subsidiary shall at all times be
considered an "Affiliate" of Borrower.
"Agreement" shall mean this Loan and Security Agreement, as it may be
amended or supplemented from time to time.
8
"Applicable Rate" shall mean the interest rate per annum payable on the
Obligations, as is defined and more particularly described in Section 2.2(a).
"Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of condemnation, merger or consolidation) by
the Borrower or any Subsidiary of any asset, but excluding (i) dispositions of
inventory in the ordinary course of business, (ii) dispositions of Restricted
Investments permitted by Section 11.5 and (iii) dispositions of Equipment
Collateral which are obsolete, worn-out or unsuitable for continued use by
Borrower; provided, that dispositions of Equipment Collateral excluded by clause
(iii) above shall not constitute an Asset Sale unless and until (and only to the
extent that) the aggregate amount of all such dispositions made after the
Closing Date, exceeds $250,000.
"Assignment of Claims Act" shall mean the federal Assignment of Claims
Act of 1940, as it may be amended from time to time.
"Balances Collateral" shall mean all property of Borrower and the
Guarantors left with Lender or in Lender's possession, custody or control now or
hereafter, all deposit accounts of Borrower and the Guarantors now or hereafter
opened with Lender, all certificates of deposit issued by Lender to Borrower or
the Guarantors, and all drafts, checks and other items deposited in or with
Lender by Borrower or the Guarantors for collection now or hereafter.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as it
may be amended from time to time.
"Borrower" shall have the meaning given to such term in the preamble to
this Agreement.
"Borrowings" shall mean advances of borrowed funds made hereunder to or
on behalf of Borrower.
"Business Day" shall mean a day on which Lender is open for the conduct
of banking business at its principal office in Atlanta, Georgia.
"Capital Expenditures" shall mean all expenditures made in respect of
the cost of any fixed asset or improvement, or replacement, substitution, or
addition thereto, having a useful life of more than one (1) year, including,
without limitation, those arising in connection with the direct or indirect
acquisition of such assets by way of increased product or service charges or
offset items or in connection with Capital Leases.
"Capital Lease" shall mean any lease of property that, in accordance
with GAAP, should be reflected as a liability on the balance sheet of a Person.
"Cash Equivalents" means, as at any date, (a) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than twelve
months from the date of acquisition, (b) dollar denominated time deposits and
certificates of deposit of (i) the Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of $500,000,000 or
(iii) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Xxxxx'x is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with maturities
of not more than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition, (d) repurchase agreements entered into by any
Person with a bank or trust company
2
9
(including the Lender) or recognized securities dealer having capital and
surplus in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States in which such Person shall have a perfected
first priority security interest (subject to no other Liens) and having, on the
date of purchase thereof, a fair market value of at least 100% of the amount of
the repurchase obligations and (e) investments, classified in accordance with
GAAP as current assets, in money market investment programs registered under the
Investment Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $500,000,000 and the
portfolios of which are limited to investments of the character described in the
foregoing subdivisions (a) through (d).
"Change in Control" means (a) any Person or group (within the meaning
of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in
effect on the date hereof) shall have acquired ownership, directly or
indirectly, beneficially or of record, of shares representing more than 30% of
the aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Borrower (other than ITC Holdings, Inc. and Omnicom
Finance, Inc. or any of their respective Subsidiaries); or (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated.
"Closing Date" shall mean the date indicated on the first page.
"Collateral" shall mean the property of Borrower and the Guarantors
described in Article 3 in which Lender has, or is to have, a security interest
as security for the payment of the Obligations.
"Collateral Locations" shall mean the Executive Office and those
additional locations, if any, set forth and described on Exhibit "A" attached
hereto.
"Collateral Reserve Account" shall mean any non-interest bearing,
demand deposit account which Borrower is or may be required to open and maintain
with Lender pursuant to the requirements of Section 4.4.
"Consolidated Subsidiaries" shall mean those Subsidiaries of Borrower
(if any) existing from time to time which, for purposes of GAAP, are required to
be consolidated for financial reporting purposes.
"Control", "Controlled" or "Controlling" shall mean, with respect to
any Person, the power to direct the management and policies of such Person,
directly, indirectly, whether through the ownership of voting securities or
otherwise; provided, however, that, in any event, any Person which owns directly
or indirectly ten percent (10%) or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation
shall be deemed to "Control" such corporation for purposes of this Agreement.
"Debt" shall mean all liabilities, obligations and indebtedness of a
Person, of any kind or nature, whether now or hereafter owing, arising, due or
payable, howsoever evidenced, created, incurred, acquired or owing, and whether
primary, secondary, direct, contingent, fixed or otherwise, including, without
in any way limiting the generality of the foregoing: (i) all obligations,
liabilities and indebtedness secured by any Lien on a Person's property, even
though such Person shall not have assumed or become liable for the payment
thereof; (ii) all obligations or liabilities created or arising under any
Capital Lease, conditional sale or other title retention agreement; (iii) all
accrued pension fund and other employee benefit plan obligations and
liabilities; (iv) all Guaranteed Obligations; (v) any liabilities under, or
associated with, interest rate protection agreements; and (vi) all deferred
taxes.
3
10
"Default Condition" shall mean the occurrence of any event which, after
satisfaction of any requirement for the giving of notice or the lapse of time,
or both, would become an Event of Default.
"Default Rate" shall mean that interest rate per annum equal to two
percent (2%) per annum in excess of the otherwise Applicable Rate payable on
any Obligation.
"Eligible Accounts" shall mean that portion of the Accounts Receivable
Collateral consisting of trade accounts receivable which are actually owing to
Borrower by its Account Debtors subject to no counterclaim, defense, setoff or
deduction and which are at all times subject to a duly perfected, first priority
security interest in favor of Lender, excluding, however, in any event any such
account: (i) with respect to which any portion thereof is more than ninety (90)
days past invoice date; (ii) which is owing by any Affiliate of Borrower; (iii)
which is owing by any Account Debtor having seventy-five percent (75%) or more
in face value of its then existing accounts with Borrower ineligible hereunder
pursuant to the operation and effect of clause (i) above; (iv) the assignment of
which is subject to any requirements set forth in the Assignment of Claims Act;
(v) which is owing by any Account Debtor whose accounts, in face amount, with
Borrower exceed ten percent (10%) of Borrower's Eligible Accounts, but only to
the extent of such excess; (vi) which is owed by, billed to, or will be paid by
an Account Debtor not located in the United States; (vii) which is owing by an
Account Debtor constituting prebilled receivables credited as a result of a
prepaid service; or (viii) which has otherwise been determined by Lender not to
be eligible for purposes hereof.
"Employee Benefit Plan" shall mean any employee welfare benefit plan as
that term is defined in Section 3(l) of ERISA, any employee pension benefit
plan, as that term is defined in Section 3(2) of ERISA or any other plan which
is subject to the provisions of Title IV of ERISA or which is for the benefit of
any employees of Borrower and any employees of any Subsidiary or any other
entity which is a member of a controlled group or under common control with
Borrower, as such terms are defined in Section 4001 (a)(14) of ERISA.
"Environmental Laws" shall mean all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters, whether now or
hereafter existing, including, but not limited to state and federal superlien
and environmental cleanup laws and U.S. Department of Transportation regulations
and any other state or local law or regulation relating to pollution,
reclamation, or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into air, water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes.
"Equipment Collateral" shall mean all equipment and fixtures of
Borrower and the Guarantors, whether now owned or hereafter acquired, wherever
located, including, without limitation, all machinery, furniture, furnishings,
leasehold improvements, computer equipment, motor vehicles, forklifts, rolling
stock, dies and tools used or useful in Borrower's business operations.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as may be amended from time to time.
"Event of Default" shall mean any of the events or conditions described
in Article 13, provided that any requirement for the giving of notice or the
lapse of time, or both, has been satisfied.
"Executive Office" shall mean the address of Borrower designated as
such on Exhibit "A".
4
11
"Fee Letter" shall mean that certain the letter agreement dated as of
the Closing Date between the Borrower and the Lender.
"Fiscal Year", in respect of a Person, shall mean the fiscal year of
such Person employed by such Person as of the Closing Date, and designated as
such on Exhibit "A" as to Borrower and Exhibit "K" as to each Subsidiary
Guarantor. The terms "Fiscal Quarter" and "Fiscal Month" shall correspond
accordingly thereto.
"GAAP" shall mean generally accepted accounting principles consistently
applied for the period or periods in question.
"Guaranteed Obligations" shall mean, with respect to any Person, all
obligations of such Person which in any manner directly or indirectly guarantee
or assure, or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person or assure or in
effect assure the holder of any such obligations against loss in respect
thereof.
"Guarantor" shall mean, individually and collectively, any and all
accommodation makers, endorsers, guarantors or sureties from whom Lender may
require the endorsement of any note or their execution of any contract of
guaranty or suretyship guaranteeing payment of any of the Obligations,
including, but not limited to, those Persons designated on Exhibit "K".
"Guaranty" shall mean any agreement or other writing executed by a
Guarantor guaranteeing payment of any of the Obligations.
"Intangibles Collateral" shall mean all general intangibles of the
Borrower and the Guarantors, without limitation, any or all of the following and
all rights associated therewith: (a) tax refunds, rights to tax refunds and all
commercial tort claims, (b) all domestic and foreign patents and applications
therefor and all reissues, divisions, renewals, extensions, continuations and
continuations-in-part thereof; (c) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, rights of privacy and
publicity, and all documentation relating to any of the foregoing; (d) all
copyrights, copyright registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (e) all mask works, mask work
registrations and applications therefor; (f) all industrial designs and any
registrations and applications therefor; (g) all trade names, logos, common law
trademarks and service marks; trademark and service xxxx registrations and
applications therefor and all goodwill associated therewith; (h) all domain
names or websites owned by Borrower; (i) blueprints, drawings, designs, trade
secrets, plans, diagrams, schematics and assembly and display materials relating
thereto, all customer lists, all books and records and (j) all software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded, and all
documentation related to any of the foregoing.
"XxxXxxxxx.Xxx Note" means that certain Promissory Note in the original
principal amount of $304,020.00, dated as of May 3, 2000 by the Borrower in
favor of Xxxxxxx Xxxxxxxxx.
"Lender" shall have the meaning given to such term in the preamble to
this Agreement.
"Letter of Credit" shall have the meaning given to such term in Section
2.1(b).
5
12
"Letter of Credit Obligations" shall mean all obligations of Borrower
arising in respect of Letters of Credit, including, without limitation, (i) all
contingent liabilities arising in respect of Letters of Credit issued, but not
drawn upon, and (ii) all reimbursement liabilities arising in respect of
drawings made under Letters of Credit.
"Lien" shall mean any deed to secure debt, deed of trust, mortgage or
similar instrument, and any lien, security interest, preferential arrangement
which has the practical effect of constituting a security interest, security
title, pledge, charge, encumbrance or servitude of any kind, whether by
consensual agreement or by operation of statute or other law, and whether
voluntary or involuntary, including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof.
"Line of Credit" shall refer to the line of credit in the principal
amount of Two Million Five Hundred Thousand Dollars ($2,500,000) opened by
Lender in favor of Borrower pursuant to the provisions of Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Notes, the Pledge and
Guaranty Agreement, any financing statements covering portions of the
Collateral, and any and all other documents, instruments, certificates and
agreements executed and/or delivered by Borrower in connection herewith, or any
one, more, or all of the foregoing, as the context shall require.
"Margin" shall mean an amount equal to the lesser of (i) seventy five
percent (75%) (or such greater or lesser percentage which Lender shall establish
by written notice to Borrower in its good faith discretion) of the face dollar
amount of Eligible Accounts as at the date of determination and (ii) the then
current borrowing availability under the Line of Credit. Lender shall also be
entitled to impose any reserve against the Margin and the availability under the
Line of Credit that it deems necessary as security for payment of the
Obligations.
"Margin Requirement" shall have the meaning ascribed to such term in
Section 2.1(a).
"Master Note" shall mean the master promissory note, dated of even date
herewith, as amended or supplemented from time to time, in a principal amount
equal to the maximum amount of the Line of Credit, evidencing advances to be
obtained by Borrower under the Line of Credit, together with any renewals or
extensions thereof, in whole or in part. The Master Note shall be substantially
in the form of Exhibit "B".
