Exhibit 10.16
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BUSINESS LOAN AND SECURITY AGREEMENT
dated as of August 12 1999,
by and among
EMPYREAN GROUP HOLDINGS, INC.,
BSG SOLUTIONS, INC.
and other Borrower parties hereto from time to time,
as the Borrowers,
FIRST UNION COMMERCIAL CORPORATION,
BANK OF AMERICA, N.A.,
and other Lender parties hereto from time to time,
as the Lenders,
FIRST UNION NATIONAL BANK,
as the Agent
and
BANK OF AMERICA, N.A.,
as Co-Lead Arranger
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TABLE OF CONTENTS
Page
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ARTICLE 1 COMMITMENT.................................................9
Section 1.1 Maximum Loan Amount........................................9
Section 1.2 Use of Proceeds...........................................10
Section 1.3 Maximum Advances; Borrowing Deficiency....................10
Section 1.4 Advances..................................................11
Section 1.5 Additional Mandatory Payments; Reduction of Commitment....12
Section 1.6 Field Audits..............................................12
Section 1.7 Fees......................................................12
Section 1.8 Termination of Advances; Reduction of the Revolving
Facility Commitment Amount................................13
Section 1.9 Appointment of Empyrean...................................14
Section 1.10 Joinder of New Subsidiaries and Affiliates................14
ARTICLE 2 LETTERS OF CREDIT.........................................14
Section 2.1 Issuance..................................................14
Section 2.2 Amounts Advanced Pursuant to Letters of Credit............15
Section 2.3 Letter of Credit Fees.....................................15
ARTICLE 3 SECURITY..................................................16
Section 3.1 Security Generally........................................16
Section 3.2 No Preference or Priority.................................17
Section 3.3 Release of Security Interest..............................17
ARTICLE 4 CONDITIONS TO THE OBLIGATIONS OF THE LENDER(S)............18
Section 4.1 Satisfaction of Commitment Letter Conditions;
Compliance with Agreements................................18
Section 4.2 No Default................................................19
Section 4.3 Documentation.............................................19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES............................20
Section 5.1 Corporate Existence and Qualification.....................20
Section 5.2 Corporate Authority; Noncontravention.....................20
Section 5.3 Financial Position........................................20
Section 5.4 Payment of Taxes..........................................20
Section 5.5 Accuracy of Submitted Information; Omissions..............21
Section 5.6 Intentionally Omitted.....................................21
Section 5.7 No Defaults or Liabilities................................21
Section 5.8 No Violations of Law......................................21
Section 5.9 Litigation and Proceedings................................21
Section 5.10 Security Interest in the Collateral.......................21
Section 5.11 Principal Place of Business; Location of Books and
Records; No Inventory.....................................22
Section 5.12 Fiscal Year...............................................22
Section 5.13 Pension Plans.............................................22
Section 5.14 O.S.H.A., ADA and Environmental Compliance................22
Section 5.15 Intellectual Property.....................................23
Section 5.16 Existing or Pending Defaults; Material Contracts..........24
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Section 5.17 Leases and Real Property..................................24
Section 5.18 Labor Relations...........................................24
Section 5.19 Empyrean..................................................24
Section 5.20 Ownership Interests.......................................25
Section 5.21 Contribution Agreement....................................25
Section 5.22 Solvency..................................................25
Section 5.23 Year 2000 Compliance......................................25
Section 5.24 Joint and Several Liability...............................25
Section 5.25 Survival of Representations and Warranties................25
ARTICLE 6 AFFIRMATIVE COVENANTS.....................................25
Section 6.1 Payment of Loan Obligations...............................26
Section 6.2 Payment of Taxes..........................................26
Section 6.3 Delivery of Financial and Other Statements................26
Section 6.4 Maintenance of Records; Review by the Lenders.............27
Section 6.5 Maintenance of Insurance Coverage.........................28
Section 6.6 Maintenance of Property/Collateral; Performance of
Contracts.................................................28
Section 6.7 Maintenance of Corporate Existence........................28
Section 6.8 Maintenance of Certain Accounts with Lender...............28
Section 6.9 Maintenance of Management.................................28
Section 6.10 Disclosure of Defaults, Etc...............................29
Section 6.11 Security Perfection; Payment of Costs.....................29
Section 6.12 Defense of Title to Collateral............................29
Section 6.13 Compliance with Law.......................................29
Section 6.14 Further Assurances; Additional Requested Information......29
Section 6.15 Financial Covenants.......................................30
Section 6.16 Year 2000 Compliance......................................31
Section 6.17 Landlord Waivers; Subordination...........................32
Section 6.18 Substitute Notes..........................................32
Section 6.19 Interest Rate Contracts...................................32
Section 6.20 Joint and Several Liability...............................32
ARTICLE 7 NEGATIVE COVENANTS........................................32
Section 7.1 Change of Control; Disposition of Assets; Merger..........33
Section 7.2 Margin Stocks.............................................34
Section 7.3 Change of Operations......................................34
Section 7.4 Judgments; Attachments....................................35
Section 7.5 Further Assignments; Performance and Modification of
Contracts; etc............................................35
Section 7.6 Affect Rights of the Agent or Lender(s)...................35
Section 7.7 Indebtedness; Granting of Security Interests..............35
Section 7.8 Dividends; Loans; Advances; Investments and Certain
Other Events..............................................36
Section 7.9 Lease Obligations.........................................36
Section 7.10 Capital Expenditures......................................36
Section 7.11 Lockbox Deposits..........................................36
Section 7.12 Shareholders Agreement; Recapitalization Agreement; Etc...36
Section 7.13 Sprint Master Services Agreement..........................37
Section 7.14 Transactions With Affiliates..............................37
Section 7.15 Joint and Several Liability...............................37
ARTICLE 8 COLLATERAL ACCOUNT........................................37
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ARTICLE 9 DEFAULT AND REMEDIES......................................38
Section 9.1 Events of Default.........................................38
Section 9.2 Remedies..................................................39
ARTICLE 10 THE AGENT; AGENCY.........................................41
Section 10.1 Appointment...............................................41
Section 10.2 General Nature of the Agent's Duties......................42
Section 10.3 Exercise of Powers........................................42
Section 10.4 General Exculpatory Provisions............................45
Section 10.5 Administration by the Agent...............................45
Section 10.6 Lenders Not Relying on the Agent or Other Lenders.........46
Section 10.7 Indemnification...........................................47
Section 10.8 The Agent in its Individual Capacity......................47
Section 10.9 Holders of Notes..........................................47
Section 10.10 Successor Agent...........................................47
Section 10.11 Additional Agents.........................................48
Section 10.12 Calculations..............................................48
Section 10.13 Funding by Agent..........................................48
Section 10.14 Benefit of Article........................................50
ARTICLE 11 CERTAIN ADDITIONAL RIGHTS AND OBLIGATIONS
REGARDING THE COLLATERAL..................................50
Section 11.1 Power of Attorney.........................................50
Section 11.2 Lockbox...................................................51
Section 11.3 Other Agreements..........................................52
ARTICLE 12 MISCELLANEOUS.............................................52
Section 12.1 Remedies Cumulative.......................................52
Section 12.2 Waiver....................................................52
Section 12.3 Notices...................................................53
Section 12.4 Entire Agreement..........................................53
Section 12.5 Relationship of the Parties...............................54
Section 12.6 Waiver of Jury Trial; Punative Damages....................54
Section 12.7 Submission to Jurisdiction; Service of Process; Venue.....54
Section 12.8 Changes in Capital Requirements...........................55
Section 12.9 Captions..................................................55
Section 12.10 Modification and Waiver...................................55
Section 12.11 Transferability...........................................55
Section 12.12 Governing Law; Binding Effect.............................56
Section 12.13 Gender; Number............................................56
Section 12.14 Materiality...............................................56
Section 12.15 Counterparts..............................................56
LIST OF EXHIBITS:
EXHIBIT 1 - Request for Advance
EXHIBIT 1(a) - Request for Swing Line Loan
EXHIBIT 2 - LIBOR Election Form and Certification
EXHIBIT 3 LIBOR Interest Election Procedure and Requirements
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EXHIBIT 4 - Non-Default Certificate
EXHIBIT 5 - Quarterly Covenant Compliance/Non-Default Certificate
EXHIBIT 6 Form of Joinder Agreement
EXHIBIT 7 Pricing Grid
EXHIBIT 8 Form of Payment Direction Letter
EXHIBIT 9 Form of Assignment and Acceptance Agreement
SCHEDULES
SCHEDULE 1 - EBITDA Adjustments
SCHEDULE 2 - Percentage
SCHEDULE 5.7 - Defaults
SCHEDULE 5.9 - Litigation and Proceedings
SCHEDULE 5.11 - Business Locations
SCHEDULE 5.13 - Pension Plan Matters
SCHEDULE 5.15 - Intellectual Property Royalty Arrangements
SCHEDULE 5.16(a) - Material Contracts
SCHEDULE 5.16(b) - Material Contract Litigation
SCHEDULE 5.17 - Leasehold Interest
SCHEDULE 5.18 - Term Employment Agreements
SCHEDULE 5.20 - Empyrean Stockholders
SCHEDULE 7.1(b) - Employee Incentive Compensation Plans
SCHEDULE 7.7 - Indebtedness Secured by Liens
SCHEDULE 7.8(b) - Loans, Salary Advances and Other Payments
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BUSINESS LOAN AND SECURITY AGREEMENT
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THIS BUSINESS LOAN AND SECURITY AGREEMENT, dated as of August 12, 1999,
is by and among (i) FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation, acting in its capacity as a Lender, and having offices at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (ii) BANK OF AMERICA,
N.A., a national banking association, acting in its capacity as a Co-Lead
Arranger and a Lender, and having offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (iii) each other person or entity who is now or
hereafter becomes a "Lender" pursuant to this Agreement; (iv) FIRST UNION
NATIONAL BANK, a North Carolina corporation, acting in its capacity as Agent for
the Lenders, having offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (v) EMPYREAN GROUP HOLDINGS, INC., a Delaware corporation
("Empyrean"), BSG SOLUTIONS, INC., a Georgia corporation ("BSGI"), each having
offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and (vi)
each other person or entity hereafter becoming a "Borrower" by executing, among
other things, a "Joinder Agreement" pursuant to this Agreement.
W I T N E S S E T H T H A T:
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In consideration of the mutual covenants and agreements herein contained,
Ten Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree,
represent and warrant as follows:
CERTAIN DEFINITIONS
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For the purposes of this Business Loan and Security Agreement, the terms
set forth below shall have the following definitions:
"Account Debtor" shall mean any person or entity who is (i) unrelated and
unaffiliated with any Borrower, and (ii) indebted to any Borrower for the
payment of any Receivable.
"Additional Base Rate Interest Margin" shall have the meaning assigned to
such term in the Notes and in Exhibit 7 attached to this Agreement.
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"Additional Libor Interest Rate Margin" shall have the meaning assigned
to such term in the Notes and in Exhibit 7 attached to this Agreement.
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"Adjusted EBITDA" shall mean, as of the date of any determination, the
Borrowers' net income (or loss), plus interest expense, plus all charges against
income for foreign, federal, state and local income taxes, plus depreciation
expense, plus amortization expense, and plus adjustments set forth on Schedule 1
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hereto and future adjustments approved by the Agent in its sole discretion, all
as determined on a consolidated basis in accordance with GAAP.
"Affected Lender" shall have the meaning attributed to such term in
Section 10.3(a) of this Agreement.
"Agent" shall mean First Union National Bank, a North Carolina
corporation, acting in its capacity as agent for the Lenders, or any successor
Agent appointed pursuant to Section 10.10 of this Agreement.
"Agreement" or "Loan Agreement" shall mean this Business Loan and
Security Agreement, together with all exhibits and schedules attached hereto and
any and all amendments or modifications of any of the foregoing made in
accordance with Section 12.10 of this Agreement.
"Applicable Interest Rate" shall mean either the (i) LIBOR or (ii) Base
Rate, as set forth in the Notes.
"Applicable Laws" shall mean any federal, state or local law, ordinance,
rule or regulation to which any Borrower or the property of any Borrower is
subject, whether domestic or international.
"Bank of America" shall mean Bank of America, N.A., a national banking
association.
"Base Rate" shall mean the higher of the (i) Federal Funds Rate, plus
one-half of one percent (.50%) or (ii) Prime Rate.
"Blocking Lender" shall have the meaning attributed to such term in
Section 10.3(a) of this Agreement.
"Borrower" or "Borrowers" shall mean Empyrean, BSGI, and/or each other
person or entity hereafter executing a Joinder Agreement pursuant to Section
1.10 of this Agreement, individually or collectively, as the context may
require.
"BSGI" shall have the meaning attributed to such term in the Preamble of
this Agreement.
"Business Day" shall mean any day other than (i) a Saturday, Sunday, or
public holiday under the laws of the Commonwealth of Virginia; (ii) any other
day on which banking institutions are authorized or obligated to close in the
city in which the Agent's office is located; or (iii) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any Loan bearing interest on a LIBOR basis, any day on which banks
are not open for trading in Dollar deposits in the London interbank market.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et
seq.).
"Closing" shall mean the settlement of the transactions contemplated
hereby.
"Closing Date" shall mean the date on which Closing occurs.
"Collateral" shall have the meaning assigned to such term in Section 3.1
of this Agreement.
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"Collateral Account" shall have the meaning assigned to such term in
Article 8 of this Agreement.
"Commitment Amount" shall mean the Revolving Facility Commitment Amount.
"Commitment Fee" shall have the meaning assigned to such term in Section
1.7(a) of this Agreement.
"Commitment Letter" shall mean that certain commitment letter dated July
27, 1999 issued by First Union, Bank of America and First Union Capital Markets
to ▇▇▇▇▇▇ Capital Partners.
"Contribution Agreement" shall mean that certain Contribution Agreement
of even date herewith, executed and delivered by and among the Borrowers
immediately prior to the Closing, as amended from time to time pursuant to the
terms thereof.
"Default Rate" shall mean the Applicable Interest Rate, plus the
applicable Additional Base Rate Interest Margin and/or the applicable Additional
Libor Interest Rate Margin (as the case may be), plus two percent (2%).
"Eligible Assignee" shall mean any Lender, an affiliate of any Lender, a
Federal Reserve Bank or any other "Qualified Institutional Buyer", as such term
is defined under Rule 144(A), promulgated under the Securities Act of 1933, as
amended.
"Empyrean" shall have the meaning attributed to such term in the Preamble
of this Agreement.
"Event of Default" shall have the meaning assigned to such term in
Section 9.1 of this Agreement.
"Facility" or "Facilities" shall mean the Revolving Facility and/or Swing
Line Facility, individually or collectively, as the context may require.
"Federal Funds Rate" for any day shall mean the rate per annum (rounded
upward to the nearest 1/8 of 1%) determined by the Agent to be the rate per
annum announced by the Federal Reserve Bank of New York (or any successor) on
such day as being the weighted average of the rates on overnight Federal Funds
transactions arranged by Federal Funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided that if such Federal Reserve
Bank (or its successor) does not announce such rate on any day, the "Federal
Funds Effective Rate" for such day shall be the Federal Funds Rate for the last
day on which such rate was announced.
"First Union" shall mean First Union Commercial Corporation, a North
Carolina corporation, acting individually, together with its successors and
assigns.
"Fixed Charge Coverage Ratio" shall have the meaning assigned to such
term in Section 6.15(b) of this Agreement.
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"GAAP" shall mean domestic generally accepted accounting principles,
consistently applied.
"Government" shall mean the United States government or any department,
instrumentality or agency thereof, and any state government or any department,
instrumentality or agency thereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances,
pollutants or contaminants as defined in CERCLA, HMTA, RCRA or any other
applicable environmental law, rule, order or regulation.
"Hazardous Wastes" shall mean, without limitation, all waste materials
subject to regulation under CERCLA, RCRA or analogous state law, and/or any
other applicable Federal and/or state law now in force or hereafter enacted
relating to hazardous waste treatment or disposal.
"HMTA" shall mean the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Sections 1801 et seq.)
"Indebtedness" shall have the meaning attributed to "Total Debt" set
forth in this Agreement.
"Intellectual Property Security Agreement" shall mean that certain
Intellectual Property Security Agreement of even date herewith, made by the
Borrowers in favor of the Agent for the ratable benefit of the Lenders, together
with any and all modifications and/or amendments thereto.
"Interest Expense" shall mean, as of the date of any determination, the
Borrowers' aggregate cash interest expense for borrowed money, plus the amount
of all other interest due (whether paid or not paid) on any indebtedness of the
Borrowers for the applicable measurement period, all as determined on a
consolidated basis in accordance with GAAP.
"Interest Period" means as to any Loan proceeds for which LIBOR based
interest has been elected in accordance with this Agreement, the period
commencing on and including the date such LIBOR election is effective (or the
effective date of the election to convert any portion of the Loan to a LIBOR
interest basis in accordance with the provisions of this Agreement) and ending
on and including the day which is 30, 60, 90 or 180 days thereafter, as
available, and as selected in accordance with the provisions of this Agreement;
provided, however, that: (i) the first day of any Interest Period shall be a
Business Day; (ii) if any Interest Period would end on a day that would not be a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day; and (iii) no Interest Period shall extend beyond the Revolving
Facility Maturity Date.
"Joinder Agreement" shall have the meaning assigned to such term in
Section 1.10 of this Agreement.
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"Lender" and/or "Lenders" shall mean, individually or collectively as the
context may require, First Union Commercial Corporation, a North Carolina
corporation, Bank of America, N.A., a national banking association, and any and
all other banking or financial institutions which have (i) extended credit to
the Borrowers pursuant to this Agreement, and (ii) agreed to be bound by the
terms and provisions of this Agreement.
"Letter of Credit" and "Letters of Credit" shall mean, respectively, each
and all of the trade and standby letters of credit issued pursuant to this
Agreement, if any.
"Letter of Credit Application" shall have the meaning assigned to such
term in Section 2.1 of this Agreement.
"Letter of Credit Administration Fee" shall have the meaning assigned to
such term in Section 2.3 of this Agreement.
"Letter of Credit Fee" shall have the meaning assigned to such term in
Section 2.3 of this Agreement.
"LIBOR" shall mean for any Interest Period with respect to any Loan
proceeds for which a LIBOR election has been made and is effective, the per
annum interest rate (rounded upward, if necessary, to the nearest next 1/8 of
1%) set forth on Telerate Page 3750, on an immediately available funds basis, at
or about 11:00 a.m. (London time) on the date that is two (2) Business Days
prior to the first day of such Interest Period, for the offering by leading
banks in the London Interbank Eurodollar market of Dollar deposits for a period
comparable in time to the duration of such Interest Period and in amounts
comparable to the amounts for which LIBOR is to be determined, adjusted for
reserve requirements, if any. If the Agent shall be unable to obtain LIBOR
quotes on Telerate Page 3750, LIBOR shall be the average of those rates quoted
on the REUTERS "LIBO" page for a period comparable to the applicable Interest
Period (rounded upward, if necessary, to the nearest next 1/8 of 1%).
"LIBOR Election Form and Certification" shall mean that certain LIBOR
Election Form and Certification attached as Exhibit 2 hereto.
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"Loan" and "Loans" shall mean, individually or collectively as the
context may require, the loan or loans made by the Lender(s) to the Borrowers in
the aggregate maximum principal amount of Forty Million and No/100 Dollars
($40,000,000.00), or so much thereof as shall be advanced or readvanced from
time to time, which are represented by the Facilities, and which shall be
evidenced by, bear interest and be payable in accordance with the terms and
provisions of the Notes and this Agreement.
"Loan Document" and "Loan Documents" shall mean, respectively, each and
all of this Agreement, the Notes, the Stock Security Agreement, the Intellectual
Property Security Agreement and each and every other document, instrument or
certificate now or hereafter executed and/or delivered by any Borrower in
connection with the Loan.
"Mandatory Payments" shall mean the mandatory payments required to be
made on the Loan pursuant to Section 1.5 of this Agreement.
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"Material Contract" shall mean (i) the Sprint Master Services Agreement;
and (ii) any and all other contracts or agreements to which a Borrower is a
party and pursuant to which such Borrower is or may be (a) entitled to receive
payments in excess of Five Hundred Thousand and No/100 Dollars ($500,000.00), in
the aggregate, per annum, or (b) obligated to make payments or have any other
obligation or liability thereunder (direct or contingent) in excess of Five
Hundred Thousand and No/100 Dollars ($500,000.00), in the aggregate, per annum.
