Exhibit 10.1
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"AGREEMENT") dated May 14, 2007 (the "EFFECTIVE DATE") between SILICON VALLEY
BANK, a California corporation ("BANK"), GlobalOptions, Inc., a Delaware
corporation ("GLOBALOPTIONS") and The Bode Technology Group, Inc., a Delaware
corporation ("BODE", and together with GlobalOptions, each a "BORROWER" and,
collectively the "BORROWERS"), provides the terms on which Bank shall lend to
Borrowers and Borrowers shall repay Bank. This Agreement amends and restates
that certain Second Amended and Restated Loan and Security Agreement between
Bank and GlobalOptions, dated October 12, 2006 (the "PRIOR AGREEMENT"), in its
entirety. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY. Borrowers, jointly and severally, hereby
unconditionally promises to pay Bank the outstanding principal amount of all
Credit Extensions and accrued and unpaid interest thereon as and when due in
accordance with this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) AVAILABILITY. Subject to the terms and conditions of this
Agreement and to deduction of Reserves, Bank shall make Advances not exceeding
the Availability Amount. Amounts borrowed hereunder may be repaid and, prior to
the Revolving Line Maturity Date, reborrowed, subject to the applicable terms
and conditions precedent herein.
(b) TERMINATION; REPAYMENT. The Revolving Line terminates on the
Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
(a) As part of the Revolving Line, Bank shall issue or have issued
Letters of Credit for each Borrower's account. Such aggregate amounts utilized
hereunder shall at all times reduce the amount otherwise available for Advances
under the Revolving Line. The face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) may not exceed the Sublimit Availability Amount minus (i) the FX
Reserve and (ii) outstanding amounts used for Cash Management Services. If, on
the Revolving Line Maturity Date, there are any outstanding Letters of Credit,
then on such date the relevant Borrower shall provide to Bank cash collateral in
an amount equal to 105% of the face amount of all such Letters of Credit plus
all interest, fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit. All Letters of Credit shall be
in form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's standard Application and Letter of
Credit Agreement (the "LETTER OF CREDIT APPLICATION"). Borrower agrees to
execute any further documentation in connection with the Letters of Credit as
Bank may reasonably request. Borrowers further agree to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Bank and opened for a Borrower's account or by Bank's
interpretations of any Letter of Credit issued by Bank for a Borrower's account,
and each Borrower understands and agrees that Bank shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
such Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.
(b) The obligation of Borrowers to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, such Letters of Credit, and the Letter of Credit Application.
(c) Borrowers may request that Bank issue a Letter of Credit
payable in a Foreign Currency. If a demand for payment is made under any such
Letter of Credit, Bank shall treat such demand as an Advance to Borrowers of the
equivalent of the amount thereof (plus fees and charges in connection therewith
such as wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing
rate of exchange in San Francisco, California, for sales of the Foreign Currency
for transfer to the country issuing such Foreign Currency.
(d) To guard against fluctuations in currency exchange rates, upon
the issuance of any Letter of Credit payable in a Foreign Currency, Bank shall
create a reserve (the "LETTER OF CREDIT RESERVE") under the Revolving Line in an
amount equal to ten percent (10%) of the face amount of such Letter of Credit.
The amount of the Letter of Credit Reserve may be adjusted by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.
2.1.3 FOREIGN EXCHANGE SUBLIMIT. As part of the Revolving Line, Borrowers
may enter into foreign exchange contracts with Bank under which Borrowers commit
to purchase from or sell to Bank a specific amount of Foreign Currency (each, a
"FX FORWARD CONTRACT") on a specified date (the "SETTLEMENT DATE"). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to the
Sublimit Availability Amount minus (i) the face amount of outstanding Letters of
Credit and any Letter of Credit Reserve and (ii) outstanding amounts used for
Cash Management Services (the "FX RESERVE"). The aggregate amount of FX Forward
Contracts at any one time may not exceed ten (10) times the amount of the FX
Reserve.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrowers may use up the Sublimit
Availability Amount minus (i) the FX Reserve and (ii) the face amount of
outstanding Letters of Credit and any Letter of Credit Reserve, for Bank's cash
management services which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in Bank's
various cash management services agreements (collectively, the "CASH MANAGEMENT
SERVICES"). Any amounts used by Borrowers for Cash Management Services will be
treated as Advances under the Revolving Line, will accrue interest at the
interest rate applicable to Advances, and will reduce the amount otherwise
available for Credit Extensions thereunder.
2.2 OVERADVANCES. If at any time or for any reason the total of all
outstanding Advances and all other monetary Obligations exceeds the Availability
Amount (an "OVERADVANCE"), Borrowers shall immediately pay the amount of the
excess in cash to Bank, without notice or demand. Without limiting Borrowers'
obligation to repay to Bank the amount of any Overadvance, Borrowers agree to
pay Bank interest on the outstanding amount of any Overadvance at the Default
Rate, if such Overadvance is not paid within 3 days of Borrower's knowledge that
such Overadvance exists and on demand from Bank.
2.3 PAYMENT OF INTEREST ON THE CREDIT EXTENSIONS.
(a) INTEREST RATE. Subject to Section 2.3(b), the amounts
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to the Applicable Rate, which interest shall be payable
monthly.
(b) DEFAULT RATE. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is five percentage points above the rate that is otherwise
applicable thereto (the "DEFAULT RATE"). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank.
(c) ADJUSTMENT TO INTEREST RATE. Changes to the interest rate of
any Credit Extension based on changes to the Prime Rate shall be effective on
the effective date of any change to the Prime Rate and to the extent of any such
change.
(d) 360-DAY YEAR. Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.
-2-
(e) DEBIT OF ACCOUNTS. Bank may debit any of Borrowers' deposit
accounts, including the Designated Deposit Accounts, for principal and interest
payments or any other amounts Borrowers owe Bank when due. These debits shall
not constitute a set-off.
(f) PAYMENT; INTEREST COMPUTATION; FLOAT CHARGE. Interest is
payable monthly on the last calendar day of each month. In computing interest on
the Obligations, all Payments received after 12:00 p.m. Pacific time on any day
shall be deemed received on the next Business Day. In addition, so long as any
principal or interest with respect to any Credit Extension remains outstanding,
Bank shall be entitled to charge Borrowers a "float" charge in an amount equal
to three (3) Business Days interest, at the interest rate applicable to the
Credit Extensions, on all Payments received by Bank. Said float charge is not
included in interest for purposes of computing Minimum Monthly Interest (if any)
under this Agreement. The float charge for each month shall be payable on the
last day of the month. Bank shall not, however, be required to credit Borrowers'
accounts for the amount of any item of payment which is unsatisfactory to Bank
in its good faith business judgment, and Bank may charge a Borrower's Designated
Deposit Account for the amount of any item of payment which is returned to Bank
unpaid.
2.4 FEES. Borrowers shall pay to Bank:
(a) COMMITMENT FEE. A fully earned, non-refundable commitment fee
of One Hundred Twelve Thousand Five Hundred Dollars ($112,500), on the Effective
Date, LESS an amount determined by dividing the commitment fee paid by Borrower
to Bank upon execution of the Prior Agreement by 360, and multiplied by the
number of days from and including October 12, 2006 though the date that is one
day prior to the Effective Date;
(b) LETTER OF CREDIT FEE. Bank's customary fees and expenses for
the issuance or renewal of Letters of Credit, upon the issuance or renewal of
such Letter of Credit by Bank;
(c) TERMINATION FEE. The termination fee as set forth in Section
12.1.
