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EXHIBIT 10 (a)
INDENET, INC.
Livonia, Michigan
$15,000,000
INVESTMENT AND LOAN AGREEMENT
March 26, 1998
Financing provided by
ALLIED CAPITAL CORPORATION
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TABLE OF CONTENTS
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PREAMBLE 7
Parties 7
Recitals 7
ARTICLE 1 - LOAN 7
Section 1.1 Funding 7
Section 1.2 Collateral 8
Section 1.3 Senior Debt; Subordinated Agreements 8
Section 1.4 Conditions to the Initial Loan 9
Section 1.5 Future Acquisition. Conditions to 10
Funding Subsequent Loan
ARTICLE 2 - EQUITY 11
Section 2.1 Stock Purchase Warrants 11
Section 2.2 Valuation of Warrants 11
ARTICLE 3 - INTENTIONALLY OMITTED 12
ARTICLE 4 - EXECUTIVE'S AGREEMENT 12
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES 12
Section 5.1 Due Organization. Authority. Binding. 12
Obligation. Opinion of Counsel.
Section 5.2 Principal Business; Title To Assets 13
Section 5.3 Litigation 13
Section 5.4 Taxes 13
(a) Generally 13
(b) No Open Returns 13
(c) Excess Parachute Payments 14
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(d) Deferred Intercompany 14
Transactions
Section 5.5 Financial Statements 14
Section 5.6 Leases; Material Contracts 14
(a) Leases 14
(b) Material Contracts 14
Section 5.7 Disclosure 14
Section 5.8 Management History 15
Section 5.9 Subsidiaries 15
Section 5.10 Incumbency 15
Section 5.11 No Material Change 15
Section 5.12 No Side Agreements 15
Section 5.13 Non-Contravention 16
Section 5.14 Fee & Brokerage 16
Section 5.15 Other Debts; Sources and Uses 16
Section 5.16 Capital Structure 16
Section 5.17 Solvency 16
Section 5.18 Regulatory Compliance 17
Section 5.19 Employee Benefit Matters 17
Section 5.20 Collective Bargaining 17
Section 5.21 Employees Contracts and 17
Non-competition Agreements
Section 5.22 No Competing Business Interests 18
Section 5.23 No Conflicting Non-Competition 18
Agreements
ARTICLE 6 - AFFIRMATIVE COVENANTS 18
Section 6.1 Monthly Financials 18
Section 6.2 Form 10Q 18
Section 6.3 Certification of Non Default 18
Section 6.4 Form 10K 18
Section 6.5 Projected Financials 19
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Section 6.6 Regulatory Filings 19
Section 6.7 Notice of Litigation 19
Section 6.8 Notice of Defaults or Judgments 19
Section 6.9 Board Meetings 19
Section 6.10 Insurance 20
Section 6.11 Use of Proceeds; Certification 20
Section 6.12 Intentionally Omitted 20
Section 6.13 Intentionally Omitted 20
Section 6.14 Payments and Other Debts 21
Section 6.15 Maintain Copies; Financing Statements 21
Section 6.16 Information Requests 21
Section 6.17 Protect the Collateral 21
Section 6.18 Further Assurance 21
ARTICLE 7 - NEGATIVE COVENANTS 27
Section 7.1 Change of Organization 27
Section 7.2 Equity Issuance or Redemption 27
Section 7.3 Dividends 27
Section 7.4 Directors 27
Section 7.5 Mergers, Etc. 28
Section 7.6 Capital Expenditures 28
Section 7.7 Employee Compensation 28
Section 7.8 Indebtedness 28
Section 7.9 Affiliate Transactions 28
Section 7.10 Change of Site or Business 28
Section 7.11 Change in Company, etc. 28
Section 7.12 New Debt Provisions 29
Section 7.13 Judgments 29
Section 7.14 Cross-Default 29
Section 7.15 Diversion of Proceeds 29
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ARTICLE 8 - TERMINATION OF AGREEMENT 25
ARTICLE 9 - DEFAULT 25
Section 9.1 Events of Default 25
(a) Principal and Interest Payments 25
(b) Representations and Warranties 25
(c) Covenants 25
(d) Loan Documents 25
(e) Other Debt to Holders 25
(f) Cross Default to Other Obligations 26
(g) Involuntary Bankruptcy or 26
Receivership Proceedings
(h) Voluntary Petitions 26
(i) Assignments for Benefit of 26
Creditors
(j) Undischarged Judgments 26
(k) Attachment 27
(l) No Assumption 27
(m) Loss of Key Employees 27
Section 9.2 Remedies 27
ARTICLE 10 - FEES AND COSTS 27
Section 10.1 Closing Costs 28
Section 10.2 Commitment Fee 28
Section 10.3 Hourly Fee 28
Section 10.4 Expenses 28
Section 10.5 Costs and Fees 28
(a) Suits 28
(b) Liability 28
ARTICLE 11 - INDEMNIFICATION; ENVIRONMENTAL 28
LIABILITY
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ARTICLE 12 - REMEDIES 29
Section 12.1 Cumulation. Receivership 29
Section 12.2 No Implied Waiver 30
ARTICLE 13 - PARTIES 30
ARTICLE 14 - NOTICE 30
ARTICLE 15 - RELATIONSHIP OF THE PARTIES 31
ARTICLE 16 - CONTROLLING LAW; VENUE AND 32
JURISDICTION; SERVICE OF PROCESS
ARTICLE 17 - WAIVER OF TRIAL BY JURY 32
ARTICLE 18 - CAPTIONS; SEVERANCE 33
ARTICLE 19 - COUNTERPARTS; ENTIRE AGREEMENT 33
ARTICLE 20 - DEFINITIONS AND RULES OF CONSTRUCTION 33
Section 20.1 Definitions 33
Section 20.2 Rules of Construction 33
TABLE OF EXHIBITS 39
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THIS INVESTMENT AND LOAN AGREEMENT is made by and among IndeNet, Inc.,
a Delaware corporation (the "Borrower"), and Allied Capital Corporation, a
Maryland corporation (collectively with its successors and assigns, the
"Holder").
RECITALS
A. Under terms of a letter dated February 16, 1998, by and between the
Holder and the Borrower (the "Commitment Letter"), the Borrower committed to
issue to the Holder subordinated debentures and warrants to purchase shares of
the Borrower's common stock, in consideration for an initial loan in the
aggregate amount of Nine Million Dollars ($9,000,000) (the "Initial Loan") and
subsequent loans in the aggregate amount of Six Million Dollars ($6,000,000),
each loan to be made in accordance with the terms and conditions set forth
herein (collectively with all modifications, renewals, extensions and
replacements thereof and therefor, the "Loans").
B. Under terms of the Commitment Letter, the Borrower has agreed to use
the Loans to repay a portion of its Senior Debt (as defined later), satisfy its
working capital needs and fund future acquisitions, as provided herein.
C. The Borrower and the Holder wish to set out their agreement and
understandings with respect to the foregoing.
PROVISIONS
In consideration of the premises and the covenants herein, the Holder
and the Borrower each agree as set forth below.
ARTICLE 1
Loan
Section 1.1 Funding. At Closing hereunder, the Holder will fund the Initial
Loan to the Borrower upon the satisfaction of conditions set forth in this
Agreement. In addition, at any time during the six month period following the
Closing Date, if the Borrower desires to make any future acquisitions which have
been approved in writing by the Holder, in its sole discretion ("Future
Acquisitions"), the Holder agrees, upon the satisfaction of conditions set forth
in this Agreement, to make one or more loans to the Borrower, in such amounts
requested by the Borrower, which in the aggregate will not exceed Six Million
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Dollars ($6,000,000), but shall be made in increments of Two Million Dollars
($2,000,000) or more (the "Subsequent Loans"), for the sole purpose of funding
such Future Acquisitions. The Initial Loan and each of the Subsequent Loans will
be evidenced by, and repaid according to the terms of certain subordinated
debentures, in the form attached hereto as EXHIBIT 1.1A (the "Initial
Debenture") or EXHIBIT 1.1B (the "Subsequent Debenture"), as applicable
collectively, the Initial Debenture and any Subsequent Debentures with all
modifications, extensions, renewals and replacements thereof and therefor, the
"Debentures"), each of which will be issued by the Borrower to the Holder at
Closing or, if applicable, the Future Acquisition Closing (as defined herein).