"Non-Default Certificate" shall mean a certificate in the form of Exhibit
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4 hereto.
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"Note" and "Notes" shall mean, individually or collectively as the
context may require, the Revolving Facility Note(s), the Swing Line Note and/or
any other promissory notes executed pursuant to this Agreement, together with
all extensions, renewals, modifications, replacements and substitutions thereof
and therefor.
"Obligation" and "Obligations" shall mean, respectively, any and all
obligations or liabilities of any Borrower to any Lender(s) and/or the Agent
arising under this Agreement or any other Loan Document, or otherwise incurred
in connection with the Loan, whether now existing or hereafter created or
arising, direct or indirect, matured or unmatured, and whether absolute or
contingent, joint, several or joint and several, and no matter how the same may
be evidenced or shall arise (including, without limitation, any and all interest
rate protection agreements, overdraft protection contracts and foreign exchange
contracts).
"Original Lenders" shall have the meaning attributed to such term in
Section 10.3(a) of this Agreement.
"Payment Default" shall have the meaning attributed to such term in
Section 9.2(c) of this Agreement.
"Percentage" shall mean with respect to each Lender, the percentage set
forth next to such Lender's name on Schedule 2 to this Agreement, as the same
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may be amended from time to time.
"Permitted Liens" shall mean: (a) liens for taxes which are not yet due
and payable or which are being contested in good faith and by appropriate
proceedings, which (i) the Borrower has the financial ability to pay, including
penalties and interest, and (ii) the non-payment thereof will not result in the
execution of any such tax lien or otherwise adversely affect the interests of
the Agent in any part of the Collateral; (b) deposits or pledges to secure
obligations under workers' compensation, social security or similar laws,
incurred in the ordinary course of business; (c) liens securing indebtedness of
the Borrowers permitted by Section 7.7 of this Agreement; (d) cash deposits
pledged to secure the performance of bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature made in the ordinary course of
business; (e) mechanics', workmen's, repairmen's, warehousemen's, vendors' or
carriers' liens or other similar liens; provided that such liens arise in the
ordinary course of the Borrower's business and secure sums which are not past
due, or which secure sums which are past due so long as such liens are being
diligently contested in good faith by appropriate proceedings, are not in
jeopardy of being executed upon by legal process and have been separately
secured by cash deposits made to or pledges with the Agent in an amount adequate
to obtain the release of such liens; (f) except
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as otherwise provided in this Agreement, statutory or contractual landlord's
liens on the Borrower's tangible personal property located in the demised
premises; (g) zoning or other similar and customary land use restrictions, which
do not materially impair the use or value of the subject property; (h) judgment
liens which are not prohibited by Section 7.4 of this Agreement; (i) other liens
expressly permitted by the terms and provisions of this Agreement; and (j) liens
in favor of the Agent.
"Prepayment Fee" shall have the meaning attributed to such term in
Exhibit 3 to this Agreement.
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"Prime Rate" shall mean the rate of interest from time to time
established and publicly announced by First Union as its prime rate, in First
Union's sole discretion, which rate of interest may be greater or less than
other interest rates charged by First Union to other borrowers and is not solely
based or dependent upon the interest rate which First Union may charge any
particular borrower or class of borrowers.
"Quarterly Covenant Compliance Certificate" shall have the meaning
attributed to such term in Section 6.3(c) of this Agreement.
"RCRA" shall mean the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 et. seq.).
"Recapitalization" shall mean the transactions contemplated by the
Recapitalization Agreement.
"Recapitalization Agreement" shall mean that certain Recapitalization
Agreement dated August 12, 1999, ▇▇▇▇▇▇ Itech Holdings, L.L.C., a Delaware
limited liability company, BSG Solutions, Inc., a Delaware corporation and BSG
Holdings, Inc., a Georgia corporation, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as trustee of the
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust dated July 24, 1998 and the ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ Trust dated July 24, 1998, D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as trustee of the
▇▇▇▇▇▇ Family Trust dated May 22, 1995 and ▇▇▇▇▇▇ ▇▇▇▇▇, as trustee of the ▇▇▇▇▇
Family Trust dated November 28, 1998.
"Receivables" shall mean all of the Borrowers' present and future
accounts, contracts, contract rights, chattel paper, general intangibles, notes,
drafts, acceptances, chattel mortgages, conditional sale contracts, bailment
leases, security agreements, contribution rights and other forms of obligations
now or hereafter arising out of or acquired in the course of or in connection
with any business the Borrowers conduct, together with all liens, guaranties,
securities, rights, remedies and privileges pertaining to any of the foregoing,
whether now existing or hereafter created or arising, and all rights with
respect to returned and repossessed items of inventory.
"Reduction/Termination Date" shall mean the date on which, in accordance
with Section 1.8 of this Agreement, the Borrowers shall have terminated the
obligation of the Lender(s) to make additional advances under the Loan, or
irrevocably reduced the Revolving Facility Commitment Amount.
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"Request for Advance and Certification" shall mean the form Request for
Advance and Certification attached as Exhibit 1 hereto.
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"Required Lenders" shall mean, on any date of determination, (i) if only
two (2) Lenders shall be parties to this Agreement, then both Lenders; or (ii)
if more than two (2) Lenders shall be parties to this Agreement, then all of the
Lenders who, at any given time (a) are not in default under or in breach of any
of the terms and conditions of this Agreement applicable to such Lender, and (b)
hold Notes or participation interests representing, in the aggregate, at least
sixty-six and two-thirds percent (66 2/3%) of the aggregate Commitment Amount
(excluding the Swing Line Commitment Amount).
"Revolving Facility" shall mean the revolving credit facility being
extended pursuant to this Agreement, in the original maximum principal amount of
Forty Million and No/100 Dollars ($40,000,000.00).
"Revolving Facility Commitment Amount" shall mean Forty Million and
No/100 Dollars ($40,000,000.00), or if the Revolving Facility Commitment Amount
shall be permanently reduced pursuant to Section 1.8 of this Agreement, such
lesser amount.
"Revolving Facility Lender" shall mean each Lender who, as of any date of
determination, owns and holds a Percentage of the Revolving Facility Commitment
Amount.
"Revolving Facility Maturity Date" shall mean August 12, 2004.
"Revolving Facility Note" and "Revolving Facility Notes" shall mean each
and all of the Revolving Facility Promissory Notes of even date herewith, made
by the Borrowers and payable to the order of certain Lenders, in the aggregate
maximum principal amount of Forty Million and No/100 Dollars ($40,000,000.00),
together with all extensions, renewals, modifications, replacements and
substitutions thereof or therefor.
"Shareholders Agreement" shall mean that certain Shareholders Agreement
of even date herewith, by and among Empyrean, ▇▇▇▇▇▇ ITech Holdings, LLC and the
other shareholder parties thereto.
"Sprint Master Services Agreement" shall mean that certain Master
Services Agreement between Spring/United Management Company and BSGI, having an
effective date of January 1, 1996, as amended from time to time in accordance
with the terms of this Agreement, together with all contract orders issued from
time to time thereunder.
"Stock Security Agreement" shall mean that certain Stock Security
Agreement of even date herewith, by and between Empyrean and the Agent, made for
the benefit of the Lender(s), together with any and all amendments and/or
modifications thereof.
"Swing Line Commitment" shall mean the Swing Line Lender's obligation to
make Swing Line Loans to the Borrowers in an aggregate principal amount not to
exceed Five Million and No/100 Dollars ($5,000,000.00).
"Swing Line Commitment Amount" shall mean Five Million and No/100 Dollars
($5,000,000.00).
8
"Swing Line Commitment Period" shall mean the period commencing on the
Closing Date and ending on the Swing Line Termination Date.
"Swing Line Facility" shall mean the swing line credit facility being
extended pursuant to this Agreement, in the original maximum principal amount
equal to the Swing Line Commitment Amount.
"Swing Line Lender" shall mean First Union Commercial Corporation, a
North Carolina corporation.
"Swing Line Loan" or "Swing Line Loans" shall have the meaning attributed
to such term in Section 1.1(b) of this Agreement.
"Swing Line Note" shall mean that certain Swing Line Promissory Note of
even date herewith, made by the Borrowers and payable to the order of the Swing
Line Lender, in the aggregate maximum principal amount of Five Million and
No/100 Dollars ($5,000,000.00) or so much thereof as shall be advanced, together
with all extensions, renewals, modifications and substitutions thereof or
therefor.
"Swing Line Outstandings" shall mean, as of any date of determination,
the aggregate principal amount of all Swing Line Loans then outstanding.
"Swing Line Termination Date" shall mean the fifth (5th) Business Day
prior to the Revolving Facility Maturity Date, or such earlier date on which the
Revolving Facility shall terminate, as provided herein.
"Total Debt" or "Indebtedness" shall mean, as of the date of
determination, the actual amount of borrowed money (including, without
limitation, subordinated debt, capital leases and synthetic leases, that remain
unpaid or outstanding as of the date of any determination), plus the aggregate
amount of any and all financial guarantees, contingent obligations and the face
amount of any and all outstanding letters of credit; it being understood and
agreed that trade debt incurred in the ordinary course of the Borrowers'
business shall not be included in the computation of Total Debt or Indebtedness.
"Total Debt to EBITDA Ratio" shall have the meaning attributed to such
term in Section 6.15 of this Agreement.
"Working Capital Purposes" shall mean the use of Loan proceeds for
purposes other than permitted acquisitions and/or mergers.
ARTICLE 1
---------
COMMITMENT
Section 1.1 Maximum Loan Amount.
----------- -------------------
(a) Subject to the terms and conditions of this Agreement, (i) each Lender
severally agrees to make the Loan to the Borrowers (except for the Swing Line
Loan, which shall be extended only by the Swing Line Lender), with the maximum
amount of each Lender's
9
obligation being equal to the Lender's Percentage of the Revolving Facility
Commitment Amount; and (ii) as more fully set forth in Section 1.1(b) below, the
Swing Line Lender shall make the Swing Line Loan to the Borrowers. The Loan,
including the Swing Line Loan, shall bear interest and be payable in accordance
with the terms and provisions of the Notes, each of which shall be payable to
the order of a Lender and all of which together (excluding the Swing Line Note)
shall equal the Commitment Amount. The Notes shall be executed and delivered to
the Agent on the Closing Date, and may be substituted and/or replaced from time
to time upon the Agent's request if the number of Lender parties to this
Agreement shall change.
(b) Subject to the terms and conditions of this Agreement, the Swing Line
Lender shall make swing line loans (each, a "Swing Line Loan" and collectively,
the "Swing Line Loans") to the Borrowers from time to time during the Swing Line
Loan Commitment Period, in the aggregate principal amount at any one time
outstanding not to exceed Five Million and No/100 Dollars ($5,000,000.00);
provided, however, that at no time may the aggregate outstanding principal
amount of the Swing Line Loans, plus the aggregate principal amount of the
Revolving Facility (including the aggregate face amount of all Letters of Credit
outstanding), exceed the Revolving Facility Commitment Amount. During the Swing
Line Commitment Period, the Borrowers may use the Swing Line Commitment by
borrowing, repaying Swing Line Loans in whole or in part, and reborrowing, all
in accordance with the terms of this Agreement. At the request of the Swing Line
Lender, the Agent may, at any time, on behalf of the Borrowers (which hereby
irrevocably direct the Agent to act on their behalf) request each Lender having
a Percentage of the Revolving Facility, including the Swing Line Lender, to
make, and each such Lender, including the Swing Line Lender, shall make an
advance under the Revolving Facility, in an amount equal to such Lender's
Percentage of the Revolving Facility, of the amount of the Swing Line
Outstandings as of the date such request is made. In such event, each such
Lender shall make the requested proceeds available to the Agent for the account
of the Swing Line Lender in accordance with the funding provisions set forth in
this Agreement. The proceeds of the Revolving Facility advanced pursuant to this
Section 1.1(b) shall be immediately applied to repay the Swing Line
Outstandings.
Section 1.2 Use of Proceeds. The Loan shall be used by the Borrowers only
---------------
for the following purposes: (i) to refinance certain existing indebtedness of
the Borrowers; (ii) to finance certain costs and expenses incurred by the
Borrowers in connection with the Closing; (iii) to finance the Recapitalization
and certain costs and expenses incurred by the Borrowers in connection with the
Recapitalization; (iv) to finance acquisitions permitted pursuant to Section 7.1
of this Agreement; and (v) for working capital and general corporate needs.
Notwithstanding the foregoing, Swing Line Loans made pursuant to this Agreement
shall be used solely for general working capital purposes. The Borrowers agree
that the Loan proceeds (including, without limitation, Swing Line Loan proceeds)
shall not be used for any other purpose without the Agent's prior written
consent.
Section 1.3 Maximum Advances; Borrowing Deficiency.
--------------------------------------
(a) Notwithstanding any term or provision of this Agreement or any other
Loan Document to the contrary, it is understood and agreed that in no event
whatsoever shall the Agent or any Lender be obligated to advance any amount
under the Revolving Facility or Swing Line Facility, or issue any Letter(s) of
Credit hereunder, if such advance or the issuance of such Letter(s) of Credit
would cause the aggregate amount of the outstanding Loans under the
10
Revolving Facility, the face amount of all outstanding Letters of Credit, and
the Swing Line Outstandings (collectively, the "Loan Outstandings") to exceed
(i) the Revolving Facility Commitment Amount; or (ii) if (both prior to and
after giving effect to the requested advance or Letter of Credit) all such Loan
Outstandings shall have been used for Working Capital Purposes, Ten Million and
No/100 Dollars ($10,000,000.00).
(b) If at any time the Loan Outstandings exceed the Revolving Facility
Commitment Amount or if at any time the Loan Outstandings used for Working
Capital Purposes exceeds $10,000,000.00 (such excess being referred to herein as
a "Borrowing Deficiency"), the Borrowers shall immediately make a principal
payment in the amount of the Borrowing Deficiency.
Section 1.4 Advances.
--------
(a) Agreement to Advance and Readvance; Procedure. So long as no Event of
---------------------------------------------
Default shall have occurred and be continuing, and no act, event or condition
shall have occurred and be continuing which with notice or the lapse of time, or
both, shall constitute an Event of Default, and subject to the terms and
provisions of this Agreement, the Lender(s) shall advance and readvance the
proceeds of the Revolving Facility and the Swing Line Facility from time to time
in accordance with this Agreement. Requests for advances of Loan proceeds with
respect to the Revolving Facility shall be in the form of Exhibit 1 hereto, and
---------
requests for advances of Swing Line Loan proceeds shall be in the form of
Exhibit 1(a) hereto; it being understood and agreed that in each case such
------------
requests may be made via facsimile on a Business Day if the Borrower provides
the Agent, in advance, with a written list of the names of the specific officers
authorized to request disbursements by facsimile. Upon request by the Agent, the
Borrower shall confirm in an original writing each facsimile request for advance
made by the Borrower. Notwithstanding the foregoing, (a) the Lender(s) shall
have no obligation to make any advance with respect to the Revolving Facility
after the Revolving Facility Maturity Date; and (b) the Swing Line Lender shall
have no obligation to make any advance with respect to the Swing Line Facility
after the Swing Line Termination Date.
(b) Interest Rate Election; Certain Advance Procedures and Limits. Amounts
-------------------------------------------------------------
advanced in connection with the Loan shall bear interest on a Base Rate basis or
LIBOR basis as more fully set forth in the Notes, except that Swing Line Loans
shall only be made available to the Borrowers on a Base Rate basis. The
Borrowers' right to request LIBOR based interest, as well as the terms,
conditions and requirements relating thereto, are set forth in the Notes and/or
on Exhibit 3 of this Agreement, and the parties expressly acknowledge and
---------
consent to such terms, conditions and requirements. Advances bearing interest on
a Base Rate basis shall be in minimum and incremental amounts of One Hundred
Thousand and No/100 Dollars ($100,000.00), and shall be made available on a
same-day basis, if requested by 12:00 Noon Washington, D.C. time on a Business
Day. Advances bearing interest on a LIBOR basis shall be in a minimum amount of
Five Hundred Thousand and No/100 Dollars ($500,000.00) and in incremental
amounts of One Hundred Thousand and No/100 Dollars ($100,000.00), and shall be
made available three (3) Business Days after request therefor, subject to the
terms of the Loan Documents. It is expressly understood and agreed that the
Borrowers shall have the right, subject to the foregoing terms, conditions and
requirements, to elect that amounts previously advanced and outstanding under
the Facilities bear interest on a LIBOR basis following the
11
Agent's receipt of a LIBOR Election Form and Certification, in the form attached
as Exhibit 2 to this Agreement.
---------
Section 1.5 Additional Mandatory Payments; Reduction of Commitment. In
------------------------------------------------------
addition to all other sums payable by the Borrowers pursuant to any of the
Notes, this Agreement or any other Loan Document, the Borrowers shall also make
mandatory payments on the Notes (applied to the Facilities as provided
hereinbelow), in the amount of one hundred percent (100%) of the cash proceeds
(net of reasonable and customary costs paid to unrelated and unaffiliated third
parties in connection with the particular transaction) arising from (i) any sale
or disposition of any of the assets of any Borrower which results in cash
proceeds in excess of Five Hundred Thousand and No/100 Dollars ($500,000.00),
individually or in the aggregate, and which is (a) not in the ordinary course of
business; or (b) prohibited by the terms of this Agreement; (ii) the receipt by
or on behalf of any Borrower of insurance proceeds (other than recoveries due to
damage to tangible property, which recoveries are promptly applied toward repair
or replacement of the damaged property); (iii) the reversion of any pension plan
assets; (iv) the issuance by any Borrower of subordinated debt securities or
other debt obligations (other than in connection with debt expressly permitted
pursuant to Section 7.7 of this Agreement); (v) the issuance by any Borrower of
any equity interests in such Borrower (other than (A) equity issuances not
otherwise prohibited by the terms of this Agreement which have been made as
consideration for an acquisition or merger, (B) equity issuances not otherwise
prohibited by the terms of this Agreement which have been made to any of the
persons or entities set forth on Schedule 5.20 attached hereto, (C) equity
-------------
issuances made pursuant to an Agent-approved stock option program), and (D)
equity issuances otherwise approved by the Agent in writing; and/or (vi) the
receipt by or on behalf of the Borrower of any net working capital adjustment
payable pursuant to Section 10 of the Recapitalization Agreement. Such mandatory
payments shall be due and payable in full upon the occurrence of any of the
events described in clauses (i) though (iv) above, and shall be accompanied by
the applicable Prepayment Fee, if any, payable pursuant to Exhibit 3 of this
---------
Agreement. Such mandatory payments shall be applied first to the Swing Line
Outstandings (if any), and then to principal outstanding under the Revolving
Facility; it being understood and agreed that if any mandatory payments shall be
applied to principal outstanding under the Revolving Facility in accordance with
this Section 1.5, the Revolving Facility Commitment Amount shall be permanently
reduced by the amount of such payment(s).
Section 1.6 Field Audits. The Agent will schedule and conduct such field
------------
audits with respect to the Collateral and the Borrowers' accounts receivable,
inventory, business and operations, as the Agent deems necessary or appropriate,
in its sole discretion. All field audits shall be at the cost and expense of the
Borrowers; provided, however that the cost and expense to the Borrowers of field
audits shall be limited to the cost and expense of no more than two (2) field
audits conducted during any twelve (12) month period (the "Field Audit Cost
Limitation"), except that any field audit conducted during an Event of Default
or with respect to the joinder of a new Borrower pursuant to Section 1.10 of
this Agreement shall not be subject to, nor count toward, the Field Audit Cost
Limitation.
Section 1.7 Fees.