(d) UNUSED REVOLVING LINE FACILITY FEE. A fee (the "UNUSED
REVOLVING LINE FACILITY FEE"), which fee shall be paid quarterly, in arrears, on
a calendar year basis, in an amount equal to 0.375% per annum of the average
unused portion of the Revolving Line, as determined by Bank; provided, however,
that if the Credit Parties maintain an average of $3,000,000, in the aggregate,
in their non-interest bearing deposit accounts with Bank in a calendar quarter,
the Unused Revolving Line Facility Fee for such calendar quarter will be waived.
Borrowers shall not be entitled to any credit, rebate or repayment of any Unused
Revolving Line Facility Fee previously earned by Bank pursuant to this Section
notwithstanding any termination of the Agreement, or suspension or termination
of Bank's obligation to make loans and advances hereunder; and
(e) BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. Bank's obligation
to make the initial Credit Extension is subject to the condition precedent that
Borrower shall consent to or have delivered, in form and substance satisfactory
to Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents to
which it is a party;
(b) duly executed original signatures to the completed Corporate
Borrowing Certificates for each Borrower;
(c) duly executed original signatures to the completed Corporate
Guaranty Certificate for Guarantor;
(d) the Reaffirmation of Guaranty executed by Guarantor;
-3-
(e) good standing certificates for each Borrower and for Guarantor
from the Secretary of State of Delaware and, with regard to GlobalOptions, the
Washington DC Corporations Division and, with regard to Bode, the Secretary of
the Commonwealth of Virginia, and, with regard to Guarantor, the New York
Department of State, all dated within 30 days of the date hereof,
(f) the Perfection Certificates completed and executed by each of
the Borrowers and Guarantor.
(g) evidence satisfactory to Bank that the insurance policies
required by Section 6.4 hereof are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured clauses or
endorsements in favor of Bank; and
(h) payment of the fees and Bank Expenses then due as specified in
Section 2.4 hereof.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) except as otherwise provided in Section 3.4, timely receipt of
an executed Transaction Report (and any schedules thereto);
(b) the representations and warranties in Section 5 shall be true
in all material respects on the date of the Transaction Report and on the
Funding Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and
(c) in Bank's sole discretion, there has not been a Material
Adverse Change.
3.3 COVENANT TO DELIVER. Borrowers agree to deliver to Bank each item
required to be delivered to Bank under this Agreement as a condition to any
Credit Extension. Borrowers expressly agree that the extension of a Credit
Extension prior to the receipt by Bank of any such item shall not constitute a
waiver by Bank of Borrowers' obligation to deliver such item, and any such
extension in the absence of a required item shall be in Bank's sole discretion.
3.4 PROCEDURES FOR BORROWING. Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance (other than Advances under Sections 2.1.2 or
2.1.4), Borrower shall notify Bank (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on the
Funding Date of the Advance. Together with such notification, Borrower must
promptly deliver to Bank by electronic mail or facsimile a completed Transaction
Report (and any schedules thereto) executed by a Responsible Officer or his or
her designee. Bank shall credit Advances to the Borrower's Designated Deposit
Account. Bank may make Advances under this Agreement based on instructions from
a Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due. Bank may rely
on any telephone notice given by a person whom Bank believes is a Responsible
Officer or designee.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
-4-
priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank's Lien under this
Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.
If this Agreement is terminated, Bank's Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations and at
such time as Bank's obligation to make Credit Extensions has terminated, Bank
shall, at Borrower's sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.
4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions to perfect or protect Bank's interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.
5 REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION, AUTHORIZATION; POWER AND AUTHORITY. Borrower is
duly existing and in good standing in its jurisdiction of formation and is
qualified and licensed to do business and is in good standing in any
jurisdiction in which the conduct of its business or its ownership of property
requires that it be qualified except where the failure to do so could not
reasonably be expected to have a material adverse effect on Borrower's business.
In connection with this Agreement, Borrower has delivered to Bank completed
certificates each signed by Borrower and Guarantor, respectively, entitled
"Perfection Certificate". Borrower represents and warrants to Bank that (a)
Borrower's exact legal name is that indicated on the Perfection Certificate and
on the signature page hereof; (b) Borrower is an organization of the type and is
organized in the jurisdiction set forth in the Perfection Certificate; (c) the
Perfection Certificate accurately sets forth Borrower's organizational
identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth Borrower's place of business, or,
if more than one, its chief executive office as well as Borrower's mailing
address (if different than its chief executive office); (e) Borrower (and each
of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction, other than as disclosed to
Bank in writing; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and
complete (it being understood and agreed that Borrower may from time to time
update certain information in the Perfection Certificate after the Effective
Date to the extent permitted by one or more specific provisions in this
Agreement).
The execution, delivery and performance by Borrower of the Loan Documents
to which it is a party have been duly authorized, and do not (i) conflict with
any of Borrower's organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law, (iii)
contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effector (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a material adverse effect on Borrower's
business.
5.2 COLLATERAL. Borrower has good title to, has rights in, and the power
to transfer each item of the Collateral upon which it purports to ▇▇▇▇▇ ▇ ▇▇▇▇
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
has no deposit accounts other than the deposit accounts with Bank, the deposit
accounts, if any, described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice and taken such
actions as are necessary to give Bank a perfected security interest therein.
The Collateral is not in the possession of any third party bailee (such as
a warehouse). Except as hereafter disclosed to Bank in writing by Borrower, none
of the components of the Collateral shall be maintained at locations other than
-5-
as provided in the Perfection Certificate. In the event that Borrower, after the
date hereof, intends to store or otherwise deliver any portion of the Collateral
to a bailee, then Borrower will first receive the written consent of Bank and
such bailee must acknowledge in writing that the bailee is holding such
Collateral for the benefit of Bank.
All Inventory is in all material respects of good and marketable quality,
free from material defects.
Borrower is the sole owner of its intellectual property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. Each patent is valid and enforceable and no part of the intellectual
property has been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower's knowledge, no claim has been made that any part of the
intellectual property violates the rights of any third party.
Except as noted on the Perfection Certificate, Borrower is not a party to,
nor is bound by, any material license or other agreement with respect to which
Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property, or (b) for which a default under or termination of could
interfere with the Bank's right to sell any Collateral. Borrower shall provide
written notice to Bank within ten (10) days of entering or becoming bound by any
such license or agreement (other than over-the-counter software that is
commercially available to the public). Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (x) all such licenses or agreements to be deemed
"Collateral" and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future, and (y) Bank to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Bank's rights and remedies under this
Agreement and the other Loan Documents.
5.3 ACCOUNTS RECEIVABLE.
(a) For each Account with respect to which Advances are requested,
on the date each Advance is requested and made, such Account shall be an
Eligible Account.
(b) All statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the Accounts are and shall
be true and correct and all such invoices, instruments and other documents, and
all of Borrower's Books are genuine and in all respects what they purport to be.
Whether or not an Event of Default has occurred and is continuing, Bank may
notify any Account Debtor owing Borrower money of Bank's security interest in
such funds and verify the amount of such Eligible Account. All sales and other
transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are an Eligible Account in any
Transaction Report. To the best of Borrower's knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are genuine, and all such documents, instruments and agreements are
legally enforceable in accordance with their terms.
5.4 LITIGATION. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than One Hundred Thousand
Dollars ($100,000.00).
