EXHIBIT 99.3
LINE OF CREDIT LOAN AND SECURITY AGREEMENT
between
SOVEREIGN BANK
and
eGAMES, INC.
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LINE OF CREDIT LOAN AND SECURITY AGREEMENT (the "Agreement") dated March 10,
1999, between SOVEREIGN BANK (the "Bank"), with offices at Two Aldwyn Center,
Lancaster Avenue and ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and eGAMES, INC.,
a Pennsylvania corporation ("Borrower"), with an office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Borrower and Bank, intending to be legally bound, hereby agree as follows.
ARTICLE 1.
DEFINITIONS
1.1. Definitions.
For purposes of this Agreement, the following terms shall have the
following meanings:
Account Debtor. The party who is obligated on or under any Account.
Advances. "Advances" shall have the meaning given to such term in
Section 2.1(a) hereof.
Affiliate. With respect to any Person, another Person directly or
indirectly Controlling, Controlled by or under common Control with any such
Person.
Agreement. This Line of Credit Loan and Security Agreement and all
amendments, modifications and supplements hereto and restatements hereof.
Assets. All of Borrower's presently owned and hereafter acquired
assets including, but not limited to, Accounts, Chattel Paper, Contracts,
Documents, General Intangibles, Instruments, present and future Inventory,
Equipment, Machinery, Goods, Fixtures, and all accessions thereto,
replacements thereof, and all products and Proceeds thereof.
Bank. Sovereign Bank, a federally-chartered, SAIF-insured savings
institution, or any successor bank.
Bankruptcy Code. The Bankruptcy Reform Act of 1994 and all similar or
successor statutes, and all rules and regulations of Federal agencies and
authorities promulgated under those statutes, all as they have been and may
be amended from time to time.
Borrowing Date. Each date upon which the Bank makes an Advance to
Borrower.
Business Day. A day other than a Saturday, Sunday or Holiday on which
the Bank is open for the transaction of banking business.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. "Collateral" shall have the meaning given to such term in
Section 3.1 hereof.
Control. The possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise.
Controlled Group. "Controlled Group" shall have the meaning set forth
for "Controlled group of corporations" at Section 1563 of the Code.
Debt. (a) All items of indebtedness or liability which, in accordance
with generally accepted accounting principles consistently applied, would
be included in determining total liabilities as shown on a balance sheet as
of the date as of which the Debt is to be determined, (b) all indebtedness
secured by any mortgage, pledge, lien or security interest existing on
property owned by the Person whose Debt is being determined, whether or not
the indebtedness secured thereby is an obligation of such entity, and (c)
guaranties, endorsements (other than for purposes of collection in the
ordinary course of business), other contingent obligations in respect of,
or to purchase or to otherwise acquire, indebtedness of others, and other
contingent obligations of a type described in Section 7.7 hereof.
Default. Any event specified in Section 8.1 of this Agreement, whether
or not any requirement for notice or passage of time or any other condition
has been satisfied.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations promulgated thereunder.
Event of Default. Any event specified in Section 8.1 of this
Agreement, provided that any requirement for notice or passage of time or
any other condition has been satisfied.
Liabilities. The obligations of Borrower to the Bank:
1.0.0.1. To pay the principal of and all interest on the Note in
accordance with the terms thereof, to pay all other amounts due by
Borrower in accordance with the terms hereof, and to satisfy all of
Borrower's liabilities to the Bank, whether hereunder or otherwise,
whether now existing or hereafter incurred, matured or unmatured,
direct or contingent, primary or secondary, joint or several,
including any extensions, modifications, renewals thereof and
substitutions therefor and liabilities of Borrower which the Bank may
have obtained by assignment, subrogation, or otherwise, and all
liabilities of Borrower as guarantor, surety or endorser of the
obligations of any third party or parties to the Bank;
1.0.0.2. To repay the Bank all amounts advanced by the Bank
hereunder or otherwise on behalf of Borrower, including, but without
limitation, advances for principal or interest, payments to prior
secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, securities, registration fees, or agency fees for any of
the Collateral;
1.0.0.3. To reimburse the Bank, on demand, for all of the Bank's
expenses and costs, including the reasonable fees and expenses of its
counsel, in connection with the preparation of and closing under this
Agreement and the amendment, modification, renewal or enforcement of
this Agreement and the documents required hereunder, including,
without limitation, any proceeding brought or threatened to enforce
payment of any of the obligations referred to in the foregoing
paragraphs (a) and (b), unless any of the foregoing are occasioned as
a result of the Bank's willful misconduct or gross negligence.
Line of Credit. The meaning provided at Article 2 hereof.
Line of Credit Note. The line of credit note executed by Borrower in
the principal amount specified in Article 2 hereof and in the form of
Exhibit "A" attached hereto and made a part hereof.
Loan. The Line of Credit Facility provided for in Article 2 hereof.
Loan Account. "Loan Account" shall mean the account of Borrower on the
books of the Bank in which is recorded, inter alia, the Advances and the
payments of principal and interest made by Borrower to the Bank.
Loan Documents. Individually and collectively, this Agreement, the
Note, and all other existing and future agreements, pledges, instruments,
documents, assignments, leases, guarantees and contracts (including
amendments, modifications, extensions, renewals and supplements to and
restatements of any of the foregoing) delivered by or on behalf of the
Borrower in connection with this Agreement.
Net Tangible ▇▇▇▇▇▇.▇▇ any time, the amount by which all of Borrower's
Assets exceeds: (a) good will and (b) Total Liabilities, all as determined
in accordance with generally accepted accounting principals applies on a
consistent basis from period to period.
Note. The Line of Credit Note.
PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
Person. Any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture,
court or government or political subdivision or agency thereof.
Plan. Any plan subject to Title IV of ERISA and maintained for
employees of Borrower, any of its subsidiaries or any members of a
Controlled Group of which Borrower is a part.
Prime Rate. "Prime Rate" shall mean the prime rate announced by the
Bank, from time to time, which may not represent the lowest rate charged by
the Bank to borrowers at any time or from time to time.
Reportable Event. "Reportable Event" has the meaning assigned to such
term in Section 4043(b) of ERISA or regulations issued thereunder.
Total Liabilities. The aggregate amount which, in accordance with
generally accepted accounting principles consistently applied, is carried
as total liabilities on the books of Borrower, or should be so carried.
1.2. Undefined Terms; Accounting Terms. Unless expressly provided in this
Agreement, or unless the context requires otherwise:
1.2.0.1. terms used in this Agreement without definition including,
but not limited to, Accounts, Assets, Contracts, Chattel Paper, Documents,
Equipment, Machinery, Goods, Fixtures, General Intangibles, Goods,
Instruments, Inventory, and Proceeds, which are defined in the Pennsylvania
Uniform Commercial Code shall have the meanings assigned to them in the
Pennsylvania Uniform Commercial Code as amended from time to time, and
1.2.0.2. all accounting terms not specifically defined herein shall be
construed, and all financial data submitted pursuant to this Agreement
shall be prepared, in accordance with generally accepted accounting
principles, as applied in the preparation of the latest audited financial
statements delivered to the Bank pursuant to Section 6.1 of this Agreement.
ARTICLE 2.
AMOUNTS, TERMS AND CONDITIONS
OF LINE OF CREDIT LOAN
2.1 Line of Credit Facility.
2.1.0.1. Subject to, and in accordance with, the terms and conditions
of this Agreement, the Bank agrees to make advances in integral multiples
of $1,000.00 (the "Advances") not to exceed One Million ($1,000,000.00)
Dollars less the sum of the then unpaid principal amount of all previous
Advances, to Borrower upon request at any time and from time to time during
the period commencing on the date hereof and ending on the earlier of (i)
the occurrence of an Event of Default, or (ii) October 31, 1999.
2.1.0.2. Borrower may request on Advance by notice to the Bank not
later than 2:00 P.M., Philadelphia, Pennsylvania time, on the Business Day
on which Borrower wishes the Bank to make the Advance.
2.1.0.3. Borrower, subject to the terms and conditions of this
Agreement, may reborrow any amount repaid by Borrower at any time and from
time to time on or before the termination of the Bank's commitment under
this Article 2.
