Loan and Security Agreement
by and among
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
as Lender
and
IVI CHECKMATE CORP., IVI CHECKMATE INC., ▇▇▇▇▇▇▇
COMPUTER SERVICES, INC., DEBITEK, INC.,
NATIONAL TRANSACTION NETWORK, INC., and
ENCONCERT SOLUTIONS, LLC
as Borrowers
Dated: April 5, 2000
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS................................................... 1
SECTION 2. CREDIT FACILITIES............................................. 9
2.1 Revolving Loans.......................................... 9
2.2 Letter of Credit Accommodations.......................... 9
2.3 Availability Reserves.................................... 11
2.4 Joint and Several Liability.............................. 11
SECTION 3. INTEREST AND FEES............................................. 12
3.1 Interest................................................. 12
3.2 Closing Fee.............................................. 13
3.3 Servicing Fee............................................ 13
3.4 Unused Line Fee.......................................... 13
3.5 Changes in Laws and Increased Costs of Loans............. 14
SECTION 4. CONDITIONS PRECEDENT.......................................... 14
4.1 Conditions Precedent to Initial Loans and
Letter of Credit Accommodations.......................... 14
4.2 Conditions Precedent to All Loans and Letter
of Credit Accommodations................................. 16
SECTION 5. GRANT OF SECURITY INTEREST.................................... 16
SECTION 6. COLLECTION AND ADMINISTRATION................................. 17
6.1 Borrowers' Loan Account.................................. 17
6.2 Statements............................................... 17
6.3 Collection of Accounts................................... 17
6.4 Payments................................................. 18
6.5 Authorization to Make Loans.............................. 19
6.6 Use of Proceeds.......................................... 19
SECTION 7. COLLATERAL REPORTING AND COVENANTS............................ 19
7.1 Collateral Reporting..................................... 19
7.2 Accounts Covenants....................................... 20
7.3 Inventory Covenants...................................... 21
7.4 Equipment Covenants...................................... 21
7.5 Power of Attorney........................................ 22
7.6 Right to Cure............................................ 22
7.7 Access to Premises....................................... 23
SECTION 8. REPRESENTATIONS AND WARRANTIES................................ 23
8.1 Corporate Existence, Power and Authority; Subsidiaries... 23
8.2 Financial Statements; No Material Adverse Change......... 23
8.3 Chief Executive Office; Collateral Locations............. 24
8.4 Priority of Liens; Title to Properties................... 24
8.5 Tax Returns.............................................. 24
8.6 Litigation............................................... 24
8.7 Compliance with Other Agreements and Applicable Laws..... 24
8.8 Accuracy and Completeness of Information................. 24
8.9 Survival of Warranties; Cumulative....................... 25
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................ 25
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9.1 Maintenance of Existence................................. 25
9.2 New Collateral Locations................................. 25
9.3 Compliance with Laws, Regulations, Etc................... 25
9.4 Payment of Taxes and Claims.............................. 25
9.5 Insurance................................................ 26
9.6 Financial Statements and Other Information............... 26
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.. 27
9.8 Encumbrances............................................. 28
9.9 Indebtedness............................................. 28
9.10 Loans, Investments, Guarantees, Etc...................... 28
9.11 Dividends and Redemptions................................ 29
9.12 Transactions with Affiliates............................. 29
9.13 Adjusted Net Worth....................................... 29
9.14 Costs and Expenses....................................... 30
9.15 Further Assurances....................................... 30
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................. 30
10.1 Events of Default........................................ 30
10.2 Remedies................................................. 32
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW... 33
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver........................................ 33
11.2 Waiver of Notices........................................ 34
11.3 Amendments and Waivers................................... 35
11.4 Waiver of Counterclaims.................................. 35
11.5 Indemnification.......................................... 35
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS............................... 35
12.1 Term 35
12.2 Notices.................................................. 37
12.3 Partial Invalidity....................................... 37
12.4 Successors............................................... 37
12.5 Entire Agreement......................................... 37
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 8.4 Existing Liens
Schedule 9.11 Permitted Dividends and Other
Distributions on Capital Stock
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LOAN AND SECURITY AGREEMENT
---------------------------
This Loan and Security Agreement dated April 5, 2000 is entered into by and
between Congress Financial Corporation (Southern), a Georgia corporation
("Lender") and IVI Checkmate Corp., a Delaware corporation ("Parent"), IVI
Checkmate Inc., a Georgia corporation ("Checkmate"), ▇▇▇▇▇▇▇ Computer Services,
Inc., a California corporation ("▇▇▇▇▇▇▇"), Debitek, Inc., a Delaware
corporation ("Debitek"), National Transaction Network, Inc., a Delaware
corporation ("NTN"), and EnConcert Solutions, LLC, a Georgia limited liability
company ("EnConcert"; Parent, Checkmate, ▇▇▇▇▇▇▇, Debitek, NTN and EnConcert are
from time to time collectively referred to as the "Borrowers" and each
individually as a "Borrower").
W I T N E S S E T H:
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WHEREAS, Borrowers have requested that Lender enter into certain financing
arrangements with Borrowers pursuant to which Lender may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
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All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrower and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3. Any accounting term used herein unless otherwise defined in
this Agreement shall have the meanings customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following terms shall
have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrowers to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
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1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (1) the Eurodollar Rate for such Interest Period by (2) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.4 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrowers under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or are reasonably likely to adversely
affect either (i) the value of the Collateral or any other property which is
security for the Obligations, (ii) the assets, business or prospects of
Borrowers or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Lender's good faith belief that any collateral report
or financial information furnished by or on behalf of any Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect or (c) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or would, with notice
or passage of time or both, constitute an Event of Default.
1.5 "Business Day" shall mean (a) for the Prime Rate Loans, any day other
than a Saturday, Sunday, or other day on which commercial banks are authorized
or required to close under the laws of the State of New York, the State of
Georgia or the State of North Carolina, and a day on which the Reference Bank
and Lender are open for the transaction of business, and (b) for all Eurodollar
Rate Loans, any such day as described in (a) above in this definition of
Business Day, excluding any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
1.6 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.7 Intentionally omitted
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1.8 "Dilution" means, in each case based upon the experience of the
immediately prior twelve (12) months, the result of dividing the Dollar amount
of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilution with respect to the Accounts, by (b) Borrowers' sales
(excluding extraordinary items) plus the Dollar amount of clause (a).
