Exhibit 10.20
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
Among
SCAN-OPTICS, INC.
as Borrower,
SCAN-OPTICS LIMITED, SCAN-OPTICS (CANADA), LTD.
and the SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTY HERETO,
and
PATRIARCH PARTNERS AGENCY SERVICES, LLC,
as Agent
Dated as of March 30, 2004
THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 30,
2004, among SCAN-OPTICS, INC., a Delaware corporation (the "Borrower"),
SCAN-OPTICS LIMITED, a United Kingdom company limited by shares ("SOL"),
SCAN-OPTICS (CANADA), LTD., a Canadian corporation formed under the Business
Corporations Act of Canada ("SOC"; and, together with SOL and the subsidiaries
of the Borrower that from time to time become guarantors hereunder, the
"Guarantors"), ARK CLO 2000-1, Limited, a Cayman Islands exempted company
("Ark"), ZOHAR CDO 2003-1, Limited, a Cayman Islands exempted company ("Zohar";
and, together with Ark and the several financial institutions and other
investors from time to time lenders under this Agreement, the "Lenders"), and
PATRIARCH PARTNERS AGENCY SERVICES, LLC, as Agent (the "Agent").
RECITALS
A. Unless otherwise defined in these Recitals or the Preamble,
capitalized terms used in these Recitals shall have the respective meanings set
forth for such terms in Section 1.1 hereof.
B. The Borrower and Ark (as assignee of Fleet National Bank, formerly
known as BankBoston, N.A.), as a lender, are parties to that certain Second
Amended and Restated Loan Agreement, dated as of May 10, 1999 (the "Original
Loan Agreement"), as amended pursuant to that certain Amendment and Waiver
Agreement, dated as of January 29, 2001 (the "First Amendment"), the Second
Amendment and Waiver Agreement, dated as of July 1, 2001 (the "Second
Amendment"), the Third Amendment and Waiver Agreement, dated as of September 1,
2001 (the "Third Amendment"), the Fourth Amendment Agreement, dated as of
December 31, 2001 (the "Fourth Amendment"), and the Fifth Amendment Agreement,
dated as of December 31, 2002 (the "Fifth Amendment"; and, together with the
Original Loan Agreement, the First Amendment, the Second Amendment, the Third
Amendment and the Fourth Amendment, collectively, the "Prior Credit Agreement").
C. Pursuant to the Prior Credit Agreement, Ark, as a lender, has
provided Borrower with (i) that certain revolving credit loan in the original
principal amount of up to $10,750,000.00 through June 30, 2002 and
$10,000,000.00 for the period from July 1, 2002 through the Revolving Credit
Maturity Date (as such term is defined in the Prior Credit Agreement), and (ii)
that certain term loan in the original principal amount of $2,000,000.00
D. Prior to giving effect to this Agreement, the outstanding principal
amount of the Revolving Credit Loans (as defined in the Prior Credit Agreement)
is $7,411,000, and the outstanding principal amount of the Term Loan (as defined
in the Prior Credit Agreement) is $1,589,000.00.
E. Pursuant to certain Unlimited Guaranties, dated as of April 7, 1993,
as reaffirmed by a Reaffirmation of Guaranties, dated May 10, 1999, each of SOL
and SOC guaranteed all of the obligations and liabilities of the Borrower under
the Prior Credit Agreement.
F. The parties hereto desire to enter into this Agreement to provide
for: (i) the restructuring of all outstanding obligations and liabilities under
the Prior Credit Agreement (collectively, the "Existing Indebtedness"), such
that, among other things the Existing Indebtedness will be refinanced and
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replaced by (a) $9,000,000 of Term Loans and (b) $2,500,000 of Revolving Loans,
and (ii) $2,000,000 of Overadvance Loans; and SOL, SOC and any other Guarantors
will enter into Guarantees pursuant to which each of them will guarantee and/or
reaffirm the guarantee of the Obligations of the Borrower under this Agreement.
G. The outstanding shares of Series A redeemable preferred stock, par
value $.02 per share, of the Borrower (the "Series A Preferred Stock") held by
Ark shall be replaced with shares of Series B redeemable preferred stock, par
value $.02 per share, of the Borrower (the "Series B Preferred Stock") on the
terms described in the Plan of Reorganization and subject to the consent of Ark
(the "Share Exchange").
H. The Borrower has agreed to secure all of its obligations hereunder
by continuing the grant and granting to the Agent, for the benefit of Lenders, a
First Priority Lien on all of its assets, including a pledge of shares of the
Capital Stock of each of its Subsidiaries.
AGREEMENT
In consideration of the premises and the mutual covenants and the
agreements herein set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree to amend and restate the Prior
Credit Agreement as follows:
ARTICLE I
Defined Terms
Section 1.1 Definitions. As used in this Agreement, including, without
limitation, the preamble, recitals, exhibits and schedules hereto, the following
terms have the meanings stated:
"Action" against a Person means an action, suit, litigation,
arbitration, investigation, complaint, contest, hearing, inquiry,
inquest, audit, examination or other proceeding threatened or pending
against or affecting the Person or its property, whether civil,
criminal, administrative, investigative or appellate, in law or equity
before any arbitrator or Governmental Body.
"Affiliate" of a Person means any other Person (a) that directly or
indirectly controls, is controlled by or is under common control with,
the Person or any of its Subsidiaries, (b) that directly or indirectly
beneficially owns or holds 5% or more of any class of equity Security
or other similar interests of the Person or any of its Subsidiaries or
(c) 5% or more of the equity Securities of which is directly or
indirectly beneficially owned or held by the Person or any of its
Subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract, agreement or otherwise. Notwithstanding
the foregoing, neither Ark nor Zohar (nor any of their Affiliates)
shall be an Affiliate of the Borrower or any of its Subsidiaries.
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"Agent" means Patriarch Partners Agency Services, LLC, together with
any successor Agent appointed pursuant to Section 9.8.
"Aggregate Amounts Due" has the meaning stated in Section 2.12.
"Agreement" means this Third Amended and Restated Credit Agreement, as
it may be amended, supplemented or otherwise modified from time to
time.
"Ark" has the meaning set forth in the Preamble to this Agreement.
"Asset Sale" means a sale, lease or sublease (as lessor or sublessor),
sale and leaseback, assignment, conveyance, transfer or other
disposition to, or any exchange of property with, any Person, in one
transaction or a series of transactions, of all or any part of
Borrower's or any of its Subsidiaries' businesses, assets or properties
of any kind, whether real, personal, or mixed and whether tangible or
intangible, whether now owned or hereafter acquired, including, without
limitation, the Capital Stock of Borrower's Subsidiaries, other than
inventory (or other assets) sold or leased in the ordinary course of
business.
"Assignment Agreement" has the meaning stated in Section 11.4(b).
"Authorized Officer" means, as applied to any Person, any individual
holding the position of chairman of the board (if an officer), chief
executive officer, president or one of its vice presidents (or the
equivalent thereof), and such Person's chief financial officer or
treasurer.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Borrower" has the meaning stated in the Preamble of this Agreement.
"Borrowing" means the making of a Loan.
"Borrowing Date" means the date of a Borrowing.
"Business Day" means a day other than Saturday or Sunday or other day
on which commercial banks in New York, New York are authorized or
required by law or other governmental action to close.
"Capital Expenditures" means amounts paid or indebtedness incurred by
the Borrower or any of its Subsidiaries in connection with the purchase
or lease by the Borrower or any of its Subsidiaries of assets that
would be required to be capitalized and shown on the balance sheet of
such Person in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation), including, without limitation, partnership
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interests and membership interests, and any and all warrants, rights or
options to purchase or other arrangements or rights to acquire any of
the foregoing.
"Cash" means money, currency or a credit balance in any demand or
Deposit Account.
"Certificate of Designations" means the Certificate of Designations,
Preferences, Rights and Restrictions for Series B Redeemable Preferred
Stock in the form attached hereto as Exhibit 3.1(o)(B).
"Change of Control" means any one or more of the following events:
(i) Any individual, corporation (other than Ark, Zohar, the
Borrower or any Subsidiary), partnership, trust, association, pool,
syndicate, or any other entity or any group of persons acting in
concert becomes the beneficial owner, as that concept is defined in
Rule 13d 3 promulgated by the Securities and Exchange Commission under
the Exchange Act of securities of the Borrower possessing either (A)
thirty percent (30%) or more of the voting power for the election of
directors of the Borrower or (B) thirty percent (30%) or more in value
of the outstanding equity securities (or the right to acquire thirty
(30%) per cent or more) of the Borrower;
(ii) There shall be consummated any consolidation, merger, or
other business combination involving the Borrower or the securities of
the Borrower in which (A) holders of voting securities of the Borrower
immediately prior to such consummation own, as a group, immediately
after such consummation, voting securities of the Borrower (or, if the
Borrower does not survive such transaction, voting securities of the
corporation surviving such transaction) having less than fifty percent
(50%) of the total voting power in an election of directors of the
Borrower (or such other surviving corporation) or (B) holders of equity
securities of the Borrower immediately prior to such consummation own,
as a group, immediately after such consummation, equity securities of
the Borrower (or, if the Borrower does not survive such transaction,
voting securities of the corporation surviving such transaction) having
less than fifty percent (50%) of the equity securities of the Borrower
(or such other surviving corporation);
(iii) During any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the
directors of the Borrower cease for any reason other than voluntary
resignation, death, disability, retirement or as otherwise provided in
the Credit Documents to constitute at least a majority thereof unless
the election, or the nomination for election by the Borrower's
shareholders, of each new director of the Borrower was approved by (A)
a vote of at least two thirds (2/3) of the directors of the Borrower
then still in office who were directors of the Borrower at the
beginning of any such period or (B) Ark and Zohar; or
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(iv) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions)
of assets representing all or substantially all of the assets of the
Borrower (on a consolidated basis) to a party which is not controlled
by or under common control with the Borrower either before or after
such transaction or series of related transactions;
provided, however, that the proposed issuance of the Borrower's stock
to Ark pursuant to the Recapitalization and/or the exercise of the
Warrant (as defined in the Fourth Amendment) shall not be deemed to be
a Change in Control.
"Closing Date" means the date on which all of the conditions set forth
in Section 3.1 are satisfied or otherwise waived by the Lenders and
Agent.
"Closing Date Certificate" has the meaning stated in Section 3.1(g).
"Collateral" has the meaning stated in the Security Agreements.
"Collateral Documents" means the Security Agreements, the Stock Pledge
Agreement, the Patent Security Agreement and the Trademark Security
Agreement and all other instruments, documents and agreements delivered
by any Credit Party pursuant to this Agreement or any of the other
Credit Documents in order to grant to the Agent, for the benefit of
Lenders and the Agent, a Lien on any real, personal or mixed property
of that Credit Party as security for the Obligations.
"Consents" means any approval, consent, authorization or order of,
notice to or registration or filing with, or any other action by, any
Governmental Body or other Person.
"Consolidated Earnings Before Interest and Taxes, Depreciation and
Amortization" means, for any period, an amount equal to the sum of (i)
the consolidated earnings (or loss) from the operations of the Borrower
and its Subsidiaries for such period, after all expenses and other
proper charges, but before payment or provision for any income taxes or
interest expense for such period, plus (ii) depreciation and
amortization for such period, determined in accordance with GAAP.
"Credit Document" means any of this Agreement, the Notes (if any), the
Collateral Documents, the Guarantees, and all other documents,
instruments or agreements executed and delivered by a Credit Party for
the benefit of Agent or any Lender in connection herewith.
"Credit Party" means each Person (other than the Agent or any Lender or
any representative thereof) from time to time party to a Credit
Document.
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"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable
certificate of deposit.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Eligible Assignee" means (a) any Lender or any Affiliate of any
Lender, (b) any commercial bank, insurance company, investment or
mutual fund or other entity that is an "accredited investor" (as
defined in Regulation D under the Securities Act) and which extends
credit or buys loans as one of its businesses and/or (c) any other
Person approved by the Agent; provided, neither Borrower nor any
Affiliate of Borrower shall be an Eligible Assignee.
"Environmental Laws" means all laws pertaining to environmental
matters, including, without limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act
of 1986, the Federal Clean Water Act, the Federal Clean Air Act, the
Toxic Substances Control Act, in each case as amended, and all rules,
regulations, judgments, decrees, orders and licenses arising under all
such laws.
"Environmental Liability" means any actual, alleged or contingent
liability or obligations of the Borrower or any of its Subsidiaries
relating to the violations or alleged violations of any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"Event of Default" means each of the conditions or events set forth in
Section 8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Indebtedness" has the meaning stated in the Recitals of this
Agreement.
"Federal Funds Rate" means, for any day, the rate per annum equal to
the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or if such day is not
a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York.
"Financials" means, with respect to any Person for any period, the
balance sheet of such Person as at the end of such period, and the
related statement of income and expense and statement of cash flow of
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such Person for such period, each setting forth in comparative form the
figures for the previous comparable fiscal period, all in reasonable
detail and prepared in accordance with GAAP.
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that
such Lien is the only Lien to which such Collateral is subject, other
than Permitted Liens.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of the Borrower and its
Subsidiaries ending on December 31 of each calendar year.
"Funding Notice" has the meaning stated in Section 3.2(a).
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time, consistently applied throughout
the periods to which reference is made.
"Governmental Body" means any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other
instrumentality of any administrative, judicial, legislative,
executive, regulatory, police or taxing authority of any government,
whether supranational, national, federal, state, regional, provincial,
local, domestic or foreign.
"Guarantees" means the Amended and Restated Unlimited Guaranty of SOC
and the Amended and Restated Unlimited Guaranty of SOL, in the forms
attached hereto as Exhibit 3.1(q)(A) and Exhibit 3.1(q)(B),
respectively.
"Guarantors" has the meaning stated in the Preamble to this Agreement.
"Indebtedness" means, with respect to any Person, all obligations of
such Person, contingent or otherwise, that in accordance with GAAP
should be classified as liabilities, including, without limitations (a)
all debt obligations, (b) all liabilities secured by Liens, (c) all
guarantees and (d) all liabilities in respect of bankers' acceptances
of letters of credit.
"Interest Payment Date" means the first Business Day of each month,
commencing on April 1, 2004, and the final maturity date of such Loan.
"Investment" means (a) any direct or indirect purchase or other
acquisition by Borrower or any of its Subsidiaries of, or of a
beneficial interest in, any of the Securities of any other Person, (b)
any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Borrower from any Person
(other than Borrower), of any Capital Stock of such Person, and (c) any
direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital
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contribution by Borrower or any of its Subsidiaries to any other Person
(other than Borrower), including all indebtedness and accounts
receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of
business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form;
provided, in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
"Knowledge of the Borrower" means the knowledge, after reasonable
inquiry, of any of the Borrower's Authorized Officers.
"Lenders" has the meaning set forth in the Preamble to this Agreement.
"Lien" means any encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any
obligation of any Person.
"Loan" means a Term Loan, an Overadvance Loan or a Revolving Loan.
"Material Adverse Effect" means any material adverse effect on the
financial condition or business operations of the Borrower and any of
its Subsidiaries taken as a whole or material impairment of the ability
of the Borrower to perform its obligations hereunder or under of any of
the other Credit Documents.
"Maturity Date" means the earlier of (a) June 1, 2005, provided,
however, in the event the Recapitalization occurs, such date shall be
March 30, 2007 and (b) the date that the Loans shall become due and
payable in full hereunder, whether by acceleration or otherwise.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, an
amount equal to: (a) Cash payments (including any Cash received by way
of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) received by
the Borrower or any of its Subsidiaries from such Asset Sale, minus (b)
any bona fide direct costs incurred in connection with such Asset Sale,
including (i) income or gains taxes actually payable by the seller as a
result of any gain recognized in connection with such Asset Sale, (ii)
payment of the outstanding principal amount of and premium or penalty,
if any, and interest on any Indebtedness (other than the Loans) that is
secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset
Sale and (iii) a reasonable reserve for any indemnification payments
(fixed or contingent) attributable to seller's indemnities and
representations and warranties to purchaser in respect of such Asset
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Sale undertaken by the Borrower or any of its Subsidiaries in
connection with such Asset Sale.
"Net Insurance/Condemnation Proceeds" means an amount equal to: (a) any
Cash payments or proceeds received by the Borrower or any of its
Subsidiaries (i) under any casualty insurance policy in respect of a
covered loss thereunder or (ii) as a result of the taking of any assets
of the Borrower or any of its Subsidiaries by any Person pursuant to
the power of eminent domain, condemnation or otherwise, or pursuant to
a sale of any such assets to a purchaser with such power under threat
of such a taking minus (b) (i) any actual and reasonable documented
costs incurred by the Borrower or any of its Subsidiaries in connection
with the adjustment or settlement of any claims of the Borrower or such
Subsidiary in respect thereof, and (ii) any bona fide direct costs
incurred in connection with any sale of such assets as referred to in
clause (a)(ii) of this definition, including income taxes actually
payable as a result of any gain recognized in connection therewith.
"Note" means a Term Note, an Overadvance Note or a Revolving Note.
"Obligations" means all indebtedness, obligations and liabilities of
each Credit Party from time to time owed to the Agent, the Lenders or
any of them or their respective Affiliates direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of
law or otherwise, arising or incurred under this Agreement or any other
Credit Document or in respect of any of the Loans, the Notes or any
other instruments at any time evidencing any thereof.
"Overadvance Commitment Period" means the period from the Closing Date
to but excluding the Overadvance Commitment Termination Date.
"Overadvance Commitment Termination Date" means the earliest to occur
of (a) the Maturity Date, (ii) July 1, 2006, (iii) the date of the
termination of the Overadvance Loan Commitment pursuant to Article VIII
and (iv) the date that the Overadvance Loan is borrowed pursuant to
Section 2.1(c).
"Overadvance Lender" means a Lender with an Overadvance Loan Exposure.
"Overadvance Loan" means a Loan made by a Lender to the Borrower
pursuant to Section 2.1(c).
"Overadvance Loan Commitment" means the commitment of a Lender to make
or otherwise fund any Overadvance Loan. The amount of each Lender's
Overadvance Loan Commitment, if any, is set forth in Section 2.1(c) or
in the applicable Assignment Agreement, subject to any adjustment or
reduction pursuant to the terms and conditions hereof. The aggregate
amount of the Overadvance Loan Commitments as of the Closing Date is
$2,000,000.00.
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"Overadvance Loan Exposure" means, with respect to any Lender, as of
and date of determination, (a) prior to the termination of the
Overadvance Loan Commitment, that Lender's Overadvance Loan Commitment
and (b) after the termination of the Overadvance Loan Commitment, the
outstanding principal amount of the Overadvance Loan of such Lender.
"Overadvance Note" has the meaning stated in Section 2.4(c).
"Patent Security Agreement" means the Amended and Restated Patent
Collateral Assignment and Security Agreement in the form attached
hereto as Exhibit 3.1(i)(C).
"Permitted Indebtedness" means the indebtness permitted pursuant to
Section 6.1(a).
"Permitted Liens" means each of the Liens permitted pursuant to Section
6.1(b).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies,
limited liability partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities,
other legal entities and Governmental Bodies.
"Plan of Reorganization" means the Plan of Reorganization in the form
attached hereto as Exhibit 3.1(o)(A), pursuant to which each
outstanding share of Series A Preferred Stock, with a stated face
amount of $1.00 per share, shall be and become, effective upon the
filing of the Certification of Designations with the Secretary of State
of the State of Delaware, and without any further action on behalf of
the holder of any such shares of Series A Preferred Stock, one tenth of
a share of Series B Preferred Stock, with a stated face amount of
$10.00 per share, such that Ark shall beneficially own 380,000 share of
Series B Preferred Stock having a stated face amount of $10.00 per
share in lieu of 3,800,000 shares of Series A Preferred Stock having a
stated face amount of $1.00 per share.