"Material Adverse Effect" shall mean with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon any of (a) the
financial condition, operations, business, properties or prospects of the
Borrower and its Consolidated Subsidiaries taken as a whole, (b) the rights and
remedies of the Lender under any of the Loan Documents or any documents,
instruments or agreements executed and/or delivered by any Person other than
Borrower in conjunction with the Loan Documents, or the ability of the Borrower
to perform its obligations under any of the Loan Documents, or (c) the legality,
validity or enforceability of any of the Loan Documents or any documents,
instruments or agreements executed and/or delivered by any Person other than
Borrower in conjunction with the Loan Documents.
"Minimum Liquidity" shall mean an amount equal to the sum of cash, Cash
Equivalents and the Unused Line of Credit Committed Amount.
6
13
"Moody's" means Xxxxx'x Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating securities.
"Net Cash Proceeds" means, with respect to any transaction or event, an
amount equal to the cash proceeds received by the Borrower or any Subsidiary
from or in respect of such transaction or event (including proceeds of any
non-cash proceeds of such transaction), less (x) any expenses reasonably
incurred by such Person in connection therewith and (y) the amount of any Debt
secured by a Lien on the related asset and discharged from the proceeds of such
Asset Sale and any taxes paid or payable by such Person in respect of such Asset
Sale.
"Net Worth" means, as of any date with respect to the Borrower and its
Subsidiaries on a consolidated bases, "net worth", as determined in accordance
with GAAP; provided, however, that in calculating "Net Worth" hereunder, any
deduction in the amount of "goodwill" after the Closing Date by reason of the
operation of FASB and the "marking-to-market" of such goodwill shall be added
back.
"Notes" shall mean, collectively, the Master Note, the Term Note and
any other instrument(s) time evidencing all or any portion of any Obligations.
"Obligations" shall mean any and all Debt of Borrower to Lender,
including without limiting the generality of the foregoing, any indebtedness,
liability or obligation of Borrower to Lender under any loan made to Borrower by
Lender prior to the date hereof and any and all extensions or renewals thereof
in whole or in part; any Debt of Borrower to Lender arising hereunder or as a
result hereof, whether evidenced by the Notes, constituting Letter of Credit
Obligations or otherwise, and any and all extensions or renewals thereof in
whole or in part; any Debt of Borrower to Lender under any later or future
advances or loans made by Lender to Borrower, and any and all extensions or
renewals thereof in whole or in part; and any and all future or additional Debt
of Borrower to Lender whatsoever and in any event, whether existing as of the
date hereof or hereafter arising, whether arising under a loan, lease, credit
card arrangement, line of credit, letter of credit or other type of financing,
and whether direct, indirect, absolute or contingent, as maker, endorser,
guarantor, surety or otherwise, and whether evidenced by, arising out of, or
relating to, a promissory note, xxxx of exchange, check, draft, bond, letter of
credit, guaranty agreement, bankers' acceptance, foreign exchange contract,
interest rate protection agreement, commitment fee, service charge or otherwise.
"Omnicom Obligations" means (a) all principal of, and interest on the
Omnicom Subordinated Note issued in connection with the that certain Amended and
Restated Credit Agreement (the "Omnicom Agreement") dated as of February 27,
2001 by and between the Borrower and Omnicom Finance, Inc., as amended from time
to time and (b) all other amounts payable under the Omnicom Agreement.
"Omnicom Subordinated Note" means that certain promissory note dated
July 19, 2000 issued by the Borrower in favor of Omnicom Finance, Inc. in the
original principal amount of $10,000,000, as amended from time to time.
"Permitted Encumbrances" shall mean (i) Liens for taxes not yet due and
payable or being actively contested as permitted by this Agreement, only if such
Liens do not adversely affect Lender's rights or the priority of Lender's
security interest in the Collateral; (ii) carriers', warehousemen's mechanics,
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business, payment for which is not yet due or which are being actively contested
in good faith and by appropriate, lawful proceedings, but only if such Liens are
and remain junior to Liens granted in favor of Lender; (iii) pledges or deposits
in connection with worker's compensation, unemployment insurance and other
social security legislation; (iv) deposits to secure the performance of
utilities, leases, statutory obligations and surety and appeal bonds and other
obligations of a like nature arising by statute or under customary terms
regarding depository
7
14
relationships on deposits held by financial institutions with whom Borrower has
a banker-customer relationship; (v) typical restrictions imposed by licenses and
leases of software (including location and transfer restrictions); (vi) Liens in
favor of Lender or an Affiliate of the Lender; (vii) Purchase Money Liens; and
(viii) other Liens set forth and described on Exhibit "A" attached hereto.
"Person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, joint stock company, trust, governmental unit
or other entity.
"Pledge and Guaranty Agreement" means that certain Irrevocable Proxy
and Pledge and Guaranty Agreement dated as of the date hereof, among the
Borrower, the Subsidiary Guarantors and Wachovia Capital Investments, Inc.
"Prime Borrowings" shall mean those Borrowings which Borrower elects,
pursuant to Section 2.2(a), to bear interest at a rate per annum determined by
reference to the Prime Rate.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by Wachovia Bank, National Association as its prime rate in
effect at its principal office in Winston-Salem, North Carolina; each change in
the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.
"Principal" shall mean Xxxxxx Xxxxxxxxxx, Chief Executive Officer of
the Borrower.
"Purchase Money Lien" shall mean any Lien granted by Borrower or any
Subsidiary from time to time to vendors or financiers of equipment to secure the
payment of the purchase price thereof so long as (i) such Liens extend only to
the specific equipment so purchased, (ii) secure only such deferred payment
obligation and related interest, fees and charges and no other Debt, and (iii)
are promptly released upon the payment in full of such purchase price and
related interest, fees and charges.
"Restricted Investment" shall mean any investment in cash or by
delivery of property to any Person, whether by acquisition of stock,
indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, or in any property except that investments
consisting of the following shall not constitute "Restricted Investments": (i)
property used or to be used in the ordinary course of business; (ii) current
assets arising from the sale of goods or the provision of services in the
ordinary course of business; and (iii) loans or advances to employees for
salary, commissions, travel or the like, made in the ordinary course of
business.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock of the same class), (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to acquire
shares of the Borrower's capital stock or (iii) any payment or prepayment of
principal of, premium, if any, or interest on, redemption, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, the Omnicom
Obligations and/or the XxxXxxxxx.Xxx Note.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
Hill Companies, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Shareholder(s)" shall mean the Person(s) designated as such on Exhibit
"A" attached hereto.
8
15
"Subsidiary" shall mean any corporation, partnership, business
association or other entity (including any Subsidiary of any of the foregoing)
of which Borrower owns, directly or indirectly, fifty percent (50%) or more of
the capital stock or equity interest having ordinary power for the election of
directors or others performing similar functions.
"Term Loan" shall mean the term loan in the principal amount of FIVE
MILLION DOLLARS ($5,000,000) made by Lender to Borrower pursuant to the
provisions of Section 2.1(c).
"Term Note" shall mean the term promissory note, dated of even date
herewith, as amended or supplemented from time to time, in the principal amount
of the Term Loan, together with any renewals or extensions thereof, in whole or
in part. The Term Note shall be substantially in the form of Exhibit "C".
"Termination Date" shall mean the earliest to occur of the following
dates: (i) that date on which, pursuant to Article 14, Lender terminates the
Line of Credit (or the Line of Credit is deemed automatically terminated)
subsequent to the occurrence of an Event of Default; or (ii) November 12, 2002.
"UCC" shall mean the Uniform Commercial Code-Secured Transactions of
Georgia (OCGA Art. 11-9), as in effect on the date hereof.
"Unused Line of Credit Committed Amount" means, for any period, the
amount by which (a) the then applicable Line of Credit exceeds (b) the daily
average sum for such period of (i) the outstanding Advances plus (ii) the
outstanding aggregate amount of Letter of Credit Obligations.
"Warrants" has the meaning set forth in the Fee Letter.
SECTION 1.2 USE OF DEFINED TERMS.
All terms defined in this Agreement and the Exhibits shall have the
same defined meanings when used in any other Loan Documents, unless the context
shall require otherwise.
SECTION 1.3 ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall have the
meanings generally attributed to such terms under GAAP.
SECTION 1.4 UCC TERMS.
The terms "accounts", "chattel paper", "instruments", "general
intangibles", "inventory", "equipment" and "fixtures", as and when used in the
Loan Documents, shall have the same meanings given such terms under the UCC.
SECTION 1.5 TERMINOLOGY.
All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
Titles of Articles and Sections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement, and all references
in this Agreement to Articles, Sections, Subsections, paragraphs, clauses,
subclauses, Exhibits or Supplements shall refer to the corresponding Article,
Section, Subsection, paragraph, clause, subclause of, or Exhibit or Supplement
attached to, this Agreement, unless specific reference is made to the articles,
sections or other subdivisions of, or Exhibit or
9
16
Supplement to, another document or instrument. Wherever in this Agreement
reference is made to any instrument, agreement or other document, including,
without limitation, any of the Loan Documents, such reference shall be
understood to mean and include any and all amendments thereto or modifications,
restatements, renewals or extensions thereof. Wherever in this Agreement
reference is made to any statute, such reference shall be understood to mean and
include any and all amendments thereof and all regulations promulgated pursuant
thereto. Whenever any matter set forth herein or in any Loan Document is to be
consented to or satisfactory to Lender, or is to be determined, calculated or
approved by Lender, then, unless otherwise expressly set forth herein or in any
such Loan Document, such consent, satisfaction, determination, calculation or
approval shall be in Lenders sole discretion, exercised in good faith and, where
required by law, in a commercially reasonable manner, and shall be conclusive
absent manifest error.
SECTION 1.6 EXHIBITS.
All Exhibits attached hereto are by reference made a part hereof.
ARTICLE II
THE FINANCING.
SECTION 2.1 EXTENSIONS OF CREDIT.
(a) LINE OF CREDIT. On the Closing Date, subject to fulfillment of
all conditions precedent set forth in Article XVI, Lender agrees to open the
Line of Credit in favor of Borrower so that, during the period from the Closing
Date to, but not including, the Termination Date, so long as there is not in
existence any Default Condition or Event of Default and the borrowing will not
cause a Default Condition or Event of Default to exist, Borrower may borrow and
repay and reborrow Advances up to a maximum aggregate principal amount
outstanding at any one time equal to the original principal amount of the Line
of Credit; subject, however, to the requirement that at no time shall the
aggregate principal amount of (i) outstanding Advances plus (ii) the aggregate
amount of Letter of Credit Obligations exceed the Margin (such requirement being
referred to herein as the "Margin Requirement"); and subject, further, to the
requirement that if, at any time hereafter, the Margin Requirement is not
satisfied, Borrower will immediately repay the then principal balance of the
Master Note by that amount necessary to satisfy the Margin Requirement. Each
Advance shall be in a minimum principal amount of $100,000 and integral
multiples of $50,000 in excess thereof (or the remaining available amount of the
Line of Credit). All proceeds so obtained under the Line of Credit may be used
by Borrower for working capital and general corporate purposes in such manner as
Borrower may elect in the ordinary course of its business operations. The Debts
arising from Advances made to or on behalf of Borrower under the Line of Credit
shall be evidenced by the Master Note, which shall be executed by Borrower and
delivered to Lender on the Closing Date. The outstanding principal amount of the
Master Note may fluctuate from time to time, but shall be due and payable in
full on the Termination Date, and each Advance thereunder shall bear interest
from the date of such Advance until paid in full at the Applicable Rate,
calculated and payable in the manner described in Section 2.2(a). Borrower shall
request Advances under the Line of Credit in a writing delivered to Lender not
later than 11:00 a.m. (Atlanta, Georgia time) on the date of the requested
Advance.