2.1.0.4. The term of this Line of Credit shall commence on the date
hereof and, unless earlier terminated, shall terminate on the earlier to
occur of (i) an Event of Default (as defined herein), or (ii) October 31,
1999. Bank at its sole discretion may extend or continue the term of this
Line of Credit pursuant to terms and conditions set forth by the Bank in
its sole discretion and based, in Bank's sole discretion and
interpretation, on the Borrower's Financial Statements (as required in
Article 6 herein) for the year end of June 30, 1999 and any other
information available to Bank or which Bank may reasonably request.
2.2. Line of Credit Note. The obligation of Borrower to pay the
principal of, and accrued interest on, the Line of Credit shall be
evidenced by its promissory note dated this date (the "Line of Credit
Note"):
2.2.0.1. payable to the order of the Bank in the face amount of One
Million ($1,000,000.00) Dollars;
2.2.0.2. bearing interest on its unpaid principal amount of all
Advances at an annual rate equal to the Prime Rate plus .50%. Interest
shall fluctuate with changes in the Prime Rate, shall be computed on the
actual number of days elapsed on the basis of a 360-day year and shall be
payable monthly on the thirtieth (30th) day of the month;
2.2.0.3. payable as to interest monthly in arrears on the thirtieth
(30th) day of each calendar month commencing March 30, 1999 through and
including the first day on which:
2.2.0.3.1. the Line of Credit shall have been terminated, and
2.2.0.3.2. Borrower shall have repaid in full the Line of Credit (it
being understood that interest shall again accrue upon any subsequent
borrowing under this Line of Credit);
2.2.0.4. payable as to principal on the earlier to occur of: (i) an
Event of Default, or (ii) October 31, 1999;
2.2.0.5. secured by the Collateral;
2.2.0.6. prepayable by Borrower without penalty or premium but with
accrued interest to the date of such prepayment on the amount prepaid, at
any time and from time to time, in whole or in part, upon notification to
the Bank of such prepayment not later than 10:00 a.m. on the date of such
prepayment; and
2.2.0.7. substantially in the form of Exhibit "A" attached hereto and
made a part hereof.
2.3. Payments
2.3.0.1.All payments by Borrower under the Loan Documents shall be
made to the Bank at its office described in the heading of this Agreement,
or such other place or places as the Bank may direct in writing, prior to
2:00 P.M., Philadelphia, Pennsylvania time, on the date of payment (or, if
the date of payment is not a Business Day, the next Business Day) in funds
which are immediately available to the Bank.
2.3.0.2. All payments received by the Bank in immediately available
funds prior to 2:00 P.M., Philadelphia, Pennsylvania time, on any Business
Day will be credited to Borrower's Loan Account on the date of receipt. All
payments received by the Bank in immediately available funds after 2:00
P.M., Philadelphia, Pennsylvania time, on any Business Day will be credited
to Borrower's Loan Account on the next Business Day.
2.3.0.3. All payments received by the Bank which are not in
immediately available funds shall be subject to a clearance of three (3)
Business Days.
2.3.0.4. Interest shall be calculated on the basis of a 360-day year
for the actual number of days elapsed (365/360 or 366/360, as the case may
be). Interest for each month shall be added to principal as of the close of
each month.
2.3.0.5. Any change in interest rate resulting from a change in the
Prime Rate shall be effective as of the opening of business on the day on
which the Bank announces the change.
2.3.0.6. Except as otherwise expressly provided in this Agreement,
whenever a payment of principal becomes due on a day which is not a
Business Day, the maturity of the Liabilities shall be extended to the next
succeeding Business Day and interest shall accrue on such Liabilities at
the applicable rate during the extension.
2.4. Confirmation of Borrower's Liabilities. Each and every statement of
account transmitted by Bank to Borrower hereunder, whether in person, or by
ordinary mail or otherwise, shall be final, conclusive and binding upon Borrower
in all respects as to all loans, fees, interest, charges, payments, receipts,
balances, Collateral and all other matters reflected therein unless Borrower,
within fifteen (15) days after the mailing thereof, shall give notice to Bank in
writing of all objections to any such statement of account specifying those
items considered by Borrower to be in dispute. Borrower agrees that its failure
to specify items in dispute within the foregoing fifteen (15) day period shall
operate as a waiver of its rights to do so at a later time.
2.5. Late Charge. If any of the payments under the Note shall become
overdue for a period of ten (10) days, Borrower shall pay the Bank a "late
charge" of five percent (5%) of the monthly interest payment then past due.
ARTICLE 3.
SECURITY INTEREST
3.1. Grant of Security Interest and Assignment of Accounts.
3.1.0.1. To secure the payment to the Bank of Borrower's Liabilities,
and to secure performance of all of its obligations under this Agreement,
Borrower hereby grants to the Bank a security interest in all of Borrower's
presently owned and hereafter acquired Accounts, Chattel Paper, Contracts,
Contract Rights, Documents, Equipment (including, but not limited to,
machinery, equipment, fixtures, office equipment and furniture, and motor
vehicles), Assets, General Intangibles (including, but not limited to,
goodwill, trademarks, tradenames, trade styles, patents, copyrights and
telephone numbers and listings), Goods, Instruments and Inventory and all
accessions thereto, replacements thereof, all products and cash and
non-cash Proceeds of the same (collectively, the "Collateral"), and
Borrower hereby assigns, transfers and sets over to the Bank all of its
presently owned and hereafter acquired Accounts and Proceeds thereof. The
security interest of the Bank in all Collateral shall be a first lien
security interest. Borrower agrees that the aforesaid grant of security
interest is intended as a contemporaneous exchange for value given to
Borrower.
3.1.0.2. The right to Proceeds provided for above does not, and shall
not be interpreted to, constitute authorization or consent by the Bank to
any disposition of any Collateral. This Agreement and the security interest
granted herein shall stand as general and continuing security for all
Liabilities and may be retained by the Bank until all Liabilities have been
satisfied in full; provided, however, that this Agreement shall not be
rendered void by the fact that no commitment by the Bank to make Advances
to Borrower exists as of any particular date, but shall continue in full
force and effect until all Liabilities have been satisfied in full and
neither party hereto has any obligation to the other under any of the Loan
Documents.
3.1.0.3. As additional security for the Liabilities, Borrower conveys,
assigns and grants a security interest to the Bank in and to all present
and future files, books, ledgers, records, bills, invoices, receipts,
deeds, certificates or documents of ownership, warranties, bills of sale
and all other data and data storage systems and media pertaining to any of
the Collateral.
3.2. Future Advances. The Liabilities secured hereby include all future
advances, including payments on guarantees, made by the Bank at any time or
times to or for the benefit of Borrower, whether obligatory or optional,
including all costs, expenses, court costs and reasonable attorneys' fees
incurred in the collection of the Liabilities and/or the Collateral, or for the
establishment, maintenance or enforcement of the Bank's security interest
therein.
3.3. Additional Security. As additional Collateral to secure the
Liabilities, Borrower grants to the Bank a security interest in all of
Borrower's present and future deposits or other monies due from instruments,
documents, policies and certificates of insurance, securities, goods, accounts
receivable, chooses in action, chattel paper, currency, property and the
proceeds thereof, owned by Borrower or in which it has an interest, now or
hereafter in the possession or control of the Bank or in transit by mail or
carrier to or from the Bank or in the possession of any other person acting in
the Bank's behalf, without regard to whether the Bank received the same in
pledge, for safekeeping, as agent for collection or transmission or otherwise,
or whether the Bank has conditionally released the same. The property described
in this paragraph shall constitute part of the Collateral for all purposes under
this Agreement.
3.4. Perfection of Security Interest. Borrower shall execute and deliver to
the Bank concurrently with the execution of this Agreement, and at any time or
times hereafter at the request of Bank all assignments, certificates of title,
conveyances, assignment statements, financing statements, renewal financing
statements, security agreements, affidavits, notices and all other agreements,
instruments and documents that the Bank may reasonably request, in form
satisfactory to the Bank, and shall take any and all other steps reasonably
requested by the Bank, in order to perfect and maintain the security interests
and liens granted herein by Borrower to the Bank and in order to fully
consummate all of the transactions contemplated herein and under this Agreement.