Section 1.2 Collateral. Subject to the prior liens described in Section 1.3
below, the Debentures and the Holder's rights herein shall be secured against
all of the Borrower's realty and personalty and other property of any kind, all
accessions thereto, substitutions for and all replacements, products and
proceeds thereof, including without limitation the collateral described below.
The Borrower hereby grants to the Holder continuing security interests in all of
the foregoing. At Closing, the Borrower shall execute and deliver or, if not a
party thereto, deliver to the Holder each of the following documents
(collectively, with all modifications, extensions, renewals and replacements
thereof and therefor, the "Collateral Documents"):
(a) a Security Agreement in the form attached hereto as EXHIBIT 1.02A;
(b) UCC-1 Financing Statements in the form attached hereto as
EXHIBIT 1.02B;
(c) a Security Agreement for Intellectual Property, covering all of the
CCMS's patents, trademarks and other intellectual properties, in the form of
EXHIBIT 1.02C hereto;
(d) a Collateral Assignment of the Borrower's leasehold interests in
real property, in the form of EXHIBIT 1.02D hereto;
(e) a Guaranty, duly executed by each of Guarantors, in the form of
EXHIBIT 1.02E hereto; and
The Collateral Documents, this Agreement and the Debentures, collectively with
all modifications, extensions, renewals and replacements thereof and therefor,
are sometimes hereinafter referred to as the "Loan Documents".
Section 1.3 Senior Debt; Subordination Agreements. (a) From time to time, the
Borrower may, subject to the conditions set forth herein, (i) obtain debt
financing from
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institutional lenders in the amounts and on terms consistent with Section 7.8
hereof and (ii) obtain purchase money and true lease financing for tangible
assets in its ordinary course of business. Such financings are sometimes
hereinafter collectively called the "Senior Debt." In no case shall the
Borrower incur any Senior Debt if such proposed Senior Debt financing will (a)
violate the ratio requirements of Section 7.8 hereof, or (b) breach any covenant
contained in the Loan Documents.
(b) So long as no Event of Default has occurred, the Holder will at the
Borrower's written request from time to time execute reasonable and customary
subordination agreements in favor of institutional lenders proposing to provide
Senior Debt on reasonable and customary terms. Such subordination agreements may
upon demand of such institutional lenders, include provisions for subordination
of lien priority under the Loan Documents, cessation of payments under the Loan
in case any Senior Debt facility is in default, and a moratorium on exercise of
Holder's remedies against the Companies for one hundred twenty (120) days after
such a default. So long as the conditions herein for the incurring of Senior
Debt are met, the Holder shall execute such subordination agreements without
undue delay.
Section 1.4 Conditions to Funding of the Initial Loan. The obligation of the
Holder to fund the Initial Loan on the date hereof (the "Closing Date") is
subject to the fulfillment, on or prior to the Closing Date, of each of the
following documents:
(a) The Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required hereunder;
(b) The Holder shall have received an opinion of the Borrower's
counsel, Miller, Canfield, Paddock and Stone, P.L.C. dated the Closing Date, in
form and substance satisfactory to the Holder;
(c) The Borrower shall have delivered to the Holder each of the
following documents, duly executed by it or such other persons, if applicable:
(i) an Initial Debenture;
(ii) an Initial Stock Purchase Warrant;
(iii) a Executive Agreement duly executed by all parties, in the
form of EXHIBIT 1.04 attached hereto;
(iv) each of the other Loan Documents; and
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(v) any other documents reasonably requested by the Holder in
connection therewith.
(d) The Holder shall have received copies of the certificate of
incorporation and any other publicly filed organizational documents of each U.S.
Company, certified by the respective states of incorporation for the U.S.
Companies;
(e) The Holder shall have received certified (as of the Closing Date)
copies of all corporate action taken by each U.S. Company, including resolutions
of their respective Board of Directors, authorizing the execution, delivery and
performance of the Loan Documents; and
(f) The Holder shall have received a certificate as to the legal
existence and good standing of each U.S. Company, issued by the Secretary of
State of the State of Delaware or appropriate public official in each of its
jurisdiction of incorporation and foreign qualification.
Section 1.5 Future Acquisitions, Conditions to Funding Subsequent Loan. In the
event that the Borrower desires the Holder to make a Subsequent Loan in
connection with a Future Acquisition which has been previously approved in
writing by the Holder, the closing of the Subsequent Loan shall take place on
such date and at such place as shall be mutually agreed upon by the parties (the
"Future Acquisition Closing Date"). On each Future Acquisition Closing Date, the
Holder and the Borrower shall take the following actions, with the obligations
of each party subject to the performance by the other of its obligations under
this Section:
1. The Borrower shall have delivered to the Holder a certificate
certifying (i) that the representations and warranties relating to the Borrower
contained in Article 5 of this Agreement are true and correct in all material
respects, as of the Future Acquisition Closing Date as though such
representations and warranties had been made on or as of such Future Acquisition
Closing Date, and (ii) the Borrower's continued performance of and compliance
with each of its covenants, obligations and agreements required by this
Agreement;
2. The Borrower shall have delivered to the Holder each of the
following documents duly executed by it or such other persons, if applicable:
(a) a Subsequent Debenture in the amount of the Subsequent Loan;
(b) a Subsequent Stock Purchase Warrant; and
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(c) any other documents reasonably requested by the Holder in
connection therewith; and
3. The Holder shall by wire transfer pay to the Borrower the proceeds
of the Subsequent Loan, net of (i) a closing fee owed to the Holder of One
Percent (1%) of the amount of the Subsequent Loan, and (ii) any fees and
expenses of the Holder or Holder's attorneys as required under Article 10
hereof.
ARTICLE 2
Equity
Section 2.1 Stock Purchase Warrants.
(a) At Closing, the Borrower will issue and sell to the Holder a stock
purchase warrant (collectively, with all modifications, extensions, renewals and
replacements thereof and therefor, the "Initial Warrant") in the form of EXHIBIT
2.01A hereto, to acquire shares of the Borrower's common stock ("Shares") which
will entitle the Holder to receive that number of the Borrower's authorized but
unissued Shares that will provide the Holder, in the aggregate, with Two and One
Tenth Percent (2.1%) of the Borrower's capital stock, calculated on a fully
diluted basis in accordance with the terms set forth therein. The purchase price
of the Initial Warrant shall be $60.
(b) At each Future Acquisition Closing, the Borrower will issue and
sell to the Holder a stock purchase warrant (collectively, with all
modifications, extensions, renewals and replacements thereof and therefor, a
"Subsequent Warrant", which together with the Initial Stock Purchase Warrant are
collectively referred to herein as the "Warrants") in the form of EXHIBIT 2.01B
hereto, to acquire Shares which will entitle the Holder to receive, for each Two
Million Dollars ($2,000,000) of Subsequent Loan amount, that number of the
Borrower's authorized but unissued Shares that will provide the Holder, in the
aggregate, with .467% of the Borrower's capital stock, calculated on a fully
diluted basis in accordance with the terms set forth therein. The purchase price
of the Subsequent Warrant shall be $13.33 for each $2,000,000 of Subsequent Loan
amount.
Section 2.2 Valuation of Warrants. The Holder and the Borrower hereby agree that
as of the Closing, the fair market value of the Warrants shall be the purchase
price thereof, and that they shall prepare and maintain their books of account,
financial statements and tax returns in a manner consistent therewith.
ARTICLE 3
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[Intentionally Omitted]
ARTICLE 4
Executive's Agreement
Reference is made to that certain Executive's Agreement being executed
herewith. The Borrower consents to the entry by all parties into such
Executive's Agreement for all purposes.
ARTICLE 5
Representations and Warranties
To induce the Holder to enter the transactions contemplated herein and
purchase the Debentures and Warrants, the Borrower represents and warrants as
set out below. All representations and warranties in this Article are being made
by the Borrower on and as of the Closing Date, shall refer to facts as they
exist at Closing and shall survive the Closing.