(b) LETTERS OF CREDIT. In addition to the foregoing, so long as
the Line of Credit remains open, Borrower shall have the right to apply for
standby letters of credit ("Letters of Credit") to be issued by Lender or
Affiliate of the Lender for use by Borrower in the ordinary course of its
business operations pursuant to a separate application and agreement (one per
each Letter of Credit) to be executed between Lender or Affiliate of the Lender
and Borrower, which shall set forth, among other things, the purpose,
beneficiary, the expiry date and credit limit, together with the fees and
charges imposed by Lender
10
17
or Affiliate of the Lender for the issuance and administration thereof. The
issuance of each Letter of Credit shall be within the sole discretion of Lender
or any such Affiliate of the Lender. All outstanding Letter of Credit
Obligations shall be reserved by Lender against borrowing availability under the
Line of Credit as more particularly described in the definition of the Margin
Requirement. Lender shall have the continuing right to charge as Advances any
outstanding Letter of Credit Obligations and any fees and charges associated
therewith. Notwithstanding the foregoing, the aggregate amounts of Letters of
Credit and Letter of Credit Obligations at any one time outstanding shall not
exceed $500,000.
(c) TERM LOAN. On the Closing Date, subject to fulfillment of all
conditions precedent set forth in Article XIV, Lender agrees to make the Term
Loan to Borrower, the proceeds from which shall be used by Borrower for general
corporate purposes. The Debt arising from the making of the Term Loan shall be
evidenced by the Term Note, which shall be executed by Borrower and delivered to
Lender on the Closing Date. The principal amount of the Term Note shall be
repaid by Borrower on the Termination Date. The Term Note shall bear interest at
the Applicable Rate, calculated and payable in the manner described in Section
2.2(a), from the date thereof on the unpaid principal amount thereof from time
to time outstanding. The Term Note may be prepaid, in whole or in part, by
Borrower at any time or from time to time hereafter; provided, however, that,
any partial prepayment of the Term Note shall be in a minimum amount of $500,000
and integral multiples of $100,000 in excess thereof and shall be applied by
Lender in the inverse order of the maturities of such principal installments of
the Term Note then remaining to be paid.
SECTION 2.2 INTEREST AND OTHER CHARGES.
(a) INTEREST AT APPLICABLE RATE. Lender and Borrower agree that
the interest rate payable on each Borrowing (herein called the "Applicable
Rate") shall be determined as follows:
(i) LINE OF CREDIT. Each Advance under the Line of Credit
shall bear interest at the Prime Rate plus two percent (2%) per annum.
(ii) TERM LOAN. The outstanding principal balance of the
Term Loan, or each outstanding portion thereof, shall bear interest at the Prime
Rate plus two percent (2%) per annum.
(iii) PAYMENT OF INTEREST. Accrued interest on each Prime
Borrowing at the Applicable Rate shall be due and payable monthly in arrears, on
the first day of each calendar month, for the preceding calendar month (or
portion thereof), commencing on the first day of the first calendar month
following the Closing Date.
(iv) CALCULATION OF INTEREST AND FEES. Interest on each
Borrowing at the Applicable Rate (and any fees described in Section 2.2(b)
computed on a per annum basis) shall be calculated on the basis of a 360-day
year and actual days elapsed. The Applicable Rate on each Prime Borrowing shall
change with each change in the Prime Rate, effective as of the opening of
business on the Business Day of such change.
(v) CHARGING INTEREST AND FEES. Accrued and unpaid
interest on any Borrowings (and any outstanding fees described in Section
2.2(b)) may, when due and payable, be paid, at Lender's option (without any
obligation to do so), either (i) by Lender's charging the Line of Credit for an
Advance in the amount thereof; or (ii) by Lender's debiting any deposit account
constituting Balances Collateral for the amount thereof.
11
18
(vi) RATE ON OTHER OBLIGATIONS. To the extent that, at any
time, there are other Obligations besides Advances and the Term Loan which are
outstanding and unpaid, such Obligations shall, unless any Note evidencing such
Obligations provides otherwise, bear interest at the same rate per annum as is
then and thereafter payable on Prime Borrowings under the Line of Credit.
(b) FEES. In addition to the payment of interest at the Applicable
Rate, Borrower shall also be obligated to pay Lender the following fees and
charges:
(i) LETTER OF CREDIT FEE. Letter of Credit fees, equal in
amount to two and one-half percent (2.50%) per annum of the outstanding amount
of any Letter of Credit Obligations, and shall be due and payable on the first
day of each calendar month, for the preceding calendar month (or portion
thereof).
(ii) UNUSED FEE. The Borrower shall pay Lender a fee (the
"Unused Fee") on the Unused Line of Credit Committed Amount computed at a per
annum rate for each day during the applicable Unused Fee Calculation Period
(hereinafter defined) at a rate equal to .50%. The Unused Fee shall commence to
accrue on the Closing Date and shall be due and payable on the first day of each
calendar month, for the preceding calendar month (or portion thereof) (each such
month or portion thereof for which the Unused Fee is payable hereunder being
herein referred to as an "Unused Fee Calculation Period").
(c) CAPITAL ADEQUACY. If, after the Closing Date, the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
administration thereof, or compliance by Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, affects or might affect the amount
of capital required or expected to be maintained by Lender or any corporation in
control of Lender and Lender determines that the amount of such capital is
increased by or based upon Lender's obligations hereunder, then from time to
time, within thirty (30) days after demand by Lender, Borrower shall pay to
Lender such additional amount or amounts as will compensate Lender in light of
such circumstances, to the extent that Lender reasonably determines such
increase in capital is allocable to Lender's obligations hereunder, and such
payment, as and when received, shall be applied by Lender in reimbursement of
Lender's increased costs in regard to such obligations.
(d) USURY SAVINGS PROVISIONS. Lender and Borrower hereby further
agree that the only charge imposed by Lender upon Borrower for the use of money
in connection herewith is and shall be the interest expressed in the Master Note
and Term Note, respectively, at the rate set forth in each of the Master Note
and the Term Note, and that all other charges imposed by Lender upon Borrower in
connection herewith, are and shall be deemed to be charges made to compensate
Lender for underwriting and administrative services and costs, and other
services and costs performed and incurred, and to be performed and incurred, by
Lender in connection with the Borrowings, and shall under no circumstances be
deemed to be charges for the use of money. In no contingency or event whatsoever
shall the aggregate of all amounts deemed interest hereunder or under the Notes
and charged or collected pursuant to the terms of this Agreement or pursuant to
the Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
applicable law and Lender shall promptly refund to Borrower any interest
received by Lender in excess of the maximum lawful rate or, if so requested by
Borrower, shall apply such excess to the principal balance of the Obligations.
It is the intent hereof that Borrower not pay or contract to pay, and that
Lender not receive or
12
19
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrower under applicable law.
SECTION 2.3. GENERAL PROVISIONS AS TO PAYMENTS.
(a) METHOD OF PAYMENT. Unless paid in accordance
with Section 2.2(a)(v), all payments of interest, fees and principal pursuant to
this Agreement must be received by Lender no later than 2:00 p.m. (Atlanta,
Georgia time) on the date when due, in Federal or other funds immediately
available to Lender in Atlanta, Georgia.
(b) APPLICATION OF PAYMENT. Except as may be
otherwise agreed to by Borrower and Lender and as set forth in Section 4.4
hereof, all payments received by Lender hereunder shall be applied, in
accordance with the then current billing statement applicable to the Borrowing,
first to accrued interest, then to fees, then to principal due and then to late
charges. Any remaining funds shall be applied to the further reduction of
principal. In the event more than one Borrowing shall be outstanding hereunder,
Lender in its sole discretion may determine which Borrowing(s) each payment
shall be applied to. Notwithstanding the foregoing, upon the occurrence of a
Default Condition or Event of Default, payments shall be applied as determined
by Lender in its sole discretion or as expressly provided in Section 14.3.
ARTICLE III
SECURITY INTEREST.
As security for the payment of all Obligations, Borrower and each
Guarantor hereby grants to Lender a continuing, general lien upon and security
interest and security title in and to the following described property, wherever
located, whether now existing or hereafter acquired or arising, namely: (a) the
Accounts Receivable Collateral; (b) inventory; (c) the Equipment Collateral; (d)
the Intangibles Collateral; (e) the Balances Collateral; and (f) all products
and/or proceeds of any and all of the foregoing, including, without limitation,
insurance proceeds (collectively, along with the other property of Borrower and
each Guarantor described hereinabove in this Article 3, are herein sometimes
collectively called the "Collateral").
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
ACCOUNTS RECEIVABLE COLLATERAL.
With respect to the Accounts Receivable Collateral, Borrower and each
Guarantor hereby represents, warrants and covenants to Lender as set forth
below.
SECTION 4.1 BONA FIDE ACCOUNTS.
Each item of the Accounts Receivable Collateral arises or will arise
under a contract between Borrower and the Account Debtor, or from the bona fide
sale or delivery of goods to or performance of services for, the Account Debtor.
13
20
SECTION 4.2 GOOD TITLE.
Borrower has good title to the Accounts Receivable Collateral free and
clear of all liens, security interests and encumbrances thereon other than any
Permitted Encumbrances, and no financing statement covering the Accounts
Receivable Collateral is on file in any public office other than any evidencing
Permitted Encumbrances.
SECTION 4.3 RIGHT TO ASSIGN.
Borrower has full right, power and authority to make this assignment of
the Accounts Receivable Collateral and hereafter will not pledge, hypothecate,
grant a security interest in, sell, assign, transfer, or otherwise dispose of
the Accounts Receivable Collateral, or any interest therein.
SECTION 4.4 COLLATERAL RESERVE ACCOUNT.
Simultaneously herewith, Borrower shall establish and maintain with
Lender a Collateral Reserve Account into which Borrower shall transfer and
deliver all cash, checks, drafts, items and other instruments for the payment of
money which it now has or may at any time hereafter receive as proceeds of the
Accounts Receivable Collateral and, pending such transfer and delivery, Borrower
shall be deemed to hold same in trust for the benefit of Lender. Borrower shall
not be entitled to draw on the Collateral Reserve Account without the prior
written consent of Lender; provided, however, that, at any time during which
deposits exist in the Collateral Reserve Account, Lender may withdraw such
deposits, or any portion thereof, therefrom, for application against the
Obligations in such manner as Lender, in its sole discretion, may determine.
Lender may, additionally, at any time in its sole discretion, direct Account
Debtors to make payments on the Accounts Receivable Collateral, or portions
thereof, directly to Lender, and the Account Debtors are hereby authorized and
directed to do so by Borrower upon Lender's direction, and the funds so received
shall be also deposited in the Collateral Reserve Account, or, at the election
of Lender, upon its receipt thereof, be applied directly to repayment of the
Obligations in such order as Lender, in its sole discretion, shall determine.
Notwithstanding the foregoing, however, so long as no Event of Default exists,
Lender agrees to settle with Borrower as to any funds which may exist in the
Collateral Reserve Account from time to time hereafter on a mutually agreeable
periodic basis.
SECTION 4.5 [RESERVED].
SECTION 4.6 POWER OF ATTORNEY.
Effective upon the occurrence of an Event of Default, Borrower
irrevocably designates and appoints Lender its true and lawful attorney either
in the name of Lender or in the name of Borrower to ask for, demand, xxx for,
collect, compromise, compound, receive, receipt for and give acquittances for
any and all sums owing or which may become due upon any items of the Accounts
Receivable Collateral and, in connection therewith, to take any and all actions
as Lender may deem necessary or desirable in order to realize upon the Accounts
Receivable Collateral, including, without limitation, power to endorse in the
name of Borrower, any checks, drafts, notes or other instruments received in
payment of or on account of the Accounts Receivable Collateral, but Lender shall
not be under any duty to exercise any such authority or power or in any way be
responsible for the collection of the Accounts Receivable Collateral.
ARTICLE V
[RESERVED]
14
21
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
EQUIPMENT COLLATERAL.
With respect to the Equipment Collateral, the Borrower and each
Guarantor hereby represents, warrants and covenants to Lender as set forth
below:
SECTION 6.1 SALE OF EQUIPMENT COLLATERAL.
Borrower will not make any Asset Sale without the prior written consent
of Lender.
Notwithstanding anything to the contrary in this Section 6.1, promptly
upon receipt by the Borrower or any Subsidiary of the proceeds of any Asset Sale
after the Closing Date, an amount equal to 100% of the Net Cash Proceeds of such
Asset Sale shall become due and payable and the Borrower shall prepay (i) the
Term Loan and (ii) after the Term Loan has been repaid in full, the Line of
Credit (with a corresponding reduction in the amount of the Line of Credit) and
(iii) after the Line of Credit has been repaid in full, to a cash collateral
account in respect of Letter of Credit Obligations.
