Exhibit 10.19
FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
(Revolving Loan)
This First Amended and Restated Loan and Security Agreement (as amended,
modified or restated from time to time, this "Agreement"), is made as of October
9, 2000 (the "Effective Date"), among: (i) American National Bank and Trust
Company of Chicago, a national banking association with its principal place of
business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (together with its
successors and assigns, the "Lender"); (ii) Leapnet, Inc., a Delaware
corporation ("Parent"); and (iii) each of Parent's subsidiaries, which are:
Leapnet I, Inc., a Delaware corporation, The Leap Partnership, Inc., an Illinois
corporation, Planet Leap, Inc., a Delaware corporation, Quantum Leap
Communications, Inc., a Delaware corporation, Bar TV, Inc., a Delaware
corporation, Tadpole Productions, Inc., an Illinois corporation, Lilypad
Services, Inc., an Illinois corporation, YAR Communications, Inc., a Delaware
corporation, Eagle Technology Partners, Inc., a Delaware corporation and Leap
Global Communications, Inc., a Delaware corporation (collectively the
"Subsidiaries" and each individually a "Subsidiary"). In this Agreement, Parent
and the Subsidiaries sometimes will be referred to collectively as the
"Borrowers" and individually as a "Borrower").
R E C I T A L S
A. Borrowers have requested Lender to maintain an existing revolving
credit facility for Borrowers, which will authorize Borrowers to draw up to
Eighteen Million Dollars ($18,000,000.00) in principal (the "Revolving Loan" or
the "Loan").
B. Certain of the Borrowers and Lenders previously entered into the
following agreements (collectively, the "Prior Agreements"): (i) those certain
Continuing Pledge Agreements dated February 24, 1999, and June 25, 1999,
executed copies of which (without exhibits) are set forth on attached Exhibits
"A-1" and "A-2" to this Agreement (the "Prior Pledge Agreements"); (ii) that
certain Cross Collaterization and Cross Default Agreement dated November 10,
1999, an executed copy of which (without exhibits) is set forth on attached
Exhibit "B" to this Agreement (the "Prior Cross Default Agreement"); (iii) that
certain Agreement Containing Financial Covenants dated February 24, 1999, an
executed copy of which (without exhibits) is set forth on attached Exhibit "C"
to this Agreement (the "Covenant Agreement"); (iv) that certain Security
Agreement (General) dated June 25, 1999, an executed copy of which (without
exhibits) is set forth on attached Exhibit "D" to this Agreement (the "Prior
Security Agreement"); and (v) that certain Promissory Note (Secured) dated
November 10, 1999 in the principal amount of $15,000,000.00, an executed copy of
which (without exhibits) is set forth on attached Exhibit "E" to this Agreement
(the "Prior Note").
C. This Agreement will replace the Covenant Agreement and Prior Security
Agreement in their entirety. Moreover, the parties desire to enter into: (i) the
"Pledge Agreement" (as defined in Section 3.1 below) to replace the Prior Pledge
Agreements; (ii) the "Cross Default Agreement" (as defined in Section 3.1 below)
to replace the Prior Cross Default Agreement; and (iii) the "Note" (as defined
in Section 2.3 below) to replace the Prior Note.
D. The Cross Default Agreement covers certain rights and obligations of
Lender, Parent and Parent's Subsidiary Quantum Leap Communications, Inc. under
that certain Amended and Restated Installment Note (Secured) in the principal
amount of $3,880,000.00 dated April 26, 2000 (the "Mortgage Note"). The Mortgage
Note is subject to that certain Mortgage, as amended from time to time which was
recorded on July 16, 1999 in the Recorder's Office of ▇▇▇▇ County, Illinois as
Document No. 99681887, concerning the real property legally described therein,
as said Mortgage has been modified by those certain first, second and third
Modification Agreements between Quantum Leap Communications, Inc. and Lender,
the first two of which were dated October 4, 1999 and the third of which was
dated April 26, 2000 (collectively the "Mortgage"). All assignments of rents and
leases, minutes, certificates, indemnifications, agreements, instruments and
other documents executed and delivered prior to, as of or subsequent to the
Effective Date, as amended, restated or replaced from time to time, by Parent,
Quantum Leap Communications, Inc. and/or any other Borrower in connection with
the Mortgage, Mortgage Note or the Indebtedness evidenced thereby, will be
referred to collectively in this Agreement as the "Related Agreements".
E. Borrowers now have requested Lender to reduce the interest rate
pertaining on the $15,000,000.00 revolving credit facility established under the
Prior Note, and to make other accommodations to Borrowers, including but
not limited to allowing additional Subsidiaries of Parent who are not parties to
the Prior Note or Prior Security Agreement to become "Borrowers" under this
Agreement. Lender was willing to do so upon the terms and conditions set forth
below.
C L A U S E S
In consideration of the preceding, the representations, warranties,
rights, covenants and obligations set forth below, and any loans, advances or
extensions of credit which Lender previously, currently or subsequently makes
for the benefit of any Borrower, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms Generally. As used in this Agreement, the terms defined
in Sections 1.2 through 1.56 below, or defined in other Sections of this
Agreement, have the meanings specified in such Sections, unless the context of
this Agreement specifically requires otherwise. Defined terms in this Agreement
include the singular number in the plural and the plural number in the singular,
as appropriate.
1.2 Account(s). The term "Account(s)" means: (i) all present and future
rights to payment for goods sold or leased or services rendered, whether or not
earned by performance, including without limitation rights evidenced by a note,
contract, security agreement, "Chattel Paper" (as defined below in this Article
1) or other evidence of indebtedness or security or a credit card, charge card
or other credit arrangement; (ii) all "accounts" as defined in Section 9-106 of
the "UCC" (as defined below in this Article 1); (iii) all security pledged,
assigned, hypothecated, granted or held to secure any of the preceding; (vi) all
rights in, to and under all purchase orders or receipts for goods or services,
which Borrowers now own or subsequently acquire; (v) all rights to any goods
represented by any of the preceding (including all unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (vi) all guarantees, endorsements and
indemnifications on, of or concerning the preceding; (vii) all powers of
attorney for the execution of any evidence of indebtedness or security or other
writing connected with the preceding; (viii) all financing statement filings
and/or other statements and the registration of other instruments or amendments
of such instruments that are connected with the preceding; (ix) all books,
records, ledger cards and invoices related to the preceding; (x) all credit
information, reports and memoranda related to the preceding; and (xii) all other
writings which in any way relate to the preceding.
1.3 Account Debtor. The term "Account Debtor" means any "Person" (as
defined below in this Article 1) who is or who may become obligated to Borrowers
under, with respect to, or on account of an Account.
1.4 Advance. The term "Advance" means any loan or credit Lender makes to
Borrowers under this Agreement.
1.5 Affiliate. The term "Affiliate" of Borrowers means each other and each
of the following: (i) any other Person that, in Lender's judgment, directly or
indirectly controls is controlled by, or is under direct or indirect common
control with either Borrower; (ii) any and all Persons from whom, in the
Lender's judgment, Borrowers have not or are not likely to exhibit independence
of decision or action; and (iii) any other Person that is or becomes a general
partner, limited partner, member, joint venturer or trustee of either Borrower.
For purposes of this Agreement, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and policies of the applicable Person, whether through ownership of
voting securities or interests, by contract, trust or otherwise, or the direct
or indirect legal or beneficial ownership of five percent (5%) or more of any
class of equity securities of the applicable Person. Each general partner or
joint venturer of a Person which is a partnership or a joint venture, and each
manager of Person which is a limited liability company, will be deemed to have
control of such Person.
1.6 Agreement. The term "Agreement" means this Agreement, and all
Schedules and Exhibits to this Agreement, as modified, supplemented, amended or
restated from time to time.
1.7 Authorized Representative. The term "Authorized Representative" means
solely those individuals identified on attached and incorporated Schedule 1.7 to
this Agreement, as having the authority to request an Advance under the
Revolving Loan on behalf of Borrowers. Borrowers may change the individual(s)
designated as Authorized Representative(s) by delivering a written certificate
to Lender, making such change, together with a new Schedule 1.7, which is
executed by Parent's chief executive officer or president, as the case may be.
Any such subsequent Schedule 1.7 identifying new Authorized Representative(s)
will be effective only after Lender's actual receipt of the same.
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1.8 Bankruptcy Code. The term "Bankruptcy Code" means Title 11 of the
United States Code entitled "Bankruptcy", as amended from time to time, and any
successor statute or statutes.
1.9 Borrowing Capacity. The term "Borrowing Capacity" for the Revolving
Loan means, at the time of computation, the lesser of $18,000,000.00, or the
then existing "Collateral Availability" (as defined below in this Article 1)
reduced by: (i) the amount of all Advances Lender makes to Borrowers under the
Revolving Loan which are then outstanding and not repaid; and (ii) the face
amount of all letters of credit (each, an L/C") and the amount of all other
credits or indulgences Lender, in its sole discretion, grants to Borrowers under
the Revolving Loan from time to time, if any.
1.10 Business Day. The term "Business Day" means any day excluding
Saturday, Sunday and any day which, in Chicago, Illinois, constitutes a legal
holiday or a day on which banking institutions are authorized or required by law
or other government actions to close.
1.11 Capital Expenditures. The term "Capital Expenditures" means, with
respect to any Person, all expenditures (whether by the payment of cash or the
incurrence of "Indebtedness" (as defined below in this Article 1) by such Person
during any measuring period, for any fixed assets or improvements or for
replacements, substitutions or additions thereto, which have a useful life of
more than one (1) year and are required to be capitalized in accordance with
"GAAP" (as defined below in this Article 1), including, but not limited to,
"Capitalized Lease Obligations" (as defined below in this Article 1).
1.12 Capitalized Lease Definitions. The term "Capitalized Lease" means
each of the following: (i) any lease of property, real or personal, the
obligations under which are capitalized on the consolidated balance sheets of
Borrowers; and (ii) any other lease, to the extent that the then present value
of the minimum rental commitment under such lease should be capitalized on a
balance sheet of the lessee in accordance with GAAP. The term "Capitalized Lease
Obligations" means all obligations of Borrowers under or concerning any
Capitalized Leases which are required in accordance with GAAP to be recorded on
the Borrowers' balance sheets.
1.13 Cash Equivalents. The term "Cash Equivalents" means each of the
following: (i) all securities either issued or directly and fully guaranteed or
insured by the United States of America or any of its agencies or
instrumentalities (provided that the United States of America has pledged its
full faith and credit in support of such securities), which have maturities of
not more than ninety (90) days from the date of acquisition; and (ii) all time
deposits and certificates of deposit with maturities of not more than ninety
(90) days from the date of acquisition, of any domestic commercial bank of
recognized standing, which bank has capital and surplus in excess of
$100,000,000.
1.14 Charges. The term "Charges" means all national, federal, state,
county, parish, city, municipal or other "Governmental Authority" (as defined
below in this Article 1), taxes, levies, assessments, charges, liens, claims,
fees or encumbrances (including but not limited to those imposed by the "PBGC",
as defined below in this Article 1) upon or related to: (i) the "Collateral" (as
defined below in this Article 1); (ii) the ownership or use of any of Borrowers'
assets, whether fixed, personal or intangible; (iii) any of Borrowers'
employees, payroll, income or gross receipts; (iv) the "Obligations" (as defined
below in this Article 1); or (v) any other aspect of Borrowers' respective
businesses.
1.15 Chattel Paper. The term "Chattel Paper" has the meaning set forth in
Section 9-105 of the UCC.
1.16 Code. The term "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and all successor or replacement statutes.
1.17 Collateral Definitions.
(a) The term "Collateral" means all the property and interests in
property of Borrowers described in Article 4 below, whether now existing or
subsequently acquired, all other property and interests in property which from
time to time secure any part of the Obligations, and all proceeds which any of
the preceding may generate and/or accessions, additions, substitutions,
replacements or products of or to any or all of the preceding.
(b) The term "Collateral Availability" means, at any particular time
and from time to time, a maximum of the sum of: (i) 100% of the principal amount
of any Certificates of Deposit contained in the "Pledged
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Account" (as defined below in this Article 1) subject to the Pledge Agreement;
(ii) 100% of any of the principal amount of any Eurodollar Time Deposits with
terms of more than 14 days that are contained in the Pledged Account; and (iii)
90% of the principal amount of any U.S. Treasury Bonds and/or Municipal or
Corporate Bonds rated BBA, BAA or better, contained in the Pledged Account.
(c) The term "Collateral Records" means all books, records, computer
software, computer printouts, electronically stored data, magnetically stored
data, data stored on compact, zip or floppy disks, information or data
retrievable by computer or through or on any media now or subsequently existing
which relate to any Collateral, and/or any customer lists, blueprints, technical
specifications, manuals and other proprietary materials of Borrowers.
1.18 Commitment Definitions. The term "Commitment" means the aggregate
principal Dollar amount of Lender's total commitment to make disbursements of
principal to Borrowers under the Loan, in any form (whether pursuant to issuance
of an L/C or otherwise), which amount shall not at any time exceed, in the
aggregate, Eighteen Million Dollars ($18,000,000.00). The term "Commitment
Termination Date" for the Loan means the earliest of: (i) the Loan's scheduled
"Maturity Date" (as defined below in this Article 1); or (ii) the date Lender's
obligations to make Advances and/or incur L/C obligations or permit the Loan to
remain outstanding under this Agreement terminates as provided in Article 8
below.
1.19 Contingent Obligation. The term "Contingent Obligation" of any Person
means any obligation of such Person which guarantees or is intended to guarantee
any Indebtedness, leases, dividends, distributions or other payment or
performance obligations (collectively "Primary Obligations") of any other Person
(the "Primary Obligor") in any manner, whether directly or indirectly,
including, without limitation any obligation of such Person, whether or not
contingent: (i) to purchase any such Primary Obligation or any property
constituting direct or indirect security therefor; (ii) to advance or supply
funds to such Primary Obligor or the Person to whom the Primary Obligor owes
such Primary Obligation either (A) to purchase or to pay any such Primary
Obligation or (B) to maintain working capital or equity capital of the Primary
Obligor or otherwise to maintain the net worth or solvency of the Primary
Obligor; (iii) to purchase property, securities or services primarily for the
purpose of assuring the Person to whom any such Primary Obligation is owed of
the ability of the Primary Obligor to make payment of such Primary Obligation;
or (iv) otherwise to assure or hold harmless the Person to whom such Primary
Obligation is owed against any loss associated with such Primary Obligation.
However, the term "Contingent Obligation" (as defined in this Agreement) does
not include endorsements of instruments for deposit or collection in the
ordinary course of business. For purposes of this Agreement, the amount of any
Contingent Obligation will be that amount which is equal to the stated or
determinable amount of the Primary Obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect of such Primary Obligation (assuming such
Person is required to perform thereunder), as determined by Lender. The Person
with such Contingent Obligation will provide Lender, on demand, with all
information, documents and instruments Lender requests in connection with the
determination of the amount of such Contingent Obligation.
1.20 Copyright Definitions. The term "Copyrights" means each of the
following, whether now owned or subsequently acquired by Borrowers: (i) all
copyrights and general intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof and all associated
applications in connection with such registrations, whether in the United States
Copyright Office or any similar office or agency of the United States or any
other Governmental Authority; and (ii) all reissues, extensions or renewals
thereof, and all derivative works (as that term is understood in United States
Copyright law) predicated thereon. The term "Copyright Security Agreements"
means any agreements necessary under United States or any other Governmental
Authority law to secure any interest in or to evidence or perfect any security
interest in the Copyright of a Person, including the associated filing of such
instrument with the United States Copyright Office or any similar office or
agency of any other Governmental Authority.
1.21 Default Event. The term "Default Event" means any event, act or
condition which with notice or lapse of time, or both, would constitute a
"Default Event" under Article 8 below, or otherwise would constitute a default
by Borrowers under any agreement with Lender, whether contractually, at law, in
equity or otherwise.
1.22 Deposit Accounts. The term "Deposit Accounts" means those accounts
which constitute "deposit accounts" as defined in Section 9-105(e) of the UCC,
and any other deposit or securities accounts, together with any funds,
instruments or other items credited to any such accounts from time-to-time, and
all interest or other income which accrues in respect of any such accounts.
1.23 Disbursement Date. The term "Disbursement Date" means each date upon
which Lender disburses
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funds to Borrowers under the Revolving Loan.
1.24 Documents. The term "Documents" means all "documents" as defined in
Section 9-105(f) of the UCC, including but not limited to all bills-of-lading,
dock warrants, dock receipts, warehouse receipts and orders for the delivery of
goods, and any other document, instrument or writing which in the regular course
of business or financing is treated as adequately evidencing that the Person in
possession of it is entitled to receive, hold and dispose of such document and
the goods or rights it covers.
1.25 Dollars. The terms "Dollars" and "$" means the lawful currency of the
United States of America.
1.26 Environmental Law Definitions.
(a) The term "Environmental Affiliate" of a Person means any other
Person whose liability for any "Environmental Claim" (as defined below in this
Section) such Person has or may have retained, assumed or otherwise become
liable for (contingently or otherwise), whether contractually, by operation of
law or equity, or otherwise.
(b) The term "Environmental Approvals" means any permit, license,
approval, ruling, variance, exemption or other authorization required under
applicable "Environmental Laws" (as defined below in this Section).
(c) The term "Environmental Claim" means, with respect to any
Person, any notice, claim, demand or similar communication (written or oral)
delivered to such Person by any other Person, alleging potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, fines or penalties
arising out of, based on or resulting from: (i) the presence or release into the
environment of any "Material of Environmental Concern" (as defined below in this
Section), at any location, whether or not owned by the Person subject to such
claim; or (ii) circumstances, facts or events, which individually, collectively,
or with notice, lapse of time or both, currently form or in the future could
form the basis of any violation or alleged violation of any Environmental Law.
(d) The term "Environmental Laws" means all federal, state,
provincial, local and foreign laws, rules, decisions and regulations of any
Governmental Authority, which relate to pollution, protection of human health or
protection of the environment (such as but not limited to ambient air, surface
water, ground water, land surface or subsurface strata), including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
(e) The term "Hazardous Substances" means any chemical, solid,
liquid, gas or other substance having the characteristics identified in: (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C.A. ss.9601(14), as a "hazardous substance"; (ii) the Clean
Water Act, 33 U.S.C.A. ss.1321(B)(2)(A), as a "hazardous substance"; (iii) the
Clean Water Act, 33 U.S.C.A. ss.ss.1317(a) and 1362(13), as a "toxic pollutant";
(iv) Table 1 of Committee Print Numbered 95-30 of the Committee on Public Works
and Transportation of the United States House of Representatives as a "toxic
pollutant"; (v) the Clean Air Act, 42 U.S.C.A. ss.7412(a)(1), as an "hazardous
air pollutant"; (vi) the Toxic Substances Control Act, 15 U.S.C.A. ss.2606(f),
as an "imminently hazardous chemical substance or mixture"; (vii) the Resource,
Conservation and Recovery Act, 42 U.S.C.A. ss.ss.6903(5) and 6921, as an
"hazardous waste"; or (viii) any other or successor laws as presenting a danger
to the public health or welfare, to the environment, or otherwise requiring
special handling, collection, storage, treatment, disposal or transportation.
The term "Hazardous Substance" also shall include, without limitation: (i)
petroleum, crude oil, gasoline, natural gas, liquified natural gas, synthetic
fuel, or other petroleum, oil or gas based products and by-products; (ii)
nuclear, radioactive or atomic substances, mixtures, wastes, compounds,
materials, elements, products or matters; or (iii) any other substance, mixture,
waste, compound, material, element, product or matter that presents a danger to
the public health or welfare, or the environment, upon its release, use,
disposal, processing, storage or transportation.
(f) The term "Materials of Environmental Concern" means all
chemicals, pollutants, contaminants, wastes, cleaning agents, toxic substances
and all other Hazardous Substances.