----
(a) Commitment Fee. In addition to principal, interest and other sums
--------------
payable under the Notes, so long as any amounts remain outstanding in connection
with the Revolving Facility, or any Lender has any obligation to make any
advance in connection
12
therewith, the Borrowers agree to pay to the Agent, for the benefit of the
Lender(s), pro-rata based on each Lender's Percentage of the Revolving Facility
Commitment Amount, a quarter-annual commitment fee (the "Commitment Fee"), at
the annual rate corresponding to the Borrower's Total Debt to EBITDA Ratio
reported as of the immediately preceding quarter, as set forth on Exhibit 7
---------
hereto, and calculated on the difference between (i) the Revolving Facility
Commitment Amount, and (ii) the sum of the average daily outstanding principal
balance of the Revolving Facility and the Swing Line Facility during the
applicable quarter, plus the aggregate face amount of all Letters of Credit
issued and/or outstanding during the applicable quarter. The Commitment Fee
shall be calculated on the basis of the actual number of days elapsed and a
three hundred sixty (360) day year, shall be due for any quarter in which the
Revolving Facility is available to the Borrower or outstanding (for all or any
portion of such quarter), and shall be payable in arrears, commencing on
September 30, 1999, and continuing on the last Business Day of every third (3rd)
calendar month thereafter so long as this Agreement remains in effect.
(b) Out-of-Pocket Fees and Expenses. The Borrowers shall timely pay all
-------------------------------
reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees and expenses of counsel for the Agent and each Lender, and of other special
and local counsel and other experts, if any, engaged by the Agent and each
Lender) from time to time incurred by the Agent and/or each Lender in connection
with the Agent's and/or each Lender's administration of, preservation of rights
in and enforcement of this Agreement, the other Loan Documents and the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, the Borrowers shall be liable for all reasonable out-of-pocket
costs and expenses associated with fixed asset appraisals and environmental
reports deemed necessary or appropriate by the Agent, in its reasonable
discretion, as well as any and all amendments, waivers and/or consents relating
to any of the Facilities. Furthermore, following the occurrence of an Event of
Default which has continued unremedied beyond any applicable notice and/or grace
period, the Borrowers shall be liable for all reasonable attorneys' fees and
expenses incurred by the Agent and/or each Lender in connection with the Agent's
or such Lender's preservation of rights in and enforcement of this Agreement,
the other Loan Documents and the transactions contemplated by this Agreement.
(c) Letter of Credit Fees. The Borrowers shall also pay all fees and
---------------------
expenses related to Letters of Credit, as set forth in Article 2 below.
Section 1.8 Termination of Advances; Reduction of the Revolving Facility
------------------------------------------------------------
Commitment Amount. The Borrowers may (a) terminate the obligation of the
-----------------
Lender(s) to make additional advances under the Revolving Facility, or (b)
irrevocably reduce the Revolving Facility Commitment Amount in whole or in part;
provided that, in each case, (i) the Borrowers shall have provided written
notice thereof to the Agent at least five (5) Business Days prior to the
Reduction/Termination Date; (ii) any reduction of the Revolving Facility
Commitment Amount shall be in minimum and incremental amounts of One Million and
No/100 Dollars ($1,000,000.00); (iii) simultaneously with any such reduction or
termination of the Revolving Facility Commitment Amount, the Borrowers shall
have paid to the Agent, for the benefit of the Lender(s), pro-rata based on each
Lender's Percentage of the Revolving Facility Commitment Amount, the applicable
Prepayment Fee, if any; and (iv) no Event of Default exists hereunder and no
act, event or condition shall have occurred or be continuing which with notice
or the passage of time, or both, would constitute an Event of Default.
13
Section 1.9 Appointment of Empyrean. Each Borrower acknowledges that (i)
-----------------------
the Lenders have agreed to extend credit to each of the Borrowers on an
integrated basis for the purposes herein set forth; (ii) it is receiving direct
and/or indirect benefits from each such extension of credit; and (iii) the
obligations of the "Borrower" or "Borrowers" under this Agreement are the joint
and several obligations of each Borrower. To facilitate the administration of
the Loan, each Borrower hereby irrevocably appoints Empyrean as its true and
lawful agent and attorney-in-fact with full power and authority to execute,
deliver and acknowledge on such Borrower's behalf, each Request for Advance and
Certification, Non-Default Certificate and all other Loan Documents or other
materials provided or to be provided to the Agent or Lenders pursuant to this
Agreement or in connection with the Loan. This power-of-attorney is coupled with
an interest and cannot be revoked, modified or amended without the prior written
consent of the Agent. Upon request of the Agent, each Borrower shall execute,
acknowledge and deliver to the Agent a form Power of Attorney confirming and
restating the power-of-attorney granted herein.
Section 1.10 Joinder of New Subsidiaries and Affiliates. Any present or
------------------------------------------
future subsidiary of any Borrower in which such Borrower now or hereafter owns,
directly or indirectly, an ownership interest of greater than fifty percent
(50%) shall, at the Agent's option, execute and deliver to the Agent (a) a
Joinder Agreement in the form attached hereto as Exhibit 6 (a "Joinder
---------
Agreement"), pursuant to which such subsidiary shall (i) join in and become a
party to this Agreement and the other Loan Documents; (ii) agree to comply with
and be bound by the terms and conditions of this Agreement and all of the other
Loan Documents; and (iii) become a "Borrower" and thereafter be jointly and
severally liable for the performance of all the past, present and future
obligations and liabilities of the Borrowers hereunder and under the Loan
Documents; and (b) such other documents, instruments and agreements as may be
reasonably required by the Agent in connection therewith (including, without
limitation, an opinion of counsel), in form and substance acceptable to the
Agent in all respects. The Borrowers acknowledge and agree that the Agent shall
perform a field audit of the accounts receivable, inventory, business and
operations of any present or future subsidiary proposed to be joined as a
"Borrower" hereunder, if requested by the Required Lenders, and without limiting
any other terms and provisions of this Agreement, the results of such field
audit must be reasonably satisfactory to the Agent.
ARTICLE 2
---------
LETTERS OF CREDIT
Section 2.1 Issuance. The Borrowers and Lenders acknowledge that from time
--------
to time the Borrowers may request that First Union issue or amend Letter(s) of
Credit. Subject to the terms and conditions of this Agreement, and any other
reasonable requirements for letters of credit normally and customarily imposed
by First Union from time to time, First Union agrees to issue such requested
letters of credit, provided that (a) such requested letters of credit are used
solely for purposes consistent with the permitted uses of Loan proceeds set
forth in Section 1.2 of this Agreement; and (b) no Event of Default has occurred
and is continuing, and no act, event or condition which with notice or the
passage of time, or both, would constitute an Event of Default has occurred and
is continuing. If any such Letter(s) of Credit are issued by First Union, each
Revolving Facility Lender shall purchase from First Union a risk participation
with respect to such Letter(s) of Credit in an amount equal to such Lender's
Percentage of such Letter(s) of
14
Credit. First Union shall have no obligation to issue any Letter of Credit which
has an expiration date beyond the Revolving Facility Maturity Date, unless the
Borrowers shall have deposited with the Agent, concurrent with the issuance of
any such Letter of Credit, cash security therefor in an amount equal to the face
amount of the Letter of Credit. Any request for a Letter of Credit shall be made
by the Borrowers submitting to the Agent an Application and Agreement for Letter
of Credit or Amendment to Letter of Credit (each being herein referred to as a
"Letter of Credit Application") on First Union's standard form, at least three
(3) Business Days prior to the date on which the issuance or amendment of the
Letter of Credit shall be required, which Letter of Credit Application shall be
executed by an authorized officer of the Borrower, and be accompanied by such
other supporting documentation and information as the Agent may from time to
time reasonably request. Each Letter of Credit Application shall be deemed to
govern the terms of issuance of the subject Letter of Credit, except to the
extent inconsistent with the terms of this Agreement. It is understood and
agreed that Letters of Credit shall not be issued for durations of longer than
one (1) year. Any outstanding Letter of Credit may be renewed from time to time;
provided that (i) at least sixty (60) days' prior written notice thereof shall
have been given by the Borrowers to the Agent; and (ii) as of the date of
application for such renewal, and as of the date of issuance of such renewal, no
Event of Default exists under the terms and provisions of the particular Letter
of Credit or this Agreement, and no act, event or condition has occurred which
with notice or the passage of time, or both, would constitute an Event of
Default under the terms and provisions of the particular Letter of Credit or
this Agreement.
Section 2.2 Amounts Advanced Pursuant to Letters of Credit. Upon the
----------------------------------------------
issuance of any Letter(s) of Credit (i) any amounts drawn under any Letter of
Credit shall be deemed advanced ratably under the Revolving Facility Notes,
shall bear interest and be payable in accordance with the terms of the Revolving
Facility Notes and shall be secured by the Collateral (in the same manner as all
other sums advanced under the Revolving Facility Notes); and (ii) each Revolving
Facility Lender shall purchase from First Union such risk participations in the
Letter(s) of Credit as shall be necessary to cause each such Lender to share the
funding obligations with respect thereto ratably in accordance with its
particular Percentage. It is expressly understood and agreed that all
obligations and liabilities of the Borrowers to First Union in connection with
any such Letter(s) of Credit shall be deemed to be "Obligations," and the Agent
shall not be required to release its security interest in the Collateral until
(i) all Notes and all other sums due to the Lender(s) in connection with the
Loan have been paid and satisfied in full, (ii) all Letters of Credit have been
canceled or expired, and (iii) no Lender has any further obligation or
responsibility to make additional Loan advances or issue additional Letters of
Credit. Furthermore, in no event whatsoever shall First Union have any
obligation to issue any Letter of Credit which would cause the face amount of
all then outstanding Letters of Credit issued for the benefit of the Borrower,
in the aggregate, to exceed Five Million Dollars ($5,000,000.00).
Section 2.3 Letter of Credit Fees. In connection with each Letter of Credit
---------------------
issued, amended or renewed pursuant to this Agreement, the Borrowers shall pay:
(i) to the Revolving Facility Lender(s) ratably, in advance, a per annum fee
(the "Letter of Credit Fee") at the annual rate corresponding to the Borrower's
Total Debt to EBITDA Ratio reported as of the immediately preceding quarter, as
set forth on Exhibit 7 hereto, which shall be calculated on the face amount of
---------
each Letter of Credit as of the date of issuance (or the anniversary or
amendment date, as applicable), and shall be calculated on the basis of the
actual number of days elapsed and a three hundred sixty (360) day year; and (ii)
to First Union, customary issuance and
15
administrative charges in an amount equal to one-eighth of one percent (.125%)
of the face amount of each Letter of Credit issued and/or outstanding (the
"Letter of Credit Administration Fee"). The Letter of Credit Administration Fee
shall be due and payable in full, in advance, on the date the Letter of Credit
is issued, amended or renewed.
ARTICLE 3
---------
SECURITY
Section 3.1 Security Generally. As collateral security for the Loan and all
------------------
other Obligations, the Borrowers hereby grant and convey to the Agent, for the
ratable benefit of the Lender(s), a security interest in all of the following
(collectively, the "Collateral"):
Receivables. All of each Borrower's present and future accounts,
-----------
contracts (including, without limitation, the Recapitalization
Agreement and the Sprint Master Services Agreement), contract
rights, chattel paper, general intangibles, notes, drafts,
acceptances, chattel mortgages, conditional sale contracts, bailment
leases, security agreements and other forms of obligations now or
hereafter arising out of or acquired in the course of or in
connection with any business any Borrower conducts, together with
all liens, guaranties, securities, rights, remedies and privileges
pertaining to any of the foregoing, whether now existing or
hereafter created or arising, and all rights with respect to
returned and repossessed items of inventory;
Inventory. All of each Borrower's inventory and goods (as defined
---------
in the Uniform Commercial Code in effect in the Commonwealth of
Virginia) now or hereafter owned by each Borrower, whenever acquired
and wherever located, and whether held for sale or lease or
furnished or to be furnished under contracts of service, and all raw
materials, work in process and materials now or hereafter owned by
any Borrower, wherever located, and used or consumed in its
business, including all returned and repossessed items; and all
other property now or hereafter constituting inventory (as defined
in the Uniform Commercial Code in effect in the Commonwealth of
Virginia);
Other Collateral. All of each Borrower's present and future
----------------
furniture, fixtures, equipment, machinery, supplies and other assets
and personal property of every type or nature whatsoever, including
without limitation, all of each Borrower's present and future
investment property (as defined in the Uniform Commercial Code in
effect in the Commonwealth of Virginia), instruments, documents,
inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, goodwill,
registrations, copyrights, licenses, franchises, customer
16
lists, tax refunds, tax refund claims, rights of claims against
carriers and shippers, leases and rights to indemnification;
Leases. All of each Borrower's present and future right, title and
------
interest in and to any and all leases, occupancy agreements,
subleases, contracts, licenses, agreements and other understandings
of or relating to the use, enjoyment and occupancy of real property
or any improvements thereon;
Stock. All of Empyrean's right, title and interest in and to all of
-----
the issued and outstanding capital stock of the Borrowers (other
than Empyrean), whether common and/or preferred, and whether now or
hereafter issued or outstanding and whether now or hereafter
acquired by Empyrean, together with all voting or other rights
appurtenant thereto, including, without limitation, the right to
receive all dividends and/or distributions, and all proceeds
thereof, pursuant to the terms and conditions of the Stock Security
Agreement; together with all right, title and interest of any
Borrower in and to all of the issued and outstanding capital stock
or other ownership interests of any entity, whether now or hereafter
issued or outstanding and whether now or hereafter acquired by such
Borrower, together with all voting or other rights appurtenant
thereto, including, without limitation, the right to receive all
dividends and/or distributions, and all proceeds thereof;
Accounts. All of each Borrower's bank accounts, cash from time to
--------
time on deposit therein and all interest from time to time earned
thereon, pursuant to the Pledge of Accounts;
Records. All of each Borrower's records, documents and files, in
-------
whatever form, pertaining to the foregoing or any part thereof; and
Proceeds, Etc. Any and all cash and non-cash proceeds, increases,
--------------
substitutions, replacements and/or additions to any or all of the
foregoing.
Section 3.2 No Preference or Priority. It is expressly understood and
-------------------------
agreed that each of the Notes shall be secured without preference or priority;
it being the intention of the parties that the Notes shall be co-equal and
coordinate in right of payment of principal, interest, late charges and other
sums due thereunder, except as may otherwise be expressly set forth herein.
Section 3.3 Release of Security Interest. At such time as (i) the Notes and
----------------------------
all other sums due to the Lender(s) pursuant to all of the Loan Documents and/or
in connection with the Loan have been paid and satisfied in full, (ii) all
Letters of Credit and interest rate protection agreements have been cancelled,
terminated or expired, and (iii) no Lender has any further obligation or
responsibility hereunder to make additional Loan advances or issue additional
Letters of Credit, the Agent shall, upon request of the Borrower and at no cost
to the Agent or
17
any Lender, execute and deliver such documentation as the Borrower may
reasonably request to release the Collateral from the Agent's lien, terminate
this Agreement and ▇▇▇▇ the Notes paid and satisfied in full.
ARTICLE 4
---------
CONDITIONS TO THE OBLIGATIONS OF THE LENDER(S)
The obligation of the Lender(s) to proceed to Closing shall be subject to
the following conditions:
Section 4.1 Satisfaction of Commitment Letter Conditions; Compliance with
-------------------------------------------------------------
Agreements. The Borrowers shall have satisfied all conditions precedent to
----------
Closing set forth in the Commitment Letter, including without limitation, each
of the following items:
(a) Execution and delivery of Loan Documents, as well as other ancillary
documentation, in each case satisfactory to the Agent and the Lenders in all
respects.
(b) The Agent's and each Lender's review of and satisfaction with the (a)
organizational structure of the Borrowers, (b) the Loan structure, and (c) tax,
ownership, capital and legal structure of the Borrowers.
(c) The Agent shall have a perfected first lien security interest in all
Collateral described herein, with such exceptions as shall be satisfactory to
the Agent and each Lender.
(d) The Agent's and each Lender's review and satisfaction with the final
terms and conditions of, and all documentation relating to, the Recapitalization
(including all representations, warranties and indemnities contained in the
Recapitalization Agreement and related documents, as well as arrangements for
the transition of management, termination of employees and non-compete matters,
if applicable).
(e) The Agent's and each Lender's review and satisfaction with evidence
provided by the Borrowers that all conditions to closing the Recapitalization
have been satisfied or waived (including, without limitation, evidence
satisfactory to the Agent and each Lender in all respects that the
Recapitalization has been financed in accordance with the Sources and Uses
exhibit attached to the Commitment Letter).
(f) Receipt of legal opinion(s) from counsel to the Borrowers, in form and
substance acceptable to the Agent and each Lender in all respects.
(g) Evidence of each Borrower's solvency (i.e., a consolidated balance
sheet dated as of the Closing Date), in form and substance satisfactory to the
Agent and each Lender in all respects.
(h) The Agent's and each Lender's satisfaction that the Loan shall be in
full compliance with all legal requirements, including without limitation, that
the Borrowers have obtained all necessary regulatory and third party consents
and approvals.
18
(i) Evidence satisfactory to the Agent and each Lender that the Borrowers
are in full compliance with all financial covenants set forth in this Agreement
as of the Closing Date.
(j) Evidence satisfactory to the Agent and each Lender of the repayment in
full of all outstanding indebtedness of the Borrowers, both direct and
contingent, other than trade payables incurred in the ordinary course of
business, operating leases and/or other indebtedness permitted pursuant to the
terms and provisions of this Agreement.
(k) No litigation by any entity (private or governmental) shall be pending
or threatened against any Borrower at Closing (i) with respect to the Loan, Loan
Documents or transactions contemplated thereby; or (ii) which in the Agent's and
each Lender's good faith judgment could reasonably be expected to have a
materially adverse effect on the business, property, assets, liabilities,
condition (financial or otherwise), or results of operations of the Borrowers
going forward.
(l) The Borrowers' compliance in all material respects with all applicable
federal, state, local and foreign laws and regulations, including all applicable
labor and environmental laws and regulations.
(m) The Agent's and each Lender's satisfaction with the terms, conditions
and existence of insurance coverage appropriate to the conduct of the Borrowers'
business.
(n) No material adverse change in the business, assets, properties,
prospects or condition (financial, proforma financial or otherwise) of Empyrean
or BSGI shall have occurred since the date of the most recent financial
statements delivered to the Agent and each Lender, and the Agent and each Lender
shall be satisfied with the business, assets, properties, prospects and
condition (financial, proforma financial and otherwise) of Empyrean and BSGI.
(o) All costs, fees and expenses (including, without limitation, reasonable
legal fees and expenses) of closing the transactions hereunder shall have been
paid in full, to the extent due.
Section 4.2 No Default. There shall exist no Event of Default, and no act,
----------
event or condition shall have occurred which with notice or the lapse of time,
or both, would constitute an Event of Default; and the Borrowers shall have
performed all agreements theretofore to be performed by the Borrowers pursuant
to the Commitment Letter, except for such non-compliance which is not reasonably
likely to have a material adverse effect on any Borrower's assets, businesses,
operations or prospects or on any Borrower's ability to fully and faithfully
perform its obligations under this Agreement and the other Loan Documents.
Section 4.3 Documentation. The Agent shall have received such certificates
-------------
of good standing, corporate resolutions, opinions and certifications, in such
form and content and from such parties, as the Agent and the Lenders shall
require. All documentation relating to the Recapitalization, the Loan and all
related transactions must be satisfactory in all respects to the Agent, each
Lender and their respective counsel.
19
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lender(s) to enter into this Agreement, each Borrower
jointly and severally represents, warrants, covenants and agrees as follows:
Section 5.1 Corporate Existence and Qualification. Each Borrower is a
-------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, with all corporate power and authority and all
necessary licenses and permits to own, operate and lease its properties and
carry on its business as now being conducted. Each Borrower is duly qualified
and authorized to do business and is in good standing in each jurisdiction in
which the nature of its activities or the character of its properties makes
qualification necessary.
Section 5.2 Corporate Authority; Noncontravention. The execution, delivery
-------------------------------------
and performance by each Borrower of its obligations set forth in this Agreement,
the Notes and the other Loan Documents (i) have been duly authorized by all
necessary corporate and/or stockholder action; (ii) do not require the consent
of any governmental body, agency or authority; (iii) will not violate or result
in (and with notice or the lapse of time will not violate or result in) the
breach of any provision of the Articles of Incorporation/Certificate of
Incorporation or By-laws of such Borrower, or any Material Contract, or any
order or regulation of any governmental authority or arbitration board or
tribunal; and (iv) except as expressly permitted by the terms and provisions of
this Agreement, result in the creation of a lien, charge or encumbrance of any
nature upon any of the properties or assets of any Borrower. When the Loan
Documents are executed and delivered, they will constitute legal, valid and
binding obligations of the Borrowers, enforceable against the Borrowers in
accordance with their respective terms, except as such enforceability may be
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and subject to
the effect of general principals of equity (whether considered in a proceeding
in equity or at law).