"Prime Rate" means, the higher of (i) the floating rate of interest per
annum published in the Wall Street Journal as being the "prime rate" of
interest charge by banks, such interest rate to be adjusted by the
Agent on the effective date of any change thereafter, and (ii) the
Federal Funds Rate plus one half of one percent (0.5%), such interest
rate to be adjusted on the effective date of any change thereof by the
Federal Reserve Bank of New York. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually
charged to any customer.
"Principal Office" means, for the Agent, its office located at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇, or such other office as the Agent may from time
to time designate in writing to the Borrower and each Lender.
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"Prior Credit Agreement" has the meaning stated in the Recitals of this
Agreement.
"Pro Rata Share" means (a) with respect to all payments, computations
and other matters relating to the Term Loans of any Lender, the
percentage obtained by dividing (i) the Term Loan Exposure of that
Lender by (ii) the aggregate Term Loan Exposure of all Lenders; (b)
with respect to all payments, computations and other matters relating
to the Revolving Credit Commitment or Revolving Loans of any Lender,
the percentage obtained by dividing (i) the Revolving Credit Exposure
of that Lender by (ii) the aggregate Revolving Credit Exposure of all
Lenders; (c) with respect to all payments, computations, and other
matters relating to the Overadvance Loans of any Lenders, the
percentage obtained by dividing (i) the Overadvance Loan Exposure of
that Lender by (ii) the aggregate Overadvance Loan Exposure of all
Lenders. For all other purposes with respect to each Lender, "Pro Rata
Share" means the percentage obtained by dividing (x) an amount equal to
the sum of the Term Loan Exposure, the Revolving Credit Exposure and
the Overadvance Loan Exposure of that Lender by (y) an amount equal to
the sum of the aggregate Term Loan Exposure, the aggregate Revolving
Credit Exposure and the aggregate Overadvance Loan Exposure of all
Lenders.
"Recapitalization" means following actions that are part of a single
integrated recapitalization of the Borrower: (i) the cancellation of
the Warrant (as defined in the Fourth Amendment) held by Ark and the
cancellation of the Series B Preferred Stock held by Ark; (ii) the
termination of the Master Agreement (as defined in the Second Amendment
to Master Agreement); (iii) the issuance by the Borrower of the
Borrower's common stock to Ark so that following such issuance Ark
shall own 79.8% of the fully diluted common stock of the Borrower (it
being understood that 15% of such common stock owned by Ark would be
subject to the exercise of management stock options currently
outstanding and up to 5% further dilution from management stock options
issued in the future, which (cumulatively) could reduce Ark's pro forma
common stock ownership of the Borrower to no less than 61.56%); (iv)
the issuance to Ark of 4% redeemable preferred stock (the "New
Preferred Stock") of the Borrower with a face amount of $841,714 (the
"Face Redemption Amount"), which Face Redemption Amount shall be
payable by the Borrower to the holder of the New Preferred Stock on the
Maturity Date and such dividends shall be payable quarterly in cash to
the extent that the Borrower generates excess cash flow (the definition
of excess cash flow to be negotiated by Ark and the Borrower); and (v)
the entering into of such documents and/or instruments, including
without limitation those described in Schedule 5.1(h), to the extent
that Ark deems such documents and/or instruments convenient, desirable
or necessary to effect the Recapitalization, in each of the foregoing
cases described in this paragraph on terms and conditions acceptable to
Ark in its sole and absolute discretion.
"Register" has the meaning stated in Section 2.4(b).
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"Regulation" means each applicable law, rule, regulation, order,
guidance or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable
agency and any request or directive (whether or not having the force of
law) of any of those Persons and each judgment, injunction, order,
writ, decree or award of any Governmental Body, arbitrator or other
Person.
"Required Lenders" means the Lenders holding a majority of the sum of
the Term Loan Exposure, Revolving Credit Exposure and the Overadvance
Loan Exposure.
"Revolving Credit Commitment" means the commitment of a Lender to make
or otherwise fund any Revolving Loan. The amount of each Lender's
Revolving Credit Commitment, if any, is set forth in Section 2.1(b) or
in the applicable Assignment Agreement, subject to any adjustment or
reduction pursuant to the terms and conditions hereof. The aggregate
amount of the Revolving Credit Commitments as of the Closing Date is
$2,500,000.00.
"Revolving Credit Commitment Period" means the period from the date of
this Agreement to but excluding the Revolving Credit Commitment
Termination Date.
"Revolving Credit Commitment Termination Date" means the earlier to
occur of (a) the Maturity Date and (b) the date of the termination of
the Revolving Credit Commitments pursuant to Article VIII.
"Revolving Credit Exposure" means, with respect to any Lender as of any
date of determination, (a) prior to the termination of the Revolving
Credit Commitments, that Lender's Revolving Credit Commitment, and (b)
after the termination of Revolving Credit Commitments, the aggregate
outstanding principal amount of the Revolving Loans of that Lender.
"Revolving Lender" means a Lender with a Revolving Credit Exposure.
"Revolving Loan" means a Loan made by a Lender to the Borrower pursuant
to Section 2.1(b).
"Revolving Note" has the meaning stated in Section 2.4(c).
"Second Amendment to Master Agreement" means the Second Amendment to
Master Agreement between the Borrower, as Lessee, and Ark, as Lessor in
the form attached hereto as Exhibit 3.1(p).
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
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unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"Security Agreements" has the meaning stated in Section 3.1(i).
"Series A Preferred Stock" has the meaning set forth in the Recitals to
this Agreement.
"Series B Preferred Stock" has the meaning set forth in the Recitals to
this Agreement.
"Share Exchange" has the meaning set forth in the Recitals to this
Agreement.
"SOC" has the meaning set forth in the Preamble to this Agreement.
"SOL" has the meaning set forth in the Preamble to this Agreement.
"Stock Pledge Agreement" means the Amended and Restated Stock Pledge
Agreement in the form attached hereto as Exhibit 3.1(j).
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or
other business entity of which more than 50% of the total voting power
of shares of stock or other ownership interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
the Person or Persons (whether directors, managers, trustees or other
Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination
thereof, provided, in determining the percentage of ownership interests
of any Person controlled by another Person, no ownership interest in
the nature of a "qualifying share" of the former Person shall be deemed
to be outstanding.
"Tax" means any present or future tax, levy, impost, duty, assessment,
charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed, provided, "Tax on the overall net
income" of a Person shall be construed as a reference to a tax imposed
by the jurisdiction in which that Person is organized or in which that
Person's applicable principal office (and/or, in the case of a Lender,
its lending office) is located or in which that Person (and/or, in the
case of a Lender, its lending, office) is deemed to be doing business
on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to
arise in or to relate to a particular jurisdiction, or otherwise) of
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that Person (and/or, in the case of a Lender, its applicable lending
office).
"Term Lender" means a Lender with a Term Loan Exposure.
"Term Loan" means a Term Loan made by a Lender to the Borrower pursuant
to Section 2.1(a).
"Term Loan Exposure" means, with respect to any Lender, as of any date
of determination, the outstanding principal amount of the Term Loans of
such Lender.
"Term Note" has the meaning stated in Section 2.4(c).
"Trademark Security Agreement" means the Amended and Restated Trademark
Collateral Security and Pledge Agreement in the form attached hereto as
Exhibit 3.1(i)(D).
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"Zohar" has the meaning set forth in the Preamble to this Agreement.
ARTICLE II
Loans
Section 2.1 Loans.
(a) Term Loan. Subject to the terms and conditions hereof, as of
the Closing Date, a portion of the outstanding Loans (as defined under
the Prior Credit Agreement) shall constitute "Term Loans" in the
outstanding principal amount of $9,000,000. On the Closing Date, Ark
shall be the sole Term Lender. The Term Loan shall (i) bear interest as
provided in Section 2.5(a)(i) hereof and (ii) be entitled to the
security interests, collateral and other rights and benefits provided
pursuant to the other Credit Documents. Any amount of Term Loans
subsequently repaid or prepaid may not be re-borrowed. Subject to
Sections 2.7(b), 2.8(a) and 2.9, all amounts owed hereunder with
respect to the Term Loans shall be paid in full no later than the
Maturity Date.
(b) Revolving Loans.
(i) Revolving Credit Commitments.
(A) During the Revolving Credit Commitment Period,
subject to and upon the terms and conditions hereof, each
Revolving Lender, severally, and not jointly and
severally, agrees to make Revolving Loans to Borrower in
the aggregate amount up to but not exceeding such
Lender's Revolving Credit Commitment. Amounts borrowed
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pursuant to this Section 2.1(b) may be repaid and re
borrowed during the Revolving Credit Commitment Period.
On the Closing Date, Ark shall be the sole Revolving
Lender.
(B) Each Lender's Revolving Credit Commitment shall
expire on the Revolving Credit Commitment Termination
Date and all Revolving Loans and all other amounts owed
hereunder with respect to the Revolving Loans and the
Revolving Credit Commitments shall be paid in full no
later than such date.
(C) The Revolving Loans shall (i) bear interest as
provided in Section 2.5(a)(ii) hereof and (ii) be
entitled to the security interests, collateral and other
rights and benefits provided pursuant to the other Credit
Documents.
(ii) Borrowing Mechanics.
(A) Revolving Loans shall be made in an aggregate minimum
amount of $25,000 and integral multiples of $25,000 in
excess of that amount.
(B) Whenever the Borrower desires that Revolving Lenders
make Revolving Loans, the Borrower shall deliver to Agent
a fully executed and delivered Funding Notice no later
than 10:00 a.m. (New York City time) at least one
Business Day in advance of the proposed Borrowing Date,
which Borrowing Date shall be a Business Day.
(C) Notice of receipt of each Funding Notice in respect
of Revolving Loans, together with the amount of each
Revolving Lender's Pro Rata Share thereof, together with
the applicable interest rate, shall be provided by Agent
to each applicable Lender by facsimile with reasonable
promptness, but (provided, Agent shall have received such
notice by 10:00 a.m. (New York City time)) not later than
4:00 p.m. (New York City time) on the same day as Agent's
receipt of such Notice from Borrower.
(D) Each Revolving Lender shall make the amount of its
Revolving Loan available to Agent no later than 2:00 p.m.
(New York City time) on the applicable Borrowing Date by
wire transfer of same day funds in Dollars, at the
Agent's Principal Office. Except as provided herein, upon
satisfaction or waiver of the conditions precedent
specified herein, Agent shall make the proceeds of such
Revolving Loans available to Borrower on the applicable
Borrowing Date by causing an amount of same day funds in
Dollars equal to the proceeds of all such Revolving Loans
received by Agent from Lenders to be credited to the
account of the Borrower designated in writing to Agent by
Borrower.
(c) Overadvance Term Loan.
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(i) Overadvance Loan Commitment.
(A) Subject to the terms and conditions hereof, during
the Overadvance Commitment Period, so long as all of the
conditions set forth in Section 3.2 have been met, each
Overadvance Lender, severally, and not jointly and
severally, agrees to make an Overadvance Loan to Borrower
in the aggregate amount up to but not exceeding 75% of
such Lender's Overadvance Loan Commitment. The
Overadvance Loan shall only be advanced in a single
Borrowing of $1,500,000 to the Borrower. For the
avoidance of doubt, the amount of the Overadvance Loan
actually advanced to Borrower shall be $1,500,000 but the
principal amount to be repaid shall be $2,000.000. The
Overadvance Loan Commitment shall terminate on the end of
the Overadvance Commitment Period. On the Closing Date,
Zohar shall be the sole Overadvance Lender.
(B) If the Borrower does not request a Borrowing of the
Overadvance Loan by the end of the Overadvance Commitment
Period, then the Borrower shall pay an amount equal to
$500,000 to the Overadvance Lender (as a structuring fee)
on the Overadvance Commitment Termination Date.
(C) The Overadvance Loans shall (A) bear interest as
provided in Section 2.5(a)(iii) hereof and (B) be
entitled to the security interests, collateral and other
rights and benefits provided pursuant to the other Credit
Documents. Any amounts of Overadvance Loans subsequently
repaid or prepaid may not be re-borrowed. Subject to
Sections 2.8(a) and 2.9, all amounts owed hereunder with
respect to the Overadvance Loans shall be paid in full no
later than the Maturity Date.
(ii) Borrowing Mechanics.
(A) When the Borrower desires that Overadvance Lenders
make the Overadvance Loan, the Borrower shall deliver to
Agent a fully executed and delivered Funding Notice no
later than 10:00 a.m. (New York City time) at least one
Business Day in advance of the proposed Borrowing Date,
which Borrowing Date shall be a Business Day.
(B) Notice of receipt of each Funding Notice in respect
of the Overadvance Loans, together with the amount of
each Overadvance Lender's Pro Rata Share thereof,
together with the applicable interest rate, shall be
provided by Agent to each applicable Overadvance Lender
by facsimile with reasonable promptness, but (provided,
Agent shall have received such notice by 10:00 a.m. (New
York City time)) not later than 4:00 p.m. (New York City
time) on the same day as Agent's receipt of such Notice
from Borrower.
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(C) Each Overadvance Lender shall make the amount of its
Overadvance Loan available to Agent no later than 2:00
p.m. (New York City time) on the applicable Borrowing
Date by wire transfer of same day funds in Dollars, at
the Agent's Principal Office. Except as provided herein,
upon satisfaction or waiver of the conditions precedent
specified herein, Agent shall make the proceeds of such
Overadvance Loans available to Borrower on the applicable
Borrowing Date by causing an amount of same day funds in
Dollars equal to the proceeds of all such Overadvance
Loans received by Agent from Lenders to be credited to
the account of the Borrower designated in writing to
Agent by Borrower.
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Section 2.2 Pro Rata Shares. All Loans shall be made by Lenders
simultaneously and proportionately to their respective Pro Rata Shares, it being
understood that no Lender shall be responsible for any default by any other
Lender in such other Lender's obligation to make a Loan requested hereunder nor
shall the Overadvance Loan Commitment or the Revolving Credit Commitment of any
Overadvance Lender or Revolving Lender be increased or decreased as a result of
a default by any other Lender in such other Lender's obligation to make a Loan
requested hereunder.
Section 2.3 Use of Proceeds. The proceeds of the Revolving Loans made
or issued after the Closing Date shall be used by Borrower and its Subsidiaries
solely for working capital and general corporate purposes of the Borrower and
its Subsidiaries. The proceeds of the Overadvance Loans shall be used by
Borrower and its Subsidiaries solely for working capital and general corporate
purposes of the Borrower and its Subsidiaries. The proceeds of the Term Loans
are a continuation of the outstanding Loans (as defined under the Prior Credit
Agreement). No portion of the proceeds of any Borrowing shall be used by
Borrower or any of its Subsidiaries in any manner that might cause such
Borrowing or the application of such proceeds to violate Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System or any other regulation thereof or to violate the Exchange Act, in each
case as in effect on the date or dates of such Borrowing and such use of
proceeds.
Section 2.4 Evidence of Debt; Register; Lenders' Books and Records;
Notes.
(a) Lenders' Evidence of Debt. Each Lender shall maintain on its
internal records an account or accounts evidencing the Indebtedness of
Borrower to such Lender, including the amounts of the Loans made by it and
each repayment and prepayment in respect thereof. Any such recordation
shall be conclusive and binding on Borrower, absent manifest error;
provided, failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Overadvance Loan Commitment,
Revolving Credit Commitments, or Term Loans or any of Borrower's
Obligations in respect of any applicable Loans; and provided, further, in
the event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern.
(b) Register. Agent shall maintain, as the Borrower's agent, at Agent's
Principal Office a register for the recordation of the names and addresses
of Lenders and the Revolving Credit Commitments, Overadvance Loan
Commitments and Loans, and the fees, interest and Loans owed to each Lender
(the "Register"). The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall record in the Register the Revolving
Credit Commitments, Overadvance Loan Commitments and the fees, interest and
the outstanding balance of the Loans, and each repayment or prepayment in
respect of the principal amount of and interest, fees and other amounts
with respect to the Loans, and any such recordation shall be conclusive and
binding on Borrower and each Lender, absent manifest error; provided,
failure to make any such recordation, or any error in such recordation,
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shall not affect any Lender's Revolving Credit Commitments or Overadvance
Loan Commitments, or the Borrower's Obligations in respect of any Loan. No
transfer of the Revolving Credit Commitments, the Overadvance Loan
Commitments, the Loans and/or any interests therein shall be effective
until such transfer is recorded in the Register.
(c) Notes. If so requested by any Lender by written notice to Borrower
(with a copy to Agent) at least two (2) Business Days prior to the Closing
Date, or at any time thereafter, Borrower shall execute and deliver to such
Lender (and/or, if applicable and if so specified in such notice, to any
Person who is an assignee of such Lender pursuant to Section 11.4) on the
Closing Date (or, if such request is delivered after the Closing Date,
promptly after such Borrower's receipt of such request) (i) a promissory
note, in the form of Exhibit 2.4(c)(i) (each, a "Revolving Note"), to
evidence such Lender's Revolving Loan, (ii) a promissory note, in the form
of Exhibit 2.4(c)(ii) (each, a "Term Note"), to evidence such Lender's Term
Loan and/or (iii) a promissory note, in the form of Exhibit 2.4(c)(iii)
(each, an "Overadvance Note") to evidence such Lender's Overadvance Loan.
For the avoidance of doubt, the obligation of the Borrower to deliver the
initial Term Note to Ark shall be conditioned upon the delivery to the
Borrower of the Fifth Amended and Restated Revolving Credit Note, dated as
of December 31, 2001, issued by the Borrower under the Prior Credit
Agreement, and the Amended and Restated Term Note, dated as of December 31,
2001, issued by the Borrower under the Prior Credit Agreement (or if one or
both of such notes cannot be located, a lost note affidavit of Ark or Ark's
trustee with respect to such note(s)).
Section 2.5 Interest on Loans.
(a) Applicable Rates. Except as otherwise set forth herein, each Loan
shall bear interest on the unpaid principal amount thereof from the date
made through repayment (whether by acceleration or otherwise) as follows:
(i) Term Loans. In the case of Term Loans, at a rate of the
Prime Rate plus 2%.
(ii) Revolving Loans. In the case of Revolving Loans, at the rate
of Prime Rate plus 2% .
(iii) Overadvance Loans. In the case of Overadvance Loans (i.e.,
initially $2,000,000 at the time the Borrowing is made and
thereafter such outstanding amount), at the Prime Rate.
(b) Calculation of Interest Rates. Interest payable pursuant to Section
2.5 shall be computed on the basis of a 365 day or 366 day year, as the
case may be, for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of the making
of such Loan or the first day of an interest period applicable to such Loan
shall be included, and the date of payment of such Loan or the expiration
date of an interest period applicable to such Loan shall be excluded;
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provided, if a Loan is repaid on the same day on which it is made, one
day's interest shall be paid on that Loan.
(c) Payment of Interest. Interest on each Term Loan, Overadvance Loan
and Revolver Loan shall be payable in arrears on (i) each Interest Payment
Date, (ii) any prepayment of that Loan, whether voluntary or mandatory, to
the extent accrued on the amount being prepaid, and (iii) the Maturity
Date, including final maturity.
(d) Default Interest. Upon the occurrence and during the continuance of
an Event of Default described in Section 8.1, the principal amount of all
Loans and, to the extent permitted by applicable law, any interest payments
on the Loans or any fees or other amounts owed hereunder not paid when due,
in each case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest (including post
petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) payable on demand at a rate that is 3% per
annum in excess of the interest rate otherwise payable hereunder with
respect to the applicable Loans. Payment or acceptance of the increased
rates of interest provided for in this Section 2.5 is not a permitted
alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Agent or any Lender.
