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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
ECC INTERNATIONAL CORP., ECC VENDING CORP.
and EDUCATIONAL COMPUTER CORPORATION INTERNATIONAL
with
MELLON BANK, N.A., as Agent and Issuing Bank
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION................................................................. 1
1.1 Terms Defined.................................................................................. 1
1.2 Accounting Principles.......................................................................... 11
SECTION 2. THE LOANS...................................................................................... 11
2.1 Revolving Credit - Description................................................................. 11
2.2 Letters of Credit:............................................................................. 12
2.3 Intentionally Omitted.......................................................................... 13
2.4 Advances, Conversions, Renewals and Payments................................................... 13
2.5 Interest....................................................................................... 16
2.6 Additional Interest Provisions................................................................. 18
2.7 Fees........................................................................................... 19
2.8 Prepayments.................................................................................... 20
2.9 Use of Proceeds................................................................................ 20
2.10 Indemnity/Loss of Margin....................................................................... 20
2.11 Capital Adequacy............................................................................... 21
2.12 Replacement of Lender.......................................................................... 21
SECTION 3. COLLATERAL..................................................................................... 22
3.1 Description.................................................................................... 22
3.2 Lien Documents................................................................................. 23
3.3 Other Actions.................................................................................. 23
3.4 Searches....................................................................................... 23
3.5 Landlord's Waivers............................................................................. 24
3.6 Filing Security Agreement...................................................................... 24
3.7 Power of Attorney.............................................................................. 24
3.8 Verifications.................................................................................. 24
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES................................................... 25
4.1 Resolutions, Opinions, and Other Documents..................................................... 25
4.2 Absence of Certain Events...................................................................... 26
4.3 Warranties and Representations at Closing...................................................... 26
4.4 Compliance with this Agreement................................................................. 26
4.5 Officer's Certificate.......................................................................... 26
4.6 Field Examination.............................................................................. 26
4.7 Cash Collateral Account........................................................................ 27
4.8 Closing........................................................................................ 27
4.9 Non-Waiver of Rights........................................................................... ▇▇
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▇▇▇▇▇▇▇ ▇. REPRESENTATIONS AND WARRANTIES................................................................. 27
5.1 Corporate Organization and Validity............................................................ 27
5.2 Places of Business............................................................................. 28
5.3 Pending Litigation............................................................................. 28
5.4 Title to Properties............................................................................ 28
5.5 Governmental Consent........................................................................... 28
5.6 Taxes.......................................................................................... 28
5.7 Financial Statements........................................................................... 28
5.8 Full Disclosure................................................................................ 29
5.9 Subsidiaries................................................................................... 29
5.10 Guarantees, Contracts, etc..................................................................... 29
5.11 Government Regulations, etc.................................................................... 29
5.12 Business Interruptions......................................................................... 30
5.13 Names.......................................................................................... 30
5.14 Other Associations............................................................................. 31
5.15 Environmental Matters.......................................................................... 31
5.16 Regulation O................................................................................... 31
5.17 Capital Stock.................................................................................. 31
5.18 Solvency....................................................................................... 32
5.19 Patents, Trademarks, Etc....................................................................... 32
5.20 Investment Company............................................................................. 32
5.21 Year 2000 Compliance........................................................................... 32
5.22 Closure of UK Subsidiary....................................................................... 32
SECTION 6. AFFIRMATIVE COVENANTS.......................................................................... 32
6.1 Payment of Taxes and Claims.................................................................... 33
6.2 Maintenance of Properties and Corporate Existence.............................................. 33
6.3 Business Conducted............................................................................. 34
6.4 Litigation..................................................................................... 34
6.5 Taxes.......................................................................................... 35
6.6 Bank Accounts.................................................................................. 37
6.7 Employee Benefit Plans......................................................................... 37
6.8 Warranties for Future Advances................................................................. 37
6.9 Financial Covenants............................................................................ 38
6.10 Financial and Business Information............................................................. 39
6.11 Officers' and Accountant's Certificates........................................................ 41
6.12 Inspection..................................................................................... 41
6.13 Tax Returns and Reports........................................................................ 41
6.14 Information to Participant..................................................................... 41
6.15 Material Adverse Developments.................................................................. 42
6.16 Name Changes, Places of Business............................................................... 42
6.17 Year 2000 Compliance........................................................................... 42
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SECTION 7. NEGATIVE COVENANTS:............................................................................ 42
7.1 Merger, Consolidation, Dissolution or Liquidation.............................................. 42
7.2 Acquisitions................................................................................... 42
7.3 Liens and Encumbrances......................................................................... 42
7.4 Transactions With Affiliates or Subsidiaries................................................... 43
7.5 Guarantees..................................................................................... 43
7.6 Distributions, Redemptions and Other Indebtedness.............................................. 44
7.7 Loans and Investments.......................................................................... 44
7.8 Use of Lenders' Name........................................................................... 44
7.9 Miscellaneous Covenants........................................................................ 44
7.10 Change of Executive Management................................................................. 44
SECTION 8. DEFAULT........................................................................................ 44
8.1 Events of Default.............................................................................. 44
8.2 Cure........................................................................................... 47
8.3 Rights and Remedies on Default................................................................. 47
8.4 Nature of Remedies............................................................................. 48
8.5 Set-Off........................................................................................ 48
SECTION 9. AGENT.......................................................................................... 48
9.1 Appointment and Authorization.................................................................. 48
9.2 General Immunity............................................................................... 49
9.3 Consultation with Counsel...................................................................... 49
9.4 Documents...................................................................................... 49
9.5 Rights as a Lender............................................................................. 49
9.6 Responsibility of Agent........................................................................ 49
9.7 Collections and Disbursements.................................................................. 50
9.8 Indemnification................................................................................ 51
9.9 Expenses....................................................................................... 51
9.10 No Reliance.................................................................................... 52
9.11 Reporting...................................................................................... 52
9.12 Removal of Agent............................................................................... 52
9.13 Action on Instructions of Lenders.............................................................. 52
9.14 Several Obligations............................................................................ 53
9.15 Consent of Lenders to Agent's Rights........................................................... 53
9.16 Participations and Assignments................................................................. 54
SECTION 10. MISCELLANEOUS.................................................................................. 55
10.1 GOVERNING LAW.................................................................................. 55
10.2 Integrated Agreement........................................................................... 55
10.3 Waiver......................................................................................... 55
10.4 Time........................................................................................... 55
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10.5 Expenses of Agent and Lenders.................................................................. 56
10.6 Brokerage...................................................................................... 56
10.7 Notices........................................................................................ 56
10.8 Headings....................................................................................... 57
10.9 Survival....................................................................................... 57
10.10 Successors and Assigns......................................................................... 58
10.11 Duplicate Originals............................................................................ 58
10.12 Modification................................................................................... 58
10.13 Signatories.................................................................................... 58
10.14 Third Parties.................................................................................. 58
10.15 Discharge of Taxes, Borrowers' Obligations, Etc................................................ 58
10.16 Withholding and Other Tax Liabilities.......................................................... 59
10.17 Publicity...................................................................................... 59
10.18 Partial Release of Mortgage.................................................................... 59
10.19 Consent to Jurisdiction........................................................................ 59
10.20 Confession of Judgment......................................................................... 60
10.21 Waiver of Jury Trial........................................................................... 60
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated as of the 24th
day of June, 1999, by and among ECC INTERNATIONAL CORP., ECC VENDING CORP. AND
EDUCATIONAL COMPUTER CORPORATION INTERNATIONAL (collectively the "Borrower"),
MELLON BANK, N.A., a national banking association, in its capacity as agent,
("Agent") and MELLON BANK, N.A. ("Mellon") and each of the financial
institutions which are now or hereafter a holder of a Note and are listed on
Schedule "A" attached hereto and made a part of this Agreement (as such Schedule
may be amended, modified or replaced from time to time), in their capacity as
lenders (Mellon and the other financial institutions, individually each being a
"Lender" and collectively all being "Lenders").
BACKGROUND
A. Borrower desires to establish financing arrangements with Lenders to
permit its uninterrupted and continuous business operations. Lenders are willing
to make loans and grant extensions of credit to Borrower, under the terms and
provisions hereinafter set forth.
B. The parties desire to define the terms and conditions of their
relationship and reduce them to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have
the following respective meanings:
Account - Any right to payment for goods sold or leased or for
services rendered which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance.
Account Debtor - Any Person obligated on any Account owing to
Borrower.
Advance(s) - Any monies advanced or credit extended to
Borrower by any Lender under the Revolving Credit, including without limitation
cash advances and the issuance of Letters of Credit.
Affiliate - Section 7.4.
Agreement - This Loan and Security Agreement, as it may
hereafter be amended, supplemented or replaced from time to time.
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Applicable Base Rate Margin - (a) Two percent (2%) per annum;
(b) ten (10) business days after Agent's receipt of Borrower's annual audited
financial statements for its fiscal year ending June 30, 2000, and thereafter,
one percent (1%) if (i) no Event of Default is reflected by such financial
statements and no Event of Default is otherwise then outstanding and (ii) there
then exists a minimum Excess Borrowing Availability of $4,000,000 (which minimum
borrowing availability shall have also existed during the 30 day period
preceding and following receipt of such financial statements); and (c) ten (10)
business days after Agent's receipt of Borrower's annual audited financial
statements for its fiscal year ending June 30, 2001, and thereafter, one half of
one percent (0.5%) if (i) no Event of Default is reflected by such financial
statements and no Event of Default is otherwise then outstanding and (ii) there
then exists a minimum Excess Borrowing Availability of $4,000,000 (which minimum
borrowing availability shall have also existed during the 30 day period
preceding and following receipt of such financial statements).
Applicable LIBOR Rate Margin - Three percent (3%) per annum.
Authorized Officer - Any officer or employee of Borrower
authorized by Borrower to request Advances as set forth in a Borrowing
Authorization.
Base Rate - The Prime Rate.
Base Rate Loan - That portion of the Loans on which interest
accrues at the Base Rate plus the Applicable Base Rate Margin.
Base Rate Option - Section 2.5(a).
Borrowing Authorization - A document, in the form of Exhibit 1
attached hereto and made part hereof, signed and delivered to Agent by an
Authorized Officer of Borrower.
Borrowing Base - As of any date of determination, an amount
equal to (a) the sum of (i) 30% of Eligible Accounts; (ii) the lesser of (A) 30%
of Eligible Unbilled Accounts or (B) $6,500,000 and (iii) the Fixed Asset
Availability Component, less (b) the L/C Reserve, the Lockheed Reserve and all
other reserves as Agent may, in its discretion, establish from time to time.
Borrowing Base Certificate - Section 2.1(d).
Business Day - Any day that is not a Saturday or Sunday or day
on which Agent or any Lender is required or permitted to close, and solely with
respect to LIBOR Rate Loans requested by Borrower, shall mean any day on which
the Agent is able to determine the LIBOR Rate for such requested LIBOR Rate
Loan.
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Capital Expenditures - Any expenditure that would be
classified as a capital expenditure on a statement of cash flow of Borrower
prepared in accordance with GAAP, consistently applied.
Cash Collateral Account - Section 2.4(b).
Century Compliant - Section 5.21.
Closing - Section 4.6.
Closing Date - Section 4.6.
Collateral - Section 3.1.
Collateral Management Fee - Section 2.7(e).
Commitment Fee - Section 2.7(a).
Current Assets - All assets that should be classified as
current assets on a consolidated balance sheet of Borrower prepared in
accordance with GAAP.
Current Liabilities - All liabilities that should be
classified as current liabilities on a consolidated balance sheet of Borrower
prepared in accordance with GAAP, including without limitation, in any event for
covenant purposes only, the Revolving Credit Loans.
Default Rate - Section 2.6(c).
Distribution -
(1) Dividends or other distributions of any kind on capital
stock of Borrower;
(2) The redemption, repurchase or acquisition of such stock or
interests or of warrants, rights or other options to purchase such stock or
interests.
Eligible Accounts - All Accounts of Borrower meeting all of
the following specifications: (i) the Account is lawfully and exclusively owned
by Borrower and subject to no Lien other than Liens of Agent for the benefit of
Lenders, and Borrower has the right of assignment thereof and the power to grant
a security interest therein; (ii) the Account is valid and enforceable
representing the indebtedness of an Account Debtor not more than 90 days past
the original invoice date (which 90 day period may be extended at Agent's sole
discretion limited only to final contract ▇▇▇▇▇▇▇▇ remaining unpaid as a result
of Borrower's post contract award closeout process in the normal course of
business); (iii) except for amounts owed under the Lockheed Note, the Account is
not subject to any defense, set-off, counterclaim, dispute,
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deduction, discount, credit, chargeback, freight claim, allowance or adjustment
of any kind; (iv) no part of any goods, the sale or lease of which has given
rise to the Account, has been returned, rejected, lost or damaged; (v) if the
Account arises from the sale of goods by Borrower, such sale was an absolute
sale and not on consignment or on approval or on a sale-or-return basis or
subject to any other repurchase or return agreement, and such goods have been
shipped to the Account Debtor or its designee; (vi) if the Account arises from
the performance of services, such services have actually been performed; (vii)
the Account arose in the ordinary course of Borrower's business; (viii) no
notice of the bankruptcy, receivership, reorganization, liquidation,
dissolution, or insolvency of the Account Debtor has been received by Agent or
Borrower; (ix) the Account Debtor is not a Subsidiary, Affiliate or employee of
Borrower and does not control Borrower and is not under the control of or under
common control with Borrower; (x) it is not an Account of an Account Debtor
having its principal place of business or executive office outside of the United
States unless such Account is guaranteed in full by an irrevocable letter of
credit reasonably satisfactory to Agent and assigned and delivered to Agent;
(xi) except as may be approved in writing by Agent in advance, the Account does
not represent a sale to the government of the United States or any subdivision
thereof unless Borrower has complied, for the benefit of Agent, with the Federal
Assignment of Claims Act (within ninety (90) days after the (i) the date hereof
with respect to existing contracts or (ii) the execution of a contract giving
rise to any such Account); (xii) the Account, together with all other Accounts
owing from the same Account Debtor, represents no more than seventy five percent
(75%) of all of the Accounts of Borrower; (xiii) not more than fifty percent
(50%) of the aggregate balance of all Accounts owing from the Account Debtor
obligated on the Account are outstanding more than ninety (90) days past
original invoice date excluding amounts more than ninety (90) days past original
invoice date at Agent's discretion as described in clause (ii) above; (xiv) the
Account is payable in lawful money of the United States; (xv) the Account Debtor
is not an individual; (xvi) in the Agent's discretion, progress ▇▇▇▇▇▇▇▇ and/or
payments due on account of goods shipped or services performed in connection
with ongoing contracts identified on Schedule 1.1, as may be supplemented and/or
amended from time to time with new contracts, shall be deemed Eligible Accounts
for purposes hereof; and (xvii) the Account meets such other specifications and
requirements which may from time to time be established by Agent. Eligible
Accounts shall not include that portion of an Account representing interest or
late charges for past due balances, debit memos, or retainage.
Eligible Unbilled Accounts - Accounts of Borrower treated in
Borrower's records as revenue recognized and meeting all the criteria of
Eligible Accounts except that no ▇▇▇▇ has been rendered (with the aggregate of
such accounts not exceeding an amount equal to total contract value less
▇▇▇▇▇▇▇▇).
ERISA - The Employee Retirement Income Security Act of 1974,
as the same may be amended, from time to time.
Event of Default - Section 8.1.
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Excess Borrowing Availability - At the time of determination,
an amount equal to the then applicable Borrowing Base less the sum of (i) the
amount of Revolving Credit Loans as of such time of determination (including
Loans requested to be made on such date) plus (ii) all sums then due and owing
to trade creditors which remain outstanding beyond normal trade terms, plus
(iii) for the purposes of such determination on the Closing Date, closing
payments and expenses.
Executive Management - The president, chief executive officer
and chief financial officer of Borrower.
Expenses - Section 10.5.
Fixed Asset Availability Component - $4,000,000 to be reduced
by $60,000 per month for each month through the first anniversary of the date
hereof, and $75,000 per month for each month thereafter as of the first day of
each calendar month after the Closing Date. If there is a partial release of
Mortgage pursuant to Section 10.18 hereof, the Fixed Asset Availability
Component shall be reduced as set forth in Section 10.18.
GAAP - Generally accepted accounting principles applied in a
manner consistent with the most recent audited financial statements of Borrower
referred to in Section 5.7 herein.
Good Business Day - Any Business Day when banks in
Philadelphia, Pennsylvania, New York, New York and London, England are open for
business.
Inventory - As defined in the UCC.
IRS - Section 6.7.
Issuing Bank - Section 2.2(a).
Letters of Credit - Section 2.2(a).
L/C Fees - Section 2.6(c).
L/C Reserve - Section 2.2(d).
L/C Sublimit - $1,000,000.
Liabilities - All liabilities of every kind as would be shown
on a balance sheet of Borrower prepared in accordance with GAAP.
LIBOR Based Rate - The LIBOR Rate plus the Applicable LIBOR
Rate Margin.
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LIBOR Based Rate Loan - That portion of the Loans on which
interest accrues at the LIBOR Based Rate.
LIBOR Interest Period - Section 2.5(b)(ii).
LIBOR Rate - An annual rate of interest determined by Agent as
being the rate available to Agent at approximately 11:00 a.m. London time in the
London Interbank Market, as referenced by Reuters Screen "LIBOR", in accordance
with the usual practice in such market, for the LIBOR Interest Period elected by
Borrower, in effect two Good Business Days prior to the funding date for a
requested LIBOR Based Rate Loan (including those requested in connection with
the conversion of a Base Rate Loan to a LIBOR Based Rate Loan in accordance with
Section 2.5 hereof), or for a LIBOR Based Rate Loan which Borrower has elected
to continue as a LIBOR Based Rate Loan beyond the expiration of the then current
LIBOR Interest Period with respect thereto, for deposits of dollars in amounts
equal (as nearly as may be estimated) to the amount of the LIBOR Based Rate Loan
which shall then be loaned by the Lenders to Borrower as of the time of such
determination, as such rate may be adjusted by the reserve percentage applicable
during the LIBOR Interest Period in effect (or if more than one such percentage
shall be applicable, the daily average of such percentages for those days in
such LIBOR Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including without limitation, any emergency, supplemental
or other marginal reserve requirement) for the Agent with respect to liabilities
or assets consisting of or including "Eurocurrency Liabilities" as such term is
defined in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time, having a term equal to such LIBOR Interest
Period ("Eurocurrency Reserve Requirement"), as reasonably applied to loans of
this type generally by the asset based loan department of Agent. Such adjustment
shall be effectuated by calculating, and the LIBOR Rate shall be equal to, the
quotient of (i) the offered rate divided by (ii) one minus the Eurocurrency
Reserve Requirement.