Section 5.3 Financial Position. The financial statements dated December 31,
------------------
1998 and April 30, 1999, copies of which have been delivered to the Agent,
present fairly the financial condition of the Borrowers as of the date thereof
and the results of the Borrowers' operations for the periods indicated therein,
were prepared in accordance with GAAP, are true and accurate in all material
respects, and with respect to the Borrowers, are not misleading in any material
respect. All liabilities, fixed or contingent, are fully shown or provided for
on the referenced financial statements or the notes thereto as of the dates
thereof. There has been no material adverse change in the business, property or
condition (financial or otherwise) of any Borrower since the date of the most
recent financial statement dated April 30, 1999, and all other financial
statements and information delivered to the Lenders prior to the Closing Date
are true and accurate in all material respects, and are not misleading in any
material respect.
Section 5.4 Payment of Taxes. Each Borrower has filed all tax returns and
----------------
reports required to be filed by it with the United States Government and/or with
all state and local governments, and has paid in full or made adequate provision
on its books for the payment of all taxes, interest, penalties, assessments or
deficiencies shown to be due or claimed to be due
20
on or in respect of such tax returns and reports, except to the extent that the
validity or amount thereof is being contested in good faith by appropriate
proceedings and the non-payment thereof pending such contest will not result in
the execution of any tax lien or otherwise adversely affect the Agent's
interests in any part of the Collateral.
Section 5.5 Accuracy of Submitted Information; Omissions. All documents,
--------------------------------------------
certificates, information, materials and financial statements (other than
projections) furnished or to be furnished to the Agent or any Lender pursuant to
this Agreement or otherwise in connection with the Loan, as of the date
furnished, (i) are and will be true and correct in all material respects; (ii)
do not and will not contain any untrue statement of a material fact; and (iii)
do not and will not omit any material fact necessary to make the statements
contained therein or herein not misleading. No Borrower is aware of any fact
which has not been disclosed to the Agent in writing which materially adversely
affects, or so far as any Borrower can now reasonably foresee, could reasonably
be expected to materially adversely affect, the properties, business, profit or
condition (financial or otherwise) of any Borrower or the ability of any
Borrower to perform its obligations under this Agreement or any other Loan
Document.
Section 5.6 Intentionally Omitted.
---------------------
Section 5.7 No Defaults or Liabilities. Except as set forth on Schedule 5.7
-------------------------- ------------
hereto, no Borrower is (a) in default in the performance of any obligation,
covenant or condition contained in any Material Contract; or (b) aware of any
condition, act, event or occurrence, including, without limitation, any pending
or threatened litigation, legal or administrative proceeding or investigation,
not disclosed to the Agent in writing which could prejudice the Agent's or any
Lender's rights under any Loan Document in any respect.
Section 5.8 No Violations of Law. Except for such non-compliance which is
--------------------
not reasonably likely to have a material adverse effect on any Borrower's
assets, businesses, operations or prospects or on any Borrower's ability to
fully and faithfully perform its obligations under this Agreement and the other
Loan Documents, no Borrower is in violation of any Applicable Laws and each
Borrower has conducted its business and operations in full compliance with all
Applicable Laws NoBorrower has failed to obtain any license, permit, franchise
or other governmental authorization necessary to the ownership of its properties
or to the conduct of its business.
Section 5.9 Litigation and Proceedings. Except as set forth on Schedule 5.9
-------------------------- ------------
hereto, no action, suit or proceeding against or affecting any Borrower is
presently pending, or to the knowledge of any Borrower, threatened, in any
court, before any governmental agency or department, or before any arbitration
board or tribunal, which could reasonably be expected to result in any judgment
or liability against any Borrower in excess of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) and which is not fully covered by insurance. No
Borrower is aware of any existing basis that is reasonably likely to result in
any such action, suit or proceeding. No Borrower is in default in any material
respect of any applicable order, writ, injunction or decree of any court,
governmental authority or arbitration board or tribunal.
Section 5.10 Security Interest in the Collateral. Each Borrower is the sole
-----------------------------------
legal and beneficial owner of the Collateral owned or purported to be owned by
it, free and clear of all liens, claims and encumbrances of any nature, except
for the Permitted Liens. Each Borrower
21
has provided or will provide to the Agent upon request written landlord waivers
from each lessor/landlord of any premises at which such Borrower's tangible
personal property (having an aggregate value in excess of $100,000.00) is
located. Each such landlord waiver subordinates or will subordinate any
statutory, contractual or other lien the lessor/landlord may have in any of the
Collateral to the lien, operation and effect of the lien being granted to the
Agent pursuant to this Agreement.
Section 5.11 Principal Place of Business; Location of Books and Records; No
--------------------------------------------------------------
Inventory. Each Borrower maintains its principal place of business and the
---------
office where it keeps its books and records with respect to accounts and
contracts rights at Empyrean's offices located at the address set forth in the
preamble of this Agreement. Set forth on Schedule 5.11 hereto is a list of each
-------------
Borrower's business locations as of the Closing Date, and all places where
Collateral having a value in excess of One Hundred Thousand and No/100 Dollars
($100,000.00), in the aggregate, is located. Except as expressly set forth
above, the Borrowers agree to notify the Agent in writing at least ten (10) days
prior to any change in any Borrower's principal place of business, or any change
in the location of the office where the Borrowers keep their books and records
with respect to accounts and contract rights, or any change of or addition to
the locations where any Collateral having a value in excess of One Hundred
Thousand and No/100 Dollars ($100,000.00), in the aggregate, is located.
Section 5.12 Fiscal Year. Each Borrower's fiscal year ends on December 31.
-----------
Section 5.13 Pension Plans. Except as set forth on Schedule 5.13 attached
------------- -------------
hereto,
(a) the present value of all benefits vested under all "employee pension
benefit plans", as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), from time to time maintained
by each Borrower (individually, a "Pension Plan" and collectively, the "Pension
Plans") did not, as of December 31, 1998, exceed the value of the assets of the
Pension Plans allocable to such vested benefits;
(b) no Pension Plan, trust created thereunder or other person dealing with
any Pension Plan has engaged in a non-exempt transaction proscribed by Section
406 of ERISA or a non-exempt "prohibited transaction", as such term is defined
in Section 4975 of the Internal Revenue Code;
(c) no Pension Plan or trust created thereunder has been terminated within
the last three (3) years (except pursuant to a "standard termination", within
the meaning of Section 4041(B) of ERISA), and there have been no material
"reportable events" (as such term is defined in Section 4043 of ERISA and the
regulations thereunder) with respect to any pension plan or trust created
thereunder after the effective date of ERISA; and
(d) no Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Internal Revenue Code) as of the end of any plan
year, whether or not waived, since the effective date of ERISA.
Section 5.14 O.S.H.A., ADA and Environmental Compliance.
------------------------------------------
22
(a) To the best of each Borrower's knowledge, each Borrower is in
compliance with, and its facilities, business assets, property, leaseholds and
equipment are in compliance with, the provisions of the Federal Occupational
Safety and Health Act ("O.S.H.A."), the Americans with Disabilities Act ("ADA"),
the Environmental Protection Act, RCRA and all other applicable environmental
and handicapped access laws; and there have been no citations, notices,
notifications or orders of any such non- compliance issued to any Borrower or
relating to its business, assets, property, leaseholds or equipment under any
such laws, rules or regulations;
(b) each Borrower has been issued all required federal, state and local
licenses, certificates and permits necessary or appropriate in the operation of
its facilities, businesses, assets, property, leaseholds and equipment; and
(c) (i) there are no visible signs of releases, spills, discharges, leaks
or disposal (collectively referred to herein as "Releases") of Hazardous
Substances at, upon, under or within any real property owned, or premises
leased, by any Borrower; (ii) to the knowledge of each Borrower, there are no
underground storage tanks or polychlorinated biphenyls on any real property
owned, or premises leased, by any Borrower; (iii) to the knowledge of each
Borrower, no real property owned, or premises leased, by any Borrower has ever
been used by any Borrower or any other person as a treatment, storage or
disposal facility for Hazardous Waste; and (iv) to the knowledge of each
Borrower, no Hazardous Substances are present on any real property owned, or
premises leased, by any Borrower, except for such quantities of Hazardous
Substances as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations, and as are necessary or appropriate
for the operation of the business of such Borrower. Each Borrower, for itself
and its successors and assigns, hereby covenants and agrees to indemnify, defend
and hold harmless the Agent and each Lender from and against any and all
liabilities, losses, claims, damages, suits, penalties, costs and expenses of
every kind or nature, including, without limitation, reasonable attorneys' fees
arising from or in connection with (i) the presence or alleged presence of any
Hazardous Substance or Hazardous Waste on, under or about any property of any
Borrower (including, without limitation, any property or premises now or
hereafter owned or leased by any Borrower), or which is caused by or results
from, directly or indirectly, any act or omission to act by any Borrower; and
(ii) any Borrower's violation of the ADA or any environmental statute,
ordinance, order, rule or regulation of any governmental entity or agency
thereof (including, without limitation, any liability arising under CERCLA,
RCRA, HMTA or any Applicable Laws).
Section 5.15 Intellectual Property. All registered patents, patent
applications, registered trademarks, trademark applications, registered
copyrights, copyright applications, registered tradenames, trade secrets and
licenses necessary for the conduct of the business of each Borrower, if any, are
and shall remain (i) owned or utilized by such Borrower, (ii) domestic property
of such Borrower; and (iii) valid and, except with respect to licenses and trade
secrets, have been duly registered or filed with all appropriate governmental
authorities; there is no objection or, to the knowledge of any Borrower, pending
challenge to the validity of any such patent, trademark, copyright, tradename,
trade secret or license, and no Borrower is aware of any grounds for any such
challenge or objection thereto. Except as set forth on Schedule 5.15 attached
-------------
hereto, no Borrower pays any royalty to anyone in connection with any patent,
trademark, copyright, tradename, trade secret or license; and no Borrower has
assigned and each Borrower has the right to bring any legal action for the
infringement of any such patent,
23
trademark, copyright, tradename, trade secret or license that is owned by such
Borrower in accordance with Applicable Laws.
Section 5.16 Existing or Pending Defaults; Material Contracts. All Material
------------------------------------------------
Contracts are listed on Schedule 5.16(a) hereto. Except as set forth on Schedule
---------------- --------
5.16(b) attached hereto, no Borrower is aware of any pending or threatened
-------
litigation, or any other legal or administrative proceeding or investigation
pending or threatened, against any Borrower arising from or related to any
Material Contract.
Section 5.17 Leases and Real Property. All leases and other agreements
------------------------
under which each Borrower occupies real property comprised of 2,000 square feet
or more are in full force and effect and constitute legal, valid and binding
obligations of, and are legally enforceable against, each Borrower, and to the
best of each Borrower's knowledge, are the binding obligations of and legally
enforceable against, the other parties thereto. All necessary governmental
approvals required to have been obtained by each Borrower, if any, have been
obtained for each such lease or agreement, and to each Borrower's knowledge
there have been no threatened cancellations thereof, and there are no
outstanding disputes with respect thereto. No Borrower owns any interest in real
property (other than the leasehold interests listed on Schedule 5.17
-------------
hereto).
Section 5.18 Labor Relations. There are no strikes, work stoppages,
---------------
grievance proceedings, union organization efforts or other labor controversies
pending, or to any Borrower's knowledge, threatened or reasonably anticipated,
between any Borrower and (i) any current or former employee of any Borrower, or
(ii) any union or other collective bargaining unit representing any such
employee. Except for such non-compliance which is not reasonably likely to have
a material adverse effect on any Borrower's assets, businesses, operations or
prospects or on any Borrower's ability to fully and faithfully perform its
obligations under this Agreement and the other Loan Documents, each Borrower is
in compliance with all Applicable Laws relating to employment or the workplace,
including, without limitation, provisions relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration, withholding, unemployment compensation, employee privacy and right
to know. Except as set forth on Schedule 5.18, there are no collective
-------------
bargaining agreements, employment agreements between any Borrower and any of its
employees, or professional service agreements not terminable at will relating to
the businesses or assets of any Borrower. The consummation of the transactions
contemplated hereby will not cause any Borrower to incur or suffer any liability
relating to, or obligation to pay, severance, termination or other similar
payments to any person or entity.
Section 5.19 Empyrean. The sole asset of Empyrean is all of the issued and
--------
outstanding capital stock of BSGI and other Borrowers, and the sole indebtedness
and liability of Empyrean is the indebtedness incurred pursuant to the
Recapitalization Agreement, this Agreement and the other Loan Documents.
Empyrean conducts no activities (other than its ownership of BSGI and other
Borrowers, fully appropriate shareholder action to authorize activities of BSGI
and other Borrowers, as necessary, and reasonably related administrative
activities); it maintains separate books, records and accounts, does not
commingle its funds with BSGI or any other Borrowers, any other Borrower or any
other person or entity, and maintains its existence as a separate and distinct
corporate entity. All assets owned and held by Empyrean prior to the
Recapitalization have been transferred to, and are now owned by, BSGI.
24
Section 5.20 Ownership Interests. All of the issued and outstanding capital
-------------------
stock of Empyrean is wholly owned and controlled by the persons and/or entities
set forth on Schedule 5.20 hereto. All of the issued and outstanding capital
stock of the Borrowers (other than Empyrean) is wholly owned and controlled by
Empyrean, free and clear of all liens, claims and encumbrances (other than the
security interest in favor of the Agent). As of the date hereof (and except as
described above), no Borrower has any subsidiaries or owns any interest in any
other entity or venture.
Section 5.21 Contribution Agreement. The Contribution Agreement is in full
----------------------
force and effect, has not been modified, altered or amended in any respect
(other than to add a new Borrower party thereto from time to time), and no
Borrower is in default thereunder.
Section 5.22 Solvency. Both immediately prior to and after giving effect to
--------
the transactions contemplated by the terms and provisions of this Agreement,
each Borrower (i) owned and owns property whose fair salable value is greater
than the amount required to pay all of such Borrower's Indebtedness (including
contingent debts), (ii) was and is able to pay all of its Indebtedness as such
Indebtedness matures, and (iii) had and has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage. For purpose hereof, "Indebtedness" means, without duplication (a) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Borrower,
as of the date on which Indebtedness is to be determined, (b) all obligations of
any other person or entity which such Borrower has guaranteed, (c) reimbursement
obligations in connection with letters of credit issued for the benefit of such
Borrower, and (d) the Obligations.
Section 5.23 Year 2000 Compliance. Each Borrower has reviewed the areas
--------------------
within its business and operations which could be adversely affected by, and has
developed or is developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer based systems and applications
used by such Borrower may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date on or after
December 31, 1999), and have made related appropriate inquiry of material
suppliers and vendors. Based on such review and program, each Borrower believes
that the "Year 2000 Problem" will not have a material adverse affect on its
business administration or operations.
Section 5.24 Joint and Several Liability. Each and all of the
---------------------------
representations and warranties made or remade to the Agent and each Lender
pursuant to this Article 5 are hereby made and shall be remade by each Borrower
severally and on a joint and several basis.
Section 5.25 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made herein shall survive the making of the Loan,
and shall be deemed remade and redated as of the date of each request for an
advance or readvance of any Loan proceeds.
ARTICLE 6
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any Obligation remains outstanding or this Agreement remains in
effect, each Borrower jointly and severally covenants and agrees with the Agent
and each Lender that:
25
Section 6.1 Payment of Loan Obligations. Each Borrower will duly and
---------------------------
punctually pay all sums to be paid to the Agent and/or any Lender in accordance
with the terms and conditions of the Loan Documents, and will comply with,
perform and observe all of the terms thereof.
Section 6.2 Payment of Taxes. Each Borrower will promptly pay and discharge
----------------
when due all federal, state and other governmental taxes, assessments, fees and
charges imposed upon each Borrower, or upon any of its properties or assets,
except to the extent that validity or amount thereof is being contested in good
faith by appropriate proceedings and the non-payment thereof will not result in
the execution of any tax lien or otherwise jeopardize the Agent's interest in
any part of the Collateral.
Section 6.3 Delivery of Financial and Other Statements. The Borrowers shall
------------------------------------------
deliver to the Agent and each Lender financial and other statements, each of
which shall, unless otherwise expressly provided to the contrary, be prepared in
accordance with GAAP consistently applied, as follows:
(a) on or before the one hundred twentieth (120th) day following the close
of each fiscal year, the Borrowers will submit to the Agent and each Lender (i)
annual audited and unqualified consolidated and consolidating financial
statements of the Borrowers, which shall be accompanied by schedules and
management letters (if issued) and certified by an independent certified public
accountant acceptable to the Agent, (ii) an annual budget for the Borrowers for
the then current year and projections for the remainder of the Loan term, in
form reasonably satisfactory to the Agent, certified by the Borrower's Chief
Financial Officer or another duly authorized executive officer of the Borrowers,
and (iii) a true, correct and complete copy of the Sprint Master Services
Agreement then in effect;
(b) on or before the forty-fifth (45th) day following the close of each
calendar month, the Borrowers will submit to the Agent and each Lender (i)
internally prepared financial statements of the Borrowers, including a balance
sheet, income statement, cash flow statement and statement of stockholders'
equity, reporting the Borrowers' current financial position and the results of
their respective operations for the month then ended and year-to-date, in form
reasonably satisfactory to the Agent, certified by the Borrower's Chief
Financial Officer or another duly authorized executive officer of the Borrowers;
and (ii) a Non-Default Certificate in the form of Exhibit 4 hereto, accompanied
---------
by a current accounts receivable agings report, an unbilled agings report and an
accounts payable listing, each of which shall be certified by an authorized
executive officer of the Borrowers;
(c) on or before the forty-fifth (45th) day following the close of each
calendar quarter, the Borrowers will submit to the Agent and each Lender a
current accounts receivable agings report, an unbilled agings report, an
accounts payable listing and a Quarterly Covenant Compliance/Non-Default
Certificate in the form of Exhibit 5 hereto (the "Quarterly Covenant Compliance
---------
Certificate"), each of which shall be certified by the Borrower's Chief
Financial Officer or another duly authorized executive officer of the Borrowers;
(d) the Borrowers will submit to the Agent and each Lender, promptly upon
issuance or receipt, copies of all notices, demands, written statements and
other documents, instruments and agreements which any Borrower issues or
receives in connection with, related to
26
or under the Sprint Master Services Agreement and which involves or relates to
(i) any reductions of amounts paid or payable under the Sprint Master Services
Agreement exceeding One Million and No/100 Dollars ($1,000,000.00), individually
or in the aggregate per annum (excluding normal and customary pre-billing and
post- billing adjustments), or any other reductions of amounts paid or payable
under the Sprint Master Services Agreement which are reasonably likely to have a
material adverse effect on any Borrower's assets, businesses, operations or
prospects or on any Borrower's ability to fully and faithfully perform its
obligations under this Agreement and the other Loan Documents, or (ii) the term
of the Sprint Master Services Agreement or the time period for performance
thereunder, or (iii) the scope of work performed or to be performed under the
Sprint Master Services Agreement, or (iv) any default or breach or alleged
default or breach under the Sprint Master Services Agreement or any failure to
comply or alleged failure to comply with any term, covenant or provision of the
Sprint Master Services Agreement; and
(e) the Borrowers will submit to the Agent and each Lender copies of all
public filings, disclosure statements and/or registration statements which any
Borrower issues to, distributes to or files with the Securities and Exchange
Commission or any state agency or department regulating securities (or any other
person or entity, pursuant to the rules and/or regulations of the Securities and
Exchange Commission or any state agency or department regulating securities).
Each such public filing, disclosure statement and/or registration statement
shall be submitted by the Borrowers to the Agent and each Lender not later than
five (5) days prior to the issuance, distribution or filing thereof (as
applicable), except in circumstances in which it is not practicable to make any
such submission to the Agent and each Lender on an earlier date, in which case
such public filing, disclosure statement and/or registration statement shall be
submitted by the Borrower to the Agent and each Lender concurrent with the
issuance, distribution or filing thereof (as applicable).