5.5 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
5.6 SOLVENCY. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.7 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
-6-
Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a
"holding company" or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company" as each term is defined and used in the Public
Utility Holding Company Act of 2005. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to have
a material adverse effect on its business. None of Borrower's or any of its
Subsidiaries' properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower's knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally. Borrower and each of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Government Authorities that are necessary to continue
their respective businesses as currently conducted.
5.8 SUBSIDIARIES; INVESTMENTS. Borrower does not own any stock,
partnership interest or other equity securities except for Permitted
Investments.
5.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed all required tax returns and reports, and Borrower has timely paid all
foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower. Borrower may defer payment of any contested taxes, provided
that Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (b)
notifies Bank in writing of the commencement of, and any material development
in, the proceedings, (c) posts bonds or takes any other steps required to
prevent the governmental authority levying such contested taxes from obtaining a
Lien upon any of the Collateral that is other than a "Permitted Lien". Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 USE OF PROCEEDS. Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements and not for personal, family, household or agricultural purposes.
5.11 FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
6 AFFIRMATIVE COVENANTS
Each Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE.
(a) Each Borrower shall maintain its and all its Subsidiaries'
legal existence and good standing in their respective jurisdictions of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on such
Borrower's business or operations. Each Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on such
Borrower's business.
(b) Each Borrower shall obtain all of the Governmental Approvals
necessary for the performance by such Borrower of its obligations under the Loan
Documents to which it is a party and the grant of a security interest to Bank in
all of its property. Each Borrower shall promptly provide copies of any such
obtained Governmental Approvals to Bank.
-7-
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) GlobalOptions shall provide Bank, on behalf of itself and
Bode, with the following:
(i) a Transaction Report (and any schedules thereto) (A) when
Borrowers' aggregate Liquidity is greater than $15,0000, then once per month (no
later than the 15th day of such month), (B) when Borrowers' aggregate Liquidity
is less than or equal to $15,0000, but greater than $10,000,000 then twice per
month (no later the 15th and last day of each month) and (C) at all other times,
weekly (on Wednesday of each such week);
(ii) within fifteen (15) days after the end of each month, (A)
monthly accounts receivable agings, aged by invoice date, (B) monthly accounts
payable agings, aged by invoice date, and outstanding or held check registers,
if any, and (C) a schedule of Deferred Revenue.
(iii) as soon as available, and in any event within thirty
(30) days after the end of each month, monthly consolidated unaudited financial
statements; provided, however, that if no Advances or Letters of Credit are
outstanding at the end a month, Borrower may deliver its financial statements
for such month no later than forty five (45) days after the end of such month;
(iv) within thirty (30) days after the end of each month a
monthly Compliance Certificate signed by a Responsible Officer, certifying that
as of the end of such month, Borrowers were in full compliance with all of the
terms and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth in this Agreement and such
other information as Bank shall reasonably request, including, without
limitation, a statement that at the end of such month there were no held checks;
(v) within thirty (30) days prior to the end of each fiscal
year of GlobalOptions, (A) annual operating budgets (including income
statements, balance sheets and cash flow statements, by month) for the upcoming
fiscal year of each Borrower, and (B) annual financial projections for the
following fiscal year (on a quarterly basis) as approved by each Borrowers'
board of directors, together with any related business forecasts used in the
preparation of such annual financial projections; and
(vi) as soon as available, and in any event within one hundred
twenty (120) days following the end of Borrowers' fiscal year, annual
consolidated financial statements certified by, and with an unqualified opinion
of, independent certified public accountants acceptable to Bank.
(b) Each Borrower shall also provide Bank with prompt written
notice of (i) any material change in the composition of the intellectual
property, (ii) the registration of any copyright, including any subsequent
ownership right of such Borrower in or to any copyright, patent or trademark not
shown in the IP Security Agreement, or (iii) such Borrower's knowledge of an
event that materially adversely affects the value of the intellectual property.
6.3 ACCOUNTS RECEIVABLE.
(a) SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrowers shall
deliver to Bank transaction reports and schedules of collections, as provided in
Section 6.2, on Bank's standard forms; provided, however, that Borrowers'
failure to execute and deliver the same shall not affect or limit Bank's Lien
and other rights in all of Borrowers' Accounts, nor shall Bank's failure to
advance or lend against a specific Account affect or limit Bank's Lien and other
rights therein. If requested by Bank, Borrowers shall furnish Bank with copies
(or, at Bank's request, originals) of all contracts, orders, invoices, and other
similar documents, and all shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Accounts. In addition, Borrowers shall deliver to Bank,
on its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.
(b) DISPUTES. Borrowers shall promptly notify Bank of all disputes
or claims relating to Accounts. Borrowers may forgive (completely or partially),
compromise, or settle any Account for less than payment in full, or agree to do
any of the foregoing so long as (i) Borrowers do so in good faith, in a
commercially reasonable manner, in the ordinary course of business, in
arm's-length transactions, and reports the same to Bank in the regular reports
provided to Bank; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) after taking into account all such discounts, settlements
and forgiveness, the total outstanding Advances will not exceed the lesser of
the Revolving Line or the Borrowing Base.
-8-
(c) COLLECTION OF ACCOUNTS. Borrowers shall direct each Account
Debtor (and each depository institution where proceeds of Accounts are on
deposit) to remit payments with respect to the Accounts to a lockbox account
established with Bank or to wire transfer payments to a cash collateral account
that Bank controls (collectively, the "Lockbox"). Until such Account Debtor has
commenced remitting such payments to the lockbox, or if an Account Debtor
inadvertently sends a payment to a Borrower, Borrower shall hold all payments
on, and proceeds of, Accounts it receives in trust for Bank, and Borrower shall
immediately deliver all such payments and proceeds to Bank in their original
form, duly endorsed. Provided no Event of Default exists or an event that with
notice or lapse of time will be an Event of Default, within three (3) days of
receipt of such amounts by Bank, Bank will turn over to Borrowers the proceeds
of the Accounts; provided, however, that if Borrowers' aggregate Liquidity is
less than $10,000,000, Bank will first apply proceeds of the Accounts to
outstanding Advances, when received, and then turn over to Borrowers the
remaining proceeds of the Accounts. This Section does not impose any affirmative
duty on Bank to perform any act other than as specifically set forth herein. All
Accounts and the proceeds thereof are Collateral and if an Event of Default
occurs, Bank may apply the proceeds of such Accounts to the Obligations.
(d) RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to a Borrower, such
Borrower shall promptly (i) determine the reason for such return, (ii) issue a
credit memorandum to the Account Debtor in the appropriate amount, and (iii)
provide a copy of such credit memorandum to Bank, upon request from Bank. In the
event any attempted return occurs after the occurrence and during the
continuance of any Event of Default, such Borrower shall hold the returned
Inventory in trust for Bank, and immediately notify Bank of the return of the
Inventory.
(e) VERIFICATION. Bank may, from time to time, verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Accounts, either in the name of Borrowers or Bank or such other
name as Bank may choose.
(f) NO LIABILITY. Bank shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Bank be
deemed to be responsible for any of Borrower's obligations under any contract or
agreement giving rise to an Account. Nothing herein shall, however, relieve Bank
from liability for its own gross negligence or willful misconduct.