(e) Payment of Interest/Fees under Prior Credit Agreement. The Borrower
shall pay to Ark on the Closing Date an amount equal to $52,092.65
(representing accrued and unpaid interest and fees with respect to Existing
Indebtedness under the Prior Credit Agreement through (but not including)
the date hereof equal to $40,457.74 and accrued but unpaid amounts under
the Original Master Agreement (as defined in the Second Amendment to Master
Agreement) through (but not including) the date hereof equal to
$11,634.91).
Section 2.6 Fees.
(a) The Borrower agrees to pay to the Revolving Lenders having
Revolving Credit Exposure an unused commitment fee equal to (i) the average
of the daily difference between (A) the Revolving Credit Commitments, and
(B) the aggregate principal amount of outstanding Revolving Loans times
(ii) 0.25% per annum.
(b) The Borrower agrees to pay to the Overadvance Lenders having
Overadvance Loan Exposure an unused commitment fee equal to (i) $2,000,000
times (ii) 0.25% per annum. For the avoidance of doubt, the Overadvance
Loan commitment fee shall accrue for the period beginning at the Closing
Date and ending on the earlier to occur of (i) the Overadvance Commitment
Termination Date and (ii) the date that the Overadvance Loan is borrowed
pursuant to Section 2.1(c) hereof.
(c) All fees referred to in this Section 2.6 shall be calculated on the
basis of a 360 day year and the actual number of days elapsed and shall be
payable quarterly in arrears on the first Business Day of each March, June,
September and December of each year during the term of this Agreement,
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commencing on June 1, 2004, and on the Maturity Date.
(d) In addition to any of the foregoing fees, Borrower agrees to pay to
the Agent such other fees in the amounts and at the times separately agreed
upon by the Agent and the Borrower.
Section 2.7 Repayment; Scheduled Payments.
(a) Repayment. All of the Term Loans shall be due and payable, and
Borrower shall be required to repay all of the unpaid Term Loans, plus all
accrued and unpaid interest on the principal amounts of the Term Loans, on
the Maturity Date. All of the Revolving Loans shall be due and payable, and
Borrower shall be required to repay all of the Revolving Loans, plus all
accrued and unpaid interest on the principal amounts of the Revolving Loans
and fees related thereto, on the Maturity Date. The Revolving Credit
Commitment shall terminate on the Revolving Credit Commitment Termination
Date. All of the unpaid Overadvance Loans shall be due and payable, and
Borrower shall be required to repay all of the unpaid Overadvance Loans,
plus all accrued and unpaid interest on the principal amounts of the
Overadvance Loans, on the Maturity Date.
(b) Scheduled Payments. On April 1st of each year (commencing on April
1, 2005) the principal amounts of the Term Loans shall be repaid in the
amount of Ninety Thousand Dollars ($90,000).
Section 2.8 Optional Prepayments.
(a) Optional Prepayments. Any time and from time to time (i) with
respect to Term Loans, the Borrower may prepay, without premium or penalty,
any Term Loans on any Business Day in whole or in part, in an aggregate
minimum amount of $25,000, (ii) with respect to Revolving Loans, the
Borrower may (A) prepay, without premium or penalty, any Revolving Loans on
any Business Day in whole or in part in an aggregate minimum amount of
$25,000 and integral multiples of $25,000in excess of that amount or (B)
reduce the Revolving Credit Commitment, without premium or penalty
(provided that such Revolving Credit Commitment may not be reduced below
the outstanding Revolving Loans), on any Business Day in whole or in part
in an aggregate minimum amount of $50,000 and integral multiples of $50,000
in excess of that amount, and the aggregate Revolving Credit Commitment
shall be permanently reduced by such amount, and (iii) with respect to the
Overadvance Loans, the Borrower may prepay, without premium or penalty, any
Overadvance Loans on any Business Day in whole or in part in an aggregate
minimum amount of $25,000. The Term Loans and Overadvance Loans shall be
prepaid pro rata (based on the outstanding Term Loans and Overadvance Loans
at such time).
(b) Notice of Optional Prepayment. All such prepayments shall be made
on a Business Day and upon not less than one Business Day's prior written
or telephonic notice, in each case given to Agent by 12:00 p.m. (New York
City time) on the date required and, if given by telephone, promptly
confirmed in writing to Agent (and Agent will promptly transmit such
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telephonic or original notice for Term Loans, Revolving Loans or
Overadvance Loans, as the case may be, by facsimile or telephone to each
Lender). Upon the giving of any such notice, the principal amount of the
Loans specified in such notice shall become due and payable on the
prepayment date specified therein. In the case of optional prepayment of
Revolving Loans, Borrower shall specify whether such prepayment shall be
applied to permanently reduce the Revolving Credit Commitment or to simply
reduce the outstanding amount of Revolving Loans without reducing the
amount of the Revolving Credit Commitment; provided in the event Borrower
fails to specify how the prepayment of Revolving Loans shall be applied,
such prepayment shall be applied to simply reduce the outstanding amount of
Revolving Loans without reducing the amount of the Revolving Credit
Commitment.
Section 2.9 Mandatory Prepayments; Mandatory Commitment Reductions.
(a) Excess Revolving Loans. If at any time the outstanding principal
amount of the Revolving Loans exceeds the Revolving Credit Commitment, the
Borrower shall immediately pay the amount of such excess to the Agent for
application to the Revolving Loans.
(b) Asset Sales. No later than the first Business Day following the
date of receipt by the Borrower or any of its Subsidiaries of any Net Asset
Sale Proceeds, Borrower shall prepay the Loans and/or the Revolving Credit
Commitments shall be permanently reduced as set forth in Section 2.10(b) in
an aggregate amount equal to such Net Asset Sale Proceeds; provided (i) so
long as no Default or Event of Default shall have occurred and be
continuing, and (ii) to the extent that aggregate Net Asset Sale Proceeds
from the Closing Date through the applicable date of determination do not
exceed $100,000, Borrower shall have the option, directly or through one or
more of its Subsidiaries, to invest Net Asset Sale Proceeds within one
hundred eighty (180) days of receipt thereof in long term productive assets
of the general type used in the business of the Borrower and its
Subsidiaries; provided further, pending any such investment all such Net
Asset Sale Proceeds shall be applied to prepay outstanding Revolving Loans
(without a reduction in Revolving Credit Commitments).
(c) Insurance/Condemnation Proceeds. No later than the first Business
Day following the date of receipt by the Borrower or any of its
Subsidiaries, or Agent as loss payee, of any Net Insurance/Condemnation
Proceeds, Borrower shall prepay the Loans and/or the Revolving Credit
Commitments shall be permanently reduced as set forth in Section 2.10(b) in
an aggregate amount equal to such Net Insurance/Condemnation Proceeds;
provided (i) so long as no Default or Event of Default shall have occurred
and be continuing, and (ii) to the extent that aggregate Net
Insurance/Condemnation Proceeds from the Closing Date through the
applicable date of determination do not exceed $100,000 Borrower shall have
the option, directly or through one or more of its Subsidiaries to invest
such Net Insurance/Condemnation Proceeds within one hundred eighty (180)
days of receipt thereof in long term productive assets of the general type
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used in the business of the Borrower and its Subsidiaries, which investment
may include the repair, restoration or replacement of the applicable assets
thereof, provided further, pending any such investment all such Net
Insurance/Condemnation Proceeds, as the case may be, shall be applied to
prepay outstanding Revolving Loans (without a reduction in Revolving Credit
Commitments).
(d) Prepayment Certificate. Concurrently with any prepayment of the
Loans and/or reduction of the Revolving Credit Commitments pursuant to
Section 2.9(a) through 2.9(c), Borrower shall deliver to Agent a
certificate of an Authorized Officer demonstrating the calculation of the
amount of the applicable net proceeds. In the event that Borrower shall
subsequently determine that the actual amount received exceeded the amount
set forth in such certificate, Borrower shall promptly make an additional
prepayment of the Loans in an amount equal to such excess, and Borrower
shall concurrently therewith deliver to Agent a certificate of an
Authorized Officer demonstrating the derivation of such excess.
Section 2.10 Application of Prepayments.
(a) Application of Optional Prepayments. Absent a Default or Event of
Default, any prepayment of any Term Loan pursuant to Section 2.8(a) shall
be to each scheduled installment of principal on the Term Loans in inverse
order of due date to the full extent thereof. In the event Borrower fails
to specify the Loans to which any such prepayment shall be applied, such
prepayments pursuant to Section 2.8(a) shall be applied to the Revolving
Loans.
(b) Application of Mandatory Prepayments. Any amount required to be
paid pursuant to Section 2.9(a) through (c) shall be applied to prepay (i)
first, the Overadvance Loans and Term Loans pro rata (based on the
outstanding balance of the Overadvance Loans and Term Loans at such date
(and, in the case of the Term Loan, shall be applied to each scheduled
installment of principal on the Term Loans in inverse order of due date to
the full extent thereof), and (ii) second, to prepay the Revolving Loans to
the full extent thereof and to permanently reduce the Revolving Credit
Commitments by the amount of such prepayment.
Section 2.11 General Provisions Regarding Payments.
(a) Payments. All payments by Borrower of principal, interest, fees and
other Obligations shall be made in Dollars in same day funds, without
defense, setoff or counterclaim, free of any restriction or condition, and
delivered to Agent not later than 12:00 p.m. (New York City time) on the
date due at the Agent's Principal Office for the account of Lenders. All
funds received by Agent after that time on such due date shall be deemed to
have been paid by Borrower on the next succeeding Business Day.
(b) Non Conforming Payments. The Agent shall deem any payment by or on
behalf of Borrower hereunder that is not made in same day funds prior to
12:00 p.m. (New York City time) to be a non conforming payment. Any such
payment shall not be deemed to have been received by Agent until the later
of (i) the time such funds become available funds and (ii) the applicable
next Business Day. Agent shall give prompt telephonic notice to Borrower
and each applicable Lender (confirmed in writing) if any payment is non
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conforming. Any non conforming payment may constitute or become a Default
or Event of Default in accordance with the terms of Section 8.1. Interest
shall continue to accrue on any principal as to which a non conforming
payment is made until such funds become available funds (but in no event
less than the period from the date of such payment to the next succeeding
applicable Business Day) at the rate determined pursuant to Section 2.5
from the date such amount was due and payable until the date such amount is
paid in full.
(c) Payments to Include Accrued Interest. All payments in respect of
the principal amount of any Loan (whether Mandatory or Optional) shall
include payment of accrued interest on the principal amount being, repaid
or prepaid, and all such payments (and, in any event, any payments in
respect of any Loan on a date when interest is due and payable with respect
to such Loan) shall be applied to the payment of interest before
application to principal.
(d) Distributions by Agent. Agent shall promptly distribute to each
Lender via facsimile or electronic correspondence, such Lender's applicable
Pro Rata Share of all payments and prepayments of principal and interest
due hereunder, together with all other amounts due thereto, including,
without limitation, all fees payable with respect thereto, to the extent
received by Agent.
(e) Business Days. Whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall
be included in the computation of the payment of interest hereunder.
Section 2.12 Ratable Sharing. Lenders hereby agree among themselves that,
except as otherwise provided in the Collateral Documents with respect to amounts
realized from the exercise of rights with respect to Liens on the Collateral, if
any of them shall, whether by voluntary payment (other than a voluntary
prepayment of Loans made and applied in accordance with the terms hereof),
through the exercise of any right of set off or banker's lien, by counter claim
or cross action or by the enforcement of any right under the Credit Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, fees and other amounts then due and
owing to such Lender hereunder or under the other Credit Documents
(collectively, the "Aggregate Amounts Due" to such Lender) which is greater than
the proportion received by any other Lender in respect of the Aggregate Amounts
Due to such other Lender, then the Lender receiving such proportionately greater
payment shall (a) notify Agent and each other Lender of the receipt of such
payment and (b) apply a portion of such payment to purchase participations
(which it shall be deemed to have purchased from each seller of a participation
simultaneously upon the receipt by such seller of its portion of such payment)
in the Aggregate Amounts Due to the other Lenders so that all such recoveries of
Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided, if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy or reorganization of the Borrower or otherwise,
those purchases shall be rescinded and the purchase prices paid for such
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participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. The Borrower expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set off or counter claim with
respect to any and all monies owing by the Borrower to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
ARTICLE III
Conditions Precedent
Section 3.1 Closing Date. The obligation of any Lender to make any Loan and
the other financial accommodations described herein on the Closing Date is
subject to the satisfaction, or waiver in accordance with Section 11.1, of the
following conditions on or before the Closing Date:
(a) Secretary's Certificate. The Lenders shall have received (i) a
certificate of the secretary or assistant secretary, the manager or the
general partner, as the case may be, of the Borrower, substantially in the
form of Exhibit 3.1(a), with respect to (A) the articles of incorporation,
certificate of formation or certificate of limited partnership, as the case
may be, of the Borrower, (B) the bylaws, operating agreement or limited
partnership agreement, as the case may be, of the Borrower, (C) the
resolutions of the board of directors, manager or general partner, as the
case may be, of the Borrower approving each Credit Document to which the
Borrower is a party and the other documents to be delivered by the Borrower
under the Credit Documents and the performance of the obligations of the
Borrower thereunder, (ii) a certificate of the secretary or assistant
secretary, the manager or the general partner, as the case may be, of the
Borrower, substantially in the form of Exhibit 3.1(b), with respect to the
names and true signatures of the officers of the Borrower or such other
persons authorized to sign each Credit Document to which the Borrower is a
party and the other documents to be delivered by it under the Credit
Documents, and (iii) a certificate of the secretary or assistant secretary,
the manager or the general partner, as the case may be, of each other
Credit Party, substantially in the form of Exhibit 3.1(c), with respect to
(A) the articles of incorporation, certificate of formation or certificate
of limited partnership, as the case may be, of such Credit Party, (B) the
bylaws, operating agreement or limited partnership agreement, as the case
may be, of such Credit Party, (C) the resolutions of the board of
directors, manager or general partner, as the case may be, of such Credit
Party approving each Credit Document to which such Credit Party is a party
and the other documents to be delivered by such Credit Party under the
Credit Documents and the performance of the obligations of such Credit
Party thereunder, and (D) the names and true signatures of the officers of
such Credit Party or such other persons authorized to sign each Credit
Document to which such Credit Party is a party and the other documents to
be delivered by it under the Credit Documents.
(b) Organizational and Capital Structure. The organizational structure
and the capital structure of the Borrower and its Subsidiaries, shall be as
set forth in Section 4.1(m) and Schedule 4.1(m).
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(c) Good Standing Certificates. The Lenders shall have received a good
standing certificate from the applicable Governmental Body of the
jurisdiction of incorporation, organization or formation, as applicable, of
the Borrower and SOC, each dated a recent date prior to the Closing Date.
(d) Financials. The Lenders shall have received the Financials
described in Section 4.1(d).
(e) Evidence of Insurance. Lenders shall have received a certificate
from the Borrower's insurance broker or other evidence satisfactory to it
that all insurance required to be maintained pursuant to Section 5.1(c) is
in full force and effect and that Agent, for the benefit of Lenders and
Agent, has been named as additional insured and loss payee thereunder.
(f) Opinions of Counsel. The Lenders shall have received an originally
executed copy of the favorable written opinion of Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel for Credit Parties, in the form of Exhibit 3.1(f), and as to such
other matters as Agent or any Lender may reasonably request dated as of the
Closing Date and otherwise in form and substance reasonably satisfactory to
Agent and Lenders.
(g) Closing Date Certificate. Lenders shall have received an originally
executed Closing Date Certificate, in the form of Exhibit 3.1(g) (the
"Closing Date Certificate"), from the Borrower, together with all
attachments thereto.
(h) UCC Financing Statements. Lenders shall have received UCC Financing
Statements duly executed by each applicable Credit Party with respect to
all personal and mixed property Collateral of such Credit Party, for filing
in all jurisdictions as may be necessary or, in the opinion of the Lenders,
desirable, to perfect the security interests created in such Collateral
pursuant to the Collateral Documents.
(i) Security Agreements. The Lenders shall have received the Amended
and Restated Security Agreement, in the form of Exhibit 3.1(i)(A) duly
executed and delivered by the Borrower; the Amended and Restated Security
Agreement in the form of Exhibit 3.1(i)(B), duly executed and delivered by
SOC (collectively, the "Security Agreements"); the Patent Security
Agreement duly executed and delivered by the Borrower; and the Trademark
Security Agreement duly executed and delivered by the Borrower.
(j) Security Collateral. The Lenders shall have received the Stock
Pledge Agreement (including the stocks pledged thereunder), certificates,
instruments and promissory notes (which certificates, instruments and
promissory notes shall be accompanied by instruments of transfer or
assignment duly endorsed in blank and otherwise in form and substance
satisfactory to Agent and Lenders) representing or evidencing all security
collateral pledged pursuant to the Collateral Documents.
(k) Other Actions to Perfect Security Interests. The Lenders shall have
received evidence that each Credit Party shall have taken or caused to be
taken any other action, executed and delivered or caused to be executed and
delivered any other agreement, document and instrument, and made or caused
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to be made any other filing and recording (other than as set forth herein)
reasonably required by the Lenders.
(l) Other Information. The Agent and Lenders shall have received any
other financial or non financial information regarding the Borrower and its
Subsidiaries as the Agent or any Lender may reasonably request.
(m) Proceedings. All proceedings taken or to be taken in connection
with the transactions contemplated by this Agreement shall be satisfactory
to the Agent and Lenders and their counsel.
(n) Fees and Costs. The Borrower shall have paid all fees and expenses
(including attorneys' fees) and out of pocket expenses of the Lenders and
Agent incurred in connection with the Prior Credit Agreement, this
Agreement and the other Credit Documents.
(o) Share Exchange. The board of directors of the Borrower shall have
adopted the Plan of Reorganization and the Certificate of Designations, and
such Certificate of Designations shall have been filed with and accepted by
the Secretary of State of the State of Delaware.
(p) Master Lease Amendment. The Second Amendment to Master Agreement
between the Borrower, as Lessee, and Ark, as Lessor, shall have been
executed and delivered by the parties thereto.
(q) Guarantees. The Lenders shall have received a Guarantee, duly
executed and delivered by each of SOC and SOL.
Section 3.2 Conditions to Each Borrowing. The obligation of each Lender to
make any Loan on any Borrowing Date, including the Closing Date, is subject to
the satisfaction, or waiver in accordance with Section 11.1, of the following
conditions precedent:
(a) Funding Notice. The Agent and Lenders shall have received a fully
executed and delivered Funding Notice in the form of Exhibit 3.2(a) (each,
a "Funding Notice"), as provided in Section 2.1. Each Funding Notice shall
be executed by an Authorized Officer of the Borrower in a writing delivered
to the Agent and Lenders on a Business Day. In lieu of delivering a Funding
Notice, the applicable Borrower may give the Agent and Lenders telephonic
notice by the required time of any proposed Borrowing; provided, each such
notice shall be promptly confirmed in writing by delivery of the Funding
Notice to the Agent and Lenders on or before the applicable date of
Borrowing. The Agent shall not incur any liability to Borrower in acting
upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person
authorized on behalf of the Borrower or for otherwise acting in good faith.
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(b) Representations and Warranties. As of such Borrowing Date, the
representations, warranties and covenants of the Credit Parties contained
in the Credit Documents shall be true, correct and complied with on and as
of that Borrowing Date.
(c) No Default or Event of Default. As of such Borrowing Date, no event
shall have occurred and be continuing or would result from the consummation
of the applicable Borrowing that would constitute an Event of Default or a
Default.