(f) promptly upon the request of the Agent, the Borrowers will provide to
the Agent and each Lender such other information and/or reports relating to the
business, operations, properties or prospects of the Borrowers as the Agent may
from time to time reasonably request.
The Borrowers acknowledge and agree that, except as otherwise set forth in this
Section 6.3 above, any and all financial statements, schedules and other
financial information required to be delivered to the Agent and each Lender
pursuant to this Section 6.3 shall be prepared on a consolidated basis.
Section 6.4 Maintenance of Records; Review by the Lenders. Each Borrower
---------------------------------------------
will maintain at all times proper books of record and account in accordance with
GAAP, consistently applied, and will permit the Agent's officers or any of the
Agent's authorized representatives or accountants to visit and inspect the
offices and properties of each Borrower, examine its respective books of account
and other records, and discuss their respective affairs, finances and accounts
with the officers of each Borrower, all at such reasonable times during normal
business hours, and as often as the Agent may desire. Each Borrower acknowledges
and agrees that, following the occurrence of an Event of Default which has
continued unremedied beyond any applicable notice and/or grace period or so long
as only two (2) Lenders shall be Lender parties hereto, each Lender shall have
the right to accompany the Agent in the exercise of the Agent's rights set forth
in this Section 6.4.
27
Section 6.5 Maintenance of Insurance Coverage. Each Borrower will maintain
---------------------------------
in effect fire and extended coverage insurance on any and all the tangible
personal property comprising the Collateral, public liability insurance and
workmen's compensation insurance, with responsible insurance companies, in such
amounts and against such risks as are customary for similar businesses, required
by governmental authorities, if any, having jurisdiction over all or part of its
operations, or otherwise reasonably required by the Agent, and will furnish to
the Agent certificates evidencing such continuing insurance. The Agent shall be
named as loss payee on all hazard and casualty insurance policies by means of a
standard noncontributory mortgagee clause and as an additional insured on all
liability insurance policies. All insurance policies shall also provide for (i)
not less than thirty (30) days written notice to the Agent prior to expiration,
cancellation or material change; and (ii) waiver of subrogation.
Section 6.6 Maintenance of Property/Collateral; Performance of Contracts.
------------------------------------------------------------
Each Borrower will at all times maintain the Collateral and its tangible
property material to the operation of its business, both real and personal, in
good order and repair (subject to ordinary wear and tear), and will permit the
Agent's officers or authorized representatives to visit and inspect all or any
part of the Collateral at such reasonable times during normal business hours, as
and when the Agent deems necessary or appropriate. Each Borrower shall perform
all obligations under all contracts to which it is a party (including, without
limitation, all obligations of such Borrower as a contractor under any Material
Contract), including all exhibits and other attachments to such contracts, all
modifications thereto and all documents and instruments delivered pursuant
thereto, and will comply in all respects with all laws, rules and regulations
governing the execution, delivery and performance thereof.
Section 6.7 Maintenance of Corporate Existence. Except as otherwise
----------------------------------
expressly permitted pursuant to this Agreement, each Borrower will maintain its
corporate existence and will provide the Agent with evidence of the same from
time to time upon the Agent's request.
Section 6.8 Maintenance of Certain Accounts with Lender. Each Borrower will
-------------------------------------------
maintain its primary operating accounts, including all depository accounts (time
and demand), disbursement accounts and collection accounts with the Agent, Bank
of America or any other financial institution reasonably satisfactory to the
Agent (an "Outside Banking Institution"); it being understood and agreed,
however, that no accounts shall be maintained with an Outside Banking
Institution unless such institution shall have acknowledged in writing the
Agent's priority security interest in and to such accounts, and the Agent,
acting in good faith, and the Outside Banking Institution shall have entered
into a mutually acceptable bank agency or intercreditor agreement.
Section 6.9 Maintenance of Management. During the period from the date of
-------------------------
this Agreement until the earlier to occur of (a) the date on which not more than
fifty percent (50%) of the Borrowers' trailing twelve (12) month consolidated
revenues arise from the Sprint Master Services Agreement, or (b) the date which
is twelve months from the date of this Agreement, each Borrower will at all
times maintain management reasonably satisfactory to the Agent. At all times
during the term of this Agreement, each Borrower shall notify the Agent in
writing of the change of any corporate officer or director of any Borrower,
within ten (10) days of the date of any such change.
28
Section 6.10 Disclosure of Defaults, Etc. Promptly upon the occurrence
---------------------------
thereof, the Borrowers will provide the Agent with written notice of any Event
of Default, or any act, event or occurrence that upon the giving of any required
notice or the lapse of time, or both, could or would constitute an Event of
Default. In addition, the Borrowers will promptly advise the Agent in writing of
any condition, act, event or occurrence which comes to any Borrower's attention
that would or could reasonably be expected to prejudice the Agent's rights in
connection with any Material Contract, the Collateral, this Agreement, any Note
or any other Loan Document, including, without limitation, the details of any
pending or threatened governmental action or proceeding, any pending or
threatened litigation, and any other legal or administrative proceeding or
investigation pending or threatened against any Borrower, including the entry of
any judgment or lien (other than a Permitted Lien) against such Borrower, its
assets or property.
Section 6.11 Security Perfection; Payment of Costs. Each Borrower will
-------------------------------------
execute and deliver and pay the costs of recording and filing financing
statements, continuation statements, termination statements, assignments and
other documents, as the Agent may from time to time deem necessary or
appropriate for the perfection of any liens granted to the Agent pursuant hereto
or pursuant to any other Loan Document. All costs and expenses incurred in
connection with the foregoing shall be borne solely by the Borrowers.
Additionally, the Borrowers will pay any and all costs of Closing hereunder, as
well as any and all taxes (other than the Agent's and each Lender's income and
franchise taxes), which may be payable as a result of the execution of this
Agreement or any agreement supplemental hereto, or as a result of the execution
and/or delivery of any Note or other Loan Document.
Section 6.12 Defense of Title to Collateral. Each Borrower will at all
------------------------------
times defend the Agent's and each Borrower's rights in the Collateral, subject
to the Permitted Liens, against all persons and all claims and demands
whatsoever, and will, upon request of the Agent (i) furnish such further
assurances of title as may be reasonably required by the Agent, and (ii) do any
other acts necessary to effectuate the purposes and provisions of this
Agreement, or as required by law or otherwise in order to perfect, preserve,
maintain or continue the security interests of the Agent in the Collateral.
Section 6.13 Compliance with Law. Except for such non-compliance which is
-------------------
not reasonably likely to have a material adverse effect on any Borrower's
assets, businesses, operations or prospects or on any Borrower's ability to
fully and faithfully perform its obligations under this Agreement and the other
Loan Documents, each Borrower will conduct its businesses and operations in full
compliance with (i) all Applicable Laws and requirements of all federal, state
and local regulatory authorities having jurisdiction, (ii) the provisions of its
charter documents and by-laws, (iii) all agreements and instruments by which it
or any of its properties may be bound, and (iv) all applicable decrees, orders
and judgments.
Section 6.14 Further Assurances; Additional Requested Information. Each
----------------------------------------------------
Borrower will provide to the Agent such further assurances and additional
documents regarding the Collateral and the Agent's security interest therein as
the Agent may from time to time reasonably request, and each Borrower will
promptly provide the Agent with such additional information, reports and
statements respecting the business, operations, properties and financial
condition of the Borrowers, and respecting their respective affiliated
businesses and investments, as the Agent may from time to time reasonably
request.
29
Section 6.15 Financial Covenants. So long as any Obligation remains
-------------------
outstanding or this Agreement remains in effect, the Borrowers will comply with
each of the financial covenants set forth below:
(a) Minimum Adjusted EBITDA. The Borrowers will at all times
-----------------------
maintain, on a consolidated basis, during the periods
specified below, an Adjusted EBITDA of not less than the
following:
--------------------------------------------------------
Adjusted EBITDA
For the Calendar
Quarter Ending On: Minimum
--------------------------------------------------------
June 30, 1999 $4,100,000.00
--------------------------------------------------------
September 30, 1999 $3,250,000.00
--------------------------------------------------------
December 31, 1999 $3,450,000.00
--------------------------------------------------------
March 31, 2000 $3,850,000.00
--------------------------------------------------------
June 30, 2000 $4,350,000.00
--------------------------------------------------------
September 30, 2000 $5,000,000.00
--------------------------------------------------------
December 31, 2000 $5,250,000.00
--------------------------------------------------------
March 31, 2001 $5,200,000.00
--------------------------------------------------------
June 30, 2001 $5,150,000.00
--------------------------------------------------------
September 30, 2001 $5,100,000.00
--------------------------------------------------------
December 31, 2001 $5,050,000.00
--------------------------------------------------------
March 31, 2002 $5,150,000.00
--------------------------------------------------------
June 30, 2002 $5,300,000.00
--------------------------------------------------------
September 30, 2002 $5,400,000.00
--------------------------------------------------------
December 31, 2002 $5,500,000.00
--------------------------------------------------------
March 31, 2003 $5,650,000.00
--------------------------------------------------------
June 30, 2003 $5,800,000.00
--------------------------------------------------------
September 30, 2003 $5,950,000.00
--------------------------------------------------------
December 31, 2003 and for
each calendar quarter ending
thereafter $6,050,000.00
--------------------------------------------------------
It is understood and agreed that the dollar amounts set forth in
this Section 6.15(a) above may, in the Agent's sole discretion
(but subject to the agreement of the Borrowers), be amended in
writing as a result of certain acquisitions and/or mergers
hereafter made by any Borrower. Minimum Adjusted EBITDA shall be
measured on the last day of each fiscal quarter, and at the end
of each of the Borrowers' fiscal years, throughout the term of
the Loan on a four (4) quarter trailing basis.
(b) Fixed Charge Coverage Ratio. The Borrowers will at all times
---------------------------
maintain, on a consolidated basis, a Fixed Charge Coverage Ratio
of not less than 2.00 to 1.00. For purposes of
30
the foregoing, "Fixed Charge Coverage Ratio" shall mean the
Borrowers' Adjusted EBITDA, minus capital expenditures, divided
by the sum of Interest Expense, plus cash taxes paid, plus
principal payments on the Facilities, plus payments for current
capital lease obligations and plus any cash payments for
earn-outs that have not already been reflected in the income
statement of the Borrowers. The Fixed Charge Coverage Ratio shall
be measured on the last day of each fiscal quarter, and at the
end of each of the Borrowers' fiscal years, throughout the term
of the Loan on a four (4) quarter trailing basis.
(c) Total Debt to EBITDA Ratio. The Borrowers will at all times
--------------------------
maintain, on a consolidated basis, a Total Debt to EBITDA Ratio
of not more than 2.75 to 1.00. For purposes hereof, the "Total
Debt to EBITDA Ratio" shall mean the ratio of Total Debt to
Adjusted EBITDA (a) calculated and tested using (i) the
Borrower's twelve (12) month trailing Adjusted EBITDA results and
(ii) Total Debt as of the date of calculation, and (b) measured
on the last day of each fiscal quarter, throughout the term of
the Loan.
(d) Total Debt to Capitalization. The Borrowers will at all times
----------------------------
maintain, on a consolidated basis, a Total Debt to Capitalization
Ratio of not more than 0.50 to 1.00. For purposes hereof, the
"Total Debt to Capitalization Ratio" shall mean Total Debt,
divided by the sum of Total Debt, plus cash equity contributed.
The Total Debt to Capitalization Ratio shall be measured on the
last day of each fiscal quarter, and at the end of each of the
Borrowers' fiscal years, throughout the term of the Loan on a
four (4) quarter trailing basis.
The financial covenants referenced above shall be calculated and tested on a
four (4) quarter trailing basis, and shall include the corresponding four (4)
quarter trailing results of any entity acquired and consolidated into the
Borrowers' financial statements within the last four (4) quarter period
immediately preceding the applicable covenant calculation date. Unless
otherwise defined, all financial terms used in this Section 6.15 shall have the
meanings attributed to such terms in accordance with GAAP.
Section 6.16 Year 2000 Compliance. Each Borrower shall take all reasonable
--------------------
action necessary to assure that its computer systems are capable of effectively
processing data and information, including dates on and after January 1, 2000,
and that all such systems (i) shall not cease to perform or provide (and shall
not cause any software and/or system which is material to the operations of such
Borrower or any interface therewith to provide) invalid or incorrect results as
a consequence of date functionality and/or data; (ii) shall not experience any
degradation of performance or functionality arising from or relating to date
functionality and/or data which is material to the operations of such Borrower
or any interface therewith and which
31
represents or references different centuries, more than one century or leap
years; (iii) shall effectively and accurately manage and manipulate data derived
from, involving or relating in any way to dates, including single century
formulas and multi-century or leap year formulas; and (iv) shall not cause an
abnormal ending scenario within such business computer related systems or in any
software and/or system with which such systems interface (or generate incorrect
values or invalid results involving such dates). Each Borrower will, promptly
upon the Agent's request, provide evidence to the Agent of such compatibility.
Section 6.17 Landlord Waivers; Subordination. Each Borrower shall provide
-------------------------------
landlord waivers to the Agent prior to any Borrower storing, keeping or locating
tangible personal property having an aggregate value in excess of One Hundred
Thousand and No/100 Dollars ($100,000.00) on any particular lessor's/landlord's
premises. Each landlord waiver shall subordinate any statutory, contractual or
other lien the lessor/landlord may have in any Collateral to the lien, operation
and effect of the lien granted to the Agent pursuant to this Agreement, and
shall be in form and substance reasonably acceptable to the Agent.
Section 6.18 Substitute Notes. Upon request of the Agent, each Borrower
----------------
shall execute and deliver to the Agent substitute promissory notes, in form and
substance satisfactory to the Agent in all respects, payable to the order of
such person or entity as may be designated by the Agent; it being understood and
agreed, however, that the aggregate principal amount of all outstanding
promissory notes shall not exceed the Commitment Amount as of the date any such
substitute note is issued. All costs and expenses incurred by the Agent in
connection with the foregoing shall be borne by the Borrowers.
Section 6.19 Interest Rate Contracts. If required by the Agent, the
-----------------------
Borrowers shall have in effect at all times interest rate protection agreements
for the Facilities ("Interest Rate Contracts") reasonably satisfactory to the
Agent. Any such Interest Rate Contract must be purchased from a Lender, an
affiliate of a Lender or another financial institution reasonably acceptable to
the Agent. The Borrowers' obligations under any Interest Rate Contract purchased
from a Lender or an affiliate of a Lender shall be secured by the Collateral on
a pari passu basis, pursuant to documentation acceptable to the Agent in all
respects. All other Interest Rate Contracts shall be unsecured in all respects.
The Borrowers shall determine to their own satisfaction whether any such
Interest Rate Contract is sufficient to meet the Borrowers' needs for interest
rate protection, and neither the Agent nor any Lender shall have any obligation
or liability with respect thereto, nor any obligation to propose, quote or enter
into any Interest Rate Contract, unless such Interest Rate Contract shall be on
terms and conditions satisfactory to the applicable Lender in all respects.
Section 6.20 Joint and Several Liability. Each Borrower acknowledges and
---------------------------
agrees that each Borrower shall be severally and jointly and severally liable
for each and every affirmative covenant set forth in this Article 6.
ARTICLE 7
---------
NEGATIVE COVENANTS
------------------
32
So long as any Obligation remains outstanding or this Agreement remains
in effect, each Borrower jointly and severally covenants and agrees that,
without the prior written consent of the Agent, no Borrower will:
Section 7.1 Change of Control; Disposition of Assets; Merger.
------------------------------------------------
(a) Permit majority ownership of any Borrower or control of any Borrower's
business or operations to be sold, assigned or otherwise transferred, legally or
equitably, to any person or entity; or
(b) suffer or permit the issuance of any capital stock of any Borrower
(except for (i) any securities issued pursuant to a stock option plan approved
by the Agent in writing, or pursuant to any other equity-based employee
incentive compensation plan approved by the Agent in writing and/or listed in
Schedule 7.1(b) hereto; and (ii) issuances of any capital stock of Empyrean
---------------
which do not, individually or in the aggregate, cause or result in a default of
any other provision of this Agreement); or
(c) sell, assign, loan, deliver, lease, transfer or otherwise dispose of
property or assets of any Borrower (except in the ordinary course of business),
in excess of One Hundred Thousand and No/100 Dollars ($100,000.00), in the
aggregate, per annum; or
(d) merge or consolidate with any company or enterprise, or acquire or
purchase any company or enterprise; it being understood and agreed, however,
that the Agent, on behalf of the Required Lenders, will agree to grant its
consent in connection with mergers and/or acquisitions pursuant to the terms of
a consent letter issued by the Agent and accepted in writing by the Borrowers so
long as (i) the aggregate cost/purchase price/consideration (i.e., the value of
cash paid (or to be paid) and cash on hand, stock exchanged, Indebtedness
incurred, earn-outs paid (or to be paid), and other actual consideration paid)
for any single acquisition or merger does not exceed Fifteen Million and No/100
Dollars ($15,000,000.00) and for all such acquisitions or mergers does not
exceed Thirty Million and No/100 Dollars ($30,000,000.00), in the aggregate, per
annum; (ii) without limiting the criteria set forth in clause (i) above, the
aggregate amount of cash paid, plus Indebtedness incurred, minus cash equity
contributed for any single acquisition or merger does not exceed Five Million
and No/100 Dollars ($5,000,000.00) and for all such acquisitions or mergers does
not exceed Ten Million and No/100 Dollars ($10,000,000.00), in the aggregate,
per annum; (iii) the pro forma financials of the Borrowers, after taking into
effect the particular merger and/or acquisition, are not projected to cause the
Borrowers to fail to comply with the financial covenants set forth in Section
6.15 of this Agreement, nor result in a Total Debt to EBITDA Ratio greater than
2.5 to 1.0 (which ratio shall also be calculated as of the closing date of the
particular acquisition or merger on a four (4) quarter trailing basis); and (iv)
the following parameters/conditions are satisfied:
(i the entity to be acquired or merged is a going concern;
(ii) the entity to be acquired or merged is in a similar
line of business to the Borrowers;
(iii) the entity to be acquired or merged has positive
Adjusted EBITDA for the preceding twelve (12) month
period;
33
(iv) there is no assumption of indebtedness, other than
trade liabilities incurred in the ordinary course of
business and/or other debt expressly consented to by
the Agent and expressly subordinated to the Loan;
(v in the case of a merger, a Borrower is the surviving,
controlling entity, and in the case of an acquisition,
such acquisition is not hostile;
(vi) no Event of Default exists, no act, event or condition
has occurred or exists which with notice or the lapse
of time, or both, would constitute an Event of Default,
and such acquisition and/or merger would not, in the
Agent's reasonable judgment, cause the Borrowers to be
in default or fail to comply with any of the covenants
set forth in this Agreement or any other Loan Document;
(vii) the entity to be acquired or merged is not, in the
Agent's reasonable judgment, subject to material
pending litigation, material contingent liabilities or
other conditions not reasonably satisfactory to the
Agent; and
(viii) the Agent shall have received all documents,
instruments and agreements reasonably requested by the
Agent in connection with such acquisition or merger.
In the event a written request for the Agent's consent to a particular
acquisition is made by a Borrower pursuant to this Section, such Borrower shall
submit to the Agent and each Lender (a) a written certification that the
proposed acquisition meets the criteria described in this Section 7.1, (b) the
Pro Forma financials described above, together with (i) a Pro Forma calculation
of the financial covenants set forth in Section 6.15 of this Agreement, after
taking into effect such acquisition, and (ii) the most recent financial
statements of the entity to be acquired by a Borrower (for the preceding twelve
(12) month period), and if requested by the Agent, consolidating financial
statements in the form required pursuant to Section 6.3 of this Agreement, and
(c) such other information as may be reasonably required by the Agent. The
Borrowers acknowledge and agree that in preparing the Pro Forma statements
required to be submitted hereunder, actual prior expenses shall not be adjusted
except to reflect changes in owner/executive compensation and other expenses
that qualify as Pro Forma adjustments, as determined by the Agent in its sole
discretion.
Section 7.2 Margin Stocks. Use all or any part of the proceeds of any
-------------
advance made hereunder to purchase or carry, or to reduce or retire any loan
incurred to purchase or carry, any margin stocks (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any such
margin stocks.