Section 5.1 Due Organization; Authority; Binding Obligation; Opinion of Counsel.
Each Company is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation having a Certificate of
Incorporation, as amended, and By-Laws, or, if applicable, such other
organizational documents (all terms of which are in full force and effect) as
previously furnished to the Holder, and true copies of which, together with all
other material constituent documents of such Company, are attached hereto as
part of EXHIBIT 5.01A. Each Company is duly qualified to conduct business as
proposed and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its business or location of its properties require such
qualification and where the failure to so qualify could have a material adverse
effect on it, evidence of which qualification and good standing with respect to
each of the U.S. Companies are attached hereto as EXHIBIT 5.01B. Each U.S.
Company has full power and authority to enter into the Loan Documents to which
it is a party, and to consummate the transactions contemplated hereby or
thereby, and to carry out the provisions hereof and thereof. Each U.S. Company
has taken all corporate action necessary for the execution and performance of
the Loan Documents to which it is a party, and to consummate the transactions
contemplated hereby or thereby as evidenced by the resolutions set forth in
EXHIBIT 5.01C. This Agreement and each document to be executed by each U.S.
Company herewith will constitute a valid and binding obligation of the U.S.
Company party thereto, enforceable in accordance with their respective terms
when executed and delivered; and
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each U.S. Company has caused its counsel to deliver a letter opining as to such
authority and related matters in the form set forth in EXHIBIT 5.01D.
Section 5.2 Principal Business; Title to Assets. The Companies are primarily
engaged in marketing and selling traffic and programming systems for broadcast
systems. Each Company has good and marketable title to and ownership of all real
and personal property it purports to own, free and clear of all liens, claims,
security interests and encumbrances except for liens created hereunder, liens
securing the Senior Debt and liens for taxes and assessments not delinquent or
which are contested in good faith.
Section 5.3 Litigation. None of the Companies have been made a party to or
threatened by any suits, actions, claims, investigations by governmental bodies
or legal, administrative or arbitrational proceedings, except to the extent such
proceeds could not have a material adverse effect, whether individually or in
the aggregate, on such Company and as set out in the litigation schedule
attached hereto as EXHIBIT 5.03 (hereinafter "Litigation Schedule"). None of
the Companies nor their officers or directors know of any basis or grounds for
any such suit or proceeding. There are no outstanding orders, judgments, writs,
injunctions or decrees of any court, government agency or arbitrational tribunal
against or affecting any Company or its properties, assets or business.
Section 5.4 Taxes.
(a) Generally. Each Company has filed all tax returns, federal, state
and local, which are required to be filed, and has duly paid or fully reserved
for all taxes or installments thereof (including any interest or penalties),
which have or may become due pursuant thereto or pursuant to any assessment
received by such Company.
(b) No Open Returns. No federal, state, local, foreign or other return
of any Company for tax years that remain open under any applicable statute of
limitations, has been examined by the Internal Revenue Service or other tax
authorities; or if so examined no deficiencies have been asserted or assessments
made as a result of such examinations (including all penalties and interest).
There are no waivers, agreements or other arrangements providing for any
extension of time with respect to the assessment or collection of any unpaid
tax, interest or penalties relating to any Company. No issues have been raised
by (or are currently pending before) the Internal Revenue Service or any other
taxing authority in connection with any return of any Company, which could
reasonably be expected to have a material adverse effect on the financial
condition of such Company if decided adversely to such Company, nor are there
any such issues which have not been so raised but if so raised by the Internal
Revenue Service, or any other taxing authority, could reasonably be expected to
have such a material adverse effect.
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(c) Excess Parachute Payments. No Company has made, has become
obligated to make, or will, as a result of the transactions contemplated by this
Agreement, make or become obligated to make, any "excess parachute payment" as
defined in Internal Revenue Code Section 280G.
(d) Deferred Intercompany Transactions. Each Company and its affiliates
have not engaged in any "deferred intercompany transactions" within the meaning
of Section 1.1502-13 of the regulations promulgated under the Internal
Revenue Code.
Section 5.5 Financial Statements. The consolidated or consolidating financial
statements for the fiscal year ending March 31, 1997 as audited by BDO ▇▇▇▇▇▇▇,
LLP, attached as EXHIBIT 5.05(a), and the Borrower's unaudited consolidated or
consolidating financial statements for the nine month period ending December 31,
1997 attached as EXHIBIT 5.05(b) are prepared in accordance with GAAP, are true
and correct in all material respects, and fairly state the results of the
Companies' operations and their financial position at such dates and for the
periods stated, subject, in the case of such unaudited financial statements, to
normal year-end adjustments which, in the aggregate, are not material.
Section 5.6 Leases; Material Contracts.
(a) Leases. A complete list of all real property leases to which each
Company is a party are attached hereto as EXHIBIT 5.06(A). Each Company's
possession of its leased property has not been disturbed, and no claim has been
asserted against such Company adverse to its leasehold interests. All lease
obligations of each Company are current in all material respects.
(b) Material Contracts. The listing of the Companies' customer
contracts and the other information set out in the Companies' Order Book of
January 31, 1998 was true and correct in all material respects as of such date,
and there has been no material adverse change in the status of such contracts
since that date; all such customer contracts to which any Company is a party are
valid and binding agreements, enforceable according to their terms, and no party
is in default thereunder; the form of customer contract attached hereto as
EXHIBIT 5.06(B) is substantially similar to the form of, and contains
substantially similar terms to, the customer contract of each Company. All
accounts payable and any other indebtedness of the Companies are current in all
material respects.
Section 5.7 Disclosure. All representations made in the Borrower's Confidential
Offering Memorandum of December 1997 attached as EXHIBIT 5.07A hereto, the
Perfection Certificates provided to the Holder attached as EXHIBIT 5.07B, the
list of indebtedness of the Companies attached as EXHIBIT 5.07C hereto and in
any other document described herein or previously supplied to the Holder in
regard to this financing, are true and correct
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in all material respects as of this date, and all projections provided in such
documents are reasonable; there are no material facts relating to the Companies
known to any Company, its officers or directors or able to be learned by
reasonable diligence, which are not fully disclosed in the above documents to
the holder; no representation, covenant or warranty made by the Companies herein
or in any such document, statement or writing furnished to the Holder in
connection with the transactions contemplated herein contains or will contain
any untrue statement of material fact, or omits to state a material fact
necessary to make a statement therein not misleading.
Section 5.8 Management History. During the past ten (10) years neither ▇▇▇▇▇
▇▇▇▇, nor ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇ Company has been arrested for or
convicted of any felony or petitioned or been granted any relief in bankruptcy.
Section 5.9 Subsidiaries. SCHEDULE 5.9 hereto correctly reflects the
organization of the Companies. Except as set forth on such Schedule, no Company
has any subsidiaries, partners or any other commonly controlled or related
entities.
Section 5.10 Incumbency. Attached hereto as EXHIBIT 5.10 is a true and
complete list of officers and directors of each Company and stockholders of each
Company (except, in the case of the stockholders of the Borrower, only those
stockholders which own more than 1,000,000 shares of the Borrower's common
stock).
Section 5.11 No Material Change. Since February 16, 1998, no Company has
suffered any material adverse change in its condition (financial or otherwise)
or its overall business prospects, nor entered into any material transactions,
or incurred any material debt, obligation or liability, absolute or contingent,
nor sustained any material loss or damage to its property, whether or not
insured except as proposed herein, nor suffered any material interference with
its business or operations, present or proposed; and there has been no sale,
lease, abandonment or other disposition by any Company of its property, real or
personal, or any interest therein or relating thereto, that is material to the
financial position of such Company.
Section 5.12 No Side Agreements. None of the Companies or any of their officers,
directors are party to any agreement with the Holder except for this Agreement
and the other documents mentioned herein or listed as exhibits hereto; except
for this Agreement and such other documents, no Company is a party to any
agreement calling for any action by it outside the ordinary course of its
business; there exists no agreement or understanding calling for any payment or
consideration from a customer or supplier of any Company to an officer, director
or shareholder of such Company in respect of any transaction between the Company
and such supplier or customer.