(d) Consents. The Lenders shall have received such Consents and other
information, approvals, opinions or documents reasonably requested by the
Agent or the Lenders in connection with such Borrowing.
(e) Available Commitment. After making the Loans requested on such
Borrowing Date, the total amount of Revolving Loans shall not exceed the
aggregate amount of Revolving Credit Commitments and the Overadvance Loans
shall not exceed the Overadvance Loan Commitment, as applicable, then in
effect.
(f) Use of Proceeds. The Borrower shall have confirmed that the
proceeds of such Borrowing shall be used only in accordance with the
provisions of Section 2.3.
(g) No Material Adverse Effect. No Material Adverse Effect shall have
occurred.
ARTICLE IV
Representations and Warranties
Section 4.1 Representations and Warranties. In order to induce the Agent
and the Lenders to enter into this Agreement and to make each Borrowing to be
made thereby, each Credit Party hereby represents and warrants to the Agent and
each Lender, on the Closing Date and on each Borrowing Date as follows:
(a) the Borrower and each of its Subsidiaries and each other Credit
Party is duly organized, validly existing, and in good standing (except
that, subject to Section 5.1(h)(ii), Scan-Optics Limited is not in good
standing) under the laws of its jurisdiction of organization and is duly
qualified and in good standing in every other jurisdiction where it is
doing business except where the failure to so qualify does not have a
Material Adverse Effect on the Borrower or any to its Subsidiaries, and the
execution, delivery and performance by the Borrower and its Subsidiaries of
the Credit Documents (i) are within their respective authority, (ii) have
been duly authorized, and (iii) do not conflict with or contravene their
respective constitutive documents;
(b) upon execution and delivery thereof, each Credit Document shall
constitute the legal, valid and binding obligation of the Borrower, each
Subsidiary of the Borrower and each other Credit Party which is a party
thereto, enforceable in accordance with its terms;
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(c) the Borrower, each of its Subsidiaries and each other Credit Party
have good and marketable title to all their respective material properties,
subject only to Permitted Liens, and possess all assets, including
intellectual properties, franchises and Consents, adequate for the conduct
of their respective businesses as now conducted, without (to the Knowledge
of the Borrower) conflict with any rights of others;
(d) the Borrower has provided to the Agent and the Lenders its audited
Financials dated as of December 31, 2002 and for the period then ended and
its unaudited management prepared Financials dated as of December 31, 2003
for the period of twelve (12) months then ended, and such Financials are
complete and correct and fairly present the position of the Borrower and
its Subsidiaries as at such dates and for such periods in accordance with
GAAP consistently applied;
(e) except as previously disclosed by the Borrower to the Lenders in
writing since December 31, 2003, there has been no material adverse change
of any kind in the Borrower or any of its Subsidiaries which would have a
Material Adverse Effect on the Borrower, its Subsidiaries or any other
Credit Party;
(f) except as set forth on Schedule 4.1(f), there are no legal or other
proceedings or investigations pending or threatened against the Borrower or
any of its Subsidiaries or any other Credit Party before any court,
tribunal or regulatory authority which would, if adversely determined,
alone or together, have a Material Adverse Effect on the Borrower, its
Subsidiaries or any other Credit Party;
(g) the execution, delivery, performance of their respective
obligations, and exercise of their respective rights under the Credit
Documents by the Borrower, each of its Subsidiaries and each other Credit
Party thereto, including Borrowings under this Agreement (i) do not require
any Consents and (ii) are not and will not be in conflict with or
prohibited or prevented by (A) any Regulation or (B) any constitutive
document, corporate minute or resolution, instrument, agreement or
provision thereof, in each case binding on any of them or affecting any of
their property;
(h) neither the Borrower nor any of its Subsidiaries nor any other
Credit Party are in violation of (i) any constitutive document, corporate
minute or resolution, (ii) any instrument or agreement, in each case biding
on it or affecting any of its property or (iii) any Regulation, in a manner
which could have a Material Adverse Effect on the Borrower, any of its
Subsidiaries or any other Credit Party, including, without limitation, all
applicable federal and state tax laws, ERISA and Environmental Laws;
(i) upon execution and delivery of the Collateral Documents and the
filing of documents thereby required, the Agent, on behalf of the Lenders,
shall have a first priority perfected security interest in the properties
and assets of the Borrower and its Subsidiaries stated to constitute
collateral thereunder, subject only to Permitted Liens, and entitled to
priority under applicable law, with no financing statements, chattel
mortgages, real estate mortgages or similar filings on record anywhere
which conflict with such first priority interest;
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(j) the Borrower has no Subsidiaries except for SOL and SOC and is not
a party to any partnership or joint venture;
(k) each fiscal year of the Borrower and each of its Subsidiaries
begins on January 1 of each calendar year and ends on December 31 of each
calendar year;
(l) any information delivered by or on behalf of the Borrower, its
Subsidiaries and/or the other Credit Parties in connection with the Credit
Documents is accurate and complete in all material respects and is not
false or misleading in any material respect as at the time made or deemed
to have been made it being understood that no representation is made with
respect to projections of future performance of the Borrower, other than
that such projections were prepared in good faith and on assumptions that
the Borrower believes to be reasonable;
(m) Schedule 4.1(m) sets forth a true, correct and complete list, as of
the Closing Date, of each Subsidiary of the Borrower and the Borrower,
showing (i) the jurisdiction of its organization and jurisdictions in which
it is qualified to do business, (ii) the number of shares of Capital Stock
of each class (A) authorized and (B) issued and outstanding, (iii) the
percentage of the outstanding shares of Capital Stock of the Borrower and
each Subsidiary owned directly or indirectly by the Borrower, (iv) the
names of the record holders of each class of outstanding shares of Capital
Stock of the Borrower's Subsidiaries and the number of such shares held by
each such holder, (v) the number of shares of Capital Stock of the Borrower
and each Subsidiary covered by all outstanding options, warrants, rights of
conversion or purchase, and similar rights, (vi) the percentage of those
options, warrants or rights owned directly or indirectly by the Borrower or
such other Persons, and (vii) the names of the record holders of such
options, warrants and rights and the number of such options, warrants and
rights held by each such holder;
(n) all outstanding shares of Capital Stock of each Subsidiary are duly
authorized, validly issued, fully paid and nonassessable and are free of
any preemptive rights and, except as set forth on Schedule 4.1(m) and
pursuant to the Collateral Documents, are owned, directly or indirectly,
beneficially and of record by the Borrower free and clear of all Liens and
any options, warrants and other rights; and
(o) there are no facts pertaining to the Borrower, its Subsidiaries,
the other Credit Parties, their assets or properties or their businesses
which could reasonably be expected to have a Material Adverse Effect and
which have not been disclosed in this Agreement. None of the
representations or warranties of the Borrower, any of its Subsidiaries or
any other Credit Party contained in the Credit Documents is untrue or
incorrect when made and on the Closing Date. There is no information, as of
the Closing Date, which would contradict or is inconsistent with any
representation or warranty of the Borrower, its Subsidiaries or any other
Credit Party contained in the Credit Documents.
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ARTICLE V
Affirmative Covenants
Section 5.1 Affirmative Covenants. Each Credit Party covenants and agrees
that so long as any Revolving Credit Commitments and/or Overadvance Loan
Commitment is in effect and until payment in full of all Obligations, each
Credit Party shall perform, and shall cause each of its Subsidiaries to perform,
all the covenants in this Article V:
(a) The Borrower, its Subsidiaries and the other Credit Parties shall
furnish to the Agent and the Lenders: (A) as soon as available but in any
event within ninety (90) days after the close of each Fiscal Year, its
audited consolidated Financials for such Fiscal Year, certified by the
Borrower's accountants; (B) as soon as available but in any event within
forty five (45) days after the end of each Fiscal Quarter, its unaudited
consolidated Financials for such quarter, certified by its chief financial
officer; and (C) together with the quarterly and annual audited
consolidated Financials, a certificate of the Borrower setting forth
computations demonstrating compliance with the Borrower's financial
covenants set forth herein, and certifying that no Default or Event of
Default has occurred, or if a Default or an Event of Default has occurred,
the actions taken by the Borrower with respect thereto.
(b) The Borrower, each of its Subsidiaries and each of the other Credit
Parties shall keep true and accurate books of account in accordance with
GAAP and shall permit the Agent and/or any Lender and or any of their
designated representatives, upon reasonable notice and at the expense of
the Borrower, to visit and inspect the premises of the Borrower, any
Subsidiary of the Borrower and/or other Credit Party, to examine the books
of account of any such Persons and their Affiliates (and to make copies
and/or extracts therefrom) and to discuss the affairs, finances and
accounts of such Persons and their Affiliates with, and to be advised as to
the same by, the officers of such Persons and to be advised as to such or
other business records upon the request of the Agent and/or Lender.
(c) The Borrower, each of its Subsidiaries and each of the other Credit
Parties shall maintain its corporate/legal existence, business and assets,
keep its business and assets adequately insured, maintain its chief
executive office in the United States, continue to engage in the same lines
of business, and comply in all material respects with all Regulations,
including without limitation, ERISA and Environmental Laws.
(d) The Borrower, each of its Subsidiaries and each of the other Credit
Parties shall notify the Agent and the Lenders promptly in writing (A) of
the occurrence of any Default or Event of Default, (B) of any noncompliance
with ERISA or any Environmental Law or proceeding in respect thereof which
could have a Material Adverse Effect, (C) of any change of address of the
Borrower, any of its Subsidiaries or any other Credit Party, (D) of any
threatened or pending litigation or similar proceeding affecting the
Borrower, any of its Subsidiaries or any other Credit Party involving
claims in excess of $100,000 in the aggregate or any material change in any
such litigation or proceeding previously reported and (E) of claims in
excess of $100,000 in the aggregate against any assets or properties of the
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Borrower, any of its Subsidiaries or any other Credit Party encumbered in
favor of the Agent and/or the Lenders.
(e) The Borrower, each of its Subsidiaries and each of the other Credit
Parties shall use the proceeds of the Loans only as permitted by Section
2.3 hereof (for the avoidance of doubt, the proceeds of the Loans shall not
be used for the purpose of purchasing or carrying of "margin security" or
"margin stock" within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224).
(f) The Borrower, each of its Subsidiaries and each of the other Credit
Parties shall cooperate with the Agent, take such action, execute such
documents, and provide such information as the Agent may from time to time
reasonably request in order further to effect the transactions contemplated
by and the purposes of the Credit Documents.
(g) At the request of the Agent or the Required Lenders, Borrower, its
Subsidiaries and each of the other Credit Parties shall enter into a
blocked account agreement in form and substance acceptable to the Agent and
the Required Lenders.
(h) Post-Closing Items.
(i) The Borrower shall use its best efforts to cause the
Recapitalization to occur by July 1, 2004; provided,
however, nothing in this Section 5.1(h)(i) shall be deemed
to obligate the Borrower's Board of Directors to take any
action that would constitute a breach of such Board of
Directors' fiduciary duties, as imposed by applicable law,
to (x) the Borrower or (y) the Borrower's shareholders
and/or creditors (if applicable).
(ii) The Borrower (i) shall take, or cause to be taken, all
necessary actions on behalf of Scan-Optics Limited such that
Scan-Optics Limited shall be in good standing under the laws
of its jurisdiction of incorporation, organization or
formation, as applicable, and (ii) shall provide to Lenders
on or before May 31, 2004 a good standing certificate, or
its equivalent, from the applicable Governmental Body of
such jurisdiction.
(i) The Borrower, its Subsidiaries and each other Credit Party shall
promptly upon request by any Lender, correct, and cause each of the other
parties to the Credit Document to promptly correct, any defect or error
that may be discovered in any Credit Document or in the execution,
acknowledgment or recordation of the Credit Document. Promptly upon request
by the Agent or the Required Lenders, the Borrower, any of its Subsidiaries
and each other Credit Party shall execute, acknowledge, deliver, record,
file and register, any and all such further acts, deeds, conveyances,
documents, security agreements, pledge agreements, mortgages, deeds of
trust, trust deeds, assignments, financing statements and continuations,
notices of assignment, transfers, certificates, assurances and other
instruments as the Agent or the Required Lenders may require from time to
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time in order to carry out more effectively the purposes of each Credit
Document. Without limiting the foregoing, the Borrower, each of its
Subsidiaries and/or each other Credit Party shall provide Agent with the
following: (i) fully executed UCC-1 financing statements and/or other
financing statements (including without limitation, amendments thereto) for
all jurisdictions requested by the Agent; and (ii) a first priority
properly perfected security interests in all intellectual property and
other assets owned by the Borrower and/or any of its Subsidiaries pursuant
to documentation in form and substance reasonably satisfactory to the Agent
and the Required Lenders that may reasonably be required by the Agent
and/or the Required Lenders to properly grant and perfect security
interests in all intellectual property and other assets owned by the
Borrower and/or any of its Subsidiaries.
(j) The Borrower shall furnish to the Agent and the Lenders no less
frequently than ten days after the end of each Fiscal Quarter of the
Borrower its backlog order report.
(k) Immediately following the Closing Date, upon the surrender by Ark
to the Borrower of the certificates(s) representing the Series A Preferred
Stock , the Borrower shall issue to Ark a certificate representing 380,000
shares of Series B Preferred Stock.
ARTICLE VI
Negative Covenants/Financial Covenants
Section 6.1 Negative Covenants. Each Credit Party covenants and agrees
that so long as any Revolving Credit Commitments and/or the Overadvance
Loan Commitment is in effect and until payment in full of all Obligations,
each Credit Party shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 6.1:
(a) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall create, incur or assume any Indebtedness other than (A)
Indebtedness to the Agent and/or the Lenders arising under the Credit
Documents, (B) Indebtedness in respect of the acquisition of property which
does not exceed $100,000 in aggregate amount, (C) current liabilities of
the Borrower, any of its Subsidiaries and/or the other Credit Parties not
incurred through the borrowing of money or the obtaining of credit except
credit on an open account customarily extended, and (D) Indebtedness in
respect of taxes or other governmental charges contested in good faith by
appropriate proceedings and for which the Borrower has made appropriate
reserves (the indebtedness described in the foregoing clauses (A) through
(D) of this paragraph, the "Permitted Indebtedness").
(b) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall create or incur, or cause any of its Subsidiaries to create or
incur, any Liens on any of the property or assets of the Borrower or any of
the Subsidiaries of such Person, except (A) Liens securing the Obligations,
(B) Liens securing taxes or other governmental charges not yet due, (C)
deposits or pledges made in connection with social security obligations,
(D) Liens of carriers, warehousemen, mechanics and materialmen, less than
120 days old as to obligations not yet due, (E) easements, rights of way,
zoning restrictions and similar minor Liens which individually and in the
aggregate do not have a Material Adverse Effect on the Borrower and/or any
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of its Subsidiaries, (F) purchase money security interests in or purchase
money mortgages on real or personal property securing purchase money
Indebtedness permitted by Section 6.1(a)(B) , covering only the property so
acquired, and (G) the Liens listed on Schedule 6.1(b) hereto (the liens
described in the foregoing clauses (A) through (G) of this paragraph, the
"Permitted Liens").
(c) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall agree with any other Person to prohibit the creation of any
Liens on any of the property or assets of the Borrower, any Subsidiary of
the Borrower, any Credit Party or any Subsidiary of any Credit Party.
(d) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall make any Investments other than Investments in (A) marketable
obligations of the United States maturing within one (1) year, (B)
certificates of deposit, bankers' acceptances and time and demand deposits
of United States banks having total assets in excess of $1,000,000,000 and
otherwise acceptable to the Agent in its discretion, (C) Capital
Expenditures as permitted pursuant to Section 6.2 of this Agreement or (D)
such other Investments as the Agent may from time to time approve in
writing.
(e) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall make any distributions on or in respect of its capital of any
nature whatsoever without the prior written consent of the Required
Lenders, except for distributions made only to the Borrower or Subsidiaries
of the Borrower by direct or indirect Subsidiaries of the Borrower.
(f) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall (A) become party to a merger or consolidation, (B) effect any
disposition of assets other than in the ordinary course, (C) purchase,
sell, lease or otherwise dispose of assets other than in the ordinary
course, (D) make any changes in the corporate structure or identity of the
Borrower, its Subsidiaries or any other Credit Party which has a Material
Adverse Effect on the Borrower and/or any of its Subsidiaries or (E) enter
into any agreement to do any of the foregoing; provided, that, any
Subsidiary of the Borrower may merge with and into the Borrower or any
other Subsidiary of the Borrower upon not less than thirty (30) days' prior
written notice to the Agent of such merger.
(g) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall change its or any of its Subsidiaries fiscal year without the
prior written consent of the Required Lenders.
(h) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall without the prior written consent of the Required Lenders,
transfer, purchase or redeem, or permit any Subsidiary to transfer or
purchase any shares of the capital stock of the Borrower, any of its
Subsidiaries, any other Credit Party or any Subsidiary of a Credit Party.
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(i) None of the Borrower, any of its Subsidiaries or any other Credit
Party shall (x) issue any securities (including without limitation warrants
and/or options) without the consent of the Required Lenders, except
pursuant to the documents listed on Schedule 6.1(i) or (y) create, dissolve
or merge any Subsidiaries without the consent of the Required Lenders,
except as provided in Section 5.1(h)(ii) hereof.
Section 6.2 Financial Covenants. Each Credit Party covenants and agrees
that so long as any Revolving Credit Commitments and/or Overadvance Loan
Commitment is in effect and until payment in full of all Obligations, each
Credit Party shall perform, and shall cause each of its Subsidiaries to perform,
all covenants in this Section 6.2:
(a) The Borrower shall not permit the Borrower's backlog (as defined in
the Borrower's most recent 10K filed with the Securities and Exchange
Commission) to be less than $10,000,000 as of the last day of any Fiscal
Quarter.
(b) None of the Borrower, its Subsidiaries or any other Credit Party
shall (in the aggregate) make any Capital Expenditures in any Fiscal Year
in excess of $375,000.
(c) The Borrower shall not permit Consolidated Earnings Before Interest
and Taxes, Depreciation and Amortization for any period consisting of four
(4) consecutive Fiscal Quarters of the Borrower ending: (i) on March 31,
2004 to be less than $2,500,000; (ii) on June 30, 2004 to be less than
$1,765,000; (iii) on September 30, 2004 to be less than $1,000,000; (iv) on
December 31, 2004 to be less than $571,000; (v) on March 31, 2005 to be
less than $100,000; (vi) on June 30, 2005 to be less than $208,000; (vii)
on September 30, 2005 to be less than $391,000; (viii) on December 31, 2005
not to be less than $307,000; and (ix) on or after March 31, 2006 to be
less than $1,069,000.
ARTICLE VII
Increased Costs; Taxes; Indemnification; Set Off; Etc.
Section 7.1 Increased Costs; Capital Adequacy. In the event that any Lender
shall have determined that the adoption, effectiveness, phase in or
applicability after the Closing Date of any law, rule or regulation (or any
provision thereof) regarding capital adequacy, or any change therein or in the
interpretation or administration thereof by any Governmental Body, central bank
or comparable agency charged with the interpretation or administration thereof,
or compliance by any Lender (or its applicable lending office) with any
guideline, request or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental Body, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Revolving Credit
Commitments or Overadvance Loan Commitment or other obligations hereunder with
respect to the Loans to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five (5) Business Days after receipt by Borrower
from such Lender of the statement referred to in the next sentence, Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or such controlling, corporation on an after tax basis for such
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reduction. Such Lender shall deliver to Borrower (with a copy to Agent) a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to Lender under this Section 7.1, which statement
shall be conclusive and binding, upon all parties hereto absent manifest error.
Section 7.2 Taxes; Withholding, etc.