3.5. Power of Attorney. Borrower does hereby irrevocably make, constitute
and appoint the Bank and any of its officers, employees or agents as the true
and lawful attorneys of Borrower with power to
3.5.0.1. sign the name of Borrower on any financing statement, renewal
financing statement, notice or other similar document which, in the Bank's
opinion, must be filed in order to perfect or continue perfected the
security interests granted in this Agreement;
3.5.0.2. upon an Event of Default, receive, endorse, assign and
deliver, in the name of Borrower or in the name of the Bank, all checks,
notes, drafts and other instruments relating to any Collateral including
but not limited to receiving, opening and properly disposing of all mail
addressed to Borrower concerning Accounts;
3.5.0.3. upon an Event of Default, sign the name of Borrower on any
invoice or ▇▇▇▇ of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, notices of assignment,
verifications of Accounts and notices to Account Debtors, including, but
not limited to, notices to Account Debtors advising them to make payments
on Accounts directly to the Bank;
3.5.0.4. upon an Event of Default, take or bring at Borrower's cost,
in its name or in the name of the Bank, all steps, actions and suits deemed
by Bank necessary or desirable to effect collections of Accounts, to
enforce payment of any Account, to settle, compromise, sell, assign,
discharge or release, in whole or in part, any amounts owing on Accounts,
to prosecute any action or proceeding with respect to Accounts, to extend
the time of payment of any and all Accounts, and to make allowances and
adjustments with respect thereto;
3.5.0.5. upon an Event of Default, secure credit in the name of
Borrower or in the name of the Bank; and
3.5.0.6. do all other things necessary to carry out this Agreement.
Neither the Bank nor any attorney will be liable for any act of commission
(other than an act of willful misconduct by the Bank) or omission nor for any
error of judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable so long as any of the Liabilities remain unpaid.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, and to make the Loan
provided for herein, Borrower represents and warrants to the Bank that:
4.1. Organization, Qualification of Borrower.
4.1.0.1. Borrower is a Pennsylvania corporation duly organized,
validly subsisting and in good standing under the laws of the Commonwealth
of Pennsylvania.
4.1.0.2. Borrower is duly licensed or qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in
which the nature of the business transacted by it and the character of the
property owned or leased by it make such licensing or qualification
necessary and where the failure to be so licensed or qualified is material
to the business of Borrower.
4.1.0.3. Borrower has no subsidiaries.
4.1.0.4. Borrower is not a member of any partnership or joint venture.
4.1.0.5. Borrower is not affiliated, by stock ownership or otherwise,
with any business entity.
4.1.0.6. Except as set forth on Schedule 4.1.0.6 hereof, Borrower has
never conducted business under or otherwise used any fictitious names or
trade names.
4.2. Authority, Authorization
4.2.0.1. Borrower has the power to execute, deliver and perform the
Loan Documents to which it is a party, and to borrow under this Agreement
and the Note.
4.2.0.2. Borrower has taken all necessary action to authorize the
borrowings provided for in this Agreement and the execution, delivery and
performance of the Loan Documents to which Borrower is a party.
4.2.0.3. No consent of any other party (including stockholders of
Borrower) and no consent, license, approval or authorization of, or
registration or declaration with, any governmental authority, bureau or
agency is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or any Loan Documents to which
Borrower is a party.
4.3. Enforceability
4.3.0.1. This Agreement has been duly and validly executed by Borrower
and constitutes a legal, valid and binding contract of Borrower,
enforceable in accordance with its terms, except as its enforceability may
be limited by bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights.
4.3.0.2. All other Loan Documents, when executed and delivered to the
Bank pursuant to the terms of this Agreement or those Loan Documents, will
be legal, valid and binding obligations enforceable in accordance with
their terms and the terms of this Agreement, except as the enforcement of
any of them may be limited by bankruptcy, insolvency or other similar laws
of general application relating to or affecting the enforcement of
creditors' rights.
4.4. Conflicts. The execution, delivery and performance of the Loan
Documents to which Borrower is a party will not conflict with, result in a
breach of, or constitute a default under any provision of:
4.4.0.1. to the knowledge of Borrower, any existing law or regulation
or order of any court, governmental authority, bureau or agency having
jurisdiction;
4.4.0.2. the Articles of Incorporation of Borrower; or
4.4.0.3. any agreement or instrument to which Borrower is a party or
which purports to be binding upon it or any of its assets.
4.5. Liens. The execution, delivery and performance of the Loan Documents
to which Borrower is a party will not result in the creation or imposition of
any lien on any of its assets pursuant to the provisions of any agreement or
instrument to which Borrower is a party or which purports to be binding upon it
or any of its assets other than such liens as are created by the Loan Documents
themselves.
4.6. Litigation.
4.6.0.1. There is no litigation or governmental proceeding pending or,
to the knowledge of Borrower, threatened which is reasonably likely to:
4.6.0.1.1. have a material adverse effect on the financial
condition or business of Borrower so as to impair the ability of
Borrower to perform this Agreement or any of the Loan Documents; or
4.6.0.1.2. prohibit, restrict or limit payment of the Note or
performance of this Agreement by Borrower.
4.6.0.2. Borrower is not in default with regard to any order of any
court or governmental authority.
4.7. Compliance with Laws. To the best of Borrower's knowledge, Borrower's
business is in compliance in all material respects with all laws, ordinances and
other governmental regulations; there is no outstanding notice of any
uncorrected violation of any such law, ordinance or governmental regulation;
Borrower has all permits, licenses, approvals and other authorizations from
federal, state and local authorities that are necessary for the conduct of its
business as now conducted or intended to be conducted in the future, and, to the
best of Borrower's knowledge, no claim is pending or threatened to revoke any of
said permits, licenses, approvals and other authorizations or to declare them
invalid in any respect.
4.8. Taxes
4.8.0.1. Borrower has filed or caused to be filed all tax returns
(including, without limitation, those relating to Federal and state income
taxes) required to be filed and has paid all taxes shown to be due and
payable on those returns or on any assessments made against it (other than
those being contested in good faith by appropriate proceedings for which
adequate reserves have been provided on its books). Borrower does not know
of any proposed additional tax assessment against it not adequately covered
by reserves.
4.8.0.2. The reserves and provisions for taxes on the books of
Borrower are adequate for all open years and for its current fiscal period.
4.8.0.3. No tax liens have been filed against the assets of Borrower,
and no claims are being asserted with respect to such taxes which, if
adversely determined, would have a material adverse effect upon the
financial condition, business or operations of Borrower.
4.9. Financial Condition. All balance sheets, profit and loss statements,
and other financial statements of Borrower which have heretofore been delivered
to the Bank, and all financial statements and data of Borrower which will
hereafter be furnished to Bank, are or will be (when furnished) true and correct
and do or will (when furnished) present fairly, accurately and completely the
financial position of Borrower and the results of its operations as of the dates
and for the periods for which the same are furnished. All such financial
statements of Borrower have been and will be prepared in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. Borrower does not possess and will not possess any "loss contingency" (as
that term is defined in Financial Accounting Standards Board, Statement of
Financial Accounting Standards No. 5 - "FASB 5") which is not accrued,
reflected, or reserved against in its audited balance sheet or disclosed in the
footnotes to such audited balance sheet. There has been no material adverse
change in the business, properties, operations or condition (financial or
otherwise) of Borrower since the date of the financial statements which were
most recently furnished by Borrower to the Bank. No event has occurred which
could reasonably be expected to interfere with the normal
business operations of Borrower, except as disclosed in writing to Bank
heretofore or concurrently herewith.
4.10. Accounts. Borrower represents and warrants that:
4.10.0.1. it is now and at all times hereafter shall be the absolute
owner, free and clear of all liens, encumbrances and security interests,
except the liens and security interests granted or permitted herein and the
potential liens of any state government to enforce possible sales tax
liabilities, of indefeasible title to its Accounts; and
4.10.0.2. every Account described in the certifications delivered in
accordance with Section 6.1(a)(iii) hereof will be a good and valid Account
representing an undisputed bona fide indebtedness of a debtor to Borrower
and there are and will be no defenses, setoffs, contraclaims, or
counterclaims of any nature whatsoever against any such Account; and no
agreement under which any deduction, discount, allowance or special terms
of payment may be claimed, has been or will be made with any Account Debtor
except as shown on the statement or invoice furnished to the Bank with
reference thereto.
4.11. Assets. Borrower represents and warrants that;
4.11.0.1. it is now, and at all times hereafter shall be, the sole
owner, free and clear of all liens, encumbrances and security interests,
except the liens and security interests granted or permitted herein, of
indefeasible title to its Assets; and
4.11.0.2. except for depreciation and obsolescence, Borrower will keep
its Assets in good repair and maintained in a state of good operating
efficiency, and will make all necessary repairs, replacements of and
renewals so that the value and operating efficiency thereof shall at all
times be maintained and preserved in a manner consistent with good
management.