1.27 Equipment. The term "Equipment" means all items described as
equipment in Section 9-109(2) of the UCC and all of Borrowers' now owned and
subsequently acquired equipment and fixtures, including without limitation,
furniture, machinery, vehicles and trade fixtures, together with any and all
accessories, parts and appurtenances thereto,
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substitutions therefor and replacements thereof.
1.28 ERISA Definitions.
(a) The term "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended or replaced from time to time. Section references to
ERISA are to ERISA as in effect on the Effective Date and any subsequent
provisions of ERISA which amend, supplement or otherwise substitute for any
provision of ERISA existing on the Effective Date.
(b) The term "ERISA Controlled Group" means a group consisting of
any "ERISA Person" (as defined below in this Section) and all members of a
controlled group of corporations and/or all partnerships, limited liability
companies, associations, trades or businesses (whether or not incorporated)
under common control with such Person that, together with such Person, are
treated as a single employer under applicable regulations of the PBGC.
(c) The term "ERISA Person" has the meaning set forth in Section
3(9) of ERISA for the term "person."
(d) The term "Multiemployer Plan" means a "Plan" (as defined below
in this Section) which is a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
(e) The term "PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor or replacement pension guaranty
entity.
(f) The term "Plan" means any employee benefit plan covered by Title
IV of ERISA, the funding requirements of which: (i) were the responsibility of
Borrowers, a Subsidiary or a member of their ERISA Controlled Groups at any time
within the five (5) years immediately preceding the Effective Date; (ii) are
currently the responsibility of Borrowers, a Subsidiary or a member of their
ERISA Controlled Group; or (iii) become the responsibility of Borrowers, a
Subsidiary or a member of their ERISA Controlled Group subsequent to the
Effective Date, including any such plans which have been or which subsequently
are terminated for any reason.
(g) The term "Reportable Event" has the meaning set forth in Section
4043(b) of ERISA (other than a Reportable Event as to which the provision of 30
days notice to the PBGC is waived under applicable regulations), and shall mean
the occurrence of any of the events described in Sections 4063(a) or 4068(f) of
ERISA.
(h) The term "Termination Event" means each of the following: (i) a
Reportable Event; (ii) the initiation of any action by Borrowers, a Subsidiary,
any member of their ERISA Controlled Groups or any ERISA Plan fiduciary to
terminate a Plan or the treatment of an amendment to a Plan as a termination
under ERISA; or (iii) the PBGC's institution of proceedings under Section 4042
of ERISA to terminate a Plan or to appoint a trustee to administer any Plan.
(i) The term "Unfunded Benefit Liabilities" means, with respect to
any Plan at any time, the amount (if any) by which: (i) the present value of all
benefit liabilities, as defined in Section 4001(a) (16) of ERISA, under such
Plan; exceeds (ii) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such Plan
(on the basis of assumptions prescribed by the PBGC for the purpose of Section
4044 of ERISA).
1.29 Federal Reserve Board. The term "Federal Reserve Board" means the
Board of Governors of the Federal Reserve System as constituted from time to
time, or any successor thereto.
1.30 Fiscal Quarter and Year. The term "Fiscal Quarter" means quarterly
periods consisting of three (3) consecutive months each, ending on March 31,
June 30, September 30 and December 31 of a Fiscal Year, and the term "Fiscal
Year" means each twelve (12) month period commencing on a January 1 of a
calendar year and continuing until December 31 of such calendar year.
1.31 Fixtures. The term "Fixtures" means any fixtures as defined in the
UCC, whether now owned or subsequently acquired by Borrowers.
1.32 GAAP. The term "GAAP" means United States generally accepted
accounting principles as in effect on
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the Effective Date or thereafter, and consistent with those used in the
preparation of Borrowers' and Subsidiaries most recently prepared annual,
audited financial statements. Any accounting terms used but not specifically
defined in this Agreement have the meanings customarily ascribed to them under
GAAP.
1.33 General Intangibles. The term "General Intangibles" means "general
intangibles" as defined in Section 9-106 of the UCC, and all other intangible
assets or intellectual or industrial property rights of any type or nature
(other than Accounts), whether or not registered, including but not limited to:
(i) all rights to the payment of money and for indemnification; (ii) all common
law and registered (as applicable) and now existing or subsequently arising
"Trademarks" (as defined below in this Article 1), Copyrights, trade names and
"Patents" (as defined below in this Article 1); (iii) all applications and
registrations for such Trademarks (excluding, solely, "intent-to-use"
registrations and applications), names, Copyrights and Patents; (iv) all good
will of the business symbolized by such Trademarks and names; (v) all rights to
▇▇▇, recover and retain damages for past infringements of said Trademarks,
names, Patents or Copyrights; (vi) all applications for reissues of such Patents
and all requests for reexamination of such Patents; (vii) all foreign
counterpart Patents and applications related to foreign counterparts of such
Patents, and all derivative works predicated on any such Copyrights; (viii) all
contracts, licenses and franchises; (ix) all federal and local income, property
and other tax refunds, concessions and abatements; (x) all proceeds of insurance
policies, prepaid expenses, deposits and goodwill; (xi) all reversionary
interests in pension and profit sharing plans; (xii) all distributions on
"certificated securities" (as defined in Section 8-102(1)(a) of the UCC) and
"uncertificated securities" (as defined in Section 8-102(1)(b) of the UCC);
(xiii) all computer programs and other computer software; (xiv) all inventions,
know-how, designs, trade secrets, good will, proprietary rights, business
records, operational manuals, formulae, blueprints, flow-charts, renderings,
customer lists, technology, supplier contracts, sale orders, correspondence,
internal memoranda and advertising materials; (xv) all payments due in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any property, all rights and claims against carriers and shippers,
all reversionary, beneficial and residual interests in trusts, and all insurance
proceeds covering the lives of key employees of any Borrower if such Borrower is
the beneficiary thereof; (xvi) all credits with and other claims against any
Person; (xvii) all inchoate rights of any type; and (xviii) any collateral for
or guaranty of any of the foregoing, the rights under any such guaranty, and the
rights under any security agreement granting a security interest in such
collateral.
1.34 Governmental Authority Definitions. The following terms have the
following meanings: (i) the term "United States" means the United States of
America, and all geographical territories and subdivisions of the United States
of America; (ii) the term "Other Nations" means each country, principality or
other independent territory, and each subdivision thereof, which is not a part
of the United States; (iii) the term "Supra-National Authority" means the
European Union, the United Nations, the World Court, the Commonwealth, the North
Atlantic Treaty Organization, the General Agreement on Tariffs and Trade, the
North American Free Trade Agreement, the Berne Convention, the Madrid Protocols,
the World Intellectual Property Organization and all other multinational
authorities or treaties, and all subdivisions and branches thereof, which have
or may have from time to time jurisdiction over any of the parties to or any
performance under this Agreement or any "Loan Document" (as defined below in
this Article 1); and (iv) the term "Governmental Authority" means any
subdivision, agency, branch, court, administrative body, legislative body,
judicial body, alternative dispute resolution authority or other governmental
institution of (A) the United States, (B) any state, municipality, county,
parish, subdivision or territory of the United States, (C) all Other Nations,
(D) any state, territory, county, province, municipality, parish or other
subdivision of any Other Nations, and (E) all Supra-National Authorities.
1.35 Indebtedness. The term "Indebtedness" of any Person means, without
duplication, each of the following, whether primary, secondary, direct,
indirect, absolute, contingent, fixed or otherwise, previously, currently or
subsequently owing, due or payable, however evidenced, created, incurred,
acquired or owing, and however arising, whether by agreement (written or oral),
at law, in equity or otherwise: (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services including
financing various insurance premiums (other than trade payables on terms of
ninety (90) days, legal fees, or unless incurred in the ordinary course of
business of such Person); (ii) all indebtedness of such Person evidenced by a
note, bond, debenture or similar instrument; (iii) the principal component of
all Capitalized Lease Obligations of such Person; (iv) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all unreimbursed amounts drawn under such letters of credit; (v)
all indebtedness of any other Person secured by any "Lien" (as defined below in
this Article 1) on any property such Person owns, whether or not such
indebtedness has been assumed; (vi) all Contingent Obligations of such Person;
and (vii) all payment obligations of such Person under any interest rate
protection agreement (including, without limitation, any interest rate swaps,
caps, floors, collars and similar agreements) and currency swaps and similar
agreements.
1.36 Insurance Policies. The term "Insurance Policies" means any and all
insurance policies which cover
7
any Collateral, Accounts, Chattel Paper, Collateral Records, Documents, General
Intangibles, "Inventory" (as defined below in this Article 1) and any
accessions, additions, substitutions, replacements, "Proceeds" (as defined below
in this Article 1) and products of or to the foregoing.
1.37 Inventory. The term "Inventory" means "inventory" as defined in
Section 9-109(4) of the UCC, and all other goods, merchandise, products or
personal property of any type (whether such goods are in the possession of
Borrowers, of a bailee or any other person or entity for sale, lease, storage,
transit, processing, use or otherwise, and whether consisting of whole goods,
spare parts, components, supplies, materials or consigned, returned or
repossessed goods), wherever located, including without limitation all such
goods which are held for sale or lease or are to be furnished or which have been
furnished under any contract of service or which are raw materials or work in
process or materials used or consumed in Borrowers' respective businesses,
whether now or subsequently acquired by Borrowers, and all such property the
sale or other disposition of which now or subsequently gives rise to Accounts or
which is returned to or repossessed or stopped in transit by Borrowers.
1.38 Lender's Office. The term "Lender's Office" means the office of
Lender located at its address set forth in Section 9.3 below, or such other
office as Lender subsequently may designate in writing as such to Parent.
1.39 Lien. The terms "Lien" or "lien" mean any mortgage, pledge,
hypothecation, assignment, deposit, arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or interest of any kind
or nature, including without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same effect as
any of the foregoing items and the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of any
Governmental Authority.
1.40 Loan Documents. The term "Loan Documents" means this Agreement, the
"Note" (as defined in below in this Article 1), the Related Agreements, the
"Security Documents" (as defined below in this Article 1), the "Pledge
Agreement" (as defined in Section 3.1 below), all "Swap Agreements" (as defined
below in this Article 1), the "Cross Default Agreements" (as defined in Section
3.1 below) and all other agreements, guaranties, instruments, bond agreements,
deeds, deeds of trust, notes, applications and agreements for letters of credit,
powers of attorney, pledges, consents, bankers' acceptances, assignments,
contracts, leases, account agreements, investment agreements, notices,
subordination agreements and trust account agreements and all exhibits,
schedules, certificates and other deliverables or written materials related to
or associated with the preceding, and all amendments, restatements,
modifications and replacements thereof, whether previously, currently or
subsequently executed by or on behalf of Borrowers or any other Person for the
benefit of Borrowers, if entered into between Lender and either Borrower, or if
related to or delivered in connection with the Loan or this Agreement, whether
or not delivered to Lender.
1.41 Margin Stock. The term "Margin Stock" has the meaning ascribed to
such term in Regulation U and Regulation G of the Federal Reserve Board, or in
any successor regulations or rules to the preceding.
1.42 Material Adverse Effect. The term "Material Adverse Effect" means:
(i) an adverse claim, result or effect impacting any Borrower or Collateral
which involves a liability, cost or loss of business of $1,000,000.00 or more,
individually or in the aggregate, which Lender determines is not fully covered
by either insurance or adequate, funded indemnification; or (ii) any other
material adverse effect upon (A) the Collateral, or (B) the ability of Borrowers
to perform, or of Lender to enforce, any of the Obligations; or (iii) the
commission by any Borrower of any criminal act under the laws of any
Governmental Authority.
1.43 Maturity Date. The term "Maturity Date" means September 30, 2002.
1.44 Money. The term "Money" has the meaning set forth in Section
1-201(24) of the UCC.
1.45 Obligations. The term "Obligations" means all obligations,
liabilities and Indebtedness of every nature which Borrowers from time to time
owe to Lender under or in connection with this Agreement or any other Loan
Document, whether primary, secondary, direct, absolute, contingent, fixed or
otherwise, including, without limitation, all interest, charges, expenses,
attorneys' fees and such other sums chargeable to Borrowers by Lender under this
Agreement or any other Loan Documents, future Advances made to or for the
benefit of Borrowers, and obligations of performance (whether arising under this
Agreement, any other Loan Documents or previously, currently or subsequently
owing, arising, due or payable from Borrowers to Lender), however evidenced,
created, incurred, acquired or owing and however arising, whether by agreement
(written or oral), at law, in equity or otherwise.
8
1.46 Other Subsidiaries. The term "Other Subsidiaries" of a Person means
each of the entities (whether corporations, partnerships, limited liability
companies or otherwise) in which such Person owns or controls at least 50% of
the equity interests.
1.47 Patent Definitions. The term "Patents" means each of the following in
which Borrowers now hold or subsequently acquire any interest: (i) all letters
patent issued by the United States Patent Office or any other Governmental
Authority, including all registrations and recordings thereof; (ii) all
applications for letters patent of the United States or any other Governmental
Authority; and (iii) all reissues, continuations, continuations in part,
extensions or foreign counterparts thereof. The term "Patent Security
Agreements" means any security agreement required to perfect the interest of a
secured party in the Patents of another Person, whether or not required by or
filed with the United States Patent Office or any other Governmental Authority.
1.48 Person. The term "Person" means and includes any individual, sole
proprietorship, partnership, joint venture, union, unincorporated organization,
firm, corporation, limited liability company, cooperative, association, trust or
other enterprise or legally recognized entity, any Governmental Authority, and
any agency, subdivision, department or instrumentality of any Governmental
Authority.
1.49 Pledged Account. The term "Pledged Account" means the account or
accounts which Borrowers must establish and maintain with Banc One, which are
subject to the Pledge Agreement, and all replacements thereof.
1.50 Proceeds. The term "Proceeds" has the meaning set forth in Section
9-306(1) of the UCC.
1.51 Rate Hedging Obligations. The term "Rate Hedging Obligations" means
any and all obligations of Borrowers, whether absolute or contingent and however
or whenever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under any and
all of the following (collectively "Swap Agreements"): (i) agreements designed
to protect Borrowers from the fluctuations of interest rates, exchange rates or
forward rates applicable to Borrowers' assets, liabilities or exchange
transactions, including but not limited to all interest rate swap agreements,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap, floor or collar agreements,
forward rate currency agreements or agreements related to interest options, puts
and warrants; and (ii) agreements related to cancellations, buy-backs,
reversals, terminations or assignments of any of the preceding.
1.52 Security Documents. The term "Security Documents" means this
Agreement, the Pledge Agreement, the Cross Default Agreement, and all other
agreements, instruments, documents, financing statements, warehouse receipts,
bills of lading, notices of assignment, schedules, assignments, mortgages,
chattel mortgages, leases, deeds of trust, guaranties, pledges, notes, powers of
attorney, security agreements, Patent Security Agreements, Copyright Security
Agreements or "Trademark Security Agreements" (as defined below in this Article
1) and other written matter necessary or requested by Lender to create, evidence
and/or perfect and maintain perfected Lender's security interests in any
Collateral.
1.53 Stock. The term "Stock" means all shares, options, interests,
participations or other equivalents (however designated) of or in a corporation,
partnership, limited liability company, trust, association or other legally
recognized entity, whether voting or non-voting, including without limitation
common stock, warrants, preferred stock, convertible debentures and all
agreements, instruments and/or documents convertible, in whole or in part, into
any one or more or all of the preceding.
1.54 Trademark Definitions. The term "Trademarks" means all the following
items which Borrowers now owns or subsequently acquire: (i) all trademarks,
trade names, corporate names, business names, brand names, trade styles, trade
dress, service marks, logos, other source or business identifiers, commercial
symbols, prints and labels on which any of the preceding have appeared,
currently appear or appear in the future, designs and general intangibles
similar in nature (whether registered or unregistered), including but not
limited to all registrations and recordings thereof and all applications in
connection therewith, whether before the United States Patent and Trademark
Office or in any other Governmental Authority; (ii) all reissues, extensions, or
renewals of any of the preceding; and (iii) all goodwill associated with or
symbolized by each of the preceding. The term "Trademark Security Agreements"
means any agreement required to perfect the security interest of a secured party
in the Trademarks of another Person, whether or not filed with the United States
Patent and Trademark Office or any other Governmental Authority.
9
1.55 Transactions. For purposes of this Agreement, the term "Transactions"
means, collectively, each transaction identified in, required by or incident to
any Loan Documents.
1.56 UCC. For purposes of this Agreement, the term "UCC" means the Uniform
Commercial Code of the state of Illinois as in effect on the Effective Date, or
amended thereafter. All terms contained in this Agreement which are not
otherwise defined will, unless the context otherwise indicates, have the
meanings ascribed to such terms in the UCC.
ARTICLE 2
AMOUNT AND TERMS OF CREDIT FACILITIES
2.1 Revolving Loan.
(a) Availability and Mechanics of Requesting Advances. Subject to
and upon the terms and conditions set forth in this Agreement, from time to time
until the Commitment Termination Date, Lender agrees to make the Revolving Loan
available to Borrowers, on a revolving basis, to use for internal working
capital needs or other legitimate and duly authorized business needs. Lender
will make Advances solely to Parent, who then will allocate the proceeds of any
such Advance among the respective Borrowers. Until the Commitment Termination
Date, the Authorized Representative may request from Lender, Advances under the
Revolving Loan for the preceding purposes, orally or in writing by facsimile,
provided that, if requested to do so by Lender, such Authorized Representative
shall transmit to Lender by overnight express delivery service, an original
version of each such facsimile request and/or a written confirmation of each
such oral request. Each such request for an Advance under the Revolving Loan
must satisfy each of the following conditions: (i) each Advance request must be
in an amount of not less than $100,000.00 or integral multiples of $50,000.00 in
excess thereof; (ii) Lender must receive each Advance request on or before 11:00
a.m. Chicago time on a Business Day which occurs at least two (2) Business Days
prior to the Commitment Termination Date; and (iii) the amount requested, when
aggregated with all other principal then outstanding under the Revolving Loan
and the face amount of all L/C's then issued by Lender for the benefit of
Borrowers, does not exceed the remaining Borrowing Capacity available under the
Revolving Loan as then computed. In no event shall the outstanding principal
under the Revolving Loan at any time exceed Eighteen Million Dollars
($18,000,000.00).
(b) Conclusive Evidence. Each oral Advance request shall
conclusively be presumed to be made by an Authorized Representative. Each
written request for an Advance shall conclusively be presumed to have been made
by the applicable Authorized Representative, so long as purportedly signed by
one of the individuals designated as an Authorized Representative on Schedule
1.7. If repaid prior to the Maturity Date, Borrowers may reborrow principal
under the Revolving Loan, but solely to the limits and for the purposes set
forth previously in this Section 2.1.
(c) Method of Crediting Loan Advances. Lender shall make all
Advances requested by an Authorized Representative, by crediting the proceeds of
the applicable Advance under the Revolving Loan, in Dollars, solely to Parent's
primary Deposit Account established with Lender. Once Lender credits an Advance
to Parent's primary Deposit Account established with Lender, said crediting
conclusively shall establish all Borrowers' joint, several and indefeasible
obligations to repay such Advance to Lender in full, together with all
associated interest, fines and penalties, if any.