6.4 REMITTANCE OF PROCEEDS. Except as otherwise provided in Section
6.3(c), each Borrower shall deliver, in kind, all proceeds arising from the
disposition of any Collateral to Bank in the original form in which received by
such Borrower not later than the following Business Day after receipt by such
Borrower, to be applied to the Obligations pursuant to the terms of Section 9.4
hereof; provided that, if no Default or Event of Default has occurred and is
continuing, no Borrower shall be obligated to remit to Bank the proceeds of the
sale of worn out or obsolete Equipment disposed of by such Borrower in good
faith in an arm's length transaction for an aggregate purchase price of $25,000
or less (for all such transactions in any fiscal year). Each Borrower agrees
that it will not commingle proceeds of Collateral with any of such Borrower's
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Bank. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
6.5 TAXES; PENSIONS. Timely file all required tax returns and reports
and timely pay all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrowers except for deferred payment of any
taxes contested pursuant to the terms of Section 5.9 hereof, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.
6.6 ACCESS TO COLLATERAL; BOOKS AND RECORDS. At reasonable times, on one
(1) Business Day's notice (provided no notice is required if an Event of Default
has occurred and is continuing), Bank, or its agents, shall have the right to
inspect the Collateral and the right to audit and copy Borrowers' Books. Such
audits will occur once per quarter (with the first to occur no later than 45
days following the Effective Date) unless an Event of Default has occurred and
-9-
is continuing. The foregoing inspections and audits shall be at Borrowers'
expense, and the charge therefor shall be $750 per person per day (or such
higher amount as shall represent Bank's then-current standard charge for the
same), plus reasonable out-of-pocket expenses. In the event a Borrower and Bank
schedule an audit more than ten (10) days in advance, and such Borrower cancels
or seeks to reschedules the audit with less than ten (10) days written notice to
Bank, then (without limiting any of Bank's rights or remedies), Borrowers shall
pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of the cancellation or
rescheduling.
6.7 INSURANCE. Keep its business and the Collateral insured for risks
and in amounts standard for companies in such Borrower's industry and location
and as Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a lender's loss payable endorsement showing Bank as the sole lender
loss payee and waive subrogation against Bank, and all liability policies shall
show, or have endorsements showing, Bank as an additional insured. All policies
(or the loss payable and additional insured endorsements) shall provide that the
insurer shall endeavor to give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank's request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any property policy shall, at Bank's option, be
payable to Bank on account of the Obligations. If Borrower fails to obtain
insurance as required under this Section 6.7 or to pay any amount or furnish any
required proof of payment to third persons and Bank, Bank may make all or part
of such payment or obtain such insurance policies required in this Section 6.7,
and take any action under the policies Bank deems prudent.
6.8 OPERATING ACCOUNTS.
(a) Maintain Borrowers', Guarantor's and Borrowers' Subsidiaries'
primary depository and operating accounts and securities accounts with Bank,
which accounts shall represent at least 75% of the dollar value of Borrowers',
Guarantor's and such Subsidiaries' accounts at all financial institutions (which
percentage shall not include cash collateral held at other financial
institutions solely to secure letters of credit or lease deposits or accounts
exclusively used for payroll).
(b) Provide Bank five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Bank or Bank's Affiliates. For each Collateral Account that Borrowers
at any time maintain, Borrowers shall cause the applicable bank or financial
institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank's Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrowers' employees and identified to Bank by Borrower as
such.
6.9 FINANCIAL COVENANTS.
Borrowers shall maintain at all times, to be tested as of the last
day of each month, unless otherwise noted, on a consolidated basis with respect
to Borrowers and their Subsidiaries:
(a) LIQUIDITY. Borrowers' aggregate unrestricted cash and Cash
Equivalents at Bank or Bank's Affiliates plus Committed Availability
("LIQUIDITY") of at least $7,500,000.
(b) EBDA. Maintain, measured on a trailing three-month basis, EBDA
of at least the following (on a consolidated basis):
PERIOD MINIMUM T3M EBITDA
Effective Date through September 30, 2007 ($1,500,000)
October 31, 2007 through December 31, 2007 ($1,000,000)
January 31, 2008 through June 30, 2008 ($ 500,000)
July 31, 2008 and each month thereafter $ 1.00
-10-
6.10 PROTECTION AND REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS. Each
Borrower shall: (a) protect, defend and maintain the validity and enforceability
of its intellectual property; (b) promptly advise Bank in writing of material
infringements of its intellectual property; and (c) not allow any intellectual
property material to Borrower's business to be abandoned, forfeited or dedicated
to the public without Bank's written consent. If a Borrower (i) obtains any
patent, registered trademark or servicemark, registered copyright, registered
mask work, or any pending application for any of the foregoing, whether as
owner, licensee or otherwise, or (ii) applies for any patent or the registration
of any trademark or servicemark, then such Borrower shall immediately provide
written notice thereof to Bank and shall execute such intellectual property
security agreements and other documents and take such other actions as Bank
shall request in its good faith business judgment to perfect and maintain a
first priority perfected security interest in favor of Bank in such property. If
a Borrower decides to register any copyrights or mask works in the United States
Copyright Office, such Borrower shall: (x) provide Bank with at least fifteen
(15) days prior written notice of such Borrower's intent to register such
copyrights or mask works together with a copy of the application it intends to
file with the United States Copyright Office (excluding exhibits thereto); (y)
execute an intellectual property security agreement and such other documents and
take such other actions as Bank may request in its good faith business judgment
to perfect and maintain a first priority perfected security interest in favor of
Bank in the copyrights or mask works intended to be registered with the United
States Copyright Office; and (z) record such intellectual property security
agreement with the United States Copyright Office contemporaneously with filing
the copyright or mask work application(s) with the United States Copyright
Office. Borrower shall promptly provide to Bank copies of all applications that
it files for patents or for the registration of trademarks, servicemarks,
copyrights or mask works, together with evidence of the recording of the
intellectual property security agreement necessary for Bank to perfect and
maintain a first priority perfected security interest in such property.
6.11 LITIGATION COOPERATION. From the date hereof and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, each Borrower and its officers, employees and agents and such Borrower's
books and records, to the extent that Bank may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Bank with respect to any Collateral or relating to such Borrower.
6.12 FURTHER ASSURANCES. Execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank's Lien in the
Collateral or to effect the purposes of this Agreement. Deliver to Bank, within
five (5) days after the same are sent or received, copies of all correspondence,
reports, documents and other filings with any Governmental Authority regarding
compliance with or maintenance of Governmental Approvals or Requirements of Law
or that could reasonably be expected to have a material effect on any of the
Governmental Approvals or otherwise on the operations of Borrowers or any of
their Subsidiaries.
7 NEGATIVE COVENANTS
No Borrower shall do any of the following without Bank's prior written
consent:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, "TRANSFER"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (a) of Inventory
in the ordinary course of business; (b) of worn-out or obsolete Equipment; and
(c) in connection with Permitted Liens and Permitted Investments.
7.2 CHANGES IN BUSINESS, MANAGEMENT, OWNERSHIP, OR BUSINESS Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by such Borrower and such Subsidiary,
as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c)
(i) have a change in management or (ii) enter into any transaction or series of
related transactions in which the stockholders of such Borrower who were not
stockholders immediately prior to the first such transaction own more than 40%
of the voting stock of such Borrower immediately after giving effect to such
transaction or related series of such transactions. Borrower shall not, without
at least thirty (30) days prior written notice to Bank: (1) add any new offices
or business locations, including warehouses (unless such new offices or business
locations contain less than Twenty Five Thousand Dollars ($25,000) in such
Borrower's assets or property), (2) change its jurisdiction of organization, (3)
-11-
change its organizational structure or type, (4) change its legal name, or (5)
change any organizational number (if any) assigned by its jurisdiction of
organization.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person, other than Permitted Acquisitions.