1.9 "Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce Lender's advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution exceeds five
percent (5%).
1.10 "Dollars or $" means United States dollars.
1.11 "Eligible Accounts" shall mean, with respect to any Borrower, Accounts
created by such Borrower which are and continue to be acceptable to Lender based
on the criteria set forth below. In general, Accounts shall be Eligible
Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by such Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days after the
original due date for them or ninety (90) days after the date of the original
invoice for them; provided, however, that in connection with the Accounts of
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Walgreen, Hertz and certain other customers of Borrowers approved by Lender,
such Accounts are not unpaid more than thirty (30) days after the original due
date, or one hundred twenty (120) days after the original invoice date;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) such Accounts are denominated in United States dollars and the
chief executive office of the account debtor with respect to such Accounts is
located in the United States of America or any of its territories or possessions
subject to the jurisdiction of the federal courts of the United States of
America, or Canada, or, at Lender's option, if either:(i) the account debtor has
delivered to such Borrower an irrevocable letter of credit issued or confirmed
by a bank satisfactory to Lender, sufficient to cover such Account, in form and
substance satisfactory to Lender and, if required by Lender, the original of
such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the assignment of the proceeds of such letter of
credit to Lender, or (ii) such Account is subject to credit insurance payable to
Lender issued by an insurer and on terms and in an amount acceptable to Lender,
or (iii) such Account is otherwise acceptable in all respects to Lender (subject
to such lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices (including, without limitation, Accounts arising
in connection with hardware or software maintenance contracts, or Accounts which
are billed prior to the shipment of goods or provision
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of services), except as to ▇▇▇▇ and hold invoices, if Lender shall have received
an agreement in writing from the account debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts;
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectibility of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with any Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty (20%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than sixty (60) days after the original due date for them or ninety
(90) days after the date of the original invoice for them, or for Walgreen,
Hertz or other account debtors approved by Lender, more than thirty (30) days
after the original due date or more than one hundred twenty (120) days after the
original invoice date, which constitute more than fifty (50%) percent of the
total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness
to Borrowers does not exceed the credit limit with respect to such account
debtors as determined by Lender from time to time (but the portion of the
Accounts not in excess of such credit limit may still be deemed Eligible
Accounts); and
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(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.12 "Eligible Inventory" shall mean, with respect to any Borrower,
Inventory consisting of finished goods held for resale in the ordinary course of
the business of such Borrower and raw materials for such finished goods which
are acceptable to Lender based on the criteria set forth below. In general,
Eligible Inventory shall not include (a) work-in-process; (b) components which
are not part of finished goods; (c) spare parts for equipment; (d) packaging and
shipping materials; (e) supplies used or consumed in such Borrower's business;
(f) Inventory at premises other than those owned and controlled by such
Borrower, except if Lender shall have received an agreement in writing from the
person in possession of such Inventory and/or the owner or operator of such
premises in form and substance satisfactory to Lender acknowledging Lender's
first priority security interest in the Inventory, waiving security interests
and claims by such person against the Inventory and permitting Lender access to,
and the right to remain on, the premises so as to exercise Lender's rights and
remedies and otherwise deal with the Collateral; (g) Inventory subject to a
security interest or lien in favor of any person other than Lender except those
permitted in this Agreement; (h) ▇▇▇▇ and hold goods; (i) unserviceable,
obsolete or slow moving Inventory; (j) Inventory which is not subject to the
first priority, valid and perfected security interest of Lender; (k) returned
(unless such Inventory is of first-quality and has been returned to stock for
resale), damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment; and (m) Inventory located outside the United States, its
territories and jurisdictions, or Canada. General criteria for Eligible
Inventory may be established and revised from time to time by Lender in good
faith. Any Inventory which is not Eligible Inventory shall nevertheless be part
of the Collateral.
1.13 "Equipment" shall mean, with respect to any Borrower, all of such
Borrower's now owned and hereafter acquired equipment, machinery, computers and
computer hardware and software (whether owned or licensed), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.14 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.15 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by any Borrower and approved by Lender) on
or about 9:00 a.m. (New York time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to any
Borrower in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by such Borrower.
1.16 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
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1.17 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the amount of the
Letter of Credit Accommodations and Revolving Loans available to Borrowers as of
such time based on the applicable lending formulas multiplied by the Net Amount
of Eligible Accounts and the Value of Eligible Inventory, as determined by
Lender, and subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder and (ii) the Maximum Credit, minus (b) the sum
of: (i) the amount of all then outstanding and unpaid Obligations, plus (ii)
the aggregate amount of all trade payables of Borrowers which are more than
thirty (30) days past due as of such time.
1.18 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.19 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.20 "Hertz" shall mean The Hertz Corporation.
1.21 "Home Depot" shall mean Home Depot U.S.A., Inc.
1.22 "Information Certificate" shall mean, collectively, the Information
Certificate of each Borrower constituting Exhibit A hereto containing material
information with respect to such Borrower, its business and assets provided by
or on behalf of such Borrower to Lender in connection with the preparation of
this Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
1.23 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as any Borrower
may elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrowers may
not elect an Interest Period which will end after the last day of the then-
current term of this Agreement.
1.24 "Interest Rate" shall mean, as to Prime Rate Loans, a rate equal to
the Prime Rate and, as to Eurodollar Rate Loans, a rate of two and three-quarter
(2.75%) percent per annum in excess of the Adjusted Eurodollar Rate (based on
the Eurodollar Rate applicable for the Interest Period selected by any Borrower
as in effect three (3) Business Days after the date of receipt by Lender of the
request of such Borrower for such Eurodollar Rate Loans in accordance with the
terms hereof, whether such rate is higher or lower than any rate previously
quoted to such Borrower); provided, that, the Interest Rate shall mean the rate
of four (4.00%) percent per annum in excess of the Prime Rate as to Prime Rate
Loans and the rate of six and three-quarters (6.75%) percent per annum in excess
of the Adjusted Eurodollar Rate as
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to Eurodollar Rate Loans, at Lender's option, without notice, (a) for the period
on and after the date of termination or non-renewal hereof, or the date of the
occurrence of any Event of Default, and for so long as such Event of Default is
continuing as determined by Lender and until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against any
Borrower) and (b) on the Revolving Loans at any time outstanding in excess of
the amounts available to Borrowers under Section 2 (whether or not such
excess(es), arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default).