(d) Authorization of Lender to Make Advances Without a Request from
an Authorized Representative. In addition to making Advances pursuant to the
request of an Authorized Representative as provided above, Borrowers irrevocably
authorize Lender to make Advances under and disburse proceeds from the Revolving
Loan at any time or from time to time, as Lender deems necessary or expedient,
in Lender's sole credit judgment, to pay each of the following: (i) any
principal and/or interest which is then accrued and due but not paid under any
Related Agreement; (ii) to reimburse Lender directly for any drawings made under
any L/C Lender issues on behalf or for the benefit of any Borrower; (iii) after
giving Parent 15 days prior, written notice thereof, any amount Lender believes
is necessary or appropriate either to protect a Lien of Lender in the
Collateral, or the priority of any "Security Interest" (as defined in Section
4.1 below), or to pay, settle, compromise or contest any Lien or claim of a Lien
against any Collateral which is not a "Permitted Lien" (as defined in Section
7.3 below); (iv) to pay any charge, cost, fine, interest, penalty or other
amount any Borrower may owe to Lender, whether arising under this Agreement, any
other Loan Document or any other agreement or account established between any
Borrower and Lender (or any of Lender's holding companies, branches, offices or
affiliates, when and as the same becomes due; and (v) any costs or expenses
(including but not limited to reasonable attorneys' fees and court costs) Lender
incurs in connection with any Loan Document or other agreement between Lender
10
and any Borrower or any account established between Lender and any Borrower. By
signing this Agreement, Borrowers irrevocably direct and authorize Lender to
disburse proceeds under the Revolving Loan to pay the amounts described in
subparts (i) through (v) of the preceding sentence and to treat all such
disbursements under the Revolving Loan as Advances loaned to Borrowers on a
joint and several basis, as if requested in writing by an Authorized
Representative, fully evidenced by the Revolving Note. Borrowers specifically
direct Lender to rely on the preceding authorization when taking any such
action, and specifically acknowledge that no Borrower retains any right
whatsoever either to receive notice of or to grant any direction or
authorization for Lender to make Advances under the Revolving Loan for the
purposes identified in this Section 2.1(d), and that all such Advances
immediately upon their disbursement constitute the joint and several
"Obligations" of Borrowers under this Agreement, fully secured by all the
Collateral. Borrowers specifically agree that Lender has no duty or obligation
whatsoever to make any Advances under this Section 2.1(d) and Lender may do so
or fail to do so in its sole discretion. Borrowers agree that Lender's failure
to make any Advances under this Section to pay any amounts identified above will
not constitute a default by Lender under this Agreement or any other Loan
Document nor in any way impair any of Lender's rights or remedies, whether
arising under this Agreement, any other Loan Document, at law, in equity or
otherwise.
(e) Reductions in Borrowing Capacity. Without duplication, the
aggregate Borrowing Capacity shall be reduced as follows: (i) each time Lender
makes an Advance to Borrowers under the Revolving Loan; (ii) any reduction in
the principal amount of Collateral Availability; and (iii) by the face amount of
all L/C's Lender issues on Borrowers' behalf. Each of the preceding events
immediately will reduce, on a Dollar for Dollar basis, the principal amount of
Borrowing Capacity available to Borrowers.
(f) Letters of Credit. Borrowers may from time to time, at their
option, request Lender to issue a letter or letters of credit in Dollars, in a
face amount not to exceed, when aggregated with all principal then outstanding
under the Revolving Loan (inclusive of the face amount of all other then issued
and outstanding L/C's), the then remaining Borrowing Capacity. Borrowers shall
complete Lender's customary application for issuing any L/C and shall provide
Lender with any additional information or documentation which Lender, in its
discretion, may request. Each L/C shall be subject to such additional terms and
conditions as Lender may require from time to time. The face amount of an
outstanding L/C shall constitute a disbursement under the Revolving Loan for
purposes of determining the available principal balance remaining undisbursed
under the Revolving Loan and for purposes of determining the remaining Borrowing
Capacity. For each L/C application Borrowers submit to Lender which Lender
accepts, Borrowers shall pay a fee for issuing such L/C in an amount equal to
one and one-half percent (1.5%) of the face amount of such L/C, per annum.
Borrowers shall pay such L/C fee quarterly in advance, in four equal
installments, within fifteen (15) days of the date billed by Lender. In no event
shall the term of any L/C last for more than one (1) year, unless Lender
specifically agrees otherwise, in writing, at the time it issues such L/C.
Borrowers irrevocably and unconditionally agree to reimburse Lender, on demand,
for each payment or disbursement Lender makes under any L/C Lender issues for
the benefit of Borrowers, if Lender honors any demand for payment made by the
beneficiary of any such L/C. If Lender is not reimbursed immediately on demand
as aforesaid, the unreimbursed amount shall bear interest from the date Lender
disbursed such amount under the L/C until and including the date such amount is
indefeasibly repaid to Lender in full, at an annual rate equal to the "Default
Rate" (as defined below in this Article 2).
(g) No Obligation. Lender shall have no obligation to make any
Advance requested under this Agreement if: (i) this Agreement has been
terminated for any reason, or the Maturity Date has occurred; (ii) there exists
a Default Event or an event which with notice or lapse of time or both would
constitute a Default Event or there is a default under the Mortgage, any other
Related Agreement or any other Loan Document; (iii) Borrowers fail at any time
to perform or observe, or have at any time violated any provisions of this
Agreement or any other agreement now or subsequently existing between Lender,
Borrowers and/or any agreement between Borrowers and any Person who is
guarantying any Obligations of Borrowers (provided if Borrowers cure any such
failure identified in this subpart (iii) to Lender's satisfaction, Lender will
thereafter fund Advance requests under this Agreement); (iv) Borrowers fail to
comply with all reporting, verification, inspection and other administrative
requirements Lender establishes from time to time (provided if Borrowers cure
any such failure identified in this subpart (iv) to Lender's satisfaction,
Lender will thereafter fund Advance requests under this Agreement); (v) any of
the conditions precedent identified in Article 3, representations and warranties
identified in Article 5, affirmative covenants identified in Article 6, or
negative covenants identified in Article 7 of this Agreement are not satisfied
at the time such Advance request is made; or (vi) any of the Collateral is
seized, is subject to any Lien other than Permitted Liens, or Borrowers fail to
satisfy all of their obligations regarding Collateral or Lender's "Security
Interests" (as identified in Article 4 below). If Lender at any time in its sole
discretion makes any Advance to Borrowers, and the aggregate Borrowing Capacity
is exceeded when such Advance is made, the making of any such Advance will not
impair, affect or in any way diminish Lender's absolute discretion in
determining whether to make any such Advance in excess of
11
such Borrowing Capacity thereafter.
2.2 One Loan Secured by All Collateral. All credit facilities and L/C's
Lender makes available to Borrowers under this Agreement or the Loan, constitute
one (1) loan and one (1) general joint and several Obligation of Borrowers to
Lender under this Agreement, and all Obligations at all times constitute one
general obligation secured by all the Collateral.
2.3 Note. Borrowers shall evidence their joint and several Obligations
under this Agreement to pay principal, interest and costs due under the Loan,
and all other amounts due to Lender under any other Loan Documents, by duly
executing that certain First Amended and Restated Secured Promissory Note (as
such promissory note may be amended, modified, supplemented or restated from
time to time the "Revolving Note" or "Note") in the form set forth on attached
and incorporated Exhibit "F" (with blanks appropriately completed in conformity
with this Agreement), in the principal amount of $18,000,000.00. The Note
replaces and restates, but does not constitute a payment or novation of, the
Prior Note. Borrowers shall deliver the duly executed Note to Lender on the
Effective Date. Borrowers' repayment under the Note is secured by the
Collateral.
2.4 Interest.
(a) Loan Rate and Default Rate. The interest which Borrowers will
pay to Lender on the outstanding and unpaid principal portion of the Loan
existing from time to time and, except as expressly provided otherwise in this
Agreement, on all other Obligations, will be computed at a daily rate equal to
the equivalent of 1.25% per year in excess of the highest rate of interest then
being earned on any Certificates of Deposit Borrowers then maintain with Banc
One in Safekeeping Account Nos. 578324375 and 578323128 and all replacements
thereof which are contained in the Pledged Account (the "Loan Rate"). All Loan
Rate interest will be calculated daily on the basis of the actual number of days
elapsed in a 360 day year. To compensate Lender for additional unreimbursed
costs resulting from the occurrence of a Default Event, including without
limitation, acts associated with the uncertainty of future funding and
additional supervisory and administrative efforts, once and for so long as any
Default Event has occurred and is continuing, the outstanding principal amount
of the Loan and, to the extent permitted by law, overdue interest in respect of
the Loan, shall bear interest at a rate per annum (the "Default Rate") equal to
the sum of three percent (3%) plus the Loan Rate otherwise applicable under this
Agreement to such principal amount, and, to the extent permitted by law, such
overdue interest, until Borrowers jointly, severally and indefeasibly pay and
perform all Obligations in full to Lender. The preceding Default Rate interest
shall pertain as aforesaid to the Loan immediately upon the occurrence of a
Default Event. All Default Rate interest shall be calculated daily on the basis
of the actual number of days elapsed in a 360 day year.
(b) Accrual. Interest under the Revolving Loan will accrue from and
including the Disbursement Date of any Advance Lender makes under the Revolving
Loan, until but excluding the date of any payment of such interest.
(c) No Excessive Charges. If at any time any Loan Rate or Default
Rate interest or other charges applicable under this Agreement are adjudicated
in a final determination by any competent Governmental Authority to exceed the
maximum rate of interest permitted by then existing laws, the following will
pertain: (i) for the period of time that any such interest or charges would have
been excessive under such ruling, such interest and charges instead will be
suspended, and in their place interest and charges at the maximum rates
permissible under such laws for the applicable period will be charged under this
Agreement, the Notes and other Loan Documents; and (ii) to the extent Lender
received any excess interest payments, Lender will apply such excess to any
unpaid principal and/or other charges or fees Borrowers owe to Lender under any
Loan Document, or if the amount of excess payments Lender actually received
exceeds the unpaid principal under the Loan and all other associated charges or
fees, Lender agrees to refund promptly such excess payment to Borrowers, and
Borrowers specifically waive any claim they may be entitled to bring against
Lender, for any penalties provided under the laws of any Governmental Authority
covering usury or otherwise for charging or receiving interest in excess of the
applicable maximum lawful rate. All sums which Borrowers pay or agree to pay
which are or subsequently are construed to be compensation for the use,
forbearance or detention of money shall, to the extent permitted under
applicable law, be amortized, prorated, spread and allocated throughout the term
of all such Indebtedness, until such Indebtedness is paid in full.
(d) Regulatory or Legal Changes Which Increase Lender's Costs. If
any Governmental Authority adopts any law, rule or regulation, changes any
preexisting rule, law or regulation, changes its interpretation of any rule, law
or regulation or issues any judgment, rule or order, and/or if any central bank
or comparable authority issues any directive, rule or order, whether or not it
has the force of law, and the same has any of the following results, then such
law, rule, regulation, order, judgment, directive, interpretation or other item
will be referred to in this Agreement as a "Cost
12
Adjustment Occurrence": (i) any new or additional tax, duty or charge is imposed
on the Loan, any L/C's, the Note or the payment thereof; (ii) Lender becomes
subject to any new or additional reserve (such as but not limited to reserves
required by the Federal Reserve Board) or is otherwise required to make special
deposits based on Lender's assets or for any credits Lender extends; (iii) there
is a reduction in the rate of return on Lender's capital as a consequence of
Lender's obligations under this Agreement below that which Lender could have
realized under this Agreement prior thereto (considering, among other things,
Lender's internal policies concerning capital adequacy); or (iv) any other
negative economic impact is made on Lender's extension of credit facilities
under any Loan Document, the Note or otherwise. If any Cost Adjustment
Occurrence transpires, and it results in any increase to or imposition of any
cost on Lender, or any other negative economic impact (including but not limited
to loss of anticipated margin) upon Lender, which is associated with any credit
facility established under any Loan Document, then the Borrowers jointly,
severally and indefeasibly will pay to Lender, on demand, such amount as will
compensate Lender fully for such increased or additional costs or such negative
economic impact associated with the applicable Cost Adjustment Occurrence, so
that the net return to Lender under the Loan will be the same as if such Cost
Adjustment Occurrence never transpired, provided that Lender shall have provided
Borrowers with notice disclosing the calculation of such amount. Any
determination of any payment due and owing under this Section which Lender makes
will be conclusive, so long as made on a reasonable basis, and constitute an
account stated in the absence of manifest error. Borrowers specifically
acknowledge that Lender is entitled to use any averaging or attribution methods
when making such computation which Lender deems reasonable, necessary or
appropriate or which otherwise comports with Lender's standard internal
policies. If Borrowers fail to pay Lender any amounts due under this Section on
demand as aforesaid, such unpaid amount will bear interest at the Default Rate
until indefeasibly paid to Lender in full.
2.5 Method and Place of Interest and Principal Payment.
(a) Loan Account. Lender will maintain a separate loan account (the
"Loan Account") on its books for Borrowers, in which Lender will record: (i) all
addresses Lender makes to Borrowers under the each Loan; (ii) all interest and
principal payments Lender receives from Borrowers; and (iii) all other
appropriate debits and credits as provided in this Agreement or the other Loan
Documents, including without limitation charges for all fees, expenses and
interest. Lender will make all entries in the Loan Account in accordance with
Lender's customary accounting practices as in effect from time to time. Lender
will evidence all Advances it makes to Borrowers and all other debits and
credits identified in this Agreement in Lender's internal data control systems,
showing the date, amount and reason for each such debit or credit. On a calendar
monthly basis, Lender will render to Borrowers a statement setting forth the
balance of the Loan Accounts which Borrowers then owe concerning the Loan,
including principal, interest, expenses and fees. Each such statement will be
subject to subsequent adjustment by Lender and Lender's right to apply or
reapply payment in accordance with the provisions of Section 2.5(h) below, but,
absent manifest errors or omissions, will be presumed correct and binding upon
Borrowers and shall constitute an account stated, unless within thirty (30) days
after receipt of any statement from Lender, Borrowers deliver to Lender a
written objection to any such statement specifying the error or errors, if any,
contained in such statement.
(b) Interest Payments. Except as provided below in this Section,
Borrowers jointly and severally shall pay all Loan Rate interest and/or Default
Rate interest they owe under the Loan on a calendar monthly basis, in arrears,
commencing on the first day of the first calendar month next succeeding the
Effective Date, and continuing on the first day of each calendar month
thereafter. Lender agrees to confirm the amount of interest charged to
Borrowers' Loan Account for any period in which interest accrued under any Loan,
and to acknowledge Lender's receipt of payment, by transmitting a statement
based on the Loan Account to Borrowers in accordance with Section 2.5(a) above.
(c) Revolving Loan Principal Payment. If at any time the outstanding
principal balance of Advances under the Revolving Loan exceeds the Collateral
Availability or the Borrowing Capacity, Borrowers immediately, jointly and
severally shall pay Lender such amount as is necessary to eliminate such excess.
Borrowers jointly and severally shall pay all principal and interest which
remains outstanding under the Revolving Loan in full, on the first to occur of
the Commitment Termination Date or the Maturity Date, without notice, demand or
presentment.
(d) Payment of Other Costs, Charges and Fees. Borrowers jointly and
severally shall pay all fees, costs, expenses and other charges of Lender on
demand, unless a different time period is expressly provided for such payment in
this Agreement or any other Loan Document. If Borrowers fail to pay any such
fees, costs, expenses or other charges of Lender when the same are due, then
such unpaid amounts shall bear interest at the Default Rate (or, if such amount
is greater than the maximum legal rate, then at said maximum legal rate), until
paid in full.
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(e) Standard Payment Transmission. Borrowers shall make all payments
and prepayments under this Agreement and the Note directly to Lender, not later
than 2:00 p.m., Chicago time, on the date when such payments are due in
accordance with this Agreement, in lawful currency of the United States, in
immediately available funds, at Lender's Office. Any funds Lender receives after
such time, for all purposes, shall be deemed to have been paid on the next
succeeding Business Day. Borrower specifically authorizes Lender, in Lender's
sole discretion, to charge against any Deposit Account of Borrowers maintained
with Lender or any holding company, branch, office, parent or affiliate of
Lender, (including but not limited to the Pledged Account) all or any amount due
under the terms of the Loan or Note, this Agreement or any other Loan Document.
(f) Payments on Business Days Only. Whenever the stated due date of
any payment of interest or principal under this Agreement or the Note is a day
which is not a Business Day, the due date of such payment shall be extended to
the next succeeding Business Day, and interest shall accrue and be payable at
the then applicable Loan Rate or Default Rate, as the case may be, during any
such extension.
(g) No Set-Offs. All payments Borrowers make under this Agreement,
the Note and the other Loan Documents shall be made irrespective of, and without
any reduction for, any set-off or counterclaims of any type or nature (including
but not limited to any Borrowers may claim against each other or any of their
Other Subsidiaries), and Borrowers specifically waive all such set-off rights,
whether arising at law, in equity or otherwise, and acknowledge that Lender is
relying on such waiver in extending the credit facilities identified in this
Agreement.
(h) Application of all Prepayments, Payments and Collections.
Borrowers irrevocably waive the right to direct the application of all
prepayments, payments and collections Lender receives from or on behalf of
Borrowers under this Agreement or in any way on account of any Obligations.
Borrowers agree that Lender has the unreviewable, continuing, exclusive right to
apply and reapply any and all such payments and collections against the
Obligations in such manner as Lender, in its sole discretion, deems appropriate,
notwithstanding any entry by Lender upon any of its books and records, including
but not limited to the Loan Account. Without limiting the preceding, Borrowers
agree that Lender may apply any or all payments or prepayments it receives in
the following order of preference: (i) first, to the payment of all accrued
interest (both Loan Rate and Default Rate interest) due on the principal amount
of the Loan then being prepaid or repaid; (ii) second, to the payment of any
penalties, costs, fines or other Obligations Borrowers then owe to Lender under
this Agreement or any other Loan Documents; and (iii) third, to reduce the
principal due under the Loan, until Borrowers have repaid indefeasibly, the
outstanding principal balance due under the Loan and all other Obligations in
full. To the extent Borrowers make a payment or payments to Lender, or Lender
receives any payment for the benefit or on behalf of Borrowers, and such
payment(s) or any part thereof subsequently are invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, state or federal law, common
law or equitable cause of any Governmental Authority, then Borrowers'
Obligations concerning any such invalidated payment shall be fully restored to
the extent of any such invalidation or disallowance, and shall be revived and
shall continue in full force and effect, as if Lender never received such
initial payment(s), and shall accrue interest under this Agreement until repaid,
at the applicable Loan Rate and/or Default Rate.
2.6 Accelerated Prepayment Following Certain Events. Concurrently with the
occurrence of any of the following, Borrowers shall prepay the outstanding
principal due under the Loan in its entirety, together with all then accrued but
unpaid interest computed at the Loan Rate and/or Default Rate, as the case may
be and all other Obligations: (i) Borrowers' sale, transfer or other disposition
of all or substantially all of their consolidated business (other than sales
permitted under Article 4 below); (ii) the sale, pledge, transfer, assignment or
hypothecation of the ownership or right to control thirty percent (30%) or more
of the voting interests or Stock in Parent or in any Subsidiary which accounts
for 35% or more of Borrowers' consolidated gross revenues, whether by agreement,
trust, beneficially, legally or otherwise, to any Person other than Lender who
is not a stockholder, member or other owner of Borrowers as of the Effective
Date; (iii) any Borrower becomes insolvent (except in those instances in which
Borrowers obtain Lender's prior, written consent to restructure or liquidate a
Borrower other than Parent which Parent believes is approaching insolvency, in
order to improve Borrowers' consolidated profitability), or incurs or assumes
any Indebtedness (other than Indebtedness permitted under Section 7.2 below),
whether vested or contingent, pursuant to any agreement (written or oral) or
arising at law, in equity or otherwise; (iv) it at any time becomes unlawful for
Borrowers to continue to conduct their primary businesses (as of the Effective
Date) under the rules of any applicable Governmental Authority, or it at any
time becomes illegal for Lender to loan funds directly to any Borrower; or (v)
any Default Event occurs under this Agreement. Nothing contained in this Section
shall permit, nor be construed as permitting, any such sale, transfer,
disposition, creation, incurrence or assumption which is otherwise prohibited
under the terms of this Agreement or any other Loan Document.