A Subsidiary may merge or consolidate into another Subsidiary or into a
Borrower.
7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
7.5 ENCUMBRANCE. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, permit any Collateral not to be subject to the first priority security
interest granted herein,or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of such Borrower's or any Subsidiary's
intellectual property, except as is otherwise permitted in Section 7.1 hereof
and the definition of "Permitted Lien" herein.
7.6 MAINTENANCE OF COLLATERAL ACCOUNTS. Maintain any Collateral Account
except pursuant to the terms of Section 6.8(b) hereof.
7.7 DISTRIBUTIONS; INVESTMENTS. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock or (b)
directly or indirectly make any Investment other than Permitted Investments, or
permit any of its Subsidiaries to do so.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of such Borrower's business,
upon fair and reasonable terms that are no less favorable to such Borrower than
would be obtained in an arm's length transaction with a non-affiliated Person.
7.9 SUBORDINATED DEBT. (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b)
amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or adversely affect the subordination thereof
to Obligations owed to Bank.
7.10 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on such Borrower's business, or permit any of its Subsidiaries to
do so; withdraw or permit any Subsidiary to withdraw from participation in,
permit partial or complete termination of, or permit the occurrence of any other
event with respect to, any present pension, profit sharing and deferred
compensation plan which could reasonably be expected to result in any liability
of Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an "EVENT
OF DEFAULT") under this Agreement:
8.1 PAYMENT DEFAULT. Either Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any
other Obligations within three (3) Business Days after such Obligations are due
-12-
and payable (which three (3) day grace period shall not apply to payments due on
the Revolving Line Maturity Date). During the cure period, the failure to cure
the payment default is not an Event of Default (but no Credit Extension will be
made during the cure period);
8.2 COVENANT DEFAULT.
(a) Either Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.5, 6.7, 6.8, or 6.9, or violates any covenant in Section 7; or
(b) Either Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by such Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
such Borrower shall have an additional period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to cure the default shall not be deemed an
Event of Default (but no Credit Extensions shall be made during such cure
period). Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants set forth in subsection
(a) above;
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. (a) Any material portion of either Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver;
(b) the service of process seeking to attach, by trustee or similar process, any
funds of a Borrower or of any entity under control of a Borrower (including a
Subsidiary) on deposit with Bank or any Bank Affiliate; (c) either Borrower is
enjoined, restrained, or prevented by court order from conducting any part of
its business; or (d) a notice of lien, levy, or assessment is filed against any
of either Borrower's assets by any government agency, and the same under clauses
(a) through (d) hereof are not, within ten (10) days after the occurrence
thereof, discharged or stayed (whether through the posting of a bond or
otherwise); provided, however, no Credit Extensions shall be made during any ten
(10) day cure period;
8.5 INSOLVENCY. (a) Either Borrower is unable to pay its debts
(including trade debts) as they become due or otherwise becomes insolvent; (b)
either Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding
is begun against either Borrower and not dismissed or stayed within thirty (30)
days (but no Credit Extensions shall be made while of any of the conditions
described in clause (a) exist and/or until any Insolvency Proceeding is
dismissed);
8.6 OTHER AGREEMENTS. There is a default in any agreement to which
either Borrower or any Guarantor is a party with a third party or parties
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a material adverse effect
on such Borrower's or any Guarantor's business;
8.7 JUDGMENTS. One or more judgments, orders, or decrees for the payment
of money in an amount, individually or in the aggregate, of at least Two Hundred
Thousand Dollars ($200,000) (not covered by independent third-party insurance as
to which liability has been accepted by such insurance carrier) shall be
rendered against either Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided that no
Credit Extensions will be made prior to the satisfaction, vacation, or stay of
such judgment, order, or decree);
8.8 MISREPRESENTATIONS. Either Borrower or any Person acting for such
Borrower makes any representation, warranty, or other statement now or later in
this Agreement, any Loan Document or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material
respect when made;
-13-
8.9 SUBORDINATED DEBT. A default or breach occurs under any agreement
between either Borrower and any creditor of such Borrower that signed a
subordination, intercreditor, or other similar agreement with Bank, or any
creditor that has signed such an agreement with Bank breaches any terms of such
agreement; or
8.10 GUARANTY. (a) Any guaranty of any Obligations terminates or ceases
for any reason to be in full force and effect; (b) any Guarantor does not
perform any obligation or covenant under any guaranty of the Obligations; (c)
any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with
respect to any Guarantor; (d) the liquidation, winding up, or termination of
existence of any Guarantor; or (e) (i) a material impairment in the perfection
or priority of Bank's Lien in the collateral provided by Guarantor or in the
value of such collateral .
8.11 GOVERNMENTAL APPROVALS. Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) has, or could reasonably be expected to have, a
Material Adverse Change, or (ii) adversely affects the legal qualifications of
either Borrower or any of its Subsidiaries to hold such Governmental Approval in
any applicable jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of such Borrower or any of its Subsidiaries to hold any
Governmental Approval in any other jurisdiction.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between a Borrower and
Bank;
(c) demand that Borrowers (i) deposit cash with Bank in an amount
equal to the aggregate amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrowers shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letter of Credit fees scheduled to be paid or payable over
the remaining term of any Letters of Credit;
(d) terminate any FX Forward Contracts;
(e) settle or adjust disputes and claims directly with Account
Debtors for amounts on terms and in any order that Bank considers advisable,
notify any Person owing Borrowers money of Bank's security interest in such
funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrowers shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrowers each grant
Bank a license to enter and occupy any of its premises, without charge, to
exercise any of Bank's rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of
Borrowers it holds, or (ii) any amount held by Bank owing to or for the credit
or the account of a Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, each Borrower's labels, patents, copyrights, mask works, rights of use
of any name, trade secrets, trade names, trademarks, service marks, and
-14-
advertising matter, or any similar property as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section, each
Borrower's rights under all licenses and all franchise agreements inure to
Bank's benefit;
(i) place a "hold" on any account maintained with Bank and/or
deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;
(j) demand and receive possession of each Borrower's Books; and
(k) exercise all rights and remedies available to Bank under the
Loan Documents or at law or equity, including all remedies provided under the
Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 POWER OF ATTORNEY. Each Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower's name on any
checks or other forms of payment or security; (b) sign Borrower's name on any
invoice or ▇▇▇▇ of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower's insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits. Each Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower's name on any documents
necessary to perfect or continue the perfection of Bank's security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder Bank's foregoing appointment as each
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 PROTECTIVE PAYMENTS. If either Borrower fails to obtain the
insurance called for by Section 6.7 or fails to pay any premium thereon or fails
to pay any other amount which Borrowers are obligated to pay under this
Agreement or any other Loan Document, Bank may obtain such insurance or make
such payment, and all amounts so paid by Bank are Bank Expenses and immediately
due and payable, bearing interest at the then highest applicable rate, and
secured by the Collateral. Bank will make reasonable efforts to provide
Borrowers with notice of Bank obtaining such insurance at the time it is
obtained or within a reasonable time thereafter. No payments by Bank are deemed
an agreement to make similar payments in the future or Bank's waiver of any
Event of Default.