Lien - Any interest of any kind or nature in property securing
an obligation owed to, or a claim of any kind or nature in Property by, a Person
other than the owner of the Property, whether such interest is based on the
common law, statute, regulation or contract, and including, but not limited to,
a security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt, a capitalized lease, consignment or bailment
for security purposes, a trust, or an assignment, or as a result of the issuance
of any execution or distraint process against Borrower. The term "Lien" shall
include without limitation, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property other than Permitted Liens or
those which would not materially interfere with Borrower's use of the Property
and would not materially detract from the value of the Property. For the
purposes of this Agreement, Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a
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conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
Loans - The unpaid balance of Advances under the Revolving
Credit (including without limitation the undrawn amounts under all issued and
outstanding Letters of Credit and all unreimbursed draws on Letters of Credit,
unless expressly stated otherwise).
Loan Documents - This Agreement, the Revolving Credit Notes,
the Mortgage, the Stock Pledge Agreement and all agreements, instruments and
documents executed and/or delivered from time to time pursuant to this Agreement
or in connection therewith, as amended or replaced from time to time.
Lockbox Agreement - That certain Lockbox Agreement(s) between
Borrower and Agent executed and delivered by Borrower to Agent as it or they may
be amended, supplemented or replaced from time to time.
Lockbox - Section 2.4(b).
Lockheed - Lockheed ▇▇▇▇▇▇, ASIC.
Lockheed Note - That certain promissory note between Lockheed,
as obligee, and the Borrower, as obligor, dated December 10, 1998.
Lockheed Reserve - The lesser of (a) $604,000 or (b) the
outstanding amount of indebtedness of Borrower to Lockheed.
Majority Lenders - At any time, Lenders holding Revolving
Credit Pro Rata Percentages aggregating at least Fifty-One (51%) percent of the
total Revolving Credit Pro Rata Shares.
Material Adverse Effect - Any material adverse effect on the
Borrower's financial condition, assets, operating status or projected financial
condition or any fact or circumstance that, singly or in the aggregate with any
fact or circumstance, has a reasonable likelihood of resulting in or leading to
the inability of Borrower to perform in any material respect its obligations
under this Agreement or under any Loan Document or the inability of Agent and/or
Lenders to enforce in any material respect the rights purported to be granted to
them under this Agreement or any Loan Document or which might have a material
adverse effect on the ability of Borrower to effectuate (including hindering or
unduly delaying) the transactions contemplated by this Agreement and the Loan
Documents on the terms contemplated hereby and thereby.
Mortgage - That certain First Mortgage, Security Agreement and
Assignment of Leases and Rents of even date herewith between Borrower and Agent
as it may be amended, supplemented or replaced from time to time creating a
valid first lien on the real property,
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improvements and fixtures situate at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ more
particularly described in said Mortgage.
Net Cash Flow - Except as may otherwise be defined herein, Net
Income plus depreciation, amortization and non-cash subordinated interest
expense, minus all Capital Expenditures, all scheduled principal payments made
on long term indebtedness and scheduled reductions under the Fixed Asset
Availability Component.
Net Income - Net income after taxes as such would appear on a
consolidated statement of income of Borrower, prepared in accordance with GAAP.
Net Proceeds - Section 10.18.
Notes - Collectively the Revolving Credit Notes.
Obligations - All existing and future liabilities and
obligations of every kind or nature at any time owing by Borrower to Lenders,
Issuing Bank, and/or to Agent in connection with the Loan Documents (including,
without limitation, this Agreement and the Revolving Credit Notes) and the
transactions contemplated hereby and thereby or administration thereof, whether
joint or several, related or unrelated, primary or secondary, matured or
contingent, direct or indirect, due or to become due, and whether principal,
interest, fees or Expenses, including, without limitation, Obligations in
respect of the Revolving Credit whether related to cash Advances or Letters of
Credit (whether drawn or undrawn) and any extensions, modifications,
substitutions, increases and renewals thereof, and the payment of all reasonable
amounts advanced by Agent, on behalf of Lenders, to preserve, protect and
enforce rights hereunder and in the Collateral and all Expenses incurred in
connection therewith and herewith.
Overadvances - Any amounts by which the outstanding Revolving
Loans (including, without limitation, drawn and undrawn amounts under Letters of
Credit) at any time exceed the Borrowing Base.
PBGC - Section 6.7.
Permitted Investments - (a) Investments made at any time there
were no Revolving Loans outstanding in direct or indirect obligations of, or
obligations unconditionally guaranteed by, the United States of America and
maturing within twelve (12) months from the date of acquisition; (b) investments
in commercial paper of Agent or commercial paper rated "Prime-1" by ▇▇▇▇▇'▇
Investors Services or "A-1" by Standard & Poor's Corporation, or with an
equivalent rating by another rating agency of nationally recognized standing,
maturing within twelve (12) months from the date of acquisition; (c)
certificates of deposit maturing within twelve (12) months from the date of
acquisition and issued by Agent; provided that Agent has a perfected first lien
security interest in and control over all such Investment Property; (d)
investments and loans in Subsidiaries existing as of the date hereof; (e) loans
and advances existing as of the date
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hereof; (f) other investments not to exceed $100,000 in the aggregate at any one
time; (g) vendor advances for tooling purposes in the ordinary course of
business not to exceed $200,000 outstanding at any time during the term hereof;
and (h) inter-company loans for tax planning purposes between ECC International
Corp. and Educational Computer Corporation International.
Permitted Liens - Section 7.3.
Person - An individual, partnership, corporation, trust,
unincorporated association or organization, joint venture, limited liability
company or partnership, or any other entity.
Prime Rate - That per annum rate designated or announced by
Agent at its principal office from time to time as its prime rate of interest,
which may be greater or less than other interest rates charged by Agent to other
borrowers and is not solely based or dependent upon the interest rate which
Agent may charge any particular borrower or class of borrowers.
Property - Any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Pro Rata Percentage - Section 2.1(a)(ii).
Regulation D - Regulation D of the Board of Governors of the
Federal Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
Revolving Credit - Section 2.1(a).
Revolving Credit Limit - $12,500,000.
Revolving Credit Loans - Section 2.1(a).
Revolving Credit Maturity Date - June 24, 2003.
Revolving Credit Notes - Those notes described in Section
2.1(b), as they may be amended, supplemented, replaced or restated from time to
time.
Revolving Credit Pro Rata Percentage - Section 2.1(a)(ii).
Revolving Credit Pro Rata Share - Section 2.1(a)(ii).
Revolving Credit Term - Section 2.1(c).
Settlement Date - Section 2.3(c)(iii).
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Software - collectively, all material applications, operating
and other computer programs (including, without limitation, all object code and
the source code therefor), all documentation (including, without limitation, all
programmers', users' and technical manuals for all such programs), the visual
expressions, screen formats, report formats and other design features of all
such programs, all ideas, methods, algorithms, formulae and concepts used in
developing and/or incorporated into such programs or documentation, all future
modifications, revisions, updates, releases, refinements, improvements and
enhancements of such programs or documentation, all derivative works based upon
any of the foregoing, and all copies of the foregoing.
Stock Pledge Agreement - That certain Stock Pledge Agreement
of even date herewith between Borrower and Lender pledging sixty five percent
(65%) of the ownership of the UK Subsidiary.
Subordinated Debt - All indebtedness of Borrower subject to
payment terms and subordination provisions acceptable to Agent in its
discretion.
Subsidiary - Any corporation more than fifty percent (50%) of
whose voting stock is legally and beneficially owned directly or indirectly by
Borrower or owned by a corporation more than fifty percent (50%) of whose voting
stock is legally and beneficially owned directly or indirectly by Borrower.
Tangible Net Worth - The amount by which the assets (excluding
trademarks, goodwill, covenants not to compete, deferred closing costs and all
other assets as would be characterized as intangible assets under GAAP) exceed
all Liabilities as would be shown on a balance sheet of Borrower, prepared in
accordance with GAAP.
Termination Fee - Section 2.7(d).
Total Liabilities - All liabilities as shown on a balance
sheet of Borrower prepared in accordance with GAAP.
UCC - The Uniform Commercial Code as adopted in the
Commonwealth of Pennsylvania at 13 Pa.C.S.A. Sections 1101 et seq.
UK Subsidiary - ECC Simulation, Ltd.
Unmatured Event of Default - An event which with the passage
of time, the giving of notice, or both would constitute an Event of Default.
Unused Revolver - means the Revolving Credit Limit minus the
Revolving Credit Loans minus the L/C Reserve.
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Unused Line Fee - Section 2.7(b).
Working Capital - Current Assets minus Current Liabilities.
Y2K Period - Section 5.21.
1.2 Accounting Principles: Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
SECTION 2. THE LOANS
2.1 Revolving Credit - Description:
(a) (i) Subject to the terms and conditions of this Agreement,
each Lender hereby establishes for the benefit of Borrower a revolving credit
facility (collectively, the "Revolving Credit") which shall include Advances
extended by Lenders to or for the benefit of Borrower from time to time
hereunder ("Revolving Credit Loans"). The aggregate principal amount of all
Revolving Credit Loans, shall not, at any time, exceed the lesser of the
Revolving Credit Limit or the Borrowing Base. Subject to such limitation, the
outstanding balance of Revolving Credit Loans may fluctuate from time to time,
to be reduced by repayments made by Borrower, to be increased by future
Revolving Credit Loans which may be made by Lenders and, subject to the
provisions of Section 8 below, shall be due and payable on the Revolving Credit
Maturity Date. If the aggregate principal amount of all Revolving Credit Loans
at any time exceeds the lesser of the Revolving Credit Limit or the Borrowing
Base, Borrower shall immediately repay such excess in full. Agent has the right
at any time and from time to time, in its reasonable discretion, to create and
set aside reasonable reserves against availability under the Borrowing Base in
such amounts as it may deem appropriate based upon Agent's evaluation of the
quality, value, collectibility or Lien status of any Collateral.
(ii) Subject to Section 8.3(a) below and the terms of this
Agreement, each Lender agrees to lend to Borrower an amount equal to such
Lender's respective percentage (as to each Lender, the percentage of the
Revolving Credit set forth opposite its name on Schedule "A" attached hereto and
made a part hereof and referred to as its "Pro Rata Percentage") of the Advance
requested by Borrower. The outstanding balance of Revolving Credit Loans of each
Lender shall not exceed the respective amount ("Revolving Credit Pro Rata
Shares") set forth opposite its name on Schedule "A".
(b) At Closing, Borrower shall execute and deliver its
promissory note to each Lender for the total principal amount of such Lender's
Revolving Credit Pro Rata Share (collectively, as may be amended, modified or
replaced from time to time, the "Revolving Credit
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Notes"). Each Revolving Credit Note shall evidence Borrower's absolute
unconditional obligation to repay such Lender for all outstanding Revolving
Credit Loans owed to such Lender, with interest as herein and therein provided.
Each and every Advance under the Revolving Credit shall be deemed evidenced by
the Revolving Credit Notes, which are deemed incorporated herein by reference
and made a part hereof.
(c) The term ("Revolving Credit Term") of the Revolving Credit
shall expire on the Revolving Credit Maturity Date. On such date, unless having
been sooner accelerated by Agent or sooner terminated by Borrower pursuant to
Section 2.8(d) hereof, all Obligations shall be due and payable in full, and
after such date no further Advances shall be available from Lenders.
(d) Borrower shall deliver a borrowing base certificate in
accordance with Section 6.10(a)(iv) hereof in the form of Exhibit 2.1(d)
attached hereto and made a part hereof ("Borrowing Base Certificate"), executed
by an Authorized Officer, prepared as of the close of business on the Business
Day immediately preceding Borrower's transmittal thereof.
2.2 Letters of Credit:
(a) As a part of the Revolving Credit and subject to its terms
and conditions (including, without limitation, the Borrowing Base) Mellon in its
capacity as a Lender ("Issuing Bank"), shall, on behalf of and for the benefit
of all Lenders, make available to Borrower documentary/merchandise letters of
credit and standby letters of credit (collectively "Letters of Credit"), the
outstanding undrawn amount of which shall not exceed, in the aggregate at any
one time the L/C Sublimit. Notwithstanding the foregoing, all Letters of Credit
shall be in form and substance satisfactory to Issuing Bank and Agent. No
documentary/merchandise letter of credit shall be issued with an expiry of
greater than 90 days from the date of issuance and unless otherwise approved by
Agent in advance, no standby letter of credit shall be issued with an expiry
date later than one year from the date of issuance, provided that any Letter of
Credit having an expiry date later than the Revolving Credit Maturity Date shall
be collateralized within five (5) business days prior to the Revolving Credit
Maturity Date with (i) cash in an amount equal to at least the L/C Reserve plus
any fees and/or expenses attendant thereto for such Letter of Credit or (ii)
such other collateral as is reasonably acceptable to Agent. Borrower shall
execute and deliver to Issuing Bank all letter of credit agreements, including
an agreement in the form attached hereto as Exhibit 2.2 and other documents
required by Issuing Bank for such purposes, all such documents to be in form and
substance satisfactory to Issuing Bank in its sole discretion.
(b) Immediately upon the issuance of any Letter of Credit,
Issuing Bank is deemed to have granted to each other Lender, and each other
Lender is hereby deemed to have acquired, an undivided participating interest
(without recourse or warranty), in accordance with each such other Lender's
respective Pro Rata Percentage, in all of Issuing Bank's rights and liabilities
with respect to such Letter of Credit. Each Lender shall be absolutely and
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unconditionally obligated without deduction or setoff of any kind, to Issuing
Bank, according to its Pro Rata Percentage, to reimburse Issuing Bank on demand
for any amount paid pursuant to any draws made at any time (including, without
limitation, following the commencement of any bankruptcy, reorganization,
receivership, liquidation or dissolution proceeding with respect to Borrower)
under any Letter of Credit.
(c) Issuing Bank shall be immediately, absolutely and
unconditionally reimbursed, without offset or deduction of any kind, by Borrower
for draws made under a Letter of Credit. Such reimbursement shall be made, at
the option of Agent, by either a cash payment by Borrower or by Lenders
automatically making or having deemed made (without further request or approval
of Borrower or Lenders), a cash Advance under the Revolving Credit (regardless
of whether availability then exists under the Borrowing Base). All cash Advances
made by Agent which constitute a reimbursement to Issuing Bank for a draw under
a Letter of Credit shall be repaid to Agent by Lenders, without deduction or
setoff of any kind, in accordance with their respective Pro Rata Percentages in
accordance with Section 2.4(c).
(d) The sum of one hundred percent (100%) of the face undrawn
amount of Letters of Credit issued and outstanding shall constitute reserves
against the Borrowing Base ("L/C Reserve").
2.3 INTENTIONALLY OMITTED
2.4 Advances, Conversions, Renewals and Payments:
(a) Except to the extent otherwise set forth in this
Agreement, all payments of principal and of interest on the Revolving Credit,
the Commitment Fee, the Expenses, the Unused Line Fee, the L/C Fees, and all
other charges and any other Obligations of Borrower hereunder, shall be made to
Agent at its main Philadelphia banking office, Mellon Bank Center, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ dollars, in immediately
available funds. Agent, on behalf of all Lenders, shall have the unconditional
right and discretion to make a cash Advance under the Revolving Credit to pay,
and/or to charge Borrower's operating account with Agent or any Lender for, all
of Borrower's Obligations as they become due from time to time under this
Agreement including without limitation, interest, principal, fees and
reimbursement of Expenses.
(b) Borrower shall maintain a lockbox and/or blocked
account(s) ("Lockbox") with Agent and/or other financial institutions acceptable
to Agent, and a non-interest bearing depository account(s) ("Cash Collateral
Account") with Agent (subject to the provisions of this subparagraph, and the
Lockbox Agreement). Borrower has agreed with Agent that all collections of
Accounts will be paid directly from Account Debtors into the Lockbox. Funds
shall then be transferred to the Cash Collateral Account which funds shall be
applied by Agent on the next Business Day to reduce the outstanding indebtedness
under the Revolving Credit, with future Advances considered by Agent under the
conditions set forth in this Section 2; provided, however, that if (a) no Event
of Default has occurred and is continuing, (b) the only Revolving
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Credit Loans outstanding are LIBOR Based Rate Loans, and (c) no Overadvances are
outstanding, funds in the Cash Collateral Account shall, if requested by
Borrower, be deposited into Borrower's deposit account with Agent. All funds
transferred from the Cash Collateral Account for application to Borrower's
Obligations shall be subject to a one (1) day funds clearance charge payable to
Agent calculated and applied in accordance with the funds clearance procedures
of the Asset Based Lender Department of the Agent. All collections of Accounts
and proceeds of other Collateral received by Borrower shall be held in trust for
the benefit of Lenders and immediately remitted, in specie, to Agent for deposit
in the Cash Collateral Account. Except as provided in the proviso to the third
sentence of this subsection (b), Borrower shall have no right of access to or
withdrawal from the Lockbox or the Cash Collateral Account; provided that if
there are no outstanding Obligations, then all collections of Accounts shall be
transferred to Borrower's operating account with Agent at such time as such
collections have become collected funds.
(c) (i) Cash Advances which may be made by Lenders from time
to time under the Revolving Credit shall be made available for the use and
benefit of Borrower by crediting such proceeds to Borrower's operating account
with Agent.