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Section 5.13 Non-Contravention. Except for matters set out in the Litigation
Schedule, each Company is not in breach of, default under, or in violation of
any applicable law, decree, order, rule or regulation which may materially and
adversely affect it; or any indenture, contract, agreement, deed, lease, loan
agreement, commitment, bond, note, deed of trust, restrictive covenant, license
or other instrument or obligation to which it is a party, or by which it is
bound, or to which any of its assets are subject which could have a material
adverse effect upon such Company's financial condition or business; the
execution, delivery and performance of this Agreement and the other documents
mentioned herein will not constitute any such breach, default or violation, or
require consent or approval of any court, governmental agency or body, except as
expressly provided contemplated herein.
Section 5.14 Fees & Brokerage. Except as provided in the Commitment Letter, no
brokerage or similar fees are due to any party in respect to the transactions
contemplated herein.
Section 5.15 Other Debts; Sources and Uses. Except for the Senior Debt, the
matters set out in the Litigation Schedule, and other debts of the types and in
the amounts described in the Financial Statements included herein as EXHIBIT
5.05(A) and EXHIBIT 5.05(B), each Company has no material, whether individually
or in the aggregate, debts, liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, arising out of any transaction
entered into or any state of facts existing prior hereto, including without
limitation, liabilities or obligations on account of taxes or government
charges, penalties, interest or fines thereon or in respect thereof; each
Company does not know, and has no reasonable grounds to know, of any basis for
any claim against it as of the date of this Agreement, or of any debt, liability
or obligation other than those mentioned herein; EXHIBIT 5.15 hereto correctly
states the uses of the Initial Loan.
Section 5.16 Capital Structure. The authorized capital stock of each Company is
as set forth on EXHIBIT 5.16A. All securities reflected thereon have been duly
issued in accordance with applicable laws including federal and state
securities laws. Except as set forth therein there are no options, warrants or
other securities which are convertible or exchangeable for capital stock of any
Company, and no preemptive rights in respect to capital stock of any Company.
There are no issued and outstanding shares of Series B or C preferred stock or
authorized but unissued shares of Series B or C preferred stock of the Borrower.
EXHIBIT 5.16B correctly reflects the form of the management options set out in
EXHIBIT 5.16.
Section 5.17 Solvency. As of the date hereof, and giving effect to the
transactions contemplated by this Agreement, the present fair saleable value of
each Company's assets is greater than the amount required to pay such Company's
total indebtedness (contingent or otherwise), and is greater than the amount
that will be required to pay such indebtedness as it matures and as it becomes
absolute and matured; the transactions contemplated hereby
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are being effectuated without intent to hinder, delay or defraud present or
future creditors of any Company; it is each Company's intention that it will
maintain the above-referenced solvent financial condition, giving effect to the
debt incurred hereunder, as long as each Company is obligated to the Holder
under this Agreement or in any other manner whatsoever; each Company has
sufficient capital to carry on its previous operations as they are now
conducted, and to consummate the transactions contemplated herein.
Section 5.18 Regulatory Compliance. Each Company has complied in all material
respects with all laws, ordinances and regulations applicable to it and to its
business, including without limitation laws, ordinances and regulations relating
to securities, patent, trademark, zoning, labor, food and drug, the Occupational
Safety & Health Act, the Employees Retirement Income Security Act, and all
federal and state environmental laws and regulations.
Section 5.19 Employee Benefit Matters. There is no existing single-employer
plan defined in Section 4021(a) of ERISA in respect of which each Company is,
an "employer" or a "substantial employer" as defined in Sections 3(5) and
4001(a)(2) of ERISA, respectively; each Company has delivered to the Holder
copies, as listed on EXHIBIT 5.19 attached hereto, of each plan described in
Section 4021(a) of ERISA, in respect of which each Company will be liable to
make contributions or pay benefits; to the Companies' knowledge there have been
no reportable events as set forth in Section 4043(b) of ERISA in respect of any
such plan, and no termination of any such plan since the effective date of
ERISA, which could result in any tax, penalty or liability being imposed upon
any Company; each Company has not participated in, nor will the purchase of the
Debentures or the Warrants by the Holder involve, any "prohibited transaction"
(as defined in Section 4975 of the Internal Revenue Code of 1986, as amended)
that could subject any Company or the Holder to any tax or penalty imposed by
said Section 4975; since the effective date of ERISA, each Company has not
incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, to which such Company could be subject or for which it
might be liable; each Company is not, and immediately after the Closing will not
be, a party to, and none of the operations of such Company is or after the
Closing will be covered by, a multi-employer plan, as defined in Section 3(37)
of ERISA.
Section 5.20 Collective Bargaining. No Company is a party to or subject to any
collective bargaining agreements or union contracts. There are no labor disputes
pending or threatened against any Company which have affected, or so far as any
Company can reasonably foresee may affect, materially and adversely the
condition of any Company.
Section 5.21 Employee Contracts and Non-competition Agreements. The Borrower has
delivered to the Holder copies of all employment, compensation and
non-competition agreements, between the Companies and Messrs. ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, and all
such copies are attached to EXHIBIT
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5.21; all such agreements are in full force and effect, no such officer or key
employee of the Companies has advised it (orally or in writing) that he or she
intends to terminate his employment.
Section 5.22 No Competing Business Interests. Messrs. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ have no direct or
indirect interest (except as the holder of not more than one percent (1%) of the
outstanding shares of a corporation whose stock is listed on any national or
regional securities exchange or reported by The National Association of
Securities Dealers, Inc. Automated Quotation System or any successor thereto),
including, but not limited to, the ownership of stock in any corporation, in
any business, that is involved in any way with, competes with, or conducts any
business similar to any of the businesses conducted by the Companies.
Section 5.23 No Conflicting Non-Competition Agreements. None of the Companies or
any of their officers, directors or employees are subject to any contract or
agreement purporting to limit their rights to compete in any market in which any
Company presently provides, or proposes to provide, goods or services; or
purporting to restrict their rights to disclose information in respect to such
competition.