9.4 APPLICATION OF PAYMENTS AND PROCEEDS. Borrowers shall have no right
to specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrowers to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion. Any
surplus shall be paid to Borrowers by credit to the Designated Deposit Accounts
or to other Persons legally entitled thereto; Borrowers shall remain liable to
Bank for any deficiency. If Bank, in its good faith business judgment, directly
or indirectly enters into a deferred payment or other credit transaction with
any purchaser at any sale of Collateral, Bank shall have the option, exercisable
at any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Bank of cash therefor.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrowers bear
all risk of loss, damage or destruction of the Collateral.
-15-
9.6 NO WAIVER; REMEDIES CUMULATIVE. Bank's failure, at any time or
times, to require strict performance by Borrowers of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith. No waiver hereunder shall be effective unless signed by Bank and then
is only effective for the specific instance and purpose for which it is given.
Bank's rights and remedies under this Agreement and the other Loan Documents are
cumulative. Bank has all rights and remedies provided under the Code, by law, or
in equity. Bank's exercise of one right or remedy is not an election, and Bank's
waiver of any Event of Default is not a continuing waiver. Bank's delay in
exercising any remedy is not a waiver, election, or acquiescence.
9.7 DEMAND WAIVER. Each Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which such
Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other
communication (collectively, "COMMUNICATION"), other than Advance requests made
pursuant to Section 3.4, by any party to this Agreement or any other Loan
Document must be in writing and be delivered or sent by facsimile at the
addresses or facsimile numbers listed below. Bank or Borrowers may change its
notice address by giving the other party written notice thereof. Each such
Communication shall be deemed to have been validly served, given, or delivered:
(a) upon the earlier of actual receipt and three (3) Business Days after deposit
in the U.S. mail, registered or certified mail, return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by facsimile
transmission (with such facsimile promptly confirmed by delivery of a copy by
personal delivery or United States mail as otherwise provided in this Section
10); (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below. Advance requests made pursuant to
Section 3.4 must be in writing and may be in the form of electronic mail,
delivered to Bank by Borrowers at the e-mail address of Bank provided below and
shall be deemed to have been validly served, given, or delivered when sent (with
such electronic mail promptly confirmed by delivery of a copy by personal
delivery or United States mail as otherwise provided in this Section 10). Bank
or Borrowers may change its address, facsimile number, or electronic mail
address by giving the other party written notice thereof in accordance with the
terms of this Section 10.
If to Borrowers: c/o GlobalOptions, Inc.
▇▇▇▇ ▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇.▇▇▇.▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇
If to Bank: Silicon Valley Bank
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇.▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrowers and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa ▇▇▇▇▇ County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Each Borrower
expressly submits and consents in advance to such jurisdiction in any action or
suit commenced in any such court, and such Borrower hereby waives any objection
that it may have based upon lack of personal jurisdiction, improper venue, or
forum non conveniens and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such court. Each Borrower hereby
-16-
waives personal service of the summons, complaints, and other process issued in
such action or suit and agrees that service of such summons, complaints, and
other process may be made by registered or certified mail addressed to such
Borrower at the address set forth in Section 10 of this Agreement and that
service so made shall be deemed completed upon the earlier to occur of such
Borrower's actual receipt thereof or three (3) days after deposit in the U.S.
mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWERS AND BANK EACH
WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO WAIVE
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a
trial by jury is not enforceable, the parties hereto agree that any and all
disputes or controversies of any nature between them arising at any time shall
be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa ▇▇▇▇▇ County,
California Superior Court) appointed in accordance with California Code of Civil
Procedure Section 638 (or pursuant to comparable provisions of federal law if
the dispute falls within the exclusive jurisdiction of the federal courts),
sitting without a jury, in Santa ▇▇▇▇▇ County, California; and the parties
hereby submit to the jurisdiction of such court. The reference proceedings shall
be conducted pursuant to and in accordance with the provisions of California
Code of Civil Procedure ▇▇.▇▇. 638 through 645.1, inclusive. The private judge
shall have the power, among others, to grant provisional relief, including
without limitation, entering temporary restraining orders, issuing preliminary
and permanent injunctions and appointing receivers. All such proceedings shall
be closed to the public and confidential and all records relating thereto shall
be permanently sealed. If during the course of any dispute, a party desires to
seek provisional relief, but a judge has not been appointed at that point
pursuant to the judicial reference procedures, then such party may apply to the
Santa ▇▇▇▇▇ County, California Superior Court for such relief. The proceeding
before the private judge shall be conducted in the same manner as it would be
before a court under the rules of evidence applicable to judicial proceedings.
The parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure ss. 644(a). Nothing
in this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.
12 GENERAL PROVISIONS
12.1 TERMINATION PRIOR TO REVOLVING LINE MATURITY DATE. This Agreement
may be terminated prior to the Revolving Line Maturity Date by Borrower,
effective three (3) Business Days after written notice of termination is given
to Bank. Notwithstanding any such termination, Bank's lien and security interest
in the Collateral shall continue until Borrower fully satisfies its Obligations.
If such termination is at Borrower's election or at Bank's election due to the
occurrence and continuance of an Event of Default, Borrower shall pay to Bank,
in addition to the payment of any other expenses or fees then-owing, a
termination fee in an amount equal to one-half of one percent (0.5%) of the
Revolving Line provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of
Silicon Valley Bank.
12.2 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or obligations under it without Bank's prior
written consent (which may be granted or withheld in Bank's discretion). Bank
has the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights, and benefits under this Agreement and the other Loan
Documents.
12.3 INDEMNIFICATION. Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank harmless against: (a) all obligations,
-17-
demands, claims, and liabilities (collectively, "CLAIMS") asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or arising from transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for Claims and/or losses directly caused
by Bank's gross negligence or willful misconduct.
12.4 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement
must be in writing and signed by both Bank and Borrower. This Agreement and the
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.
12.8 SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.
12.9 CONFIDENTIALITY. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank's
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee's or
purchaser's agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank's regulators or as otherwise
required in connection with Bank's examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.10 ATTORNEYS' FEES, COSTS AND EXPENSES. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.
12.11 BORROWER LIABILITY. Either Borrower may, acting singly, request
Advances hereunder. Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder, including with respect to requesting Advances
hereunder. Each Borrower hereunder shall be obligated to repay all Advances made
hereunder, regardless of which Borrower actually receives said Advance, as if
each Borrower hereunder directly received ALL Advances. Notwithstanding any
other provision of this Agreement or other related document, each Borrower
irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating Borrower to the rights of Bank under
this Agreement) to seek contribution, indemnification or any other form of
reimbursement from any other Borrower, or any other Person now or hereafter
primarily or secondarily liable for any of the Obligations, for any payment made
by Borrower with respect to the Obligations in connection with this Agreement or
otherwise and all rights that it might have to benefit from, or to participate
in, any security for the Obligations as a result of any payment made by Borrower
with respect to the Obligations in connection with this Agreement or otherwise.
Any agreement providing for indemnification, reimbursement or any other
arrangement prohibited under this Section shall be null and void. If any payment
is made to a Borrower in contravention of this Section, such Borrower shall hold
such payment in trust for Bank and such payment shall be promptly delivered to
Bank for application to the Obligations, whether matured or unmatured.
-18-
13 DEFINITIONS
13.1 DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"ACCOUNT" is any "account" as defined in the Code with such additions to
such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to a Borrower.
"ACCOUNT DEBTOR" is any "account debtor" as defined in the Code with such
additions to such term as may hereafter be made.