(ii) All cash Advances subject to the Base Rate
Option requested by Borrower under the Revolving Credit must be requested by
11:00 A.M., Philadelphia time, on the date such Advance is to be made, which
must be a Business Day. All cash Advances subject to the LIBOR Rate Option or
conversions from cash Advances subject to the Base Rate Option to the LIBOR Rate
Option, requested by Borrower must be requested by 11:00 A.M. Philadelphia time,
three Good Business Days prior to the date of such requested cash Advance. If
Borrower does not have the required availability for such requested Advance
under the Borrowing Base on the date any such LIBOR Based Rate Loan is to be
made, then Lenders shall not be required to make such Advance. All remittances
at any time among Lenders and Agent under this Agreement shall be made in
immediately available funds by federal funds wire transfer. All requests for a
cash Advance may be made either by telephone or in writing, provided that all
telephonic requests are, upon Agent's request, to be confirmed by Borrower in
writing on the same day and further provided that such written confirmation may
be sent by telecopy or facsimile transmission. No Lender shall be obligated, for
any reason whatsoever, to advance or reimburse Agent for the share of any other
Lender.
(iii) A. Between each Settlement Date, Agent, in its
capacity as a Lender, shall have the discretion (without any duty or obligation
regardless of any prior practice or procedures) to make all cash Advances for
the account and on behalf of the Lenders in accordance with each Lender's Pro
Rata Percentage. Periodically but not less frequently than once every week on
the same day of each week, unless such day is not a Business Day, in which event
such determination shall be made the next Business Day ("Settlement Date"),
Agent shall make a determination of the appropriate dollar amount of each
Lender's Loans based upon each such Lender's Pro Rata Percentage of all then
outstanding Loans, which amounts shall be calculated as of the close of the
Business Day immediately preceding each respective Settlement Date.
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Amounts of principal paid to Agent by Borrower from time to time, between
Settlement Dates, shall be applied to the outstanding balance of Loans made by
Agent, as a Lender pursuant hereto, with the outstanding balance of Loans made
by each other Lender to be adjusted on the next Settlement Date. Interest shall
accrue and each Lender shall be entitled to receive interest at the applicable
rate only on the actual outstanding dollar amount of its respective outstanding
Loans without regard to a prospective settlement. On each Settlement Date, Agent
shall then issue to each Lender a settlement schedule containing information
with respect to the status of the Loans and the relevant net positions of the
Lenders and the outstanding balances of their respective Loans as of the close
of the Business Day preceding such Settlement Date. Each settlement schedule
shall show the net amount then owing by each Lender to Agent or by Agent to each
such Lender based upon the aggregate cash Advances made and collections received
since the most recent Settlement Date and settlement among the Lenders and the
Agent shall be made in accordance with the direction of Agent no later than
11:00 A.M. Philadelphia time, on each Settlement Date. To the extent Agent is
not reimbursed by any Lender on a Settlement Date in accordance with Agent's
direction, Borrower shall immediately repay Agent on demand the amount of any
reimbursement not so made by any Lender which was disbursed to Borrower.
B. Each Lender is absolutely and
unconditionally obligated without setoff or deduction of any kind, to remit to
Agent on the Settlement Date any amount showing to be owing to Agent by such
Lender on the settlement schedule for such date. Agent shall also be entitled to
recover any and all actual losses and damages (including without limitation,
reasonable attorneys' fees) from any party failing to remit payment on the
Settlement Date in accordance with this Agreement. Agent may set off the
obligations of such party under this paragraph against any distributions or
payments of the Obligations which such party would otherwise make available at
any time.
(iv) A. In lieu of the procedure set forth in the
preceding subparagraph (iii), Agent may provide the Lenders with notice that the
Borrower has requested a cash Advance, on the same Business Day as such request,
and request each Lender to provide Agent with such Lender's Pro Rata Percentage
of such requested cash Advance prior to Agent's making such cash Advance. Upon
receipt of such notice from Agent prior to 12:00 p.m., Philadelphia time, each
Lender shall remit to Agent its respective Pro Rata Percentage of such requested
cash Advance, prior to 1:00 P.M. Philadelphia time, on the Business Day Agent is
scheduled to make such cash Advance in accordance with Section 2.3(c)(ii)
hereof. Neither Agent nor any other Lender shall be obligated, for any reason
whatsoever, to remit or advance the share of any other Lender. Agent shall not
be required to make the full amount of the requested cash Advance unless and
until it receives funds representing each other Lender's Pro Rata Percentage of
such requested cash Advance, but Agent shall advance to Borrower that portion of
the requested cash Advance equal to the Pro Rata Percentages of such requested
cash Advance which it has received from the Lenders.
B. If Agent does not receive each other
Lender's Pro Rata Percentage of such requested cash Advance, and Agent elects,
in its sole discretion, to make the
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requested cash Advance on behalf of Lenders or any of them, Agent shall be
entitled to recover from such non-advancing Lender such non-advancing Lender's
Pro Rata Percentage of each cash Advance together with interest at a per annum
rate equal to the Federal Funds Rate during the period commencing on the date
such cash Advance is made and ending on (but excluding) the date Agent recovers
such amount. Each Lender is absolutely and unconditionally obligated, without
deduction or setoff of any kind, to forward to Agent its Pro Rata Percentage of
each cash Advance made pursuant to the terms of this Agreement. To the extent
Agent is not reimbursed by such Lender, Borrower shall repay Agent immediately
on demand, such amount. Agent shall also be entitled to recover any and all
actual losses and damages (including, without limitation, reasonable attorneys'
fees) from any Lender failing to so advance upon demand of Agent. Agent may set
off the obligations of a Lender under this paragraph against any distributions
or payments of the Obligations which Agent would otherwise make available to
such Lender at any time.
(v) To the extent and during the time period in which
any Lender fails to provide or delays providing its respective payment to Agent
pursuant to clause (iii) or (iv) above, such Lender's percentage of all payments
of the Obligations (but not its Revolving Credit Pro Rata Percentage of future
Advances required to be funded by such Lender) shall decrease to reflect the
actual percentage which its actual outstanding Loans bears to the total
outstanding Loans of all Lenders.
2.5 Interest:
(a) Base Rate Option - The unpaid principal balance of Loans,
including amounts drawn and not yet reimbursed under Letters of Credit, unless
subject to the LIBOR Rate Option, shall bear interest, subject to the terms
hereof, at the per annum rate equal to the Base Rate plus the Applicable Base
Rate Margin ("Base Rate Option"). Changes in the Base Rate shall become
effective on the same day as Agent announces a change in its Prime Rate.
Interest on Base Rate Loans shall be due and payable in arrears on the first day
of each calendar month commencing the first day of the first full calendar month
following the Closing Date.
(b) LIBOR Rate Option:
(i) During and only during such time as the margin
set forth in clause (c) of the definition of Applicable Base Rate Margin is
applicable, Borrower shall have the option to have the unpaid principal balance
of Loans bear interest at the LIBOR Based Rate ("LIBOR Rate Option"), provided
that LIBOR Rate Loans shall be in $500,000 increments and in a minimum amount of
$1,000,000. In no event, however, may Borrower have more than four (4) LIBOR
Rate Loans outstanding at any one time.
(ii) LIBOR Based Rate Loans shall be selected for a
period of either one month, two months or three months duration, as the Borrower
may elect, during which the LIBOR Based Rate is applicable ("LIBOR Interest
Period"); provided, however, that (a) if the
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LIBOR Interest Period would otherwise end on a day which shall not be a Good
Business Day, such LIBOR Interest Period shall be extended to the next
succeeding Good Business Day, unless such Good Business Day falls in another
calendar month, in which case such LIBOR Interest Period shall end on the next
preceding Good Business Day subject to clause (c) below; (b) interest shall
accrue from and including the first day of each LIBOR Interest Period to, but
excluding the day on which any LIBOR Interest Period expires; and (c) with
respect to any LIBOR Interest Period which begins on the last Good Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such LIBOR Interest Period), the LIBOR
Interest Period shall end on the last Good Business Day of a calendar month.
Interest on a LIBOR Based Rate Loan shall be due and payable monthly and on the
last day of the applicable LIBOR Interest Period in arrears regardless of the
selected LIBOR Interest Period. No LIBOR Interest Period may end after the
Revolving Credit Maturity Date. Subject to all of the terms and conditions
applicable to a request that a new cash Advance be a LIBOR Based Rate Loan,
Borrower may extend a LIBOR Based Rate Loan as of the last day of the LIBOR
Interest Period to a new LIBOR Based Rate Loan or may convert all or a portion
of the Loans subject to the Base Rate Option to a LIBOR Based Rate Loan. If the
Borrower fails to notify the Agent of the LIBOR Interest Period for a subsequent
LIBOR Based Rate Loan at least three Good Business Days prior to the last day of
the then current LIBOR Interest Period of an outstanding LIBOR Based Rate Loan,
then such outstanding LIBOR Based Rate Loan shall become a loan subject to the
Base Rate Option at the end of the current LIBOR Interest Period for such
outstanding LIBOR Based Rate Loan and shall accrue interest in accordance with
Section 2.5(a) above.
(iii) The LIBOR Rate may be automatically adjusted by
Agent on a prospective basis to take into account with respect to Advances made
under this Agreement the additional or increased cost of maintaining any
necessary reserves for Eurodollar deposits or increased costs due to changes in
applicable law or regulation or the interpretation thereof occurring subsequent
to the commencement of the then applicable LIBOR Interest Period, including but
not limited to changes in tax laws (except changes of general applicability in
corporate income tax laws as they affect financial institutions) and changes in
the reserve requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding any such changes that have resulted
in a payment pursuant to Section 2.11 hereof, that increase the cost to Lenders
of funding the LIBOR Based Rate Loan. Agent shall promptly give the Borrower and
each Lender notice of such a determination and adjustment, which determination
shall be presumptive as to the correctness of the fact and the amount of such
adjustment, absent manifest error. In connection with each request, Agent shall,
by written notice to Borrower, furnish to the Borrower a statement setting forth
the basis for adjusting such LIBOR Based Rate and the method for determining the
amount of such adjustment. Borrower may prepay the LIBOR Based Rate Loan with
respect to which such adjustment is made, subject to the requirements of Section
2.10 below.
(iv) In the event that the Borrower shall have
requested the LIBOR Rate Option in accordance with Section 2.5(b) and Agent
shall have reasonably determined that
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Eurodollar deposits equal to the amount of the principal of the requested LIBOR
Based Rate Loan and for the LIBOR Interest Period specified are unavailable,
impractical or unlawful, or that the rate based on the LIBOR Rate will not
adequately and fairly reflect the cost of funds of the LIBOR Based Rate
applicable to the specified LIBOR Interest Period, of making or maintaining the
principal amount of the requested LIBOR Based Rate Loan specified by the
Borrower during the LIBOR Interest Period specified, or that by reason of
circumstances affecting Eurodollar markets, adequate and reasonable means do not
exist for ascertaining the rate based on the LIBOR Rate applicable to the
specified LIBOR Interest Period, Agent shall promptly give notice of such
determination to the Borrower that the rate based on the LIBOR Rate is not
available. A determination by Agent hereunder shall be prima facie evidence of
the correctness of the fact and amount of such additional costs or
unavailability. Upon such a determination, (A) the right of Borrower to select,
convert to, or maintain a LIBOR Based Rate Loan at the rate based on the LIBOR
Rate shall be suspended until Agent shall have notified the Borrower that such
conditions shall have ceased to exist (which notice Agent shall promptly provide
to Borrower upon LIBOR Rate being available), and (B) the Loans subject to the
requested LIBOR Rate Option shall accrue interest in accordance with Section
2.5(a) above.
(v) In the event that, as a result of any changes in
applicable law or regulation or the interpretation thereof, it becomes unlawful
for a Lender to make or to continue to fund or maintain LIBOR Based Rate Loans
or to maintain Eurodollar liabilities sufficient to fund any LIBOR Based Rate
Loan subject to the LIBOR Based Rate, then such Lender shall immediately notify
Agent who shall immediately notify the other Lenders and Borrower thereof and
such Lender's obligations to make, convert to, or maintain a LIBOR Based Rate
Loan at the LIBOR Based Rate shall be suspended until such time as such Lender
may again cause the LIBOR Based Rate to be applicable to its share of any LIBOR
Based Rate Loans and such Lender's share of the Loans subject to the LIBOR Based
Rate shall accrue interest in accordance with Section 2.5(a) above. Promptly
after becoming aware that it is no longer unlawful for such Lender to maintain
such Eurodollar liabilities, such Lender shall notify Agent who will notify
Borrower thereof and such suspension shall cease to exist.
2.6 Additional Interest Provisions.
(a) Calculation of Interest: Interest on the Loans, regardless
of the rate option, shall be based on a three hundred sixty (360) day year and
charged for the actual number of days elapsed.
(b) Limitation on LIBOR Based Rate Loans: Upon the occurrence
and continuance of an Event of Default, Agent may in its sole discretion
eliminate the availability of LIBOR Based Rate Loans.
(c) Default Rate: After the occurrence and during the
continuance of an Event of Default hereunder, Agent may, and shall at the
direction of the Majority Lenders, increase the per annum effective rate of
interest on all Loans outstanding under the Revolving Credit,
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including amounts drawn and not yet reimbursed under Letters of Credit,
regardless of the rate option, to a rate equal to two (2%) percentage points in
excess of the applicable interest rate (the "Default Rate").
(d) Conversion: Following the occurrence of an Event of
Default and written notice from Agent that the Obligations have been
accelerated, all LIBOR Based Rate Loans shall convert to a Base Rate Loan, which
conversion is independent of Agent's rights under Section 2.6 (b) and (c).
(e) Continuation of Interest Charges: All contractual rates of
interest chargeable on outstanding Loans, regardless of the rate option, shall
continue to accrue and be paid even after default, maturity, acceleration,
judgment, bankruptcy, insolvency proceedings of any kind or the happening of any
event or occurrence similar or dissimilar.
(f) Applicable Interest Limitations: In no contingency or
event whatsoever shall the aggregate of all amounts deemed interest hereunder
and charged or collected pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
court determines Lenders have charged or received interest hereunder in excess
of the highest applicable rate, Agent, on behalf of Lenders, shall in its sole
discretion, apply and set off such excess interest received by Lenders against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.
2.7 Fees:
(a) Commitment Fee: Agent acknowledges receipt from Borrower
of a non-refundable Commitment Fee in the amount of $156,250.00 ("Commitment
Fee").
(b) Unused Line Fee: So long as the Revolving Credit is
outstanding and has not been terminated pursuant to the terms hereof, Borrower
shall unconditionally pay to Agent, for the benefit of Lenders in accordance
with their Revolving Credit Pro Rata Percentage, a non-refundable fee ("Unused
Line Fee") equal to one half percent (.50%) per annum of the average daily
Unused Revolver. The Unused Line Fee shall be computed and paid on a monthly
basis, in arrears, on the first day of each calendar month, beginning on the
first day of the first calendar month after the initial Advance hereunder.
(c) Letter of Credit Fees: Borrower shall pay to Agent, for
the benefit of Lenders in accordance with their Revolving Credit Pro Rata
Percentage, letter of credit fees equal to: three quarters of one percent
(.75%)of the face amount of documentary/merchandise letters of credit upon and
as a condition of the issuance thereof, and one and one half of one percent
(1.50%) per annum of the face amount of each standby letter of credit on the
first day of each calendar quarter in advance. Borrower shall also pay to
Issuing Bank all of Issuing Bank's standard charges (including without
limitation all cable and wire transfer charges) for the account
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of Issuing Bank for the issuance, amendment, negotiation/payment, extension and
cancellation of each such Letter of Credit. All such fees are collectively, the
"L/C Fees".
(d) Termination Fee: In the event there occurs any termination
of the Revolving Credit for any reason whatsoever prior to the Revolving Credit
Maturity Date, Borrower, if initiating such termination, may only effect such
termination on at least ninety (90) days prior written notice to Agent and in
all events Borrower shall pay to Agent for the benefit of Lenders in accordance
with their Pro Rata Percentage, a prepayment premium (the "Termination Fee") in
an amount equal to three percent (3%) of the aggregate of the Revolving Credit
Limit if such termination occurs during the first year of the Revolving Credit,
two percent (2%) of the aggregate of the Revolving Credit Limit if the
termination occurs during the second or third year of the Revolving Credit and
one percent (1%) of the aggregate of the Revolving Credit Limit if such
termination occurs at any time thereafter prior to the Revolving Credit Maturity
Date, as well as make full payment of all outstanding Obligations, in which case
any and all commitments of Lenders and Agent hereunder shall cease as of such
date of termination.
(e) Collateral Management Fee: So long as the Revolving Credit
is outstanding and has not been terminated pursuant to the terms hereof,
Borrower shall unconditionally pay to Agent, for its sole benefit, a
non-refundable collateral management fee in the amount of $3,000.00 per month
payable quarterly in advance ("Collateral Management Fee").
(f) Calculation of Fees: All fees provided for in this Section
2.7 shall be based on a three hundred sixty (360) day year and charged for the
actual number of days elapsed.
2.8 Prepayments:
(a) LIBOR Based Rate Loans: Apart from the provisions of
Section 2.7(d) above, if applicable, no portion of any LIBOR Based Rate Loan may
be prepaid at any time unless Borrower first satisfies in full its obligations
under Section 2.10 below arising from such prepayment.
(b) Base Rate Loans: Subject to Sections 2.7(b) and (d), Base
Rate Loans may be prepaid at any time and from time to time in whole or in part
without premium or penalty.
(c) Proceeds of Collateral: Borrower shall, upon the receipt
of proceeds of any Collateral, hold such proceeds in trust for Lenders and
immediately remit in specie, all such proceeds to Agent, which funds, unless the
only outstanding Loans are LIBOR Based Rate Loans, no Overadvances are
outstanding and no Event of Default exists, shall be applied against the
Obligations.