1.25 "Inventory" shall mean, with respect to any Borrower, all of such
Borrower's now owned and hereafter existing or acquired raw materials, work in
process, finished goods and all other inventory of whatsoever kind or nature,
wherever located.
1.26 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer.
1.27 "Loans" shall mean the Revolving Loans.
1.28 "Lockbox Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.29 "Maximum Credit" shall mean the amount of $15,000,000.00.
1.30 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.31 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrowers to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to any Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.32 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrowers.
1.33 "Parent" shall have the meaning set forth in the Preamble hereof.
1.34 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
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1.35 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
or political subdivision thereof.
1.36 "Permitted Merger" shall have the meaning set forth in Section 9.7
hereof.
1.37 "Permitted Subsidiary" shall mean any shell subsidiary formed by a
Borrower hereunder solely to effect a Permitted Merger, provided, however, that
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such subsidiary shall have no other operations, liabilities or assets prior to
such Permitted Merger.
1.38 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, at its office in Charlotte,
North Carolina, as its prime rate, whether or not such announced rate is the
best rate available at such bank.
1.39 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.40 "Records" shall mean, with respect to any Borrower, all of such
Borrower's present and future books of account of every kind or nature, purchase
and sale agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other data
relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of such Borrower with respect to the foregoing maintained with or by any
other person).
1.41 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.
1.42 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.43 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.44 "Walgreen" shall mean Walgreen Company.
SECTION 2. CREDIT FACILITIES
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2.1 Revolving Loans.
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(a) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to Borrowers from time to time in amounts
requested by any Borrower up to the amount equal to the sum of:
(i) (A) eighty-five (85%) percent of the Net Amount of Eligible
Accounts, less (B) any Dilution Reserves, plus
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(ii) the lowest of: (A) the sum of (1) fifty (50%) percent of the
Value of Eligible Inventory consisting of finished goods plus (2) the
lesser of (x) thirty (30%) percent of the Value of Eligible Inventory
consisting of raw materials for such finished goods or (y) $500,000, (B)
eighty (80%) percent of the net orderly liquidation value of Eligible
Inventory as determined by the most recent appraisal of the Eligible
Inventory in form and substance satisfactory to Lender, or (C) the amount
of $6,000,000, less
----
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less than
ten (10) days prior notice to Parent, (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Lender determines in good faith
that the general creditworthiness of account debtors has declined or (ii) reduce
the lending formula(s) with respect to Eligible Inventory to the extent that
Lender determines that: (A) the number of days of the turnover of the Inventory
for any period has changed in any material respect or (B) the liquidation value
of the Eligible Inventory, or any category thereof, has decreased, or (C) the
nature and quality of the Inventory has deteriorated. In determining whether to
reduce the lending formula(s), Lender may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans and
the Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit. In the event that the outstanding amount of any component of the
Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(c) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrowers shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
--------------------------------
(a) Subject to, and upon the terms and conditions contained herein, at
the request of any Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrowers containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrowers pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Lender a letter of credit fee at a rate equal to one and one-half
(1.50%) percent per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month. Such letter of
credit fee shall be calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed and the obligation of Borrowers to pay such fee
shall survive the termination or non-renewal of this Agreement.
-9-
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrowers (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) fifty (50%) percent of the cost of such Eligible Inventory consisting
of finished goods plus seventy (70%) percent of the cost of such Eligible
Inventory consisting of raw materials plus (B) freight, taxes, duty and other
amounts which Lender estimates, in its reasonable discretion, must be paid in
connection with such Inventory upon arrival and for delivery to one of any
Borrower's locations for Eligible Inventory within the United States of America
and its territories and jurisdictions and Canada, and (ii) if the proposed
Letter of Credit Accommodation is for any other purpose, an amount equal to one
hundred (100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, the amount of Revolving Loans
which might otherwise be available to Borrowers shall be reduced by the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed
$5,000,000 and (ii) the amount of all outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory and all other
commitments and obligations made or incurred by Lender in connection therewith
shall not at any time exceed: (A) $5,000,000 minus (B) the amount of the then
outstanding Revolving Loans based on Eligible Inventory pursuant to Section
2.1(a)(ii) hereof. At any time an Event of Default exists or has occurred and
is continuing, upon Lender's request, Borrowers will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrowers shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation. Borrowers assume all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's agent. Borrowers assume all risks for, and agree to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrowers hereby release and hold Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
any Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or non-
renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrowers any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any
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interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of any Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrowers shall
not: (i) at any time an Event of Default exists or has occurred and is
continuing, (A) approve or resolve any questions of non-compliance of documents,
(B) give any instructions as to acceptance or rejection of any documents or
goods or (C) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders, and (ii) at all times, (A) grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents, and (B) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letter of Credit Accommodations,
or documents, drafts or acceptances thereunder or any letters of credit included
in the Collateral. Lender may take such actions either in its own name or in any
Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by any Borrower to any issuer or correspondent in any application for any Letter
of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by all Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrowers to Lender
and to apply in all respects to Borrowers.
2.3 Availability Reserves. All Revolving Loans otherwise available to
---------------------
Borrowers pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves.
2.4 Joint and Several Liability.
---------------------------
(a) Each Borrower expressly represents and acknowledges that it is
part of a common enterprise with the other Borrowers and that any financial
accommodations by Lender to any other Borrower hereunder and under the other
Financing Agreements are and will be of direct and indirect interest, benefit
and advantage to all Borrowers. Each Borrower acknowledges that any notice
given by Lender to any other Borrower shall be effective with respect to all
Borrowers. Each Borrower shall be entitled to subrogation and contribution
rights from and against any other Borrower to the extent such Borrower is
required to pay to Lender any amount in excess of the Loans hereunder used
directly by such Borrower or as otherwise available under applicable law;
provided, however, that such subrogation and contribution rights are and shall
-------- -------
be subject to the terms and conditions of Section 2.4(b) hereof. The provisions
of this Section 2.4(a) shall in no way limit the obligations and liabilities of
any Borrower and each Borrower shall remain liable to Lender for the full amount
of the Obligations.