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2.7 Taxes. All payments Borrowers make to Lender and all Security
Interests Borrowers grant to Lender under this Agreement, the Note or any other
Loan Document, shall be free and clear of, and without reduction or withholding
for or on account of, any present or future income, value added, stamp,
recordation, or other taxes, levies, imposts, duties, fees, deductions,
withholdings or other Charges now or subsequently imposed, levied, collected,
withheld or assessed by any Governmental Authority (collectively "Taxes"). If
any Governmental Authority at any time requires any Taxes to be withheld from
any amounts payable to Lender under this Agreement, the Notes or any other Loan
Documents, the amounts so payable to Lender shall be increased to the extent
necessary to yield to Lender (after payment of all such Taxes), interest or any
such other amounts payable under this Agreement, the Note or any other Loan
Documents, at the gross rates or in the gross amounts specified in this
Agreement, the Note or any other Loan Documents, as applicable. Whenever any
Taxes are payable by Borrowers, if Lender so requests, as promptly as possible
thereafter, Borrowers shall send to Lender a certified copy of an original
official receipt Borrowers receive evidencing payment of such Taxes. If
Borrowers fail to pay any Taxes when due to the appropriate Governmental
Authority or fail to remit to Lender the required receipts or other required
documentary evidence, Borrowers jointly and severally shall indemnify Lender
fully and on demand for any incremental taxes, interest or penalties that may
become payable as a result of any such failure. Borrowers' obligations in this
Section shall survive the termination of this Agreement and the Loan Documents,
and the payment of the Notes and all other Obligations.
2.8 Changes in Law Making Credit Extensions Illegal. If any Governmental
Authority changes or adopts any law, rule or regulation, issues any new
judgment, ruling or verdict, or changes its interpretation of any preexisting
law, rule or regulation and Lender, in its sole judgment, determines that the
same has made it unlawful for Lender to make, maintain or fund any credit
facilities under this Agreement, then Lender's obligations to extend any such
credit facilities under this Agreement will terminate immediately. Thereafter,
Lender will have no obligation whatsoever to make any Advance or Loan under this
Agreement, all associated Commitments will terminate and Borrowers jointly and
severally will repay and/or prepay all principal they owe under any such Loan(s)
to Lender, without subjecting Lender to any liability whatsoever.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Conditions Identified. Lender's obligation to make the Loan available
to Borrowers under this Agreement is subject to the satisfaction of each of the
conditions precedent identified in Sections 3.1(a) through 3.1(h) of this
Agreement, on or before the Effective Date.
(a) Loan Documents. Each Borrower duly shall execute and deliver to
Lender, an original counterpart of each of the following: (i) this Agreement;
(ii) the Note; (iii) all Security Documents, including but not limited to (A)
the First Amended and Restated Pledge Agreement in form and substance as set
forth on attached Exhibit "G" to this Agreement (the "Pledge Agreement"), (B)
the First Amended and Restated Cross Default and Collateralization Agreement in
form and substance as set forth on attached Exhibit "H" to this Agreement (the
"Cross Default Agreement"), and (C) such certificates, lien searches, corporate
documentation, UCC filings, Insurance Policies and other documentation required
by Lender or its counsel.
(b) Lender's Fees. In consideration of Lender extending the Loan to
Borrowers, Borrowers shall pay in full to Lender, all costs of Lender, including
but not limited to Lender's attorneys' fees and UCC search and filing costs.
(c) Certified Borrowing Resolutions. Borrowers shall deliver to
Lender, a certificate of a duly authorized executive officer of Parent dated the
Effective Date, and in the form set forth on attached and incorporated Schedule
3.1(c) certifying that: (i) the names and signatures of Borrowers' officers as
identified on attached Schedule 1.7 are true and accurate, and that said
individuals have full power and authority to execute and deliver all Loan
Documents on behalf of Borrowers; (ii) the copies of the Articles of
Incorporation and Bylaws (or the applicable counterpart documents) of Borrowers
attached to said Schedule 3.1(c) are true and complete as of the Effective Date,
inclusive of all exhibits and amendments thereto; (iii) Borrowers' board of
directors (or applicable counterpart management board) resolutions approving and
authorizing the execution, delivery and performance of all Loan Documents,
original copies of which are attached to Schedule 3.1(c), were duly passed and
remain in full force and effect, without change, modification or deletion; and
(iv) that no Default Event under this Agreement has occurred or is continuing
giving effect to the Transaction.
(d) Certified Organizational Documents. Borrowers shall deliver to
Lender, copies, as set forth on
15
attached and incorporated Schedule 3.1(d), certified as of the most recent date
practicable, by the Secretaries of State of Delaware and Illinois, respectively,
concerning Borrowers' respective Articles of Incorporation or other applicable
organization documents.
(e) Certificates of Good Standing. Borrowers shall deliver to
Lender, certificates of good standing, as of the most recent dates practicable,
from the Secretaries of State of Delaware and Illinois, and the same shall be
set forth on attached and incorporated Schedule 3.1(e).
(f) Representations and Warranties. Borrowers' representations and
warranties contained in this Agreement and/or in the other Loan Documents shall
be true and correct both before and after giving effect to the Transactions.
(g) No Default Events or Material Adverse Effects. No Default Event
and no event which with notice, the passage of time or both would constitute a
Default Event shall have occurred and be continuing, and Borrowers shall not
have experienced any Material Adverse Effect, before or after giving effect to
the Transactions.
(h) Additional Matters. Borrowers shall provide Lender with such
other certificates, opinions, documents and instruments relating to the
Transactions as Lender may request prior to or as of the Effective Date and/or
each Disbursement Date or at any time thereafter. All deliverables of Borrowers
to Lender under the Loan Documents, and all other documents (including, without
limitation, all documents referenced in this Agreement and not attached as
Exhibits or Schedules to this Agreement) and all legal matters in connection
with the Transactions, shall be reasonably satisfactory to Lender.
3.2 Conditions Precedent which Pertain to Advances Requested Subsequent to
the Effective Date.
(a) Future Disbursements. Notwithstanding any contrary provision of
this Agreement, Lender's obligation to make Advances or issue L/C's under the
Loan from time to time until the Maturity Date is expressly subject to and
conditioned upon the satisfaction of each of the conditions precedent identified
in Sections 3.2(b) through 3.2(d) below.
(b) No Default Event. No Default Event or event or condition which
with notice or lapse of time or both would constitute a Default Event will have
occurred and be continuing or will result from the making of any such Advance or
issuing such L/C. Each of the warranties and representations identified in
Article 5 of this Agreement shall be true and correct as of each date upon which
an Authorized Representative requests an Advance or L/C, with the same effect as
if such representations or warranties were made on such date, and will continue
to be true and correct on each corresponding Disbursement Date. Borrowers will
not have experienced any material adverse change in their business, credit,
operations or financial conditions or prospects since the last previous
Disbursement Date of an Advance Lender made under this Agreement.
(c) Reporting Obligations and Field Examinations. Lender shall have
received all reports and/or certificates from Borrowers described in this
Agreement or any other Loan Document, on a timely basis, and Borrowers shall
have timely complied with all other reporting, verification, inspection and
administrative requirements either identified in any Loan Document or as
otherwise requested by Lender from time to time. The preceding reporting
obligations of Borrowers include but are not limited to all financial and/or
fiscal statements Borrowers are required to provide to Lender, whether audited
or not. Borrowers shall have allowed Lender to conduct all field examinations of
Borrowers' respective facilities, assets and premises when and as requested by
Lender, and Borrowers shall have cooperated fully with Lender in conducting such
field examinations.
(d) Certificate. If requested to do so by Lender, Borrowers shall
provide Lender with a certificate signed by a duly authorized executive officer
of Borrowers and dated as of the date of any such requested Advance or L/C,
which certifies the satisfaction of the conditions precedent specified in
Sections 3.2(b) and 3.2(c) of this Agreement. In addition, Borrowers shall
provide Lender with such other documents as Lender reasonably may request to
support any Advance or L/C.
3.3 Conditions that Pertain to Deliverables. Notwithstanding any contrary
provision of this Agreement, if Borrowers have the obligation to provide any
deliverable to Lender as of the Effective Date, and such deliverable involves
the certification of the occurrence, nonoccurrence, existence or nonexistence of
facts, events, conditions, or
16
circumstances, or involves the accuracy of representations or warranties, or
involves the performance of covenants, duties or obligations, then Borrowers
shall update, and duly execute and deliver the same deliverables to Lender as
relevant developments occur, with Borrowers modifying such deliverables to
account for any matters occurring in the time between the Effective Date and any
such subsequent date. Borrowers shall provide such updated deliverables to
Lender either upon Lender's request, or within five (5) Business Days of
Borrowers becoming aware of any event or failure which materially may affect the
disclosures made in any such deliverable.
ARTICLE 4
COLLATERAL AND SECURITY MATTERS
4.1 Grant of Security Interests. To secure Borrowers' prompt payment and
performance of all the Obligations Borrowers owe to Lender under any Loan
Document, each Borrower, through this instrument, irrevocably grants to Lender,
its successors and assigns, a right of set-off against and a continuing first
position (except for the "Permitted Liens") security interest and first Lien
(collectively the "Security Interests") in and to all the following property and
interests in property of such Borrower, whether now owned or existing or
subsequently acquired or arising, and wherever located (collectively, the
"Collateral"): (i) all Accounts, Inventory, Equipment, Fixtures, machinery,
vehicles, general business assets, contracts and contract rights, General
Intangibles (other than "intent to use" Trademark registrations and
applications), tax refunds, Chattel Paper, Cash Equivalents, capital
contributions, instruments, notes Collateral Records, letters of credit,
Documents and documents of title; (ii) all Deposit Accounts (general or special)
with and credits and other claims against any depository bank therefor or
Lender, or any other financial institutions with which such Borrower maintains
deposits (if any) and all amounts deposited therein: (iii) all now owned or
subsequently acquired Monies, and any and all other tangible or intangible
property, and all know-how or technology or applications of technology developed
therefrom, whether or not now or subsequently coming into the actual possession,
custody or control of Lender or any agent or affiliate of Lender in any way or
for any purpose (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise); (iv) all Insurance Policies of or
relating to any of the foregoing and all proceeds from Insurance Policies from
any life insurance policy covering the life of any director, officer, employee
or former director, officer or employee of such Borrower, if such Borrower is
the beneficiary thereof, and all proceeds from Insurance Policies covering
business interruption insurance; (v) all books and records relating to any of
the preceding; (vi) all good will and going concern value of such Borrower's
business; (vii) all Stock or other ownership interests in each of the
Subsidiaries; and (viii) all accessions and additions to, substitutions for, and
replacements, products and Proceeds of any of the preceding. Borrowers and
Lender specifically intend and agree that the term "Collateral" as defined in
this Agreement includes all property and interests in property of each Borrower,
whether real, personal, intangible, inchoate or otherwise, whether now existing
or subsequently acquired or arising/or whether or not specifically enumerated in
this Agreement, except as identified specifically on attached Schedule 4.1.
Borrowers therefore acknowledge and agree that the term "Collateral" as defined
in this Agreement is to be construed in the broadest manner possible, and if,
after the Effective Date, at any time or from time to time, any Borrower
acquires any property or interest in property (real, personal, intangible,
inchoate or otherwise) that is not described or adequately described in this
Section 4.1, Borrowers will notify Lender of the same, and the parties will
amend this Section 4.1 to cover specifically any such items, if Lender deems the
same necessary.
4.2 First Position in the Collateral. The Security Interests in the
Collateral which Borrowers have granted to Lender under this Agreement are first
position, indefeasible security interests in all the Collateral, except as
expressly permitted under Section 7.3 below and indicated otherwise on attached
and incorporated Schedule 4.2 (collectively, the "Permitted Liens"), if any.
Notwithstanding any termination of this Agreement, until the Borrowers jointly,
severally and indefeasibly pay or perform all the Obligations arising under the
Loan in full, Lender shall retain its Security Interests in the Collateral and
Lender shall retain all of its rights and remedies under this Agreement, at law
or in equity.
4.3 Disclosure of Security Interests and Maintenance of Records. Borrowers
shall make appropriate entries upon their financial statements and books and
records disclosing Lender's Security Interests in the Collateral, in accordance
with GAAP. Borrowers shall keep and maintain, at their sole cost and expense,
complete records of the Collateral, including but not limited to the originals
of all documentation with respect to all Accounts and records of all payments
received and all credits granted on the Accounts.
4.4 Special Collateral. Immediately upon Borrowers' receipt of any
Collateral that is evidenced or secured by an agreement, Chattel Paper, letter
of credit, instrument or document, including without limitation, promissory
notes, documents of title and warehouse receipts (the "Special Collateral"),
Borrowers shall deliver the original thereof to Lender or to such agent of
Lender as Lender designates, together with appropriate endorsements, the
documents required
17
to draw thereunder (as may be relevant to letters of credit or similar items) or
other specific evidence (in form and substance acceptable to Lender) of valid,
unconditional assignment thereof and title and possession therein to Lender,
with full recourse to Borrowers. Borrowers shall deliver to Lender all title
documents covering any and all vehicles Borrowers own from time to time,
endorsed appropriately to evidence the Security Interests, which titles Lender
shall retain to perfect its Security Interests in the underlying vehicles. All
vehicles and other Special Collateral existing as of the Effective Date are
identified on attached and incorporated Schedule 4.4. However, the failure to
identify any Special Collateral on Schedule 4.4 shall not affect, impair,
modify, terminate, alter or negate, in whole or in part, the first position
Security Interests of Lender in such Special Collateral, the sole purpose of
Schedule 4.4 being informational to facilitate the perfecting of said Security
Interests, and not limiting in any way.
4.5 Further Assurances and Power of Attorney. At Lender's request,
Borrowers shall, from time to time: (i) execute and deliver to Lender, on
demand, all Security Documents that Lender may request, in form and substance
acceptable to Lender, and pay the costs of recording or filing the same,
including but not limited to Copyright Security Agreements, Patent Security
Agreements and Trademark Security Agreements; and (ii) take such other actions
as Lender may request in order to effect fully the purposes of this Agreement
and to protect Lender's interests in the Collateral, including but not limited
to maintaining the Security Interests as valid, continuing, first position
security interests in all Collateral. Borrowers, through this instrument,
irrevocably make, constitute and appoint Lender (and all Persons designated by
Lender for that purpose) with full power of substitution, as Borrowers' true and
lawful attorney and agent-in-fact with full, irrevocable power and authority in
the place and stead of Borrowers, to sign the name of Borrowers on any Security
Documents and to deliver any Security Documents to such Persons as Lender, in
its sole discretion, may elect, for the purposes of effectuating the terms of
this Agreement, and otherwise to take any and all actions, to execute any and
all documents and to consummate any and all filings which may be necessary or
desirable to accomplish the purposes of this Agreement or to protect Lender's
rights or Security Interests. Without limiting the generality of the preceding,
Lender, (and all Persons designated by Lender) as Borrowers' true and lawful
attorney and agent in-fact as aforesaid, may, without notice to Borrowers:
(a) endorse by writing or stamp Borrowers' names on any checks,
notes, drafts or any other payments related to and/or Proceeds of the Collateral
which come into the possession of Lender or under Lender's control and deposit
the same to the account of Lender for application to the Obligations;
(b) in Borrowers' or Lender's name, upon the occurrence and during
the continuance of a Default Event: (i) demand payment of the Collateral; (ii)
enforce payment of the Collateral, by legal proceedings or otherwise; (iii)
exercise all of Borrowers' rights and remedies with respect to the collection of
Collateral; (iv) settle, adjust, compromise, extend or renew the Accounts and
the Special Collateral; (v) settle, adjust or compromise any legal proceedings
brought to collect Collateral; (vi) if permitted by applicable law, sell or
assign Collateral upon such terms, for such amounts and at such time or times as
Lender deems advisable; (vii) satisfy and release the Accounts and Special
Collateral; (viii) take control, in any manner, of any item of payment or
proceeds referenced in Section 4.9 below; (ix) prepare, file and sign Borrowers'
names on any proof of claim in any Bankruptcy concerning any Account Debtor; (x)
prepare, file and sign Borrowers' names on any notice of lien, assignment or
satisfaction of lien or similar document in connection with Collateral; (xi) do
all acts and things necessary, in Lender's sole discretion, to fulfill
Borrowers' obligations under this Agreement or any Loan Document; (xii) endorse
by writing or stamp the names of Borrowers upon any chattel paper, document,
instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or
agreement relating to Collateral; (xiii) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to Collateral to which Borrowers have access; (xiv) withdraw any and
all amounts contained in any of Borrowers' Deposit Accounts; and (xv)
compromise, settle, pursue, retain, enforce or collect any claim of Borrowers
under any Insurance Policy covering Collateral; and
(c) upon the occurrence and during the continuance of a Default
Event, notify the post office authorities to change the address for delivery of
Borrowers' mail to an address designated by Lender and receive, open and dispose
of all mail addressed to Borrowers.
Borrowers ratify every action that Lender takes as said attorney-in-fact
by virtue of Borrowers' execution of this Agreement. The foregoing power of
attorney is a power coupled with an interest and is irrevocable. The powers
conferred on Lender under this Agreement are to protect Lender's Security
Interests and other rights and interests in the Collateral, and do not impose
any duty upon Lender to exercise such powers. Neither Lender nor its officers,
directors, employees or agents shall be responsible to Borrowers for any act or
failure to act under this Section concerning the aforesaid power of attorney.
Borrowers agree that a carbon, photographic, photostatic, facsimile or other
reproduction of this Agreement or of
18
a financing statement is sufficient as a financing statement.
4.6 Inspection. Lender (by any of its officers, employees or agents) shall
have the right, at any time or times during Borrowers' usual business hours,
without prior notice, to inspect Collateral, all records related thereto (and to
make copies of or extracts from such records) and the premises upon which any of
the Collateral is located, to discuss Borrowers' affairs and finances with any
Person and to verify the amount, quality, value and condition of, or any other
matter relating to, the Collateral.
4.7 Location and Movement of Collateral. Borrowers' respective chief
executive offices, principal places of business and all other offices and
locations of the Collateral and books and records related thereto (including,
without limitation, computer programs, printouts and other computer materials
and records concerning Collateral) are set forth on attached and incorporated
Schedule 4.7. Borrowers shall not remove their books and records or the
Collateral from any such locations (except for removal of items of Inventory
upon sale in accordance with the terms of this Agreement) and shall not open any
new offices or relocate any of their books and records or the Collateral except
within the continental United States of America, and unless prior to such
transfer Borrowers satisfy each of the following: (i) Borrowers provide Lender
at least 30 days prior, written notice of such relocation; (ii) Borrowers
specifically identify the Collateral being transferred by title, dollar value,
identification number (if any), registration number (if any), title
documentation (if any) and such other documentation as concerns such transferred
Collateral as exists or as Lender requests; (iii) Borrowers provide Lender with
a certificate executed by the duly authorized officer of Parent which
certificate verifies to Lender the value of the Collateral and that the location
of such Collateral at such new facility shall not in any way release,
subordinate, affect, modify, terminate or alter or have any other negative
impact whatsoever on the first position Security Interests in such Collateral
granted to Lender under this Agreement; and (iv) Borrowers execute and cause to
be executed such other documents and filings as Lender deems necessary,
appropriate or expedient for maintaining Lender's first position Security
Interests in such Collateral on a continuing basis following any such relocation
of any such Collateral.
4.8 Lender's Optional Rights to Pay Certain Claims Asserted Against
Borrowers. Lender may, but shall not be obligated to, at any time or times
subsequent to the Effective Date, in its sole discretion, and without waiving
any Default Event or waiving or releasing any Security Interest or Obligation,
liability or duty of Borrowers under this Agreement or the other Loan Documents:
(i) pay, acquire or accept an assignment of any security interest, Lien, claims
or other encumbrance asserted by any Person against the Collateral; (ii)
discharge taxes, Liens or security interests or other encumbrances at any time
levied or placed upon the Collateral or Borrowers' business premises; (iii)
place and pay for insurance on the Collateral or Borrowers' business premises
upon Borrowers' failure to provide insurance satisfactory to Lender; and (iv)
pay for the maintenance, repair and preservation of Collateral. Borrowers
jointly and severally shall reimburse Lender on demand for any such payment
which Lender makes, or any such expense which Lender incurs pursuant to the
foregoing authorization.