2.9 Use of Proceeds: The extensions of credit under and proceeds of the
Revolving Credit shall be used for (i) refinancing Borrower's existing borrowed
indebtedness, and (ii) working capital and any other lawful purpose not
otherwise prohibited under this Agreement.
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2.10 Indemnity/Loss of Margin: Except for prepayment or termination of
any LIBOR Rate Loans in connection with Sections 2.5(iv) or (v), [2.6(b) or (d)]
and 2.7(d):
(a) Borrower shall indemnify, defend and hold harmless Agent
and Lenders against any and all loss, liability, cost or expense which Agent and
any Lender or Lenders may sustain or incur as a consequence of (i) any failure
of Borrower to obtain, convert or extend any LIBOR Based Rate Loan after notice
thereof has been given to Agent; (ii) any payment, prepayment, termination or
conversion of a LIBOR Based Rate Loan made for any reason on a date other than
the last day of the applicable LIBOR Interest Period; or (iii) any failure of
Borrower to have the required availability under the Borrowing Base for a
requested Advance subject to the LIBOR Rate Option. Borrower shall pay the full
amount thereof to Agent, for the ratable benefit of Lenders, on demand by Agent.
(b) In the event that any change in any present or future law,
rule, regulation, treaty or official directive or the interpretation or
application thereof by any central bank, monetary authority or governmental
authority, or the compliance with any guideline or request of any central bank,
monetary authority or governmental authority (whether or not having the force of
law) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit, or other similar requirement with respect to deposits in or for
the account of, or loans or advances or commitment to make loans or advances by,
or letters of credit issued or commitment to issue letters of credit by a Lender
and the result of any of the foregoing is to increase the costs of a Lender,
reduce the income receivable by or return on equity of Lender or impose any
expense upon Lender with respect to any advances or extensions of credit or
commitments to make advances or extensions of credit under this Agreement, such
Lender shall so notify Agent in writing. Upon notice from Agent, Borrower agrees
to pay such Lender the amount (which is solely attributable to the Advances
under this Agreement) of such increase in cost, reduction in income, reduced
return on equity or capital, or additional expense after presentation by such
Lender of a statement concerning such increase in cost, reduction in income,
reduced return on equity or capital, or additional expense. Such statement shall
set forth a brief explanation of the amount and such Lender's calculation of the
amount (in determining such amount such Lender may use any reasonable averaging
and attribution methods), which statement shall be conclusively deemed correct
absent manifest error.
2.11 Capital Adequacy: If any change in any present or future law,
governmental rule, regulation, policy, guideline, directive or similar
requirement (whether or not having the force of law) imposes, modifies, or deems
applicable any capital adequacy, capital maintenance or similar requirement
which affects the manner in which any Lender allocates capital resources to its
commitments (including any commitments hereunder), and as a result thereof, in
the opinion of such Lender, the rate of return on such Lender's capital with
regard to the Loans and/or its obligations hereunder is reduced to a level below
that which such Lender could have achieved but for such circumstances taking
into account such Lender's policies regarding capital adequacy, then in such
case and upon notice from Agent to Borrower, from time to time, Borrower shall
pay such Lender such additional amount or amounts (which is solely attributable
to the Advances
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under this Agreement) as shall compensate such Lender for such reduction in its
rate of return. Such notice shall contain the statement of such Lender with
regard to any such amount or amounts which shall, in the absence of manifest
error, be binding upon Borrower. In determining such amount, such Lender may use
any reasonable method of averaging and attribution that it deems applicable.
2.12 Replacement of Lender: In the event that a Lender, other than
Mellon, exercises its rights under Section 2.11 or there is a failure by a
Lender to make an Advance pursuant to Section 2.4(c), or there is a loss of
margin because a Lender becomes subject to Section 2.10(b) or a Lender becomes
subject to the taxes set forth in Section 6.5(a), then Borrower shall have the
option to replace such Lender with another financial institution (acceptable to
Agent) who will purchase all (but not part) of such Lender's Revolving Credit
Pro Rata Share. Such Lender shall be required to assign and transfer to the
financial institution obtained by Borrower, pursuant to an agreement reasonably
satisfactory to such Lender and without representation, warranty or recourse,
its respective Revolving Credit Pro Rata Share in exchange for full payment of
the outstanding balance thereof, with accrued interest and unpaid fees.
SECTION 3. COLLATERAL
3.1 Description: As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents:
(a) Borrower hereby assigns and grants to Agent, on behalf of
Lenders and Issuing Bank, a continuing first lien on and security interest in,
upon and to all of its following described Property ("Collateral"):
(i) Accounts, Contract Rights, Etc. - All now owned
and hereafter acquired, created, or arising Accounts, accounts receivable, notes
receivable, contract rights, chattel paper, documents (including documents of
title), instruments and letters of credit;
(ii) Inventory - All now owned or hereafter acquired
Inventory of every nature and kind, wherever located;
(iii) Equipment - All now owned or hereafter acquired
equipment, including without limitation machinery, vehicles, furniture and
fixtures, wherever located, and all replacements, parts, accessories,
substitutions and additions thereto;
(iv) General Intangibles - All now owned and
hereafter acquired, created or arising general intangibles of every kind and
description, including, but not limited, to all existing and future customer
lists, chooses in action, loans, claims, books, records, patents and patent
applications, copyrights, trademarks, tradenames, tradestyles, trademark
applications, blue-
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prints, drawings, designs and plans, trade secrets, contracts, contract rights,
distributorship agreements, licenses, license agreements, good will associated
with the business and assets of the Borrower, formulae, tax and any other types
of refunds, rights to or in employee or other pension, retirement or similar
plans and any assets thereof, or any portion thereof, including without
limitation refunds for overpayments, distributions upon termination, reversion
of any surplus assets or otherwise, returned and unearned insurance premiums,
rights and claims under insurance policies relating to the Collateral, and
computer information, software, records and data;
(v) Deposit Accounts - All now existing and hereafter
acquired or arising deposit and investment accounts, commercial paper,
investment securities, investment property and certificates of deposit, of every
nature, wherever located, and all documents and records associated therewith;
(vi) Property in Lender's Possession - All Property,
now or hereafter in Agent's or any Lender's possession; and
(vii) Proceeds - The proceeds (including, without
limitation, insurance proceeds), whether cash or non-cash, of all of the
foregoing.
(b) The Mortgage.
(c) The Revolving Credit Loans and all other Obligations shall
constitute one obligation of Borrower, secured by the Collateral; provided,
however, Agent and Lenders may agree to allocate payments from Borrower and
proceeds of Collateral among Lenders in any manner without Borrower's consent
pursuant to a separate agreement between Agent and Lenders.
(d) Agent (for the benefit of Lenders) shall have received the
Stock Pledge Agreement, the documents required thereby and stock certificates
evidencing sixty five percent (65%) of the issued and outstanding stock of the
UK Subsidiary.
3.2 Lien Documents: At Closing and thereafter as Agent deems necessary,
Borrower shall execute and deliver to Agent, or have executed and delivered (all
in form and substance reasonably satisfactory to Agent):
(a) Financing Statements - Financing statements pursuant to
the UCC, which Agent, on behalf of Lenders, may file in any jurisdiction where
any Collateral is or may be located and in any other jurisdiction that Agent
deems reasonably appropriate; and
(b) Other Agreements - Any other agreements, documents,
instruments and writings, including, without limitation, patent and trademark
security agreements, stock powers, etc., reasonably required by Agent to
evidence, perfect or protect Lenders' liens and security interest in the
Collateral or as Agent may reasonably request from time to time.
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3.3 Other Actions: In addition to the foregoing, Borrower shall do
anything further that may be lawfully and reasonably required by Agent to secure
Lenders and effectuate the intentions and objects of this Agreement, including,
but not limited to, the execution and delivery of lockbox agreements,
continuation statements, amendments to financing statements, security
agreements, contracts and any other documents required hereunder. At Agent's
request, Borrower shall also immediately deliver (with execution by Borrower of
all necessary documents or forms to reflect Agent's Lien thereon) to Agent as
bailee for Lenders, all items for which Lenders must receive possession to
obtain a perfected security interest, including without limitation, all notes,
letters of credit, documents of title, chattel paper, warehouse receipts,
instruments, and any other similar instruments constituting Collateral.
3.4 Searches: Agent shall, prior to or at Closing, and thereafter as
Agent may reasonably determine from time to time, at Borrower's expense, obtain
the following searches (the results of which are to be consistent with the
warranties made by Borrower in this Agreement):
(a) UCC Searches: UCC searches with the Secretary of State and
local filing office of each state where Borrower maintains its executive office,
a place of business, or assets;
(b) Judgments, Etc.: Judgment, federal tax lien and corporate
tax lien searches, in all applicable filing offices of each state searched under
subparagraph (a) above.
(d) Intellectual Property Searches: Patent and trademark
searches from the United States Patent and Trademark Office.
Borrower shall, prior to or at Closing and at its expense,
obtain and deliver to Agent good standing certificates showing Borrower to be in
good standing in its state of incorporation and in each other state in which it
is doing and presently intends to do business except any such jurisdiction for
which such failure to be so qualified will not have a Material Adverse Effect.
3.5 Landlord's Waivers: Borrower will cause each landlord, mortgagee
and/or warehouseman of all premises occupied by Borrower or to be occupied by
Borrower, or where Collateral at any time is held, to execute and deliver to
Agent an instrument, in form and substance reasonably satisfactory to Agent,
under which such landlord, mortgagee or warehouseman waives its/his/their right
to distrain on or foreclose against the Collateral and agrees to allow Agent to
remain on such premises to dispose of or deal with any Collateral located
thereon.
3.6 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
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3.7 Power of Attorney: Each of the officers of Agent is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring any of them to act as such) with full power of
substitution to do the following: (a) endorse the name of Borrower upon any and
all checks, drafts, money orders and other instruments for the payment of monies
that are payable to Borrower and constitute collections on Borrower's Accounts
or proceeds of other Collateral; (b) execute in the name of Borrower any
financing statements, schedules, assignments, instruments, documents and
statements that Borrower is obligated to give Agent hereunder or is necessary to
perfect Agent's security interest or lien in the Collateral; (c) to verify
validity, amount or any other matter relating to the Collateral by mail,
telephone, telecopy or otherwise in accordance with the customary procedures of
Agent's asset based lending department; and (d) following an Event of Default,
do such other and further acts and deeds in the name of any such entity that
Agent may reasonably deem necessary or desirable to enforce any Account or
realize upon any other Collateral. This power of attorney is coupled with an
interest, and is irrevocable until the Obligations are indefeasibly paid in
full.
3.8 Verifications: Agent, on behalf of Lenders, shall be entitled to
verify validity, amount, or any other matter relating to the Collateral by mail,
telephone, telecopy or otherwise in accordance with the customary procedures of
Agent's asset-based lending department.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all documents to be in form and substance satisfactory to Agent and
Agent's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrower shall have
delivered to Agent the following:
(a) this Agreement and the Revolving Credit Notes all properly
executed;
(b) each Loan Document;
(c) certified copies of (i) resolutions of the board of
directors of Borrower authorizing the execution of this Agreement, and the
Revolving Credit Notes to be issued hereunder and each document required to be
delivered by Borrower pursuant to any Section hereof and (ii) Borrower's
Articles or Certificate of Incorporation and By-laws;
(d) an incumbency certificate for Borrower identifying all
Authorized Officers, with specimen signatures;
(e) a written opinion of Borrower's independent counsel
addressed to Agent for the benefit of all Lenders and opinions of such other
counsel as Agent deems reasonably necessary;
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(f) certification by the chief financial officer of Borrower
that there has not occurred any material adverse change in the operations and
condition (financial or otherwise) of Borrower since December 31, 1998 and March
31, 1999.
(g) payment by Borrower of all fees including, without
limitation, the Commitment Fee owing to Agent and/or Lenders and Expenses
associated with the Revolving Credit incurred to the Closing Date;
(h) Uniform Commercial Code, judgment, intellectual property,
federal and state tax lien searches against Borrower, at Borrower's expense,
showing that the Property of Borrower is not subject to any Liens except for
Permitted Liens, together with Good Standing and Corporate Tax Lien Search
Certificates showing no Liens on Borrower's Property and showing Borrower to be
in good standing in each jurisdiction as required by Section 3.4 above;
(i) an initial Borrowing Base Certificate dated the Closing
Date evidencing that, Borrower has a minimum Excess Borrowing Availability of at
least $3,500,000; and
(j) Lockbox Agreement all in form and substance satisfactory
to Agent.
(k) a first mortgage by way of an assignment of an existing
mortgage and restatement and amendment thereof on Borrower's interest in real
property located in Orlando, Florida with title insurance in an amount and in
form and substance acceptable to Agent with respect thereto, along with flood
insurance or an appropriate certification that the mortgaged property is not
located in a flood zone.
(l) a Phase One environmental report from an engineer or
consultant acceptable to Agent with the results thereof acceptable in all
respects to Agent.
(m) acceptable appraisals of all of Borrower's real and
personal Property from appraisers acceptable to Agent reflecting an aggregate
minimum value of $10,000,000.
(n) evidence to Agent that the Borrower's obligation under the
Lockheed Note does not exceed $3,450,000, and that no interest is accruing in
connection therewith.
(o) reference checks on Borrower and its management acceptable
to Agent.
(p) copies of Borrower's 10-Q for the period ending March 31,
1999 and internally prepared financial statements dated April 30, 1999.
4.2 Absence of Certain Events: At the Closing Date, no Event of Default
hereunder shall have occurred and be continuing, and no event shall have
occurred and be continuing which, with the passage of time, or the giving of
notice, or both, would constitute an Event of Default hereunder.
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4.3 Warranties and Representations at Closing: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on and as of that date. Borrower shall not
have taken any action or permitted any condition to exist which would have been
prohibited by any Section hereof.
4.4 Compliance with this Agreement: Borrower shall have performed and
complied in all material respects, with all agreements, covenants and conditions
contained herein including, without limitation, the provisions of Sections 6 and
7 hereof, which are required to be performed or complied with by Borrower before
or at the Closing Date.
4.5 Officer's Certificate: Agent shall have received a certificate
dated the Closing Date and signed by the chief financial officer or a senior
financial executive of Borrower certifying that all of the conditions specified
in this Section have been fulfilled.
4.6 Field Examination: Agent shall have completed a field examination
to its satisfaction within ten (10) Business Days prior to the Closing Date.
4.7 Cash Collateral Account: Borrower shall have established the Cash
Collateral Account with Agent.
4.8 Closing: Subject to the conditions of this Section 4, the Revolving
Credit shall be made available on the date ("Closing Date") this Agreement is
executed and all of the conditions contained in Section 4.1 hereof are completed
(the "Closing").
4.9 Non-Waiver of Rights: By completing the Closing hereunder, or by
making advances hereunder, Agent and Lenders do not thereby waive a breach of
any warranty or representation made by Borrower hereunder or any agreement,
document, or instrument delivered to Agent or any Lender, or otherwise referred
to herein, and any claims and rights of Agent or any Lender resulting from any
breach or misrepresentation by Borrower are specifically reserved by Agent and
Lenders.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lenders to complete the Closing and make the initial Advances
under the Revolving Credit to Borrower, Borrower warrants and represents to
Agent and Lenders that:
5.1 Corporate Organization and Validity:
(a) Borrower is a corporation duly organized and validly
existing under the laws of its state of incorporation, is duly qualified, is
validly existing and in good standing and has lawful power and authority to
engage in the business it conducts in each state where the nature and extent of
its business requires qualification, except where the failure to so qualify will
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not have a Material Adverse Effect. A list of all states and other jurisdictions
where Borrower is qualified to do business is attached hereto as Exhibit "5.1"
and made a part hereof.
(b) The making and performance of this Agreement and the other
Loan Documents will not violate or result in a default (immediately or with the
passage of time) under any law, government rule or regulation, or the charter,
minutes or bylaw provisions of Borrower, or any material contract, agreement or
instrument to which Borrower is a party, or by which it is bound. Borrower is
not in violation of and has not knowingly caused any Person to violate any term
of any material agreement or instrument to which it or such Person is a party or
by which it may be bound or of its charter, minutes or its bylaws.
(c) Borrower has all requisite corporate power and authority
to enter into and perform this Agreement and to incur the obligations herein
provided for, and has taken all proper and necessary corporate action to
authorize the execution, delivery and performance of this Agreement, and the
documents and related agreements required hereby.
(d) This Agreement, the Revolving Credit Notes to be issued
hereunder, and all related agreements and documents required to be executed and
delivered by Borrower hereunder, when delivered, will be valid and binding upon
Borrower, and enforceable in accordance with their respective terms subject to
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally.
5.2 Places of Business: The only places of business of Borrower, and
the places where it keeps and intends to keep its Property and records
concerning its Property (other than Property used by employees while traveling
on business), are at the addresses listed in Exhibit "5.2" attached hereto and
made a part hereof.
5.3 Pending Litigation: There are no judgments or judicial or
administrative orders, proceedings, litigation or investigations (civil or
criminal) pending, or threatened, against Borrower in any court or before any
governmental authority or arbitration board or tribunal except as shown in
Exhibit "5.3", none of which are reasonably likely to have a Material Adverse
Effect. Borrower is not in default with respect to any order of any court,
governmental authority, regulatory agency or arbitration board or tribunal.
Neither Borrower nor any executive officer of Borrower has been indicted or
convicted in connection with or is engaging in any criminal conduct, or is
currently subject to any lawsuit or proceeding or, to Borrower's knowledge,
under investigation in connection with any anti-racketeering or criminal conduct
or activity.
5.4 Title to Properties: Borrower has good and marketable title to all
the Property constituting Collateral, free from Liens, except those of Agent
and/or Lenders, and free from the claims of any other Person, except for
Permitted Liens and those Liens set forth on Exhibit "5.4", attached hereto and
made a part hereof.
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5.5 Governmental Consent: Neither the nature of Borrower or of its
business or Property, nor any relationship between Borrower and any other
Person, nor any circumstance affecting Borrower in connection with the issuance
or delivery of this Agreement or the other Loan Documents, is such as to require
a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of Borrower in
connection with the execution and delivery of this Agreement or the issuance or
delivery of the other Loan Documents.