(b) No Borrower will exercise any rights which it may acquire by way
of subrogation hereunder or under any other Financing Agreement or at law by any
payment made hereunder or otherwise, nor shall any Borrower seek or be entitled
to seek any contribution or reimbursement from any other Borrower in respect of
payments made by such Borrower hereunder or under any other Financing
Agreements, until all amounts owing to Lender on account of the Obligations are
paid in full and Lender's commitments hereunder are terminated. If any amounts
shall be paid to any Borrower on account of such subrogation or contribution
rights at any time when all of the Obligations
-11-
shall not have been paid in full, such amount shall be held by such Borrower in
trust for Lender, segregated from other funds of such Borrower, and shall,
forthwith upon receipt by such Borrower, be turned over to Lender in the exact
form received by such Borrower (duly endorsed by such Borrower to Lender, if
required), to be applied against the Obligations, whether matured or unmatured,
as provided for herein.
SECTION 3. INTEREST AND FEES
-----------------
3.1 Interest.
--------
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Parent may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Parent shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Lender of such a
request from Parent, such Prime Rate Loans shall be converted to Eurodollar Rate
Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default, or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrowers shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrowers from time to time for requests by Borrowers for Eurodollar Rate Loans,
(iv) no more than three (3) Interest Periods may be in effect at any one time,
(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof,
(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by
any Borrower shall not exceed the amount equal to eighty (80%) percent of the
daily average of the principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest Period, in each
case as determined by Lender (but with no obligation of Lender to make such
Revolving Loans) and (vii) Lender shall have determined that the Interest Period
or Adjusted Eurodollar Rate is available to Lender through the Reference Bank
and can be readily determined as of the date of the request for such Eurodollar
Rate Loan by Borrowers. Any request by Borrowers to convert Prime Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to any Borrower, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which with the notice or passage of time or both would
constitute an Event of Default, shall exist, (ii) this Agreement shall terminate
or not be renewed, or (iii) the aggregate principal amount of the Prime Rate
Loans which
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have previously been converted to Eurodollar Rate Loans or existing Eurodollar
Rate Loans continued, as the case may be, at the beginning of an Interest Period
shall at any time during such Interest Period exceed the aggregate principal
amount of the Loans then outstanding or the Revolving Loans then available to
Borrowers under Section 2 hereof. Borrowers shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account of Borrowers) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall
charges constituting interest payable by Borrowers to Lender exceed the maximum
amount or the rate permitted under any applicable law or regulation, and if any
such part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrowers shall pay to Lender as a non-refundable
-----------
closing fee the amount of $93,750.00 at closing.
3.3 Servicing Fee. Borrowers shall pay to Lender monthly a servicing
-------------
fee in an amount equal to $1,000.00 in respect of Lender's services for each
month (or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
3.4 Unused Line Fee. Borrowers shall pay to Lender monthly an unused
---------------
line fee at a rate equal to one quarter (0.25%) percent per annum calculated
upon the amount by which $15,000,000 exceeds the average daily principal balance
of the outstanding Revolving Loans and Letter of Credit Accommodations during
the immediately preceding month (or part thereof) while this Agreement is in
effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.5 Changes in Laws and Increased Costs of Loans.
--------------------------------------------
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, by an amount deemed by Lender to be material, or
(B) shall result in the increase in the costs to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans or (C) reduce the
amounts received or receivable by Lender in respect thereof, by an amount deemed
by Lender to be material or (ii) the cost to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans shall otherwise
increase by an amount deemed by Lender to be material. Borrowers shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrowers)
-13-
any amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof. A certificate of
Lender setting forth the basis for the determination of such amount necessary to
compensate Lender as aforesaid shall be delivered to any Borrower and shall be
conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions Precedent to Initial Loans and Letter of Credit
----------------------------------------------------------
Accommodations. Each of the following is a condition precedent to Lender
--------------
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lender or
lenders to any Borrower of their respective financing arrangements with such
Borrower and the termination and release by it or them, as the case may be, of
any interest in and to any assets and properties of such Borrower and each
Obligor, duly authorized, executed and delivered by it or each of them,
including, but not limited to, (i) UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and such Borrower or any Obligor, as debtor and
(ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to
secure debt by such Borrower or any Obligor in favor of such existing lender or
lenders, in form acceptable for recording in the appropriate government office;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral(including all ownership
interests of Parent in its subsidiaries) and any other property which is
intended to be security for the Obligations or the liability of any Obligor in
respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) All requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
-14-
(d) No material adverse change shall have occurred in the assets,
business or prospects of Borrowers since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrowers or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(e) Lender shall have received such financial statements, projections,
budgets, business plans, agings, and other financial information as it may
request, in form and substance acceptable to Lender;
(f) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrowers, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
(g) Lender shall have received, in form and substance satisfactory
to Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including, without limitation, acknowledgments by lessors,
mortgagees, processors and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral;
(h) The Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $3,000,000.00 after giving effect to the initial
Loans and Letter of Credit Accommodations made or to be made in connection with
the initial transactions hereunder;
(i) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(j) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrowers with respect to the
Financing Agreements and such other matters as Lender may request; and
(k) The other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
---------------------------------------------------------------------
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrowers, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) All representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or
-15-
providing each such Letter of Credit Accommodation and after giving effect
thereto, except to the extent such representations and warranties expressly
relate to an earlier date; and
(b) No Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, each Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, all property and
interests in property, including, whether now owned or hereafter acquired or
existing, and wherever located, of such Borrower (collectively, the
"Collateral"):
5.1 Accounts;
5.2 All present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, chooses
in action and other claims and existing and future leasehold interests in
Equipment, real estate and fixtures), chattel paper, investment property,
documents, instruments, letters of credit, bankers' acceptances and guaranties;
5.3 All present and future monies, securities, credit balances, deposits,
deposit accounts and other property of such Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of such Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 All products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
-16-
6.1 Borrowers' Loan Account. Lender shall maintain one or more loan
-----------------------
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Parent each month a statement
----------
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from any Borrower of any specific exceptions of Borrowers thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrowers a written statement
as provided above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrowers.