4.9 Accounts.
(a) Verification. Borrowers shall keep accurate and complete records
of their Accounts. Any of Lender's officers, employees or agents shall have the
right, at any time or times subsequent to the Effective Date, in Lender's or
Borrowers' name(s) or in the name of a firm of independent certified public
accountants acceptable to Lender, to verify the validity, amount of or any other
matters relating to any Accounts, by mail, telephone, modem, telegraph or
otherwise. Immediately upon the occurrence of a Default Event, Borrowers shall
reimburse Lender on demand for any costs or fees Lender incurs in connection
with any such verification, and such costs and fees shall constitute additional
"Obligations" as defined in this Agreement. Thereafter, Borrowers shall deliver
to Lender, on demand, the original copy of all Documents, including, without
limitation, repayment histories, present status reports and shipment reports,
relating to the Accounts and such other matters and information relating to the
status of then existing Accounts as Lender reasonably requests.
(b) Sale or Encumbrance. Except for the Permitted Liens, Borrowers
shall not sell, assign, transfer, grant a security interest in or otherwise
dispose of or encumber any Accounts or any rights to receive any payments in
respect of any Accounts, to any Person other than Lender.
(c) Marking of Records and Dispensation of Accounts. Borrowers shall
legend, in form and manner satisfactory to Lender, all Chattel Papers and other
evidences of Accounts with an appropriate reference to the fact that the Chattel
Paper and all other Accounts have been assigned to Lender and that Lender has
the Security Interests in said Chattel Paper and Accounts. If requested by
Lender, after a Default Event, Borrowers shall notify all
19
Account Debtors that such Accounts have been assigned to Lender and that all
payments in respect of such Accounts shall be made directly to Lender at such
lock box account, or other account as Lender may designate. Lender, in its own
name or in the name of Borrowers, may communicate with Account Debtors to verify
with them to Lender's satisfaction the existence, amount and terms of any
Accounts. Irrespective of any actions which Lender takes concerning any
Accounts, and notwithstanding any contrary provision in this Agreement,
Borrowers shall remain liable under each of the Accounts to observe and perform
all the conditions and obligations of Borrowers under such Accounts, all in
accordance with the terms of any agreement giving rise to such Accounts. Lender
shall not have any obligation or liability under any Account (or any agreement
or document which gives rise to such Account) by reason of this Agreement or
Lender's receipt of any payment relating to such Account pursuant to this
Agreement. Lender shall not be obligated in any manner: (i) to perform any of
Borrowers' obligations under or pursuant to any Account (or agreement or
document giving rise to such Account); (ii) to make any payment; (iii) to make
any inquiry as to the nature or the sufficiency of any payment received by
Lender or as to the sufficiency of any performance by any party under any
Account (or any agreement or document which gives rise to any Account); or (iv)
to present or file any claim, to take any action to enforce any performance or
to collect the payment of any amounts which may have been assigned to Lender or
to which Lender may be entitled at any time or times.
4.10 Inventory. Borrowers shall not rent, lease or otherwise transfer or
dispose of any Inventory without Lender's prior written consent, except as set
forth in this Section. Unless a Default Event occurs, Borrowers may sell
Inventory in the ordinary course of business (which does not include a transfer
in partial or total satisfaction of Indebtedness, sales in bulk, sales on
consignment or sales on an approval or return basis). Borrowers shall maintain
all Inventory in good and salable condition at all times.
4.11 Equipment. Borrowers shall keep and maintain the Equipment in good
operating condition and repair and shall make all necessary replacements thereof
so that the value, utility and operating efficiency thereof at all times will be
maintained and preserved, ordinary wear and tear excepted. Borrowers shall not
permit any such items to become affixed to real estate in such manner that such
items of Equipment will become a Fixture or an accession to other personal
property. Borrowers shall, upon Lender's request, deliver to Lender all evidence
of ownership of the Equipment (including, without limitation, bills of sale,
certificates of title and application for title). All replacement Equipment
purchased by Borrowers shall be free and clear of all liens, claims, security
interests and other encumbrances, except for the Security Interests granted to
Lender, purchase money security interests then consented to in writing by
Lender, and the Permitted Liens.
4.12 Set-Off. Each Borrower agrees that Lender has all rights of set-off
and banker's lien under applicable laws. Moreover, each Borrower agrees that, in
addition to all other rights available to Lender with respect to the Collateral
or Proceeds thereof, at any time any amounts are then due by such Borrower under
this Agreement or any other Loan Document or any Default Event exists, Lender
may apply to the payment of the Obligations, any and all balances, credits,
deposits, accounts or monies of such Borrower then or thereafter held by Lender,
and/or contained in the Pledged Account. Without limiting the preceding and in
addition to all of the rights or remedies available to Lender concerning the
Collateral or any Proceeds thereof, each Borrower agrees that after the
occurrence of a Default Event, Lender and each of its branches, affiliates,
holding companies, parents and offices are authorized at any and from time to
time and without notice: (i) to set-off against and to appropriate and apply to
the payment of the Obligations, whether matured or unmatured, fixed or
contingent or liquidated or unliquidated, any and all amounts such Borrower owes
to Lender or any such branches, affiliates, holding companies, parents and
offices by such Borrower (whether matured or unmatured and, in the case of
deposits, whether general or special, time or demand and however evidenced); and
(ii) pending any such action, to the extent necessary, to hold such amounts as
Collateral to secure such Obligations and to return as unpaid for insufficient
funds any and all checks or other items drawn against any deposits so held as
Lender may elect in its sole discretion.
4.13 Safekeeping. Lender has no responsibility for: (i) the safekeeping of
any Collateral; (ii) any loss of or damage to Collateral; (iii) any diminution
in the value of any Collateral; or (iv) any act or default of any carrier,
repairman, warehouseman, bailee, forwarding agency or any other Person. As
between Borrowers and Lender, all risk of loss, damage, destruction or
diminution in value of the Collateral is borne solely by the Borrowers. Without
Lender's prior, written consent, Borrower will not at any time store any
Collateral with a bailee, warehouseman, consignee or similar third party. Lender
acknowledges that, as concerns the Pledged Account, Banc One has undertaken such
responsibilities as are set forth in the documentation between Borrowers and
Banc One concerning said Account.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Inducement. To induce Lender to enter into this Agreement and to make
the Loan, Borrowers jointly and severally make the representations and
warranties set forth in Sections 5.2 through 5.22 below, which representations
and warranties shall survive the execution and delivery of this Agreement and
the Loan Documents and the making of the Loan, until such time as Borrowers have
indefeasibly repaid the Loan and otherwise paid and performed all the
Obligations. For purposes of this Agreement, the "Best Knowledge" of Borrowers
means the knowledge which a reasonable, prudent, experienced individual in
similar business circumstances would have after a diligent inquiry into the
subject matter at issue.
5.2 Status and Names. Borrowers: (i) are duly organized and validly
existing corporations in good standing under the laws of the State of Delaware
and Illinois, respectively; (ii) have the power and authority to own their
property and assets and to transact the businesses in which they are engaged or
presently propose to engage; and (iii) have duly qualified and are authorized to
do business and are in good standing as a foreign corporation in Illinois and in
every jurisdiction of every Governmental Authority in which they own or lease
real property or in which the nature of their businesses require them to be so
qualified, and where the failure to be so qualified could have a Material
Adverse Effect. Borrowers have paid and will continue to pay all taxes, Charges,
levies and other fees associated with such qualifications, and shall maintain
the same in full force and effect. Each corporate, trade or other fictitious
name used by any Borrower at any time in the United States during the three (3)
year period immediately preceding the Effective Date, is identified completely
and accurately on attached Schedule 5.2 to this Agreement. Except as disclosed
on Schedule 5.2, no Borrower is using any other corporate, trade or fictitious
name. Except as otherwise identified in Section 5.17 below, none of such
corporate, trade or other fictitious names are registered Trademarks with any
Governmental Authority or are the subject of any application therefor.
5.3 Power and Authority. Borrowers have full corporate power and authority
to execute, deliver and perform the terms and provisions of each of the Loan
Documents. Borrowers have taken all necessary and proper corporation,
partnership or limited liability company (as the case may be) actions to
authorize their execution, delivery and performance of and under each Loan
Document. Borrowers duly have executed and delivered each Loan Document, and
each Loan Document constitutes Borrowers' legal, valid and binding obligation,
enforceable against them in accordance with said Loan Document's terms, except
as bankruptcy, insolvency, similar laws which affect creditors' rights generally
or general equity principles may limit such enforceability.
5.4 Outside Consents. Borrowers do not have to obtain the consent or
authorization of any Governmental Authority or other Person in connection with:
(i) their execution and delivery of or performance under this Agreement, any
Security Documents, the Note or any other Loan Documents or for the consummation
of any of the Transactions incident to any of the preceding; or (ii) the
legality, validity, binding effect or enforceability of any Loan Document,
except those which Borrowers duly made or obtained, and which remain in full
force and effect. Borrowers did not issue any of their Stock or other equity or
ownership interest or securities of any type or nature in violation of any
securities or similar laws of any Governmental Authority. All consents and
approvals of, and filings and registrations with, and all other actions by, any
Person (whether or not such Person is a Governmental Authority) required in
order to make or consummate all Transactions have been obtained, given, filed or
taken and are or will be in full force and effect.
5.5 No Violation. Neither Borrowers' execution, delivery or performance
of, nor compliance with the terms and provisions of the Loan Documents nor the
consummation of the Transactions, either currently or with the passage of time
or granting of notice, will: (i) to Borrowers' Best Knowledge, contravene any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or Governmental Authority; (ii) conflict or be
inconsistent with or result in any breach of, any terms, covenants, conditions
or provisions of, constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any
Collateral or other property or assets of Borrowers, pursuant to the terms of
any indenture, mortgage, deed of trust, agreement, bond, note, Insurance Policy,
license or other instrument to which Borrowers are parties or by which Borrowers
or any Collateral are bound or to which Borrowers may be subject; or (iii) will
contravene, constitute a violation of, a default under or in any manner conflict
with any Certificate of Incorporation, Articles of Incorporation, by-laws or
other organizational documents of Borrowers.
5.6 Litigation. Except as disclosed in Borrowers' publicly available
securities filings, there are no actions, claims, demand letters,
investigations, suits or proceedings pending or to Borrowers' Best Knowledge
threatened, against or affecting Borrowers: (i) with respect to any of the
Transactions, or any of the Loan Documents; (ii) which could,
21
individually or in the aggregate, have a Material Adverse Effect on Borrowers or
any Collateral; (iii) which involves the possibility of any judgment or
liability, which is not fully covered by insurance or otherwise in the aggregate
material in light of the consolidated financial condition and assets of
Borrowers. There are no actions, suits or proceedings pending or to Borrowers'
Best Knowledge threatened against or affecting Borrowers or any Collateral
regarding any Environmental Claims, Environmental Laws or Materials of
Environmental Concern.
5.7 Margin Regulations. Borrowers will not use all or any portion of any
proceeds received under the Loan to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock. Neither the making of the Loan nor the use of the proceeds from the Loan
will violate or be inconsistent with the provisions of Regulations G, T, U or X
of the Federal Reserve Board.
5.8 Investment Company Act. Borrowers are not: (i) "investment companies"
or "controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended; or (ii) subject to any other federal or state
law or regulation which purports to restrict or regulate their ability to borrow
money.
5.9 Disclosure. All factual information furnished by or on behalf of
Borrowers to Lender on or prior to the Effective Date, for purposes of or in
connection with this Agreement, the Loan, the Loan Documents and/or the
Transaction is, and all other such factual information subsequently furnished by
or on behalf of Borrowers to Lender will be, true, complete and accurate in all
respects on the date as of which such information is dated and/or furnished, and
not incomplete by omitting to state any material fact necessary to make such
information not misleading at such time. The preceding includes any information,
representations or warranties of or provided by or on behalf of Borrowers in any
schedule or exhibit to any Loan Documents, as well as contained in the corpus of
such Loan Documents, or provided separately in conjunction with such Loan
Documents. The copies of all documents or instruments Borrowers provide to
Lender in conjunction with the Transactions are complete, accurate copies of the
items they purport to be.
5.10 No Default. Borrowers are not in default under or with respect to any
of the Prior Agreements (other than under the Financial Covenant Agreement, as
previously disclosed to Lender), Related Agreements or any Loan Documents, or
any other agreement, instrument or undertaking to which Borrowers are parties or
by which Borrowers or any Collateral is bound. No Default Event exists before or
after giving effect to any or all of the Transactions, or will exist with the
passage of time or the giving of notice.
5.11 Licenses and Permits. To Borrowers' Best Knowledge, Borrowers have
obtained and hold in full force and effect, all franchises, licenses, permits,
certificates, registrations, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals (collectively
"Permits") which are materially necessary for the operation of their businesses
as conducted prior to and as will be conducted following the Effective Date.
Borrowers have fulfilled and performed all of their obligations under each
Permit. No event has occurred or condition or state of facts exists which
constitutes, or after notice or lapse of time or both, would constitute, a
breach or default under any Permit, or would cause the revocation or termination
of any Permit. Borrowers have not received notice of cancellation, of default or
of any material dispute concerning any Permit. Each Permit is valid, subsisting
and in full force and effect. Borrowers shall renew all Permits which expire
while any Loan or Obligations are outstanding.
5.12 Compliance with Laws. To Borrowers' Best Knowledge, Borrowers are in
compliance with all laws, rules, member association rules, injunctions,
ordinances, franchises and regulations (including, without limitation, all
Environmental Laws), and all orders, judgments, writs and decrees of any
Governmental Authority applicable to Borrowers or any of their assets both prior
and after giving effect to the closing of the Loan Documents. There have been no
legislative or regulatory proposals adopted or to Borrowers' Best Knowledge,
pending, which could have a Material Adverse Effect on Borrowers' businesses.
Borrowers do not use any funds for any unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity.
Borrowers have not made any direct or indirect unlawful payment to government
officials of any Governmental Authority or others and Borrowers have not
established or maintained any unlawful or unrecorded funds for such purposes.
Borrowers have not violated any provisions of the Foreign Corrupt Practices Act
of 1977 of the United States or any rules or regulations associated with said
Act, as amended from time to time. Borrowers have not received any illegal
discounts or rebates and are not currently being investigated by any
Governmental Authority. Borrowers have complied with all laws of any
Governmental Authority which involve or concern anti-trust or anti-competitive
restrictions or requirements, and/or which identify restrictions concerning the
products and/or services Borrowers perform, develop, manufacture and market.
5.13 Solvency. Parent is not "insolvent" as that term is defined in
Section 101(32) of the Bankruptcy Code (11
22
U.S.C. ss. 101(32)), Section 2 of the Uniform Fraudulent Transfer Act ("UFTA"),
or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), does not have
"unreasonably small capital," as that term is used in Section 548(a)(2)(B)(ii)
of the Bankruptcy Code and Section 5 of the UFCA, is not engaged or about to
engage in a business or a transaction for which its remaining property is
"unreasonably small" in relation to the business or transaction as that term is
used in Section 4 of the UFTA, is not unable to pay its debts as they mature,
within the meaning of Sections 548(a)(2)(B) and 548(a)(2)(A)(iii) of the
Bankruptcy Code, Section 4 of the UFTA, or Section 6 of the UFCA and the
Borrowers on a consolidated basis now own property having a value both at "fair
valuation" and at "present fair salable value" greater than the amount required
to pay their aggregate "debts", as such terms are used in Section 2 of the UFTA,
or Section 2 of the UFCA. None of the Borrowers will be rendered insolvent (as
defined above) by the execution and delivery of this Agreement or any of the
other Loan Documents or by the Transactions.
5.14 Tax Returns. Borrowers have filed on a timely basis all federal,
state, county and local income, excise, withholding, value added, property,
sales, use, franchise or other tax returns, declarations or reports which any
state, local, municipal, or federal authority of any Governmental Authority
required Borrowers to file on or before the Effective Date. All such tax
returns, declarations and reports were true and correct, and accurately
reflected all taxable income and tax liabilities of Borrowers for all periods
such reports covered. Borrowers have paid all taxes, interest and penalties, (if
any), which became due pursuant to such returns or pursuant to any assessment
which has become payable. Borrowers have withheld all monies from their
employees which the United States Federal Government, any state government of
the United States, or any other Governmental Authority required them to withhold
for income taxes, social security or other payroll taxes. Borrowers have
collected all such taxes and either paid such taxes to the appropriate agencies
of such Governmental Authorities, or set aside funds in sufficient amounts to
satisfy all such taxes in accounts established for such purposes, or accrued,
reserved against and entered upon their books an amount sufficient to satisfy
such taxes. If requested by Lender, Borrowers shall provide Lender, during
normal business hours with access to all income and other tax returns they have
filed in the previous five (5) years with any Governmental Authority, and, if
requested by Lender, will provide Lender with copies of all or any such returns.
5.15 Financial Statements. Borrowers have provided Lender with audited
financial statements concerning Borrowers (the "Audited Financials") for the
twelve (12) month period ended January 31, 2000. The Audited Financials were
prepared by Borrowers' independent certified public accounting firm (the
"Borrowers Accountant"). In addition, Borrowers have provided Lender with
unaudited financial statements prepared by Borrowers' management, which cover
the two (2) month period ended June 30, 2000 (the "Unaudited Financials"). The
Audited Financials, Unaudited Financials and all other financial information,
statements, warranties, projections, balance sheets, cash flow statements and
reports which Borrowers provide from time to time to Lender shall be referred to
collectively in this Agreement as "Financial Statements". The Financial
Statements which Borrowers have delivered or will deliver to Lender in the
future fully, fairly and accurately present the financial condition of Borrowers
and the results of their business operations for the respective periods
indicated in such Financial Statements. The Financial Statements were prepared
in conformity with GAAP, applied on a basis consistent with prior periods.
5.16 COBRA. To Borrowers' Best Knowledge, Borrowers have provided each of
their former employees with the right to continue his or her respective
insurance program with Borrowers, in compliance with all relevant provisions of
the Code, as modified by the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"), including all amendments to COBRA as contained in the Tax Reform
Act of 1986, or any subsequent legislation or rules.
5.17 Intellectual Property. All General Intangibles of Borrowers,
including but not limited to trade secrets, Copyrights, Trademarks, licenses,
Patents, software, tool kits, modules, modifications, derivative works, rights
as an author, moral rights and other intangible, industrial or intellectual
property of any type or nature which Borrowers use, own, have applied for, are
developing, are licensed to use, are franchised to use, service or which
otherwise constitute a part of Borrowers' businesses shall be referred to in
this Agreement collectively as "Intellectual Property". All Intellectual
Property is valid, subsisting, in good standing and to Borrowers' Best
Knowledge, uncontested, except as specifically identified otherwise on attached
and incorporated Schedule 5.17. Except as disclosed on Schedule 5.17, Borrowers
either own exclusive, full and clear title to the Intellectual Property or have
the legal, unencumbered right to use the Intellectual Property they license. No
employees or former employees of Borrowers or independent contractors retained
by Borrowers have any claim to or title in any Intellectual Property. Borrowers
have executed agreements with all such employees and/or independent contractors
which specify that Borrowers have sole title to all the Intellectual Property,
whether or not developed solely or jointly by or with such employees or
independent contractors. None of the Intellectual Property which is or could be
a subject of any Patent, Copyright, Trademark or other registration (whether in
the United States or any other Governmental Authority) has been claimed or
judged to be invalid or unenforceable in whole or in part.