SECTION 6.2 INSURANCE.
Borrower agrees that it will obtain and maintain insurance on the
Equipment Collateral with such companies and in such amounts and against such
risks as Lender may reasonably request, with loss payable to Lender as its
interests may appear; provided, however, that the Lender acknowledges that the
Borrower's current coverage as of the Closing Date is adequate. Such insurance
shall not be cancelable by Borrower, unless with the prior written consent of
Lender, or by Borrower's insurer, unless with at least thirty (30) days (or such
greater or lesser number of days as Lender may require or accept) advance
written notice to Lender. In addition, Borrower shall cause insurer to provide
to Lender at least thirty (30) days (or such greater or lesser number of days as
Lender may require or accept) advance written notice prior to insurer's
nonrenewal of such insurance. Borrower shall provide to Lender a copy of each
such insurance policy.
SECTION 6.3 GOOD TITLE.
Borrower owns the Equipment Collateral free and clear of any security
interest, lien or encumbrance thereon other than with respect to any Permitted
Encumbrances and no financing statements or other evidences of the grant of a
security interest respecting the Equipment Collateral exist on the public
records as of the date hereof other than any evidencing any Permitted
Encumbrances.
SECTION 6.4 RIGHT TO GRANT SECURITY INTEREST.
Borrower has the right to grant a security interest in the Equipment
Collateral. Borrower will pay all taxes and other charges against the Equipment
Collateral, Borrower will not use the Equipment Collateral illegally or allow
the Equipment Collateral to be encumbered except for the security interest in
favor of Lender granted herein and except for any Permitted Encumbrances.
SECTION 6.5 LOCATION.
As of the date hereof, the Equipment Collateral is located only at one
or more of the Collateral Locations and, hereafter, Borrower covenants with
Lender not to locate any of the Equipment Collateral at any location other than
a Collateral Location without at least thirty (30) days written notice to
Lender.
15
22
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
BALANCES COLLATERAL.
With respect to the Balances Collateral, Borrower and each Guarantor
hereby represents, warrants and covenants to Lender as set forth below:
SECTION 7.1 OWNERSHIP.
Borrower and the Guarantors own the Balances Collateral free and clear
of any Liens thereon, except for any Permitted Encumbrances.
SECTION 7.2 REMEDIES.
In addition to such other rights and remedies with respect to the
Balances Collateral as may exist from time to time hereafter in favor of Lender,
whether by way of set-off, banker's lien, consensual security interest or
otherwise, Lender may at any time charge any part or all of the obligations of
Lender to Borrower represented by items constituting the Balances Collateral in
the possession and control of Lender against the Obligations.
SECTION 7.3 LIENS.
Hereafter, Borrower and the Guarantors will not incur, create or suffer
to exist any Lien upon the Balances Collateral, except for Permitted
Encumbrances, or sell, convey, hypothecate, pledge or assign its respective
right, title or interest therein, without the prior written consent of Lender
thereto.
ARTICLE VIII
REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
INTANGIBLES COLLATERAL.
With respect to the Intangibles Collateral, Borrower and each Guarantor
hereby represents, warrants and covenants to Lender as set forth below:
SECTION 8.1 OWNERSHIP.
Borrower and the Guarantors own the Intangibles Collateral free and
clear of any Liens thereon other than with respect to any Permitted Encumbrances
and no financing statements or other evidences of the grant of a security
interest respecting the Intangibles Collateral exist on the public records as of
the date hereof other than any evidencing any Permitted Encumbrances. Set forth
on Exhibit "A" is a list of (i) all commercial tort claims set forth in
reasonable detail and (ii) all material unregistered trademarks, tradenames and
copyrights and all registered Intangible Collateral and all applications for the
registration thereof owned by each of the Borrower and its Subsidiaries or that
the Borrower or any of its Subsidiaries has the right to use (other than
commercially available software). The registrations of the Intangibles
Collateral listed on the Exhibit "A" are valid and subsisting, all necessary
registration and renewal fees in connection with such registrations have been
made, and all necessary documents and certificates in connection with such
registrations have been filed, as applicable, with the relevant patent,
copyrights,
16
23
trademark and domain name authorities in the United States or other jurisdiction
for the purposes of maintaining such Intangibles Collateral registrations. (a)
no Person has any rights to use any of the Intangibles Collateral of the
Borrower or any of its Subsidiaries; and (b) the Borrower nor any of its
Subsidiaries have granted to any Person, nor authorized any Person to retain,
any rights in the Intangibles Collateral of the Borrower or any of its
Subsidiaries. Except for "shrink wrap" and similar commercial end-user licenses,
the Borrower and its Subsidiaries own and have good and exclusive title to each
material item of Intangibles Collateral of the Borrower and its Subsidiaries,
free and clear of any Lien; and the Borrower and its Subsidiaries own, or have
the right, pursuant to a valid contract to use or operate under, all other
material Intangibles Collateral of the Borrower and its Subsidiaries. To the
knowledge of the Borrower and its Subsidiaries, the operation of the business of
Borrower and its Subsidiaries as is currently conducted does not infringe the
Intangibles Collateral of any other Person. Neither the Borrower nor any of its
Subsidiaries have received notice from any Person that the operation of its
business infringes the Intangibles Collateral of any Person. There are no
contracts between the Borrower or any of its Subsidiaries and any other Person
with respect to the Intangibles Collateral of the Borrower and its Subsidiaries
in respect of which there is any dispute known to the Borrower and its
Subsidiaries regarding the scope of such agreement, or performance under such
contract, including with respect to any payments to be made or received by the
Borrower or any of its Subsidiaries. To the knowledge of the Borrower and each
of its Subsidiaries, no Person is infringing or misappropriating any of the
Intangibles Collateral of the Borrower or any of its Subsidiaries.
SECTION 8.2 LIENS.
Hereafter, Borrower and the Guarantors will not incur, create or suffer
to exist any Lien upon the Intangibles Collateral except for the security
interest granted herein and except for any Permitted Encumbrances or sell,
convey, hypothecate, pledge or assign its right, title or interest therein.
SECTION 8.3 PRESERVATION.
Hereafter, Borrower and the Guarantors will take all necessary and
appropriate measures to obtain, maintain, protect and preserve the Intangibles
Collateral including, without limitation, registration thereof with the
appropriate state or federal governmental agency or department.
ARTICLE IX
GENERAL REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, Borrower hereby
represents and warrants to Lender (which representations and warranties,
together with any other representations and warranties of Borrower contained
elsewhere in this Agreement, shall be deemed to be renewed as of the date of
each Advance under the Line of Credit) as set forth below:
SECTION 9.1 CORPORATE EXISTENCE AND QUALIFICATION.
Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of its incorporation, as designated on
Exhibit "A", with its principal place of business, chief executive office and
office where it keeps all of its books and records being located at the
Executive Office and is duly qualified as a foreign corporation in good standing
in each other state in which a Collateral Location is situated or wherein the
conduct of its business or the ownership of its property requires such
qualification, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. Borrower has as its corporate name, as registered with the
17
24
secretary of state of the state of its incorporation, the words first inscribed
hereinabove as its name, and, except as may be described on Exhibit "A", has not
done business under any other name for at least the past seven (7) years.
SECTION 9.2 CORPORATE AUTHORITY; VALIDITY AND BINDING EFFECT.
Borrower has the power to make, deliver and perform under the Loan
Documents, and to borrow hereunder, and has taken all necessary and appropriate
corporate action to authorize the execution, delivery and performance of the
Loan Documents. This Agreement constitutes, and the remainder of the Loan
Documents, when executed and delivered for value received, will constitute, the
valid obligations of Borrower, legally binding upon it and enforceable against
it in accordance with their respective terms.
SECTION 9.3 INCUMBENCY AND AUTHORITY OF SIGNING OFFICERS.
The undersigned officers of Borrower hold the offices specified
hereinbelow and, in such capacities, are duly authorized and empowered to
execute, attest and deliver this Agreement and the remainder of the Loan
Documents for and on behalf of Borrower, and to bind Borrower accordingly
thereby.
SECTION 9.4 NO MATERIAL LITIGATION.
Except as may be set forth on Exhibit "A", there are no legal
proceedings pending (or, so far as Borrower or its officers know, threatened),
before any court or administrative agency which, if adversely determined, could
reasonably be expected to materially and adversely affect the financial
condition or operations of Borrower.
SECTION 9.5 TAXES.
Borrower has filed or caused to be filed all tax returns required to be
filed by it and has paid all taxes shown to be due and payable by it on said
returns or on any assessments made against it.
SECTION 9.6 CAPITAL STOCK.
All capital stock, debentures, bonds, notes and all other securities of
Borrower presently issued and outstanding are validly and properly issued in
accordance with all applicable laws, including, but not limited to, the "blue
sky" laws of all applicable states and the federal securities laws.
SECTION 9.7 CORPORATE ORGANIZATION.
The articles of incorporation of and bylaws of Borrower are in full
force and effect under the law of the state of its incorporation and all
amendments to said articles of incorporation and bylaws have been duly and
properly made under and in accordance with all applicable laws.
SECTION 9.8 INSOLVENCY.
After giving effect to the execution and delivery of the Loan Documents
and the making of any disbursements under the Notes, Borrower will not be
"insolvent", within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or
as defined in ss. 101(32) of the Bankruptcy Code; or be unable to pay its debts
generally as such debts become due; or have an unreasonably small capital.
18
25
SECTION 9.9 TITLE.
Borrower has good and marketable title to all of its properties subject
to no material Lien of any kind except as otherwise disclosed in writing to
Lender and as to the Collateral, except for the Permitted Encumbrances.
SECTION 9.10 MARGIN STOCK.
Borrower is not engaged principally, or as one of its important
activities, in the business of purchasing or carrying any "margin stock", as
that term is defined in Section 221.2 of Regulation U of the Board of Governors
of the Federal Reserve System, and no part of the proceeds of any borrowing made
pursuant hereto will be used to purchase or carry any such margin stock or to
extend credit to others for the purpose of purchasing or carrying any such
margin stock, or be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulation X of said Board of Governors. In
connection herewith, if requested by Lender, Borrower will furnish to Lender a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in said Regulation U to the foregoing effect.
SECTION 9.11 NO VIOLATIONS.
The execution, delivery and performance by Borrower of this Agreement
and the Notes have been duly authorized by all necessary corporate action and do
not and will not require any consent or approval of the shareholders of
Borrower, violate any provision of any law, rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to Borrower or of the charter or bylaws
of Borrower, or 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; and Borrower is not in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award or
any such indenture, agreement, lease or instrument.
SECTION 9.12 FINANCIAL STATEMENTS.
The audited financial statements of Borrower and its Consolidated
Subsidiaries (if any) for its most recent Fiscal Year together with the
unaudited financial statements of Borrower and its Consolidated Subsidiaries (if
any) for that portion ended with its most recent Fiscal Month of its current
Fiscal Year, for which statements have been prepared, copies of which heretofore
have been furnished to Lender, are complete and accurately and fairly represent
the financial condition of Borrower and its Consolidated Subsidiaries (if any),
the results of its operations and the transactions in its equity accounts as of
the dates and for the periods referred to therein, and have been prepared in
accordance with GAAP. There are no material liabilities, direct or indirect,
fixed or contingent, of Borrower or any such Consolidated Subsidiaries as of the
date of such financial statements which are not reflected therein or in the
notes thereto. No Material Adverse Effect has occurred since the date of the
balance sheet contained in audited financial statements described hereinabove.
SECTION 9.13 PURCHASE OF COLLATERAL.
Except as set forth in Exhibit "A", within the twelve (12) months
period preceding the Closing Date, neither Borrower nor any Subsidiary has
purchased any of the Collateral in a bulk transfer or in a transaction which was
outside the ordinary course of the business of Borrower's seller.
19
26
SECTION 9.14 POLLUTION AND ENVIRONMENTAL CONTROL.
Borrower and each Subsidiary have obtained all permits, licenses and
other authorizations which are required under, and is in material compliance
with, all Environmental Laws.