6.3 Collection of Accounts.
----------------------
(a) Each Borrower shall establish, as of the date hereof, and
maintain, at its expense, blocked accounts or lockboxes and related blocked
accounts (in either case, "Lockbox Accounts"), as Lender may specify, with such
banks as are acceptable to Lender into which such Borrower shall promptly
deposit and direct its account debtors to directly remit all payments on
Accounts and all payments constituting proceeds of Inventory or other Collateral
in the identical form in which such payments are made, whether by cash, check or
other manner. The banks at which the Lockbox Accounts are established shall
have entered into an agreement, in form and substance satisfactory to Lender,
providing that all items received or deposited in the Lockbox Accounts are the
property of Lender, that the depository bank has no lien upon, or right to
setoff against, the Lockbox Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the depository bank will
wire, or otherwise transfer, in immediately available funds, on a daily basis,
all funds received or deposited into the Lockbox Accounts to such bank account
of Lender as Lender may from time to time designate for such purpose ("Payment
Account"). Each Borrower agrees that all payments made to such Lockbox Accounts
or other funds received and collected by Lender, whether on the Accounts or as
proceeds of Inventory or other Collateral or otherwise shall be the property of
Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) business day following the date of
receipt of immediately available funds by Lender in the Payment Account. For
purposes of calculating the amount of the Revolving Loans available to Borrowers
such payments will be applied (conditional upon final collection) to the
Obligations on the business day of receipt by Lender in the Payment Account, if
such payments are received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to credit
Borrowers' loan account on such day, and if not, then on the next business day.
(c) Each Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall
-17-
deposit or cause the same to be deposited in the Lockbox Accounts, or remit the
same or cause the same to be remitted, in kind, to Lender. In no event shall the
same be commingled with any Borrower's own funds. Each Borrower agrees to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Lockbox Account is established or any other bank or person involved in the
transfer of funds to or from the Lockbox Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
--------
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrowers or for
the account of Borrowers (including, without limitation, the monetary proceeds
of collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers. Each
Borrower shall make all payments to Lender on the Obligations free and clear of,
and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Each Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
---------------------------
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Parent or other
authorized person or, at the discretion of Lender, if such Loans are necessary
to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a business day) and the amount of the requested Loan. Requests received after
11:00 a.m. Atlanta time on any day shall be deemed to have been made as of the
opening of business on the immediately following business day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrowers when deposited to the credit of Borrowers or otherwise disbursed or
established in accordance with the instructions of any Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the
---------------
Loans provided by Lender to Borrowers hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing
-18-
or carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be
considered a "purpose credit" within the meaning of Regulation T, U or X of the
Board of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
----------------------------------
7.1 Collateral Reporting. Parent, on behalf of all Borrowers, shall
--------------------
provide Lender with the following documents in a form satisfactory to Lender:
(a) on a regular basis as required by Lender, a schedule of Accounts; (b) on a
weekly basis (and in any event no later than Tuesday of each week) or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category and (iii) agings of accounts payable, (c) upon
Lender's request, (i) copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank statements, (ii)
copies of shipping and delivery documents, and (iii) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired by
Borrowers; (d) agings of accounts receivable on a weekly basis or more
frequently as Lender may request; and (e) such other reports as to the
Collateral as Lender shall request from time to time. If any of a Borrower's
records or reports of the Collateral are prepared or maintained by an accounting
service, contractor, shipper or other agent, each Borrower hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Lender and to follow Lender's instructions
with respect to further services at any time that an Event of Default exists or
has occurred and is continuing.
7.2 Accounts Covenants.
------------------
(a) Borrowers shall notify Lender promptly of: (i) any material delay
in any Borrower's performance of any of its obligations to any account debtor or
the assertion of any material claims, offsets, defenses or counterclaims by any
account debtor, or any material disputes with account debtors, or any material
settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor, (iii) any
event or circumstance which, to Borrower's knowledge would cause Lender to
consider any then existing Accounts as no longer constituting Eligible Accounts,
and (iv) each shipment of any Inventory by any Borrower to Home Depot. No
credit, discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default
exists or has occurred and is continuing, Borrowers shall settle, adjust or
compromise any claim, offset, counterclaim or dispute with any account debtor.
At any time that an Event of Default exists or has occurred and is continuing,
Lender shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors or
grant any credits, discounts or allowances.
(b) Borrowers shall promptly report to Lender any return of Inventory
by an account debtor having a sales price in excess of $50,000. At any time
that Inventory is returned, reclaimed or repossessed, the related Account shall
not be deemed an Eligible Account. In the event any account debtor returns
Inventory when an Event of Default exists or has occurred and is continuing,
Borrowers shall, upon Lender's request, (i) hold the returned Inventory in trust
for Lender, (ii) segregate all returned Inventory from all of its other
property, (iii) dispose of the returned Inventory solely according to Lender's
instructions, and (iv) not issue any credits, discounts or allowances with
respect thereto without Lender's prior written consent.