4.12. Collateral. Borrower represents and warrants that:
4.12.0.1. it is the lawful owner of all Collateral and has the right
to pledge, sell, assign and transfer the same and grant a security interest
therein; no Collateral has been or will be pledged, sold, assigned or
transferred to any person, firm or corporation, other than the Bank or in
any way encumbered and Borrower will warrant and defend all Collateral
against the claims and demands of all persons, firms or corporations;
4.12.0.2. all representations made by Borrower to the Bank with
reference to the description, content or valuation of any and all of the
Collateral are true and correct; the sale of all merchandise which gives
rise to an Account is an absolute sale and not on consignment or approval
and all such merchandise shall have been the absolute property of Borrower,
free of lien, and Borrower does not have the same on consignment or
approval; all services which give rise to an Account have actually been
performed; all invoices, records, notes, documents of title, shipping, and
delivery receipts and any and all other instruments, memoranda and
documents presented or delivered to the Bank shall be valid, genuine and
not subject to any dispute or defense;
4.12.0.3. as of the execution of this Agreement, no other financing
agreements are in force and no claim of any security interest, lien or
encumbrance in or on the Collateral is on file in any public office;
4.12.0.4. there is no fact that Borrower has not disclosed to the Bank
in writing that could materially adversely affect the properties, business
or financial condition of Borrower or of the Collateral or the Loan
provided for in this Agreement;
4.12.0.5. this Agreement, upon the filing of financing statements in
the appropriate governmental offices and payment of all fees associated
therewith, will create in favor of the Bank valid and perfected first lien
security interests in the Collateral; and
4.12.0.6. the Collateral and all of the records, ledger sheets,
correspondence and invoice documents and instruments, relating to or
evidencing the Collateral shall be kept on the premises described in
Section 9.14 of this Agreement, such records to be kept in appropriate
containers in safe places. The Bank at all reasonable times shall have full
access to and the right to audit the Borrower's books and records.
4.13. Contingent Liabilities. There are no suretyship agreements,
guarantees or other contingent liabilities of Borrower that are not disclosed in
the financial statements described in Article 6, except such liabilities as are
created by the Loan Documents.
4.14. Trademarks, Tradenames, Patents and Copyrights. All trademarks,
tradenames, patents and copyrights owned by Borrower, as well as all
applications for any of the foregoing, are described in Schedule 4.8 attached
hereto and made a part hereof.
4.15. ERISA. No Reportable Event has occurred with respect to any Plan.
Each Plan has been maintained, in all material respects, in accordance with its
terms and with all provisions of ERISA applicable thereto. Borrower has not
incurred any liability to the PBGC.
4.16. Operations of Borrower. All operations of Borrower have been carried
on in accordance with all applicable laws, statutes, ordinances, rules and
regulations, including, but not limited to, those relating to degradation of the
environment. No investigation by any governmental authority, federal, state or
local, is pending to the knowledge of Borrower, or threatened against Borrower.
4.17. Labor. Borrower is not involved in any strike, lock-out, boycott or
any other labor trouble, similar or dissimilar, nor is it involved in labor
negotiations. Borrower is not a party to any collective bargaining agreement.
4.18. COBRA Continuation Coverage. Borrower provides COBRA Continuation
Coverage under group health plans (if any) for separating employees in
accordance with the provisions of Section 162(k) of the Code.
4.19. Environmental Representations, Obligations and Covenants.
4.19.0.1. Borrower represents and warrants that it has conducted all
appropriate inquiry and does not know or have reason to know of any
activity at any real property leased by Borrower (collectively, the "Real
Property") which has been conducted, or is being conducted, except in
compliance with all statutes, ordinances, regulations, orders and
requirements of common law concerning (i) those activities, (ii) repairs or
construction of any improvements, (iii) handling of any materials, (iv)
discharges to the air, soil, surface water or ground water, and (v) storage
treatment or disposal of any waste at or connected with any activity at the
Real Property ("Environmental Statutes").
4.19.0.2. Borrower shall cause all activities at the Real Property to
be conducted in compliance with all Environmental Statutes. Borrower shall
cause all permits, licenses or approvals to be obtained, and shall cause
all notifications to be made, as required by Environmental Statutes.
Borrower shall, at all times, cause compliance with the terms and
conditions of any such approvals or notifications.
4.19.0.3. Borrower represents and warrants that, to the best of its
knowledge, no contamination is present at the Real Property. Borrower shall
not permit contamination of the Real Property by hazardous substances.
Borrower shall cause hazardous substances to be handled on the Real
Property in a manner which will not cause an undue risk of the
contamination of the Real Property.
4.19.0.4. For purposes of this section, the term "contamination" shall
mean the uncontained presence of hazardous substances at the Real Property,
or arising from the Real Property, which may require remediation under any
applicable law.
4.19.0.5. For purposes of this section, "hazardous substances" shall
mean "hazardous substances" or "contaminants" as defined pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601-9657, as amended by the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. ▇▇. ▇▇-▇▇▇, ▇▇▇ ▇▇▇▇. ▇▇▇▇ (▇▇▇. 17,
1986), "regulated substances" within the meaning of subtitle I of the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6991-699li, as
amended by the Superfund Amendments and Reauthorization Act of 1986 Pub. L.
▇▇. ▇▇-▇▇▇, ▇▇▇ ▇▇▇▇. ▇▇▇▇ (▇▇▇. 17, 1986), and "hazardous substances" or
"contaminants" as defined pursuant to the Pennsylvania Hazardous Sites
Cleanup Act, Pa. Stat. ▇▇▇. tit. 35, Section 6020.101 to .1305 (▇▇▇▇▇▇
Supp. 1989), or any other substances which may be the subject of liability
pursuant to Sections 316 or 401 of the Pennsylvania Clean Streams Law, Pa.
Stat. ▇▇▇. tit. 35, Section 691.1 to .1001 (▇▇▇▇▇▇ 1977 and Supp. 1989).
4.19.0.6. Borrower represents and warrants that it has conducted all
appropriate inquiry and does not know or have any reason to know of any:
4.19.0.6.1. polychlorinated biphenyls or substances containing
polychlorinated biphenyls present on the Real Property,
4.19.0.6.2. asbestos or materials containing asbestos present on
the Real Property, or
4.19.0.6.3. urea formaldehyde foam insulation on the Real
Property.
4.19.0.7. Borrower represents and warrants that it does not know or
have reason to know of any investigation of the Real Property for presence
of radon gas or the presence of the radioactive decay products of radon.
4.19.0.8. Borrower represents and warrants that no tanks presently or
formerly used for the storage of any gas, chemical or petroleum product
above or below ground are present at the Real Property. Borrower shall
neither install nor permit to be installed any temporary or permanent tanks
for the storage of any liquid or gas above or below ground except as in
compliance with the other provisions of this Section.
4.19.0.9. Upon the occurrence of an Event of Default and acceleration
of payment of all obligations of Borrower under Article 8 hereof, the Bank
may, at its
discretion, commission an investigation at Borrower's expense of (i)
compliance at the Real Property with Environmental Statutes, (ii) the
presence of hazardous substances or contamination at the Real Property,
(iii) the presence at the Real Property of material which is the subject of
subparagraph 4.19.06 of this section, (iv) the presence at the Real
Property of radon, or (v) the presence at the Real Property of tanks which
are the subject of subparagraph 4.19.0.8 of this Section.
4.19.0.10. In connection with any investigation pursuant to
subparagraph 4.19.0 of this paragraph, Borrower shall comply with any
reasonable request for information made by the Bank or its agents in
connection with any such investigation. Borrower represents and warrants
that any response to any such request for information will be full and
complete.
4.19.0.11. Borrower will assist the Bank and its agents to obtain any
records pertaining to the Real Property or to Borrower in connection with
an investigation pursuant to subparagraph 4.19.0.9 of this Section.
4.19.0.12. Borrower will afford the Bank and its agents access to all
areas of the Real Property at reasonable times and in reasonable manners in
connection with any investigation pursuant to subparagraph 4.19.0.9 of this
Section.
4.19.0.13. No investigation commissioned pursuant to subparagraph
4.19.0.9 shall have any effect upon the representations or warranties made
by Borrower to the Bank under this Section.