23
Borrowers have taken all actions and effectuated all registrations necessary to
protect and to maintain their exclusive title to the Intellectual Property
throughout the world, and necessary to maintain the existence of the
Intellectual Property in the United States and to Borrowers Best Knowledge, in
any other Governmental Authority in which Borrowers conduct any business, to the
extent that failure to take such actions could have a Material Adverse Effect.
Prior to utilizing any Intellectual Property in the jurisdiction of any
Governmental Authority, Borrowers, to Borrowers' Best Knowledge, have taken all
actions necessary to protect and/or register such Intellectual Property so that
the use of such Intellectual Property in such jurisdiction will not jeopardize
any of Borrowers' ownership or other rights or registrations in such
Intellectual Property. Upon demand from Lender, Borrowers shall deliver to
Lender copies of all documents which establish or evidence the Intellectual
Property in any way, together with a complete and accurate description of all
such Intellectual Property. Borrowers own all or possess adequate registrations
of the Intellectual Property with Governmental Authorities necessary for
Borrowers to continue to operate their businesses as currently conducted. All
registered Intellectual Property is identified with particularity on attached
Schedule 5.17. Except as identified on Schedule 5.17, Borrowers do not have to
license any Patents owned by any Person in order to operate their businesses,
and there exist no "blocking patents" which could require Borrowers to execute
any such license in the future. Borrowers did not obtain any Intellectual
Property in any illegal fashion, and have not copied any Patent applications,
Copyrights, Trademarks or other intellectual property of any other party.
Borrowers have implemented adequate procedures to maintain the confidentiality
and/or trade secret status of any Intellectual Property which is confidential
and/or a trade secret in nature. To Borrower's Best Knowledge, the Intellectual
Property does not infringe upon any Patents, Copyrights, Trademarks, licenses,
trade secrets or franchises which any other Person or entity may own or claim.
There is no claim or action pending or to Borrowers' Best Knowledge threatened
concerning any Intellectual Property. None of the Intellectual Property contains
any slanderous or defamatory material. All of the Intellectual Property which is
comprised of software Borrowers license or sell as a vendor (including but not
limited to embedded chips) are calendar year 2000 compliant (i.e. will function
fully with dates both prior and subsequent to the calendar year 2000 AD and with
leap years, and will not fail to operate in any way because of such dates or
leap years). All such Intellectual Property of Borrowers will manage and
manipulate data involving dates, including single century and multi-century
formulae, and will not cause an abnormally ending scenario within any
application or generate incorrect values or invalid results involving any dates
or data or software function which is reliant on date information. Borrowers
have reviewed all areas within their businesses and operations which could be
adversely affected by, and have developed a plan to address on a timely basis,
the "Year 2000 Problem" (i.e. the risk that computer applications Borrowers use,
whether in the form of software or embedded chips, may be unable to recognize
and perform properly data-sensitive functions involving certain dates prior to
and any date on or after December 31, 1999), and Borrowers have made related
appropriate inquiries of their material suppliers and vendors. Based on such
review and such plan, the Year 2000 Problem will not have a Material Adverse
Effect on Borrowers.
5.18 Title. Except for the Security Interests granted in this Agreement
and the Permitted Liens, Borrowers are the sole owners of all Collateral, and
Borrowers have good, indefeasible and merchantable title to and ownership of all
Collateral, free and clear from any and all adverse liens, security interests,
claims or encumbrances of any nature. Borrowers will defend all Collateral
diligently against claims and demands of all individuals or entities who at any
time claim any interest in any Collateral.
5.19 Validity, Perfection and Priority. The Security Interests in the
Collateral granted under this Agreement constitute valid and continuing,
indefeasible, first position security interests in the Collateral, which shall
remain and continue in full force and effect until such time as Borrowers
jointly, severally and indefeasibly pay to Lender, all amounts Borrowers owe to
Lender under the Note and each of the Loan Documents and otherwise pay or
perform in full all the Obligations. If any of the Security Interests granted
under this Agreement may be perfected by filing, financing statements naming
Borrowers as debtors and Lender as secured party shall be filed in all
appropriate offices, on or before the Effective Date. All such filings, along
with the office, county, state and other identification of the place and time
thereof and the Collateral covered thereby, are identified on attached Schedule
5.19. All the Security Interests constitute perfected security interests
superior and prior to all Liens, claims and encumbrances of any nature or type,
other than the Permitted Liens. Except for those of Lender and corresponding to
the Permitted Liens (if any), no financing statement concerning any of the
Collateral or any Proceeds of the Collateral is on file in any public office.
Borrowers immediately shall notify Lender in writing of any change of name or
address (whether personal or business) of Borrowers from that shown in this
Agreement.
5.20 Account Warranties and Representations. Borrowers represent and
warrant that to their Best Knowledge: (i) all Accounts are genuine, are in all
respects what they purport to be, are not reduced to a judgment and, if
evidenced by any instrument, item of Chattel Paper, agreement, contract or
Documents, are evidenced by only one executed original revision of such
instrument, item of Chattel Paper, agreement, contract, or Document, which
original has
24
been endorsed and delivered to Lender or, if arising in the future will
immediately be endorsed and delivered to Lender; (ii) all Accounts represent
undisputed, bona fide transactions arising in the ordinary course of business in
accordance with the terms and provisions contained in any Documents related
thereto; (iii) there are no facts, events or occurrences which in any way impair
the validity or enforcement of any Accounts or reduce the amount payable
thereunder from the amount of the invoice shown on any Accounts Report; (iv) all
Account Debtors are solvent and had the capacity to contract at the time any
contract or other Document giving rise to or evidencing the Accounts was
executed; (v) the goods and/or services the sale, licensing or leasing of which
gave rise to the Accounts are not, and were not at the time of the sale,
licensing or leasing thereof, subject to any lien, claim, security interest or
other encumbrance, except those of Lender, and those removed or terminated prior
to the Effective Date, and the Permitted Liens; and (vi) the Accounts have not
been pledged or sold to any other Person or otherwise encumbered and Borrowers
are the owners of the Accounts free of all liens and encumbrances except those
of Lender and the Permitted Liens.
5.21 ERISA. As of the Effective Date, all Plans satisfy all minimum
funding standards of Section 302 of ERISA, and no Reportable Event, Termination
Event or Unfunded Benefit Liabilities currently exist or with the closing of the
Transaction will exist concerning any such Plan of Borrowers or any member of
any Borrowers' ERISA Controlled Group.
5.22 Survival and Reaffirmation of Representations and Warranties. All the
covenants, representations and warranties set forth in Article 5 of this
Agreement shall survive and continue to be true, complete and correct until all
Obligations are indefeasibly paid and/or performed in full. Each request for an
Advance or L/C made by Borrowers shall constitute: (i) an automatic
representation and warranty by Borrowers to Lender that as of the date of such
request, there does not exist any Default Event; and (ii) a reaffirmation as of
the date of said request of all representations and warranties of Borrowers set
forth in this Agreement.
ARTICLE 6
AFFIRMATIVE COVENANTS
6.1 Duration of Affirmative Covenants. Borrowers covenant and agree that
on and after the Effective Date, and until Borrowers indefeasibly pay and/or
perform in full all the Obligations, Borrowers shall comply with the affirmative
covenants set forth in Sections 6.2 through 6.12 below.
6.2 Financial Covenant. At all times during the term of this Agreement,
Parent shall maintain in the Pledged Account, a cash deposit in the form of
readily available funds or Cash Equivalents, in a minimum, principal amount (the
"Minimum Deposit Requirement") equal to the greater of: (i) one hundred fifty
percent (150%) of the amount outstanding under the Revolving Loan; or (ii) the
sum of six million dollars ($6,000,000.00) plus the amount outstanding under the
Revolving Loan.
6.3 Information Covenants.
(a) General Obligation to Provide Notice. Borrowers will furnish to
Lender written notice of each of the events and within the time periods,
referenced in Sections 6.3(b) through 6.3(g) below.
(b) Notice of Default, Liens or Litigation. Promptly, and in any
event within ten (10) Business Days after Borrowers obtain knowledge of each of
the following, Borrowers shall provide written notice of the same to Lender: (i)
the occurrence of any Default Event; (ii) any Lien on, or any claim or charge
asserted against any Collateral; (iii) any litigation or governmental proceeding
pending or threatened against Borrowers which could, if adversely determined,
have a Material Adverse Effect or which may affect or impair any Security
Interests; or (iv) any other event, act or condition which could have a Material
Adverse Effect on Collateral or Borrowers, or which may affect or impair any
Security Interests.
(c) ERISA Notices. Borrowers shall provide written notice of each of
the following ERISA matters to Lender within the time periods provided:
(i) as soon as possible, and in any event within ten (10)
Business Days after Borrowers or any member of its ERISA Controlled Group knows,
or have reason to know, that: (A) any Termination Event with respect to a Plan
has occurred or will occur, (B) any condition exists with respect to a Plan
which presents a material risk of termination of the Plan or imposition of an
excise tax or other liability on Borrowers or any member of their ERISA
Controlled Group, (C) Borrowers or any member of their ERISA Controlled Group
applies for a waiver of the minimum
25
funding standard under Section 412 of the Code or Section 302 of ERISA, (D)
Borrowers or any member of their ERISA Controlled Group engage in a "prohibited
transaction," as defined in Section 4975 of the Code or as described in Section
406 of ERISA, that is not exempt under Section 4975 of the Code and Section 408
of ERISA, (E) the aggregate present value of the Unfunded Benefit Liabilities
under all Borrowers' Plans exceeds fifty thousand dollars ($50,000.00), (F) any
condition exists with respect to a Multiemployer Plan which presents a material
risk of a partial or complete withdrawal (as described in Section 4203 or 4205
of ERISA) by Borrowers or any member of their ERISA Controlled Group from a
Multiemployer Plan, (G) Borrowers or any member of their ERISA Controlled Group
is in "default" (as defined in Section 4219(c) (5) of ERISA) with respect to
payments to a Multiemployer Plan, (H) a Multiemployer Plan is in
"reorganization" (as defined in Section 418 of the Code or Section 4241 of
ERISA) or is "insolvent" (as defined in Section 4245 of ERISA), (I) the
potential withdrawal liability (as determined in accordance with Title IV of
ERISA) of Borrowers and the members of their ERISA Controlled Group with respect
to all Multiemployer Plans is in excess of fifty thousand dollars ($50,000), (J)
an action is brought against Borrowers or any member of their ERISA Controlled
Group under Section 502 of ERISA with respect to a failure to comply with
Section 515 of ERISA; and
(ii) as soon as possible, and in any event within ten (10)
Business Days after the receipt by Borrowers or any member of their ERISA
Controlled Group of a demand letter from the PBGC notifying Borrowers or such
member of their ERISA Controlled Group of the PBGC's final decision finding
liability and the date by which such liability must be paid, Borrowers shall
provide Lender with a copy of such letter, together with a certificate of the
chief financial officer of Borrowers setting forth the action which Borrowers or
such member of their ERISA Controlled Group proposes to take with respect to
such matter. In the case of a notice required under Sections 6.3(c)(i)(A)
through 6.3(c)(i)(J) of this Agreement, Borrowers shall deliver to Lender, a
certificate of Borrowers' duly authorized executive officer, setting forth the
details of each such event and the action which Borrowers or the applicable
member of their ERISA Controlled Group proposes to take with respect to such
matter, together with a copy of any notice or filing from the PBGC or which may
be required by the PBGC or other agency of the United States government with
respect to such events.
(d) Environmental Notices. Promptly, and in any event within ten
(10) Business Days after the existence of any of the following, Borrowers shall
provide Lender with a certificate of Parent's duly authorized executive officer
specifying in detail the nature of such condition and Borrowers' or their
Environmental Affiliate's proposed response to any of the following: (i) the
receipt by Borrowers or any of their Environmental Affiliates of any
communication (written or oral), whether from a Governmental Authority, citizens
group, employee or otherwise, that alleges that Borrowers or such Environmental
Affiliate is not in compliance with any Environmental Laws; (ii) Borrowers or
any of their Environmental Affiliates obtains actual knowledge that there exists
any Environmental Claim pending or threatened against Borrowers or such
Environmental Affiliate; (iii) any release, emission, discharge or disposal of
any Material of Environmental Concern that could form the basis of any
Environmental Claim against Borrowers or any of their Environmental Affiliates.
Borrowers shall comply fully with and assist any associated environmental
investigation and/or clean-up, and promptly complete any remedial actions.
(e) Financial Statements. Until all Obligations are indefeasibly
paid or performed, Borrowers shall provide Lender consolidated interim,
internally prepared income statements, cash flow statements, balance sheets,
profit and loss statements, shareholder equity statements and statements of
changes in financial position, each with supporting footnotes (if any), on a
calendar quarterly basis, as soon as practicable but in no event more than
forty-five (45) days following the final day of each such calendar month
occurring during the term of this Agreement. Each such Financial Statement shall
be in reasonable detail, shall identify in detail Borrowers' operations, shall
be certified by the Authorized Representative, and shall be accurate and fairly
present Borrowers' financial condition. In addition, as soon as practicable but
in no event more than ninety (90) days from the final day of each Fiscal Year
occurring while the Loan and/or any Obligations are outstanding, Borrowers shall
provide Lender with complete, audited annual Financial Statements, balance
sheets, cash flow statements, shareholder equity statements profit and loss
statements, and income sheets, inclusive of all footnotes and comments
concerning all aspects of Borrowers' businesses, which Financial Statements
shall be certified to have been prepared in accordance with GAAP by Borrowers'
Accountant, and said certified Financial Statements shall contain the
unqualified opinion of such independent certified public accountants with
respect to such Financial Statements.
(f) Fiscal Year. At all times during the terms of this Agreement,
Borrowers' Fiscal Year will end on December 31, and no Borrower will change such
Fiscal Year, without first providing at least thirty (30) days prior, written
notice to Lender.
(g) Other Information and Representation Updates. From time to time,
Borrowers shall provide
26
Lender with such other information or documents (financial or otherwise) as
Lender reasonably may request, within ten (10) Business Days of Lender's request
for the same. Within ten (10) Business Days of discovering the same, Borrowers
shall update any representations or warranties of Borrowers set forth in this
Agreement, if facts or events arise which cause such representations or
warranties to become wholly or partially untrue, misleading or materially
different than as set forth in this Agreement.
6.4 Books, Records and Inspections. Borrowers shall keep complete, proper
accurate books of record and account concerning their businesses and the
Collateral, in which Borrowers shall make full, true and correct entries, in
conformity with GAAP and all requirements of law, of all dealings and
transactions in relation to their businesses, the Collateral and their
activities. Borrowers shall permit officers and designated representatives of
Lender, at Lender's expense, (including, without limitation, internal or
external auditors of Lender) to visit and inspect any of the properties of
Borrowers and to examine the books of record and account of Borrowers, to review
and/or audit the books and records of Borrowers, to review the work papers of
Borrowers' independent certified public accountants, make copies or abstracts of
any of the preceding, and to discuss the affairs, finances and accounts of
Borrowers with, and be advised as to the same by, the officers and independent
accountants of Borrowers, all upon reasonable notice and at such reasonable
times as Lender may desire. By this provision, Borrowers irrevocably authorize
all their officers to discuss said finances and affairs with Lender.
6.5 Insurance. At all times during the term of this Agreement, Borrowers
will maintain insurance on the Collateral against such risks ordinarily insured
against by reasonably prudent individuals in similar business situations.
Without limiting the generality of the preceding, Borrowers will maintain in
full force and effect, at a minimum, each of the following types of insurance:
(i) property insurance covering the Collateral from damage or loss
by fire, theft, explosion, sprinklers, lightening, wind storm, vandalism,
malicious mischief and all other hazards or risks ordinarily insured against
under "all risk" coverage policies in the State of Illinois in an amount equal
to one hundred percent of such Collateral's replacement value;
(ii) comprehensive general public liability insurance (including
coverage for elevators and escalators, if any, contractual liability, explosion,
underground property and broad form property damage endorsement against claims
for bodily injury, death, or property damage occurring or caused by events
occurring on, in or about any Real Property;
(iii) product liability insurance in such amounts as are reasonable
for the risks presented by the Inventory Borrowers sell;
(iv) worker's compensation and employer's liability insurance
covering Borrowers' employees in such amounts as are required by law from time
to time;
(v) fire and extended coverage insurance (contents broad form) and
sprinkler leakage insurance on Borrowers' tangible personal property located on
any real property including but not limited to any improvements thereto, in an
amount sufficient to insure fully such tangible personal property; and
(vi) business interruption insurance in such amounts as Lender
reasonably establishes from time to time, but in no event less than the
estimated regularly scheduled principal and interest payments due under the
loans in a complete twelve (12) month period.
All such insurance will be in such form, for such period and
written by such companies as Lender reasonably may approve in writing from time
to time. Lender's acceptance of a policy in lesser amounts or risks does not
constitute and will not constitute a waiver of Borrowers' foregoing obligations.
Borrowers shall deliver to Lender an original certificate of insurance
evidencing all coverage required of Borrowers under this Agreement, and if
Lender so requests, the original (or certified) copy of each such policy of
insurance and corresponding evidence of Borrowers' payment of all associated
premiums. Borrowers shall deliver renewals of all such insurance policies to
Lender, at least ten (10) business days prior to their then scheduled expiration
dates. Each such policy of insurance will contain an endorsement, in form and
substance satisfactory to Lender, which shows all losses payable to Lender, or
in Lender's reasonable discretion, Borrowers will be permitted to execute a
separate assignment thereof also in form and substance satisfactory to Lender.
Lender will be named as "Lender Loss Payee, Mortgagee, Additional Insured and
Secured Party" in all policies of property insurance any Borrower obtains, and
Lender will be named as an "Additional Insured" in all policies of liability
27
insurance any Borrower obtains. Each endorsement of an insurance policy will
provide that the applicable insurance companies will provide Lender at least
thirty (30) days advance, written notice before materially modifying and/or
canceling any such policy, and will further provide that no default by any
Borrower or any other person will affect Lender's right to recover under any
such policy in case of loss or damage. Borrowers jointly, severally and
irrevocably direct all insurers under any such policies to pay all proceeds
thereunder directly to Lender, and specifically authorize said insurance
companies and Lender to rely upon said direction without obtaining any further
authority from Borrowers. Commencing upon the occurrence and continuing for the
duration of any Default Event, Borrowers irrevocably appoint Lender and its
respective officers, employees or agents as Borrowers' true and lawful attorney
and agent in fact to make, settle and adjust any claims under any insurance
policies Borrowers obtain from time to time, endorsing Borrowers' names in
writing or by stamp on any check, draft, instrument or other item of payment for
the proceeds of such insurance policies and for making all determinations and
decisions concerning the same. If Borrowers fail to obtain or maintain any
insurance coverage as required under this Section, Lender will have the right
(but not the obligation) to obtain and maintain any such coverage, with such
insurance companies as Lender deems appropriate in any such action for failure
to act by Lender will not waive or release any of the Obligations and may be
effected without any notice whatsoever to Borrowers. Borrowers specifically
acknowledge the premium Lender pays in accordance with its preceding authority,
if any, may be greater than those which Borrower could have obtained, and
Borrowers specifically waive any claims, rights or remedies with respect
thereto. Any such expenses for costs which Lender incurs under this Agreement,
(including but not limited to its reasonable attorney's fees) will constitute
part of the "Obligations" as defined in this Agreement and will be payable by
Borrowers to Lender on demand.
6.6 Taxes. Borrowers shall pay or cause to be paid when due, all taxes,
Charges and assessments and all other lawful claims they are required to pay to
any Governmental Authority, except as Borrowers may contest in good faith and by
appropriate proceedings diligently conducted, so long as Borrowers establish
adequate reserves with respect to such contest, in accordance with GAAP.
6.7 Franchises. Borrowers shall do or cause to be done all things
necessary to preserve and keep in full force and effect their corporate or
limited liability company existence and all their Patents, Trademarks, service
marks, trade names, Copyrights, franchises, licenses, other Intellectual
Property, Permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals necessary or
desirable in the conduct of their businesses.