5.6 Taxes: All tax returns required to be filed by Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon Borrower, or upon any of its respective Property,
income or franchises, which are shown to be due and payable on such returns have
been paid, except for those taxes being contested in good faith with due
diligence by appropriate proceedings for which appropriate reserves have been
maintained under GAAP. Borrower is not aware of any proposed additional tax
assessment or tax to be assessed against or applicable to Borrower that would be
reasonably likely to have a Material Adverse Effect.
5.7 Financial Statements: Borrower's annual audited balance sheet as of
June 30, 1998 and the related income statement and statement of cash flow as of
such date, accompanied, by the unqualified report thereon, by Borrower's
independent certified public accountants, (complete copies of which have been
delivered to Agent), have been prepared in accordance with GAAP and present
fairly, the financial position of Borrower as of such date and the results of
its operations for such period. Borrower's fiscal year ends on June 30 of each
calendar year. Borrower's federal tax identification number is ▇▇-▇▇▇▇▇▇▇.
5.8 Full Disclosure: Neither the financial statements referred to in
Section 5.7, nor this Agreement nor any other Loan Document nor any submission
to any government agency or any financial projections, written reports or
certificates regarding Accounts, or other financial statements or reports
furnished by Borrower to Agent or any Lender in connection with the negotiation
of the Revolving Credit or contained in any financial statements or documents
relating to Borrower, as of the time they were furnished, contained any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading in any material respect.
There is no fact known to Borrower which has not been disclosed in writing to
Agent which has or could have a Material Adverse Effect.
5.9 Subsidiaries: Borrower has no Subsidiaries, except as listed on
Exhibit "5.9" attached hereto and made a part hereof.
5.10 Guarantees, Contracts, etc.:
(a) Borrower does not own or hold equity or long term debt
investments in, have any outstanding advances to, or serve as guarantor, surety
or accommodation maker for the obligations of, or have any outstanding
borrowings from, any Person, or has entered into any
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leases for real or personal property (whether as landlord or tenant), except as
described in Exhibit "5.10", attached hereto and a made part hereof.
(b) Borrower is not a party to any contract or agreement, or
subject to any charter or other corporate restriction, which has or could have a
Material Adverse Effect.
(c) Except as otherwise specifically provided in this
Agreement, Borrower has not agreed or consented to cause or permit any of its
Property whether now owned or hereafter acquired to be subject in the future
(upon the happening of a contingency or otherwise) to a Lien not permitted by
this Agreement.
5.11 Government Regulations, etc.:
(a) The use of the proceeds of and Borrower's issuance of the
Notes will not directly or indirectly violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, Regulations U, T
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. Borrower neither owns nor intends to carry or purchase any "margin
stock" within the meaning of said Regulation U.
(b) Borrower has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership of its Property
and for the conduct of its business, except those which, if not obtained, would
have or could have a Material Adverse Effect.
(c) As of the date hereof, no employee benefit plan ("Pension
Plan"), as defined in Section 3(2) of ERISA, maintained by Borrower or under
which Borrower could have any liability under ERISA (i) has failed to meet the
minimum funding standards established in Section 302 of ERISA, except for any
such failure corrected in full prior to the date hereof, and described on
Exhibit "5.11", attached hereto and made a part hereof; (ii) has failed to
comply with all applicable requirements of ERISA and of the Internal Revenue
Code, including all applicable rulings and regulations thereunder, (iii) has
engaged in or been involved in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Internal Revenue Code which would subject Borrower
to any material liability, or (iv) has been terminated if such termination would
subject Borrower to any material liability. Borrower has not assumed, or
received notice of a claim asserted against Borrower for, withdrawal liability
(as defined in Section 4207 of ERISA) with respect to any multi- employer
pension plan and is not a member of any Controlled Group (as defined in ERISA).
Borrower has timely made all contributions when due with respect to any
multi-employer pension plan in which it participates and no event has occurred
triggering a claim against Borrower for withdrawal liability with respect to any
multi-employer pension plan in which Borrower participates. All Pension Plans
and multi-employer pension plans to which Borrower participates are listed on
Exhibit "5.11" attached hereto and made a part hereof.
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(d) Borrower is not in violation of, and has not received
written notice that it is in violation of, or has knowingly caused any Person to
violate any applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency, or department thereof, (including without
limitation, environmental laws and regulations).
5.12 Business Interruptions: Except as set forth in Exhibit "5.12"
hereof, within five (5) years prior to the date hereof, none of the business,
Property or operations of Borrower have been materially and adversely affected
in any way by any casualty, strike, lockout, combination of workers, order of
the United States of America, or any state or local government, or any political
subdivision or agency thereof, directed against Borrower. There are no pending
or threatened labor disputes, strikes, lockouts or similar occurrences or
grievances affecting the business being operated by Borrower.
5.13 Names:
(a) Within five (5) years prior to the Closing Date, Borrower
has not conducted business under or used any other name (whether corporate or
assumed) except for the names shown on Exhibit "5.13(a)", attached hereto and
made a part hereof. Borrower is the sole owner of all names listed on such
Exhibit "5.13(a)" and any and all business done and all invoices issued in such
trade names are Borrower's sales, business and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a separate
corporate subsidiary or affiliate or independent entity.
(b) All registered trademarks, patents or copyrights, or such
as to which applications for registration have been submitted, which Borrower
uses, plans to use or has a right to use are listed on Exhibit "5.13(b)"
attached hereto and made a part hereof. The Borrower is the sole owner of such
Property except to the extent any other Person has claims or rights in such
Property, as such claims and rights are described on such Exhibit "5.13(b)". To
the best of Borrower's knowledge, Borrower is not in violation of any rights of
any other Person with respect to such Property.
5.14 Other Associations: Borrower is not engaged or does not have an
interest in any joint venture or partnership with any other Person except as
described on Exhibit "5.14" hereto and made a part hereof.
5.15 Environmental Matters: Borrower has no knowledge except as
disclosed on Exhibit "5.15" attached hereto and made part hereof of any of the
following which would have a Material Adverse Effect:
(a) the presence of any Hazardous Substances on any of the
real property on which the Collateral is located, or
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(b) any on-site spills, releases, discharges, disposal or
storage of Hazardous Substances that have occurred or are presently occurring on
any of such real property, or
(c) any spills, releases, discharges or disposal of Hazardous
Substances that have occurred or are presently occurring at other real
properties as a result of the activities or omissions of Borrower or for which
Borrower is reasonably likely to be held responsible, or
(d) any notice, summons, citation or other communication sent
to Borrower from any state or federal agency concerning any intentional or
unintentional action or conduct, inaction or omission, past or present which is
or may be in violation of any state or federal environmental law, rule or
regulation.
As used herein, the term "Hazardous Substances" means any regulated levels of
substances defined or designated as hazardous or toxic waste, hazardous or toxic
material, hazardous or toxic substance or similar term, by any environmental
statute, rule or regulation of any governmental entity presently in effect and
applicable to the Borrower.
5.16 Regulation O: No director, executive officer or principal
shareholder of Borrower is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director" (when
used with reference to a Lender), "executive officer" and "principal
shareholder" have the respective meanings assigned thereto in Regulation O
issued by the Board of Governors of the Federal Reserve System.
5.17 INTENTIONALLY OMITTED
5.18 Solvency: Borrower is solvent, able to pay its debts as they
become due, and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns Property having a value
both at fair valuation and at present fair salable value greater than the amount
required to pay its debts. Borrower will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other documents executed
in connection with this Agreement or by the transactions contemplated hereunder
or thereunder.
5.19 Patents, Trademarks, Etc.: Except as set forth on Exhibit "5.19"
attached hereto and made a part hereof, (a) Borrower does not require any
registered patents, trademarks or other intellectual property, or any license(s)
to use any registered patents, trademarks or other intellectual property in
order to sell Inventory in the ordinary course of business; and (b) Agent will
not require any registered patents, trademarks or other intellectual property or
any licenses to use the same in order to sell any of such Inventory after the
occurrence of an Event of Default.
5.20 Investment Company: Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is Borrower controlled by such a company.
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5.21 Year 2000 Compliance: Borrower represents and warrants that it is
taking all action necessary to assure that there will be no Material Adverse
Change to any Borrower's business by reason of the advent of the year 2000.
Borrower further represents and warrants that, by August 31, 1999, all of
Borrower's material Software shall, during the Y2K Period, be Century Compliant
and shall continue to (a) manage and manipulate data involving all dates within
the Y2K Period (including the fact that the year 2000 is a leap year) without
functional or data abnormality related to such dates; (b) manage and manipulate
data involving all dates within the Y2K Period without inaccurate results
related to such dates; (c) have user interfaces and data fields formatted to
distinguish between dates within the Y2K Period; and (d) store all core
application data in a format that includes indications of the millennium,
century, and decade as well as the actual year. "Century Compliant" means that
such Software is capable and will remain capable of providing accurate results
using data having date ranges spanning the twentieth (20th) and twenty first
(21st) centuries (the"Y2K Period"), except where the failure to do so would not
have a Material Adverse Effect.
5.22 Closure of UK Subsidiary: Borrower shall terminate the operations
of the UK Subsidiary no later than June 30, 1999. To the extent not applied as
set forth in Section 7.4(c) hereof, Borrower shall apply any net cash or liquid
assets of the UK Subsidiary after payment of wind down liabilities incurred in
the ordinary course of cessation of business and the Lockheed Note, to reduce
the Revolving Loans.
SECTION 6. AFFIRMATIVE COVENANTS
Borrower covenants that until all of the Obligations to Lenders are
paid and satisfied in full and the Revolving Credit has been terminated:
6.1 Payment of Taxes and Claims: Borrower shall pay, before they become
delinquent,
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons entitled to the benefit of statutory
or common law Liens, which, if unpaid, would result in the imposition of a Lien
upon its Property; provided, however, that Borrower shall not be required to pay
any such tax, assessment, charge, levy, claim or demand if the amount,
applicability or validity thereof shall at the time be contested in good faith
and by appropriate proceedings by Borrower, and if Borrower shall have set aside
on its books adequate reserves in respect thereof, in accordance with GAAP;
which deferment of payment is permissible so long as no Lien other than a
Permitted Lien has been entered and Borrower's title to, and its right to use,
its Property are not materially adversely affected thereby.
6.2 Maintenance of Properties and Corporate Existence:
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(a) Property - Borrower shall maintain its Property in good
condition and make all renewals, replacements, additions, betterments and
improvements thereto in the ordinary course of business, as Borrower deems
reasonably necessary in good faith in the exercise of its business judgment, and
will pay and discharge when due the cost of repairs and maintenance to its
Property.
(b) Insurance - Borrower shall maintain insurance on all
insurable tangible Property against fire, flood, casualty and such other hazards
(including, without limitation, extended coverage, business interruption,
workmen's compensation, boiler and machinery) in such amounts, with such
deductibles and with such insurers as are customarily used by companies
operating in the same industry as Borrower and reasonably acceptable to Agent.
At or prior to Closing, Borrower shall furnish Agent with a schedule of all such
insurance prepared by its insurance broker, and certificates of insurance with
respect thereto (including the text of the Lender's Loss Payable Clause in favor
of Agent required below), or such other evidence of insurance as Agent may
require. Borrower shall furnish Agent with a copy of such policy at or prior to
Closing. In the event Borrower fails to procure or cause to be procured any such
insurance or to timely pay or cause to be paid the premium(s) on any such
insurance, Agent (on behalf of Lenders) may do so for Borrower, but Borrower
shall continue to be liable for the same. The policies of all casualty insurance
with respect to Borrower's Tangible Property and the Collateral shall contain
standard Lender's Loss Payable Clauses issued in favor of Agent (on behalf of
Lenders) indicating that Agent is sole Lender Loss Payee under which all losses
thereunder with respect to the Inventory shall be paid to Agent (on behalf of
Lenders) as Agent's interest may appear. Such policies shall expressly provide
that the requisite insurance cannot be altered or canceled without thirty (30)
days prior written notice to Agent and shall insure Lenders notwithstanding the
act or neglect of Borrower. Borrower hereby appoints Agent as its
attorney-in-fact, exercisable at Agent's option (without any obligation to do
so), to endorse any check which may be payable to Borrower, and to file proofs
of loss with respect to any insurance claims, in order to collect the proceeds
of such insurance and any amount or amounts collected by Agent pursuant to the
provisions of this paragraph may be applied by Agent to the Obligations.
Borrower further covenants that all insurance premiums due and owing under their
current casualty policies have been paid. Borrower also agrees to notify Agent,
promptly, upon any receipt of a notice of termination, cancellation, or
non-renewal from its insurance company of any such policy.
(c) Public and Products Liability Insurance - Borrower shall
maintain, and shall deliver to Agent upon Agent's request evidence of, public
liability, products liability and business interruption insurance in such
amounts as are reasonably acceptable to Agent, but in any event not more than
are customary for companies in the same or similar businesses located in the
same or similar area.
(d) Financial Records - Consistent with the existing practice
of Borrower, it shall keep current and accurate books of records and accounts in
which full and correct entries will be made of all of its business transactions,
and will reflect in its financial statements
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adequate accruals and appropriations to reserves, all in accordance with GAAP.
Borrower shall not change its fiscal year end date without providing Agent
thirty (30) days prior written notice thereof, provided that Borrower may make
such change only once prior to the Revolving Credit Maturity Date.
(e) Corporate Existence and Rights - Borrower shall do (or
cause to be done) all things necessary to preserve and keep in full force and
effect its existence, good standing in all jurisdictions where its failure to be
in good standing might result in a Material Adverse Effect, and all of its
rights, licenses and franchises, the absence of which might result in a Material
Adverse Effect.
(f) Compliance with Laws - Borrower shall (i) be in compliance
with any and all laws, ordinances, governmental rules and regulations, and court
or administrative orders or decrees to which it is subject, whether federal,
state or local, (including, without limitation, environmental or
environmental-related laws, statutes, ordinances, rules, regulations and
notices); (ii) shall obtain and maintain any and all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its Property or to the conduct of its business, which violation or failure to
obtain or maintain causes or might cause a Material Adverse Effect. Borrower
shall timely satisfy all assessments, fines, costs and penalties imposed by any
governmental body against Borrower or any Property of Borrower subject to the
provisions of Section 6.1 above.
6.3 Business Conducted: Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any material
respect in any line of business substantially different from the business
conducted by the Borrower immediately prior to the Closing Date, unless such
line of business is reasonably related to such business so conducted prior to
the Closing Date.
6.4 Litigation: Borrower, upon having knowledge thereof, shall give
prompt notice to Agent of (a) the commencement against Borrower of any
litigation claiming from Borrower more than $100,000 in excess of any available
insurance coverage Borrower may have for such claim, and (b) any other claims
made against Borrower, or investigations or proceedings commenced against
Borrower the existence of which or adverse disposition of which might have a
Material Adverse Effect.
6.5 Taxes:
(a) Notwithstanding any other provision of this Agreement
other than 6.5(f) and (g), any and all payments by Borrower hereunder shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts or withholding taxes, and all liabilities with respect
thereto, excluding taxes imposed on Agent's or any Lender's net income and
franchise taxes imposed on Agent or any Lender by the United States or any
jurisdiction under the laws of which it is organized or in which an office is
located or any political
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subdivision thereof (all such non-excluded taxes, levies, imports, withholding
taxes and liabilities being hereinafter referred to as "Taxes"). If Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender or Agent (i) the sum payable shall be increased
by the amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 6.5) such
Lender or Agent shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) Borrower shall make such deductions and
(iii) Borrower shall pay the full amount deducted to the relevant taxing
authority or other governmental authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other general intangible, excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) Borrower will indemnify each Lender and Agent for the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 6.5) paid by such Lender
or Agent in respect of any and all payments made by Borrower hereunder, as the
case may be, and any liability (including penalties, interest and expenses other
than those resulting from the failure of a Lender or Agent to pay any Taxes or
Other Taxes for which it shall have received an indemnity payment hereunder)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Such indemnification shall be made
promptly after the date any Lender or Agent, as the case may be, makes written
demand therefor. If a Lender or Agent shall become aware that it is entitled to
receive a refund it shall notify Borrower and shall, promptly after receipt of a
request by Borrower, apply for and pursue such a refund at Borrower's expense.
If any Lender or Agent receives a refund in respect of any Taxes or Other Taxes
for which such Lender or Agent has received payment from Borrower hereunder it
shall promptly upon receipt repay such refund to Borrower without interest,
except to the extent interest shall have accompanied such refund, provided that
Borrower, upon the request of such Lender or Agent, agrees to return such refund
(plus penalties, interest or other charges) to such Lender or Agent in the event
such Lender or Agent is required to repay such refund.
(d) Within 45 days after the date of any payment of Taxes or
Other Taxes withheld by Borrower in respect of any payment to any Lender or
Agent, Borrower will furnish to the Agent, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 6.5
shall survive the payment in full of principal and interest hereunder.
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(f) On or prior to the date it becomes a party to this
Agreement, each Lender that is organized outside of the United States shall
deliver to Borrower such certificates, documents or other evidence, as required
by the Code or Treasury Regulations issued pursuant thereto, including Internal
Revenue Service Form 4224 or 1001 and any other certificate or statement or
exemption required by Treasury Regulation Section 1.1441-4(a) or Section 1.1441-
6(c) or any subsequent version thereof, properly completed and duly executed by
such Lender establishing that such payment is (i) not subject to withholding
under the Code because such payment is effectively connected with the conduct by
such Lender of a trade or business in the United States or (ii) totally exempt
from United States Federal withholding tax under a provision of an applicable
tax treaty. In addition, each such Lender shall, if legally able to do so,
thereafter deliver such certificates, documents or other evidence from time to
time, including, without limitation, Internal Revenue Service Form W-8,
establishing that payments received hereunder are not subject to such
withholding upon receipt of a written request therefor from Borrower or Agent.