(a) Payments to Be Free and Clear. All sums payable by any Credit Party
hereunder and under the other Credit Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from or to which
a payment is made by or on behalf of any Credit Party or by any federation
or organization of which the United States of America or any such
jurisdiction is a member at the time of payment.
(b) Withholding of Taxes. If any Credit Party or any other Person is
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by any Credit Party to Agent or any Lender
under any of the Credit Documents: (i) Borrower shall notify Agent of any
such requirement or any change in any such requirement as soon as Borrower
become aware of it, (ii) Borrower shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the liability
to pay is imposed on any Credit Party) for its own account or (if that
liability is imposed on Agent or such Lender, as the case may be) on behalf
of and in the name of Agent or such Lender, (iii) the sum payable by such
Credit Party in respect of which the relevant deduction, withholding or
payment is required shall be increased to the extent necessary to ensure
that, after the making of that deduction, withholding or payment, Agent or
such Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made, and (iv) within 30 days after paying any sum
from which it is required by law to make any deduction or withholding, and
within 30 days after the due date of payment of any Tax which it is
required by clause (ii) above to pay, Borrower shall deliver to Agent
evidence satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the relevant taxing
or other authority; provided, no such additional amount shall be required
to be paid to any Lender under clause (iii) above except to the extent that
any change after the date hereof (in the case of each Lender listed on the
signature pages hereof on the Closing Date) or after the effective date of
the Assignment Agreement pursuant to which such Lender became a Lender (in
the case of each other Lender) in any such requirement for a deduction,
withholding or payment as is mentioned therein shall result in an increase
in the rate of such deduction, withholding or payment from that in effect
at the date hereof or at the date of such Assignment Agreement, as the case
may be, in respect of payments to such Lender.
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Section 7.3 Indemnification.
(a) Indemnification by the Borrower. The Borrower and its Subsidiaries
will indemnify and defend the Agent, the Lenders and each of their
respective shareholders, partners, members, managers, directors, officers,
employees, agents, attorneys and Affiliates (collectively, the "Indemnified
Persons") against and hold each Indemnified Person harmless from any and
all liabilities, obligations, losses, damages, costs, expenses, claims,
penalties, Actions, judgments, disbursements of any kind or nature
whatsoever, interest, fines, cleanup costs, settlements, costs of
preparation and investigation, costs incurred in enforcing this indemnity
and reasonable attorneys' fees and expenses (collectively, "Losses"), that
the Indemnified Persons may incur, suffer, sustain or become subject to
arising out of, relating to, or due to (i) any inaccuracy or breach of any
of the representations and warranties of any Credit Party contained in any
Credit Document or in any certificate delivered thereunder, (ii) the
nonfulfillment or breach of any covenant, undertaking, agreement or other
obligation of any Credit Party contained in any Credit Document or in any
certificate delivered thereunder, (iii) any Environmental Liability, and/or
(iv) any use of proceeds of any Loans; provided that such indemnity shall
not, as to any Indemnified Person, be available to the extent such Losses
arise out of the gross negligence or willful misconduct of such Indemnified
Person. Upon request of an Indemnified Person, Borrower shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person in connection with any Losses or threatened Losses and
shall pay the reasonable fees and disbursements of such counsel. The
Indemnified Person shall have the right to employ its own counsel at the
expense of Borrower if (i) the employment of counsel by the Indemnified
Person at the Borrower's expense has been authorized in writing by
Borrower, (ii) the Borrower has not in fact employed counsel to represent
the Indemnified Person within a reasonable time after receiving notice of a
request for the retention of counsel or (iii) both the Indemnified Person
and Borrower are implicated with respect to the Losses or the threatened
Losses, and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them,
in each of which cases the reasonable fees and expenses of counsel
(including local counsel) will be at the expense of the Borrower, and all
such fees and expenses will be reimbursed promptly as they are incurred.
(b) Contribution. If the indemnification provided for in this Section
7.3 is prohibited under applicable Regulations to an Indemnified Person,
then the Borrower, in lieu of indemnifying the Indemnified Person, will
contribute to the amount paid or payable by the Indemnified Person as a
result of the Losses in such proportion as is appropriate to reflect the
relative fault of Borrower, on the one hand, and of the Indemnified Person,
on the other, in connection with the events or circumstances which resulted
in the Losses as well as any other relevant equitable considerations.
Section 7.4 Right of Set Off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default each Lender and Agent are hereby
authorized by each Credit Party at any time or from time to time, without notice
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to any Credit Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other Indebtedness at any time held or owing by such Lender or Agent to or
for the credit or the account of any Credit Party against and on account of the
Obligations of any Credit Party to such Lender or Agent hereunder, irrespective
of whether or not (a) such Lender or Agent shall have made any demand hereunder
or (b) the principal of or the interest on the Loans or any other amounts due
hereunder or the other Credit Documents shall have become due and payable and
although such obligations and liabilities, or any of them, may be contingent or
unmatured.
ARTICLE VIII
Events of Default
Section 8.1 Events of Default. Any one or more of the following events
which shall occur and be continuing shall constitute an "Event of Default":
(a) Failure to Make Payments When Due. Failure by the Borrower to pay
(i) when due any installment of principal of any Loan, whether at stated
maturity, by acceleration, by notice of voluntary prepayment, by mandatory
prepayment or otherwise, or (ii) any interest on any Loan or any fee or any
other amount due hereunder within two (2) Business Days after the date due;
(b) Breach of Certain Covenants. Failure of any Credit Party to perform
or comply with any term or condition contained in Section 2.3, Article V or
Article VI;
(c) Breach of Representations, etc. Any representation, warranty,
certification or other statement made or deemed made by any Credit Party in
any Credit Document or in any statement or certificate at any time given by
any Credit Party or any of its Subsidiaries in writing, pursuant hereto or
thereto or in connection herewith or therewith shall be false in any
material respect as of the date made or deemed made;
(d) Other Defaults Under Credit Documents. Any Credit Party shall
default in the performance of or compliance with any term contained herein
or any of the other Credit Documents, other than any such term referred to
in any other section of this Section 8.1, and such default shall not have
been remedied or waived within 30 days after the earlier of (i) an
Authorized Officer of such Credit Party becoming aware of such default and
(ii) receipt by the Borrower of notice from Agent or any Lender of such
default;
(e) Default in Other Agreements. (i) Failure of any Credit Party to pay
when due any principal of or interest on or any other amount payable in
respect of one or more items of Indebtedness in an individual principal
amount of $50,000 or more or with an aggregate principal amount of $100,000
or more, in each case beyond the grace period, if any, provided therefor,
or (ii) breach or default by any Credit Party with respect to any other
material term of (A) one or more items of Indebtedness in the individual or
aggregate principal amounts referred to in clause (i) above or (B) any loan
agreement, mortgage, indenture or other agreement relating to such item of
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Indebtedness, in each case beyond the grace period, if any, provided
therefor, if the effect of such breach or default is to cause, or to permit
the holder or holders of that Indebtedness (or a trustee on behalf of such
holder or holders), to cause, that Indebtedness to become or be declared
due and payable (or redeemable) prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be;
(f) Involuntary Bankruptcy, Appointment of Receiver, etc. (i) A court
of competent jurisdiction shall enter a decree or order for relief in
respect of Borrower or any of its Subsidiaries in an involuntary case under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, which decree or order is not
stayed, or any other similar relief shall be granted under any applicable
federal or state law, or (ii) an involuntary case shall be commenced
against Borrower or any of its Subsidiaries under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over such
Borrower or any of its Subsidiaries, or over all or a substantial part of
its property, shall have been entered; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian
of such Borrower or any of its Subsidiaries for all or a substantial part
of its property or a warrant of attachment, execution or similar process
shall have been issued against any substantial part of the property of the
Borrower or any of its Subsidiaries, and any such event described in this
clause (ii) shall continue for 60 days without having been dismissed,
bonded or discharged;
(g) Voluntary Bankruptcy, Appointment of Receiver, etc. (i) Borrower or
any of its Subsidiaries shall have an order for relief entered with respect
to it or shall commence a voluntary case under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or hereafter
in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or the Borrower or any of its
Subsidiaries shall make any assignment for the benefit of creditors, or
(ii) Borrower or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the board of directors (or similar governing
body) of Borrower or any of its Subsidiaries (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any
of the actions referred to herein or in Section 8.1(f);
(h) Judgments and Attachments. Any money judgment, writ or warrant of
attachment or similar process involving (i) in any individual case an
amount in excess of $50,000 or (ii) in the aggregate at any time an amount
in excess of $100,000 (in either case to the extent not adequately covered
by insurance as to which a solvent and unaffiliated insurance company has
acknowledged coverage) shall be entered or filed against Borrower or any of
its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60 days (or
in any event later than 5 days prior to the date of any proposed sale
thereunder);
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(i) Dissolution. Any order, judgment or decree shall be entered against
any Credit Party decreeing, the dissolution or split up of the Borrower or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of thirty 30 days;
(j) Change of Control. A Change of Control shall occur;
(k) Collateral Documents and other Credit Documents. At any time after
the execution and delivery thereof, (i) this Agreement or any Credit
Document ceases to be in full force and effect (other than by reason of a
release of Collateral in accordance with the terms hereof or thereof or the
satisfaction in full of the Obligations in accordance with the terms
hereof) or shall be declared null and void, or Agent shall not have or
shall cease to have a valid and perfected Lien in any Collateral purported
to be covered by the Collateral Documents with the priority required by the
relevant Collateral Document, or (ii) any Credit Party shall contest the
validity or enforceability of any Credit Document in writing or deny in
writing that it has any further liability, including with respect to future
advances by Lenders, under any Credit Document to which it is a party; or
(l) Backlog Inaccuracy. More than ten percent (10%) of those accounts
receivable of the Borrower created or arising in connection with any
contract disclosed in the Borrower's backlog report to the Agent and/or the
Lenders are not valid and legally enforceable obligations of the applicable
account debtors or are subject to any present or contingent offset,
deduction or counterclaim, dispute or other defense on the part of such
account debtors.
Section 8.2 Remedies. Upon and after the occurrence of an Event of Default:
(a) Non Bankruptcy Related Defaults. In the case of any Event of
Default specified in any Section other than Section 8.1(f) or 8.1(g), the
Agent may, and at the request of the Required Lenders shall, by notice to
the Borrower (i) terminate the Revolving Credit Commitments and/or if the
Overadvance Loan has not yet been made, terminate the Overadvance Loan
Commitment and it/they shall thereupon terminate, and (ii) declare each of
the following to be immediately due and payable, which shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower, (A) the
unpaid principal amount of and interest on the Loans and (B) all other
Obligations.
(b) Bankruptcy Events of Default. In the case of any of the Events of
Default specified in Section 8.1(f) or 8.1(g), without any notice to the
Borrower or any other act by the Agent or any Lender, automatically, (i)
the Revolving Credit Commitments and, if the Overadvance Loan has not yet
been made, the Overadvance Loan Commitments shall thereupon terminate, and
(ii) each of the following shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower, (A) the unpaid principal amount of and
interest on the Loans and (B) all other Obligations.
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(c) Remedies in All Events of Default. The Agent shall, at the request
of or with the consent of the Required Lenders, (i) exercise all rights and
remedies provided in the Credit Documents, (ii) exercise any right of
counterclaim, setoff, banker's lien or otherwise which it may have with
respect to money or property of the Borrower, (iii) bring any lawsuit,
action or other proceeding permitted by law for the specific performance
of, or injunction against any violation of, any Credit Document and may
exercise any power granted under or to recover judgment under any Credit
Document, (iv) enforce any and all Liens and security interests created
pursuant to Collateral Documents, and (v) exercise any other right or
remedy permitted by applicable Regulations.
(d) Lenders' Remedies. Unless otherwise directed by the Required
Lenders, in case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to Section 8.2, the Agent
may proceed to protect and enforce the rights of the Agent and/or any
Lender by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained
in this Credit Agreement and the other Credit Documents or any instrument
pursuant to which the Obligations to the Agent and/or such Lender are
evidenced, including as permitted by applicable law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due,
by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of the Agent and/or such Lender. No remedy
herein conferred upon any Lender or the Agent or the holder of any Note is
intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
any other provision of law.
ARTICLE IX
The Agent
Section 9.1 Appointment of Agent. Patriarch Partners Agency Services, LLC
is hereby appointed Agent hereunder, and each Lender hereby authorizes Agent to
act as its agent in accordance with the terms hereof and the other Credit
Documents. The Agent hereby agrees to act upon the express conditions contained
herein and the other Credit Documents, as applicable. The provisions of this
Article IX are solely for the benefit of Agent and Lenders and no Credit Party
shall have any rights as a third party beneficiary of any of the provisions
thereof. In performing its functions and duties hereunder, the Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for the Borrower or any of its Subsidiaries. The Agent without consent of or
notice to any party hereto, may assign any and all of its rights or obligations
hereunder to any of its Affiliates.
Section 9.2 Powers and Duties. Each Lender irrevocably authorizes the Agent
to take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Credit Documents as are specifically
delegated or granted to the Agent by the terms hereof and thereof, together with
such powers, rights and remedies as are reasonably incidental thereto. The Agent
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shall have only those duties and responsibilities that are expressly specified
herein and the other Credit Documents. The Agent may execute any of its duties
under this Agreement and the other Credit Documents by or through agents or
attorneys in fact, or may assign such duties to its wholly owned nominee without
the consent of the Lenders, and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not have, by
reason hereof or any of the other Credit Documents, a fiduciary relationship in
respect of any Lender and nothing herein or any of the other Credit Documents,
expressed or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect hereof or any of the other Credit Documents
except as expressly set forth herein or therein.
Section 9.3 Delegation of Duties. Agent may execute any of its duties under
this Agreement or any other Credit Document by or through third parties, agents,
employees or attorneys in fact (any such entity, a "Sub Agent") or may assign
such duties to its wholly owned nominee without the consent of the Lenders, and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
third party, agent or attorney in fact that it selects as long as such selection
was made with reasonable care. The Borrower and each Lender hereby agree that
any Sub Agent appointed hereunder shall be entitled to the benefit of the
provisions of Sections 7.3, 9.2, 9.4, 9.5, 9.6, 9.7, 9.9, 9.10 and 9.11 of this
Agreement as if such Sub Agent is a party to this Agreement.
Section 9.4 General Immunity.
(a) No Responsibility for Certain Matters. The Agent shall not be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency hereof or any other
Credit Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements
or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by the Agent to
Lenders or by or on behalf of any Credit Party to the Agent or any Lender
in connection with the Credit Documents and the transactions contemplated
thereby or for the financial condition or business affairs of any Credit
Party or any other Person liable for the payment of any Obligations, nor
shall the Agent be required to ascertain or inquire as to the performance
or observance of any of the terms, conditions, provisions, covenants or
agreements contained in any of the Credit Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any
Event of Default or Default. Anything contained herein to the contrary
notwithstanding, Agent shall not have any liability arising from
confirmations of the amount of outstanding Loans.
(b) Exculpatory Provisions. None of the Agent or any of its officers,
trustees, partners, members, directors, employees, attorneys or agents
shall be liable to Lenders for any action taken or omitted by the Agent
under or in connection with any of the Credit Documents except to the
extent caused by the Agent's gross negligence or willful misconduct. The
Agent shall be entitled to refrain from any act or the taking of any action
(including the failure to take an action) in connection herewith or any of
the other Credit Documents or from the exercise of any power, discretion or
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authority vested in it hereunder or thereunder unless and until the Agent
shall have received instructions in respect thereof from the Required
Lenders (or such other Lenders as may be required to give such instructions
under Section 11.1) and, upon receipt of such instructions from the
Required Lenders (or such other Lenders, as the case may be), the Agent
shall be entitled to act or (where so instructed) refrain from acting, or
to exercise such power, discretion or authority, in accordance with such
instructions. Without prejudice to the generality of the foregoing, (i) the
Agent shall be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it to be genuine
and correct and to have been signed or sent by the proper Person or
Persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for the Borrower
and its Subsidiaries), accountants, experts and other professional advisors
selected by it, and (ii) no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or (where so
instructed) refraining from acting hereunder or any of the other Credit
Documents in accordance with the instructions of the Required Lenders (or
such other Lenders as may be required to give such instructions under
Section 11.1). The Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Credit Document which
involves discretionary decision making absent express written instructions
from the Required Lenders with respect thereto.
Section 9.5 Agent Entitled to Act with Borrower. The Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of banking, trust, financial advisory or other business with the Borrower
or any of its Affiliates as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Borrower for
services in connection herewith and otherwise without having to account for the
same to Lenders.
Section 9.6 Lenders' Representations, Warranties and Acknowledgment.
(a) Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of the
Borrower and its Subsidiaries in connection with Borrowings hereunder and
that it has made and shall continue to make its own appraisal of the
creditworthiness of the Borrower and its Subsidiaries. The Agent shall not
have any duty or responsibility, either initially or on a continuing basis,
to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans
or at any time or times thereafter, and the Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
(b) Each Lender, by delivering its signature page to this Agreement and
funding or continuing any of its Term Loans, or Revolving Loans and
accepting its Revolving Credit Commitments and Overadvance Loan Commitments
on the Closing Date, shall be deemed to have acknowledged receipt of, and
consented to and approved, each Credit Document and each other document
required to be approved by the Agent or Lenders, as applicable on the
Closing Date.
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Section 9.7 Right to Indemnity. Each Lender, in proportion to its Pro Rata
Share, severally agrees to indemnify the Agent and its stockholders, directors,
officers, employees, agents, attorneys and Affiliates (each an "Indemnified
Agent Person"), to the extent that the Agent shall not have been reimbursed by
any Credit Party, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against such
Indemnified Agent Person in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Credit Documents or otherwise
in its capacity as the Agent in any way relating to or arising out hereof or the
other Credit Documents; provided, no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. If any indemnity furnished to the Agent for
any purpose shall, in the opinion of such Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished; provided, in no event shall this sentence require any Lender to
indemnify the Agent against any liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement in excess of such Lender's
Pro Rata Share thereof, and provided further, this sentence shall not be deemed
to require any Lender to indemnify the Agent against any liability, obligation,
loss, damage, penalty, action, judgment, suit, cost, expense or disbursement
described in the proviso in the immediately preceding sentence.
Section 9.8 Successor Agent.
(a) The Agent may resign at any time by giving not less than ten (10)
Business Days prior written notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Required Lenders shall have the right to
appoint a successor Agent.
(b) If no successor Agent shall have been so appointed by the Lenders
within ten (10) Business Days after the resigning Agent's giving of notice
of resignation, then the resigning Agent may appoint, on behalf of the
Borrower and the Lenders, a successor Agent, which shall be a commercial
bank organized under the laws of the United States of America or of any
state thereof and having a combined capital and surplus of at least
$250,000,000. In the event that the Agent is unable to appoint a
replacement successor within ten (10) Business Days after it is entitled to
do so after using reasonable efforts, the Agent may nonetheless resign by
delivering a written resignation to the Lenders and the Borrower, provided
that in such circumstances, and unless and until a successor Agent is
appointed, the Agent shall remain Agent solely for the purpose of serving
as secured party of record with respect to the Collateral, its sole duty in
that capacity shall be to take such ministerial actions as it shall be
directed to take by the Lenders (including, without limitation, the
execution and delivery of documents or instruments relating to the
Collateral), and the Agent shall be entitled to reimbursement from the
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Borrower for its out of pocket costs and expenses and reasonable
compensation from the Borrower for its services. If the Agent has resigned
and no successor Agent has been appointed, subject to the preceding
sentence, the Lenders shall perform the duties of the Agent hereunder, and
the Borrower shall make all payments in respect of the Obligations to the
applicable Lender and shall deal directly with the Lenders.