ARTICLE 6
Affirmative Covenants
The Borrower shall, and shall cause each Company, to:
Section 6.1 Monthly Financials. Maintain a standard modern system of accounting;
make, to the best of its knowledge, full, true and correct entries in such
system of all dealings and transactions in relation to its business and
affairs; forward, or cause to be forwarded to the Holder the Borrower's monthly
year-to-date consolidated and consolidating financial statements (including a
monthly and year-to-date balance sheet, profit and loss statement);
Section 6.2 Form 10Q. Provide the Holder within 45 days of the end of each
calendar quarter with such information required to be disclosed in a Quarterly
Report on Form 10Q pursuant to the Securities Exchange Act of 1934, as amended,
and with such financial information prepared in accordance with any applicable
accounting rules relating thereto; such quarterly information shall be delivered
to the Holder irrespective of whether (a) the Borrower has failed to make such
filing with the Securities and Exchange Commission (the "SEC") or (b) the
Borrower is required to make such filing with the SEC;
Section 6.3 Certification of Non-Default. Provide to the Holder in writing each
quarter a written certification by the Chief Executive Officer and Chief
Financial Officer of the
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Borrower, that no default has occurred under the Debentures or this Agreement,
or any Senior Debt; or if any such default exists, stating the nature of such
default;
Section 6.4 Form 10K. Within ninety (90) days of each fiscal year-end, provide
to the Holder with such information required to be disclosed in an Annual Report
on Form 10K pursuant to the Securities Exchange Act Of 1934, as Amended, and
with such financial information prepared in accordance with any applicable
accounting rules relating thereto; such annual information shall be delivered to
the Holder irrespective of whether (a) the Borrower has failed to make such
filing with the SEC or (b) the Borrower is required to make such filing with the
SEC;
Section 6.5 Projected Financials. Prior to each accounting year-end, provide the
Holder with projected financial statements for the coming three (3) years and
monthly projections for the coming year, in the same format as used for Section
6.1;
Section 6.6 Regulatory Filings. Within thirty (30) days of filing, provide the
Holder with copies of all returns and material documents filed with federal,
state or local government agencies, including without limitation the Internal
Revenue Service, the Environmental Protection Agency, the Occupational Safety &
Health Administration and the Securities & Exchange Commission; routine payroll
tax withholding items shall be excluded;
Section 6.7 Notice of Litigation. Notify the Holder of any litigation to which
any Company is a party wherein the amount at issue is in excess of Seven Hundred
Fifty Thousand ($750,000) by mailing to the Holder, in accordance with the
provisions of Article 14 hereof, within thirty (30) days of receipt thereof, a
copy of the Complaint, Motion for Judgment or other such pleadings served on or
by a Company; and any litigation to which a Company is not a party but which
could substantially affect the operations of a Company's business or the
collateral pledged under this Agreement, by mailing to the Holder, in accordance
with the provisions of Article 14 hereof, a copy of all Complaints and Answers
obtained by a Company in regard to such litigation, or if no pleadings are
obtained, a letter setting out the facts known about the litigation within
thirty (30) days of receipt or knowledge thereof; a Company shall not be obliged
by this paragraph to give notice of suits wherein a Company is a creditor
seeking collection of account debts;
Section 6.8 Notice of Defaults or Judgments. Give the Holder notice of default
declared in regard to any loan or lease of a Company or any judgment entered
against a Company which could have a material adverse effect upon the financial
condition or business of such Company by mailing a copy to the Holder within ten
(10) days of receipt thereof;
Section 6.9 Board Meetings. Hold periodic meetings of its Board of Directors;
give the Holder prior notice of such meeting at the same time that notice is
given to members of
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the Board of Directors; allow one designee of the Holder to attend such board
meeting at the Borrower's expense; notwithstanding the foregoing, if the
Borrower's Board of Directors desires to act by unanimous consent in lieu of
meeting, they may do so provided that the Holder is sent a copy of the
resolutions adopted at least ten (10) days following to their adoption;
Section 6.10 Insurance. Maintain all-risk hazard insurance on its assets, with a
mortgagee clause in favor of the Holder, in such reasonable amounts and forms as
acceptable to the Holder; this shall include federal flood insurance if any
assets are in a designated flood plain; and supply the Holder annually with a
certification of such insurance from the relevant insurers in the form set
forth as EXHIBIT 6.10;
Section 6.11 Use of Proceeds; Certification. Use the proceeds of the Loans only
in the manner set forth on EXHIBIT 5.15. The Holder shall be entitled to
review, at any time, the Borrower's use of the proceeds of the Loans.
Section 6.12 [Intentionally Omitted]
Section 6.13 [Intentionally Omitted]
Section 6.14 Payments and Other Debts. Make all payments of principal, interest
and expenses as and when due under the Debentures, without setoff and regardless
of any claim the Borrower may have against the Holder except for setoff rights
and claims which have been reduced to a final judgment against the Holder by a
court of competent jurisdiction; and comply in all respects with all terms,
conditions and covenants relating to other debt obligations of the Borrower;
Section 6.15 Maintain Copies; Financing Statements. Maintain an original or a
true copy of this Agreement and any modifications hereof, which shall be
available for inspection as called for herein or in the Debentures; and pay the
taxes and costs of, or incidental to, any recording or filing of any financing
statements concerning any collateral for the Debentures;
Section 6.16 Information Requests. Furnish from time to time to the Holder at
the Borrower's expense all information that the Holder may reasonably request to
enable the Holder to prepare and file any report or form required of the Holder
by the Securities and Exchange Commission or any other regulatory authority;
Section 6.17 Protect the Collateral. Take all necessary steps to administer,
supervise, preserve and protect the collateral for the Debentures and to perfect
and maintain the Holder's security interest in such collateral; regardless of
any action taken by the Holder, there shall be no duty upon the Holder in this
respect; and
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Section 6.18 Further Assurance. From time to time promptly execute and deliver
to the Holder such additional documents, and take such other reasonable steps,
as the Holder may reasonably require to carry out the purposes hereof and of the
other Loan Documents, or to protect the Holder's rights thereunder, including
(without limiting the generality of the foregoing) the execution of recordable
documents to reflect the Holder's interests in any collateral for the Loans, and
the recording thereof at Borrower's expense in the relevant public records.
ARTICLE 7
Negative Covenants
The Borrower shall not do any of the following acts, and shall cause
each of the Companies to refrain from doing any of the following acts, without
the prior written consent of the Holder. Holder's consent to such acts shall not
be unreasonably withheld or delayed with respect to the covenants contained in
Sections 7.1, 7.2, 7.4, 7.6, 7.7, 7.9 and (except in the case of proposed Future
Acquisitions for which the Borrower will seek a Subsequent Loan from the Holder)
7.10.
Section 7.1 Change of Organization. Make or suffer any material change in its
organization (including amendments to its charter or bylaws if such change will
adversely affect the Holder's rights or interest hereunder), cause or suffer any
change in its percentage ownership of its subsidiaries, or establish any parent
or subsidiary entities in which the Holder will not have a direct or indirect
pro rata equity interest;
Section 7.2 Equity Redemption. Except as contemplated by EXHIBIT 5.15, redeem
any capital stock of any class or any convertible debt or other equity security
of the Borrower except as required by the Warrants;
Section 7.3 Dividends. Except in the case of dividends made by the Companies
(other than the Borrower) to the Borrower, whether directly or indirectly,
declare or pay any dividend or distribution of any type on any class of its
equity securities;
Section 7.4 Directors. Suffer ▇▇. ▇▇▇▇▇ ▇▇▇▇ or ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to resign
or otherwise cease to be a Director of the Borrower;
Section 7.5 Mergers, Etc. Become a party to any merger or consolidation, except
where the relevant Company is the surviving corporation, with any other
corporation, company or entity, or dispose of assets necessary to continue its
present or proposed business operations;
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Section 7.6 Capital Expenditures. Make capital expenditures in any fiscal year
in excess of One Million Six Hundred Thousand DOLLARS ($1,600,000), except to
the extent such expenditures are included in a capital improvements budget
approved by the Board of Directors and the Holder; provided, however, that the
limit on capital expenditures hereunder shall either be increased or decreased
at the beginning of each fiscal year commencing on April 1, 1999, commensurate
with the percentage of the Borrower's annual increase or, if applicable,
decrease of gross profits during the prior fiscal year, for example, if the
Borrower experienced an annual increase of gross profits of ten percent (10%)
during the prior fiscal year then the limit on capital expenditures hereunder
shall be increased by ten percent (10%) for the following fiscal year or,
conversely, if the Borrower experienced an annual decrease of gross profits of
ten percent (10%) the prior fiscal year then the limit on capital expenditures
hereunder shall be decreased by ten percent (10%) during the following fiscal
year; provided, further, that, under no circumstances, shah the limit on capital
expenditures hereunder be less than One Million Six Hundred Thousand Dollars
($1,600,000); or prepay any debt except for that incurred hereunder;
Section 7.7 Employee Compensation. Pay a salary or other compensation or advance
to any employee in excess of Six Hundred Thousand Dollars ($600,000) per year
(inclusive of any bonuses approved by the Board of Directors, without any
interested Director voting in favor of such award);
Section 7.8 Indebtedness and Financial Ratios. Incur, suffer or maintain
indebtedness, calculated on a consolidated basis for all the Companies, such
that
(a) at the end of each calendar quarter, the ratio of the Companies'
total indebtedness to their EBITDA for the twelve (12) calendar month period
then ending is greater than 4.0 to 1, PROVIDED, HOWEVER, that so long as the
Borrower does not acquire Boss, Inc. or its assets, the ratio applicable to this
sub-section (a) shall be 4.25 to 1 instead of 4.0 to 1 for the first twelve (12)
months after the date hereof; and
(b) at the end of each calendar quarter through December 31, 2001, the
ratio of the Companies' EBITDA for the twelve (12) calendar month period then
ending, to its debt service required in the relevant month (including principal
and interest) is less than 1.5 to 1;
(c) at the end of each calendar quarter beginning with March 31, 2002,
the ratio of the Companies' EBITDA for the twelve (12) calendar month period
then ending, to its debt service required in the relevant month (including
principal and interest) is less than 2.0 to 1; and
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(d) at the end of each calendar month preceding a month when the
Borrower is to make a material acquisition, the Companies shall be in compliance
with the financial ratios set out in sub-sections (a), (b) and (c) above;
PROVIDED, HOWEVER, that the Borrower shall not be in breach of this covenant
solely by virtue of its incurring and maintaining Senior Debt up to an aggregate
amount of $5,000,000 and Loans hereunder in an aggregate amount up to
$9,000,000; PROVIDED FURTHER that in calculating EBITDA under this Section 7.8
and in the definition of EBITDA at Section 20.1, below, (x) in cases where the
Borrower has acquired any operations after the date hereof, the acquired
entity's average monthly EBITDA during the twenty-four months prior to the
acquisition or, if elected by the Borrower and the Borrower has notified the
Holder of such election, during the twelve months prior to the acquisition shall
be included in the calculation of the Companies' EBITDA on a pro forma basis for
each of the twelve (12) months after the acquisition, and adjustments may be
made to reflect on a pro-forma basis operating cost savings reasonably expected
to result from the acquisition, and (y) capital leases may, at the Borrower's
option, be treated either as debt such that the total lease obligations are
included in the calculation of total indebtedness and the relevant rents are
treated as interest and principal payments; or capital leases may be treated as
if they were operating leases, such that the lease obligations are excluded from
the calculation of total indebtedness, the relevant rents are deducted in full
from gross revenues in calculating net income, and no portion of such rents
shall be treated as an interest expense; AND provided, further, that
indebtedness under that certain hedging facility at Barclays Bank PLC shall not
be included in any calculation of indebtedness herein so long as such facility
continues to be collateralized in full by cash or cash equivalents.