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(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of such Borrower's business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(d) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrowers, all
chattel paper and instruments which any Borrower now owns or may at any time
acquire immediately upon such Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrowers shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrowers
-------------------
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, each Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrowers shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrowers shall not remove any Inventory from the
locations set forth or permitted
-20-
herein, without the prior written consent of Lender, except for sales of
Inventory in the ordinary course of such Borrower's business and except to move
Inventory directly from one location set forth or permitted herein to another
such location; (d) upon Lender's request, each Borrower shall, at its expense,
twice in any twelve (12) month period, but at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Inventory in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to rely; (e)
Borrowers shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including, but not limited to,
the requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); (f) each Borrower assumes
all responsibility and liability arising from or relating to the production,
use, sale or other disposition of the Inventory; (g) no Borrower shall sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate any Borrower to repurchase such Inventory;
(h) Borrowers shall keep the Inventory in good and marketable condition; and (i)
no Borrower shall, without prior written notice to Lender, acquire or accept any
Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
-------------------
Lender's request, each Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) Borrowers shall keep the Equipment in good order, repair, running
and marketable condition (ordinary wear and tear excepted); (c) Borrowers shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in a Borrower's business and not
for personal, family, household or farming use; (e) no Borrower shall remove any
Equipment from the locations set forth or permitted herein, except to the extent
necessary to have any Equipment repaired or maintained in the ordinary course of
the business of such Borrower or to move Equipment directly from one location
set forth or permitted herein to another such location and except for the
movement of motor vehicles used by or for the benefit of such Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) each Borrower assumes all
responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Each Borrower hereby irrevocably designates and
-----------------
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in such Borrower's or
Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing (i) demand payment on Accounts or other proceeds
of Inventory or other Collateral, (ii) enforce payment of Accounts by legal
proceedings or otherwise, (iii) exercise all of such Borrower's rights and
remedies to collect any Account or other Collateral, (iv) sell or assign any
Account upon such terms, for such amount and at such time or times as the Lender
deems advisable, (v) settle, adjust, compromise, extend or renew an Account,
(vi) discharge and release any Account, (vii) prepare, file and sign such
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor, (viii) notify the post office authorities to change
the address for delivery of such Borrower's mail to an address designated by
Lender, and open and dispose of all mail addressed to such Borrower, and (ix) do
all acts and things which are necessary, in Lender's determination, to fulfill
such Borrower's obligations under this Agreement and the other Financing
Agreements and (b) at any time to (i) take control in any manner of any item of
payment or proceeds thereof, (ii) have access to any lockbox or postal box into
which such Borrower's mail is deposited, (iii) endorse such Borrower's name upon
any items of payment or proceeds thereof and deposit the same in the Lender's
account for
-21-
application to the Obligations, (iv) endorse such Borrower's name upon any
chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other Collateral,
(v) sign such Borrower's name on any verification of Accounts and notices
thereof to account debtors and (vi) execute in such Borrower's name and file any
UCC financing statements or amendments thereto. Each Borrower hereby releases
Lender and its officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Lender's own gross
negligence or wilful misconduct as determined pursuant to a final non-appealable
order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
-------------
Borrowers under any agreement with a third party or pay or bond on appeal any
judgment entered against any Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's reasonable judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrowers' account therefor, such amounts to be repayable by Borrowers on
demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of any Borrower. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
------------------
the cost and expense of Borrowers, (a) Lender or its designee shall have
complete access to all of Borrowers' premises during normal business hours and
after notice to any Borrower, or at any time and without notice to any Borrower
if an Event of Default exists or has occurred and is continuing, for the
purposes of inspecting, verifying and auditing the Collateral and all of
Borrower's books and records, including, without limitation, the Records, and
(b) Borrowers shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may reasonably request, and (c) use
during normal business hours such of any Borrower's personnel, Equipment,
supplies and premises as may be reasonably necessary for the foregoing and if an
Event of Default exists or has occurred and is continuing for the collection of
Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each
------------------------------------------------------
Borrower is a corporation duly organized and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the
-22-
ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on such Borrower's financial condition, results of operation or
business or the rights of Lender in or to any of the Collateral. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within such
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of such Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which such Borrower is a party or by which such
Borrower or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms. Borrowers do not have any
subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
------------------------------------------------
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrowers,
since the date of the most recent audited financial statements furnished by
Borrowers to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
--------------------------------------------
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the
-23-
addresses set forth in the Information Certificate, subject to the right of such
Borrower to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by such Borrower and sets forth the owners and/or operators thereof and to
the best of such Borrower's knowledge, the holders of any mortgages on such
locations.
8.4 Priority of Liens; Title to Properties. The security interests and
--------------------------------------
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower
has good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
-----------
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
----------
there is no present investigation by any governmental agency pending, or to the
best of each Borrower's knowledge threatened, against or affecting such
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of each Borrower's knowledge
threatened, against such Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against such Borrower would result in any material adverse change in
the assets, business or prospects of such Borrower or would impair the ability
of such Borrower to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. No Borrower
----------------------------------------------------
is in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority.
8.8 Accuracy and Completeness of Information. All information furnished
----------------------------------------
by or on behalf of Borrowers in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business, assets or prospects
of any Borrower, which has not been fully and accurately disclosed to Lender in
writing.
-24-
8.9 Survival of Warranties; Cumulative. All representations and
----------------------------------
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder, except to the extent such representations
and warranties expressly relate to an earlier date, and shall be conclusively
presumed to have been relied on by Lender regardless of any investigation made
or information possessed by Lender. The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which any Borrower shall now or hereafter give, or cause to be given,
to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 Maintenance of Existence. Each Borrower shall at all times
------------------------
preserve, renew and keep in full, force and effect its corporate existence and
rights and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Each Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name and such Borrower shall deliver to Lender a copy of the
amendment to the Certificate of Incorporation of such Borrower providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation of such Borrower as soon as it is available.
9.2 New Collateral Locations. Any Borrower may open a new location
------------------------
within the continental United States or Canada provided such Borrower (a) gives
Lender thirty (30) days prior written notice of the intended opening of any such
new location and (b) prior to moving any Collateral to such new location,
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, instruments and opinions of counsel as Lender may deem
reasonably necessary or desirable to protect its interests, and evidence and
confirm its first priority perfected security interest, in the Collateral at
such location, including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc. Each Borrower shall, at all
--------------------------------------
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, State or local
governmental authority applicable to it.
9.4 Payment of Taxes and Claims. Each Borrower shall duly pay and
---------------------------
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower and with respect to which adequate reserves have
been set aside on its books. Borrowers shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for herein
and each Borrower agrees to indemnify and hold Lender harmless with respect to
the foregoing, and to repay to Lender on demand the amount thereof, and until
paid by Borrowers such amount shall be added and deemed part of the Loans,
provided, that, nothing contained herein shall be construed to require Borrowers
to pay any income or franchise taxes attributable to the income of Lender from
any amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
-25-
9.5 Insurance. Each Borrower shall, at all times, maintain with
---------
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Each Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if any Borrower fails to do so, Lender is authorized, but not required, to
obtain such insurance at the expense of such Borrower. All policies shall
provide for at least thirty (30) days prior written notice to Lender of any
cancellation or reduction of coverage and that Lender may act as attorney for
such Borrower in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Each Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and such Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by any Borrower or any of its affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
------------------------------------------
(a) Each Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower and its
subsidiaries (if any) in accordance with GAAP and, Parent, on behalf of the
Borrowers, shall furnish or cause to be furnished to Lender: (i) within thirty
(30) days after the end of each fiscal month, monthly unaudited consolidated
financial statements, and, if any Borrower has any subsidiaries, unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss and statements of shareholders' equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of such Borrower and its subsidiaries as of the end of and
through such fiscal month and (ii) within ninety (90) days after the end of each
fiscal year, audited consolidated financial statements and, if any Borrower has
any subsidiaries, audited consolidating financial statements of such Borrower
and its subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of such
Borrower and its subsidiaries as of the end of and for such fiscal year,
together with the opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrowers and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of each Borrower and its subsidiaries as of the end of
and for the fiscal year then ended.