"ADVANCE" or "ADVANCES" means an advance (or advances) under the Revolving
Line.
"AFFILIATE" of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"AGREEMENT" is defined in the preamble hereof.
"APPLICABLE RATE" is, through the quarter ending June 30, 2007, the Prime
Rate plus one and one-half percent (1.5%). Thereafter, when Borrower's Liquidity
is greater than or equal to $25,000,000, the Prime Rate plus three-quarters of
one percent (0.75%) and, at all other times, the Prime Rate plus one and
one-half percent (1.5%).
"AVAILABILITY AMOUNT" is (a) the lesser of (i) the Revolving Line or (ii)
the Borrowing Base minus (b) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) plus an amount equal to the
Letter of Credit Reserve, minus (c) the FX Reserve, minus (d) any amounts used
for Cash Management Services, and minus (e) the outstanding principal balance of
any Advances.
"BANK" is defined in the preamble hereof.
"BANK EXPENSES" are all audit fees and expenses, costs, and expenses
(including reasonable attorneys' fees and expenses) for preparing, amending,
negotiating, administering, defending and enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or
Insolvency Proceedings) or otherwise incurred with respect to Borrower.
"BORROWER(S)" are defined in the preamble hereof.
"BORROWER'S BOOKS" are all a Borrower's books and records including
ledgers, federal and state tax returns, records regarding a Borrower's assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
"BORROWING BASE" means 80% of Eligible Accounts, as determined by Bank
from Borrowers' most recent Transaction Reports; provided, however, that Bank
may decrease the foregoing percentage in its good faith business judgment based
on events, conditions, contingencies, or risks which, as determined by Bank, may
adversely affect Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
Bank is closed.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or ▇▇▇▇▇'▇ Investors Service, Inc.; (c) Bank's certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
-19-
"CASH MANAGEMENT SERVICES" is defined in Section 2.1.4.
"CODE" is the Uniform Commercial Code, as the same may, from time to time,
be enacted and in effect in the State of California; provided, that, to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank's Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the State of
California, the term "CODE" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes on the provisions
thereof relating to such attachment, perfection, priority, or remedies and for
purposes of definitions relating to such provisions.
"COLLATERAL" is any and all properties, rights and assets of Borrowers
described on EXHIBIT A.
"COLLATERAL ACCOUNT" is any Deposit Account, Securities Account, or
Commodity Account.
"COMMITTED AVAILABILITY" means, as the date of determination, an amount
equal to the Borrowing Base MINUS all outstanding Credit Extensions.
"COMMODITY ACCOUNT" is any "commodity account" as defined in the Code with
such additions to such term as may hereafter be made.
"COMMUNICATION" is defined in Section 10.
"COMPLIANCE CERTIFICATE" is that certain certificate in the form attached
hereto as EXHIBIT B.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
"CONTROL AGREEMENT" is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which a Borrower maintains
a Securities Account or a Commodity Account, Borrower, and Bank pursuant to
which Bank obtains control (within the meaning of the Code) over such Deposit
Account, Securities Account, or Commodity Account.
"CREDIT EXTENSION" is any Advance, Letter of Credit, FX Forward Contract,
amount utilized for Cash Management Services, or any other extension of credit
by Bank for Borrower's benefit.
"CREDIT PARTIES" are all Borrowers and Guarantors.
"DEFAULT RATE" is defined in Section 2.3(b).
"DEFERRED REVENUE" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"DEPOSIT ACCOUNT" is any "deposit account" as defined in the Code with
such additions to such term as may hereafter be made.
-20-
"DESIGNATED DEPOSIT ACCOUNT" is, for GlobalOptions, deposit account number
3300405584, and for Bode, deposit account number ______________, each maintained
with Bank.
"DOLLARS," "DOLLARS" and "$" each mean lawful money of the United States.
"EBDA" shall mean (a) Net Income, plus (b) to the extent deducted in the
calculation of Net Income, depreciation expense, amortization expense, non-cash
impairment and stock compensation charges, and other non-cash charges as may be
agreed between Bank and Borrower.
"EFFECTIVE DATE" is May 14, 2007.
"ELIGIBLE ACCOUNTS" means Accounts which arise in the ordinary course of a
Borrower's business that meet all Borrower's representations and warranties in
Section 5.3. Bank reserves the right at any time after the Effective Date to
adjust any of the criteria set forth below and to establish new criteria in its
good faith business judgment. Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor has not been invoiced;
(b) Accounts that the Account Debtor has not paid within ninety
(90) days of invoice date;
(c) Accounts owing from an Account Debtor, fifty percent (50%) or
more of whose Accounts have not been paid within ninety (90) days of invoice
date;
(d) Accounts with credit balances over ninety (90) days from
invoice date;
(e) Accounts owing from an Account Debtor, including Affiliates,
whose total obligations to Borrower exceed twenty-five (25%) of all Accounts
(except for Accounts from the State of Louisiana, for which such percentage is
35%) for the amounts that exceed that percentage, unless Bank approves in
writing;
(f) Accounts owing from an Account Debtor which does not have its
principal place of business in the United States;
(g) Accounts owing from an Account Debtor which is a federal
government entity or any department, agency, or instrumentality thereof except
for Accounts of the United States if a Borrower has assigned its payment rights
to Bank and the assignment has been acknowledged under the Federal Assignment of
Claims Act of 1940, as amended;
(h) Accounts owing from an Account Debtor to the extent that a
Borrower is indebted or obligated in any manner to the Account Debtor (as
creditor, lessor, supplier or otherwise - sometimes called "contra" accounts,
accounts payable, customer deposits or credit accounts), with the exception of
customary credits, adjustments and/or discounts given to an Account Debtor by a
Borrower in the ordinary course of its business;
(i) Accounts for demonstration or promotional equipment, or in
which goods are consigned, or sold on a "sale guaranteed", "sale or return",
"sale on approval", "▇▇▇▇ and hold", or other terms if Account Debtor's payment
may be conditional;
(j) Accounts for which the Account Debtor is a Borrower's
Affiliate, officer, employee, or agent;
(k) Accounts in which the Account Debtor disputes liability or
makes any claim (but only up to the disputed or claimed amount), or if the
Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or
goes out of business;
(l) Accounts owing from an Account Debtor with respect to which a
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue); and
(m) Accounts for which Bank in its good faith business judgment
determines collection to be doubtful.
-21-
"EQUIPMENT" is all "equipment" as defined in the Code with such additions
to such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.
"ERISA" is the Employee Retirement Income Security Act of 1974, and its
regulations.
"EVENT OF DEFAULT" is defined in Section 8.
"FUNDING DATE" is any date on which a Credit Extension is made to or on
account of a Borrower which shall be a Business Day.
"FX BUSINESS DAY" is any day when (a) Bank's Foreign Exchange Department
is conducting its normal business and (b) the Foreign Currency being purchased
or sold by Borrower is available to Bank from the entity from which Bank shall
buy or sell such Foreign Currency.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL INTANGIBLES" is all "general intangibles" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
"GOVERNMENTAL APPROVAL" is any consent, authorization, approval, order,
license, franchise, permit, certificate, accreditation, registration, filing or
notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.
"GOVERNMENTAL AUTHORITY" is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
"GUARANTOR" is any present or future guarantor of the Obligations,
including GlobalOptions Group, Inc.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVENTORY" is all "inventory" as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and
includes without limitation all merchandise, raw materials, parts, supplies,
-22-
packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
"INVESTMENT" is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.