Section 7.9 Affiliate Transactions. Purchase or sell any property or services or
borrow or lend money or property from or to, or co-invest in any transaction
with, any officer, director, employee or other affiliate, or any affiliate of
any such officer, director, employee or affiliate, except for transactions
wherein the terms are no less favorable to such entity than the best terms
available from an unaffiliated person;
Section 7.10 Change of Business. Expend or invest any funds in any manner not
strictly related to the business of producing, selling and providing support
services for computer software;
Section 7.11 Change, etc. Alter its charter, bylaws or other constituent
documents, reorganize the current business entities, or, in the case of the
Borrower only, invest more than Two Million Dollars ($2,000,000) in any
affiliates or other entities;
Section 7.12 New Debt Provisions. Enter any lease or debt agreement which
explicitly precludes the Holder from curing defaults thereunder; this Section
shall not be construed to require the Holder to cure any such defaults;
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Section 7.13 Judgments. Permit any material final judgment obtained against it
to remain unpaid for over twenty (20) days without obtaining a stay of execution
or bond;
Section 7.14 Cross-Default. Incur any declared default under any material
lease, loan or other agreement pertaining to another debt or material obligation
of it; or
Section 7.15 Diversion of Proceeds. Divert any proceeds of the Loans or Warrants
from the purposes set out in Section 6.10, above.
ARTICLE 8
Termination of Agreement
This Agreement shall automatically terminate and shall no longer be of
any force or effect when the Debentures and the Loans have been fully and
indefeasibly repaid.
ARTICLE 9
Default
Section 9.1 Events of Default. Any of the following events shall be an "Event of
Default" as that term is used herein:
(a) Principal and Interest Payments. The Borrower fails to make payment
when due of any principal or interest installment on the Debentures;
(b) Representations and Warranties. Any representation or warranty
made by the Borrower proves to have been incorrect in any material respect as of
the date thereof and remains incorrect after ten (10) days' notice; or any
representation, statement (including financial statements), certificate or data
furnished or made by the Borrower (or any officer, accountant or attorney of the
Borrower) under this Agreement, proves to have been untrue in any material
respect, as of the date as of which the facts therein set forth were stated or
certified;
(c) Covenants. The Borrower defaults in the observance or performance
of any of the covenants or agreements contained in this Agreement (other than a
default under any other subsections of this Section 9.1) or a default occurs
under the Executive Agreement attached as EXHIBIT 1.04 hereto, and such default
continues unremedied for a period of ten (10) days after the earlier of (i)
notice thereof being given by the Holder to the Company, or (ii) such default
otherwise becoming known to the officers or chief financial officer of the
Borrower;
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(d) Loan Documents. The Borrower defaults in the observance or
performance of any of the covenants or agreements contained in any Loan Document
which continues beyond the expiration of any notice and cure period pertaining
thereto;
(e) Other Debt to Holders. The Borrower defaults in the payment of any
amounts due to the Holder, or the Holder declares a default by the Borrower
(which has not been cured within any applicable cure periods), in connection
with the observance or performance of any of the covenants or agreements
contained in any credit agreements, notes, collateral or other documents
relating to any indebtedness of the Borrower to the Holder, other than the
Debentures;
(f) Cross Default to Other Obligations. Without implying that such
other indebtedness is permitted, a Company defaults in the payment of any
amounts due to any person (other than the Holder), or in the observance or
performance of any of the covenants or agreements contained in any credit
agreements, notes, leases, collateral or other documents relating to any
obligation of a Company in excess of $750,000 to any person (other than the
Holder), after any grace period applicable to such default has elapsed;
(g) Involuntary Bankruptcy or Receivership Proceedings. A receiver,
conservator, liquidator or trustee of a Company or of its property is appointed
by order or decree of any court or agency or supervisory authority having
jurisdiction; or an order for relief is entered against a Company under the U.S.
Bankruptcy Code; or a Company is adjudicated bankrupt or insolvent; or any
material portion of the properties of a Company is sequestered by court order
and such order remains in effect for more than fifty (50) days after a Company
obtains knowledge thereof; or a petition is filed against a Company under any
state, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any jurisdiction, whether now or
hereafter in effect, and such petition is not dismissed within sixty (60) days;
(h) Voluntary Petitions. A Company files a petition under the U.S.
Bankruptcy Code or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any case or petition against it under any such law;
(i) Assignments for Benefit of Creditors. A Company makes a general
assignment for the benefit of its creditors, or admits in writing its inability
to pay its debts generally as they become due, or consents to the appointment of
a receiver, trustee or liquidator of all or any part of its property;
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(j) Undischarged Judgments. Judgment for the payment of money, which is
not covered by insurance, is rendered by any court or other governmental body
against the Company, and such Company does not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof within twenty (20) days from the date of entry thereof, and within said
period of twenty (20) days from the date of entry thereof or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal while providing
such reserves therefor as may be required under GAAP;
(k) Attachment. A writ or warrant of attachment, seizure or any similar
process shall be issued by any court against all or any material portion of the
property of a Company, and such writ or warrant of attachment or any similar
process is not released or bonded within twenty (20) days after its entry; and
(1) No Assumption. Substantially all of the ownership interest in a
Company, or any Company's assets, are sold, exchanged or transferred.
With respect to any breach described above that is capable of being cured and
for which no cure period is already specified (a "Curable Default"), the
occurrence of such Curable Default shall not constitute an Event of Default
hereunder if such Curable Default is fully cured and/or corrected within thirty
(30) days (ten (10) days, if such Curable Default may be cured by payment of a
sum of money) of notice thereof to Borrower given in accordance with the
provisions hereof; provided, however, that this provision shall not require
notice to Borrower and an opportunity to cure any Curable Default of which
Borrower has had actual knowledge for the requisite number of days set forth.
Section 9.2 Remedies. Upon the occurrence of any Event of Default, the Holder
may
(a) by written notice to the Borrower, declare the entire principal
amount of the Loans then outstanding, including interest accrued thereon,
together with all other fees and charges payable in connection with the Loans,
to be immediately due and payable without presentment, demand, protest, notice
of protest or dishonor or other notice of default of any kind, all of which are
hereby expressly waived by the Borrower; and
(b) exercise any of the rights or remedies provided in the Collateral
Documents or avail themselves of any other rights or remedies provided by
applicable law; and
(c) set-off any funds of the Borrower in the possession of the Holder
against any amounts then due by the Borrower to the Holder pursuant to this
Agreement.