(b) Each Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in such
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
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(c) Each Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which such
Borrower sends to its stockholders generally and copies of all reports and
registration statements which such Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Each Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of such Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of such
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Each Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at such Borrower's expense, copies of the financial statements of such
Borrower and any reports or management letters prepared by such accountants or
auditors on behalf of such Borrower and to disclose to Lender such information
as they may have regarding the business of such Borrower. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrowers to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
-------------------------------------------------------
(a) Borrowers shall not, directly or indirectly, (i) merge into or
with or consolidate with any other Person or permit any other Person to merge
into or with or consolidate with it (except as otherwise set forth in Section
9.7(b)), or (ii) sell, assign, lease, transfer, abandon or otherwise dispose of
any stock or indebtedness to any other Person or any of its assets to any other
Person (except for (A) sales of Inventory in the ordinary course of business and
(B) the disposition of worn-out or obsolete Equipment or Equipment no longer
used in the business of Borrowers so long as (1) if an Event of Default exists
or has occurred and is continuing, any proceeds are paid to Lender and (2) such
sales do not involve Equipment having an aggregate fair market value in excess
of $25,000 for all such Equipment disposed of in any fiscal year of Borrowers),
or (iii) form or acquire any subsidiaries (except as otherwise set forth in
Section 9.7(b)), or (iv) wind up, liquidate or dissolve, or (v) agree to do any
of the foregoing.
(b) Notwithstanding the foregoing, any Borrower may merge with or
into any other Borrower, or any Permitted Subsidiary of any Borrower (a
"Permitted Merger") provided, that, no later than thirty (30) days prior to the
-------- ----
effective date of such Permitted Merger, Lender shall receive (i) written notice
of the intended Permitted Merger and copies of all documents relating thereto,
and (ii) all security documents, amendments, lockbox agreements, third party
waivers, financing statements, opinions of counsel and other documents
reasonably requested by Lender to evidence and continue Lender's first priority
lien on and security interest in the Collateral and Lender's rights under any
Financing Agreement.
9.8 Encumbrances. Borrowers shall not create, incur, assume or suffer
------------
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests
-27-
of Lender; (b) liens securing the payment of taxes, either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrowers and with respect to
which adequate reserves have been set aside on its books; (c) non-consensual
statutory liens (other than liens securing the payment of taxes) arising in the
ordinary course of each Borrower's business to the extent: (i) such liens secure
indebtedness which is not overdue or (ii) such liens secure indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books; (d) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of real property which do not interfere in
any material respect with the use of such real property or ordinary conduct of
the business of Borrowers as presently conducted thereon or materially impair
the value of the real property which may be subject thereto; (e) purchase money
security interests in Equipment (including capital leases) and purchase money
mortgages on real estate not to exceed $100,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of Borrowers other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; and (f) the security interests and
liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrowers shall not incur, create, assume, become or
------------
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except: (a) the Obligations; (b) trade obligations and normal
------
accruals in the ordinary course of business not yet due and payable, or with
respect to which a Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to
Borrowers, and with respect to which adequate reserves have been set aside on
its books; (c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement; and (d) obligations or indebtedness
set forth on the Information Certificate; provided, that, (i) Borrowers may only
-------- ----
make regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, and (iii) Borrowers shall furnish
to Lender all notices or demands in connection with such indebtedness either
received by any Borrower or on its behalf, promptly after the receipt thereof,
or sent by any Borrower or on its behalf, concurrently with the sending thereof,
as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrowers shall not, directly
-----------------------------------
or indirectly, make any loans or advance money or property to any Person
(including, without limitation, IVI Checkmate Ltd., Debitek Holdings Limited and
IVI Ingenico Inc.), or invest in (by capital contribution, dividend or
otherwise) or purchase or repurchase the stock or indebtedness or all or a
substantial part of the assets or property of any Person (including, without
limitation, IVI Checkmate Ltd., Debitek Holdings Limited and IVI Ingenico Inc.),
or guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly) the indebtedness, performance, obligations or dividends of any
Person (including, without limitation, IVI Checkmate Ltd., Debitek Holdings
Limited and IVI Ingenico Inc.) or agree to do any of the foregoing, except: (a)
------
the endorsement of instruments for collection or deposit in the ordinary course
of business; (b) investments in: (i) short-term direct obligations of the
United States Government, (ii) negotiable certificates of deposit issued by any
bank satisfactory to Lender, payable to the order of a Borrower or to bearer and
delivered to Lender, (iii) commercial paper rated A1 or P1, or (iv) in
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connection with a Permitted Merger if such other Person is a Borrower hereunder;
provided, that, as to any of the foregoing, unless waived in writing by Lender,
-------- ----
Borrowers shall take such actions as are deemed necessary by Lender to perfect
the security interest of Lender in such investments, (c) the guarantees set
forth in the Information Certificate, and (d) the purchase or re-purchase of
stock in connection with a Permitted Merger.
9.11 Dividends and Redemptions. Borrowers shall not, directly or
-------------------------
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of any Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except as set forth on Schedule 9.11
hereto.
9.12 Transactions with Affiliates. Borrowers shall not enter into any
----------------------------
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's business and upon
fair and reasonable terms no less favorable to such Borrower than such Borrower
would obtain in a comparable arm's length transaction with an unaffiliated
person.
9.13 Adjusted Net Worth.
------------------
(a) Parent, on a consolidated basis, shall maintain Adjusted Net
Worth as of the last day of each fiscal quarter during any period set forth
below in an amount not less than the amount set forth below for such quarter:
Amount Period
------ ------
(i) $37,000,000 from the date hereof through
December 30, 2000
(ii) $39,000,000 from December 31, 2000 through
December 30, 2001
(iii) $41,000,000 from December 31, 2001 and thereafter.
(b) Parent, on a consolidated basis with all subsidiaries of Parent
that are organized under the laws of any state of the United States of America,
including without limitation Checkmate, ▇▇▇▇▇▇▇, Debitek NTN and EnConcert,
shall, for the corresponding time periods, maintain an Adjusted Net Worth that
is at least equal to eighty percent (80%) of the consolidated Adjusted Net Worth
amounts set forth in Section 9.13(a) hereof.