4.19.0.14. Borrower hereby agrees to indemnify and to hold harmless
the Bank of, from and against any and all expenses, loss or liability
suffered by the Bank by reason of Borrower's breach of any of the
provisions of this Section including (but not limited to) (i) any and all
expenses that the Bank may incur in complying with the Environmental
Statutes; (ii) any and all costs that the Bank may incur in studying or
remedying any contamination of the Real Property; (iii) any and all fines,
penalties or other sanctions (including a voiding of any transfer of the
Real Property) assessed upon the Bank by reason of failure of Borrower to
have complied with Environmental Statutes; (iv) any and all loss of value
of the Real Property by reason of: (A) failure to comply with Environmental
Statutes; (B) the presence on the Real Property of any hazardous
substances; (C) the presence on the Real Property of any materials which
are the subject of this section; (D) the presence on the Real Property of
radon; or (E) the presence on the Real Property of any tank; and (v) any
and all legal and professional fees and costs incurred by the Bank in
connection with the foregoing. This indemnification shall survive payment
of the Note.
ARTICLE 5
CONDITIONS OF LENDING
The obligation of the Bank to make any Advances is subject to the accuracy
of the representations and warranties in Article 4 of this Agreement as of the
date of this Agreement, the performance by Borrower of its obligations to be
performed under this Agreement before the date of each of the Advances, and the
satisfaction of the following conditions:
5.1. Loan Documents. Borrower shall have executed and delivered or caused
to be executed and delivered to the Bank all Loan Documents.
5.2. Representations, Warranties. The representations and warranties
contained in Article 4 of this Agreement shall be true at and as of the date of
the making of any Advance with the same effect as if made at and as of such
time, except to the extent that the facts upon which such representations and
warranties are based may be changed in the ordinary course by the transactions
permitted or contemplated by this Agreement.
5.3. Defaults. There shall exist no Default or condition which, with the
giving of notice or the passage of time or both, would result in an Event of
Default upon consummation of any Advance.
5.4. Certificates, Supporting Documents. The Bank shall have received:
5.4.0.1. Articles of Incorporation and By-Laws of Borrower;
5.4.0.2. resolutions and incumbency certificate from the Borrower
authorizing the execution, delivery and performance of the Loan Documents;
5.4.0.3. a certificate of the Secretary of State of the jurisdiction
of incorporation of Borrower as to the good standing of Borrower dated no
more than ten (10) days prior to the date of this Agreement; and
5.5. Collateral Security Documents. Borrower shall have delivered or shall
have caused to be delivered to the Bank all Collateral security documents as
shall be required by the Bank. Financing statements describing the Collateral
shall have been filed or readied for filing in each jurisdiction and in each
office as shall have been required by the Bank.
5.6. Insurance. Borrower shall have provided the Bank with certificates of
insurance evidencing Borrower's compliance with the requirements of Section 6.8
hereof.
5.7. Landlord's Waiver. Borrower shall have delivered or caused to be
delivered to the Bank a Landlord's Waiver in form and substance satisfactory to
Bank and its counsel duly executed by the landlord for the location listed in
Section 9.13 of this Agreement; provided, however, that it shall not be an event
of default hereunder or otherwise limit Borrower's ability to receive Advances
hereunder if Borrower uses its commercially reasonable efforts to obtain same
and is unable to as a result of the landlord's refusal to execute same.
ARTICLE 6.
AFFIRMATIVE COVENANTS
On and after the date of this Agreement and so long as the Note remains
outstanding and unpaid in whole or in part, or so long as the credit
availability evidenced thereby remains in effect, whichever is longer, Borrower
will observe the following covenants unless the Bank shall otherwise consent in
writing:
6.1. Financial Statements.
6.1.1. Borrower will furnish to the Bank the financial information
described below:
6.1.1.1. Annual Statements. As soon as available, and in any event not
later than 90 days after the close of each fiscal year of Borrower
beginning with the fiscal year ending June 30, 1999, the annual audited
financial report of Borrower containing a balance sheet of Borrower as of
the end of such fiscal year and related statements of income, shareholders'
equity and changes in financial position of Borrower for such fiscal year,
setting forth in each case in comparative form the corresponding figures of
the previous annual audit report, all in reasonable detail, prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, and audited without
exception or qualification by independent certified public accountants
selected by Borrower and satisfactory to the Bank.
6.1.1.2. Quarterly Statements. As soon as available, and in any event
not later than 45 days after the close of each three-month period of each
fiscal year of Borrower, a 10-Q Report including, balance sheet and profit
and loss statement of Borrower as of the end of such quarter and related
statements of income, shareholders' equity and changes in financial
position of Borrower for such three-month period and for the period from
the beginning of the current fiscal year to the end of such three-month
period, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the preceding fiscal year, all in
reasonable detail, prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, and compiled by an independent certified public accountant or the
chief financial officer of Borrower.
6.1.1.3. Tax Returns of Borrower. As soon as available, and in any
event not later than 30 days after the filing thereof, Borrower shall
furnish copies of its tax return, if any, to the Bank during each year of
the Loan.
6.1.1.4. Borrower's Certificate. Concurrently with the delivery of the
financial statements referred to in Section 6.1 a certificate of the
principal financial officer of Borrower, to the effect that:
(A) no Event of Default or Default has occurred and is continuing
under this Agreement, or, if any such Event of Default or Default
exists, specifying its nature, the period of its existence and the
curative action Borrower has taken or proposes to take, and
(B) Borrower is not in default under any material agreement to
which it is a party, and
(C) from time to time, such additional financial and other
information as the Bank may request, and
(D) to the best of his knowledge that the certification is valid,
accurate and prepared in accordance with all Bank requirements.
6.2. Maximum Debt to Net Tangible Assets. During the term of the Loan,
Borrower will maintain a ratio of Maximum Debt to Net Tangible Assets not to
exceed 1.5:1.00. Borrower's compliance with this covenant shall be verified at
the close of each fiscal quarter of Borrower in accordance with generally
accepted accounting principles consistently applied.
6.3 Minimum Working Capital. During the terms of the Loan, Borrower will
maintain a minimum working capital of $1,500,000.00. Borrower's compliance with
this covenant shall be verified at the close of each fiscal quarter of Borrower
in accordance with generally accepted accounting principles consistently
applied.
6.4 Liabilities and Total Liabilities. Borrower will pay and discharge, at
or before their maturity, all of its respective obligations and liabilities
(including, without limitation, tax liabilities), except those which may be
contested in good faith, and maintain in accordance with generally accepted
accounting principles and practices adequate reserves for any of the same.
6.5 ERISA. Borrower will comply in all material respects with ERISA.
Borrower will furnish to the Bank, as soon as possible and in any event within
thirty (30) days after Borrower knows or has reason to know that any Reportable
Event has occurred with respect to any Plan or that the PBGC or Borrower has
instituted or will institute proceedings under Title IV of ERISA to terminate
any Plan, a certificate of the chief financial officer of Borrower setting forth
details as to such Reportable Event and the action which Borrower proposes to
take with respect thereto, together with a copy of any notice of such Reportable
Event that may be required to be filed with the PBGC, or any notice delivered by
the PBGC evidencing its intent to institute such proceedings or any notice to
the PBGC that such Plan is to be terminated, as the case may be. For all
purposes of this Section 6.5, Borrower shall be deemed to have all knowledge or
knowledge of all facts attributable to the administrator of such Plan.
6.6. Notice of Default, Labor Troubles, Litigation. Borrower will promptly
give notice in writing to the Bank of the occurrence of any Event of Default or
Default under this Agreement, or of any event of default under any instrument or
other agreement of Borrower, or of the occurrence of any strike, lock-out,
boycott or any other labor dispute affecting Borrower and any dispute between
Borrower or any other party, if such litigation, proceeding or dispute might
substantially interfere with the normal business operations of Borrower or, if
resolved other than in the favor of Borrower, such litigation, proceeding or
dispute would have a material adverse effect on Borrower's financial condition.
6.7. Corporate Existence, Properties. Borrower will maintain, (a) its
corporate existence, its qualification to do business and its good standing in
each jurisdiction in which qualification is necessary for the proper conduct of
its businesses, (b) all licenses, permits and other authorizations necessary for
the ownership and operation of its properties and businesses, and (c) its
properties in good repair, working order and condition and to make all necessary
or appropriate repairs, renewals, replacements and substitutions, so that the
efficiency of all such property shall at all times be properly preserved and
maintained.