(c) No successor Agent shall be deemed to be appointed hereunder until
such successor Agent has accepted the appointment in writing. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent and
upon the execution and filing of such financing statements, or amendments
thereto, and such other instruments and notices, as may be necessary or
desirable or as the Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted under the
Collateral Documents, such successor Agent shall succeed to and become
vested with all the rights, powers, discretion, privileges and duties of
the resigning Agent, and the resignation of the Agent shall then be
effective for all purposes. Upon the effectiveness of the resignation of
the Agent, the resigning Agent shall be discharged from its duties and
obligations under the Credit Documents. After the effectiveness of the
resignation of an Agent, the provisions of Section 7.3, Section 11.3 and
this Article IX shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was acting as the Agent under this
Agreement.
(d) The Required Lenders may replace the Agent with a successor Agent,
with or without cause, at any time by giving not less than thirty (30)
days' prior written notice thereof to the Agent and the Borrower.
Section 9.9 Collateral Documents.
(a) Agent as Agent under Collateral Documents. Each Lender hereby
further authorizes Agent, on behalf of and for the benefit of Lenders, to
be the agent for and representative of Lenders with respect to the
Collateral and the Collateral Documents. Subject to Section 11.1, without
further written consent or authorization from Lenders, Agent may execute
any documents or instruments necessary to release any Lien encumbering any
item of Collateral that is the subject of a sale or other disposition of
assets permitted hereby or to which Lenders have otherwise consented.
(b) Agent's Right to Realize on Collateral. Anything contained in any
of the Credit Documents to the contrary notwithstanding the Borrower, Agent
and each Lender hereby agree that (i) no Lender shall have any right
individually to realize upon any of the Collateral, it being understood and
agreed that all powers, rights and remedies hereunder may be exercised
solely by Agent, on behalf of Lenders in accordance with the terms hereof,
and (ii) in the event of a foreclosure by Agent on any of the Collateral
pursuant to a public or private sale, Agent or any Lender may be the
purchaser of any or all of such Collateral at any such sale and Agent, as
agent for and representative of Lenders (but not any Lender or Lenders in
its or their respective individual capacities unless the Required Lenders
shall otherwise agree in writing) shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or
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any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price
for any collateral payable by Agent at such sale.
Section 9.10 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Lenders; provided that unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
Section 9.11 Delivery of Documents, Notices , Etc. In addition to, and in
furtherance of any requirement placed upon the Agent herein to deliver, provide,
distribute, notify or otherwise convey items received from the Borrower to the
Lenders, the Agent shall promptly notify Lenders of any notices, documents,
requests, demands or other items Agent received from Borrower and promptly
deliver or convey, to the extent they are in written form, such notices,
documents, requests, demands or items to the Lenders.
ARTICLE X
Release
Section 10.1 Release.
In consideration of the premises hereto, and the covenants and agreements
contained in this Agreement, the Borrower, the Guarantors, their Affiliates,
members, partners, managers, officers, shareholders, directors, officers,
employees, attorneys and agents of each of them, and each of the heirs,
executors, administrators successors and assigns of any of those persons
(collectively, the "Releasors"), hereby release and discharge the Agent, the
Lenders, their Affiliates, members, partners, managers, shareholders, directors,
officers, employees, attorneys and agents of each of them, and each of the
heirs, executors, administrators successors and assigns of any of those persons
(collectively, the "Releasees"), from any and all actions, causes of action,
suits, debts, obligations, liabilities, contracts, controversies, agreements,
promises, damages, judgments, claims or demands whatsoever, of whatever kind and
based on whatever legal theory that the Releasors ever had, now has or hereafter
can, shall or may have against the Releasees, for, upon, or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the date of
this Agreement.
ARTICLE XI
Miscellaneous
Section 11.1 Amendments and Waivers.
(a) General. Subject to Section 11.1(b) and Section 11.1(c) below, no
amendment, modification, termination or waiver of any provision of the
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Credit Documents, or consent to any departure by any Credit Party
therefrom, shall be effective without the written consent of the Required
Lenders.
(b) Other Consent. Notwithstanding the provisions of Section 11.1(a)
above, no amendment, modification, termination or waiver of any provision
of the Credit Documents, or consent to any departure by any Credit Party
therefrom, shall amend, modify, terminate or waive any provision of Article
IX as the same applies to the Agent, or any other provision hereof as the
same applies to the rights or obligations of the Agent, in each case
without the consent of the Agent.
(c) Without the prior unanimous written consent of the affected
Lenders,
(i) no amendment, consent or waiver shall (A) affect the amount
or extend the time of the obligation of any Lender to make
Loans or (B) extend the originally scheduled time or times
of repayment of the principal of any Loan or (C) alter the
time or times of payment of interest on any Loan or of any
fees payable for the account of the Lenders or (D) alter the
amount of the principal of any Loan or the rate of interest
thereon or (E) after the amount of any fee payable hereunder
of the account of the Lenders or (F) permit any
subordination of the principal of or interest on any Loan or
(G) permit the subordination of the Lien credited by the
Collateral Documents in any of the Collateral,
(ii) no Collateral, other than in connection with Asset Sale made
in accordance with the terms hereof or as otherwise
specifically permitted in this Agreement or the Collateral
Documents, shall be released from the Lien of the Collateral
Documents; and
(iii) none of the provisions of this Section 11.1(c) shall be
amended.
(d) Effect of Notices, Waivers or Consents. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on any Credit Party in any case
shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.1 shall be
binding upon each Lender at the time outstanding, each future Lender and,
if signed by a Credit Party, on such Credit Party.
Section 11.2 Notices. All notices, requests, demands and other communications to
any party or given under any Credit Document (collectively, "Notices") will be
in writing and delivered personally, by overnight courier or by registered mail
to the parties at the following address or sent by telecopier, with confirmation
received, to the telecopy number specified below (or at such other address or
telecopy number as will be specified by a party by like notice given at least
five calendar days prior thereto):
(a) If to the Borrower, at:
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Scan Optics, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
With a copy to:
Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) If to the Agent, at:
PATRIARCH PARTNERS AGENCY SERVICES, LLC ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attention: Loan Administration/Scan Optics
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(c) If to the Lenders, to the address for such Lender set forth on the
signature pages hereto.
All Notices will be deemed delivered when actually received. Each of the parties
will hereafter notify the other in accordance with this Section of any change of
address or telecopy number to which notice is required to be mailed.
Section 11.3 Expenses.
Whether or not the transactions contemplated hereby shall be consummated or any
Loans shall be made, Borrower agrees to pay promptly:
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(a) all the actual and reasonable costs and expenses of preparation of
the Credit Documents and any consents, amendments, waivers or other
modifications thereto; the reasonable fees, expenses and disbursements of
counsel to Lenders and Agent in connection with the negotiation,
preparation, execution and administration of the Credit Documents and any
consents, amendments, supplements, waivers or other modifications thereto
and any other documents or matters requested by Borrower;
(b) all the actual costs and reasonable expenses of creating and
perfecting Liens in favor of Agent, for the benefit of Lenders and Agent,
pursuant hereto, including filing and recording fees, expenses and taxes,
stamp or documentary taxes, search fees, title insurance premiums and
reasonable fees, expenses and disbursements of counsel to Agent and
Lenders;
(c) all the actual costs and reasonable fees, expenses and
disbursements of any auditors, accountants, consultants or appraisers;
(d) all the actual costs and reasonable expenses (including the
reasonable fees, expenses and disbursements of any appraisers, consultants,
advisors and agents employed or retained by Agent and its counsel) in
connection with the inspection, verification, custody or preservation of
any of the Collateral;
(e) after the occurrence of a Default or an Event of Default, all costs
and expenses, including reasonable attorneys' fees (including allocated
costs of internal counsel) and costs of settlement, incurred by any Agent
or Lenders in enforcing any Obligations of or in collecting any payments
due from any Credit Party hereunder or under the other Credit Documents by
reason of such Default or Event of Default (including in connection with
the sale of, collection from, or other realization upon any of the
Collateral or the enforcement of any guaranty) or in connection with any
negotiations, reviews, refinancing or restructuring of the credit
arrangements provided hereunder, including without limitation in the nature
of a "work out" or pursuant to any insolvency or bankruptcy cases or
proceedings.
(f) The foregoing shall not be construed to limit any other provisions
of the Credit Documents regarding costs and expenses to be paid by the
Borrower.
Section 11.4 Enforceability; Successors and Assigns.
(a) Enforceability; Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of and is enforceable by the
respective successors and permitted assigns of the parties hereto. This
Agreement may not be assigned by the Borrower hereto without the prior
written consent of the Agent and each Lender. Any assignment or attempted
assignment in contravention of this Section will be void ab initio and will
not relieve the assigning party of any obligation under this Agreement.
(b) Assignments. Each Lender may assign (each, an "Assignment") to one
or more Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including all or a portion of
such Lender's Loans, Overadvance Loan Commitment, Revolving Credit
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Commitment and Notes, as the case may be). Such Assignment may be made
without the consent of the Borrower but shall require the consent of the
Agent. In connection with any such Assignment, the assigning Lender and the
Assignee shall execute and deliver to the Agent an Assignment Agreement, in
the form of Exhibit 11.4(b) (each, an "Assignment Agreement"), and a
$3,500.00 Assignment Fee payable to Agent. Upon its receipt of a duly
executed and completed Assignment Agreement, Agent shall record the
information contained in such Assignment Agreement in the Register, shall
give prompt notice thereof to the Borrower and shall maintain a copy of
such Assignment Agreement. From and after the effective date of an
Assignment, the Assignee shall be a party hereto and, to the extent of the
interest assigned pursuant to the Assignment, have the rights and
obligations of a lender under this Agreement, and the Lender shall, to the
extent of the interest assigned, be released from its obligations under
this Agreement. The Borrower hereby consents to the disclosure of any
information obtained by Lender in connection with this Agreement to any
Person to which Lender sells, or proposes to sell, its Loans, Overadvance
Loan Commitment, Revolving Credit Commitment or Notes provided any such
Person shall agree to keep any such information confidential.
(c) Participations. Each Lender may sell participations (each, a
"Participation") to one or more Persons (each, a "Participant") in all or a
portion of such Lender's rights and obligations under this Agreement
(including all or a portion of such Lender's Loans, Overadvance Loan
Commitment, Revolving Credit Commitment and Notes, as the case may be);
provided that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the
Borrower for the performance of such obligations, and (iii) the Borrower
shall continue to deal solely and directly with the Lender in connection
with the Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which the Lender sells such a
participation shall provide that the Lender shall retain the sole right to
enforce the Credit Documents and to approve any amendment, modification or
waiver of any provision of the Credit Documents. Borrower hereby consents
to the disclosure of any information obtained by a Lender in connection
with this Agreement to any Person to which such Lender participates, or
proposes to participate, its Loans, Revolving Credit Commitment or the
Note.
(d) Notwithstanding anything else to the contrary contained herein, any
Lender may any time pledge its Loans and such Lender's rights under this
Agreement and the other Credit Documents to a Federal Reserve Bank and, in
the case of any Lender that is a fund, to its trustee for the benefit of
its investors; provided, that no such pledge to a Federal Reserve Bank (or
in the case of any Lender that is a fund, to its trustee for the benefit of
its investors) shall release such Lender from such Lender's obligations
hereunder or under any other Credit Document.
Section 11.5 Lenders' Obligations Several: Independent Nature of Lenders'
Rights. The obligation of each Lender hereunder is several and not joint and
neither Agent nor any Lender shall be responsible for the obligation of any
other Lender hereunder. In the event that any Lender at any time should fail to
continue a Loan as herein provided, the Lenders, or any of them, at their sole
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option, may continue the Loan that was to have been continued by the Lender so
failing to continue such Loan. Nothing contained in any Credit Document and no
action taken by Agent or any Lender pursuant hereto or thereto shall be deemed
to constitute Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and, provided the Agent fails
or refuses to exercise any independent debt, and, provided the Agent fails or
refuses to exercise any remedies against Borrower after receiving the direction
of the Lenders, each Lender shall be entitled to protect and enforce its rights
arising out of this Agreement and it shall not be necessary for any other Lender
to be joined as an additional party in any proceeding for such purpose.
Section 11.6 Integration. This Agreement and the other Credit Documents
contain and constitute the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior negotiations, agreements and
understandings, whether written or oral, of the parties hereto.
Section 11.7 No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement or any of the
other Credit Documents will operate as a waiver of the right, power or
privilege. A single or partial exercise of any right, power or privilege will
not preclude any other or further exercise of the right, power or privilege or
the exercise of any other right, power or privilege. The rights and remedies
provided in the Credit Documents will be cumulative and not exclusive of any
rights or remedies provided by law.
Section 11.8 Submission to Jurisdiction. Each of the Borrower, the other
Credit Parties, the Agent and the Lenders hereby (a) agrees that any Action with
respect to any Credit Document may be brought in the courts of the City and
State of New York or of the United States of America for the Southern District
of New York, (b) accepts for itself and in respect of its property, generally
and unconditionally, the non-exclusive jurisdiction of such courts, (c)
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any Action in those jurisdictions,
and (d) irrevocably consents to the service of process of any of the courts
referred to above in any Action by the mailing of copies of the process to the
parties hereto as provided in Section 11.2. Service effected as provided in this
manner will become effective ten (10) calendar days after the mailing of the
process.
Section 11.9 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement.
Section 11.10 Governing Law. This Agreement and the other Credit Documents
will be governed by, and construed in accordance with, the laws of the state of
New York applicable to contracts executed in and to be performed entirely within
that state, without reference to conflicts of laws provisions.
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Section 11.11 Waiver of Jury. THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT THAT THEY MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN
ANY LEGAL PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON
CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT, OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 11.12 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 11.13 Survival. All representations, warranties, covenants,
agreements, and conditions contained in or made pursuant to this Agreement or
the other Credit Documents shall survive (a) the making of any Loans and the
payment of the Obligations and (b) the performance, observance and compliance
with the covenants, terms and conditions, express or implied, of all Credit
Documents, until the due and punctual (i) indefeasible payment of the
Obligations and (ii) performance, observance and compliance with the covenants,
terms and conditions, express or implied, of this Agreement and all of the other
Credit Documents; provided, however, that the provisions of Article VII, Section
9.6 and Section 11.3 shall survive (i) indefeasible payment of the Obligations
and (ii) performance, observance and compliance with the covenants, terms and
conditions, express or implied, of this Agreement and all of the other Credit
Documents.
Section 11.14 Lawful Interest. The Borrower shall not be obligated to pay
any interest in excess of the maximum rate provided by law and interest under
any Credit Document otherwise in excess of that rate shall be reduced to that
rate.
Section 11.15 Interpretation. As used in this Agreement, references to the
singular will include the plural and vice versa and references to the masculine
gender will include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (a) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular
provision of this Agreement and (b) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. Unless the context otherwise requires, the term "including"
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will mean "including, without limitation." The headings in this Agreement and in
the Schedules are included for convenience of reference only and will not affect
in any way the meaning or interpretation of this Agreement.
Section 11.16 Ambiguities. This Agreement and the other Credit Documents
were negotiated between legal counsel for the parties and any ambiguity in this
Agreement or the other Credit Documents shall not be construed against the party
who drafted this Agreement or such other Credit Documents.
[Remainder of page intentionally left blank; signatures on following pages.]
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In witness whereof, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER: SCAN-OPTICS, INC.
--------
By: ____________________________
Name:
Title:
GUARANTORS: SCAN-OPTICS LIMITED
----------
By: ____________________________
Name:
Title:
SCAN OPTICS (CANADA), LTD.
By: ____________________________
Name:
Title:
AGENT: PATRIARCH PARTNERS AGENCY
-----
SERVICES, LLC, as Agent
By: ____________________________
Name:
Title:
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LENDERS:
Address for Notices: ARK CLO 2000-1, LIMITED
-------------------
c/o Patriarch Partners, LLC By: Patriarch Partners, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ its Collateral Manager
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ By: ____________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
Address for Notices: ZOHAR CDO 2003-1, LIMITED
-------------------
c/o Patriarch Partners VIII, LLC By: Patriarch Partners VIII, LLC,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ its Collateral Manager
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ By: ____________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
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TABLE OF CONTENTS
ARTICLE I Defined Terms........................................................................................2
Section 1.1 Definitions...............................................................................2
ARTICLE II Loans..............................................................................................14
Section 2.1 Loans....................................................................................14
Section 2.2 Pro Rata Shares..........................................................................18
Section 2.3 Use of Proceeds..........................................................................18
Section 2.4 Evidence of Debt; Register; Lenders' Books and Records; Notes............................18
Section 2.5 Interest on Loans........................................................................19
Section 2.6 Fees.....................................................................................20
Section 2.7 Repayment; Scheduled Payments............................................................21
Section 2.8 Optional Prepayments.....................................................................21
Section 2.9 Mandatory Prepayments; Mandatory Commitment Reductions...................................22
Section 2.10 Application of Prepayments...............................................................23
Section 2.11 General Provisions Regarding Payments....................................................23
Section 2.12 Ratable Sharing..........................................................................24
ARTICLE III Conditions Precedent..............................................................................25
Section 3.1 Closing Date.............................................................................25
Section 3.2 Conditions to Each Borrowing.............................................................27
ARTICLE IV Representations and Warranties.....................................................................28
Section 4.1 Representations and Warranties...........................................................28
ARTICLE V Affirmative Covenants...............................................................................31
Section 5.1 Affirmative Covenants....................................................................31
ARTICLE VI Negative Covenants/Financial Covenants.............................................................33
Section 6.1 Negative Covenants.......................................................................33
Section 6.2 Financial Covenants......................................................................35
ARTICLE VII Increased Costs; Taxes; Indemnification; Set Off; Etc.............................................35
Section 7.1 Increased Costs; Capital Adequacy........................................................35
Section 7.2 Taxes; Withholding, etc..................................................................36
Section 7.3 Indemnification..........................................................................37
Section 7.4 Right of Set Off.........................................................................37
ARTICLE VIII Events of Default................................................................................38
Section 8.1 Events of Default........................................................................38
Section 8.2 Remedies.................................................................................40
ARTICLE IX The Agent..........................................................................................41
Section 9.1 Appointment of Agent.....................................................................41
Section 9.2 Powers and Duties........................................................................41
Section 9.3 Delegation of Duties.....................................................................42
Section 9.4 General Immunity.........................................................................42
Section 9.5 Agent Entitled to Act with Borrower......................................................43
Section 9.6 Lenders' Representations, Warranties and Acknowledgment..................................43
Section 9.7 Right to Indemnity.......................................................................44
Section 9.8 Successor Agent..........................................................................44
Section 9.9 Collateral Documents.....................................................................45
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Section 9.10 Notice of Default........................................................................46
Section 9.11 Delivery of Documents, Notices , Etc.....................................................46
ARTICLE X Release.............................................................................................46
Section 10.1 Release..................................................................................46
ARTICLE XI Miscellaneous......................................................................................46
Section 11.1 Amendments and Waivers...................................................................46
Section 11.2 Notices..................................................................................47
Section 11.3 Expenses.................................................................................48
Section 11.4 Enforceability; Successors and Assigns...................................................49
Section 11.5 Lenders' Obligations Several: Independent Nature of Lenders' Rights......................50
Section 11.6 Integration..............................................................................51
Section 11.7 No Waiver; Remedies......................................................................51
Section 11.8 Submission to Jurisdiction...............................................................51
Section 11.9 Execution in Counterparts................................................................51
Section 11.10 Governing Law............................................................................51
Section 11.11 Waiver of Jury...........................................................................52
Section 11.12 Severability.............................................................................52
Section 11.13 Survival.................................................................................52
Section 11.14 Lawful Interest..........................................................................52
Section 11.15 Interpretation...........................................................................52
Section 11.16 Ambiguities..............................................................................53
Exhibit 2.4(c)(i) Form of Revolving Note
Exhibit 2.4(c)(ii) Form of Term Note
Exhibit 2.4(c)(iii) Form of Overadvance Note
Exhibit 3.1(a) Form of Secretary's Certificate
Exhibit 3.1(b) Form of Incumbency Certificate
Exhibit 3.1(c) Form of Subsidiary Secretary's Certificate
Exhibit 3.1(f) Form of Opinion of Counsel (Day, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP)
Exhibit 3.1(g) Form of Closing Date Certificate
Exhibit 3.1(i)(A) Form of Amended and Restated Security Agreement (Borrower)
Exhibit 3.1(i)(B) Form of Amended and Restated Security Agreement (SOC)
Exhibit 3.1(i)(C) Form of Amended and Restated Patent Collateral Assignment and Security Agreement
Exhibit 3.1(i)(D) Form of Amended and Restated Trademark Collateral Security and Pledge Agreement
Exhibit 3.1(j) Form of Amended and Restated Stock Pledge Agreement
Exhibit 3.1(o)(A) Form of Plan of Reorganization
Exhibit 3.1(o)(B) Form of Certificate of Designations
Exhibit 3.1(p) Form of Second Amendment to Master Agreement
Exhibit 3.1(q)(A) Form of Amended and Restated Unlimited Guaranty by Scan-Optics (Canada), Ltd.