9.14 Costs and Expenses. Borrowers shall pay to Lender on demand all
------------------
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
-29-
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) all title insurance
and other insurance premiums, appraisal fees and search fees; (c) costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Lockbox Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including, without limitation,
preparations for and consultations concerning any such matters); (g) all out-of-
pocket expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
any Borrower's operations, plus a per diem charge at the rate of $650 per person
per day for Lender's examiners in the field and office; and (h) the fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
9.15 Further Assurances. At the request of Lender at any time and from
------------------
time to time, each Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of any
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, each Borrower
hereby authorizes Lender to execute and file one or more UCC financing
statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 Events of Default. The occurrence or existence of any one or more
-----------------
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Any Borrower fails to pay when due any of the Obligations or
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements;
(b) Any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) Any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
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(d) Any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of $100,000 in any one case or in excess of
$100,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or any Obligor or any of their assets;
(e) Any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership or corporation, dissolves or suspends or discontinues doing
business;
(f) Any Borrower or any Obligor becomes insolvent (however defined
under applicable law or evidenced), makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors;
(g) A case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(h) A case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property; or
(i) Any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $100,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by any
Borrower or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) (i) Any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, or more than five percent (5%) of the total voting power
of all classes of stock then outstanding of Parent entitled to vote in the
election of directors; or (ii) Parent shall fail to own at all times (A) one
hundred percent (100%) of all issued and outstanding equity interests of
Checkmate, ▇▇▇▇▇▇▇, Debitek and EnConcert, or (B) eighty percent (80%) of all
issued and outstanding equity interests of NTN;
(k) The indictment of any Borrower or any Obligor under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against any Borrower or
-31-
any Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of any Borrower or
such Obligor with a fair market value or book value in excess of $100,000;
(l) There shall be a material adverse change in the business, assets
or prospects of any Borrower or any Obligor after the date hereof; or
(m) There shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrowers of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against any Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require any Borrower, at such Borrower's
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v) remove
any or all of the Collateral from any premises on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other disposition
thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrowers, which right or equity of redemption
is hereby expressly waived and released by Borrowers and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5) days prior notice by
Lender to any Borrower designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof and each Borrower
waives any other notice. In the event Lender institutes an action to
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recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Borrower waives the posting of any bond which might otherwise be
required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default, Lender may, at its option, without notice, (i) cease making Loans or
arranging for Letter of Credit Accommodations or reduce the lending formulas or
amounts of Revolving Loans and Letter of Credit Accommodations available to
Borrowers and/or (ii) terminate any provision of this Agreement providing for
any future Loans or Letter of Credit Accommodations to be made by Lender to
Borrowers.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
----------------------------------------------
GOVERNING LAW
-------------
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
--------------------------------------------------------------
Waiver.
------
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Georgia
(without giving effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of a Georgia state or superior court located in
▇▇▇▇▇▇ County and the United States District Court for the Northern District of
Georgia and waive any objection based on venue or forum non conveniens with
----- --- ----------
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against any
Borrower or its property in the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against any Borrower or its property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon such Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
such Borrower shall appear in answer to such process, failing which such
Borrower shall be deemed in default and judgment may be entered by Lender
against such Borrower for the amount of the claim and other relief requested.
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(d) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWERS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to any Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, Lender shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Lender may elect to give shall entitle any
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to
-----------------------
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold Lender,
---------------
and its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with
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any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers shall pay the maximum portion which
it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
12.1 Term.
----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof; provided, that, Lender may, at
-------- ----
its option, extend the Renewal Date to the date four (4) years from the date
hereof by giving Parent notice at least sixty (60) days prior to the third
anniversary of this Agreement. Lender or Borrowers (subject to Lender's right
to extend the Renewal Date as provided above) may terminate this Agreement and
the other Financing Agreements effective on the Renewal Date or on the
anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
-------- ----
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrowers shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrowers for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrowers to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Atlanta time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid, except for any Obligations which, by
their express terms, survive the termination or non-renewal of this Agreement.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agrees to pay to Lender, upon the
effective date of
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such termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
Amount Period
------ ------
(i) 3% of Maximum Credit after the date hereof but prior
to and including the one (1) year
anniversary of the date hereof
(ii) 2% of Maximum Credit after the one (1) year anniversary
of the date hereof, but prior to
and including the two (2) year
anniversary of the date hereof
(iii) 1% of Maximum Credit after the two (2) year anniversary
of the date hereof but prior to the
Renewal Date.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and each Borrower
agrees that it is reasonable under the circumstances currently existing. The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations. Notwithstanding the foregoing, Lender hereby agrees to
waive the early termination fee otherwise payable pursuant to this Section
12.1(c) in the event Borrowers choose to refinance the borrowings under this
Agreement with First Union National Bank, or its successors, affiliates or
subsidiaries.
12.2 Notices. All notices, requests and demands hereunder shall be in
-------
writing and (a) made to Lender at its address set forth below and to any
Borrower at its chief executive office set forth below, or to such other address
as either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
------------------
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
----------
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, each Borrower and their
respective successors and assigns, except that no Borrower may assign its rights
under this Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent of Lender.
Lender may, after notice to any Borrower, assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements and further
may assign, or sell participations in, all or any part of the Loans, the Letter
of Credit Accommodations or any other interest herein to another financial
institution or other person, in which
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event, the assignee or participant shall have, to the extent of such assignment
or participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such assignment
or participation.
12.5 Entire Agreement. This Agreement, the other Financing Agreements,
----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6 Counterparts; Facsimile Execution. This Agreement may be executed in
---------------------------------
any number of counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original, executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile shall also deliver an
original executed counterpart of this Agreement, but the failure to deliver an
original, executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION IVI CHECKMATE CORP.
(SOUTHERN)
By: ______________________________
By:______________________________ Title:____________________________
Title:___________________________ Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ IVI CHECKMATE INC.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ By:_______________________________
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Title:____________________________
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ COMPUTER SERVICES, INC.
By:_______________________________
Title:____________________________
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DEBITEK, INC.
By:_______________________________
Title:____________________________
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NATIONAL TRANSACTION NETWORK, INC.
By:_______________________________
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Title:____________________________
Chief Executive Office:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ENCONCERT SOLUTIONS, LLC
By:_______________________________
Title:____________________________
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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