ARTICLE 10
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Fees and Costs
The Borrower shall pay:
Section 10.1 All closing costs, brokerage commissions, due diligence costs and
other fees and expenses incurred by the Holder in connection with the
transactions contemplated by this Agreement, including fees of KPMG Peat Marwick
not to exceed $10,000;
Section 10.2 A closing fee to the Holder of One Percent (1%) of all Loans made
at the Closing of, if applicable, any Future Acquisition Closing.
Section 10.3 The hourly fees and expenses of the Holder's attorneys for work
done in connection with the transactions contemplated by this Agreement;
Section 10.4 All of Holder's expenses of any nature which may be reasonably
necessary, either before or after a default hereunder, for the enforcement or
preservation of the Holder's rights under this Agreement, the Debentures, the
Warrants, or any other agreement of the Borrower mentioned herein, including but
not limited to reasonable attorneys' fees, appellate costs and fees, and costs
incurred by the Holder as a participant in any bankruptcy proceeding, workout,
debt restructuring, extension of maturity or document amendment, involving the
Borrower or any other obligor under the Debentures;
Section 10.5 All costs and fees, including attorneys' fees and expenses,
incurred by the Holder or its affiliates in connection with:
(a) any suit, action or claim of the Holder to enforce the provisions
of this Agreement or any other document related hereto; and
(b) any suit, action, claim or other liability asserted against the
Holder or its affiliates by a Company or ▇▇. ▇▇▇▇, in either case, in which
such parties do not prevail with respect to substantially all of their claims.
ARTICLE 11
Indemnification. Environmental Liability
The Borrower will indemnify the Holder and its directors, officers,
employees, agents and controlling persons (hereinafter "Indemnitees") against,
and hold the Holder and each such Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses (including attorneys' fees
and expenses) incurred by or asserted against the
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Holder or any such Indemnitee arising out of, in any way connected with, or
resulting from the following:
(a) this Agreement, the other documents contemplated hereby, the
performance by the parties hereto and thereto of their respective obligations
hereunder and thereunder, or consummation of the transactions contemplated
hereby and thereby;
(b) any and all liability and loss with respect to or resulting from
any and all claims for or on account of any broker's or finder's fees or
commissions with respect to this transaction as may have been created by
Borrower or its officers, partners, employees or agents, together with any stamp
or excise taxes which may become payable in connection with this transaction or
the issuance of stock hereunder;
(c) the spilling, leaking, pumping, pouring, unsettling, discharging,
leaching or releasing of hazardous substances on property owned by the Borrower
or any violations by the Borrower of CERCLA, the Federal Clean Water Act or any
other Federal, state or local environmental law, regulation or ordinance; and
(d) any claim, litigation investigation or proceeding relating to any
of the foregoing, whether or not the Holder or any such person is a party
thereto;
PROVIDED, HOWEVER, that any such indemnity shall not apply to any such
losses, claims, damages, liabilities or related expenses arising from the
Holder's gross negligence or willful misconduct.
The provisions of this Section shall remain operative and in full force
and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of the
Debentures, the invalidity or unenforceability of any term or provision of this
Agreement, the Debentures or any Collateral Documents, or any investigation made
by or on behalf of the Holder. All amounts due under this Article shall be
payable on written demand therefor.
ARTICLE 12
Remedies
Section 12.1 Cumulation. Receivership. None of the rights or remedies of the
Holder provided herein shall be exclusive, but each shall be cumulative with and
in addition to every other right or remedy of the Holder, now or hereafter
existing, at law or in equity, by statute, agreement or otherwise. In any action
under this Agreement, the Debentures or
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the Warrants, the Holder shall be entitled to appointment of a receiver to
administer the Borrower, or all or any portion of its assets as may be subject
to Holder's claims.
Section 12.2 No Implied Waver. No course of dealing between the Holder and any
other party hereto, or any failure or delay on the part of the Holder in
exercising any rights or remedies hereunder, shall operate as a waiver of any
rights or remedies of the Holder under this or any other applicable agreement.
No single or partial exercise of any rights or remedies hereunder shall operate
as a waiver or preclude the exercise of any other rights or remedies hereunder.
ARTICLE 13
Parties
This Agreement will bind and accrue to the benefit of Borrower the
Holder, any holders of the Warrants or the Debentures, and their successors and
assigns. Any purchaser, assignee, transferee or pledgee of the Warrants or
Debentures, or any document arising in connection with the transaction subject
to this Agreement (or any of them), sold, assigned, transferred, pledged or
repledged by a Holder shall forthwith become vested with and entitled to
exercise all rights and remedies provided herein to the Holder, as if said
purchaser, assignee, transferee or pledgee were originally named in this
Agreement in place of the Holder.
ARTICLE 14
Notice
All notices or communications under this Agreement or the Warrants or
Debentures shall be in writing and mailed, postage prepaid, or delivered as
follows:
To Holder: ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Principal
and to
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
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To the Company: IndeNet, Inc.
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
and to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, P.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or, to such subsequent addresses as may hereafter be specified by the parties.
Rejection or other refusal to accept, or the inability to deliver because of a
changed address of which no notice was given, shall not affect the date of such
notice sent in accordance with the foregoing provisions. Each such notice,
request or other communication shall be deemed sufficiently given, served, sent
and received for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, the affidavit of the messenger
or the answer back being deemed conclusive [but not exclusive] evidence of such
delivery), or at such time as delivery is refused by addressee upon
presentation.
ARTICLE 15
Relationship of the Parties
This Agreement provides, among other things, for the making, of loans
by the Holder, in its capacity as a lender, to the Borrower, in its capacity as
a borrower, and for the payment of interest and repayment of principal by the
Borrower to the Holder. The provisions herein for compliance with financial
covenants and delivery of financial statements are intended solely for the
benefit of the Holder to protect its interests as a lender in assuring, payments
of interest and repayment of principal, and as warrant or stock holder in
preserving its equity stake in the Borrower. Nothing contained in this
Agreement shall be construed as permitting or obligating the Holder to act as
financial or business advisors or consultants to the Borrower, as permitting or
obligating the Holder to control the Borrower or to conduct the Borrower's
operations, as creating any fiduciary obligation on the part of the Holder to
the Borrower, or as creating any joint venture, agency or other relationship
between the parties, other than as explicitly and specifically stated in this
Agreement. The Holder is not, and shall not be construed as, a partner, joint
venturer, alter-ego, manager, controlling person, operator or other business
participant of any kind of the Borrower, neither the Holder nor the Borrower
intend the Holder to assume such
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status, and, accordingly, the Holder shall not be deemed responsible for or a
participant in any acts or omissions of the Borrower. The Borrower represents
that it has had the advice of experienced counsel of its own choosing in
connection with the negotiation and execution of this agreement and with respect
to all matters contained herein.
ARTICLE 16
Controlling Law; Venue and Jurisdiction; Service of Process,
This Agreement shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the laws of the District of
Columbia, without regard to its principles of conflicts of law. Venue for any
adjudication hereof shall be only in the courts of the District of Columbia or
the Federal courts in such District, to the jurisdiction of which courts all
undersigned parties hereby submit as the agreement of such parties, as not
inconvenient, and as not subject to review by any court other than such courts
in the District of Columbia. All parties intend and agree that the courts of
jurisdictions in which the Borrower is incorporated and conducts its business
shall afford full faith and credit to any judgment rendered by a court of the
District of Columbia against the Borrower or other obligees hereunder, and that
such District of Columbia and federal courts shall have in personam jurisdiction
to enter a valid judgment against the Borrower or other obligees hereunder.
Service of any summons and/or complaint and any other process which may be
served on the Borrower in any action in respect hereto, may be made by mailing
via registered mail, or delivering a copy of such process to the Borrower at its
address specified above. The parties hereto agree that this submission to
jurisdiction and consent to service of process are reasonable and made for the
express benefit of the Holder.