Exhibit 3.1(q)(B) Form of Amended and Restated Unlimited Guaranty by Scan-Optics Limited
Exhibit 3.2(a) Form of Funding Notice
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Exhibit 11.4(b) Form of Assignment Agreement
Schedule 4.1(f) Legal and Other Proceedings
Schedule 4.1(m) Subsidiaries/Capital Structure
Schedule 5.1(h) Recapitalization Documents
Schedule 6.1(b) Liens
Schedule 6.1(i) Documents Allowing Issuance of Securities
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Exhibit 2.4(c)(i)
Form of Revolving Note
SIXTH AMENDED AND RESTATED REVOLVING NOTE
SCAN-OPTICS, INC.
$2,500,000.00 Dated as of March __, 2004
FOR VALUE RECEIVED, the undersigned, SCAN-OPTICS, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called the "Borrower"), promises to pay, on or before the Maturity Date (as
hereinafter defined by reference) to the order of ARK CLO 2000-1, LIMITED, a
Cayman Islands exempted company (hereinafter, together with its successors in
title and assigns, called the "Lender"), the principal sum of TWO MILLION FIVE
HUNDRED THOUSAND AND 00/100 DOLLARS ($2,500,000.00), in immediately available
funds or, if less, the aggregate unpaid principal amount of the Revolving Loans
made by the Lender to the Borrower pursuant to the Credit Agreement to which
reference is hereinafter made and to pay interest, in like money, on the unpaid
principal amount owing hereunder from time to time from the date hereof until
payment in full of such principal amount as provided in the Credit Agreement.
This Revolving Note is made and delivered by the Borrower pursuant to
Sections 2.1 and 2.4 of the Third Amended and Restated Credit Agreement, by and
among the Borrower, the Guarantors party thereto, the Lenders party thereto and
Patriarch Partners Agency Services, LLC, as Agent, dated as of even date
herewith, and as may be further amended, modified, supplemented and in effect
from time to time (as so amended, modified and supplemented, the "Credit
Agreement"), and is entitled to the benefits and is subject to the provisions of
the Credit Agreement. All capitalized terms used herein which are defined in the
Credit Agreement shall have the same meanings herein as therein.
This Revolving Note amends and restates that certain Fifth Amended and
Restated Revolving Credit Note, dated as of December 31, 2001, in the original
principal amount of $10,750,000.00 executed and delivered by the Borrower to the
Lender (the "Original Revolving Note"). This Revolving Note is executed and
delivered in partial substitution for, but not in satisfaction of, the Original
Revolving Note, all as described in more detail in the Credit Agreement.
The Borrower has the right to prepay the principal of this Revolving
Note on the terms and conditions specified in the Credit Agreement. All of the
terms, covenants and conditions of the Credit Agreement and the other Credit
Documents are hereby made a part of the Revolving Note and are deemed
incorporated in full.
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If any Event of Default shall occur, the entire unpaid principal amount
of this Revolving Note and all of the unpaid interest accrued thereon may become
or be declared due and payable in the manner and with the effect provided in the
Credit Agreement.
The Borrower and all guarantors and endorsers hereby waive presentment,
demand, protest and notice of any kind in connection with the delivery,
acceptance, performance and enforcement of this Revolving Note, and also hereby
assent to extensions of time of payment or forbearance or other indulgences
without notice.
This Revolving Note and the obligations of the Borrower hereunder shall
be governed by, and interpreted and determined in accordance with, the laws of
the State of New York.
THE BORROWER HEREBY REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS
OF THE REVOLVING LOANS SHALL BE USED ONLY FOR THE PURPOSES DESCRIBED IN THE
CREDIT AGREEMENT AND THAT THIS REVOLVING NOTE IS PART OF A "COMMERCIAL
TRANSACTION" AS DEFINED BY THE STATUTES OF THE STATE OF CONNECTICUT. THE
BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT
ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278A ET SEQ. AS AMENDED OR
UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT
REMEDIES THE LENDER MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER.
MORE SPECIFICALLY, THE BORROWER ACKNOWLEDGES THAT LENDER'S ATTORNEY MAY,
PURSUANT TO CONNECTICUT GENERAL STATUTES SECTION 52-278F, ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE BORROWER ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT
FOR PREJUDGMENT REMEDY BY LENDER'S ATTORNEY. THE LENDER ACKNOWLEDGES THE
BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. THE
BORROWER FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER POST A BOND, WITH OR
WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY
PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER.
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IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
signed in its corporate name by its duly authorized officer on the day and in
the year first above written.
SCAN-OPTICS, INC.
By : ______________________________
Name:
Title:
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Exhibit 2.4(c)(ii)
Form of Term Note
SECOND AMENDED AND RESTATED TERM NOTE
SCAN-OPTICS, INC.
$9,000,000.00 Dated as of March __, 2004
FOR VALUE RECEIVED, the undersigned, SCAN-OPTICS, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called the "Borrower"), promises to pay, on or before the Maturity Date (as
hereinafter defined by reference) to the order of ARK CLO 2000-1, LIMITED, a
Cayman Islands exempted company (hereinafter, together with its successors in
title and assigns, called the "Lender"), the principal sum of NINE MILLION AND
00/100 DOLLARS ($9,000,000.00), in immediately available funds or, if less, the
aggregate unpaid principal amount of the Term Loan made by the Lender to the
Borrower pursuant to the Credit Agreement to which reference is hereinafter made
and to pay interest, in like money, on the unpaid principal amount owing
hereunder from time to time from the date hereof until payment in full of such
principal amount as provided in the Credit Agreement.
This Term Note is made and delivered by the Borrower pursuant to
Sections 2.1 and 2.4 of the Third Amended and Restated Credit Agreement, by and
among the Borrower, the Guarantors party thereto, the Lenders party thereto and
Patriarch Partners Agency Services, LLC, as Agent, dated as of even date
herewith, and as may be further amended, modified, supplemented and in effect
from time to time (as so amended, modified and supplemented, the "Credit
Agreement"), and is entitled to the benefits and is subject to the provisions of
the Credit Agreement. All capitalized terms used herein which are defined in the
Credit Agreement shall have the same meanings herein as therein.
This Term Note amends and restates that certain Amended and Restated
Term Note, dated as of December 31, 2001, in the original principal amount of
$2,000,000.00 executed and delivered by the Borrower to the Lender (the
"Original Term Note"). This Term Note is executed and delivered in partial
substitution for, but not in satisfaction of, the Original Term Note, all as
described in the Credit Agreement.
The Borrower has the right to prepay the principal of this Term Note on
the terms and conditions specified in the Credit Agreement. All of the terms,
covenants and conditions of the Credit Agreement and the other Credit Documents
are hereby made a part of the Term Note and are deemed incorporated in full.
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If any Event of Default shall occur, the entire unpaid principal amount
of this Term Note and all of the unpaid interest accrued thereon may become or
be declared due and payable in the manner and with the effect provided in the
Credit Agreement.
The Borrower and all guarantors and endorsers hereby waive presentment,
demand, protest and notice of any kind in connection with the delivery,
acceptance, performance and enforcement of this Term Note, and also hereby
assent to extensions of time of payment or forbearance or other indulgences
without notice.
This Term Note and the obligations of the Borrower hereunder shall be
governed by, and interpreted and determined in accordance with, the laws of the
State of New York.
THE BORROWER HEREBY REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS
OF THE TERM LOAN SHALL BE USED ONLY FOR THE PURPOSES DESCRIBED IN THE CREDIT
AGREEMENT AND THAT THIS TERM NOTE IS PART OF A "COMMERCIAL TRANSACTION" AS
DEFINED BY THE STATUTES OF THE STATE OF CONNECTICUT. THE BORROWER HEREBY WAIVES
ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT
GENERAL STATUTES SECTIONS 52-278A ET SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR
FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE LENDER MAY
EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE
BORROWER ACKNOWLEDGES THAT LENDER'S ATTORNEY MAY, PURSUANT TO CONNECTICUT
GENERAL STATUTES SECTION 52-278F, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT
SECURING A COURT ORDER. THE BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO
NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY
BY LENDER'S ATTORNEY. THE LENDER ACKNOWLEDGES THE BORROWER'S RIGHT TO SAID
HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. THE BORROWER FURTHER WAIVES ITS
RIGHTS TO REQUEST THAT LENDER POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT
BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR
OBTAINED BY LENDER.
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IN WITNESS WHEREOF, the Borrower has caused this Term Note to be signed
in its corporate name by its duly authorized officer on the day and in the year
first above written.
SCAN-OPTICS, INC.
By : ______________________________
Name:
Title:
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Exhibit 2.4(c)(iii)
Form of Overadvance Note
OVERADVANCE NOTE
SCAN-OPTICS, INC.
$2,000,000.00 Dated as of March __, 2004
FOR VALUE RECEIVED, the undersigned, SCAN-OPTICS, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called the "Borrower"), promises to pay, on or before the Maturity Date (as
hereinafter defined by reference) to the order of ZOHAR CDO 2003-1, LIMITED, a
Cayman Islands exempted company (hereinafter, together with its successors in
title and assigns, called the "Lender"), the principal sum of TWO MILLION AND
00/100 DOLLARS ($2,000,000.00), in immediately available funds or, if less, the
aggregate unpaid principal amount of the Overadvance Loan made by the Lender to
the Borrower pursuant to the Credit Agreement to which reference is hereinafter
made and to pay interest, in like money, on the unpaid principal amount owing
hereunder from time to time from the date hereof until payment in full of such
principal amount as provided in the Credit Agreement.
This Overadvance Note is made and delivered by the Borrower pursuant to
Sections 2.1 and 2.4 of the Third Amended and Restated Credit Agreement, by and
among the Borrower, the Guarantors party thereto, the Lenders party thereto and
Patriarch Partners Agency Services, LLC, as Agent, dated as of even date
herewith, and as may be further amended, modified, supplemented and in effect
from time to time (as so amended, modified and supplemented, the "Credit
Agreement"), and is entitled to the benefits and is subject to the provisions of
the Credit Agreement. All capitalized terms used herein which are defined in the
Credit Agreement shall have the same meanings herein as therein.
The Borrower has the right to prepay the principal of this Overadvance
Note on the terms and conditions specified in the Credit Agreement. All of the
terms, covenants and conditions of the Credit Agreement and the other Credit
Documents are hereby made a part of this Overadvance Note and are deemed
incorporated in full, including without limitation Section 2.1(c)(i)(B).
If any Event of Default shall occur, the entire unpaid principal amount
of this Overadvance Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
The Borrower and all guarantors and endorsers hereby waive presentment,
demand, protest and notice of any kind in connection with the delivery,
acceptance, performance and enforcement of this Overadvance Note, and also
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hereby assent to extensions of time of payment or forbearance or other
indulgences without notice.
This Overadvance Note and the obligations of the Borrower hereunder
shall be governed by, and interpreted and determined in accordance with, the
laws of the State of New York.
THE BORROWER HEREBY REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS
OF THE OVERADVANCE LOAN SHALL BE USED ONLY FOR THE PURPOSES DESCRIBED IN THE
CREDIT AGREEMENT AND THAT THIS OVERADVANCE NOTE IS PART OF A "COMMERCIAL
TRANSACTION" AS DEFINED BY THE STATUTES OF THE STATE OF CONNECTICUT. THE
BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT
ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278A ET SEQ. AS AMENDED OR
UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT
REMEDIES THE LENDER MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER.
MORE SPECIFICALLY, THE BORROWER ACKNOWLEDGES THAT LENDER'S ATTORNEY MAY,
PURSUANT TO CONNECTICUT GENERAL STATUTES SECTION 52-278F, ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE BORROWER ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT
FOR PREJUDGMENT REMEDY BY LENDER'S ATTORNEY. THE LENDER ACKNOWLEDGES THE
BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. THE
BORROWER FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER POST A BOND, WITH OR
WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY
PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER.
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IN WITNESS WHEREOF, the Borrower has caused this Overadvance Note to be
signed in its corporate name by its duly authorized officer on the day and in
the year first above written.
SCAN-OPTICS, INC.
By : ______________________________
Name:
Title:
-67-
Exhibit 3.1(a)
Form of Secretary's Certificate
CERTIFICATE OF THE ASSISTANT SECRETARY
OF
SCAN-OPTICS, INC.
The undersigned, being an Assistant Secretary of Scan-Optics, Inc., a
Delaware corporation (the "Credit Party"), does hereby certify, not individually
but solely in such capacity, as follows:
1. This Certificate is furnished pursuant to Section 3.1(a) of that
certain Third Amended and Restated Credit Agreement, dated as of March __, 2004
(the "Credit Agreement"), among Scan-Optics, Inc, as Borrower, Scan-Optics
Limited ("SOL"), Scan-Optics (Canada), Ltd. ("SOC"; and together with SOL and
the subsidiaries of the Borrower that from time to time become guarantors
thereunder, the "Guarantors"), Ark CLO 2000-1, Limited ("Ark"), Zohar CDO
2003-1, Limited ("Zohar"; and together with Ark, the "Lenders") and Patriarch
Partners Agency Services, LLC, as Agent. Unless otherwise defined herein,
capitalized terms used in this Certificate shall have the meanings set forth in
the Credit Agreement.
2. Attached hereto as Exhibit A is a certified copy of the Certificate
of Incorporation of the Credit Party as filed with the Secretary of State of the
jurisdiction of its organization, together with all amendments thereto adopted
through the date hereof.
3. Attached here to as Exhibit B is a true and correct copy of the
by-laws of the Credit Party, as in effect of the date hereof.
4. Attached hereto as Exhibit C is a true and correct copy of the
resolutions of the Board of Directors of the Credit Party duly adopted at a
meeting of the Board of Directors of the Company held on March 10, 2004, and
that at the date hereof, such resolutions have not been modified, amended or
rescinded and are in full force and effect.
5. Attached hereto as Exhibit D is a true and correct copy of the Plan
of Reorganization, and that such Plan of Reorganization was duly adopted by the
Board of Directors of the Credit Party on March 10, 2004 and that all consents,
if any, necessary with respect thereto have been obtained.
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IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed on this ____ day of March, 2004.
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Assistant Secretary of Scan-Optics, Inc.
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Exhibit 3.1(b)
Form of Incumbency Certificate
CERTIFICATE OF THE SECRETARY
OF
SCAN-OPTICS, INC.
The undersigned, being the Secretary of Scan-Optics, Inc., a Delaware
corporation (the "Credit Party"), does hereby certify, not individually but
solely in such capacity, as follows:
1. This Certificate is furnished pursuant to Section 3.1(a) of that
certain Third Amended and Restated Credit Agreement, dated as of March __, 2004
(the "Credit Agreement"), among Scan-Optics, Inc, as Borrower, Scan-Optics
Limited ("SOL"), Scan-Optics (Canada), Ltd. ("SOC"; and together with SOL and
the subsidiaries of the Borrower that from time to time become guarantors
thereunder, the "Guarantors"), Ark CLO 2000-1, Limited ("Ark"), Zohar CDO
2003-1, Limited ("Zohar"; and together with Ark, the "Lenders") and Patriarch
Partners Agency Services, LLC, as Agent. Unless otherwise defined herein,
capitalized terms used in this Certificate shall have the meanings set forth in
the Credit Agreement.
2. The following named individuals are duly elected officers of the
Credit Party, each holds the office of the Credit Party set forth opposite his
name and has such office as of the date hereof. The signature written opposite
name and title of each such officer is his correct signature.
Name Office Signature
▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman, Chief Executive Officer and
President _________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary _________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Secretary _________________
[Signature page follows on next page]
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IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed on this ____ day of March, 2004.
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary of Scan-Optics, Inc.
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Exhibit 3.1(c)
Form of Subsidiary Secretary's Certificate
FORM OF
CERTIFICATE OF THE [specify office]
OF
[specify Subsidiary]
The undersigned, being a [specify office] of [specify Subsidiary], a
[specify jurisdiction of organization and type of entity] (the "Credit Party"),
does hereby certify, not individually but solely in such capacity, as follows:
1. This Certificate is furnished pursuant to Section 3.1(a) of that
certain Third Amended and Restated Credit Agreement, dated as of [March ___],
2004 (the "Credit Agreement"), among Scan-Optics, Inc, as Borrower, Scan-Optics
Limited ("SOL"), Scan-Optics (Canada), Ltd. ("SOC"; and together with SOL and
the subsidiaries of the Borrower that from time to time become guarantors
thereunder, the "Guarantors"), Ark CLO 2000-1, Limited ("Ark"), Zohar CDO
2003-1, Limited ("Zohar"; and together with Ark, the "Lenders") and Patriarch
Partners Agency Services, LLC, as Agent. Unless otherwise defined herein,
capitalized terms used in this Certificate shall have the meanings set forth in
the Credit Agreement.
2. Attached hereto as Exhibit A is a certified copy of the [specify
organizational document] of the Credit Party as filed in the [specify filing
office] of the jurisdiction of its organization, together with all amendments
thereto adopted through the date hereof.
3. Attached here to as Exhibit B is a true and correct copy of the
[specify operating agreement ] of the Credit Party, as in effect of the date
hereof.
4. Attached hereto as Exhibit C is a true and correct copy of the
resolutions of the [Board of Directors, manager or general partner] of the
Credit Party duly adopted [by unanimous written consent] on [date], and that at
the date hereof, such resolutions have not been modified, amended or rescinded
and are in full force and effect.
5. The following named individuals are duly elected officers of the
Credit Party, each holds the office of the Credit Party set forth opposite his
name and has such office as of the date hereof. The signature written opposite
name and title of each such officer is his correct signature.
Name Office Signature
[Signature page follows on next page]
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IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed on this ____ day of __________________, 2004.