6.8. Insurance. Borrower will maintain, with respect to all its properties,
Assets and businesses, insurance with financially sound and reputable insurers
against loss or damage of the kinds customarily insured against by corporations
or other business entities of established reputation engaged in the same or
similar business and similarly constituted, in such types and amounts as are
customarily carried under similar circumstances by such other corporations or
other business entities, and/or as are required by the Bank, including fire and
extended coverage insurance on all insurable assets which will contain standard
loss payee clauses in favor of the Bank, will be in an amount not less than 80%
of the insurable value of such assets or 100% of the Loan, whichever is greater,
and will provide for thirty-days' notice of cancellation to the Bank. Borrower
shall provide the Bank with a certificate of insurance prior to settlement.
6.9. Policies; Proceeds. Borrower shall deliver to the Bank on demand
certified copies of all such insurance policies (or, at the option of the Bank,
certificates evidencing coverage) covering the risks set forth in Section 6.8
above, with loss payable clauses in a form satisfactory to the Bank naming the
Bank as payee and co-insured. All proceeds payable under any of said policies
shall be payable in all events to the Bank, but at the option of the Bank any
such proceeds may be released to Borrower. Borrower hereby grants to the Bank a
continuing security interest in and to all of said policies and the proceeds
thereof to secure the repayment of the Liabilities and agrees that the Bank
shall have the right, in the name of Borrower or in the name of the Bank, to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be made thereunder, and to execute any and
all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any such claims under any such insurance policies.
6.10. Books, Records, Audits. Borrower will maintain accurate and complete
records and books of account with respect to all its operations in accordance
with generally accepted accounting principles consistently applied. Borrower
will permit, at all reasonable times and upon reasonable prior notice, officers
and representatives of the Bank to examine and make copies from its books and
records, and to discuss the affairs, finances and accounts of Borrower with its
officers and public accountants, to visit and inspect its real and personal
property. Upon the occurrence of an Event of Default and so long as the same
remains uncured, the Bank may perform audits at any time upon reasonable notice.
6.11. Intentionally Deleted.
6.12. Taxes, Etc. Borrower will pay when due all taxes, assessments and
charges imposed upon it or its property or that it is required to withhold and
pay over, except where contested in good faith and where adequate reserves have
been set aside. Upon the Bank's request, Borrower shall furnish the Bank with
proof satisfactory to the Bank of the making of the payment or deposit of all
Federal, state and local withholding taxes required of Borrower by applicable
law; such proof shall be furnished within five (5) days after the due date of
each such payment or deposit established by law.
6.13. Compliance with Laws. Borrower will comply with all laws and
regulations applicable to it in the operation of its business. Borrower will
comply with all of its obligations under Article 4.
6.14. Banking Relationship. Borrower, at all times when the Note remains
outstanding in whole or in part, will maintain the Bank as its primary bank of
account.
6.15. Financial Condition. Borrower and Guarantor will immediately give the
Bank written notice of any material adverse change in its financial condition,
operations or collateral from that described in the most recent financial
statements of Borrower and Guarantor previously delivered to the Bank.
6.16. Use of Proceeds. Borrower shall use the proceeds of the Loan for
working capital and short-term borrowing purposes.
6.17. Intentionally Deleted.
6.18. Expenses. Borrower shall pay all costs and expenses including but not
limited to attorney's fees and other costs of preparation and filing concerning
the Loan and other documents as required by law or deemed necessary by the Bank
and shall reimburse the Bank for any costs or expenses incurred by Bank in
relation to the above. Such costs, expenses and reimbursements shall be paid
simultaneously with the execution of this Agreement and expenses thereafter
incurred shall be paid within fifteen (15) days after notice by the Bank.
ARTICLE 7.
NEGATIVE COVENANTS
On and after the date of this Agreement and so long as the Note remains
outstanding and unpaid, in whole or in part, or so long as the credit
availability evidenced thereby remains in effect, whichever is longer, Borrower
will observe the following covenants unless the Bank shall otherwise consent in
writing:
7.1. Debt. Borrower will not create, incur, assume, guarantee or in any
manner become or remain liable with regard to any debt, except:
7.1.0.1. Debt existing on the date of this Agreement and disclosed in
writing to Bank (excluding debt evidenced by the Note);
7.1.0.2. The Note; and
7.1.0.3. Debt with regard to accounts payable and other extensions of
trade credit incurred in the ordinary course of business and which is not
more than 60 days overdue, unless Borrower is contesting, in good faith and
by appropriate proceedings, its obligation to make payment, and has
established such reserve with regard to the contested obligation as its
certified public accountants shall consider adequate.
7.2. Liens. Borrower will not create, incur, assume or suffer to exist any
lien upon any of its existing or future, tangible or intangible, real, personal
or mixed property, except:
7.2.0.1. Pledges or deposits under workmen's compensation laws,
unemployment compensation laws or other similar laws;
7.2.0.2. Good faith deposits in connection with bids, tenders,
contracts (other than for the purpose of borrowing money or obtaining
credit) and leases to which Borrower is a party, including rent security
deposits;
7.2.0.3. Deposits to secure public or statutory obligations of
Borrower, surety or appeal bonds to which Borrower is a party, payment of
contested taxes of Borrower, or payment of import duties of Borrower;
7.2.0.4. Any lien which is imposed by law, e.g., those of carriers,
materialmen, mechanics and warehousemen, if payment secured by that lien is
not yet due, or if the validity or the amount of payment is being contested
in good faith by appropriate proceedings for which adequate reserves have
been established;
7.2.0.5. Any lien arising from a judgment or award against Borrower
with regard to which Borrower is prosecuting an appeal or proceedings for
review, and has obtained a stay of execution pending such appeal or
proceedings for review;
7.2.0.6. Any lien for taxes, assessments or other governmental charges
or levies not yet subject to penalties for nonpayment, or the validity or
amount of which is being contested by appropriate legal proceedings, and
with regard to which adequate reserves have been established; and
7.2.0.7. Any lien created for the sole purpose of extending, renewing
or refunding any lien permitted under paragraphs 7.2.0.1. through 7.2.0.6.,
if such lien is limited to all or part of the same property covered by the
original lien, and if the amount of the debt secured by the lien does not
exceed the amount of debt secured by the lien at the time of extension,
renewal or refunding.
7.3. Endorsements, Etc. Borrower shall not endorse, guarantee or become
surety for the obligations of any person, firm or corporation, except Borrower
may endorse checks in the ordinary course of business.
7.4. Change in Business; Mergers, Consolidations. Borrower will not make
any substantial change in the nature of the business of Borrower, or merge or
consolidate with any other corporation.
7.5 Intentionally Deleted.
7.6. Subsidiaries. Borrower will not create any new subsidiaries.
7.7. Contingent Liabilities. Borrower will not become or remain liable,
directly or indirectly, in connection with the obligations, stock or dividends
of any person, firm, corporation or other entity, whether by guarantee,
endorsement, agreement to supply or advance funds, agreement to maintain working
capital or net worth, agreement to purchase or repurchase goods or services
whether or not such goods or services are actually acquired, or otherwise, other
than in connection with the Loan, except that Borrower may endorse negotiable
instruments for collection in the ordinary course of its business.
7.8. Sales and Lease-Backs. Borrower will not enter into any arrangement,
directly or indirectly, with any Person, firm, corporation or other entity,
whereby any of them shall sell or transfer any property, real or personal,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which the lessee intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
7.9. Limitation of Leases. Borrower will not incur, create or assume any
commitment to make any direct or indirect payment, whether as rent or otherwise,
under any lease, rental or other arrangement for the use or hire of property of
any person, firm, corporation or other entity, if, after giving effect thereto,
the aggregate amount of such payments to be made by Borrower under all such
leases, rentals or other arrangements would be in excess of $200,000 (excluding
leases required to be capitalized under Financial Accounting Standards Board,
Statement of Accounting Standards No. 13) during any fiscal year of Borrower.
7.10. Voluntary Prepayments, Modification of Debt Instruments. Except in
the ordinary course of business, Borrower will not (a) prepay, purchase, redeem
or otherwise acquire for value prior to the stated maturity thereof all or any
part of any indebtedness for borrowed money (other than indebtedness evidenced
by the Note, or any other indebtedness to the Bank, subject to any applicable
prepayment penalty) or (b) amend, modify or supplement in any way, or request
any waiver of the provisions of, any instrument providing for or evidencing any
indebtedness for borrowed money or constituting the deferred purchase price of
property or assets.