SECTION 9.15 POSSESSION OF PERMITS.
Borrower and each Subsidiary possess all franchises, certificates,
licenses, permits and other authorizations from governmental political
subdivisions or regulatory authorities, and all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the ownership, maintenance and operation of
any of its properties and assets, and Borrower is not in violation of any
thereof, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 9.16. SUBSIDIARIES.
As of the Closing Date, Borrower has no Subsidiaries except as
described on Exhibit "A".
SECTION 9.17. FEDERAL TAXPAYER IDENTIFICATION NUMBER.
Borrower's federal taxpayer identification number is as indicated on
Exhibit "A".
SECTION 9.18 EMPLOYEE BENEFIT PLANS.
As of the Closing Date, Borrower has no Employee Benefit Plans except
as described on Exhibit "A".
SECTION 9.19 GUARANTOR INFORMATION.
As of the Closing Date, the information set forth on Exhibit "K" is
true and correct.
SECTION 9.20 PRIVATE OFFERING.
Neither the Borrower nor any Person acting on its or their behalf has
offered the Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than the Lender and not more than five other
institutional investors. Neither the Borrower nor any Person acting on its or
their behalf has taken, or will take, any action which would subject the
issuance or sale of the Notes to Section 5 of the Securities Act.
SECTION 9.21 REAL PROPERTY INTERESTS.
Except for the ownership, leasehold or other interests set forth in
Exhibit "A", the Borrower and its Subsidiaries have, as of the Closing Date, no
ownership, leasehold or other interest in real property.
20
27
ARTICLE X
AFFIRMATIVE COVENANTS.
Borrower covenants to Lender that from and after the date hereof, and
so long as any amount remain unpaid on account of any of the Obligations or this
Agreement remains effective (whichever is the last to occur), Borrower will
comply (and cause each Subsidiary to comply) with the affirmative covenants set
forth below:
SECTION 10.1 RECORDS RESPECTING COLLATERAL.
All records of Borrower with respect to the Collateral will be kept at
its Executive Office and will not be removed from such address without the prior
written consent of Lender.
SECTION 10.2 FURTHER ASSURANCES.
Borrower shall duly execute and/or deliver (or cause to be duly
executed and/or delivered) to Lender any instrument, invoice, document, document
of title, dock warrant, dock receipt, warehouse receipt, xxxx of lading, order,
financing statement, assignment, waiver, consent or other writing which may be
reasonably necessary to Lender to carry out the terms of this Agreement and any
of the other Loan Documents and to perfect its security interest in and
facilitate the collection of the Collateral, the proceeds thereof, and any other
property at any time constituting security to Lender. Borrower shall perform or
cause to be performed such acts as Lender may reasonably request to establish
and maintain for Lender a valid and perfected security interest in and security
title to the Collateral, free and clear of any Liens other than Permitted
Encumbrances.
SECTION 10.3 RIGHT TO INSPECT.
Lender (or any person or persons designated by it) shall, in its sole
discretion, have the right to call at any place of business of Borrower at any
reasonable time after reasonable notice, inspect, audit, check and make extracts
from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to the Collateral, to Borrower's business
or to any other transactions between the parties hereto. Borrower shall pay to
Lender, Lender's standard audit fee for each audit performed by Lender's
employees or its agents, provided however, that unless a Default Condition shall
exist, Borrower shall not have to pay for more than one (1) audit for any Fiscal
Year of Borrower.
SECTION 10.4 REPORTS.
Borrower shall, as soon as practicable, but in any event on or before
forty (40) days after the end of each calendar month, furnish or cause to be
furnished to Lender a status report, certified by a duly authorized officer of
Borrower, showing the aggregate dollar value of the items comprising the
Accounts Receivable Collateral and the age of each individual item thereof as of
the last day of the preceding Fiscal Month (segregating such items in such
manner and to such degree as Lender may request), the aggregate dollar value of
the items comprising the accounts payable of Borrower and the age of each
individual item thereof as of the last day of the preceding Fiscal Month
(segregating such items in such manner and to such degree as Lender may
request). Additionally, Lender may, at any time in its sole discretion, require
Borrower to permit Lender to verify the individual account balances of the
individual Account Debtors immediately upon its request therefor. In any event,
with the above described status report for the month of December of each year
and upon request from Lender, made at any time hereafter, Borrower shall furnish
Lender with a then current customer and Account Debtor name and address list.
21
28
SECTION 10.5 SETTLEMENT REPORTS.
Borrower shall, as soon as practicable, but in any event on or before
forty (40) days after the end of each calendar month, or such more frequent
intervals as required by Lender from time to time, prepare and deliver to Lender
a settlement report together with accompanying documentation required by Lender,
with respect to satisfaction of the Margin Requirement as of the last day of the
reporting period, in such form as specified in Exhibit "J" or such other form as
Lender may deliver for such purpose to Borrower from time to time hereafter, the
statements in which, in each instance, shall be certified as to truth and
accuracy by a duly authorized officer of Borrower.
SECTION 10.6. FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Borrower will furnish to the Lender:
(a) As soon as practicable, and in any event within forty
(40) days after the end of each Fiscal Month, furnish to Lender (i)
unaudited financial statements of Borrower and each Consolidated
Subsidiary, including balance sheets, income statements and statements
of cash flow for the Fiscal Month ended, and for the Fiscal Year to
date, on a consolidated and, if requested by Lender, consolidating
basis, certified as to truth and accuracy by a duly authorized officer
of Borrower and (ii) a monthly revised full year forecast, which
forecast shall include balance sheets, income statements and statements
of cash flow.
(b) As soon as practicable, and in any event within
ninety (90) days after the end of each Fiscal Year, furnish to Lender
the annual audit report of Borrower, certified without material
qualification by independent certified public accountants selected by
Borrower and acceptable to Lender, and prepared in accordance with
GAAP, together with relevant financial statements of Borrower for the
Fiscal Year then ended, on a consolidating and a consolidated basis, if
applicable. Borrower shall cause said accountants to furnish Lender
with a statement that in making their examination of such financial
statements, they obtained no knowledge of any Event of Default or
Default Condition which pertains to accounting matters relating to this
Agreement or the Notes, or, in lieu thereof, a statement specifying the
nature and period of existence of any such Event of Default or Default
Condition disclosed by their examination (the Lender agrees that the
Borrower's obligations under this paragraph (b) will be satisfied in
respect of any fiscal year by delivery to the Lender, within 90 days
after the end of such fiscal year of its annual report for such fiscal
year on Form 10-K (without a "going concern" or like qualification or
exception and without any qualification or exception as to the scope of
such audit) as filed with the SEC).
(c) As soon as available, but in any event within
forty-five (45) days after the end of each Fiscal Year, furnish to
Lender a copy of the detailed annual budget or plan of the Borrower for
the next fiscal year on a monthly basis and a monthly revised full year
forecast, which forecast shall include balance sheets, income
statements and statements of cash flow, in form and detail reasonably
acceptable to the Lender, together with a summary of the material
assumptions made in the preparation of such annual budget or plan;
(d) Promptly after the same become publicly available or
after transmission or receipt thereof, copies of all periodic reports,
proxy statements and registration statements (other than exhibits
thereto) filed by the Borrower or any Subsidiary with the Securities
and Exchange Commission, or any Governmental Authority succeeding to
any or all of the functions of said Commission, or with any national
securities exchange, or distributed by the Borrower to its shareholders
generally, as the case may be; and
22
29
(e) Promptly upon receipt thereof, copies of all reports
submitted to the Borrower by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of the Borrower made by such accountants, including the
comment letter submitted by such accountants to management in
connection with their annual audit.
SECTION 10.7 PAYMENT OF TAXES.
Borrower shall pay and discharge all taxes, assessments and
governmental charges upon it, its income and its properties prior to the date on
which penalties attach thereto, unless and to the extent only that (x) such
taxes, assessments and governmental charges are being contested in good faith
and by appropriate proceedings by Borrower, (y) Borrower maintains reasonable
reserves on its books therefor and (z) the non-payment of such taxes does not
result in a Lien upon any of the Collateral other than a Permitted Encumbrance.
SECTION 10.8 MAINTENANCE OF INSURANCE.
In addition to and cumulative with any other requirements herein
imposed on Borrower with respect to insurance, Borrower shall maintain insurance
with responsible insurance companies on such of its properties, in such amounts
and against such risks as is customarily maintained by similar businesses
operating in the same vicinity, but in any event to include business
interruption, freight, loss, damage, flood, windstorm, fire, theft, extended
coverage and product liability insurance in amounts satisfactory to Lender;
provided, however, that the Lender acknowledge that the Borrower's current
coverage as of the Closing Date is adequate, which such insurance shall not be
cancelable by Borrower, unless with the prior written consent of Lender, or by
Borrower's insurer, unless with at least thirty (30) days (or such lesser or
greater number of days as Lender may agree or accept) advance written notice to
Lender thereof. Borrower shall file with Lender upon its request a detailed list
of such insurance then in effect stating the names of the insurance companies,
the amounts and rate of insurance, the date of expiration thereof, the
properties and risks covered thereby and the insured with respect thereto, a
copy of each such insurance policy, and within thirty (30) days after notice in
writing from Lender, obtain such additional insurance as Lender may reasonably
request.
SECTION 10.9 MAINTENANCE OF PROPERTY.
Borrower shall maintain its property in good working condition.
SECTION 10.10 CERTIFICATE OF NO DEFAULT.
Borrower shall, on a quarterly basis not later than forty (40) days
after the close of each of its first eleven Fiscal Months and not later than
ninety (90) days after the close of its Fiscal Year, certify to Lender, in a
statement executed by a duly authorized officer of Borrower in the form of
Exhibit "D" attached hereto, that no Event of Default and no Default Condition
exists or has occurred, or, if an Event of Default or Default Condition exists
or has occurred, specifying the nature and period of existence thereof. Such
certificate shall also set forth, in reasonable detail, compliance with all
financial covenants set forth in Article XII hereof for the immediately
preceding Fiscal Month or Fiscal Quarter, as applicable.
23
30
SECTION 10.11 CHANGE OF PRINCIPAL PLACE OF BUSINESS.
Borrower hereby understands and agrees that if, at any time hereafter,
Borrower elects to move its Executive Office, or if Borrower elects to change
its name, identity or its structure to other than a corporate structure,
Borrower will notify Lender in writing at least thirty (30) days prior thereto.
SECTION 10.12 WAIVERS.
With respect to each of the Collateral Locations, Borrower will use its
commercially reasonable efforts to obtain such waivers of lien, estoppel
certificates or subordination agreements as Lender may reasonably require to
insure the priority of its security interest in that portion of the Collateral
situated at such locations.
SECTION 10.13 PRESERVATION OF CORPORATE EXISTENCE.
Borrower shall preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties.
SECTION 10.14 COMPLIANCE WITH LAWS.
Borrower and each of its Subsidiaries shall comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which would or could materially
adversely affect their respective financial condition or the ownership,
maintenance or operation of any material portion of any of their respective
properties. Without limiting the foregoing, each of Borrower and its
Subsidiaries shall obtain and maintain all permits, licenses and other
authorizations which are required under, and otherwise comply with, all federal,
state, and local laws and regulations.
SECTION 10.15 CERTAIN REQUIRED NOTICES.
Promptly, upon its receipt of notice or knowledge thereof, Borrower
will report to Lender: (i) any lawsuit or administrative proceeding in which
Borrower is a defendant in which the amount or amounts in controversy exceed
$175,000; or (ii) the existence and nature of any Default Condition or Event of
Default.
ARTICLE XI
NEGATIVE COVENANTS.
Borrower covenants to Lender that from and after the date hereof and so
long as any amount remains unpaid on account of any of the Obligations or this
Agreement remains effective (whichever is the last to occur), Borrower will not
do (and will not permit any Subsidiary to do), without the prior written consent
of Lender, any of the things or acts set forth below:
SECTION 11.1 ENCUMBRANCES.
Create, assume, or suffer to exist any Lien on its property, except for
Permitted Encumbrances.
24
31
SECTION 11.2 DEBT.