Section 7.3 Change of Operations. Suffer or permit any change in the
--------------------
general character of any Borrower's business as conducted on the Closing Date,
or suffer or permit any
34
Borrower to engage in any type of business not reasonably related to or
compatible with such business as presently and normally conducted.
Section 7.4 Judgments; Attachments. Suffer or permit any judgment in excess
----------------------
of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) against any
Borrower or any attachment against any Borrower's property (for an amount not
fully covered by insurance) to remain unpaid, undischarged or undismissed for a
period of thirty (30) days, unless enforcement thereof shall be effectively
stayed or bonded.
Section 7.5 Further Assignments; Performance and Modification of Contracts;
---------------------------------------------------------------
etc. Except as may be expressly permitted by the Loan Documents (i) make any
----
further assignment, pledge or disposition of the Collateral or any part thereof
(other than dispositions of inventory or equipment in the ordinary course of
business or the sale of obsolete equipment or other equipment not material to
the operation of such Borrower's business); (ii) permit any set-off or
reduction, delay the timing of any payment under, or otherwise modify any
Material Contract (other than the Sprint Master Services Agreement) which is
reasonably likely to have a material adverse effect on any Borrower's assets,
businesses, operations or prospects or on any Borrower's ability to fully and
faithfully perform its obligations under this Agreement and the other Loan
Documents, (iii) permit any set-off or reduction, delay the timing of any
payment under, or otherwise modify the Sprint Master Services Agreement; (iv)
create, incur or permit to exist any lien or encumbrance (other than Permitted
Liens) on any real or personal property now or hereafter owned by any Borrower;
or (v) do or permit to be done anything to impair the Agent's or any Lender's
security in any Collateral or the payments due to any Borrower thereunder.
Section 7.6 Affect Rights of the Agent or Lender(s). At any time do or
---------------------------------------
perform any act or permit any act to be performed which would or reasonably
could materially adversely affect the interests or rights of the Agent or any
Lender under any Loan Document.
Section 7.7 Indebtedness; Granting of Security Interests. Suffer or permit
--------------------------------------------
any Borrower to incur any new indebtedness, except for (i) trade debt and
operating leases incurred in the ordinary course of business; (ii) indebtedness
secured by liens listed on Schedule 7.7 hereto, or other indebtedness secured by
------------
Permitted Liens; and (iii) indebtedness incurred to finance (by purchase or
lease) equipment constituting capital expenditures, provided that the aggregate
amount outstanding under all capital leases permitted hereby does not exceed Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00). Except as otherwise
expressly permitted herein, no Borrower shall mortgage, assign, pledge,
hypothecate or otherwise encumber or permit any lien, security interest or other
encumbrance, including purchase money liens, whether under conditional or
installment sales arrangements or otherwise, to affect the Collateral or any
other assets or properties of any Borrower (except for Permitted Liens), nor
shall any Borrower guarantee or otherwise become obligated for any indebtedness
of others. Furthermore, each Borrower agrees that it will not enter into any
agreement or understanding with any person or entity pursuant to which such
Borrower agrees to be bound by a covenant not to encumber all or any part of its
property or assets, unless such agreement or understanding is entered into in
connection with the granting of purchase money security interests permitted
pursuant to the terms and provisions this Agreement (and relates to solely to
the property subject to such purchase money security interests).
35
Section 7.8 Dividends; Loans; Advances; Investments and Certain Other Events.
-----------------------------------------------------------------
(a) suffer or permit any dividend to be declared or paid on any Borrower's
capital stock of any class (other than dividends payable solely to another
Borrower and/or dividends payable in the form of additional preferred stock of
Empyrean), suffer or permit any alteration or amendment to any Borrower's
capital structure (other than equity issuances expressly permitted pursuant to
this Agreement), or suffer or permit any Borrower to purchase, redeem or
otherwise retire any shares of such Borrower's capital stock (other than stock
repurchases by Empyrean to accommodate capital stock issuances to new executives
of a Borrower so long as such repurchases result in a $0.00 effect on Empyrean),
or suffer or permit any voluntary prepayment, acquisition or anticipation of any
sinking fund requirement of any indebtedness of any Borrower, or suffer or
permit any distributions to be made in cash or assets to any shareholders of any
Borrower (other than to another Borrower); or
(b) suffer or permit any loans, salary advances or other payments to be
made by any Borrower to (i) any shareholders of any Borrower (other than to
another Borrower); (ii) any corporation or other enterprise directly or
indirectly owned in whole or in part by any shareholder of any Borrower (other
than another Borrower); or (iii) any other person or entity; it being understood
and agreed that this negative covenant shall not be deemed violated by (A)
normal and customary operating expenses and trade credit extended to customers
of the Borrowers, in each case made in the ordinary course of business; (B)
regularly scheduled salary payments and commercially reasonable bonuses
disclosed to the Agent and each Lender in writing in advance of such payments,
in each case to shareholders of any Borrower who are also salaried employees of
such Borrower; (C) travel and expense reimbursement payments to salaried
employees in an amount not to exceed One Hundred Thousand and No/100 Dollars
($100,000.00), in the aggregate; (D) payments for net working capital
adjustments payable pursuant to Section 2.10 of the Recapitalization Agreement
(if applicable) and payments for other net working capital adjustments arising
from any permitted acquisition or merger; (E) loans or other payments by and
between Borrowers; and (E) the loans, salary advances or other payments made or
to be made by any Borrower and described more fully on Schedule 7.8(b) attached
---------------
hereto.
Section 7.9 Lease Obligations. Enter into any new lease of real or personal
-----------------
property, except in the ordinary course of business.
Section 7.10 Capital Expenditures. Make any capital expenditure, including,
--------------------
but not limited to, expenditures for leasehold improvements and capitalized
costs, in excess of Two Million and No/100 Dollars ($2,000,000.00), in the
aggregate, per annum.
Section 7.11 Lockbox Deposits. Permit or cause any and all payments
----------------
required to be made directly to the Agent or any Lender pursuant to Section 11.2
of this Agreement to be made or directed to any other person or entity, without
the prior approval of the Agent.
Section 7.12 Shareholders Agreement; Recapitalization Agreement; Etc..
--------------------------------------------------------
Suffer or permit any modification or amendment to the Shareholders Agreement or
the Recapitalization Agreement.
36
Section 7.13 Sprint Master Services Agreement. Suffer or permit any
--------------------------------
modification or amendment to the Sprint Master Services Agreement without
providing to the Agent and each Lender not less than five (5) Business Days
prior written notice thereof, together with a copy of the proposed modification
or amendment; it being understood and agreed that, for purposes of this covenant
only, normal and customary contract orders and task orders issued in the
ordinary course of business shall not constitute modifications or amendments to
the Sprint Master Services Agreement.
Section 7.14 Transactions With Affiliates. Enter into or otherwise bind any
----------------------------
Borrower to any contract, agreement or other understanding with any person or
entity directly or indirectly related to, affiliated with or under common
control or ownership with any Borrower or any stockholder of any Borrower (other
than another Borrower), except upon fair and reasonable terms which are at least
as favorable to such Borrower as would be the case in a comparable, arm's-length
transaction with an unaffiliated and unrelated entity or person.
Section 7.15 Joint and Several Liability. Each Borrower acknowledges and
---------------------------
agrees that each Borrower shall be severally and jointly and severally liable
for each and every negative covenant set forth in this Article 7.
ARTICLE 8
---------
COLLATERAL ACCOUNT
------------------
The Borrowers will deposit or cause to be deposited into a collateral
account (the "Collateral Account") designated by the Agent, all checks, drafts,
cash and other remittances received by each Borrower, and the Borrowers shall
deposit such items for credit to the Collateral Account within one (1) Business
Day of the receipt thereof and in precisely the form received. Pending such
deposit, no Borrower will commingle any such items of payment with any of its
other funds or property, but will hold them separate and apart.
The Borrowers hereby covenant and agree that the Collateral Account shall
secure the Obligations and hereby grant, assign and transfer to the Agent, for
the ratable benefit of the Lenders, a continuing security interest in all of
each Borrower's right, title and interest in and to the Collateral Account.
Notwithstanding anything to the contrary under applicable state law, the Agent
may apply funds in the Collateral Account to any of the Obligations, including,
without limitation, any principal, interest or other payment(s) not made when
due, whether arising under this Loan Agreement and/or any other Loan Document,
or any other Obligation of any Borrower, without notice to the Borrowers,
without regard to the origin of the deposits in the account, the beneficial
ownership of the funds therein or whether such Obligations are owed jointly with
another or severally; the order and method of such application to be in the sole
discretion of the Agent. The Agent's right to deduct sums due under the Loan
Documents from the account(s) of the Borrowers shall not relieve any Borrower
from its obligation to make all payments required by the Loan Documents as and
when required by the Loan Documents, and the Agent shall not have any obligation
to make any such deductions or any liability whatsoever for any failure to do
so.
37
ARTICLE 9
---------
DEFAULT AND REMEDIES
--------------------
Section 9.1 Events of Default. Any one of the following events shall be
-----------------
considered an "Event of Default":
(a) if any Borrower shall fail to pay any principal, interest or other sum
owing on any of the Notes or any other Obligation when the same shall become due
and payable, whether by reason of acceleration or otherwise;
(b) if at any time the outstanding principal balance of the Revolving
Facility shall exceed the Revolving Facility Commitment Amount and the Borrowers
shall fail, immediately upon the happening of any such occurrence, without
notice or demand therefor, to make a payment to the Agent, for the benefit of
the Lender(s), in an amount equal to or greater than the Borrowing Deficiency;
(c) if any Borrower shall fail to pay and satisfy in full, within thirty
(30) days of the rendering thereof, any judgment against such Borrower in excess
of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) which is not, to
the reasonable satisfaction of the Agent, fully bonded, stayed, covered by
insurance or covered by appropriate reserves;
(d) with respect to any warranty or representation expressly qualified by a
"materiality" standard set forth herein or in any other Loan Document and made
by any Borrower or any other person or entity on behalf of any Borrower, if such
warranty or representation shall be untrue in any respect when made, including,
without limitation, any information contained in any financial statement,
application, schedule, report or other document given by any Borrower or any
other person or entity on behalf of any Borrower in connection with any of the
Obligations or Loan Documents; and/or with respect to any warranty or
representation not expressly qualified with a "materiality" standard set forth
herein or in any other Loan Document and made by any Borrower or any other
person or entity on behalf of any Borrower, if such warranty or representation
shall be untrue in any material respect when made, including, without
limitation, any information contained in any financial statement, application,
schedule, report or other document given by any Borrower or any other person or
entity on behalf of any Borrower in connection with any of the Obligations or
Loan Documents;
(e) if there shall be non-compliance with or a breach of any of the
Affirmative Covenants or Negative Covenants contained in this Agreement, or any
other covenants or agreements of any Borrower, in any of the Notes or in any
other Loan Document;
(f) if (i) without the prior written consent of the Agent, any Borrower
shall be liquidated or dissolved or shall discontinue its business; (ii) a
trustee or receiver is appointed for any Borrower or for all or a substantial
part of its assets; (iii) any Borrower makes a general assignment for the
benefit of creditors; (iv) any Borrower files or is the subject of any
insolvency proceeding or petition in bankruptcy, which in the case of an
involuntary bankruptcy, remains undismissed for sixty (60) days; (v) any
Borrower shall become insolvent or at any time fail generally to pay its debts
as such debts become due; or (vi) any governmental agency or
38
bankruptcy court or other court of competent jurisdiction shall assume custody
or control of the whole or any material part of the assets of any Borrower;
(g) if any property or assets of any Borrower (including, without
limitation, any deposit accounts) having a value, individually or in the
aggregate, in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) are levied upon, attached or subject to any other enforcement
proceeding, which is not fully bonded or stayed within thirty (30) days of such
levy, attachment or other enforcement proceeding;
(h) if, except as otherwise expressly permitted pursuant to this Agreement,
any Borrower shall dissolve, merge or consolidate with another entity, or
reorganize, in each case without the prior written consent of the Agent;
(i) if any obligation of any Borrower for the payment of borrowed money,
which involves amounts in excess of Fifty Thousand and No/100 Dollars
($50,000.00), whether now existing or hereafter created, incurred or arising,
becomes or is declared to be due and payable prior to the expressed maturity
thereof, whether such obligation is owed to the Agent, any Lender or any other
person or entity;
(j) if a Borrower shall be in default under any Material Contract (other
than the Sprint Master Services Agreement) and such default remains uncured
beyond (x) the expiration of the time period available to the Borrower pursuant
to such Material Contract to cure the noticed default, or (y) the date on which
the other contracting party is entitled to exercise its rights and remedies
under the Material Contract as a consequence of such default;
(k) if a Borrower shall be in default under the Sprint Master Services
Agreement (regardless of whether any applicable notice and/or cure period shall
have lapsed), or if the Master Services Agreement shall be cancelled, terminated
or modified in any material respect without the prior written consent of the
Agent, or if the Sprint Master Services Agreement shall not be renewed in
accordance with the terms thereof;
(l) intentionally omitted;
(m) intentionally omitted;
(n) if either the Agent or the Required Lenders believe in good faith there
is a material adverse change in the business, assets, properties, prospects,
condition (financial or otherwise) of any Borrower; and/or
(o) if, except as otherwise expressly permitted pursuant to this Agreement,
any change in majority ownership or control of any Borrower's business or
operations shall occur.
Section 9.2 Remedies. Upon the occurrence of any Event of Default, the
--------
Agent, acting on behalf of the Lender(s), may exercise any or all of the
following remedies:
(a) Withhold disbursement of all or any part of the Loan proceeds until
such time that such Event of Default is cured to the satisfaction of the Agent
and no other Event of Default exists;
39
(b) Subject to the expiration of the applicable notice and cure period set
forth in subsection (c) below, terminate the obligation of the Lender(s) to make
further disbursements of the Loan proceeds;
(c) Declare all principal, interest and other sums owing on the Obligations
to be immediately due and payable without demand, protest, notice of protest,
notice of default, presentment for payment or further notice of any kind;
provided, however, that payments of amounts hereunder shall not be accelerated
by reason of (i) a default in the payment of any sum due and payable hereunder
or pursuant to any other Loan Document (a "Payment Default"), unless such
Payment Default remains uncured for five (5) days (with no notice of default
being required); and (ii) a default other than a Payment Default (a "Non-Payment
Default"), unless such Non-Payment Default remains uncured for twenty (20) days
following notice thereof from the Agent to the Borrower. Notwithstanding the
foregoing, no notice of a Non- Payment Default or grace period therefor shall be
required prior to acceleration or prior to the Agent or any Lender exercising
any other right or remedy under this Agreement or any other Loan Document, if
(i) the Agent in good faith believes that any such delay would adversely affect
the Agent's security or the Agent's lien priority, (ii) the default is a
violation of, or failure to observe or comply with, Section 6.7 or Section 6.15
of this Agreement or (iii) the default is a violation of, or failure to observe
or comply with, any of the covenants set forth in Article 7 of this Agreement;
(d) Without notice, offset and apply against all or any part of the
Obligations then owing by any Borrower to the Agent or any Lender, any and all
money, credits, stocks, bonds or other securities or property of any Borrower of
any kind or nature whatsoever on deposit with, held by or in the possession of
the Agent or any Lender in any capacity whatsoever, including, without
limitation, any deposits with the Agent or any Lender or any of its affiliates,
to the credit of or for the account of any Borrower. Notwithstanding any
applicable state law to the contrary (and without limiting the Agent's right,
for the convenience of the Borrowers, to charge any Borrower's account(s) for
any principal, interest or other sums payable pursuant to this Agreement, the
Notes or any other Loan Document when due), the Agent and/or any Lender is
authorized at any time to charge the Obligations against any Borrower's
account(s), without regard to the origin of deposits to the account or
beneficial ownership of the funds;
(e) Exercise all rights, powers and remedies of a secured party under the
Uniform Commercial Code in effect in the Commonwealth of Virginia, any other
jurisdiction in which the Collateral is located and/or any other applicable
law(s), including, without limitation, the right to (i) require the Borrowers to
assemble the Collateral (to the extent that it is movable) and make it available
to the Agent at a place to be designated by the Agent, and (ii) enter upon any
Borrower's premises, peaceably by the Agent's own means or with legal process,
and take possession of, render unusable or dispose of the Collateral on such
premises; each Borrower hereby agreeing not to resist or interfere with any such
action. The Agent agrees to give the Borrower written notice of the time and
place of any public sale of the Collateral or any part thereof, and the time
after which any private sale or any other intended disposition of the Collateral
is to be made, and such notice will be mailed, postage prepaid, to the principal
place of business of the Borrower, at least ten (10) days before the time of any
such sale or disposition, unless any Applicable Law permits a shorter notice
period. Each Borrower acknowledges and agrees that the ten (10) day notice
period (or shorter notice period permitted by Applicable Law) is commercially
reasonable. Each Borrower hereby authorizes and appoints the Agent and its
40
successors and assigns to (x) sell the Collateral, and (y) declare that such
Borrower assents to the passage of a decree by a court of proper jurisdiction
for the sale of the Collateral. Any such sale pursuant to (x) or (y) above is to
be made in accordance with the applicable provisions of the laws and rules of
procedure of the Commonwealth of Virginia or other applicable law; and/or
(f) Proceed to enforce such other and additional rights and remedies as the
Agent and/or any Lender may have hereunder, and/or under any of the other Loan
Documents, or as may be provided by applicable law.
It is expressly understood and agreed that the Agent and/or any Lender may
exercise its respective rights under this Agreement or under any other Loan
Document without exercising the rights or affecting the security afforded by any
other Loan Document, and it is further understood and agreed that the Agent may
proceed against all or any portion of the Collateral in such order and at such
times as the Agent, in its sole discretion, sees fit; and each Borrower hereby
expressly waives, to the extent permitted by law, all benefit of valuation,
appraisement, marshaling of assets and all exemptions under the laws of the
Commonwealth of Virginia and/or any other state, district or territory of the
United States. Furthermore, if any Borrower shall default in the performance
when due of any of the provisions of this Agreement, the Agent, without notice
to or demand upon the Borrower (and without any grace or cure period) and
without waiving or releasing any of the Obligations or any default hereunder,
under the Notes or under any other Loan Document, may (but shall be under no
obligation to) perform the same for such Borrower's account, and any monies
expended in so doing shall be chargeable to the Borrowers with interest, at the
Default Rate, until the Event of Default is cured, and added to the indebtedness
secured by the Collateral.
All sums paid or advanced by the Agent or any Lender in connection with the
foregoing or otherwise in connection with the Loan, and all court costs and
expenses of collection, including without limitation, reasonable attorneys' fees
and expenses (and fees and expenses resulting from the taking, holding or
disposition of the Collateral) incurred in connection therewith shall be paid by
the Borrowers upon demand and shall become a part of the Obligations secured by
the Collateral. The Borrowers agree to bear the expense of each lien search,
property and judgment report or other form of Collateral ownership investigation
as the Agent in its discretion, shall deem necessary or desirable to assure or
further assure to the Agent its interests in the Collateral.
Notwithstanding anything to the contrary set forth in this Agreement or any
other Loan Document, in the event that any Collateral proceeds shall have been
received by the Agent to pay any of the Obligations, such proceeds shall be
applied first to the Obligations relating to, arising from or incurred in
connection with the transactions contemplated by this Agreement in accordance
with the terms and provisions of this Agreement, and then to any other
Obligations of any Borrower.
ARTICLE 10
----------
THE AGENT; AGENCY
-----------------
Section 10.1 Appointment. Each Lender hereby irrevocably appoints First
------------
Union National Bank to act as the Agent for each such Lender pursuant to the
provisions of this
41
Agreement and the other Loan Documents, and irrevocably authorizes the Agent to
take such action, and exercise such powers and perform such duties as are
expressly delegated to or required of the Agent by the terms hereof or thereof,
or are reasonably incidental thereto, including without limitation, executing
documents on behalf of the Lender(s), as agent. First Union National Bank agrees
to act as Agent on behalf of the Lender(s) on the terms and conditions set forth
in this Agreement and the other Loan Documents, subject to its right to resign
as provided in Section 10.10 of this Agreement. Each Lender agrees that the
rights and remedies granted to the Agent under this Agreement and the other Loan
Documents shall be exercised exclusively by the Agent, and that no Lender shall
have the right individually to exercise any such right or remedy, except to the
extent expressly provided herein or therein.