7.11. Removal and Protection of Property. Except as otherwise expressly
permitted herein, Borrower will not remove (other than in the ordinary course of
business) any Assets, Equipment, Goods, Inventory, or General Intangibles (as
defined in the Pennsylvania Uniform Commercial Code) from the place of business
where presently located, nor permit the value of any property to be impaired.
7.12. Transactions with Affiliates. Borrower shall not, except as otherwise
expressly permitted by this Agreement, directly or indirectly enter into any
transaction or modify any existing transaction with any Affiliate including,
without limitation, (a) investments in, or loans or advances to, an Affiliate,
(b) the transfer, sale, lease, assignment or other disposition of any assets to
an Affiliate, (c) the merger into or consolidation with or purchase or
acquisition of assets from an Affiliate, or (d) any other transaction directly
or indirectly with or for the benefit of any Affiliate (including, without
limitation, any guarantees or assumptions of obligations of an Affiliate by
Borrower or of Borrower by an Affiliate). The Bank may withhold its consent to
any such transaction with an Affiliate if (i) an Event of Default has occurred
and is continuing, or (ii) such transaction, based upon the reasonable
assumptions of the Bank, could (A) result in a material adverse change in the
business, operations, financial condition or prospects of Borrower, (B) affect
Borrower's ability to repay the indebtedness evidenced by the Note or any other
indebtedness of Borrower to the Bank, (C) prejudice or impair, or result in the
diminution of, any rights of the Bank with respect to the indebtedness evidenced
by the Note or any other indebtedness of Borrower to the Bank or any collateral
pledged to secure such indebtedness, or (D) result in a Default or an Event of
Default hereunder or under the Loan Documents or a default under or with respect
to any other document or instrument evidencing and/or securing the Loan or any
other material obligation of Borrower to any Person.
7.13. Disposition of Assets. Borrower will not liquidate or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, pledge, or
otherwise transfer or dispose of all or any substantial part of its property,
Assets or business other than in the ordinary course of business.
7.14. Disposition of Accounts. Borrower will not sell, discount or
otherwise dispose of its notes, Accounts, Chattel Paper, Documents, General
Intangibles or Instruments (all as defined in the Pennsylvania Uniform
Commercial Code) except to, or with, the Bank.
ARTICLE 8
EVENTS OF DEFAULT, REMEDIES
8.1. Events of Default. Each of the following shall constitute an Event of
Default:
8.1.0.1. Payment. Failure by Borrower to pay the principal of, or
accrued interest on, the Note or any other instrument or obligation of
Borrower to the Bank when such amounts become due, or the failure of
Borrower to pay any other amount payable to the Bank under the Loan
Documents within five (5) days of the date, when such amount becomes due.
8.1.0.2. Representations, Warranties. Any representation or warranty
made by Borrower in the Loan Documents shall prove to be false or
misleading in any material respect as of the date when made.
8.1.0.3. Covenants. Failure by Borrower to observe or perform any
covenants, conditions or provisions applicable to it contained in the Loan
Documents [other than those described in paragraphs 8.1.0.1 and 8.1.0.2
above] provided that such failure shall continue for a period of thirty
(30) days after written notice from the Bank to Borrower.
8.1.0.4. Other Obligations. Borrower defaults in:
8.1.0.4.1. any payment of principal of, or interest on, any
obligations for borrowed money (other than the Note or any such
obligation payable to the Bank), or for the deferred purchase price of
property beyond any grace period provided with regard to such payment,
8.1.0.4.2. the performance of any other material agreement, term
or condition contained in any such obligation or in any agreement
relating to such obligation, or
8.1.0.4.3. the performance of any lease of other contract
material to Borrower's business, if the effect of such default is to
cause, or to permit the holder or holders of such obligation or the
other party to such lease of contract (or trustee on behalf of such
holder or holders or parties) to then cause such obligation to become
due or such lease or contract to be terminated prior to its stated
maturity.
8.1.0.5. Voluntary Bankruptcy. Filing by Borrower of a voluntary
petition in bankruptcy or a voluntary petition or any answer seeking
reorganization, arrangement, readjustment of its debts or for any other
relief under the Bankruptcy Code, or under any other existing or future
federal or state insolvency act or law, or any formal written consent to,
approval of, or acquiescence in, any such petition or proceeding by
Borrower, the application by Borrower for, or the appointment by consent or
acquiescence of, a receiver or trustee of, Borrower or for all or a
substantial part of its property; the making by Borrower of an assignment
for the benefit of creditors.
8.1.0.6. Involuntary Bankruptcy. Filing of any involuntary petition
against Borrower in bankruptcy or seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Bankruptcy
Code, or under any other existing or future federal or state insolvency act
or law; or the involuntary appointment of a receiver or trustee of
Borrower, or for all or a substantial part of the property of Borrower; and
the continuance of any of such events for a period of sixty (60) days
undismissed, unbonded or undischarged.
8.1.0.7. Reportable Event. If (1) any Reportable Event that the Bank
reasonably determines in good faith creates a reasonable possibility of the
termination of any Plan or of the appointment by the appropriate United
States district court of a trustee to administer any Plan shall have
occurred and be continuing 30 days after written notice to such effect
shall have been given to Borrower by the Bank, or (2) any Plan shall be
terminated, or (3) the plan administrator of any Plan shall file with the
PBGC a notice of intention to terminate such Plan, or (4) the PBGC shall
institute proceedings to terminate any Plan or to appoint a trustee to
administer any Plan and such proceedings shall remain undismissed or
unstayed for three (3) business days and if, in any of the cases described
in the foregoing clauses (1) to (4), the Bank further reasonably determines
in good faith that the amount of the unfunded guaranteed benefits (within
the meaning of Title IV of ERISA) resulting upon termination of such Plan
would have a material adverse effect on the financial condition, properties
or operations of Borrower if a lien against the assets of Borrower were to
result under ERISA.
8.1.0.8. Intentionally Deleted.
8.1.0.9. Insecurity. Borrower fails to maintain, in the reasonable
judgment of the Bank, a satisfactory financial condition.
8.2. Acceleration and Termination of Commitments. (a) Upon the occurrence
of an Event of Default specified in Sections 8.1.0.1. through 8.1.0.4. and
8.1.0.7.through 8.1.0.9. of this Agreement, the Bank may:
(i) terminate immediately and irrevocably the unused portions of the
credit availability evidenced by the Note;
(ii) declare the unpaid principal balance of, all accrued, unpaid
interest on, and all other sums payable with regard to, the Note and all
other Liabilities from Borrower to the Bank to be immediately due and
payable whereupon the Note, all such accrued interest and all such
Liabilities shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by Borrower; and
(iii) pursue all other remedies of the Bank provided for in the Loan
Documents as well as those available at law and in equity.
8.2.0.1. Upon the occurrence of an Event of Default specified in
Sections 8.1.0.5. and 8.1.0.6. of this Agreement, the unused portions of
the credit availability evidenced by the Note shall automatically and
immediately terminate and the unpaid principal balance of, all accrued,
unpaid interest on, and all other sums payable with regard to, the Note and
all other instruments of obligation of Borrower to the Bank shall
automatically and immediately become due and payable, in all cases without
any action on the part of the Bank.
8.2.0.2. Upon the occurrence of a monetary default hereunder, the rate
of interest on all of the Note shall be increased to a rate equal to two
percent (2%) above the interest rate payable on the date of default (the
"Default Rate"). Interest at the rates provided for in the Note, or at the
Default Rate, shall continue to accrue at such rate, and continue to be
paid even after default, maturity, acceleration, recovery of judgment,
bankruptcy or insolvency proceeding of any kind until such monetary default
has been cured.
8.3. Right of Set-Off. Upon the occurrence of an Event of Default, the Bank
shall have the right, in addition to all other rights and remedies available to
it, to set-off against the unpaid balance of the Note, any debt owing to
Borrower by the Bank and any funds in any deposit account maintained by Borrower
with the Bank.
8.4. Marshalling.
8.4.0.1. If an Event of Default shall have occurred and be continuing,
the Bank shall not be required to marshal any present or future security
for, or guarantees of, the Liabilities or to resort to any such security or
guarantees in any particular order.
8.4.0.2. Borrower waives, to the fullest extent it lawfully can, any
right it might have to require the Bank to pursue any particular remedy
before proceeding against it, and any right to the benefit of, or to direct
the application of the proceeds of, any Collateral until the Note and all
other Liabilities have been paid in full.