ARTICLE 17
Waiver of Trial by Jury
Each party to this Agreement waives all right to trial by jury of all
claims, defenses counterclaims and suits of any kind directly or indirectly
arising from or relating to this Agreement or the Loan Documents or the dealings
of the parties in respect thereto. The parties hereto acknowledge and agree that
this Article is a material term of this Agreement and that the Holder would not
extend any funds under this Agreement if this waiver of jury trial were not a
part of this Agreement. Each party hereto acknowledges that this is a waiver of
a legal right and that it makes this waiver voluntarily and knowingly after
consultation with, or the opportunity to consult with, counsel of its choice.
Each party hereto agrees that all such claims, defenses, counterclaims and suits
shall be tried before a judge of competent jurisdiction, without a jury.
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ARTICLE 18
Captions; Severance.
The captions in this Agreement and the Warrants and Debentures are
inserted for reference only and shall be construed neither to limit nor amplify
the meaning of the other text of such documents. To the extent any provision
herein violates any applicable law, such provision shall be void and the balance
of this Agreement shall remain unchanged.
ARTICLE 19
Counterparts; Entire Agreement
This Agreement may be executed in as many counterpart copies and
counterpart signature pages as may be convenient. It shall not be necessary that
the signature of, or on behalf of, each party appear on each counterpart, but it
shall be sufficient that the signature of, or on behalf of, each party appear on
one or more of the counterparts. All counterparts shall collectively constitute
a single agreement. It shall not be necessary in any proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties. This Agreement,
the Warrants, the Debentures, the exhibits hereto and the documents mentioned
herein set forth the entire agreements and understandings of the parties hereto
in respect of this transaction. Any verbal agreements in respect of this
transaction are hereby terminated. The terms herein may not be changed verbally
but only by a writing signed by the party against which enforcement of the
change is sought.
ARTICLE 20
Definitions and Rules of Construction
Section 20.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms shall have the meanings as
follow:
(a) "Agreement" is defined as this Investment and Loan Agreement and
the exhibits and schedules hereto, as the same may be amended, supplemented,
extended, modified or replaced in accordance with the terms hereof;
(b) "Borrower" shall have the definition set out in the preamble
hereof;
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(c) "Closing" is defined as the consummation of this Agreement;
(d) "Closing Date" shall have the meaning set forth in Section 1.4
hereof;
(e) "Collateral Documents" shall have the definition set out in
Section 1.2 hereof;
(f) "Commitment Letter" shall have the meaning set forth in Recital A
hereof;
(g) "Companies" shall mean the Borrower, Enterprise Systems Group
Limited, an English company, Cable Computerized Management Systems, Inc., a
Michigan corporation, Enterprise Broadcast Systems Limited, an English
registered company, Enterprise Systems Group, Inc., a New York corporation,
Enterprise Air-Time Systems Limited, an English registered company, Enterprise
Systems Group (Australia) Pty Limited, an Australian registered company, Media
Information Services Limited, an English registered company;
(h) Cable Computerized Management Systems, Inc., a Michigan
corporation;
(i) "Debentures" shall have the definition set out in Section 1.1
hereof;
(j) "EBITDA" is defined as (a) net income; plus, (b) in each case, to
the extent deducted in determining net income for the relevant period (i) taxes,
(ii) interest expenses as determined with reference to Section 7.8 hereof and
(iii) amortization, depreciation and similar non cash charges; and minus (c) to
the extent included in determining net income for such period, extraordinary
gains; all calculated in accordance with GAAP;
(k) "ERISA" is defined as the Employee Retirement Income Security Act
of 1974;
(l) "fully diluted basis" shall mean, in respect to a corporation or
other legal entity, the condition wherein all outstanding options, warrants and
other securities of such entity which are exercisable or exchangeable for
capital stock or other equity interests in the entity, are, for the purpose of
calculating relative ownership rights, presumed to have been exercised or
exchanged in full;
(m) "Future Acquisition" shall have the meaning set forth in Section
1.1 hereof;
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(n) "Future Acquisition Closing" shall mean the consummation of any
Subsequent Loans by the Holder to the Borrower to finance a Future Acquisition;
(o) "Future Acquisition Closing Date". shall have the meaning set forth
in Section 1.5 hereof;
(p) "GAAP" is defined as generally accepted accounting principles of
the United States as established from time-to-time by the Financial Accounting
Standards Board, consistently applied and maintained throughout the period
indicated;
(q) "Guarantors" shall mean Cable Computerized Management Systems, Inc.
a Michigan corporation, and Enterprise Systems Group, Inc., a New York
corporation.
(r) "Holder" shall have the definition set out in the preamble hereof;
(s) "Indebtedness" shall mean all obligations for borrowed money,
obligations arising from installment purchases of property or services,
capitalized lease obligations, and the face amount of letters of credit and
without duplication all drafts drawn thereunder;
(t) "Initial Debenture" shall have the meaning set forth in Section 1.1
hereof;
(u) "Initial Loan" shall have the meaning set forth in Recital A
hereof;
(v) "Initial Warrant" shall have the meaning set forth in Section 2.1
hereof;
(w) "Liens" is defined as any interest in property securing an
obligation owed to, or a claim by, a person other than the owner of such
property, whether such interest is based on common law, statute or contract, and
including, but not limited to, the security interest, security title or lien
arising from a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes;
(x) "Litigation Schedule" shall have the meaning set forth in Section
5.3 hereof;
(y) "Loans" shall have the meaning set forth in Recital B hereof;
(z) "Loan Documents" shall have the definition set out in Section 1.2
hereof
(aa) "Permitted Liens " shall have the definition set out in Recital C,
hereof;
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(ab) "The Securities Act" is defined as the Securities Act of 1933, as
amended;
(ac) "Senior Debt" shall have the definition set out in Section 1.3
hereof;
(ad) "Shares" shall have the meaning set forth in Section 2.1 hereof;
(ae) "Subsequent Debenture" shall have the meaning set forth in Section
1.1 hereof;
(af) "Subsequent Loans" shall have the meaning set forth in forth in
Section 1. 1 hereof;
(ag) "Subsequent Warrant" shall have the meaning set forth in Section
2.1 hereof;
(ah) "U.S. Companies" shall mean the Borrower and the Guarantors;
(ai) "Warrants" shall mean either or both the Initial Warrant and the
Subsequent Warrants.
Section 20.2 Rules of Construction. The rule of ejusdem generis shall not be
applicable herein to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned. Unless the context otherwise requires:
(a) A term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) Provisions apply to successive events and transactions;
(d) "Herein", "Hereof", "Hereto", "Hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision unless otherwise so provided;
(e) The word "person" shall mean any natural person, partnership,
corporation, nation, state, government, union, association, agency, tribunal,
board, bureau and any other form of business or legal entity;
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(f) All words or terms used in this Agreement, regardless of the number
or gender in which they are used, shall be deemed to include any other number
and any other gender; and
(g) All financial terms used herein and not capitalized shall have the
meaning accorded them under GAAP.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first above written.
INDENET, INC.
By: ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, Vice-President
ALLIED CAPITAL CORPORATION
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Principal
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EXHIBITS
Document Number
Initial Debenture 1.1A
Subsequent Debenture 1.1B
Security Agreement 1.02A
UCC-1 Financing Statements 1.02B
Security Agreement for Intellectual Property 1.02C
Form of Collateral Assignment of Lease 1.02D
Guaranty 1.02E
Executive's Agreement 1.04
Initial Warrant 2.01A
Subsequent Warrant 2.01B
Charter and Bylaws 5.01A
Foreign Qualifications 5.01B
Resolutions of Boards of Directors of Borrower and Guarantors 5.01C
Legal Opinion of Borrower's Counsel 5.01D
Litigation Schedule 5.03
March 31, 1997 Financial Statements 5.05(a)
December 31, 1997 Financial Statements 5.05(b)
List of Leases 5.06A
Form of Customer Contract 5.06B
Offering Memorandum of December 1997 5.07A
Perfection Certificates 5.07B
List of Indebtedness of Companies 5.07C
Organization Chart 5.09
Incumbency Certificate 5.10
Loan Sources and Uses 5.15
Capitalization Chart 5.16A
Form of Management Option 5.16B
Insurance Certificate 6.10
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