Unless Borrower and Agent have received forms or other documents satisfactory to
them indicating that payments hereunder or under the Revolving Credit Notes are
not subject to United States Federal withholding tax under an applicable tax
treaty, Borrower or Agent shall withhold taxes from such payments at the
applicable statutory rate.
(g) Borrower shall not be required to pay any additional
amounts to any Lender in respect of United States Federal withholding tax
pursuant to this Section 6.5 if the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to deliver the
certificate, documents or other evidence specified in this Section 6.5 unless
such failure is attributable to (i) a change in applicable law, regulation or
official interpretation thereof or (ii) an amendment or modification to or a
revocation of any applicable tax treaty or a change in official position
regarding the application or interpretation thereof, in each case on or after
the date such Lender becomes a party to this Agreement, provided, however, that
such Lender shall promptly notify Borrower of any such matter described in
clause (i) or (ii) above upon its learning of the same and shall thereafter take
all reasonable actions resulting from such matter including delivering
certificates, documents or other evidence as may be necessary to eliminate or
reduce the amount of tax required to be withheld.
(h) Any Lender claiming any additional amounts payable
pursuant to this Section 6.5 shall use reasonable efforts (consistent with legal
and regulatory restrictions) to file any certificate or document requested by
Borrower or to change the jurisdiction of its applicable lending office if the
making of such filing or change would avoid the need for or reduce the amount of
any such additional amounts which may thereafter accrue and would not result in
the incurrence by such Lender of any cost for which Borrower does not provide
such security or indemnity as may be reasonably required by the Lender to
indemnify it in full for such cost and would not in the judgment of such Lender
be otherwise disadvantageous to it. Each Lender agrees with reasonable
promptness to notify Borrower of any determination which it shall make to make
any claim for additional amounts payable pursuant to this Section 6.5.
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6.6 Bank Accounts: Borrower shall establish, on or prior to the Closing
Date, and thereafter maintain, its principal depository and disbursement
account(s) with Agent.
6.7 Employee Benefit Plans: Borrower will (a) fund all its Pension
Plan(s) in a manner that will satisfy the minimum funding standards of Section
302 of ERISA, or will promptly satisfy any accumulated funding deficiency that
arises under Section 302 of ERISA, (b) furnish Agent, promptly upon Agent's
request of the same, with copies of all reports or other statements filed with
the United States Department of Labor, the Pension Benefit Guaranty Corporation
("PBGC") or the Internal Revenue Service ("IRS") with respect to all Pension
Plan(s), or which Borrower, or any member of a Controlled Group, may receive
from the United States Department of Labor, the IRS or the PBGC, with respect to
all such Pension Plan(s) which would have a Material Adverse Effect, and (c)
promptly advise Agent of the occurrence of any reportable event (as defined in
Section 4043 of ERISA, other than a reportable event for which the thirty (30)
day notice requirement has been waived by the PBGC) or prohibited transaction
(under Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with
respect to any such Pension Plan(s) and the action which Borrower proposes to
take with respect thereto. Borrower will make all contributions when due with
respect to any multi-employer pension plan in which it participates and will
promptly advise Agent (i) upon its receipt of notice of the assertion against it
of a claim for withdrawal liability, (ii) upon the occurrence of any event
which, to the best of Borrower's knowledge, would trigger the assertion of a
claim for withdrawal liability against Borrower, and (iii) upon the occurrence
of any event which, to the best of Borrower's knowledge upon its learning of the
same, would place Borrower in a Controlled Group as a result of which any member
(including Borrower) thereof may be subject to a claim for withdrawal liability,
whether liquidated or contingent.
6.8 Warranties for Future Advances: Each request by Borrower for an
Advance under the Revolving Credit in any form following the Closing Date shall
constitute an automatic representation and warranty, the truth and accuracy of
such representation and warranty of which shall be a further condition to the
funding of each Advance, by Borrower to the effect that (without waiving,
impairing or limiting the rights of Agent and the Lenders under Section 8
below):
(a) There has not occurred any event or occurrence since the
date of delivery of Borrower's most recent financial statements which has
resulted in, or has had, a Material Adverse Effect.
(b) No Event of Default then exists, and no event or condition
which with the giving of notice or passage of time, or both, would constitute an
Event of Default, then exists;
(c) Each Advance is within and complies with the terms and
conditions of this Agreement including without limitation the notice provisions
contained in Section 2.3 hereof; and
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(d) Each representation and warranty set forth in Section 5 of
this Agreement is then true and correct in all material respects; provided that
Borrower may update all Exhibits and prepare additional Exhibits so that all
such Exhibits and the representations and warranties, taken together, accurately
reflect the state of Borrower's affairs as of the date of a request for an
Advance by giving written notice thereof to Agent, and further provided that
such updated and additional Exhibits do not reflect events or conditions which
constitute violations of Section 6 or 7 hereof or otherwise reflect material
adverse developments.
6.9 Financial Covenants: Borrower shall maintain and comply with the
following financial covenants (calculated on the basis of GAAP), it being
understood that as of July 1, 1999 calculations for all applicable covenants
shall exclude income, if any, from the UK Subsidiary:
(a) Working Capital: Borrower shall have and maintain Working
Capital on a consolidated basis measured monthly at all times of not less than:
Amount Period
------ ------
$11,907,000 as of March 31, 1999 and at all times through June 29, 2000
$15,856,000 as of June 30, 2000 and at all times through June 29, 2001
$18,583,000 as of June 30, 2001 and at all times thereafter.
(b) Tangible Net Worth: Borrower shall have and maintain a
Tangible Net Worth on a consolidated basis measured annually, at all times of
not less than:
Amount Period
------ ------
$29,779,000 as of June 30, 1999 and at all times through June 29, 2000
$31,779,000 as of June 30, 2000 and at all times through June 29, 2001
$34,779,000 as of June 30, 2001 and at all times thereafter.
(c) Quarterly Cumulative Net Income: Borrower shall have and
maintain Net Income on a consolidated basis measured quarterly beginning in the
first quarter ending September 30, 1999, of not less than:
Amount Period
------ ------
$500,000 for every 3 month period ending September 30
$1,000,000 for every 6 month period ending December 31
$1,500,000 for every 9 month period ending March 31
and for every fiscal year thereafter.
Not withstanding the foregoing, losses shall not exceed the following amounts
during the stated periods measured quarterly:
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Amount Period
------ ------
N/A for each fiscal first quarter (July 1 through September 30)
($250,000) for each fiscal second quarter (October 1 through December 31)
($750,000) for each fiscal third quarter (January 1 through March 31)
($1,000,000) for each fiscal fourth quarter (April 1 through June 30)
(d) Net Income: Borrower shall have and maintain Net Income on
a consolidated basis measured annually of not less than:
Amount Period
------ ------
($3,800,000) as of June 30, 1999
$2,000,000 as of June 30, 2000
$3,000,000 as of June 30, 2001 and as of the end of each fiscal year thereafter.
(e) Capital Expenditures: Borrower shall not expend for
Capital Expenditures in excess of $2,036,000.00 during the fiscal year ending
June 30,1999, $1,500,000.00 during the fiscal year ending June 30, 2000, and
$2,000,000.00 during the fiscal year ending June 30, 2001, all on a
noncumulative basis.
(f) Net Cash Flow: Borrower shall have and maintain a Net Cash
Flow on a consolidated basis measured annually of not less than:
Amount Period
------ ------
($2,290,000) as of June 30, 1999
$2,030,000 as of June 30, 2000
$2,360,000 as of June 30, 2001 and as of the end of each fiscal year thereafter.
6.10 Financial and Business Information: Borrower shall deliver to
Agent the following:
(a) Financial Statements and Collateral Reports: such data,
reports, statements and information, financial or otherwise, as Agent may
reasonably request, including, without limitation:
(i) within ninety (90) days after the end of each
fiscal year of Borrower, financial statements of Borrower for such year on a
consolidated and consolidating basis, eliminating inter-company transactions,
including the balance sheet as at the end of such fiscal year and a statement of
cash flows and income statement for such fiscal year, setting forth in the
consolidated statements in comparative form, the corresponding figures as at the
end of and for the previous fiscal year, all in reasonable detail, including all
supporting schedules and if requested management letters, and audited and
certified on an unqualified basis by independent
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public accountants of recognized standing, selected by Borrower and reasonably
satisfactory to the Agent, to have been prepared in accordance with GAAP.
(ii) within twenty one (21) days after each calendar
month for the initial six months of the term herein and within fifteen (15) days
of the end of each calendar month thereafter, Borrower's billed Accounts
receivable aging report and listings of Unbilled Accounts by customer and
contract, accounts payable aging report, and such other reports as Agent deems
reasonably necessary.
(iii) within thirty (30) days after the end of each
calendar month, internally prepared consolidated and consolidating financial
statements for Borrower, including balance sheet, income statement and
statements of cash flows, prepared in accordance with GAAP, without footnotes
and subject to normal year end adjustments, all in form and substance reasonably
satisfactory to Agent.
(iv) Borrowing Base Certificate together with reports
of ▇▇▇▇▇▇▇▇, collections, credit adjustments, and all other information
pertaining to Accounts, billed accounts, revenue recognition by customer and
contract and all information pertaining to Unbilled Accounts Receivable shall be
submitted to Agent in conjunction with each Advance but in no event less than
weekly, all in a form satisfactory to Agent.
(v) at least 30 days prior to the end of each fiscal
year, annual consolidated and consolidating projections of profit and loss, cash
flows and balance sheets and availability prepared in accordance with GAAP, and
prepared on a monthly basis.
(vi) such other collateral and financial reports and
information as Agent may reasonably request.
(b) Notice of Event of Default - promptly upon becoming aware
of the existence of any condition or event which constitutes an Event of Default
under this Agreement, or which with the passage of time or the giving of notice,
or both, could reasonably be expected to become an Event of Default hereunder, a
written notice specifying the nature and period of existence thereof and what
action Borrower is taking (and proposes to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by
Borrower, notice of default, oral or written, given to Borrower by any creditor
for borrowed money in excess of $250,000;
(d) Securities and Other Reports - if Borrower shall be
required to file reports with the Securities and Exchange Commission pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
promptly upon its becoming available, one copy of each financial statement,
report, notice or proxy statement sent by Borrower to stockholders generally,
and, a copy of each regular or periodic report, and any registration statement,
or prospectus in
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respect thereof, filed by Borrower with any securities exchange or with federal
or state securities and exchange commissions or any successor agency.
6.11 Officers' and Accountant's Certificates: Along with the set of
financial statements and other reports delivered to Agent and each Lender at the
end of each month, fiscal quarter and fiscal year, as applicable, pursuant to
Section 6.10(a) hereof, Borrower shall deliver to Agent (a) a certificate (in
the form of Exhibit "6.11(a)" attached hereto and made a part hereof) from the
chief financial officer of Borrower; and (b) with respect to the annual
statements of Borrower, a certificate from Borrower's independent certified
public accountant, addressed to Agent, setting forth the calculations required
to establish whether or not Borrower was in compliance with Section 6.9.
6.12 Inspection: So long as Borrower is indebted to Lenders hereunder,
Borrower will permit any of Agent's officers or other representatives to visit
and inspect any of the locations of Borrower at any time during normal business
hours, provided that prior to the occurrence of any Event of Default or an event
which with the passage of time, the giving of notice or both would become an
Event of Default, Agent shall give Borrower at least 48 hours prior notice of
each visit, to examine and audit all of Borrower's books of account, records,
reports and other papers, to make copies and extracts therefrom and to discuss
its affairs, finances and accounts with its officers, employees and independent
certified public accountants. Borrower hereby irrevocably authorizes and directs
all such accountants and auditors to exhibit and deliver to Agent copies of any
and all of Borrower's financial statements or other accounting records of any
sort in the accountant's or auditor's possession. All such inspections shall be
at Borrower's expense (in addition to the Collateral Management Fee) at the rate
of $650.00 per person per day plus out-of-pocket costs and expenses for such
activities.
6.13 Tax Returns and Reports: At Agent's request from time to time,
Borrower shall promptly furnish Agent with copies of its annual federal and
state income tax returns. Borrower further agrees that, if requested by Agent,
it shall promptly furnish Agent with copies of all reports filed by it with any
federal, state or local governmental authority or agency, board or commission.
6.14 Information to Participant: Each Lender may divulge to any
participant, co-lender or assignee or prospective participant, co-lender or
assignee it is permitted to obtain in the Revolving Credit, or any portion
thereof, all information, and furnish to such Person copies of any reports,
financial statements, certificates, and documents obtained under any provision
of this Agreement, or related agreements and documents.
6.15 Material Adverse Developments: Borrower agrees that immediately
upon becoming aware of any development or other information which would
reasonably be expected to have or cause a Material Adverse Effect, it shall give
to Agent telephonic or telegraphic notice specifying the nature of such
development or information and such anticipated effect. In addition, such verbal
communication shall be confirmed by written notice thereof to Agent on the next
business day after such verbal notice is given.
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6.16 Name Changes, Places of Business: Borrower shall give thirty (30)
days prior written notice to Agent of any name change or change in the location
of any of its respective places of business, of the places where records
concerning its Accounts are kept, or the establishment of any new, or the
discontinuance of any existing place of business.
6.17 Year 2000 Compliance: Borrower shall take whatever steps may be
required to insure that by August 31, 1999 its computer systems shall be Year
2000 compliant.
SECTION 7. NEGATIVE COVENANTS:
Borrower covenants that until all of the Obligations to Lenders are
paid and satisfied in full and the Revolving Credit has been terminated, that:
7.1 Merger, Consolidation, Dissolution or Liquidation:
(a) Except with prior written approval of Agent or in
accordance with Section 10.18 hereof, Borrower shall not sell, lease, license,
transfer or otherwise dispose of its Property, other than Inventory, equipment
or real estate sold in the ordinary course of Borrower's business.
(b) Except for the merger of wholly owned subsidiaries where
Borrower is the surviving entity, Borrower shall not merge or consolidate with
any other Person, or commence a dissolution or liquidation.
7.2 Acquisitions: Borrower shall not acquire all or a material portion
of the stock, securities or assets of any Person in any transaction or in any
series of related transactions or enter into any sale and leaseback transaction.
7.3 Liens and Encumbrances: Borrower shall not, except with prior
written approval of Agent: (i) execute a negative pledge agreement with any
Person other than Agent and/or Lenders covering any of its Property or (ii)
cause or permit or agree or consent to cause or permit in the future (upon the
happening of a contingency or otherwise), its Property (including, without
limitation, the Collateral), whether now owned or hereafter acquired, to be
subject to a Lien or be subject to any claim except for Permitted Liens. As used
herein, "Permitted Liens" means:
(a) Liens securing taxes, assessments or governmental charges
or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like persons, provided the payment thereof is
not at the time required by Section 6.1;
(b) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment, insurance,
social security and other like laws;
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(c) Liens described in Exhibit 5.4;
(d) Liens constituting purchase money security interests,
capitalized leases or finance leases hereafter created by Borrower to Persons
providing financing for Capital Expenditures permitted under this Agreement so
long as each obligation secured by a Lien permitted by this subparagraph (d)
does not exceed 100% of the total cost (including interest) to acquire and
install such Property and such Lien extends only to the Property actually
acquired with such financing;
(e) Liens in favor of Agent or Lenders;
(f) Liens reflected on the title insurance policy as of the
Closing Date; and
(g) Liens incurred in the ordinary course of Borrower's
business which do not, in the aggregate, exceed $100,000.
7.4 Transactions With Affiliates or Subsidiaries:
(a) Borrower shall not enter into any transaction with any
Affiliate or Subsidiary including, without limitation, the purchase, sale, or
exchange of Property, or except in accordance with Section 7.7 the loaning or
giving of funds to any Affiliate or any Subsidiary. (An "Affiliate" means any
entity which directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with Borrower. Control may be by
ownership, contract, or otherwise.)
(b) Borrower shall not create or acquire any Subsidiary.
(c) To the extent there is cash or other liquid assets
remaining in the UK Subsidiary, said cash or liquid assets may only be used for
the payment of wind down liabilities incurred in the ordinary course of the
cessation of business and the Lockheed Note.
7.5 Guarantees: Excepting (i) wind down liabilities of Borrower's
subsidiaries and existing obligations of such subsidiaries, and (ii) the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection, Borrower shall not become or be liable, directly or
indirectly, primary or secondary, matured or contingent, in any manner, whether
as guarantor, surety, accommodation maker, or otherwise, for the existing or
future indebtedness of any kind of any Person.
7.6 Distributions, Redemptions and Other Indebtedness: Borrower shall
not: (a) declare or pay or make any forms of Distribution to its shareholders,
their successors or assigns; (b) make any prepayments on any existing or future
indebtedness for borrowed money to any Person; or (c) hereafter borrow money
other than from Lenders hereunder except in connection with borrowed money
giving rise to a Permitted Lien under Section 7.3(d).
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7.7 Loans and Investments: Except for Permitted Investments and as set
forth on Exhibit 7.7, Borrower shall not make or have outstanding loans,
advances, extensions of credit or capital contributions to, or investments in,
any Person other than advances made to employees for travel, expenses and other
business related activities, in the ordinary course of Borrower's business, in
an aggregate amount not to exceed $50,000.
7.8 Use of Lenders' Name: Borrower shall not use any Lender's name (or
the name of any of any Lender's affiliates) or Agent's name in connection with
any of its business operations except to identify the existence of the Revolving
Credit and the names of the Lenders and Agent in the ordinary course of
Borrower's business. Nothing herein contained is intended to permit or authorize
Borrower to make any commitment or contract on behalf of any Lender or Agent.
7.9 Miscellaneous Covenants:
(a) Borrower shall not become or be a party to any contract or
agreement which at the time of becoming a party to such contract or agreement
materially impairs Borrower's ability to perform under this Agreement, or under
any other material instrument, agreement or document to which Borrower is a
party or by which it is or may be bound.
(b) Borrower shall not carry or purchase any "margin stock"
within the meaning of Regulations U, T or X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II.