8.5. Cumulative Remedies. The rights and remedies provided in the Loan
Documents are cumulative and not exclusive of any rights or remedies provided by
law or in equity.
ARTICLE 9
MISCELLANEOUS
9.1. Waivers.
9.1.0.1. No failure or delay on the part of the Bank in exercising any
right, power or privilege under the Loan Documents shall operate as a
waiver of any right, power or privilege, except as and to the extent that
the assertion of such right, power or privilege shall be barred by an
applicable statute of limitations.
9.1.0.2. No single or partial exercise of, or abandonment or
discontinuance of steps to enforce, any right, power or privilege under the
Loan Documents shall preclude any other or further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege.
9.1.0.3. BORROWER AND BANK BY THEIR EXECUTION HEREOF DO HEREBY
EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF
ANY KIND WHETHER ARISING OUT OF, UNDER OR BY REASON OF THE LOAN DOCUMENTS
OR ANY ASSIGNMENT OR TRANSACTION THEREUNDER. BORROWER UNDERSTANDS THAT THE
BANK IS RELYING ON THIS WAIVER IN MAKING THE LOAN PROVIDED FOR HEREIN.
9.2. Notices. All notices, requests and demands to or upon the parties
shall be deemed to have been given or made on the day of personal service or on
the day they are deposited in the mails, postage prepaid, registered or
certified mail, return receipt requested, or sent by mutually-recognized
overnight courier providing proof of delivery or, in the case of telegraphic
notice, when delivered to the telegraph company, charges prepaid, addressed to
the parties at the addresses set forth below or to such other address as may be
hereafter designated in writing in accordance herewith:
Borrower:
eGAMES, INC.
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
with a copy to its counsel:
McCausland, Keen, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
The Bank:
Sovereign Bank
Two Aldwyn Center
Lancaster Avenue and ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
with a copy to its counsel:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Riley, Riper, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9.3. Legal Costs; Filing Costs. If at any time or times hereafter the Bank
employs counsel to prepare or consider approvals, waivers or consents, or to
intervene, file a petition, answer, motion or other pleading in any suit or
proceeding relating to this Agreement or relating to any Collateral, or to
protect, take possession of, or liquidate any Collateral, or to attempt to
enforce any security interest or lien in any Collateral, or to enforce any
rights of the Bank or liabilities of Borrower's Account Debtors, or any other
person, firm or corporation which may be obligated to the Bank by virtue of the
Loan Documents, then in any of such events, all of the reasonable attorneys'
fees arising from such services, and any expenses, costs and charges relating
thereto, shall become a part of Borrower's Liabilities secured by the
Collateral, payable on demand.
Borrower further agrees to reimburse the Bank for its out-of-pocket
expenses, including but not limited to attorneys' fees and other costs of
preparation and filing of the Loan Documents and other documents as required by
law or deemed necessary by the Bank including but not limited to the cost of all
lien searches deemed necessary by the Bank. Such costs and expenses shall be
paid simultaneously with the execution of this Agreement and all such expenses
hereafter incurred shall be paid within fifteen (15) days after notice by the
Bank.
9.4. Right of Entry. Upon the occurrence of an Event of Default, the Bank
shall have the right to enter and remain upon the premises of Borrower without
cost or charge to the Bank, and to use the same, together with materials,
supplies, books and records of Borrower, for the purpose of liquidating or
collecting the Collateral, or for the purpose of preparing for and conducting
the sale of Collateral, whether by foreclosure, auction or otherwise.
9.5. Intentionally Deleted.
9.6. No Waiver. The Bank's failure at any time or times hereafter to
require strict performance by Borrower of any of the provisions, warranties,
terms and conditions contained in this Agreement shall not waive, affect or
diminish any right of the Bank at any time or times hereafter to demand strict
performance therewith and with respect to any other provisions, warranties,
terms and conditions contained in this Agreement and any waiver of any Event of
Default shall not waive or affect any other Event of Default, whether prior or
subsequent thereto, and whether of the same or a different type. None of the
warranties, conditions, provisions and terms contained in this Agreement shall
be deemed to have been waived by any act or knowledge of the Bank, its agents,
officers or employees except by an instrument in writing signed by an officer of
the Bank and directed to Borrower specifying such waiver.
9.7. Application of Proceeds.
9.7.0.1. On and after the date, if any, on which the Borrower's
Liabilities to the Bank are accelerated pursuant to Section 8.2 of this
Agreement, Borrower irrevocably waives the right to direct the application
of all subsequent payments (including proceeds of Collateral) which the
Bank receives from or for the benefit of Borrower.
9.7.0.2. The proceeds of any sale or other disposition of any
Collateral shall be applied by the Bank in the following order:
9.7.0.2.1. first, to the payment of all costs and expenses due
under the Loan Documents, including without limitation all costs and
expenses of collecting Borrower's Liabilities and reasonable
attorneys' fees;
9.7.0.2.2. second, to the payment in full of all accrued and
unpaid interest on Borrower's Liabilities;
9.7.0.2.3. third, to the payment in full of the principal balance
of Borrower's Liabilities; and
9.7.0.2.4. fourth, to Borrower to the extent of any surplus.
9.7.0.3. Borrower shall remain liable to the Bank for any deficiency
in payment of Borrower's Liabilities after application of the proceeds in
accordance with paragraph 9.7.0.2.
9.8. Representation, Warranties.
9.8.0.1. All representations, warranties, covenants and agreements
made in the Loan Documents shall survive the execution and delivery of this
Agreement, the making of the Advances under this Agreement and the issuance
of the Note.
9.8.0.2. The provisions of Section 9.3 of this Agreement shall survive
payment of the Note and all other liabilities of Borrower to the Bank.
9.9. Successors. This Agreement shall be binding upon and inure to the
benefit of Borrower and the Bank and their respective successors and assigns,
except that Borrower may not assign or transfer its rights under this Agreement
without the prior written consent of the Bank.
9.10. Governing Law. The Loan Documents, and the rights and obligations of
the parties under the Loan Documents, shall be governed by, and construed and
interpreted in accordance with, the domestic, internal laws, but not the law of
conflict of laws, of the Commonwealth of Pennsylvania.
9.11. Headings. The section, subsection, paragraph and other headings in
this Agreement are for reference purposes only and shall not control or affect
the construction or interpretation of this Agreement in any respect.
9.12. Severability. The parties intend the provisions of this Agreement to
be severable. If any provision of this Agreement is held to be invalid or
unenforceable in whole or in part in any jurisdiction, such provision, as to
such jurisdiction, shall be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of that provision in any other jurisdiction, or the remaining provisions of this
Agreement in any jurisdiction.
9.13. Entire Agreement. This Agreement and the Loan Documents represent the
entire agreement and understanding of the parties, and may not be amended
subsequently by oral statements of, or courses of dealing between, the parties.
9.14. Location of Business; Inventory; Records. Borrower maintains its only
place of business and substantially all of its records and assets at the
following location:
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Borrower will notify the Bank in advance of any change in the location of
any business of Borrower, including any change in the location of records and
inventory, whether by reason of the establishment of a new place of business or
the discontinuance of a present place of business.
9.15. Conflicting Provisions. In the event of any direct conflict between
the provisions of this Agreement and the provisions of other Loan Documents, the
provisions of this Agreement shall control.
9.16. Submission to Jurisdiction. Borrower hereby irrevocably and
unconditionally waives any right to claim immunity in respect of itself or any
of its property or assets, including immunity from jurisdiction, immunity from
attachment prior to entry of judgment, immunity from attachment in aid of
execution of judgment, in any suit, action or proceeding arising out of or
relating to this Agreement. In addition, Borrower and the Bank agree that any
suit, action or proceeding may be instituted in the Court of Common Pleas of
Delaware County, Pennsylvania or in the United States District Court of the
Eastern District of Pennsylvania, and irrevocably and unconditionally submit to
the jurisdiction of any such court for such purpose.
9.17. Further Assurances. From time to time Borrower shall execute and
deliver to the Bank such additional documents and will provide such additional
information as the Bank may reasonably request to carry out the intent of this
Agreement.
9.18. Seal. This Agreement is intended to take effect as an instrument
under seal.
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, have
caused this Agreement to be duly executed on the day and year first above
written.
eGAMES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (SEAL)
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SOVEREIGN BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President