"IP AGREEMENT" is each of (a) that certain Intellectual Property Security
Agreement executed and delivered by GlobalOptions to Bank, dated as of October
12, 2006, as amended from time to time and (b) that (a) that certain
Intellectual Property Security Agreement executed and delivered by Bode to Bank,
dated of even date herewith, as amended from time to time.
"LETTER OF CREDIT" means a standby letter of credit issued by Bank or
another institution based upon an application, guarantee, indemnity or similar
agreement on the part of Bank as set forth in Section 2.1.2.
"LETTER OF CREDIT APPLICATION" is defined in Section 2.1.2(a).
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2(d).
"LIEN" is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.
"LIQUIDITY" is defined in Section 6.9(a).
"LOAN DOCUMENTS" are, collectively, this Agreement, the Perfection
Certificates, the IP Agreements, any note, or notes or guaranties executed by
Borrower or any Guarantor, and any other present or future agreement between
Borrower any Guarantor and/or for the benefit of Bank in connection with this
Agreement, all as amended, restated, or otherwise modified.
"MATERIAL ADVERSE CHANGE" is (a) a material impairment in the perfection
or priority of Bank's Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of either Borrower; (c) a material impairment of the
prospect of repayment of any portion of the Obligations or (d) Bank determines,
based upon information available to it and in its reasonable judgment, that
there is a reasonable likelihood that either Borrower shall fail to comply with
one or more of the financial covenants in Section 6 during the next succeeding
financial reporting period.
"NET CASH BALANCE" is the aggregate average daily cash balance of the
Credit Parties at Bank minus all outstanding Advances and minus the face amount
of all outstanding Letters of Credit.
"NET INCOME" means, as calculated on a consolidated basis for Borrowers
and their Subsidiaries for any period as at any date of determination, the net
profit (or loss), after provision for taxes, of Borrowers and their Subsidiaries
for such period taken as a single accounting period.
"OBLIGATIONS" are any Credit Party's obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts any Credit Party owes Bank
now or later, whether under this Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of any Credit Party assigned to Bank, and the performance of any
Credit Party's duties under the Loan Documents.
"PERMITTED ACQUISITIONS" include (i) acquisitions by a Borrower, of
substantially all the stock or property of any Person or (ii) acquisitions by
Guarantor which result in substantially all of the stock or property of a Person
being owned by a Borrower following the closing of such transaction, in each
case where:
(a) Borrowers have provided Bank with no less than 30 days notice prior
to the closing of such transaction, which notice includes the details of such
transaction, including, without limitation, the name of the Person that a
-23-
Borrower or Guarantor, as the case may be, is acquiring, the total consideration
for the transaction (broken out into line items for cash and other property),
the form of the transaction (asset purchase, stock purchase or otherwise) and
any other information reasonably requested by Bank;
(b) Borrowers have provided Bank with lien and judgment searches
conducted by Borrowers on the Person being acquired prior to the closing of the
transaction (which shall include, without limitation lien searches on any other
names (prior names, d/b/a's or otherwise) of such Person used within the past
five years);
(c) The Net Cash Balance is greater than $5,000,000 prior to and
immediately following such transaction;
(d) The cash portion of the purchase price in such transaction is not
more than $5,000,000 in the aggregate, including any contingent obligations
(other than earn out payments);
(e) The aggregate cash portion of the purchase price paid in all such
transactions since March 31, 2007, without limitation all, including contingent
obligations, is not more than $15,000,000 in the aggregate (other than earn out
payments);
(f) An Event of Default has not occurred and is continuing or could
reasonably be expected to result from such transaction; and
(g) The assets of the target company in such acquisition are free and
clear of all Liens that would not otherwise constitute Permitted Liens hereunder
at the time of the closing of such transaction.
"PERFECTION CERTIFICATE" is defined in Section 5.1.
"PERMITTED INDEBTEDNESS" is:
(a) Borrowers' Indebtedness to Bank under this Agreement and the other
Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors and with respect to surety
bonds and similar obligations incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business;
(f) Indebtedness secured by Permitted Liens; and
(g) extensions, refinancings, modifications, amendments and restatements
of any items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;
(b) Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of a
Borrower;
(d) Investments consisting of deposit accounts in which Bank has a
perfected security interest;
-24-
(e) Investments accepted in connection with Transfers permitted by
Section 7.1;
(f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by a Borrower's Board of
Directors;
(g) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; and
(h) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary.
"PERMITTED LIENS" are:
(a) Liens arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which a
Borrower maintains adequate reserves on Borrower's Books, if they have no
priority over any of Bank's security interests;
(c) Purchase money Liens securing no more than $50,000.00 in the
aggregate amount outstanding (i) on equipment acquired or held by a Borrower
incurred for financing the acquisition of the equipment, or (ii) existing on
equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;
(d) Leases or subleases and non-exclusive licenses or sublicenses
granted in the ordinary course of Borrower's business, if the leases, subleases,
licenses and sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (d), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"PRIOR AGREEMENT" is defined in the preamble hereof.
"REQUIREMENT OF LAW" is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESERVES" means, as of any date of determination, such amounts as Bank
may from time to time establish and revise in its good faith business judgment,
reducing the amount of Advances and other financial accommodations which would
otherwise be available to a Borrower (a) to reflect events, conditions,
contingencies or risks which, as determined by Bank in its good faith business
judgment, do or may adversely affect (i) the Collateral or any other property
which is security for the Obligations or its value (including without limitation
any increase in delinquencies of Accounts), (ii) the assets, business or
prospects of a Borrower or any Guarantor, or (iii) the security interests and
other rights of Bank in the Collateral (including the enforceability, perfection
and priority thereof); or (b) to reflect Bank's good faith belief that any
collateral report or financial information furnished by or on behalf of a
Borrower or any Guarantor to Bank is or may have been incomplete, inaccurate or
misleading in any material respect; or (c) in respect of any state of facts
which Bank determines in good faith constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default.
-25-
"RESPONSIBLE OFFICER" is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of a Borrower.
"REVOLVING LINE" is an Advance or Advances in an amount equal to Fifteen
Million Dollars ($15,000,000.00).
"REVOLVING LINE MATURITY DATE" is 364 days from the Effective Date.
"SECURITIES ACCOUNT" is any "securities account" as defined in the Code
with such additions to such term as may hereafter be made.
"SETTLEMENT DATE" is defined in Section 2.1.3.
"SUBLIMIT AVAILABILITY AMOUNT" is $3,000,000.
"SUBORDINATED DEBT" is indebtedness incurred by a Borrower subordinated to
all of such Borrower's now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.
"SUBSIDIARY" means, with respect to any Person, any Person of which more
than 50.0% of the voting stock or other equity interests (in the case of Persons
other than corporations) is owned or controlled directly or indirectly by such
Person or one or more of Affiliates of such Person.
"TRANSACTION REPORT" is that certain report of transactions and schedule
of collections in the form attached hereto as EXHIBIT C.
"TRANSFER" is defined in Section 7.1.
"UNUSED REVOLVING LINE FACILITY FEE" is defined in Section 2.4(d).
[Signature page follows.]
-26-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
BORROWERS:
GLOBALOPTIONS, INC.
By
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
THE BODE TECHNOLOGY GROUP, INC.
By
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
BANK:
SILICON VALLEY BANK
By
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[Signature page to Loan and Security Agreement]