7.10 Change in Executive Management: Borrower shall not remove or
replace any Person who is a member of Executive Management without the prior
written consent of the Agent, which shall not be unreasonably withheld. In the
event of the death of any member of Executive Management or termination of
employment by such member of Executive Management, Borrower shall have ninety
(90) days to replace such Person, and any such replacement shall be acceptable
to the Lender in its reasonable discretion.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall constitute an
event of default ("Event of Default") and Agent shall thereupon have the option,
and the Majority Lenders shall have the option to cause Agent, to declare the
Obligations immediately due and payable, all without demand, notice, presentment
or protest or further action of any kind (it also being understood that the
occurrence of any of the events or conditions set forth in subparagraphs (j),
(k) or (l) shall automatically cause an acceleration of the Obligations):
(a) Payments - if Borrower fails to make any payment of
principal or interest, including any Overadvance, or any fees, under the
Revolving Credit on the due date of such payment; or
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(b) Other Charges - if Borrower fails to pay any other
charges, Expenses or other monetary obligations owing to any Lender or Agent
arising out of or incurred in connection with this Agreement, as applicable; or
(c) Covenant Defaults - if Borrower fails to perform, comply
with or observe any affirmative or negative covenant or undertaking contained in
this Agreement; provided however that with respect to Borrower's failure to
perform or comply with the covenants contained in Section 6.1 above, Borrower
shall have five (5) Business Days from the occurrence thereof to perform and/or
comply with such covenant; or
(d) Financial Information - if any statement, report,
financial statement, or certificate made or delivered in connection herewith at
any time by Borrower or any of its officers, employees or agents, to Agent or
any Lender is not true and correct, in all material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured damage
to or loss, theft, or destruction with respect to any portion of any Property of
Borrower which (a) is in excess of $75,000 with respect to any portion of any
Property of Borrower, or (b) is reasonably likely to result in a Material
Adverse Effect; or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of Borrower contained in or
pursuant to this Agreement, or in any document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement, is
false, erroneous, or misleading in any material respect when made or deemed
made; or
(g) Agreements with Others - if there shall be any default by
Borrower beyond any grace period under any agreement with any other creditor for
borrowed money in excess of $100,000, and (i) such default consists of the
failure to pay any principal, premium or interest with respect to such
indebtedness, or (ii) such default consists of the failure to perform any
covenant or agreement with respect to such indebtedness, if the effect of such
default is to cause or to permit the relevant creditor to cause Borrower's
obligations which are the subject thereof to become due prior to their maturity
date or prior to their regularly scheduled date of payment;
(h) Other Agreements with Lenders - if Borrower breaches or
violates the terms of, or if a default or an Event of Default, occurs under, any
other existing or future agreement (related or unrelated) between Borrower or
among Borrower or Agent or any Lender or all Lenders (subject to any applicable
grace or cure period which may be contained in such other agreement); or
(i) Judgments - if any final judgment is entered against
Borrower for the payment of money in excess of $25,000 which shall not be
satisfied, dismissed or bonded pending appeal within 60 days after the entry
thereof; or
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(j) Assignment for Benefit of Creditors, etc. - if Borrower
makes or proposes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by
Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of
any action for the dissolution or liquidation of Borrower, or the commencement
of any case or proceeding for reorganization or liquidation of Borrower's debts
under the Bankruptcy Code or any other state or federal law, now or hereafter
enacted for the relief of debtors, whether instituted by or against Borrower;
provided, however, that Borrower shall have sixty (60) days to obtain the
dismissal or discharge of any involuntary proceeding filed against it, it being
understood that during such sixty (60) day period, no Lender shall be obligated
to make Advances hereunder and Agent may seek adequate protection in any
bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower or for a
material portion of Borrower's Property; or
(m) Execution Process, Seizure, etc. - if any Property of
Borrower, with a cost in excess of $25,000 is seized by any governmental entity
(federal, state or local), landlord or other Person without Borrower's consent;
or
(n) Termination of Business - if Borrower ceases any material
portion of its business operations as presently conducted; or
(o) Pension Benefits, etc. - if Borrower fails to comply with
ERISA, so that grounds exist to permit the appointment of a trustee under ERISA
to administer Borrower's employee plans or to allow the Pension Benefit Guaranty
Corporation to institute proceedings to appoint a trustee to administer such
plan(s), or to permit the entry of a Lien to secure any deficiency or claim; or
(p) Criminal Conduct and Investigations - if Borrower commits
or is indicted for committing any felony or if any proceeding or investigation
by any governmental body is pending an adverse disposition of which would be
reasonably likely to result in the forfeiture of any material Property of
Borrower to any governmental entity, federal, state or local; or
(q) Material Adverse Effect - the happening of any event or
occurrence which results in or causes a Material Adverse Effect; or
(r) Change of Management - if any senior management or
officers as of the date hereof leave and are not replaced to the satisfaction of
Lender.
8.2 Cure - Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Agent and/or Lenders to accept a cure of any Event of
Default hereunder.
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8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies
granted or available to Agent or Lenders under this Agreement or the Loan
Documents, or otherwise available at law or in equity, upon or at any time after
the occurrence and during the continuance of an Event of Default, or any event
which with the giving of notice or the passage of time, or both, would become an
Event of Default, Agent may, in its discretion, direct Lenders, and the Majority
Lenders shall have the option to instruct Agent to direct Lenders, to, withhold
or cease making Advances under the Revolving Credit.
(b) In addition to all other rights, options and remedies
granted or available to Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, in its discretion, upon
or at any time after the occurrence and during the continuance of an Event of
Default, terminate this Agreement and immediately cease making Advances
hereunder.
(c) In addition to all other rights, options and remedies
granted or available to Agent, under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), upon or at any time after the
occurrence and during the continuance of an Event of Default Borrower shall be
obligated to deliver and pledge to Agent, on behalf of all Lenders, cash
collateral in the unpaid amount of all outstanding Letters of Credit.
(d) In addition to all other rights, options and remedies
granted or available to Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, upon or at any time
following the occurrence and during the continuance of an Event of Default
exercise all rights under the UCC and any other applicable law or in equity, and
under all Loan Documents permitted to be exercised after the occurrence and
during the continuance of an Event of Default, including the following rights
and remedies (which list is given by way of example and is not intended to be an
exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices
regarding and collect directly the Collateral, with or without judicial process
(including without limitation the right to notify the United States postal
authorities to redirect mail addressed to Borrower to an address designated by
Agent); or
(ii) By its own means or with judicial assistance,
enter Borrower's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on such premises in compliance with
subsection (e) below, without any liability for rent, storage, utilities or
other sums, and Borrower shall not resist or interfere with such action; or
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(iii) Require Borrower at Borrower's expense to
assemble all or any part of the Collateral and make it available to Agent at any
place designated by Agent;
(iv) The right to reduce the Revolving Credit Limit
or the advance rates, or to reduce, modify, take additional reserves under the
Borrowing Base or any portion thereof for the benefit of Lenders or to modify
the terms and conditions upon which Agent, on behalf of Lenders, or Lenders may
be willing to consider making Advances under the Credit Facility.
(e) Borrower hereby agrees that a notice received by it at
least ten (10) days before the time of any intended public sale or of the time
after which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other disposition.
If permitted by applicable law, any perishable inventory or Collateral which
threatens to speedily decline in value or which is sold on a recognized market
may be sold immediately by Agent without prior notice to Borrower. Borrower
covenants and agrees not to interfere with or impose any obstacle to Agent's
exercise of its rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder.
8.4 Nature of Remedies: All rights and remedies granted Agent or
Lenders hereunder and under the Loan Documents, or otherwise available at law or
in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Agent may proceed with any number of remedies at the same time
until all Obligations are satisfied in full. The exercise of any one right or
remedy shall not be deemed a waiver or release of any other right or remedy, and
Agent, upon or at any time after the occurrence of an Event of Default, may
proceed against Borrower or any of the Collateral, at any time, under any
agreement, with any available remedy and in any order.
8.5 Set-Off: If any bank account of Borrower with Agent, or any Lender
is attached or otherwise liened or levied upon by any third party, such Lender
as agent for Lenders shall have and be deemed to have, without notice to
Borrower, the immediate right of set-off and may apply the funds or amount thus
set-off against any of the Obligations hereunder.
SECTION 9. AGENT
9.1 Appointment and Authorization. Each Lender, and each subsequent
holder of any of the Notes by its acceptance thereof, hereby irrevocably
appoints and authorizes the Agent to take such action on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
Except as may be otherwise expressly provided herein, Borrower is hereby
authorized by the Lenders to deal solely with the Agent in all transactions
which affect the Lenders under this Agreement and the Loan Documents. The
rights, privileges and remedies accorded to the Agent hereunder shall be
exercised by the Agent on behalf of all of the Lenders.
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9.2 General Immunity. Subject to the provisions of this Agreement, the
Agent will handle all transactions relating to the Loans and all other
Obligations, including, without limitation, all transactions with respect to
Letters of Credit, this Agreement, the Loan Documents and all related documents
in accordance with its usual banking practices. In performing its duties as
Agent hereunder, the Agent will take the same care as it takes in connection
with loans in which it alone is interested. However, neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them hereunder or in connection herewith
except for its or their own gross negligence or willful misconduct.
9.3 Consultation with Counsel. The Agent may consult with legal counsel
and any other professional advisors or consultants deemed necessary or
appropriate and selected by Agent and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
9.4 Documents. The Agent shall not be under a duty to examine into or
pass upon the effectiveness, genuineness or validity of this Agreement or any of
the Notes or any other instrument or document furnished pursuant hereto or in
connection herewith, and the Agent shall be entitled to assume that the same are
valid, effective and genuine and what they purport to be. In addition the Agent
shall not be liable for failing to make any inquiry concerning the accuracy,
performance or observance of any of the terms, provisions or conditions of such
instrument or document.
9.5 Rights as a Lender. With respect to its applicable Pro Rata
Percentage of the Revolving Credit, the Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. Subject to
the provisions of this Agreement, the Agent may accept deposits from, lend money
to and generally engage in any kind of banking or trust business with Borrower
and its Affiliates as if it were not the Agent.
9.6 Responsibility of Agent. It is expressly understood and agreed that
the obligations of the Agent hereunder are only those expressly set forth in
this Agreement and that the Agent shall be entitled to assume that no Event of
Default, and no event which with the passage of time, or the giving of notice,
would constitute an Event of Default, has occurred and is continuing, unless the
Agent has actual knowledge of such fact. Except to the extent Agent is required
by the Lenders pursuant to the express terms hereof to take a specific action,
the Agent shall be entitled to use its discretion with respect to exercising or
refraining from exercising any rights which may be vested in it by, or with
respect to taking or refraining from taking any action or actions that it may be
able to take under or in respect of, this Agreement and the Loan Documents. The
Agent shall incur no liability under or in respect of this Agreement and the
Loan Documents by acting upon any notice, consent, certificate, warranty or
other paper or instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything that it may
do or refrain from doing in the reasonable exercise of its
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judgment, or that may seem to it to be necessary or desirable under the
circumstances. The relationship between the Agent and each Lender is and shall
be that of agent and principal only and nothing herein shall be construed to
constitute the Agent a joint venturer with any Lender, a trustee or fiduciary
for any of the Lenders or for the holder of a participation therein nor impose
on the Agent duties and obligations other than those set forth herein.
9.7 Collections and Disbursements.
(a) The Agent will have the right to collect and receive all
payments of the Obligations, and to collect and receive all reimbursements for
draws made under the Letters of Credit, together with all fees, charges or other
amounts due under this Agreement and the Loan Documents. On each Settlement
Date, Agent shall make a determination of the actual outstanding dollar amount
of each Lender's Loans based upon its Pro Rata Percentage (or such lesser
percentage if such Lender has failed to remit a required payment to Agent
hereunder) of the outstanding principal amount of all Loans.
(b) Agent shall pay to each Lender, on each Settlement Date,
from the interest actually received by Agent from Borrowers, a sum equal to the
interest calculated for the actual number of days elapsed on the basis of a year
of 360 days, on each Lender's outstanding balance of its Loans at the rate equal
to the applicable rate of interest chosen by Borrower with respect to such
Lender's Pro Rata Percentage of the Advances outstanding. If Agent should for
any reason receive less than the full amount of the interest or other
compensation due under the Loan Documents, each Lender's share of such interest
or compensation shall decrease in proportion to each Lender's Pro Rata
Percentage.
(c) If any such payment received by the Agent is rescinded,
determined to be unenforceable or invalid or is otherwise required to be
returned for any reason at any time, whether before or after termination of this
Agreement and the Loan Documents, each Lender will, upon written notice from the
Agent, promptly pay over to the Agent its Pro Rata Percentage of the amount so
rescinded, held unenforceable or invalid or required to be returned, together
with interest and other fees thereon if also required to be rescinded or
returned.
(d) All payments by the Agent and the Lenders to each other
hereunder shall be in immediately available funds. The Agent will at all times
maintain proper books of account and records reflecting the interest of each
Lender in the Revolving Credit and the Letters of Credit, in a manner customary
to the Agent's keeping of such records, which books and records shall be
available for inspection by each Lender at reasonable times during normal
business hours, at such Lender's sole expense. In the event that any Lender
shall receive any payments in reduction of the Obligations in an amount greater
than its applicable Pro Rata Percentage in respect of indebtedness to the
Lenders evidenced hereby (including, without limitation amounts obtained by
reason of setoffs), such Lender shall hold such excess in trust (to the extent
such Lender is lawfully able to do so) for Agent (on behalf of all other
Lenders) and shall promptly remit to the Agent such excess amount so that the
amounts received by each Lender hereunder
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shall at all times be in accordance with its applicable Pro Rata Percentage. To
the extent necessary for each Lender's actual percentage of all outstanding
Loans to equal its applicable Pro Rata Percentage, the Lender having a greater
share of any payment(s) than its applicable Pro Rata Percentage shall acquire a
participation in the applicable outstanding balances of the Revolving Credit Pro
Rata Shares of the other Lenders as determined by Agent.
(e) The proceeds from the sale or disposition of any
Collateral shall be applied first to Expenses incurred by Agent, then to accrued
but unpaid interest, then to unpaid fees owing to Lenders and/or Agent, then on
the next Settlement Date to the principal balance of Loans in accordance with
percentage which each Lender's respective outstanding Loans bears to the
aggregate outstanding Loans.
9.8 Indemnification. To the extent not promptly paid by Borrower, the
Lenders hereby each indemnify the Agent (and Issuing Bank with respect to
Letters of Credit) ratably according to their respective Pro Rata Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (or Issuing Bank, as the case may be) in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken
or omitted by the Agent (or Issuing Bank, as the case may be) under or related
to this Agreement or the other Loan Documents or the Loans, provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's (or Issuing Bank's, as the case may be) gross
negligence or wilful misconduct. Agent shall have the right to deduct, from any
amounts to be paid by Agent to any Lender hereunder, any amounts owing to Agent
by such Lender by virtue of this paragraph.
9.9 Expenses.
(a) All reasonable out-of-pocket costs and out-of-pocket
expenses incurred by Agent in connection with the creation, amendment,
administration, termination and enforcement of the Loans (including, without
limitation, audit expenses, counsel fees and expenditures to protect, preserve
and defend Agent's and each Lender's rights and interest under the Loan
Documents) shall be shared and paid on demand by Lenders pro rata based on their
applicable Pro Rata Percentage.
(b) Agent may deduct from payments or distributions to be made
to Lenders such funds as may be necessary to pay or reimburse Agent for such
costs or expenses.
(c) In connection with reimbursement of expenses set forth in
this Section 9.9 and indemnification obligations set forth in Section 9.8, Agent
shall provide a written statement to Lenders describing such expenses or
indemnification obligations.
9.10 No Reliance. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the Loan
Documents solely upon its
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own independent investigation and is not relying upon any information supplied
by or any representations made by Agent. Each Lender shall continue to make its
own analysis and evaluation of Borrower. Agent makes no representation or
warranty and assumes no responsibility with respect to the financial condition
or Property of Borrower, any Obligor or any account debtor of Borrower; the
accuracy, sufficiency or currency of any information concerning the financial
condition, prospects or results of operations of Borrower; or for sufficiency,
authenticity, legal effect, validity or enforceability of the Loan Documents.
Agent assumes no responsibility or liability with respect to the collectibility
of the Obligations or the performance by Borrower of any obligation under the
Loan Documents.
9.11 Reporting. During the term of this Agreement, Agent will promptly
furnish each Lender or make available to each Lender at Agent's office in
Philadelphia, Pennsylvania, such financial statements, reports and other
materials actually received by Agent, as any Lender may reasonably request.
Agent will notify Lenders within a reasonable period of time (not to exceed ten
(10) Business Days) after it receives actual knowledge of any Event of Default
under the Loan Documents.
9.12 Removal of Agent. The Agent may resign at any time upon thirty
(30) days prior written notice thereof to Lenders and Borrower and upon receipt
from Borrower of its written consent to such resignation, which consent shall
not be unreasonably withheld. The Agent may be removed as Agent hereunder by the
written direction of Lenders (exclusive of Mellon) upon the following (i)
willful misconduct in the performance of Agent's duties or responsibilities
under this Agreement; or (ii) if a receiver, trustee or conservator is appointed
for Agent or any state or federal regulatory authority assumes management or
control of Agent or, if under applicable law, the administrative discretionary
duties and responsibilities of Agent hereunder become controlled by or subject
to the approval of any state or federal regulatory authority. Upon any such
removal, the Majority Lenders shall have the right to appoint a successor Agent,
which successor must be acceptable to Borrower, in its reasonable discretion.
Upon the acceptance of the appointment as a successor Agent hereunder by such
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all rights, powers, obligations and duties of the retiring Agent and
the retiring Agent shall be discharged from its duties and obligations
hereunder.
9.13 Action on Instructions of Lenders. With respect to any provision
of this Agreement, or any issue arising thereunder, concerning which the Agent
is authorized to act or withhold action by direction of Lenders (or as the case
may be under this Agreement, the Majority Lenders), the Agent shall in all cases
be fully protected in so acting, or in so refraining from acting, hereunder in
accordance with written instructions signed by Lenders. Such instructions and
any action taken or failure to act pursuant thereto shall be binding on all
Lenders and on all holders of the Revolving Credit Notes.