Incur, assume, or suffer to exist any Debt, except for:
(i) Debt to Lender or any Affiliate of Lender;
(ii) Debt to Persons other than Lender existing on the
date of this Agreement set forth on Exhibit "A" (and renewals,
refinancings and extensions thereof on terms and conditions not
materially less favorable to such Person than such existing
Indebtedness; provided, however, the letters of credit set forth on
Exhibit "A" may not be renewed, refinanced or extended except
hereunder);
(iii) Debt consisting of the Omnicom Obligations and the
XxxXxxxxx.Xxx Note;
(iv) trade payables and contractual obligations to
suppliers and customers incurred in the ordinary course of business;
(v) accrued pension fund and other employee benefit plan
obligations and liabilities (provided, however, that such Debt does not
result in the existence of any Event of Default or Default Condition
under any other provision of this Agreement);
(vi) deferred taxes;
(vii) Debt resulting from endorsements of negotiable
instruments received in the ordinary course of its business;
(viii) Debt secured by Purchase Money Liens not to exceed
$175,000 in the aggregate for any Fiscal Year of Borrower; and
(ix) other unsecured Debt not to exceed $100,000 in the
aggregate for any Fiscal Year of Borrower.
SECTION 11.3 CONTINGENT LIABILITIES.
Guarantee, endorse, become surety with respect to or otherwise become
directly or contingently liable for or in connection with the obligations of any
other Person, except for (i) endorsements of negotiable instruments for
collection in the ordinary course of business, (ii) Guarantee of Debt permitted
to be incurred under Section 11.2 of this Agreement, (iii) Guarantee of leases
and other contracts of the Borrower and its Subsidiaries entered into in the
ordinary course of business; (iv) Guarantee in connection with investments
permitted by Section 11.5 of this Agreement.
SECTION 11.4 RESTRICTED PAYMENTS.
The Borrower will not, and will not permit any Subsidiary to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Payment, except:
(i) purchases or redemptions of the Warrants under the
terms thereof;
25
32
(ii) so long as there is not in existence any Default Condition or
Event of Default, the Borrower may make regularly scheduled payments of
interest or scheduled final maturity payments on the XxxXxxxxx.Xxx Note
in accordance with the terms of such instrument;
(iii) so long as there is not in existence any Default Condition or
Event of Default, the Borrower may make payments of interest (in cash
or otherwise) on the Omnicom Obligations in accordance with the terms
of the Omnicom Agreement;
(iv) so long as (A) there is not in existence any Default Condition
or Event of Default and (B) Minimum Liquidity has been greater than
$4,750,000 at all times following the Closing Date, during the period
from July 1, 2001 to and including September 30, 2001, the Borrower may
make a payment of not more than $750,000 to Omnicom Finance, Inc. to
prepay Omnicom Obligations, which obligations Borrower has prevented
from being converted to equity pursuant to the Omnicom Agreement (the
"Initial Omnicom Payment"); and
(v) so long as (A) there is not in existence any Default Condition
or Event of Default, (B) Minimum Liquidity has been greater than
$4,750,000 at all times prior to the earlier of the Initial Omnicom
Payment or September 30, 2001 and (C) Minimum Liquidity has been
greater than $4,000,000 at all times after the earlier of the Initial
Omnicom Payment or October 1, 2001, during the period from October 1,
2001 to and including December 31, 2001, the Borrower may make a
payment of not more than $1,000,000 to Omnicom Finance, Inc. to prepay
Omnicom Obligations, which obligations Borrower has prevented from
being converted to equity pursuant to the Omnicom Agreement.
Notwithstanding any provision contained in this Section 11.4 to the
contrary, the Borrower shall not be prohibited at any time from issuing
common stock to satisfy the Omnicom Obligations.
SECTION 11.5 RESTRICTED INVESTMENTS.
Make any Restricted Investment except the following: (i) Cash
Equivalents and (ii) other Restricted Investments existing on the Closing Date
and set forth on Exhibit "A" hereto.
SECTION 11.6 MERGERS.
Dissolve or otherwise terminate its corporate status or enter into any
merger, reorganization or consolidation or make any substantial change in the
basic type of business conducted by Borrower and its Subsidiaries, as of the
Closing Date except mergers of Subsidiaries into Subsidiaries or into the
Borrower (so long as the Borrower is the survivor).
SECTION 11.7 BUSINESS LOCATIONS.
Transfer its principal place of business or chief executive office or
transfer the location of any Collateral maintained with InFlow, Inc. or records
with respect to Collateral from the locations set forth on Exhibit "A", except
upon at least thirty (30) days prior written notice to Lender and after the
delivery to Lender of financing statements, if required by Lender, in form
satisfactory to Lender, to perfect or continue the perfection of Lender's Lien.
Open new sales locations or warehouses, or transfer existing sales locations or
warehouses, to or at any locations other than those at which the same are
presently kept or maintained as set forth on Exhibit "A", unless the Borrower
has delivered to the Lender, no less than quarterly, an updated Exhibit "A"
with respect to such Collateral locations.
26
33
SECTION 11.8 AFFILIATE TRANSACTIONS.
Enter into, or be a party to, or permit any Subsidiary to 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 or such
Subsidiary's business and upon fair and reasonable terms which (if required) are
fully disclosed to Lender pursuant to the Borrower's SEC filings and are no less
favorable to Borrower than would obtain in a comparable arm's length transaction
with a Person not an Affiliate.
SECTION 11.9 SUBSIDIARIES.
Create any Subsidiary or divest itself of any material assets by
transferring them to any Subsidiary which is hereafter created without Lender's
consent, unless (i) such Subsidiary shall (A) cause all of its owned personal
property and all of its owned real property to be subject to a first priority,
perfected Lien in favor of the Lender pursuant to such security documents as the
Lender shall reasonably request and (B) execute a guaranty with substantially
the same terms as contained in the Pledge and Guaranty Agreement executed by the
Subsidiaries on the Closing Date and (ii) the aggregate amount of all assets
owned by the Subsidiaries does not exceed 20% of the then total consolidated
assets of the Borrower.
SECTION 11.10 FISCAL YEAR/CORPORATE NAME.
Change its (i) Fiscal Year, or permit any Subsidiary to have a fiscal
year different from the Fiscal Year of Borrower or (ii) corporate name, or
permit any Subsidiary to change its corporate name, from that set forth on
Exhibit "A" except upon at least thirty (30) days prior written notice to Lender
and after the delivery to Lender of financing statements, if required by Lender,
in form satisfactory to Lender, to perfect or continue the perfection of
Lender's Lien.
SECTION 11.11 DISPOSITION OF ASSETS.
Sell, lease or otherwise dispose of any of its properties, including
any disposition of property as part of a sale and leaseback transaction, to or
in favor of any Person, except (i) sales of inventory in the ordinary course of
Borrower's business for so long as no Event of Default exists hereunder or (ii)
dispositions otherwise expressly authorized by this Agreement or as to which the
Borrower complies with Section 6.1 hereof.
SECTION 11.12 FEDERAL TAXPAYER IDENTIFICATION NUMBER.
Change its federal taxpayer identification number without prior written
notice to Lender.
SECTION 11.13 EMPLOYEE BENEFIT PLANS.
Permit an Employee Benefit Plan to become materially underfunded or
create any Employee Benefit Plan without prior written notice to Lender and upon
such notification, this Agreement shall be amended as determined necessary by
Lender in its discretion as a result of the creation of such Plan.
SECTION 11.14 AMENDMENTS AND WAIVERS.
Without the prior written consent of the Lenders, the Borrower will
not, nor will it permit any Subsidiary to, agree to (i) any amendment to or
waiver of or in respect of its organizational documents, to the extent that such
amendment or waiver could reasonably be expected to have a material adverse
effect on the ability of the Borrower to perform its obligations under the Loan
Documents, (ii) any other
27
34
material amendment to or waiver of any material contract (other than any
document with respect to Omnicom Obligations or the XxxXxxxxx.Xxx Note) which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or (iii) any amendment to or waiver of or in respect of
the Omnicom Obligations or the XxxXxxxxx.Xxx Note.
ARTICLE XII
FINANCIAL COVENANTS.
Borrower covenants to Lender that, from and after the date hereof and
so long as any amount remains unpaid on account of any of the Obligations or
this Agreement remains effective (whichever is the last to occur), it will
comply with the financial covenants set forth below:
SECTION 12.1 MINIMUM LIQUIDITY.
The Borrower shall maintain a Minimum Liquidity of at least Three
Million Dollars ($3,000,000) at all times.
SECTION 12.2 MINIMUM NET WORTH.
Borrower shall maintain a minimum Net Worth of at least (i) Fifty
Million Dollars ($50,000,000) at all times prior to and including December 31,
2001 and (ii) Forty-Five Million Dollars ($45,000,000) at all times after
December 31, 2001.
SECTION 12.3 ACCOUNTS.
The Borrower shall, within thirty days from the Closing Date, maintain
all checking, savings, cash management, investment, and brokerage accounts with
the Lender or an Affiliate of the Lender.
ARTICLE XIII
EVENTS OF DEFAULT.
The occurrence of any events or conditions set forth below shall
constitute an Event of Default hereunder, provided that any requirement for the
giving of notice or the lapse of time, or both, has been satisfied:
SECTION 13.1 OBLIGATIONS.
Borrower shall fail to make any payments on any of its Obligations,
when due.
SECTION 13.2 MISREPRESENTATIONS.
Borrower, any Subsidiary or any Guarantor shall make any
representations or warranties in any of the Loan Documents or in any Guaranty or
in any certificate or statement furnished at any time hereunder or in connection
with any of the Loan Documents or any Guaranty which proves to have been untrue
or misleading in any material respect when made or furnished.
28
35
SECTION 13.3 CERTAIN COVENANTS.
Borrower shall default in the observance or performance of any covenant
or agreement contained in Sections 10.3, 10.4, 10.5, 10.6, 10.7, 10.11, 10.14,
or in Articles 11 or 12.
SECTION 13.4 OTHER COVENANTS.
Borrower, any Subsidiary or any Guarantor shall default in the
observance or performance of any covenant or agreement contained herein, in any
of the other Loan Documents or any Guaranty (other than a default the
performance or observance of which is dealt with specifically elsewhere in this
Article 13) unless (i) with respect to this Agreement, such default is cured to
Lender's satisfaction within ten (10) days after the sooner to occur of receipt
of notice of such default from Lender or the date on which such default first
becomes known to Borrower and (ii) with respect to any other Loan Document or
Guaranty, such default is cured within any applicable grace, cure or notice and
cure period contained therein.
SECTION 13.5 OTHER DEBTS.
Borrower shall default in connection with any agreement for Debt with
any creditor other than Lender which entitles said creditor to accelerate the
maturity thereof or any Guarantor shall default in connection with any agreement
for Debt with Lender or any creditor other than Lender which entities Lender or
said other creditor to accelerate the maturity thereof.
SECTION 13.6 VOLUNTARY BANKRUPTCY.
Borrower, any Subsidiary or any Guarantor shall file a voluntary
petition in bankruptcy or a voluntary petition or answer seeking liquidation,
reorganization, arrangement, readjustment of its debts, or for any other relief
under the Bankruptcy code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, Federal, or foreign, now or
hereafter existing; Borrower, any Subsidiary or any Guarantor shall enter into
any agreement indicating its consent to, approval of, or acquiescence in, any
such petition or proceeding; Borrower, any Subsidiary or any Guarantor shall
apply for or permit the appointment by consent or acquiescence of a receiver,
custodian or trustee of Borrower, any Subsidiary or any Guarantor for all or a
substantial part of its property; Borrower, any Subsidiary or any Guarantor
shall make an assignment for the benefit of creditors; or Borrower, any
Subsidiary or any Guarantor shall be unable or shall fail to pay its debts
generally as such debts become due, or Borrower, any Subsidiary or any Guarantor
shall admit, in writing, its inability or failure to pay its debts generally as
such debts become due.
SECTION 13.7 INVOLUNTARY BANKRUPTCY.