6.8 Compliance with Law. Borrowers shall comply with all applicable laws,
rules, statutes, regulations, decrees and orders of, and all applicable
restrictions imposed by, all Governmental Authorities, in respect of the
Collateral, the conduct of their businesses and the ownership of their
properties, including, without limitation, all Environmental Laws, ERISA laws,
COBRA and the Fair Labor Standards Act, as amended, provided that Borrowers'
failure so to comply will not create a Default Event unless it could have a
Material Adverse Effect on Borrowers or the Collateral, or could result in an
imposition of a Lien on the Collateral.
6.9 Performance of Obligations. Borrowers shall perform all of their
obligations under the terms of each mortgage, indenture, security agreement,
debt instrument, lease, undertaking and contract by which they or any of the
Collateral or their properties are bound or to which Borrowers are parties,
including but not limited to each of the Loan Documents.
6.10 Conduct of Business. Borrowers shall conduct their businesses solely
in the ordinary course, including but not limited to collecting Accounts
receivable and/or developing, selling or licensing (as applicable) Inventory
(such as computer software licenses) and/or providing services.
6.11 Use of Loan Proceeds and Account Maintenance. At all times while the
Loan are outstanding and until the entire principal balance of all Loan and the
other Obligations are indefeasibly paid or performed in full, Borrowers shall
maintain all their disbursement, depository and short-term investment accounts
with Lender except for the Pledged Account, which will be maintained with Banc
One, and except for the following accounts, none of which will be the primary
deposit account of Parent: (i) Bank of America Tulsa, account #▇▇▇▇-▇▇▇▇-▇▇▇▇;
(ii) Bank One Dallas, account #▇▇▇▇▇▇▇; (iii) Firstar Milwaukee, account
#182844190; and (iv) Chase Manhattan Bank, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, account # 134-661761. Borrowers understand that Lender will charge
monthly and other service charges for all accounts Borrowers establish with
Lender, as determined by Lender in accordance with its customary practices in
effect from time to time. Lender will deduct such charges directly from any of
Borrowers' accounts. Borrowers shall use any Advances or other proceeds they
receive under the Loan solely for the lawful pursuit of their businesses, as
duly
28
authorized by appropriate resolutions of their boards of directors or other
governing body, and not for any personal use nor for any unlawful purposes such
as but not limited to any improper inducement, whether financial, material or
otherwise, to any supplier, customer or individual working for any Governmental
Authority.
6.12 Collateral Maintenance. Borrowers shall keep the Collateral in good
order and repair, shall not waste or destroy the Collateral and shall not
utilize the Collateral in derogation of any laws, rules, regulations, orders,
decrees, judgments or ordinances of any Governmental Authority. Borrowers shall
pay when due all taxes on the Collateral or incident to its use.
ARTICLE 7
NEGATIVE COVENANTS
7.1 Duration of Negative Covenants. Borrowers jointly and severally
covenant and agree that on and after the Effective Date and until Borrowers
indefeasibly pay and/or perform in full all the Obligations owed to Lender,
Borrowers shall comply with the negative covenants set forth in Sections 7.2
through 7.8 below.
7.2 Indebtedness and Contingent Obligations. Without the prior written
consent of Lender, Borrowers shall not create, incur, assume, suffer to exist or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness or Contingent Obligations, other than: (i) Indebtedness under this
Agreement and under the other Loan Documents; (ii) Indebtedness approved by
Lender and outstanding on the Effective Date as specifically disclosed on
attached and incorporated Schedule 7.2; (iii) Indebtedness which is unsecured
and which Borrowers owe to Persons who execute and deliver to Lender (in form
and substance acceptable to Lender and its counsel, in their sole discretion)
subordination agreements subordinating their claims against Borrowers to the
payment of the Obligations; (iv) other Indebtedness under Swap Agreements
entered into with either Lender or an affiliate of Lender; (v) Capitalized
Leases permitted in Section 7.3; (vi) Indebtedness secured by purchase money
security interests permitted in Section 7.3; (vii) Indebtedness under the
Related Agreements; and (viii) obligations owing to Lender associated with
purchase of the property located at ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. Borrowers
have no outstanding Rate Hedging Obligation as of the Effective Date and will
not incur one thereafter, unless Borrowers do so with Lender or one of Lender's
affiliates.
7.3 Liens. Without the prior, written consent of Lender, Borrowers shall
not create, incur, assume or suffer to exist, directly or indirectly, any Lien
on any Collateral (other than the Security Interests of Lender under this
Agreement) or on any of its other property now owned or subsequently acquired,
other than the following, which will constitute "Permitted Liens" under this
Agreement: (i) the Permitted Liens existing on the Effective Date as
specifically disclosed on Schedule 4.2; (ii) Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are being maintained in
accordance with GAAP; (iii) Liens (other than any Lien imposed by ERISA or
pursuant to any Environmental Law) incurred or deposits made in the ordinary
course of business in connection with workers compensation, unemployment
insurance and other types of social security; (iv) those other Liens shown on
the Financial Statements of Borrowers which Lender has approved, in writing; (v)
Liens for Capitalized Leases, other sale - lease backs or other Equipment Leases
which Borrowers incur in the ordinary course of business and which do not
exceed, $1,000,000.00 per year, in the aggregate; and (vi) Liens in the form of
"purchase money security interests" (as defined in the UCC) which, individually
or in the aggregate do not exceed $500,000.00 at any time.
7.4 Sale of Assets. Borrowers shall not, directly or indirectly assign,
pledge, hypothecate, encumber, grant a security interest in, convey, lease,
sell, transfer or otherwise dispose of (or agree to do so at any future time),
by sale, merger, consolidation, liquidation, dissolution or otherwise, all or
any part of the Collateral or any of their other properties or assets, except:
(i) sales of Inventory and/or licenses in the ordinary course of business; and
(ii) sales of Equipment which is uneconomic, obsolete or no longer useful in
their businesses.
7.5 Plans. Borrowers shall not, nor shall they permit any member of their
ERISA Controlled Groups to, take any action which would increase the aggregate
present value of the Unfunded Benefit Liabilities under all Plans to an amount
in excess of fifty thousand and 00/100 dollars ($50,000).
7.6 No Impairment. Borrowers shall not take or permit to be taken any
action which would or reasonably could be expected to impair Lender's rights,
titles or Security Interests in any Collateral, nor enter into any transaction
which could adversely affect Borrowers' ability to pay or perform the
Obligations. Borrowers further shall not guaranty or otherwise in any way become
liable concerning the obligations of any Person, except: (i) their Affiliates'
obligations to
29
Lender (if any); and (ii) by endorsement of instruments or items of payment for
deposit to the general accounts of Borrowers maintained with Lender, or for
delivery to Lender on account of the Obligations.
7.7 Materials of Environmental Concern. Borrowers shall not use in their
businesses or operations, any products or by-products which constitute, nor
store or hold at any site or location at which they conduct business or
otherwise operate, any Hazardous Substances or Materials of Environmental
Concern unless Borrowers comply with all requirements of applicable
Environmental Laws which require the special handling, collection, storage,
treatment, disposal or transportation of such items. Borrowers shall not release
and shall not permit the release of any Materials of Environmental Concern on,
from or near any location at which Borrowers conducts their business or
operations, nor in any way violate any Environmental Laws.
7.8 Margin Stock. Borrowers shall not use all or any portion of the
proceeds from the Loan to purchase or carry any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock.
ARTICLE 8
DEFAULT EVENTS
8.1 Default Events. Each of the events, acts, occurrences or conditions
identified in Sections 8.1(a) through 8.1(l) below shall constitute "Default
Events" under this Agreement, regardless of whether such events, acts,
occurrences or conditions are voluntary or involuntary, result from the
operation of law or equity, or pursuant to or as a result of compliance by any
Person with any judgment, decree, order, rule or regulation of any Governmental
Authority.
(a) Failure to Make Payments. A Default Event shall occur if
Borrowers fail to pay when due any principal or interest under the Loan or Note,
or any other amounts Borrowers may owe under this Agreement or any other Loan
Document when due, either by their terms, by acceleration or otherwise, and such
default continues uncured for ten (10) Business Days.
(b) Breach of Representation or Warranty. A Default Event shall
occur if any Financial Statement, representation or warranty of Borrowers in
this Agreement or in any other Loan Document or in any certificate or statement
delivered pursuant to this Agreement or any other Loan Document or otherwise
made in writing to Lender proves to be false or misleading in any material
respect either on the date as of which made or deemed made, or as to those
representations and warranties of Borrowers which are ongoing or required to be
updated, with the passage of time or the giving of notice.
(c) Collateral, Security and Related Problems. A Default Event shall
occur if there is any loss, theft or substantial damage to or destruction, sale
or encumbrance of any Collateral (except as permitted under the terms of this
Agreement) or if any seizure, levy or attachment on or of the Collateral occurs
or vests or any Collateral becomes subject to a writ or distress warrant. A
Default Event shall occur under this Agreement if at any time Lender loses any
of its Security Interests under this Agreement, or if said Security Interests
are in any way diminished, altered or modified in a manner which is or could be
to the detriment of Lender. A Default Event shall occur if any material,
uninsured damage to or loss, theft or destruction of any Collateral transpires.
A Default Event shall occur if a notice of lien, levy or assessment is filed of
record with respect to all or any Collateral by the United States, any
department, agency or instrumentality thereof, or by any state, county,
municipal or other Governmental Authority, including without limitation, the
PBGC, or any taxes or debts owed to any of the foregoing become a lien or
encumbrance upon any Collateral, and such lien or encumbrance is not released
within thirty (30) days after its creation.
(d) Breach of Covenants. A Default Event shall occur if: (i)
Borrowers fail to perform or observe any agreement, covenant or obligation
arising under Articles 6 or 7 of this Agreement and such failure is not cured
within seven (7) Business Days; or (ii) Borrowers fail to perform or observe any
agreement, covenant or obligation arising under this Agreement or any other Loan
Document not specifically described in subsections (a), (b), (c) and (d)(i)
above, or otherwise fails to perform any Obligation when due, and such failure
continues uncured to Lender's satisfaction for thirty (30) days.
(e) Default Under Other Agreements. A Default Event shall occur if
Borrowers default in the payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) of any amount owing in
respect of any Indebtedness, or Borrowers or any guarantor of Borrowers'
Obligations defaults in the performance or observance of any obligation or
condition with respect to any such Indebtedness. A Default Event also shall
exist if any other event occurs or condition exists, if the effect of such event
or condition is to accelerate the maturity
30
of Indebtedness involving $500,000.00 or more, individually or in the aggregate,
which Borrowers or any guarantor of Borrowers' Obligations owe to any Person or
to permit (or, with the giving of notice or lapse of time or both, would permit)
the holder or holders or any trustee or agent for such holders, to accelerate
the maturity of any such Indebtedness, or if any such Indebtedness otherwise
becomes or is declared to be due and payable prior to its stated maturity other
than as a result of a regularly scheduled payment.
(f) Bankruptcy, etc. A Default Event shall occur if: (i) Borrowers
or any of them commence a voluntary case concerning themselves under the
Bankruptcy Code or any other law; (ii) an involuntary bankruptcy case is
commenced against Borrowers or any of them and the petition is not controverted
within ten (10) days, or is not dismissed within sixty (60) days after
commencement of such case; (iii) a "custodian" (as defined in the Bankruptcy
Code) or similar Person is appointed for, or takes charge of, all or
substantially all of any Borrower's property, or Borrowers or any of them
commence any other proceedings under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any Governmental Authority, whether now or subsequently in effect, or
there is commenced against Borrowers or any of them any such proceeding which
remains undismissed for a period of sixty (60) days following commencement; (iv)
any order of relief or other order approving any such case or proceeding is
entered; (v) Borrowers or any of them become insolvent or are adjudicated
bankrupt; (vi) Borrowers or any of them suffer any appointment of any custodian
or the like for them or any substantial part of their property to continue
undischarged for a period of thirty (30) days; (vii) Borrowers or any of them
make a general assignment for the benefit of creditors; (viii) Borrowers or any
of them fail to pay, or state that they are unable to pay, or become unable to
pay, their debts generally as they become due; (ix) Borrowers or any of them
call a meeting of creditors with a view to arranging a composition or adjustment
of debts; (x) Borrowers or any of them by any act or failure to act, consent to,
approve of or acquiesce in any of the foregoing; or (xi) any action is taken by
Borrowers or any of them for the purpose of effecting any of the foregoing.
(g) Loan Documents. A Default Event shall occur if any provision of
this Agreement or any other Loan Document ceases to be in full force and effect,
or ceases to give Lender the Liens, Security Interests, rights, powers and
privileges purported to be created in such instrument.
(h) Judgments. A Default Event shall occur if one or more
non-appealable judgments or decrees which individually or in the aggregate total
$1,000,000.00 or more, are entered by a court or courts of competent
jurisdiction against Borrowers (other than any judgment as to which, and only to
the extent, a reputable insurance company has acknowledged coverage of the full
amount of such claim, in writing), if the same is/are not paid in full in
accordance with the terms of such judgment(s).
(i) Material Adverse Effect. A Default Event shall occur if a
Material Adverse Effect occurs in or to the Collateral or the business,
operations, or conditions (financial or otherwise) of Borrowers, or the ability
of Borrowers to perform or pay the Obligations or in the ability of Lender to
enforce the Obligations or the Security Interests, or otherwise foreclose
against, garnish or collect any Collateral.
(j) ERISA. A Default Event shall occur if: (i) any Termination Event
occurs; (ii) any Plan incurs an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iii)
Borrowers or a member of their ERISA Controlled Group engage in a transaction
which is prohibited under Section 4975 of the Code or Section 406 of ERISA which
could result in the imposition of liability in excess of $50,000 on Borrowers or
any member of their ERISA Controlled Group; (iv) Borrowers or any member of
their ERISA Controlled Group fail to pay when due an amount which any of them
has become liable to pay to the PBGC, any Plan or a trust established under
Title IV of ERISA; (v) a condition exists by reason of which the PBGC would be
entitled to obtain a decree adjudicating that a Plan of Borrowers or any member
of their ERISA Controlled Group must be terminated or have a trustee appointed
to administer any Plan; (vi) Borrowers or a member of their ERISA Controlled
Group suffers a partial or complete withdrawal from a Multiemployer Plan, or is
in "default" (as defined in Section 4219(c) (5) of ERISA) with respect to
payments to a Multiemployer Plan; (vii) a proceeding is instituted against
Borrowers or any member of their ERISA Controlled Group to enforce Section 5l5
of ERISA; (viii) any other event or condition occurs or exists with respect to
any Plan which could subject Borrowers or any member of their ERISA Controlled
Group to any tax, penalty or other liability in excess of $50,000; or (ix)
Borrowers fail to comply with all notice and continuation requirements under
COBRA concerning any of Borrowers' employees.
(k) Environmental Matters. A Default Event shall occur if: (i) any
Environmental Claim is asserted against Borrowers or any of their Environmental
Affiliates which could have a Material Adverse Effect; (ii) any release,
emission, discharge or disposal of any Material of Environmental Concern occurs,
and such event could form the basis of
31
an Environmental Claim against Borrowers or any of their Environmental
Affiliates which could have a Material Adverse Effect; or (iii) Borrowers or
their Environmental Affiliate fail to obtain any Environmental Approval
necessary for the management, use, control, ownership, or operation of their
business, property or assets or any such Environmental Approval is revoked,
terminated or otherwise ceases to be in full force and effect, in each case, if
the existence of such condition could have a Material Adverse Effect.
(l) Related Matters. A Default Event shall occur if there is any
default under or breach of any Related Agreement, or any Borrower commits any
default under any agreement between any Borrower and Lender not specifically
referenced in this Agreement, as the documentation of any of the preceding
either currently exists or is amended or restated from time to time.
8.2 Rights and Remedies.
(a) General. In addition to all other remedies available to Lender
contractually, at law, in equity or otherwise, upon the occurrence of any
Default Event, Lender also will have the remedies identified below in this
Section 8.2.
(b) Acceleration of Obligations. Upon and after the occurrence of a
Default Event, Lender, at its option and without demand, notice, or legal
process of any kind, may declare all the Obligations under the Loan immediately
due and payable, whereupon said Obligations shall become immediately due and
payable, irrespective of which Loan or Loan Document the applicable Default
Event pertained to or affects, (with all Default Rate interest, if applicable),
and without presentation, demand, or protest or other notice or requirements of
any kind (including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which Borrowers expressly waive. Borrowers jointly and
severally shall pay all costs of Lender associated with Lender's exercise of any
rights under this Section 8.2, on demand.
(c) Bankruptcy. Upon the occurrence of any Default Event described
in Section 8.1(f) above: (i) all Loan Commitments under this Agreement shall
terminate automatically and immediately; and (ii) the unpaid principal amount of
and any and all accrued and unpaid interest on the Loan and any and all other
Obligations then owing automatically shall become due and payable immediately,
(including any and all applicable Default Rate interest), without presentation,
demand or protest or other notice or requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and notice of acceleration), all of which
Borrowers expressly waive.
(d) UCC and Cumulative Remedies. Borrowers specifically acknowledge
and agree that upon the occurrence of any Default Event, Lender shall have all
rights available to it under this Agreement, under any other Loan Document,
under the UCC (as a secured party or otherwise), at law, in equity or otherwise,
and that all remedies set forth in this Agreement are cumulative and not
exclusive. Lender may pursue any one or more of said remedies or rely upon any
other remedies available to Lender under this Agreement, any other Loan
Document, at law, in equity or otherwise, individually, concurrently or as
Lender deems appropriate.
(e) Peaceful Entry, etc. Lender shall have the right to: (i) enter
peacefully upon Borrowers' premises or any other place or places where the
Collateral is located and kept, without any obligations to pay rent to Borrowers
or any other Person, through self-help and without judicial process or first
obtaining a final judgment or giving Borrowers notice and opportunity for a
hearing on the validity of Lender's claim, and remove the Collateral from such
premises and places to the premises of Lender or any agent of Lender, for such
time as Lender may require to collect or liquidate the Collateral; and/or (ii)
require Borrowers to assemble and deliver the Collateral to Lender at a place to
be designated by Lender.
(f) Accounts. Lender shall have the right to: (i) open Borrowers'
mail and collect any and amounts due from Account Debtors; (ii) notify Account
Debtors that the Accounts have been assigned to Lender and that Lender has a
security interest therein; and (iii) direct such Account Debtors to make all
payments due from them upon the Accounts, including but not limited to the
Special Collateral directly to Lender or to a lock box designated by Lender.
Lender shall promptly furnish Borrowers with a copy of any such notice and
Borrowers agree that any such notice in Lender's reasonable discretion, may be
sent on Lender's stationery, in which event, Borrowers upon demand, shall
co-sign such notice with Lender.
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(g) Dispose of Collateral. Lender shall have the right to sell,
lease or to otherwise dispose of all or any Collateral in its then condition, or
after any further manufacturing or processing thereof, at public or private sale
or sales, with such notice as provided in Section 8.4 below, in lots or in bulk,
for cash or on credit, all as Lender, in its sole discretion, deems advisable.
At any such sale or sales, the Collateral need not be in view of those present
and attending the sale, nor at the same location at which the sale is being
conducted. Lender shall have the right to conduct such sales on Borrowers'
premises or elsewhere and shall have the right to use Borrowers' premises
without charge for such sales for such time or times as Lender sees fit.
Borrowers grant an irrevocable license or other right to use, without charge,
Borrowers' labels, Patents, Copyrights, rights of use of any name, trade
secrets, trade names, Trademarks and advertising matter, or any property of a
similar nature in advertising for sale and selling any Collateral and Borrowers'
rights under all licenses and all franchise agreements shall inure to Lender's
benefit, but Lender shall have no obligations thereunder. Lender may purchase
all or any part of the Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may setoff the
amount of such price against the Obligations. The proceeds realized from the
sale of any Collateral shall be applied first to the reasonable costs, expenses
and attorneys' and paralegal fees and expenses Lender incurred for enforcement
of its rights under any Loan Document, or for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
second to Loan Rate and Default Rate interest due upon any Obligations; and
third to the principal of the Obligations. Lender shall account to Borrowers for
any surplus. If any deficiency shall arise, Borrowers shall remain liable to
Lender therefor, together with interest at the Default Rate until paid.