Section 10.2 General Nature of the Agent's Duties. Notwithstanding anything
------------------------------------
to the contrary elsewhere in this Agreement or any other Loan Document:
(a) The Agent shall have no duties or responsibilities other than those
expressly set forth in this Agreement and the other Loan Documents, and no
implied duties or responsibilities on the part of the Agent shall be read into
this Agreement or any other Loan Document or shall otherwise exist.
(b) The duties and responsibilities of the Agent under this Agreement and
the other Loan Documents shall be mechanical and administrative in nature, and
the Agent shall not have a fiduciary relationship in respect of any Lender,
except with respect to funds or collateral it receives on behalf of any Lender.
(c) The Agent is and shall be solely the agent of the Lender(s). The Agent
does not assume, and shall not at any time be deemed to have, any relationship
of agency or trust with or for, or any other duty or responsibility to, any
Borrower or any other person.
(d) The Agent shall be under no obligation to take any action hereunder or
under any other Loan Document if the Agent believes in good faith that taking
such action may conflict with any applicable law, or any provision of this
Agreement or any other Loan Document, or may require the Agent to qualify to do
business in any jurisdiction where it is not then so qualified.
Section 10.3 Exercise of Powers.
------------------
(a) During any period in which First Union and Bank of America (each, an
"Original Lender" and collectively, the "Original Lenders") are the only
"Lender" parties to this Agreement (the "Original Lender Period"), the Agent
shall not have the authority to take any action of the type specified in this
Agreement or any other Loan Document as being within the Agent's rights, powers
or discretion, unless (i) such action shall have been authorized by both of the
Original Lenders; or (ii) such action is otherwise permitted pursuant to
subsection (1) below. In furtherance of the foregoing, it is expressly
understood and agreed that, except as otherwise provided in subsection (1)
below, during the Original Lender Period, the Agent shall not amend, modify,
grant any consent or waive any term or provision of this Agreement or any other
Loan Document, acknowledge satisfaction of any requirement set forth in this
Agreement or in any other Loan Document, declare an Event of Default, provide
formal written notice of an Event of Default to the Borrowers or exercise any
rights or remedies against any Borrower, or do or
42
refrain from doing any other act as the Agent for the Lenders, unless such
action or refraining from acting shall have been authorized by both of the
Original Lenders.
(1) Notwithstanding the foregoing, if during the Original Lender Period (A)
either of the Original Lenders authorizes and directs the Agent to request and
obtain documents, instruments or information from any Borrower or all of the
Borrowers, the Agent shall undertake such action, whether or not both of the
Original Lenders have requested or consented to such action; and/or (B) the
Original Lenders fail to agree (such disagreement being hereinafter referred to
as a "Dispute") on whether to take or pursue any specific action (other than
enforcement action as provided below), then the Original Lenders shall, upon the
demand of either of the Original Lenders, submit the Dispute to arbitration in
accordance with the rules, regulations and procedures of the American
Arbitration Association (sitting in Washington, D.C.) on an expedited basis, and
the decision of the American Arbitration Association shall be binding on the
Original Lenders.
(2) Notwithstanding the foregoing requirement to submit the Dispute to
arbitration as provided in subsection (1) above, if the Dispute involves a
disagreement regarding whether to enforce (or the manner or timing of
enforcement of) any rights or remedies that the Agent may be entitled to
exercise against any Borrower and/or any Collateral pursuant to this Agreement,
any other Loan Document or applicable law, then the Original Lender who does not
agree to authorize the Agent to take all available enforcement action (the
"Blocking Lender") shall have the right to require the other Original Lender
(the "Affected Lender") to sell and assign to the Blocking Lender (or to such
other person or entity as the Blocking Lender may designate), all of such
Affected Lender's rights and obligations under this Agreement, in accordance
with Section 12.11 of this Agreement, and for a price payable in immediately
available funds concurrently with the execution and delivery of the sale and
assignment, in an amount equal to all amounts owed to the Affected Lender
hereunder or under any other Loan Document, including amounts funded by the
Affected Lender ratably in accordance with the Affected Lender's Percentage of
the aggregate outstanding principal amount of the Loans which remain due and
owing to such Lender, together with accrued interest thereon through the date of
such assignment. Any such sale and assignment shall be made pursuant to
assignment documentation, in the form attached as Exhibit 9 hereto (the
---------
"Assignment"), and shall be executed and delivered by the Affected Lender within
five (5) Business Days after written demand for such sale and assignment made in
accordance with this provision. If the Affected Lender fails or refuses to
execute and deliver the same within five (5) Business Days after the date of
such demand, provided the Affected Lender does not deliver to the Agent written
notice of the existence of a bona fide dispute as to amounts due and owing
hereunder between the Affected Lender, the Agent and/or the Borrowers, which
notice sets forth with particularity the nature of such dispute, the Affected
Lender shall be liable for all direct, indirect and consequential damages
incurred by the Blocking Lender as a result of the Affected Lender's failure to
execute and deliver the Assignment (including, without limitation, any costs,
claims, expenses, damages and liabilities arising from the impairment (if
applicable) of the Blocking Lender's rights and remedies set forth in this
Agreement or the impairment of its ability to exercise any such rights and
remedies). Upon the replacement of any Affected Lender pursuant to this Section
10.3(a), such Affected Lender shall cease to have any participation in,
entitlement to, or other right to share in the Loan or the security interests
granted in favor of the Agent in any Collateral, and such Affected Lender shall
have no further liability to the Agent or any other Lender under any of the Loan
Documents (except as otherwise provided hereinabove or as
43
otherwise provided in Section 12.11(a) of this Agreement as to events or
transactions which occurred prior to the replacement of such Affected Lender).
In the event that First Union becomes an Affected Lender pursuant to this
Section 10.3(a), the Blocking Lender shall have the right to remove First Union
National Bank as the Agent under this Agreement, such removal to occur
concurrently with the Assignment by the Affected Lender.
(b) If, as of any applicable date of determination, the Original Lenders
are no longer the only "Lender" parties to this Agreement, the Agent shall have
the authority to take any action of the type specified in this Agreement or any
other Loan Document as being within the Agent's rights, powers or discretion, as
it determines in its sole discretion, except as provided in subsection (c)
below, and except as provided in any other Loan Document which expressly
requires the direction or consent of (i) the Required Lenders; or (ii) all of
the Lenders, in either of which circumstances the Agent shall not take such
action absent such direction or consent. Any action or inaction pursuant to such
direction or consent shall be binding on all of the Lenders.
(c) Except as otherwise expressly provided in this Agreement, without the
consent or approval of the Required Lenders, the Agent shall not, in any
material respect, amend, modify, grant consents or waive terms or provisions of
this Agreement or any other Loan Document (each, an "Amendment and collectively,
"Amendments"), or declare an Event of Default, provide formal written notice of
an Event of Default to the Borrowers or exercise any rights or remedies against
any Borrower. Each Lender agrees that its decision to consent to or reject any
request by the Agent for any Amendment or for permission to declare an Event of
Default, provide formal notice thereof to the Borrowers and/or exercise any
rights or remedies arising by virtue of such default, shall be made as soon as
reasonably practicable after the Agent has provided all information reasonably
necessary to act on any such request, but in all events within five (5) Business
Days of the receipt of such information; provided, however, that in an emergency
situation, the Agent may require the Lenders to respond within such shorter time
period as may be specified by the Agent in writing, but in no event less than
two (2) Business Days from the receipt of such information. Unless otherwise
provided herein, the Agent shall exercise any and all rights and
responsibilities on behalf of the Lenders in connection with an Event of
Default. Additionally, the consent or approval of all of the Lenders shall be
required for the Agent to (a) extend the final maturity of the Loan or any Note,
reduce the interest rate payable on or extend the time of payment for any
installment of principal, interest or fees payable in connection with the Loan,
or issue Letters of Credit (i) having an expiration date beyond the Revolving
Facility Maturity Date, except as otherwise expressly provided in this
Agreement, or (ii) causing the aggregate outstanding amount of all such Letters
of Credit issued to exceed Five Million Dollars ($5,000,000); (b) change the
Percentage or the Commitment Amount of any Lender, (c) release all or a
substantial portion of the Collateral, except in accordance with the provisions
of any applicable Loan Document, (d) amend the definition of the Required
Lenders, (e) consent to the assignment or transfer by any Borrower of any of its
rights or obligations hereunder, (f) amend, modify or waive any provisions of
this Section 10.3, (g) change the manner of application by the Agent of payments
made under the Loan Documents, or (h) change the method of calculation used in
connection with the computation of interest, commissions or fees. Each Lender
agrees that its decision to approve or reject any request for an amendment or
waiver with respect to this Agreement shall be made as soon as reasonably
practicable after the Lender has received all information deemed by the Agent to
be necessary to act on any such request.
44
Section 10.4 General Exculpatory Provisions. Notwithstanding anything to
------------------------------
the contrary elsewhere in this Agreement or any other Loan Document:
(a) The Agent, in its capacity as Agent (but not as a Lender), shall not be
liable for any action taken or omitted to be taken by it under or in connection
with this Agreement or any other Loan Document, unless the same constitutes
gross negligence or willful misconduct, as finally determined by a court of
competent jurisdiction.
(b) The Agent, in its capacity as the Agent (but not a Lender), shall not
be responsible for (i) the execution, delivery, effectiveness, enforceability,
genuineness, validity or adequacy of this Agreement or any other Loan Document,
(ii) any recital, representation, warranty, document, certificate, report or
statement in this Agreement or any other Loan Document, (iii) any failure of any
Borrower or any Lender to perform any of their respective obligations under this
Agreement or any other Loan Document, (iv) the existence, validity,
enforceability, perfection, recordation, priority, adequacy or value, now or
hereafter, of any lien or encumbrance or other direct or indirect security
afforded or purported to be afforded by any of the Loan Documents, or otherwise
from time to time, or (v) caring for, protecting, insuring or paying any taxes,
charges or assessments with respect to any Collateral.
(c) The Agent shall be under no obligation to ascertain, inquire or give
any notice relating to (i) the performance or observance of any of the terms or
conditions of this Agreement or any other Loan Document on the part of any
Borrower, (ii) the business, operations, condition (financial or otherwise) or
prospects of any Borrower, or (iii) except to the extent as may be set forth in
Section 10.5(f) of this Agreement, the existence of any Event of Default.
(d) The Agent shall be under no obligation, either initially or on a
continuing basis, to provide any Lender with any notices, reports or information
of any nature, whether in its possession presently or hereafter, except for such
notices, reports and other information expressly required by this Agreement or
any other Loan Document to be furnished by the Agent to such Lender; it being
understood and agreed that the Agent shall promptly deliver to each Lender
copies of any and all notices, documents, instruments and agreements deemed by
the Agent, in its reasonable discretion, to be material to the transactions
contemplated by this Agreement (including, without limitation, copies of any and
all field audit results and requests for the issuance of any Letter(s) of
Credit).
Section 10.5 Administration by the Agent.
---------------------------
(a) The Agent may rely upon any notice or other communication of any nature
(written or oral, including telephone conversations, whether or not such notice
or other communication is made in a manner permitted or required by this
Agreement or any other Loan Document) purportedly made by or on behalf of the
proper party or parties, and the Agent shall have no duty to verify the identity
or authority of any person giving such notice or other communication.
(b) The Agent may consult with legal counsel (including in-house counsel
for the Agent), independent public accountants and any other experts selected by
the Agent from
45
time to time, and the Agent shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts.
(c) The Agent may conclusively rely upon the truth of the statements and
the correctness of the opinions expressed in any certificates or opinions
furnished to the Agent in accordance with the requirements of this Agreement or
any other Loan Document. Whenever the Agent shall deem it necessary or desirable
that a matter be proved or established with respect to any Borrower or any
Lender, such matter may (in the Agent's discretion) be established by a
certificate of such Borrower or such Lender, as the case may be, and the Agent
may conclusively rely upon such certificate.
(d) The Agent may fail or refuse to take any action unless it shall be
indemnified to its reasonable satisfaction from time to time against any and all
amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of every kind and nature
which may be imposed on, incurred by or asserted against the Agent by reason of
taking or continuing to take any such action; provided that no Lender shall be
obligated to indemnify the Agent for any portion of such amounts, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements resulting solely from the gross negligence or willful
misconduct of the Agent, as finally determined by a court of competent
jurisdiction.
(e) The Agent may perform any of its duties under this Agreement or any
other Loan Document by or through agents or attorneys-in-fact. The Agent shall
not be responsible for the gross negligence or willful misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
(f) In the event that any Lender becomes aware (other than by written
notice from the Agent) that an Event of Default exists, such Lender shall
promptly provide written notice thereof to the Agent, as provided hereinbelow.
The Agent shall not be deemed to have any knowledge or notice of the occurrence
of any Event of Default (other than a default in the payment of regularly
scheduled principal or interest), unless the Agent has received from a Lender or
any Borrower a written notice referring to this Agreement, describing the Event
of Default, and stating that such notice is a "notice of default". If the Agent
receives such a notice from any Lender or Borrower, the Agent shall give prompt
notice thereof to each Lender.
(g) Except in emergency situations requiring immediate audits, as
determined by the Agent, the Agent shall provide three (3) Business Days prior
notice to the Lender(s) of any field audit scheduled to be performed by the
Agent pursuant to Section 1.6 of this Agreement. The Lender(s) shall be entitled
to (i) receive copies of field audits performed by the Agent, and (ii) accompany
the Agent to any field audit, provided that the Agent may, in its discretion,
limit the number of Lenders attending any such field audit.
Section 10.6 Lenders Not Relying on the Agent or Other Lenders. Each Lender
-------------------------------------------------
acknowledges as follows:
(a) Neither the Agent nor any other Lender has made any representations or
warranties to it, and no act taken hereafter by the Agent or any other Lender
shall be deemed to constitute any representation or warranty by the Agent or
such other Lender to it.
46
(b) It has, independently and without reliance upon the Agent or any other
Lender, and based upon such documents and information as it has deemed
appropriate, made its own credit and legal analysis and decision to enter into
this Agreement and the other Loan Documents.
(c) It will, independently and without reliance upon the Agent or any other
Lender, and based upon such documents and information as it shall deem
appropriate at the time, make its own decisions to authorize the Agent to take
or not take action under or in connection with this Agreement and the other Loan
Documents.
Section 10.7 Indemnification. Each Lender agrees to reimburse and indemnify
---------------
the Agent and the Agent's directors, officers, employees and agents (to the
extent not reimbursed by any Borrower, and without limitation of the obligation
of the Borrowers to do so), ratably in accordance with each Lender's Percentage,
from and against any and all amounts, losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs and
disbursements of every kind or nature (including the reasonable fees and
disbursements of counsel for the Agent or such other person in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not the Agent or such other person shall be designated a
party thereto) that may at any time be imposed on, reasonably incurred by or
asserted against the Agent or such other person as a result of this Agreement,
any other Loan Document, any transaction from time to time contemplated hereby
or thereby, or any transaction financed in whole or in part, directly or
indirectly, with the proceeds of the Loan; provided that no Lender shall be
obligated to indemnify the Agent or such other person for any portion of such
amounts, losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements resulting solely from the
gross negligence or willful misconduct of the person seeking indemnity, as
finally determined by a court of competent jurisdiction.
Section 10.8 The Agent in its Individual Capacity. With respect to its
------------------------------------
commitments and the Obligations owing to it, First Union shall have the same
rights and powers under this Agreement and each other Loan Document as any other
Lender, and may exercise the same as though it was not the Agent. The terms
"Lender," "holders of Notes" and like terms shall include First Union in its
individual capacity. First Union and its affiliates may make loans to, accept
deposits from, acquire debt or equity interests in, act as trustee under
indentures of and engage in any other business with any Borrower and any
stockholder, subsidiary or affiliate of any Borrower, as though First Union was
not the Agent hereunder, and without liability to account to any other Lender
with respect to the same.
Section 10.9 Holders of Notes. The Agent may deem and treat any Lender
----------------
which is the payee of a Note as the owner and holder of such Note for all
purposes hereof unless and until written notice evidencing such transfer shall
have been filed with the Agent; it being understood and agreed that any such
transfer must comply with the requirements of Section 12.10(b) of this
Agreement,. Any authority, direction or consent of any person who at the time of
giving such authority, direction or consent was a Lender shall be conclusive and
binding on each present and subsequent holder, transferee or assignee of any
Note or Notes payable to such Lender or issued in exchange therefor.
Section 10.10 Successor Agent. The Agent may resign at any time by giving
---------------
fifteen (15) days prior written notice thereof to the Lender(s) and the
Borrower, subject to appointment
47
of a successor Agent (and such appointees acceptance of appointment) as below
provided in this Section 10.10. Upon any such resignation, the Required Lenders
shall appoint another Lender as the successor Agent; provided that such Lender
is a commercial bank or trust company organized under the laws of the United
States of America or any State thereof and has a combined capital and surplus of
at least $1,000,000,000. In such event, the Agent's resignation shall not be
effective until the successor Agent shall have accepted its appointment. Upon
the acceptance by a successor Agent of its appointment as Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all of the
properties, rights, powers, privileges and duties of the former Agent, without
further act, deed or conveyance. Upon the effective date of resignation of a
retiring Agent, such Agent shall be discharged from its duties under this
Agreement and the other Loan Documents, but the provisions of this Agreement
shall continue to inure to its benefit as to any actions taken or omitted by it
while it was Agent under this Agreement. If for any reason, at any time, there
is no Agent hereunder, then during such period, the Required Lenders shall have
the right to exercise the Agent's rights and perform its duties hereunder,
except that (i) all notices or other communications required or permitted to be
given to the Agent shall be given to each Lender, and (ii) with respect to the
absence of the Agent, all payments to be made to the Agent shall be made
directly to the Lender for whose account such payment is made (or to the
Borrowers, if applicable).
Section 10.11 Additional Agents. If the Agent shall from time to time deem
-----------------
it necessary or advisable to engage other agents for its own protection in the
performance of its duties hereunder or in the interests of the Lenders, then the
Agent and the Borrowers shall execute and deliver a supplemental agreement and
all other instruments and agreements necessary or advisable, in the opinion of
the Agent, to constitute another commercial bank or trust company, or one or
more other persons approved by the Agent, to act as co-Agent or a separate agent
with respect to any part of the Collateral, with such powers as may be provided
in such supplemental agreement, and with the power to vest in such bank, trust
company or other person (as such co-Agent or separate agent, as the case may
be), any properties, rights, powers, privileges and duties of such Agent under
this Agreement or any other Loan Document.
Section 10.12 Calculations. The Agent shall not be liable for any
------------
calculation, apportionment or distribution of payments made by it in good faith.
If such calculation, apportionment or distribution is subsequently determined to
have been made in error, the sole recourse of any Lender to whom payment was due
but not made shall be to recover from the Lenders any payment in excess of the
amount to which they are determined to be entitled, with interest thereon at the
Federal Funds Rate, or, if the amount due was not paid by the Borrowers, to
recover such amount from the Borrowers, with interest thereon at the rate
provided in the applicable Note.
Section 10.13 Funding by Agent.
----------------
(a) Except as otherwise expressly provided in this Agreement, the Agent
alone shall be entitled to make all advances in connection with the Loan and
shall receive all payments and other receipts relating to the Loan; it being
understood, however, that the Agent has reserved the right not to advance any
amounts to the Borrowers which the Agent has not received from the Lender(s).
The Agent will notify each Lender of the date and amount of any requested
advance, and if such notification is received by 1:00 p.m. Washington, D.C. time
on any given Business Day, the Lender(s) shall provide the required funds to the
Agent no later than
48
the close of business on such Business Day. Once per week, or within such
shorter time frame as may be requested by the Agent, the Agent and each Lender
shall pay to each other such amounts (the "Equalization Payments") as may be
necessary to cause each Lender to own its applicable Percentage of the Loan and
otherwise implement the terms and provisions of this Agreement; it being
understood that (i) each Lender shall be entitled to receive interest on amounts
advanced by it only from the date of such Lender's advance of funds; (ii)
payments made by the Borrowers and received by the Agent shall be promptly
distributed to the Lenders in accordance with the terms of this Agreement; and
(iii) LIBOR advances and payments of amounts outstanding on a LIBOR basis shall
be made by and between the Agent and the applicable Lenders on a same day basis,
provided that the applicable Request for Advance, LIBOR Election Form and
Certification and/or payment of amounts outstanding on a LIBOR basis shall have
been received by the Agent on or before 1:00 p.m. Washington, D.C. time on any
given Business Day. The obligation of the Agent and each Lender to make
Equalization Payments shall not be affected by a bankruptcy filing by any
Borrower, the occurrence of any Event of Default or any other act, occurrence or
event whatsoever, whether the same occurs, before, on or after the date on which
an Equalization Payment is required to be made. All Equalization Payments shall
be made by 1:00 p.m. Washington, D.C. time on the date such payment is required.