There shall have been filed against Borrower, any Subsidiary or any
Guarantor an involuntary petition in bankruptcy or seeking liquidation,
reorganization, arrangement, readjustment of its debts or for any other relief
under the Bankruptcy Code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign, now or hereafter
existing; Borrower, any Subsidiary or any Guarantor shall suffer or permit the
involuntary appointment of a receiver, custodian or trustee of Borrower, any
Subsidiary or any Guarantor or for all or a substantial part of its property; or
Borrower, any Subsidiary or any Guarantor shall suffer or permit the issuance of
a warrant of attachment, execution or similar process against all or any
substantial part of the property of Borrower, any Subsidiary or any Guarantor.
29
36
SECTION 13.8 DAMAGE, LOSS, THEFT OR DESTRUCTION OF COLLATERAL.
There shall have occurred material uninsured damage to, or loss, theft
or destruction of, any material part of the Collateral.
SECTION 13.9 JUDGMENTS.
A final judgment or order for the payment of money is rendered against
Borrower, any Subsidiary in the amount of One Hundred Thousand Dollars
($100,000) or more (exclusive of amounts covered by insurance) and either (x)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order, or (y) a stay of enforcement of such judgment or order, by
reason of pending appeal or otherwise, shall not be in effect for any period of
thirty (30) consecutive days.
SECTION 13.10 BANKRUPTCY OF AFFILIATE.
Any motion, complaint or other pleading is filed in any bankruptcy case
of any Person other than Borrower and such motion, complaint or pleading seeks
the consolidation of Borrower's assets and liabilities with the assets and
liabilities of such Person.
SECTION 13.11 MATERIAL ADVERSE EFFECT.
There shall be any event, act, condition or occurrence having a
Material Adverse Effect.
SECTION 13.12 CHANGE OF CONTROL, ETC.
There shall occur a Change in Control of the Borrower.
SECTION 13.13 CHANGE IN MANAGEMENT, ETC.
The Principal shall die, become incapacitated, cease to be either (a)
the chief executive officer or (b) either (i) a member of the Board of Directors
of the Borrower so long as Xxxxxxx X. Xxxxx III shall be Chairman of the Board
of Directors of Borrower or (ii) Chairman of the Board of Directors of Borrower.
ARTICLE XIV
REMEDIES.
Upon the occurrence of any Default Condition or Event of Default,
Lender's obligation to extend financing under the Line of Credit and to disburse
any then undisbursed portion of the Term Loan shall immediately cease; provided,
however, that if such obligation has ceased due to the occurrence of a Default
Condition, and such Default Condition does not become an Event of Default due to
its having been cured or waived before it has matured into an Event of Default,
then such obligation shall be reinstated as of the date such Default Condition
is cured or waived. Upon the occurrence or existence of any Event of Default, or
any time thereafter, without prejudice to the rights of Lender to enforce its
claims against Borrower for damages for failure by Borrower to fulfill any of
its obligations hereunder, subject only to prior receipt by Lender of payment in
full of all Obligations then outstanding in a form acceptable to Lender, Lender
shall have all of the rights and remedies set forth below, and it may exercise
any one, more, or all of such remedies, in its sole discretion, without thereby
waiving any of the others.
30
37
SECTION 14.1 ACCELERATION OF THE OBLIGATIONS.
Lender, at its option, may declare all of the Obligations (including
but not limited to that portion thereof evidenced by any one or both of the
Notes) to be immediately due and payable, whereupon the same shall become
immediately due and payable without presentment, demand, protest, notice of
nonpayment or any other notice required by law relative thereto, all of which
are hereby expressly waived by Borrower, anything contained herein to the
contrary notwithstanding. If any note of Borrower to Lender constituting
Obligations, including, without limitation, any of the Notes, shall be a demand
instrument, however, the recitation of the right of Lender to declare any and
all Obligations to be immediately due and payable, whether such recitation is
contained in such note or in this Agreement, as well as the recitation of the
above events permitting Lender to declare all Obligations due and payable, shall
not constitute an election by Lender to waive its right to demand payment under
a demand at any time and in any event, as Lender in its discretion may deem
appropriate. Thereafter, Lender, at its option, may, but shall not be obligated
to, accept less than the entire amount of Obligations due, if tendered,
provided, however, that unless then agreed to in writing by Lender, no such
acceptance shall or shall be deemed to constitute a waiver of any Event of
Default or a reinstatement of any commitments of Lender hereunder.
SECTION 14.2 INTEREST RATE.
If Lender so elects, by further written notice to Borrower, Lender may
increase the rate of interest charged on the Notes then outstanding for so long
thereafter as Lender further shall elect by an amount not to exceed the Default
Rate.
SECTION 14.3 REMEDIES OF A SECURED PARTY.
Lender shall thereupon have the rights and remedies of a secured party
under the UCC in effect on date thereof (regardless of whether the same has been
enacted in the jurisdiction where the rights or remedies are asserted),
including, without limitation, the right to take possession of any of the
Collateral or the proceeds thereof, to sell or otherwise dispose of the same, to
apply the proceeds therefrom to any of the Obligations in such order as Lender,
in its sole discretion, may elect. Lender shall give Borrower written notice of
the time and place of any public sale of the Collateral or the time after which
any other intended disposition thereof is to be made. The requirement of sending
reasonable notice shall be met if such notice is given to Borrower at least ten
(10) days before such disposition. Expenses of retaking, holding, insuring,
preserving, protecting, preparing for sale or selling or the like with respect
to the Collateral shall include, in any event, reasonable attorneys' fees and
other legally recoverable collection expenses, all of which shall constitute
Obligations.
SECTION 14.4 REPOSSESSION OF THE COLLATERAL.
Lender may take the Collateral or any portion thereof into its
possession, by such means (without breach of the peace) and through agents or
otherwise as it may elect (and, in connection therewith, demand that Borrower
assemble the Collateral at a place or places and in such manner as Lender shall
prescribe), and sell, lease or otherwise dispose of the Collateral or any
portion thereof in its then condition or following any commercially reasonable
preparation or processing, which disposition may be by public or private
proceedings, by one or more contracts, as a unit or in parcels, at any time and
place and on any terms, so long as the same are commercially reasonable and
Borrower hereby waives all rights which Borrower has or may have under and by
virtue of OCGA CH. 44-14, including, without limitation, the right of Borrower
to notice and to a judicial hearing prior to seizure of any Collateral by
Lender.
31
38
SECTION 14.5 OTHER REMEDIES.
Unless and except to the extent expressly provided for to the contrary
herein, the rights of Lender specified herein shall be in addition to, and not
in limitation of, Lender's rights under the UCC, as amended from time to time,
or any other statute or rule of law or equity, or under any other provision of
any of the Loan Documents, or under the provisions of any other document,
instrument or other writing executed by Borrower or any third party in favor of
Lender, all of which may be exercised successively or concurrently.
SECTION 14.6 SET OFF.
Lender may exercise the remedies provided in Section 7.2.
ARTICLE XV
MISCELLANEOUS.
SECTION 15.1 WAIVER.
Each and every right granted to Lender under this Agreement, or any of
the other Loan Documents, or any other document delivered hereunder or in
connection herewith or allowed it by law or in equity, shall be cumulative and
may be exercised from time to time. No failure on the part of Lender to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. No waiver by Lender of any Default Condition or Event of Default shall
constitute a waiver of any subsequent Default Condition or Event of Default.
SECTION 15.2 GOVERNING LAW.
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORGIA.
SECTION 15.3 SURVIVAL
All representations, warranties and covenants made herein and in the
Loan Documents shall survive the execution and delivery hereof and thereof. The
terms and provisions of this Agreement shall continue in full force and effect,
notwithstanding the payment of one or more of the Notes or the termination of
the Line of Credit, until all of the Obligations have been paid in full and
Lender has terminated this Agreement in writing.
SECTION 15.4 NO ASSIGNMENT BY BORROWER.
No assignment hereof or of any Loan Document shall be made by Borrower
without the prior written consent of Lender. Lender may assign, or sell
participants in, its rights, title and interest herein and in the Loan Documents
at any time upon consent of the Borrower, which consent shall not be
unreasonably withheld; provided, that any consent of the Borrower otherwise
required under this paragraph shall not be required if there is in existence any
Default Condition or Event of Default.
32
39
SECTION 15.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which when fully executed shall be an original, and all of said counterparts
taken together shall be deemed to constitute one and the same agreement.
SECTION 15.6 REIMBURSEMENT.
Borrower shall pay to Lender on demand all out-of-pocket costs and
expenses that Lender pays or actually incurs in connection with the negotiation,
preparation, consummation, enforcement and termination of this Agreement and the
other Loan Documents, including, without limitation: (a) reasonable attorneys'
fees and paralegals' fees and disbursements of outside counsel; (b) costs and
expenses (including reasonable outside attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent or subsequent
closing in connection with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien and title searches and title insurance;
(d) actual taxes, fees and other charges for recording any deeds to secure debt,
deeds of trust, mortgages, filing financing statements and continuations, and
other actions to perfect, protect and continue the Lien of Lender in the
Collateral; (e) sums paid or incurred to pay for any amount or to take any
action required of Borrower under the Loan Documents that Borrower fails to pay
or take; (f) costs of appraisals, inspections, field audits and verifications of
the Collateral, including, without limitation, costs of travel, for inspections
of the Collateral and Borrower's operations by Lender or its designees; (g)
costs and expenses of preserving and protecting the Collateral; and (h) after an
Event of Default, costs and expenses (including attorneys' and paralegals' fees
and disbursements) paid or incurred to obtain payment of the Obligations,
enforce the Lien in the Collateral, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents or to
defend any claim made or threatened against Lender arising out of the
transactions contemplated hereby (including, without limitation, preparations
for and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by Borrower. All of the foregoing costs and expenses
may, in the discretion of Lender, be charged to the Master Note. Borrower will
pay all expenses incurred by it in the transaction. In the event Borrower
becomes a debtor under the Bankruptcy Code, Lender's secured claim in such case
shall include interest on the Obligations and all fees, costs and charges
provided for herein (including, without limitation, reasonable attorneys' fees
actually incurred), all to the extent allowed by the Bankruptcy Code.
SECTION 15.7 SUCCESSORS AND ASSIGNS.
This Agreement and Loan Documents shall be binding upon and inure to
the benefit of the successors and permitted assigns of the parties hereto and
thereto.
SECTION 15.8 SEVERABILITY.
If any provision this Agreement or of any of the Loan Documents or the
application thereof to any party thereto or circumstances shall be invalid or
unenforceable to any extent, the remainder of such Loan Documents and the
application of such provisions to any other party thereto or circumstance shall
not be affected thereby and shall be enforced to the greatest extent permitted
by law.
SECTION 15.9 NOTICES.
All notices, requests and demands to or upon the respective parties
hereto shall be deemed to have been given or made when personally delivered or
deposited in the mail, registered or certified mail, postage prepaid, addressed
to the Borrower at its Executive Office and to the Lender at 000 Xxxxxxxxx
Xxxxxx,
00
00
Xxxxxxx, Xxxxxxx 00000, Attn: Emerging Companies Group (or to such other address
as may be designated hereafter in writing by the respective parties hereto)
except in cases where it is expressly provided herein or by applicable law that
such notice, demand or request is not effective until received by the party to
whom it is addressed.
SECTION 15.10 ENTIRE AGREEMENT; AMENDMENTS.
This Agreement, together with the remaining Loan Documents, constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof Neither this Agreement nor any Loan Document may be changed,
waived, discharged, modified or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement is sought.
SECTION 15.11 INTERPRETATION.
No provision of this Agreement or any Loan Document shall be construed
against or interpreted to the disadvantage of any party hereto by any court or
other governmental or judicial authority by reason of such party having or being
deemed to have structured or dictated such provision.
SECTION 15.12 LENDER NOT A JOINT VENTURER.
Neither this Agreement nor any Loan Document shall in any respect be
interpreted, deemed or construed as making Lender a partner or joint venturer
with Borrower or as creating any similar relationship or entity, and Borrower
agrees that it will not make any contrary assertion, contention, claim or
counterclaim in any action, suit or other legal proceeding involving Lender and
Borrower.
SECTION 15.13 JURISDICTION.