Borrowers irrevocably waive any requirement that Lender obtain or post any bond
in connection with pursuing any of its rights or remedies against any
Collateral, under this Agreement of any other Loan Document, or arising at law,
in equity or otherwise.
(h) Terminate All Loan Commitments and Exercise Common Law Rights.
Upon the occurrence of any Default Event, Lender may, by written notice to
Borrowers declare that all Loan Commitments under this Agreement are terminated,
whereupon said Commitments and the obligation of Lender to continue to make
Advances or extend any credit to Borrowers shall terminate immediately.
Moreover, upon the occurrence of any Default Event, Lender shall be entitled to
exercise at any time or from time to time, in whole or in part, its common law
set-off rights respecting any amounts on deposit in any of Borrowers' Deposit
Accounts maintained with Lender, and Lender agrees to look first to the Pledged
Account.
8.3 Joint and Several Nature of Obligations. Borrowers specifically agree
that all the Obligations constitute the joint and several Obligations of each of
them. Each Borrower individually will have full and complete responsibility for
all Obligations, irrespective of whether Lender elects to make all Borrowers
parties to any suit or claim in respect of any specific Default Event or
Obligation. Therefore, if any Obligation is not performed or paid when and as
the same is due in accordance with the terms of this Agreement, or any other
Loan Document, the Lender at its sole election and option, may bring one or more
successive or concurrent suits against one, a few or all Borrowers, whether or
not the Borrower who is subject to such suit is the Borrower which incurred the
applicable Obligation or otherwise committed or is affected by the applicable
Default Event. Each Borrower waives any right to assert as a defense in any such
action, any counterclaim, set-off, crossclaim (legal or equitable) which any of
them now or subsequently may have, whether against any other Borrower, any
guarantor of any Obligations, any of their respective Affiliates or any other
Person.
8.4 Notice. Borrowers agree that any notice Lender is required to give of
a sale, lease, other disposition of any Collateral or any other intended action
by Lender, which is personally delivered to Parent or which is deposited in the
United States mail, postage prepaid and duly addressed as provided in Section
9.3 below, at least ten (10) Business Days prior to any such public sale, lease
or other disposition or other action being taken, or the time after which any
private sale of the Collateral is to be held, shall constitute commercially
reasonable and fair notice thereof to all Borrowers.
8.5 Assignment of Intellectual Property. Immediately upon the occurrence
of a Default Event, Borrowers grant, convey and assign to Lender, exclusively
for and throughout the world, in and for all languages (including but not
limited to computer languages and human languages) and media (now or
subsequently existing) all of Borrowers' rights, titles and interests in their
Intellectual Property, including but not limited to all rights of Borrowers
under federal or state copyright, trademark, trade name, trade secret, patent,
intellectual property and other statutory or common laws, including the right to
▇▇▇ for and collect and retain damages for past or future infringement of the
same, to enforce the same, to register or re-register the same and to exploit
the same. The foregoing assignment of rights by Borrowers to Lender is all
inclusive and without reservation, and shall become immediately effective
without any further act of Borrowers or Lender, upon the occurrence of
33
a Default Event. Irrespective of the preceding, Borrowers covenant and agree
that they shall execute any and all documents necessary, appropriate or
desirable, as reasonably requested by Lender, to evidence or consummate the
preceding assignment. Borrowers' assignment of Intellectual Property to Lender
upon the occurrence of a Default Event constitutes a complete, absolute and
exclusive transfer of all rights (legal, equitable, use, copyright, trademark,
service ▇▇▇▇, patent and otherwise) in the Intellectual Property, whether
currently existing or arising in the future. Borrowers do not reserve or retain
any title or interest in its Intellectual Property, any component of its
Intellectual Property or any related information, including the right to
prosecute claims or rights concerning reissues and applications for reissues of
Patents, requests for reexamination of Patents and foreign counterpart patents
and application relating to the same, and/or the right to ▇▇▇ for past, present
or future infringement of any Intellectual Property as well as the rights to
collect and retain all damages associated therewith. Borrowers specifically
represent, warrant and covenant to Lender that, if Lender exercises any of its
rights in, to or against any Intellectual Property, whether arising under this
Agreement or otherwise, that said exercise by Lender will not constitute a
violation of any Agreement concerning such Intellectual Property whether in the
form of a license, royalty agreement, know-how transfer, Copyright, Patent or
Trademark Agreement or otherwise.
ARTICLE 9
MISCELLANEOUS
9.1 Payment of Expenses, Indemnity, etc.
(a) Payment of Fees. Borrowers jointly and severally shall pay,
immediately on demand all out-of-pocket costs and expenses of Lender arising in
connection with: (i) Lender's preservation or perfection of its Security
Interests or other rights under, and enforcement of or foreclosure under, the
Loan Documents and the documents and instruments referenced therein or in
connection with any restructuring or rescheduling of the Obligations (including,
without limitation, the reasonable fees and disbursements of counsel for Lender)
and/or any inspection, verification or other costs of Lender; (ii) any attempt
by Lender to inspect, verify, protect, collect, sell, liquidate or otherwise
dispose of any of the Collateral and/or inspection, verification, protection,
collection, sale, liquidation or other disposition of any of the Collateral; and
(iii) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Lender, Borrowers, or any other Person) which in any way relates
to the Collateral, this Agreement, the Loan Documents, or Borrowers' affairs,
including but not limited to any attempt by Lender to enforce any of its rights
against any Account Debtors or concerning any Accounts. In any such event, the
reasonable attorneys', paralegals' fees and expenses of Lender arising from such
activity and all other reasonably incurred expenses, costs, charges and fees of
or paid by Lender in connection with or related to the events or actions
described in this Section shall be paid by Borrowers jointly and severally to
Lender on demand, and shall constitute additional "Obligations". Without
limiting the generality of the preceding, all such expenses, costs, charges and
fees may include reasonable accountants' fees, costs and expenses, court cost
fees and expenses, photocopying and duplicating expenses, court reports fees,
costs and expenses, long distance telephone charges, air express charges,
telegram charges and secretarial overtime charges.
(b) General Indemnification Obligations. Borrowers jointly and
severally, upon demand, shall defend, indemnify and hold harmless Lender, its
successors, assigns, partners and affiliates and each of their respective
officers, shareholders, directors, agents, employees and representatives
(collectively the "Indemnitees"), from and against all liabilities and
reasonable expenses (including but not limited to attorneys' fees), judgments,
fines or penalties, which any Indemnitee may incur that results from any claim,
action, suit or proceeding (whether civil, criminal, administrative or
investigative, including any associated appeals) in or under the laws of any
Governmental Authority, whether or not such Indemnitee is a party to the same,
or is threatened to become a party to the same, which arise due to: (i) the
negotiation, execution, delivery or performance of any Loan Document; (ii) any
violation by Borrowers, or any of their respective Environmental Affiliates, of
any Environmental Law; (iii) any Environmental Claim arising out of the
management, use, control, ownership or operation of property or assets by
Borrowers or any of their respective Environmental Affiliates, including,
without limitation, all on site and off-site activities, transportation and
storage involving Materials of Environmental Concern; and (iv) the breach of any
Loan Document and/or the occurrence of any Default Event. Borrowers' obligations
under this Section 9.1 shall survive the termination of the Loan Documents and
the payment of the Obligations.
(c) Failure to Pay on Demand. If Borrowers fail to pay Lender any
amount identified in Sections 8.2 or 9.1 of this Agreement on demand, then
commencing on the date Lender made demand for such payment, until such payment
is made, such unpaid amount shall bear interest at the Default Rate.
9.2 Undiminished Application of Terms and Provisions. Borrowers
acknowledge and agree that, notwithstanding any investigation or due diligence
performed by Lender, all covenants, agreements, representations and warranties
of Borrowers set forth in this Agreement are material, and were relied upon by
Lender in accordance with their
34
express terms. Therefore, each of such covenants, agreements, representations
and warranties shall survive the execution and delivery to Lender of this
Agreement, the Note, any extension or renewal of this Agreement or the Note,
and/or any other Loan Documents. No investigation or due diligence performed by
Lender shall in any way modify or diminish any of the respective agreements,
covenants, representations or warranties of Borrowers set forth in this
Agreement, and this Agreement shall continue to secure and govern all terms of
any extensions or renewals of the Note. From time to time, Borrowers shall
execute and deliver to Lender such additional documents and shall provide such
additional information as Lender reasonably may require either to effectuate any
of the terms and provisions of this Agreement, the Note or any other Loan
Document, or to keep Lender, in Lender's sole judgment adequately informed of
Borrowers' status and affairs.
9.3 Notices. All notices concerning this Agreement shall be given in
writing, as follows: (i) by actual delivery of the notice into the hands of the
party entitled to receive it, in which case such notice shall be deemed given on
the date of delivery; (ii) by mailing such notice by registered or certified
mail, return receipt requested, in which case such notice shall be deemed given
ten (10) Business Days from the date of its mailing; (iii) by Federal Express,
UPS, DHL or any other overnight carrier, in which case such notice shall be
deemed given two (2) Business Days from the date of its transmission; or (iv) by
Facsimile or telecopy, in which case such notice shall be deemed given on the
date it is sent. All notices which concern this Agreement shall be addressed as
follows:
If to Borrowers: If to Lender:
Leapnet, Inc. American National Bank and Trust
420 West Huron Company of Chicago
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇.: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CFO ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: with a copy to:
Leapnet, Inc. ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
420 West Huron 233 ▇. ▇▇▇▇▇▇ Drive, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Legal Officer Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Borrowers, Lender, all future holders of the Note and their
respective successors and assigns, except that Borrowers may not assign, sell
nor in any manner transfer any of their rights or obligations under this
Agreement without the prior, written consent of Lender, which consent Lender may
grant or withhold in its sole discretion. Borrowers' successors and assigns
shall include, without limitation, a trustee, receiver or debtor-in-possession
of or for Borrowers. Borrowers by executing this Agreement, consent to Lender's
partition, sale, assignment, transfer or other disposition at any time or times
subsequent to the Effective Date of this Agreement or any other Loan Documents
or the Note, or of any portion thereof, including without limitation Lender's
rights, titles, interests, remedies, Security Interests, powers or duties under
any of the preceding. Borrowers authorize Lender to disclose to any assignee and
any prospective assignee of Lender, any and all financial and other information
in Lender's possession concerning Borrowers which has been delivered to Lender.
9.5 Amendments, Waivers and Notice. No Loan Document nor any terms of this
Agreement may be amended, supplemented, modified or waived except in writing
signed by Borrowers and Lender. A party's attempted waiver, consent or
authorization of any kind, whether required pursuant to the terms of this
Agreement or granted pursuant to any breach or Default Event occurring under
this Agreement or any other Loan Document shall not be effective or binding upon
such party unless the same is in a written instrument which such party has
signed. Any such waiver, consent or authorization shall be valid solely to the
extent specifically set forth in such written instrument. In the case of any
waiver, Borrowers and Lender shall be restored to their former position and
rights under the applicable Loan Document and under the Note, and any Default
Event waived shall be deemed cured and not continuing, but solely to the extent
specifically set forth in such written instrument. No such waiver shall extend
to any subsequent or other Default Event, or impair any right consequent
thereon. No failure or delay by Lender or any holder of the Note to exercise any
right, power or privilege under
35
this Agreement or under any other Loan Document, and no course of dealing
between Borrowers and Lender or the holder of the Note shall operate as a waiver
of any such right, power or privilege. No single or partial exercise of any
right, power or privilege under this Agreement or under any other Loan Document
shall preclude any other or future exercise of the same or any other right,
power or privilege. No notice to or demand on Borrowers in any case shall
entitle Borrowers to any other or future notice or demand in similar or other
circumstances or shall constitute a waiver of the rights of Lender or the holder
of the Note to any other or future action in any circumstances without notice or
demand.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument.
9.7 Descriptive Headings. All section headings, titles and subtitles are
inserted in this Agreement for convenience of reference only, and are to be
ignored in any construction of this Agreement's provisions.
9.8 Marshalling; Recapture. Lender shall not be under any obligation to
▇▇▇▇▇▇▇▇ any assets in favor of Borrowers or any other party or against or in
payment of any or all Obligations. To the extent Lender receives any payment by
or on behalf of Borrowers, which payment, in whole or in part, subsequently is
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to Borrowers or Borrowers' estate, trustee, receiver, custodian or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause of any Governmental Authority, then the amount so repaid shall
be reinstated in full and shall be included within the Obligations of Borrowers
to Lender as of the date such initial payment, reduction or satisfaction
occurred.
9.9 Prior Agreements Superseded. This Agreement supersedes any prior
understandings, written agreements or oral arrangements among the parties which
concerns the subject matter of this Agreement, including but not limited to the
any commitment letters or other correspondence. Without limiting the generality
of the preceding, this Agreement specifically supersedes and replaces the Prior
Security Agreement and the Covenant Agreement in their entirety, said agreements
being terminated as of the Effective Date and of no further force or effect. The
terms of this Agreement shall govern if there is any conflict between this
Agreement and: (i) the terms of any other Loan Document or the Note; and (ii)
any other written instrument which concerns or affects the subject matter of
this Agreement, unless such written instrument clearly states that Lender and
Borrowers intended that such written instrument supersede this Agreement.
9.10 Governing Law; Submission to Jurisdiction.
(a) Applicable Law. THE LAWS OF THE STATE OF ILLINOIS (OTHER THAN
THOSE PERTAINING TO CONFLICTS OF LAW) SHALL GOVERN ALL ASPECTS OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE LOAN, IRRESPECTIVE OF THE FACT THAT
ONE OR MORE OF THE PARTIES NOW IS OR MAY BECOME A RESIDENT OF A DIFFERENT STATE
OR COUNTRY, AND WITHOUT REFERENCE TO OR INCLUSION OR APPLICATION OF THE UNITED
NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS, SAID
CONVENTION BEING EXPRESSLY EXCLUDED IN ITS ENTIRETY. THE PARTIES SHALL SUBMIT
ALL DISPUTES WHICH ARISE UNDER THIS AGREEMENT TO STATE OR FEDERAL COURTS LOCATED
IN THE CITY OF CHICAGO, ILLINOIS FOR RESOLUTION. THE PARTIES ACKNOWLEDGE THE
AFORESAID COURTS HAVE EXCLUSIVE JURISDICTION OVER THIS AGREEMENT, AND
SPECIFICALLY WAIVE ANY CLAIMS WHICH THEY MAY HAVE THAT INVOLVE JURISDICTION OR
VENUE, INCLUDING BUT NOT LIMITED TO FORUM NON CONVENIENS. SERVICE OF PROCESS FOR
ANY CLAIM WHICH ARISES UNDER THIS AGREEMENT SHALL BE VALID IF MAILED TO THE
PARTY BEING SERVED, BY FIRST-CLASS MAIL, DHL, FEDERAL EXPRESS, UPS, OR ANOTHER
INTERNATIONAL CARRIER, TO THE ADDRESSES AND AS OTHERWISE SET FORTH IN SECTION
9.3 ABOVE. IF SERVICE OF PROCESS IS MADE AS AFORESAID, THE PARTY SERVED AGREES
THAT SUCH SERVICE SHALL CONSTITUTE VALID SERVICE, AND SPECIFICALLY WAIVES AND
AGREES NOT TO PLEAD ANY OBJECTIONS THE PARTY SERVED MAY HAVE UNDER ANY STATE OR
FEDERAL LAW OR RULE CONCERNING SERVICE OF PROCESS. SERVICE OF PROCESS IN
ACCORDANCE WITH THIS SECTION SHALL BE IN ADDITION TO AND NOT TO THE EXCLUSION OF
ANY OTHER SERVICE OF PROCESS METHOD LEGALLY AVAILABLE. BORROWERS AGREE NOT TO
INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST LENDER OR ANY OF LENDER'S
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS IN ANY
COURT OTHER THAN ONE LOCATED IN ▇▇▇▇ COUNTY, ILLINOIS. BORROWERS WAIVE PERSONAL
SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED IN ANY
36
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS AGREEMENT OR ANY LOAN DOCUMENTS. SHOULD BORROWERS FAIL TO APPEAR OR ANSWER
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SERVED WITHIN THIRTY (30) DAYS AFTER
THE MAILING THEREOF, THEY SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR
JUDGMENT MAY BE ENTERED AGAINST BORROWERS AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS.
(b) No Limit. Nothing in this Agreement shall limit the right of
Lender, to the extent permitted by applicable law, to bring actions, suit or
proceedings with respect to the Obligations under, or any other matter arising
out of or in connection with, this Agreement, the Notes or any other Loan
Document, or for recognition or enforcement of any judgment rendered in any such
action, suit or proceeding, in the courts of any jurisdiction in which any
office of Borrowers may be located, or any Collateral or other assets,
properties or revenues of Borrowers may be found, or as Lender otherwise deems
appropriate, or the right to effect service of process in any jurisdiction in
any other manner permitted by law.
9.11 Waiver of Trial by Jury and Bonds. BORROWERS IRREVOCABLY WAIVE ALL
RIGHTS OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ASSOCIATED
MATTER. EACH PARTY TO THIS AGREEMENT AGREES THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM WILL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT AS WRITTEN EVIDENCE
OF THE WAIVER OF ALL RIGHTS TO TRIAL BY JURY BY ALL PARTIES TO THIS AGREEMENT.
EACH BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF LENDER IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF,
REPLEVY, ATTACH, OR LEVY UPON COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR ORDER ENTERED IN FAVOR OF LENDER
INCLUDING SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDERS OR PERMANENT OR
PRELIMINARY INJUNCTIONS.
9.12 Severability. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is ruled by a court with valid
jurisdiction as prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement
9.13 Waiver of Borrowers. Except as otherwise provided in this Agreement,
Borrowers waive: (i) presentment, demand and protest, notice of protest, notice
of presentment, default, non-payment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, Accounts, contract rights,
documents, instruments, Chattel Paper and guaranties at any time held by Lender
on which Borrowers may in any way be liable and ratify and confirm whatever
Lender may do in this regard; (ii) all rights to notice and a hearing prior to
Lender's taking possession or control of, or to Lender's replevy, attachment or
levy upon the Collateral or any bond or security which might be required by any
court prior to allowing Lender to exercise any of Lender's remedies; and (iii)
the benefit of all valuation, appraisement, extension and exemption laws. Each
Borrower represents that it has been advised by counsel of its choice with
respect to this Agreement.
The parties have caused their duly authorized representatives to execute
and deliver this Agreement as of the Effective Date.
American National Bank and Leapnet, Inc., a
Trust Company of Chicago, a national Delaware corporation
banking association
By:______________________________ By:_____________________________
Its:______________________________ Its:_____________________________
SUBSIDIARY SIGNATURES ON FOLLOWING PAGE
37
SUBSIDIARY SIGNATURES
Leapnet I, Inc., a Delaware corporation Eagle Technology Partners, Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------- -------------------------
Its: VP & CFO Its: VP & CFO
-------- --------
The Leap Partnership, Inc., Leap Global Communications, Inc.,
an Illinois corporation a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------- -------------------------
Its: VP & CFO Its: VP & CFO
-------- --------
Planet Leap, Inc., a Delaware corporation YAR Communications, Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------- -------------------------
Its: VP & CFO Its: VP & CFO
-------- --------
Quantum Leap Communications, Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Its: VP & CFO
--------
Bar TV, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Its: VP & CFO
--------
Tadpole Productions, Inc.,
an Illinois corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Its: VP & CFO
--------
Lilypad Services, Inc., an Illinois corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Its: VP & CFO
--------
38