(b) Unless the Agent shall have been notified in writing by any Lender no
later than the close of business on the Business Day before the Business Day on
which an advance requested by the Borrowers is to be made, that such Lender will
not make its ratable share of such advance, the Agent may assume that such
Lender will make its ratable share of the advance, and in reliance upon such
assumption the Agent may (but in no circumstances shall be required to) make
available to the Borrowers a corresponding amount. If and to the extent that any
Lender fails to make such payment to the Agent when required, such Lender shall
pay such amount on demand (or, if such Lender fails to pay such amount on
demand, the Borrowers shall arrange for the repayment of such amount to the
Agent), together with interest for the Agent's own account for each day from and
including the date of the Agent's payment, to and including the date of
repayment to the Agent (before and after judgment). Interest (a) if paid by such
Lender (i) for each day from and including the date of the Agent's payment to
and including the second Business Day thereafter, shall accrue at the Federal
Funds Rate for such day, and (ii) for each day thereafter, shall accrue at the
rate or rates per annum payable under the Notes; and (b) if paid by the
Borrowers, shall accrue at the rate or rates per annum payable under the Notes.
All payments to the Agent under this Section shall be made to the Agent at its
office set forth in the preamble of this Agreement (or as otherwise directed by
the Agent), in dollars, in immediately available funds, without set-off,
withholding, counterclaim or other deduction of any nature.
(c) All borrowings under this Agreement shall be incurred from the Lenders
pro rata on the basis of their respective Percentages of the Revolving Facility
(except to the extent advanced (i) as a Swing Line Loan, or (ii) by the Agent on
behalf of any Lender as provided in subsection (a) or (b) above). It is
understood that no Lender shall be responsible for any other Lender's failure to
meet its obligation to make advances hereunder, and that each Lender shall be
obligated to make advances required to be made by it hereunder regardless of the
failure of any other Lender to make its advances hereunder.
(d) Each payment and prepayment received by the Agent for the account of
the Lenders shall be distributed first to the Swing Line Lender for application
to any Swing Line Outstandings, and then to each Lender entitled to share in
such payment, ratably in accordance
49
with each Lender's Percentage; provided, however, that any Lender who shall be
in default of its obligations set forth in this Agreement or any other Loan
Document or who has failed to fund its Percentage of any advance under the Loan
shall not be entitled to share in any such payment(s) until such time as such
default has been cured or such failure to fund, together with interest thereon
(as provided in subsection (b) above), has been paid to the Agent in accordance
with the terms and conditions of this Agreement or cured (as the case may be).
Payments from the Agent to the Lenders shall be made by wire transfer in
accordance with written instructions provided to the Agent by the Lenders from
time to time. Unless the Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to the Lenders hereunder that the
Borrowers will not make such payment in full, the Agent may assume that the
Borrowers have made such payment in full on such date and the Agent, in reliance
upon such assumption, may cause to be distributed to each Lender on such due
date an amount equal to the amount then due such Lender. If and to the extent
the Borrowers shall not have made such payment in full to the Agent, each Lender
shall repay to the Agent upon its demand therefor such amount distributed to
such Lender, together with interest thereon at the overnight Federal Funds Rate
for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Agent.
(e) If any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) in excess of such
Lender's Percentage of payments, such Lender shall forthwith purchase from the
other Lender(s) such participations in the Loans made by them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of the other Lender(s); provided, however, if all or any portion of
such excess payment is thereafter recovered from such purchasing Lender, such
purchase from the other Lender(s) shall be rescinded and each other Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery, together with an amount equal to such Lender's ratable share
(according to the proportion of (1) the amount of such Lender's required
repayment, to (2) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount recovered. The Borrowers agree that any Lender purchasing a
participation from another Lender pursuant to this Section 10.13(e), to the
fullest extent permitted by law, may exercise all of its rights of payment with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.
Section 10.14 Benefit of Article. The provisions of this Article 10 are solely
------------------
for the benefit of the Lenders. The Borrowers shall have no rights under (or
rights to require any Lender's compliance with) any of the provisions of this
Article 10; it being understood that the provisions of this Article 10 are not
in limitation of any right, power, duty, obligation or liability which the Agent
would have to or against any Borrower.
ARTICLE 11
----------
CERTAIN ADDITIONAL RIGHTS AND
OBLIGATIONS REGARDING THE COLLATERAL
------------------------------------
Section 11.1 Power of Attorney. Each Borrower hereby irrevocably appoints
-----------------
the Agent as its agent and attorney-in-fact, with power of substitution, having
full power and authority, in its own name, in the name of any Borrower or
otherwise (but at the cost and
50
expense of the Borrowers and without notice to the Borrowers), to (i) notify
Account Debtors obligated on any of the Receivables to make payments thereon
directly to the lockbox referenced in Section 11.2, and to take control of the
cash and non-cash proceeds of any such Receivables, which right the Agent may
exercise at any time whether or not any Borrower is then in default hereunder or
was theretofore making collections thereon; (ii) charge against any bank account
of any Borrower any item of payment credited to the Collateral Account which is
dishonored by the drawee or the maker thereof; (iii) upon an Event of Default,
compromise, extend or renew any of the Collateral constituting Receivables or
deal with any of the Collateral as the Agent may deem advisable; (iv) upon an
Event of Default, release its interest in, make exchanges or substitutions for
and/or surrender, all or any part of any Borrower's interest in all or any part
of the Collateral; (v) upon an Event of Default, remove from any Borrower's
place(s) of business all books, records, ledger sheets, correspondence, invoices
and documents relating to or evidencing any of the Collateral, or without cost
or expense to the Agent or any Lender, make such use of any Borrower's place(s)
of business as may be reasonably necessary to administer, control and/or collect
the Collateral; (vi) upon an Event of Default, repair, alter or supply goods, if
any, necessary to fulfill in whole or in part the purchase order of any Account
Debtor; (vii) demand, collect receipt for and upon an Event of Default, give
renewals, extensions, discharges and releases of all or any part of the
Collateral; (viii) upon an Event of Default, institute and prosecute legal and
equitable proceedings to enforce collection of, or realize upon, all or any part
of the Collateral; (ix) upon an Event of Default, settle, renew, extend,
compromise, compound, exchange or adjust claims with respect to all or any part
of the Collateral or any legal proceedings brought with respect thereto; and (x)
receive and open all mail addressed to any Borrower, and if an Event of Default
exists hereunder, notify the Post Office authorities to change the address for
the delivery of mail to any Borrower to such address as the Agent may designate;
it being understood that the rights granted to the Agent in this clause (x),
which are operative on the occurrence of an Event of Default, shall not in any
way limit or impair the other rights provided to the Agent or any Lender in this
Agreement or any other Loan Document, including, without limitation, their
rights with respect to the Collateral Account and the below-referenced lockbox.
Furthermore, each Borrower hereby irrevocably appoints the Agent as its agent
and attorney-in-fact, with power of substitution, having full power and
authority, in its own name, in the name of the Agent, in the name of such
Borrower or otherwise (but at the cost and expense of the Borrowers and without
notice to the Borrowers) and regardless of whether an Event of Default has
occurred or any act, event or condition which with notice or the lapse of time,
or both, would constitute an Event of Default has occurred, to (a) file
financing statements and continuation statements covering the Collateral and
execute the same on behalf of any Borrower; (b) charge against any banking
account of any Borrower any item of payment credited to any Borrower's account
which is dishonored by the drawee or maker thereof; and/or (iii) endorse the
name of any Borrower upon any items of payment relating to the Collateral or
upon any proof of claim in bankruptcy against any Account Debtor.
Section 11.2 Lockbox. The Borrowers shall establish and continually
-------
maintain on terms and conditions reasonably satisfactory to the Agent, one or
more lockboxes (and, if required by the Agent, one or more blocked accounts) for
the collection of Receivables. Each Borrower hereby authorizes the Agent to
receive and collect any amount or amounts due or to become due on account of any
Receivables following the occurrence of an Event of Default and, at its
discretion, to apply the same to the repayment of the Notes. Except as otherwise
may be approved by the Agent in writing, any checks or other remittances
received by any Borrower in payment of the Receivables shall be held in trust by
such Borrower for the Agent and Lender(s).
51
Each Borrower shall, in writing, within thirty (30) days from the date of this
Agreement, direct all of its customers (other than certain customers as may be
approved by the Agent in writing) to make payments directly to the Agent
pursuant to the form of Payment Direction Letter attached as Exhibit 8 hereto,
---------
and shall include on all of its invoices, a direction to its customer to make
all payments directly to the lockbox designated by the Agent in writing.
Section 11.3 Other Agreements. Except as may otherwise be expressly
----------------
permitted by the terms of this Agreement, and without limiting any other
restrictions or provisions of this Agreement, each Borrower will (i) on demand,
subject to any confidentiality and secrecy requirements imposed by any
Government agency, make available in form reasonably acceptable to the Agent,
shipping documents and delivery receipts evidencing the shipment of goods which
gave rise to the sale or lease of inventory or of an account, contract right or
chattel paper, completion certificates or other proof of the satisfactory
performance of services which gave rise to the sale or lease of inventory or of
an account, contract right or chattel paper, and each Borrower's copy of any
written contract or order from which a sale or lease of inventory, an account,
contract right or chattel paper arose; and (ii) when requested, advise the Agent
when an Account Debtor returns or refuses to retain any goods, the sale or lease
of which gave rise to an account, contract right or chattel paper, and of any
delay in delivery or performance, or claims made in regard to any sale or lease
of inventory, account, contract right or chattel paper. Upon reasonable notice,
all such records will be available for examination by authorized agents of the
Agent.
It is expressly understood and agreed, however, that neither the Agent nor
any Lender shall be required or obligated in any manner to make any inquiries as
to the nature or sufficiency of any payment received by it or to present or file
any claims or take any other action to collect or enforce a payment of any
amounts which may have been assigned to it or to which it may be entitled
hereunder at any time or times.
ARTICLE 12
----------
MISCELLANEOUS
-------------
Section 12.1 Remedies Cumulative. Each right, power and remedy of the Agent
-------------------
and/or Lender(s) provided for in this Agreement or in any other Loan Document or
now or hereafter existing at law or in equity, by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
or remedy provided for in this Agreement or in any other Loan Document, or now
or hereafter existing at law or in equity, by statute or otherwise, and the
exercise or beginning of the exercise by the Agent and/or any Lender of any one
or more of such rights, powers or remedies shall not preclude the simultaneous
or later exercise by the Agent and/or any Lender of any or all such other
rights, powers or remedies.
Section 12.2 Waiver. No failure or delay by the Agent or any Lender to
------
insist upon the strict performance of any term, condition, covenant or agreement
set forth in this Agreement or any other Loan Document, or to exercise any
right, power or remedy consequent upon a breach thereof, shall constitute a
waiver of such term, condition, covenant or agreement or of any such breach, or
preclude the Agent or any Lender from exercising any such right, power or remedy
at any later time or times. By accepting payment after the due date of any of
the Obligations, neither the Agent nor any Lender shall be deemed to have waived
either the right to
52
require prompt payment when due of all other Obligations, or the right to
declare a default for failure to make payment of any such other Obligations.
Section 12.3 Notices. Notices to any party shall be in writing and shall be
-------
delivered personally or by first-class mail or nationally-recognized overnight
delivery service addressed to the parties at the addresses set forth below or
otherwise designated in writing:
If to the Borrowers: c/o Empyrean Holdings
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
If to the Agent: First Union National Bank
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Director
If to the Lender(s): First Union Commercial Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Director
Bank of America, N.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Senior Vice President
and to the other Lender parties hereto from
time to time
with a copy of all notices
to the Agent and/or
Lender to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
with a copy of all notices
to the Borrowers to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
Columbia Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Section 12.4 Entire Agreement. This Agreement and the other Loan Documents
----------------
constitute the entire agreement of the parties with respect to the Loan and
supersede all prior
53
agreements and understandings (except for the Commitment Letter, which shall
survive the execution and delivery of this Agreement). This Agreement and the
other Loan Documents shall continue in full force and effect for so long as any
Borrower shall be indebted hereunder or under any Note, and thereafter until the
Agent shall have actually received written notice of the termination hereof from
the Borrowers and all Obligations incurred or contracted before receipt of such
notice shall have been fully paid.
Section 12.5 Relationship of the Parties. This Agreement provides for the
---------------------------
extension of financial accommodations by the Lender(s), in their capacity as
lender, to each Borrower, in its capacity as a borrower, and for the payment of
interest and repayment of the Obligations by the Borrowers. Certain provisions
herein, such as those relating to compliance with the financial covenants,
delivery to the Agent and/or Lender(s) of financial statements, and compliance
with other affirmative and negative covenants are for the benefit of the
Lender(s) to protect the interests of the Lender(s) in assuring repayment of the
Obligations. Nothing contained in this Agreement shall be construed as
permitting or obligating the Agent or any Lender to act as a financial or
business advisor or consultant to any Borrower, as permitting or obligating the
Agent or any Lender to control any Borrower or to conduct any Borrower's
operations, as creating any fiduciary obligation on the part of the Agent or any
Lender to any Borrower, or as creating any joint venture, agency or other
relationship between the parties other than as explicitly and specifically
stated in this Agreement. Each Borrower acknowledges that it has had the
opportunity to obtain the advice of experienced counsel of its own choosing in
connection with the negotiation and execution of this Agreement and to obtain
the advice of such counsel with respect to all matters contained herein,
including, without limitation, the provision in this Agreement for waiver of
trial by jury. Each Borrower further acknowledges that it is have experienced
with respect to financial and credit matters and has made its own independent
decision to request the Obligations and execute and deliver this Agreement.
Section 12.6 Waiver of Jury Trial; Punative Damages. Each Borrower hereby
--------------------------------------
(a) covenants and agrees not to elect a trial by jury of any issue triable by a
jury, and (b) waives any right to trial by jury and any right to claim punitive
damages, in each case, fully to the extent that any such right shall now or
hereafter exist. This waiver of right to trial by jury and right to claim
punitive damages is separately given by each Borrower, knowingly and
voluntarily, and this waiver is intended to encompass individually each instance
and each issue as to which the right to a jury trial or any claim of punitive
damages would otherwise accrue. The Agent or any Lender is hereby authorized and
requested to submit this Agreement to any court having jurisdiction over the
subject matter and the parties hereto, so as to serve as conclusive evidence of
the Borrower's herein contained waiver of the right to jury trial and any right
to claim punitive damages. Further, each Borrower hereby certifies that no
representative or agent of the Agent or any Lender (including counsel for the
Agent and/or and Lender) has represented, expressly or otherwise, to the
undersigned that the Agent or any Lender will not seek to enforce this provision
waiving the right to a trial by jury or any right to claim punitive damages.
Section 12.7 Submission to Jurisdiction; Service of Process; Venue. Any
-----------------------------------------------------
judicial proceeding brought against any Borrower with respect to this Agreement
or any other Loan Document may be brought in any court of competent jurisdiction
in the Commonwealth of Virginia, and by execution and delivery of this
Agreement, each party accepts for themselves and in connection with their
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid court, and irrevocably agree to be bound by any judgment rendered by
such
54
court in connection with this Agreement. Each Borrower irrevocably designates
and appoints ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, whose address is c/o Empyrean Group Holdings, Inc.,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as its agent to receive
on its behalf service of all process in any such proceeding in any court in the
Commonwealth of Virginia, such service being hereby acknowledged by each
Borrower to be effective and binding on it in every respect. A copy of any such
process so served shall be mailed by registered or certified mail to the
Borrowers at the address to which notices are to be addressed in accordance with
this Agreement, except that any failure to mail such copy shall not affect the
validity of service of process. Each Borrower shall at all times maintain an
agent for service of process pursuant to this provision. If any Borrower fails
to appoint such an agent, or if such agent refuses to accept service, such
Borrower hereby agrees that service upon it by mail shall constitute sufficient
notice. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of the Agent or any Lender to
bring proceedings against any Borrower in the courts of any other jurisdiction.
Section 12.8 Changes in Capital Requirements. If after the date of this
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Agreement any Lender shall determine that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof, or compliance by such
Lender with any request or directive regarding capital adequacy of any
authority, central bank or comparable agency, which adoption, change or
compliance has or would have the effect of reducing the rate of return on such
Lender's capital as a consequence of such Lender's obligations hereunder to a
level below that which such Lender could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's policies with
respect to capital adequacy), then the interest rate on the Notes shall be
increased to a rate which shall retain such Lender's original rate of return on
such Lender's capital.
Section 12.9 Captions. The paragraph headings of this Agreement are for
--------
convenience of reference only, and in no way define, limit or describe the scope
of this Agreement or the intent of any provision hereof.
Section 12.10 Modification and Waiver. Neither this Agreement nor any term,
-----------------------
condition, covenant or agreement hereof may be changed, waived, discharged or
terminated orally, but that may be accomplished only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
Section 12.11 Transferability.
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(a) No Borrower shall sell, assign or otherwise transfer any of its rights,
interests or Obligations under this Agreement.
(b) No Lender shall sell, assign or otherwise transfer its interests under
this Agreement to any person or entity (other than an Eligible Assignee),
without the prior written consent of the Agent, which consent shall not be
unreasonably withheld, delayed or conditioned. Furthermore, no sale, assignment
or transfer shall be made by any Lender (other than First Union) unless (i) if
the proposed assignee of the transferring Lender is not an affiliate of the
transferring Lender, at least thirty (30) days' prior written notice of such
sale, assignment or transfer shall have been issued by such transferring Lender
to the Agent and the Borrowers, and
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such notice identifies the proposed assignee; (ii) if the proposed assignee of
the transferring Lender is an affiliate of the transferring Lender, written
notice of such sale, assignment or transfer shall have been issued by such
transferring Lender to the Agent and the Borrowers simultaneously with such
sale, assignment or transfer, and such notice identifies the proposed assignee;
(iii) the dollar equivalent of the Percentage of the transferring Lender being
assigned equals or exceeds Five Million and No/100 Dollars ($5,000,000.00); (iv)
the Agent shall have received a duly executed Assignment and Acceptance
agreement, in the form attached as Exhibit 9 hereto; and (v) if the proposed
assignee of the transferring Lender is not an affiliate of the transferring
Lender, an assignment fee in the amount of Five Thousand and No/100 Dollars
($5,000.00) shall have been paid to the Agent.
Section 12.12 Governing Law; Binding Effect. This Agreement shall be
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governed by the laws of the Commonwealth of Virginia and be binding upon the
Borrower and inure to the benefit of the parties hereto and their respective
personal representatives, successors and assigns.
Section 12.13 Gender; Number. As used herein, the singular number shall
--------------
include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.
Section 12.14 Materiality. Unless the context clearly indicates to the
-----------
contrary, determinations regarding the materiality of any act, event, condition
or circumstance shall be in the reasonable judgment of the Agent.
Section 12.15 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed an original and all of which
together shall be deemed one and the same instrument.
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This Agreement is signed, sealed and delivered as of the date first
above-written.
ATTEST: Borrowers:
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[Corporate Seal] EMPYREAN GROUP HOLDINGS, INC., a
Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------- -----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------
Title: Vice President Title: Chief Financial Officer
-------------------
ATTEST:
[Corporate Seal] BSG SOLUTIONS, INC.,
a Georgia corporation
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------- ----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------
Title: Vice President Title: Chief Financial Officer
-------------------
Agent:
-----
FIRST UNION NATIONAL BANK
By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Vice President
Lenders:
-------
FIRST UNION COMMERCIAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Senior Vice President
The Exhibits and Schedules to this Business Loan and Security Agreement are not
included with this Registration Statement on Form S-1. The Registrant will
provide these Exhibits and Schedules upon request of the Securities and Exchange
Commission.
57