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9.14 Several Obligations. The obligation of each Lender is several, and
neither the Agent nor any other Lender shall be responsible for any obligation
or commitment hereunder of any other Lender.
9.15 Consent of Lenders to Agent's Rights.
(a) Agent shall have the sole and exclusive right to service,
administer and monitor the Loans and the Loan Documents, including without
limitation, the right to exercise all rights, remedies, privileges and options
under the Loan Documents, including without limitation the credit judgment with
respect to the making of Advances and the determination as to the basis on which
and extent to which Advances may be made and the determination as to whether
Letters of Credit should be issued, amended, extended or whether draws should be
honored for Letters of Credit.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
all Lenders: (i) extend the Revolving Credit Term or the Revolving Credit
Maturity Date, (ii) decrease any interest rate on the Revolving Credit or any
fee owing to Lenders, (iii) compromise or settle all or any material portion of
the Obligations, (iv) release any obligor from the Obligations except in
connection with termination of the Revolving Credit and full payment and
satisfaction of all Obligations, (v) modify this Section 9.15(b) or the
definition of Majority Lenders, (vi) release any material portion of the
Collateral except in connection with a sale in the ordinary course or other
permitted disposition or upon full payment of the Obligations; or (vii) increase
the Revolving Credit Limit or the Revolving Credit Pro Rata Share of any Lender;
and, except as expressly provided in this Section 9.15(b) Agent shall not,
without the prior written consent of the Majority Lenders, modify, amend or
waive any provision of this Agreement or the other Loan Documents unless
expressly permitted herein.
(c) Notwithstanding anything to the contrary contained in
subparagraph (b) above, Agent may in its discretion waive a violation of any
provision of Section 6.9 above or withhold enforcement of action as a result of
a violation thereof, for an indefinite period without the consent of any Lenders
if the then most recent financial statements indicate that the deviation from
the financial covenant required to be maintained as of that date is less than 3%
from the required level.
(d) After an acceleration of the Obligations, Agent shall have
the sole and exclusive right, with communication (to the extent reasonably
practicable under the circumstances) with all Lenders, to exercise or refrain
from exercising any and all right, remedies, privileges and options under the
Loan Documents and available at law or in equity to protect and enforce the
rights of the Lenders and collect the Obligations, including, without
limitation, instituting and pursuing all legal actions against Borrower or to
collect the Obligations, or defending any and all actions brought by Borrower or
other Person; or incurring Expenses or otherwise making expenditures to protect
the Loans, the Collateral or Lenders' rights or remedies.
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(e) To the extent Agent is required to obtain or otherwise
elects to seek the consent of Lenders to an action Agent desires to take, if any
Lender fails to notify Agent, in writing, of its consent or dissent to any
request of Agent hereunder within five (5) Business Days of such Lender's
receipt of such request, such Lender shall be deemed to have given its consent
thereto. If any Lender dissents to any such request of Agent, Agent may within
seven (7) business days thereafter elect in its sole discretion to purchase such
Lender's entire Pro Rata Share of the Loans without penalty.
(f) Notwithstanding any other provision of this Section 9.15
and without impairing Agent's discretionary rights under Section 8, to the
extent Agent agrees to make an Overadvance or that there occurs any
redetermination of which Accounts constitute Eligible Accounts or which
Inventory constitutes Eligible Inventory which redetermination results in the
creation of an Overadvance, to the extent Overadvances outstanding at any time
as permitted under this Section 9.15(f) do not exceed $500,000, Agent shall, in
its sole discretion, without right of disapproval by any or all of the Lenders,
be entitled in its discretion to permit Borrower a period not to exceed thirty
(30) days to repay or remove such Overadvance. During such thirty (30) day
period, the amount of Loans constituting such Overadvance shall be excluded in
the determination of whether availability exists within the Borrowing Base for
future Advances.
(g) Any amendment to Section 9 of this Agreement shall not
require Borrower's consent.
9.16 Participations and Assignments: Each Lender may at any time: (a)
grant participations of its Pro Rata Percentage of Loans or in and to its
interests under this Agreement (collectively, "Participations") to any other
lending office of such Lender or to any other bank, lending institution or other
entity which such Lender determines has the requisite sophistication to evaluate
the merits and risks of investments in Participations ("Participants"); provided
however that: all amounts payable by the Borrower to such Lender hereunder and
voting rights of such Lender hereunder shall be determined as if such Lender had
not granted such Participation; and (iii) any agreement pursuant to which such
Lender may grant a Participation (A) shall provide that such Lender is not
delegating and therefor shall retain the sole right and responsibility to
exercise its rights and privileges including, without limitation, the right to
approve any amendment, modification or waiver of any provisions of this
Agreement, provided, however that as between such Lender and its Participant
such Lender may agree to consult with and obtain the approval of its Participant
regarding any amendment, modification or waiver of any provision set forth in
Section 9.15(b); and (B) shall not release or discharge such Lender from its
duties and obligations, which shall remain absolute, to make Advances hereunder;
and (b) assign all or any portion of its Pro Rata Percentage of Loans and its
right, title and interest therein or in and to this Agreement to a Lender or any
affiliate of a Lender, or to any other bank or financial institution.
Notwithstanding anything to the contrary contained herein, each Lender may at
any time collaterally assign all or any portion of its rights under this
Agreement and its Revolving Credit Note to any Federal Reserve Bank to secure
overnight deposits, provided that no such assignment shall release the assignor
Lender from its obligations hereunder.
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SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN
ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
10.2 Integrated Agreement: The Revolving Credit Notes, the other Loan
Documents, all related agreements, and this Agreement shall be construed as
integrated and complementary of each other, and as augmenting and not
restricting Lenders' and Agent's rights and remedies. If, after applying the
foregoing, an inconsistency still exists, the provisions of this Agreement shall
constitute an amendment thereto and shall control.
10.3 Waiver:
(a) No omission or delay by Agent or Lenders in exercising any
right or power under this Agreement or any related agreements and documents will
impair such right or power or be construed to be a waiver of any default, or
Event of Default or an acquiescence therein, and any single or partial exercise
of any such right or power will not preclude other or further exercise thereof
or the exercise of any other right, and as to Borrowers no waiver will be valid
unless in writing and signed by Agent and then only to the extent specified.
(b) Borrower releases and shall indemnify, defend and hold
harmless Agent and Lenders, and their respective officers, employees and agents,
of and from any claims, demands, liabilities, obligations, judgments, injuries,
losses, damages and costs and expenses (including, without limitation,
reasonable legal fees) resulting from (i) acts or conduct of Borrower under,
pursuant or related to this Agreement and the other Loan Documents, (ii)
Borrower's breach or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (iii)
Borrower's failure to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees, (including without limitation
environmental laws, etc.) and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting from acts or conduct of Lenders
constituting wilful misconduct or gross negligence. The obligations of Borrower
under this Section 10.3(b) shall survive the occurrence of any and all events
whatsoever, including without limitation, payment of the Obligations or
investigation by or knowledge of Lenders.
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10.4 Time: Whenever Borrower shall be required to make any payment, or
perform any act, on a day which is not a Business Day, such payment may be made,
or such act may be performed, on the next succeeding Business Day except with
respect to the repayment of LIBOR Based Loans as set forth in Section
2.4(b)(ii). Time is of the essence in the performance under all provisions of
this Agreement and all related agreements and documents.
10.5 Expenses of Agent and Lenders: At Closing and from time to time
thereafter, Borrower will pay all reasonable expenses of Agent on demand
(including, without limitation, search costs, audit fees, appraisal fees,
environmental fees and the reasonable fees and expenses of legal counsel for
Agent) relating to this Agreement, and all related agreements and documents,
including, without limitation, expenses incurred in the analysis, negotiation,
preparation, closing, administration, enforcement of this Agreement and the
other Loan Documents, the enforcement, protection and defense of the rights of
Agent and Lenders in and to the Loans and Collateral or otherwise hereunder, and
any expenses relating to extensions, amendments, waivers or consents pursuant to
the provisions hereof, or any related agreements and documents or relating to
agreements with other creditors, or termination of this Agreement. Borrower
further agrees to pay, or reimburse Lenders for, all reasonable out-of-pocket
costs and expenses, including without limitation attorneys' fees, incurred in
connection with the enforcement, protection and defense of their rights in and
to the Loans and the Collateral or otherwise hereunder, following acceleration
of the Obligations after the occurrence of an Event of Default hereunder.
Collectively all of the foregoing are referred to as the "Expenses."
10.6 Brokerage: This transaction was brought about and entered into by
Agent, Lenders and Borrower acting as principals and without any brokers, agents
or finders being the effective procuring cause hereof. Borrower represents that
it has not committed Agent or any Lender to the payment of any brokerage fee,
commission or charge in connection with this transaction. If any such claim is
made on Agent or any Lender by any broker, finder or agent or other person,
Borrower hereby indemnifies, defends and saves such party harmless against such
claim and further will defend, with counsel satisfactory to Agent, any action or
actions to recover on such claim, at Borrower's own cost and expense, including
such party's reasonable counsel fees. Borrower further agrees that until any
such claim or demand is adjudicated in such party's favor, the amount demanded
shall be deemed a liability of Borrower under this Agreement.
10.7 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person
or if sent by telecopy or by nationally recognized overnight courier, or via
first class, Certified or Registered mail, postage prepaid, as follows, unless
such address is changed by written notice hereunder:
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If to Agent to: Mellon Bank, ▇.▇.
▇▇▇▇▇▇ Bank Center
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
Telecopy No.: 215/553-0201
With copies to: Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Telecopy No.: 215/569-5555
If to Borrower to: ECC International Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Telecopy No.: 407/851-1871
With copies to: ▇▇▇▇ and ▇▇▇▇, LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esquire
Telecopy No.: 617/526-5000
If to Lenders: to the addresses set forth on Schedule "B"
(b) Any notice sent by Agent, any Lender or Borrower by any of
the above methods shall be deemed to be given when so received.
(c) Agent shall be fully entitled to rely upon any facsimile
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
10.8 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
10.9 Survival: All warranties, representations, and covenants made by
Borrower herein, or in any agreement referred to herein or on any certificate,
document or other instrument
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delivered by it or on its behalf under this Agreement, shall be considered to
have been relied upon by Agent and Lenders, and shall survive the delivery to
Lenders of the Revolving Credit Notes, regardless of any investigation made by
Lenders or on their behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of Agent and any and all
Lenders shall constitute warranties and representations by Borrower hereunder.
Except as otherwise expressly provided herein, all covenants made by Borrower
hereunder or under any other agreement or instrument shall be deemed continuing
until all Obligations are satisfied in full.
10.10 Successors and Assigns: This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
Borrower may not transfer, assign or delegate any of its duties or obligations
hereunder.
10.11 Duplicate Originals: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed document.
10.12 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Borrower,
Agent and the Lenders except as provided in Section 9 hereof. Any modification
in accordance with the terms hereof shall be binding on all parties hereto,
whether or not each is a signatory thereto.
10.13 Signatories: Each individual signatory, if any, hereto represents
and warrants that he/she is duly authorized to execute this Agreement on behalf
of his/her principal and that he/she executes the Agreement in such capacity and
not as a party.
10.14 Third Parties: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Agent or any Lender of
Borrower's duty of performance, including, without limitation, Borrower's duties
under any account or contract with any other Person.
10.15 Discharge of Taxes, Borrowers' Obligations, Etc.: Agent, in its
sole discretion, shall have the right at any time, and from time to time, if
Borrower fails to timely perform, to: (a) pay for the performance of any of
Borrower's Obligations hereunder, and (b) discharge taxes or Liens, at any time
levied or placed on any of Borrower's Property in violation of this Agreement
unless such entity is in good faith with due diligence by appropriate
proceedings contesting such taxes or Liens and maintaining proper reserves
therefor in accordance with GAAP. Expenses and advances shall be added to the
Revolving Credit, bear interest at the same rate applied to the Revolving
Credit, until reimbursed to Agent. Such payments and advances made by Agent
shall not be construed as a waiver by Agent or Lenders of an Event of Default
under this Agreement.
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10.16 Withholding and Other Tax Liabilities: Each Lender shall have the
right to refuse to make any Advances from time to time unless Borrower shall, at
Agent's request, have given to Agent evidence, reasonably satisfactory to Agent,
that they have properly deposited or paid, as required by law, all withholding
taxes and all federal, state, city, county or other taxes due up to and
including the date of the requested Advance. Copies of deposit slips showing
payment shall likewise constitute satisfactory evidence for such purpose. In the
event that any lien, assessment or tax liability against Borrower shall arise
in favor of any taxing authority, whether or not notice thereof shall be filed
or recorded as may be required by law, Agent shall have the right (but shall not
be obligated, nor shall Agent or any Lender hereby assume the duty) to pay any
such lien, assessment or tax liability by virtue of which such charge shall have
arisen; provided, however, that Agent shall not pay any such tax, assessment or
lien if the amount, applicability or validity thereof is being contested in good
faith and by appropriate proceedings by such entity. In order to pay any such
lien, assessment or tax liability, Agent shall not be obliged to wait until said
lien, assessment or tax liability is filed before taking such action as
hereinabove set forth. Any sum or sums which Agent (shared ratably by Lenders)
shall have paid for the discharge of any such lien shall be added to the
Revolving Credit and shall be paid by Borrower to Agent with interest thereon,
upon demand, and Agent shall be subrogated to all rights of such taxing
authority against Borrower.
10.17 Publicity: Agent, in and using its reasonable discretion, may
disclose the existence (but not the terms) of the credit facilities under this
Agreement to a public forum including without limitation "tombstone"
announcements in the print media provided Borrower shall be provided a copy of
such notice prior to any publication and which notice shall not be published
without Borrower's consent which shall not be unreasonably withheld.
10.18 Real Estate Subject to Release: Provided there is no Event of
Default hereunder, Agent shall release its Mortgage lien on the parcels of real
estate identified on Exhibit 10.18 hereto if Borrower consummates the sale
thereof on terms reasonably acceptable to Agent. Proceeds of said dispositions
shall reduce Fixed Asset Availability as follows: (i) sixty percent (60%) of the
first $2,000,000 of the Net Proceeds (as defined below) of the sale of those
parcels of real estate released hereunder; and (ii) in the Agent's discretion,
no less than sixty percent (60%), but up to one hundred percent (100%) of the
Net Proceeds in excess of $2,000,000 shall reduce Fixed Asset Availability. For
purposes hereof, "Net Proceeds" shall mean the contract sales price minus
customary closing expenses, adjustments, and brokers' commissions. Agent shall
consider granting additional partial release(s) in its sole discretion provided
it has received an appraisal reflecting an appraised value (giving prospective
effect to the contemplated disposition) of the real estate subject to the
Mortgage satisfactory to Agent.
10.19 CONSENT TO JURISDICTION: BORROWER AND EACH LENDER HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF COMMON PLEAS OF
PHILADELPHIA, COMMONWEALTH OF PENNSYLVANIA OR THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA IN ANY AND ALL ACTIONS AND PROCEEDINGS
WHETHER ARISING HEREUNDER OR UNDER
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ANY OTHER AGREEMENT OR UNDERTAKING AND IRREVOCABLY AGREE TO SERVICE OF PROCESS
BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE
PARTY SET FORTH HEREIN.
10.20 Confession of Judgment: If an Event of Default shall occur
hereunder, or a default shall exist under any of the Loan Documents which has
not been cured within the applicable cure periods (without duplication of any
periods of notice or cure provided elsewhere) or defaults under any other
obligation whatsoever of Borrower to Lender, the undersigned hereby irrevocably
authorizes and empowers any attorney or clerk of any court of record in the
Commonwealth of Pennsylvania or elsewhere (either by amicable action or in a
proceeding commenced by Complaint) to appear for and CONFESS JUDGMENT against
all, or any of them, (a) for such sums for which the undersigned are or may
become liable to Lender and/or (b) in any action of replevin or upon any Writ of
Ejectment and/or Possession instituted by Lender to obtain possession of any
Collateral securing the undersigned's liability hereunder or any Collateral in
possession of any of the undersigned which secures any of their obligations to
Lender, in either case, with or without declaration, with costs of suit, without
stay of execution, and with fifteen percent (15%) of the principal amount
thereof but not less than $5,000 added for attorneys' fees together with
interest on said judgment at the highest annual rate permitted by law, or if no
such rate is specified by law, then at the rate of five percent (5%) per annum
in excess of the rate set forth in the Security Agreement or other documents
evidencing the undersigned's obligations to Lender, calculated from the date of
confession until full payment of same is received by Lender. Undersigned each
(a) waive the right of inquisition on any real estate levied on, voluntarily
condemn the same, authorize any attorney or clerk to enter upon the Writ of
Execution said voluntary condemnation and agree that said real estate may be
sold on a Writ of Execution; (b) waive and release all relief from any and all
appraisement, stay, exemption or appeal clause of any state now in force or
hereafter enacted; and (c) release Lender and any said attorney from all errors
and damages arising out of compliance with this warrant.
10.21 Waiver of Jury Trial: AS AN INDEPENDENT COVENANT, EACH OF AGENT,
EACH LENDER AND BORROWER HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A JURY
TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST ANY OF THEM WITH
RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN
DOCUMENTS WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
[INTENTIONALLY LEFT PARTIALLY BLANK]
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IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.
BORROWER: ECC INTERNATIONAL CORP.
Attest: /s/ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------ ------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ECC VENDING CORP.
Attest: /s/ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------ ------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
EDUCATIONAL COMPUTER CORPORATION
INTERNATIONAL
Attest: /s/ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------ ------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
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AGENT: MELLON BANK, N.A., as Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
LENDER: MELLON BANK, N.A., as Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
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SCHEDULE A
Revolving Credit Revolving Credit
Lender Pro Rata Share Pro Rata Percentage
------ ---------------- -------------------
Mellon Bank, N.A. $12,500,000 100%