BORROWER AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
GEORGIA OR THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA,
ATLANTA DIVISION, ALL AS LENDER MAY ELECT. BY EXECUTION OF THIS AGREEMENT,
BORROWER HEREBY SUBMITS TO EACH SUCH JURISDICTION, HEREBY EXPRESSLY WAIVING
WHATEVER RIGHTS MAY CORRESPOND TO IT BY REASON OF ITS PRESENT OR FUTURE
DOMICILE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER JURISDICTION OR
TO SERVE PROCESS IN ANY MANNER PERMITTED OR REQUIRED BY LAW.
SECTION 15.14 ACCEPTANCE.
This Agreement, together with the other Loan Documents, shall not
become effective unless and until delivered to Lender at its principal office in
Atlanta, Xxxxxx County, Georgia and accepted in writing by Lender at such office
as evidenced by its execution hereof (notice of which delivery and acceptance
are hereby waived by Borrower).
SECTION 15.15 PAYMENT ON NON-BUSINESS DAYS.
Whenever any payment to be made hereunder or under the Notes shall be
stated to be due on a Saturday, Sunday or a public holiday under the laws of the
State of Georgia, such payment may be made on
34
41
the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest hereunder or under the
Notes.
SECTION 15.16 CURE OF DEFAULTS BY LENDER.
If, hereafter, Borrower defaults in the performance of any duty or
obligation to Lender hereunder or under any Loan Document, Lender may, at its
option, but without obligation, cure such default and any costs, fees and
expenses incurred by Lender in connection therewith including, without
limitation, for the purchase of insurance, the payment of taxes and the removal
or settlement of liens and claims, shall be deemed to be advances against the
Master Note, whether or not this creates an overadvance thereunder, and shall be
payable in accordance with its terms.
SECTION 15.17 RECITALS.
All recitals contained herein are hereby incorporated by reference into
this Agreement and made part thereof.
SECTION 15.18 ATTORNEY-IN-FACT.
Borrower hereby designates, appoints and empowers Lender irrevocably as
its attorney-in-fact, at Borrower's cost and expense, to do in the name of
Borrower any and all actions which Lender may deem necessary or advisable to
carry out the terms of this Agreement or any other Loan Document upon the
failure, refusal or inability of Borrower to do so and Borrower hereby agrees to
indemnify and hold Lender harmless from any costs, damages, expenses or
liabilities arising against or incurred by Lender in connection therewith.
SECTION 15.19 SOLE BENEFIT.
The rights and benefits set forth in this Agreement and the other Loan
Documents are for the sole and exclusive benefit of the parties hereto and
thereto and may be relied upon only by them.
SECTION 15.20 INDEMNIFICATION. Borrower will hold Lender, its
respective directors, officers, employees, agents, Affiliates, successors and
assigns harmless from and indemnify Lender, its respective directors, officers,
employees, agents, Affiliates, successors and assigns against, all loss,
damages, costs and expenses (including, without limitation, reasonable attorneys
fees, costs and expenses) actually incurred by any of the foregoing, whether
direct, indirect or consequential, as a result of or arising from or relating to
any "Proceedings" (as defined below) by any Person, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute, case or regulation, including, without limitation, any
federal or state securities laws or under any common law or equitable case or
otherwise, arising from or in connection with this Agreement, and any other of
the transactions contemplated by this Agreement, except to the extent such
losses, damages, costs or expenses are due to the willful misconduct or gross
negligence of Lender. As used herein, "Proceedings" shall mean actions, suits or
proceedings before any court, governmental or regulatory authority and shall
include, particularly, but without limitation, any actions concerning
Environmental Laws. At the request of Lender, Borrower will indemnify any Person
to whom Lender transfers or sells all or any portion of its interest in the
Obligations or participations therein on terms substantially similar to the
terms set forth above. Lender shall not be responsible or liable to any Person
for consequential damages which may be alleged as a result of this Agreement or
any of the transactions
35
42
contemplated hereby. The obligations of Borrower under this Section shall
survive the termination of this Agreement and payment of the Obligations.
SECTION 15.21 JURY TRIAL WAIVER.
EACH OF BORROWER AND LENDER HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
OBLIGATIONS OR THE COLLATERAL.
SECTION 15.22 CONFIDENTIALITY.
The Lender agrees to maintain the confidentiality of the Information (as defined
below) and will not, and will not permit any of its officers, directors and
employees of the lender, to purchase or sell securities of the Borrower based
upon Information that is not otherwise publicly available, except that
Information may be disclosed (a) to its and its Affiliates' and its directors,
officers, employees and agents, including accountants, legal counsel and other
advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed
to keep such Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent, and only to the extent, required by
applicable laws or regulations or by any subpoena or similar legal process,
provided that the Person required to disclose such information shall take
reasonable efforts (at Borrower's expense) to ensure that any Information so
disclosed shall be afforded confidential treatment, (d) to any other party to
this Agreement, (e) in connection with the exercise of any remedies hereunder or
any suit, action or proceeding relating to this Agreement or the enforcement of
rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to any assignee of any of its
rights or obligations under this Agreement, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the Lender
on a nonconfidential basis from a source other than the Borrower who is not, to
the knowledge of the Lender, under an obligation of confidentiality to Borrower
with respect to such Information. For the purposes of this Section,
"Information" means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to
the Lender on a nonconfidential basis prior to disclosure by the Borrower or
that constitutes interim financial statements or information that is not
otherwise publicly available; provided that, in the case of information received
from the Borrower after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 15.23 ACCREDITED INVESTOR.
The Lender (including any assignee of the Lender at the time of such
assignment) represents that it (i) is acquiring its Notes solely for investment
purposes and not with a view toward, or for sale in connection with, any
distribution thereof, (ii) has received and reviewed such information as it
deems necessary to evaluate the merits and risks of its investment in the Notes,
(iii) is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act and (iv) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment in the Notes, including a complete loss of its investment.
36
43
ARTICLE XVI
CONDITIONS PRECEDENT.
Unless waived in writing by Lender at or prior to the execution and
delivery of this Agreement, the conditions set forth below shall constitute
express conditions precedent to any obligation of Lender hereunder.
SECTION 16.1 SECRETARY'S CERTIFICATE.
Receipt by Lender of a certificate from the Secretary (or Assistant
Secretary) of Borrower, certifying to Lender that appropriate resolutions have
been entered into by the Board of Directors of Borrower incident hereto and that
the officers of Borrower whose signatures appear hereinbelow, on the other Loan
Documents, and on any and all other documents, instruments and agreements
executed in connection herewith, are duly authorized by the Board of Directors
of Borrower for and on behalf of Borrower to execute and deliver this Agreement,
the other Loan Documents and such other documents, instruments and agreements,
and to bind Borrower accordingly thereby, all in form and substance
substantially similar to those board resolutions set forth and described on
Exhibit "E".
SECTION 16.2 GOOD STANDING CERTIFICATES.
Receipt by Lender of a certificate of good standing with respect to Borrower
from the secretaries of state of the state of incorporation of Borrower and of
any state in which a Collateral Location is situated, dated within 10 days of
the date hereof.
SECTION 16.3 ARTICLES/BY-LAWS.
Receipt by Lender of copies of the articles of incorporation and bylaws
of Borrower as in effect on date hereof, certified as to truth and accuracy by
the corporate secretary of Borrower.
SECTION 16.4 LOAN DOCUMENTS, GUARANTY AND WARRANTS.
Receipt by Lender of all the other Loan Documents, any Guaranty, and
certificates representing the Warrants, each duly executed in form and substance
acceptable to Lender.
SECTION 16.5 OMNICOM INTERCREDITOR AGREEMENT.
Receipt by Lender of an intercreditor agreement by and among the
Borrower, Omnicom Finance Inc. and the Lender, with respect to the Omnicom
Obligations, duly executed in form and substance acceptable to Lender.
SECTION 16.6 INSURANCE.
Receipt by Lender of a copy of each hazard liability and business
interruption insurance policy required hereunder and certificate respecting all
hazard insurance required hereunder, in form and substance acceptable to Lender,
together with a loss payee and additional insured endorsement thereof, favoring
Lender, to be substantially in the form of Exhibit "F" attached hereto.
37
44
SECTION 16.7 FINANCING STATEMENTS.
Receipt by Lender of Uniform Commercial Code financing statements
respecting the Collateral, duly executed by Borrower in form and substance
acceptable to Lender.
SECTION 16.8 OPINION OF COUNSEL.
Receipt by Lender of an opinion of counsel from independent legal
counsel to Borrower in substantially the form of Exhibit "G".
SECTION 16.9 LANDLORD AGREEMENTS.
Landlord or warehouseman agreements, in form and substance satisfactory
to Lender, with respect to each premises leased by Borrower and which are
disclosed by Exhibit "A" attached hereto.
SECTION 16.10 NO DEFAULT.
No Default Condition or Event of Default shall exist and Borrower shall
in all respects be in compliance with all of the terms of the Loan Documents, as
evidenced by its delivery of a certificate of no default to such effect, to be
substantially in the form of Exhibit "D" attached hereto.
SECTION 16.11 DISBURSEMENTS LETTER.
Receipt by Lender of a disbursements letter, concerning the use of the
proceeds of the initial extensions of credit hereunder, to be substantially in
the form of Exhibit "I" attached hereto.
SECTION 16.12 MINIMUM LIQUIDITY.
Receipt by Lender of satisfactory evidence that the Borrower has
balance of cash and Cash Equivalents of at least Three Million Dollars
($4,750,000).
SECTION 16.13 SETTLEMENT REPORT.
Receipt by Lender of a settlement report in the form of Exhibit "J"
attached hereto, together with accompanying documentation required by Lender
(all in form and substance required by Lender, but to include in any event an
accounts receivable and accounts payable aging and a then current customer and
Account Debtor name and address list, all as more particularly described in
Section 10.4), which shall indicate satisfaction of the Margin Requirement as of
the date of the initial Borrowing, and if no funds are borrowed on the Closing
Date, shall indicate the amount of Borrowings available taking into account the
Margin Requirement, each certified as to truth and accuracy by a duly authorized
officer of Borrower.
SECTION 16.14 FEES.
The Lender shall have received all fees, if any, owing pursuant to the
Fee Letter.
SECTION 16.15 OTHER.
Receipt by Lender of such other documents, certificates, instruments
and agreements as shall be required hereunder or provided for herein or as
Lender or Lender's counsel may require in connection herewith, including,
without limitation, with respect to each Guarantor, board and shareholder
authorization,
38
45
good standing certificates, articles/bylaws, opinion of counsel, a certificate
from the Secretary (or Assistant Secretary) of each Guarantor, certifying to
Lender that appropriate resolutions have been entered into by the Board of
Directors of such Guarantor and that the officers of such Guarantor whose
signatures appear on its Guaranty and on any of the other Loan Documents, are
duly authorized by the Board of Directors of such Guarantor for and on behalf of
such Guarantor to execute and deliver its Guaranty, and the other Loan
Documents, and to bind such Guarantor accordingly thereby, all in form and
substance substantially similar to those board resolutions set forth and
described on Exhibit "L".
39
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and Borrower has caused its seal to be affixed hereto, as of the day
and year first above written.
"LENDER"
WACHOVIA CAPITAL
INVESTMENTS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
---------------------------------
Title: Managing Director
--------------------------------
"BORROWER"
XXXXXXXXXX.XXX, INC. (SEAL)
By: /s/ W. Xxxxx Xxxxx
-----------------------------------
Name: W. Xxxxx Xxxxx
---------------------------------
Title: CFO
--------------------------------
"GUARANTORS"
HNET, INC.
By: /s/ W. Xxxxx Xxxxx
-----------------------------------
Name: W. Xxxxx Xxxxx
---------------------------------
Title: CFO, President
--------------------------------
RESUME ACQUISITION CORPORATION
By: /s/ W. Xxxxx Xxxxx
-----------------------------------
Name: W. Xxxxx Xxxxx
---------------------------------
Title: CFO, VP
--------------------------------
HEADHUNTERHEALTH ACQUISITION
CORPORATION
By: /s/ W. Xxxxx Xxxxx
-----------------------------------
Name: W. Xxxxx Xxxxx
---------------------------------
Title: CFO, VP
--------------------------------
47
HEADHUNTERS LLC
By: /s/ W. Xxxxx Xxxxx
-----------------------------------
Name: W. Xxxxx Xxxxx
---------------------------------
Title: CFO, VP
--------------------------------
41