-------------------------------
Name:
Title: ___________ of [specify Subsidiary]
-73-
Exhibit 3.1(f)
Form of Opinion of Counsel
March 30, 2004
To: The Agent and the Several Financial Institutions (collectively, the
"Lenders") that are Parties to the Third Amended and Restated Credit Agreement
referred to below
Re: Third Amended and Restated Credit Agreement dated as of
March 30, 2004 (the "Credit Agreement") by and among
Scan-Optics, Inc., a Delaware corporation (the "Borrower"),
the Guarantors who are Parties thereto, the Lenders and
Patriarch Partners Agency Services, LLC (the "Agent")
Dear Ladies and Gentlemen:
We have acted as counsel to the Borrower in connection with the
transactions contemplated by the Credit Agreement. The Borrower and one of the
Lenders, ARK CLO 2000-1, Limited ("ARK"), as assignee of Fleet National Bank,
formerly known as BankBoston, N.A., as a lender, were parties to that certain
Second Amended and Restated Loan Agreement, dated as of May 10, 1999 , as
amended pursuant to that certain Amendment and Waiver Agreement, dated as of
January 29, 2001, the Second Amendment and Waiver Agreement, dated as of July 1,
2001, the Third Amendment and Waiver Agreement, dated as of September 1, 2001,
the Fourth Amendment Agreement, dated as of December 31, 2001, and the Fifth
Amendment Agreement, dated as of December 31, 2002. Capitalized terms used
herein and not otherwise defined herein have the meanings assigned to them in
the Credit Agreement.
As such counsel, we have examined the originals or copies, certified or
otherwise identified to our satisfaction, of the following:
a) the Credit Agreement;
b) the Term Note, the Revolving Note and the Overadvance Note;
c) the Amended and Restated Security Agreement among the Lenders,
the Agent and the Borrower of even date herewith (the "Amended
and Restated Security Agreement");
d) the Stock Pledge Agreement;
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e) the Patent Security Agreement;
f) the Trademark Security Agreement;
g) the Second Amendment to Master Agreement (together with the
Credit Agreement, the Term Note, the Revolving Note, the
Overadvance Note, the Amended and Restated Security Agreement,
the Stock Pledge Agreement, the Patent Security Agreement and
the Trademark Security Agreement, the "Loan Documents");
h) the Guarantees executed by Scan-Optics (Canada), Ltd. ("SOC")
and Scan-Optics Limited ("SOUK" and, together with SOC, the
"Non-U.S. Credit Parties") of even date herewith;
i) the Amended and Restated Security Agreement among the Lenders,
the Agent and SOC of even date herewith (the "SOC Security
Agreement" and, together with the Guarantees, the "Non-U.S.
Loan Documents")
j) UCC-3 financing statements noting the assignment from ARK to
the Agent, a UCC-1 financing statement naming Agent as secured
party and Borrower as debtor and a financing statement naming
Agent as secured party and SOC as debtor filed under the
Personal Property Security Act (Ontario), all of which are
attached hereto as Exhibit A (the "Financing Statements");
k) the Plan of Reorganization;
l) the Certificate of Designations;
m) the Share Exchange Agreement (together with the Plan of
Reorganization and the Certificate of Designation, the
"Securities Documents")
n) a copy, certified by the Secretary of State of Delaware, of
the Certificate of Incorporation of the Borrower on file on
the date thereof;
o) a copy, certified by the Assistant Secretary of the Borrower,
of the By-Laws of the Borrower;
p) a copy, certified by the Assistant Secretary of the Borrower,
of the votes taken by the Board of Directors of the Borrower
authorizing the execution, delivery and performance of the
Loan Documents and the Securities Documents, and the filing of
the Certificate of Designations with the Secretary of State of
Delaware;
q) a certificate of the Secretary of the Borrower as to the
incumbency in office of the officers of the Borrower;
r) a certificate dated March 16, 2004 of the Secretary of State
of Delaware as to the legal existence and corporate good
standing of the Borrower; and
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s) a certificate dated March 8, 2004 of the Secretary of State of
Connecticut as to the qualification of the Borrower to do
business in Connecticut.
We have examined the Loan Documents, the Securities Documents and the
Financing Statements and originals or copies, certified or otherwise identified
to our satisfaction, of such other documents, records and instruments as in our
judgment are necessary or appropriate to enable us to render the opinions
expressed below.
Our opinions set forth herein are subject to the following
qualifications:
In our examination and in rendering this opinion, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
power and authority of all persons (other than the Borrower and the other Credit
Parties and officers of the Borrower and the other Credit Parties), the
authenticity and completeness of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such latter
documents.
In rendering this opinion, we have assumed that the Lenders have all
requisite power and authority and have taken all necessary corporate or other
action to authorize each Lender to execute, deliver and perform the Loan
Documents and the Securities Documents to which it is a party and to effect the
transactions contemplated thereby; that each Lender has duly executed and
delivered the Loan Documents and the Securities Documents to which it is a
party; and that the same constitute the legal, valid and binding obligations of
each Lender enforceable against it.
Our opinions set forth herein as to the legality, validity, binding
effect and enforceability of the Loan Documents are specifically qualified to
the extent that the legality, validity, binding effect or enforceability of any
obligations of Borrower under said documents or the availability or
enforceability of any remedies made applicable to Borrower thereby may be
subject to or limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and transfer, and other similar laws of
general application, heretofore or hereafter enacted or in effect, affecting the
rights and remedies of creditors generally, (ii) general principles of equity,
whether applied in a proceeding in equity or at law, (iii) the exercise of
judicial or administrative discretion in accordance with general principles of
public policy, (iv) limitations on the legality, validity, binding effect or
enforceability of waivers, provisions in the nature of penalties, rights of set
off, self-help provisions, exculpatory provisions, indemnification provisions,
forum selection provisions and consents to jurisdiction and service of process,
(v) such duties as the Lenders may have to act reasonably and in good faith and,
with respect to any of the Lender's rights with respect to collateral security,
to act, as to any disposition thereof or realization thereon, in a commercially
reasonable manner and (vi) applicable usury laws heretofore or hereafter enacted
or in effect.
In addition, we call your attention to the following:
(i) the effectiveness of Uniform Commercial Code financing
statements generally lapses five years from the date of filing
unless continuation statements are properly filed within six
months prior to such lapse in accordance with Section 9-515 of
Article 9 of the Official Text of the Uniform Commercial Code,
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as in effect in the jurisdiction of filing;
(ii) continued perfection of security interests may require the
filing of new appropriate financing statements or of
amendments to financing statements in the event of a change of
the name, location, or legal identity or structure of the
Borrower, or, in certain cases, a change in the location of
collateral;
(iii) under certain circumstances described in Section 9-315 of
Article 9 of the Official Text of the Uniform Commercial Code,
as in effect in the applicable jurisdiction, perfection of and
the rights of a secured party to enforce a security interest
in proceeds of collateral may be limited;
(iv) under certain circumstances described in Sections 9-408(c) and
9-409(b) of Article 9 of the Uniform Commercial Code, as in
effect in the State of New York, the rights of a secured party
to enforce a security interest in letter of credit rights,
promissory notes, health care insurance receivables, or
general intangibles may be limited;
(v) ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code (11 U.S.C.
ss.552) limits the extent to which property acquired by a
debtor after the commencement of a case under the Bankruptcy
Code may be subject to a lien resulting from any security
agreement entered into by the debtor before the commencement
of the case; and
(vi) the Lenders' exercise of their rights and remedies under the
Stock Pledge Agreement may in certain circumstances be subject
to the registration requirements and other requirements of
state and federal securities laws and foreign laws.
No opinion is expressed herein with respect to the existence of or any
title to property (real or personal, tangible or intangible), or the priority of
any security interest or other lien, or, except as specifically stated herein,
the perfection of any security interest or other lien. We have assumed that the
Borrower has rights in any collateral. We have assumed that none of the
collateral is as-extracted collateral or timber to be cut. We have assumed that,
in the event of any exercise by the Agent of its rights under Section 2(b) of
the Trademark Security Agreement, all Related Assets (as defined therein) will
be conveyed to the Agent together with the Trademark Rights (as defined
therein).
In rendering this opinion, we have examined and relied as to factual
matters upon the certificates and other materials referred to in the second
paragraph of this opinion and upon the representations and warranties of the
Borrower contained therein. With respect to references herein to "our knowledge"
or "known to us" or words of similar import, such references mean the knowledge
which lawyers involved in this transaction (including ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇) have obtained. Except as specifically
noted above, we have not made any independent review or investigation of any
factual matter. Without limiting the foregoing, we note that we have made no
examination of dockets or other public records except as expressly set forth in
the second paragraph of this opinion. Nonetheless, nothing has come to the
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attention of the lawyers of this firm who have worked on this transaction that
would give us reason to question the accuracy of the Borrower's warranties and
representations.
Our opinion as to the legal existence and corporate good standing of
the Borrower is based solely on the certificate referred to in clause (r) of the
second paragraph of this opinion and is limited accordingly and, as to such
matters, our opinion is rendered as of the date of such certificate. Our opinion
as to the qualification of the Borrower to do business in Connecticut is based
solely on the certificate referred to in clause (s) of the second paragraph of
this opinion and is limited accordingly and as to such matters our opinion is
rendered as of the date of such certificate.
Our opinion expressed in paragraph 4 below is subject to the following
assumptions:
(i) Each of Non-U.S. Credit Parties is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
domiciled.
(ii) The execution, delivery and performance of the Non-U.S. Loan
Documents and the Credit Agreement to which each Non-U.S. Credit Party is a
party have been duly authorized by all necessary corporate or similar action on
the part of such Non-U.S. Credit Party.
(iii) The Non-U.S. Loan Documents and the Credit Agreement to which
each Non-U.S. Credit Party is a party have been duly executed and delivered on
behalf of such Non-U.S. Credit Party.
(iv) Neither the execution and delivery of the Non-U.S. Loan Documents
and the Credit Agreement to which such Non-U.S. Credit Party is a party nor the
performance of the obligations thereunder will violate any term or provision of
such Non-U.S. Credit Party's constitutive documents (e.g., certificate of
incorporation, by-laws or equivalent documents) or of any order, writ, judgment,
injunction, decree, statute, rule or regulation of the domicile of such Non-U.S.
Credit Party and applicable to the Non-U.S. Credit Party.
(v) No consent, license, approval or authorization of or registration
or declaration with any governmental bureau or agency of the jurisdiction in
which such Non-U.S. Credit Party is domiciled is required in connection with the
execution, delivery or performance by, or the validity of or enforceability
against the Non-U.S. Credit Party of the Non-U.S. Loan Documents and/or the
Credit Agreement to which such Non-U.S. Credit Party is a party.
(vi) Each of the Non-U.S. Credit Parties shall have received lawful
consideration for entering into and performing the Non-U.S. Loan Documents and
the Credit Agreement to which each is a party.
We call your attention to the fact that SOUK is delinquent in filing
with Companies House certain annual reports and accounts for fiscal years 2001
and 2002 for which it faces monetary penalties and possible dissolution.
We do not express any opinion with respect to the laws or regulations
of any jurisdiction other than the substantive laws and regulations of The
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Commonwealth of Massachusetts, the State of Connecticut, the State of New York,
Federal laws and regulations, and the General Corporation Law of the State of
Delaware, all as in effect on the date hereof. We express no opinion as to the
enforceability of the governing law provisions of the Loan Documents, the
Non-U.S. Loan Documents and the Securities Documents. With respect to our
opinion in paragraph 10, we have assumed, with your permission, that the
applicable law in the State of North Carolina is the same as the applicable law
in the State of New York.
Based on the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified and authorized to do business in the State of Connecticut.
2. The execution, delivery and performance of the Loan Documents and
the Securities Documents and the issuance of 380,000 shares of Series B
Redeemable Preferred Stock, par value $.02 per share, of the Borrower (the
"Series B Preferred Stock") in exchange for 3,800,000 shares of Series A
Redeemable Preferred Stock, par value $.02 per share, that are outstanding and
held of record by ARK are within the corporate powers of the Borrower and have
been duly authorized by all necessary corporate action on the part of the
Borrower. The Loan Documents and the Securities Documents have been duly
executed and delivered on behalf of the Borrower.
3. The Loan Documents and the Securities Documents constitute valid and
binding obligations of the Borrower and are enforceable against the Borrower in
accordance with their terms.
4. The Non-U.S. Loan Documents to which either Non-U.S. Credit Party is
a party and the Credit Agreement constitute valid and binding obligations of
such Non-U.S. Credit Party and are enforceable against each such Non-U.S. Credit
Party in accordance with their terms.
5. The Borrower's authorized capital stock is 23,000,000 shares,
consisting of 15,000,000 shares of common stock, par value $0.02 per share,
3,000,000 shares of Class A stock, par value $0.02 per share, and 5,000,000
shares of preferred stock, par value $0.02 per share. Upon the issuance of the
shares of Series B Preferred Stock in accordance with the Share Exchange
Agreement, such Series B Preferred Stock will be validly issued, fully paid and
non-assessable. It is not necessary in connection with the issuance, sale and
delivery of the Series B Preferred Stock in accordance with the Share Exchange
Agreement to register the offer and sale of such shares under the Securities Act
of 1933, as amended.
6. Neither the execution and delivery of the Loan Documents and the
Securities Documents nor the performance of the obligations thereunder by the
Borrower will violate any term or provision of the Borrower's Certificate of
Incorporation or By-Laws, any indenture or other agreement or instrument known
to us to which it is a party or by which it or any of its property is bound, or
any order, writ, judgment, injunction, decree, statute, rule or regulation known
to us, the violation of which would materially and adversely affect the
financial condition, business or operations of the Borrower and its
subsidiaries, taken as a whole, or the transactions contemplated by the Loan
Documents and the Securities Documents; and no consent, license, approval or
authorization of or registration or declaration with any governmental bureau or
agency, and, to the best of our knowledge, no consent of any other party, is
required in connection with the execution, delivery, performance, validity or
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enforceability against the Borrower of the Loan Documents and/or the Securities
Documents, other than the Financing Statements and such filings with the U.S.
Patent and Trademark Office, the U.S. Copyright Office and the offices
designated for the filing and recording of interests in real property, as may be
necessary to perfect and enforce liens in the Collateral under the Loan
Documents.
7. To the best of our knowledge, based on our inquiry of the Chief
Executive Officer and Chief Financial Officer of the Borrower and our knowledge
of those matters in which this firm has been engaged by the Borrower for legal
consultation or representation, except as disclosed in the Credit Agreement,
there is no action, suit, proceeding or investigation pending or threatened
against the Borrower or any of its subsidiaries which, if adversely determined,
would, either in any case or in the aggregate, materially and adversely affect
the properties, assets, financial condition or businesses of the Borrower and
its subsidiaries, taken as a whole, or materially impair their right to carry on
their businesses as now conducted.
8. The execution, delivery and performance by the Borrower of the Loan
Documents and Securities Documents will not adversely alter or affect the
validity, priority or perfection of the existing security interests of the
Lenders in the Collateral. We express no opinion that said security interests
have been continuously perfected since they were granted. To our knowledge,
Borrower has not taken any action which would adversely affect the perfection of
said security interests.
9. The provisions of the Amended and Restated Security Agreement, the
Patent Security Agreement and the Trademark Security Agreement are sufficient to
create security interests in favor of the Agent and the Lenders in those items
and types of collateral described therein in which a security interest may be
created under Article 9 of the Uniform Commercial Code as in effect in The State
of New York (the "NY UCC"). We express no opinion as to the sufficiency of such
filings to perfect security interests in patents, trademarks or copyrights of
the Borrower. Pursuant to the provisions of Sections 9-301 through 9-307 of the
NY UCC, assuming that the Financing Statements are properly filed with the
proper filing office in the State of Delaware and all fees and taxes in
connection with such filing are paid, such filings are sufficient as of the date
of this opinion to perfect said security interests as to the items and types of
collateral described in the Financing Statements (other than fixtures), assuming
that they may be perfected by filing financing statements under Article 9 of the
Uniform Commercial Code as in effect in the State of Delaware.
10. The Stock Pledge Agreement, together with delivery of the
certificates representing the shares of capital stock of the subsidiaries of the
Borrower identified in such agreement to the Agent in the State of North
Carolina, duly endorsed for transfer, are sufficient to create a perfected
security interest in favor of the Agent and the Lenders in said shares of
capital stock under Article 9 of the NY UCC. In rendering this opinion, we have
assumed that the Agent will retain possession of said certificates in North
Carolina.
Our opinion is given as of the date hereof and we assume no obligation
to advise you of any subsequent developments in law or fact that could affect
the matters herein. This opinion may not, without our prior written consent or
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except as otherwise required by law, be furnished or disclosed to or relied upon
by any other person other than an assignee of or participant in any of the
Lender's (s') rights under the Loan Documents and/or the Securities Documents.
Very truly yours,
DAY, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
AMT/PK/RDH
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Exhibit 3.1(g)
Form of Closing Date Certificate
CLOSING DATE CERTIFICATE
This Closing Date Certificate is delivered pursuant to Section 3.1(g)
of that certain Third Amended and Restated Credit Agreement, dated as of March
___, 2004 (the "Credit Agreement"), among Scan-Optics, Inc, as Borrower,
Scan-Optics Limited ("SOL"), Scan-Optics (Canada), Ltd. ("SOC"; and together
with SOL and the subsidiaries of the Borrower that from time to time become
guarantors thereunder, the "Guarantors"), Ark CLO 2000-1, Limited ("Ark"), Zohar
CDO 2003-1, Limited ("Zohar"; and together with Ark, the "Lenders") and
Patriarch Partners Agency Services, LLC, as Agent. Unless otherwise defined
herein, capitalized terms used in this Certificate shall have the meanings set
forth in the Credit Agreement.
The undersigned does hereby certify that:
1. I am the duly elected Chief Financial Officer of the Borrower.
2. In my capacity as the Chief Financial Officer of the Borrower, I am
qualified to and I have reviewed the Credit Agreement and each of the Credit
Documents, and to the best of my knowledge after due inquiry each representation
and warranty contained in each of the Credit Documents to which the Borrower is
a party was correct in all material respects when made and is true and correct
in all material respects as of the date hereof (except to the extent that any
such representation and warranty expressly relates to a specific date, in which
case such representation and warranty was correct in all material respects as of
such date).
3. To the best of my knowledge after due inquiry, the Borrower has
performed, satisfied or complied in all material respects with all covenants,
warranties and representations, conditions and other obligations to be
performed, satisfied or complied with by it under the Credit Documents on or
before the date hereof, and to the best of my knowledge after due inquiry no
Default or Event of Default exists as of the date hereof.
[Signature page follows on next page]
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IN WITNESS WHEREOF, the undersigned has caused this Closing Date
Certificate to be executed as of this ____ day of March, 2004.
By: ______________________________
Name:
Title:
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Exhibit 3.1(i)(A)
Form of Amended and Restated Security Agreement (Borrower)
AMENDED AND RESTATED SECURITY AGREEMENT
SCAN-OPTICS, INC.
This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of March 30,
2004, by and among SCAN-OPTICS, INC., a Delaware corporation (the "Company"),
and PATRIARCH PARTNERS AGENCY SERVICES, LLC, a Delaware limited liability
company (the "Agent"), on behalf of itself, as Agent under the Third Amended and
Restated Credit Agreement, dated as of the date hereof, among Scan-Optics, Inc.,
the Guarantors party thereto, the Lenders party thereto and the Agent, as the
same may be amended, restated, modified or supplemented from time to time (such
agreement, as in effect from time to time, the "Amended and Restated Credit
Agreement") and the Lenders. Capitalized terms which are used herein without
definition and which are defined in the Amended and Restated Credit Agreement
shall have the same meanings herein as in the Amended and Restated Credit
Agreement.
W I T N E S S E T H:
WHEREAS, Ark CLO 2000-1, Limited ("Ark") has extended certain loans to
the Borrower pursuant to the Prior Credit Agreement;
WHEREAS, the Company has (i) granted a security interest in
substantially all of its assets to Ark pursuant to the terms of that certain
Security Agreement, dated as of April 7, 1993, between Ark (as assignee of Fleet
National Bank, formerly known as BankBoston, N.A., as successor/assignee of Bank
of Boston Connecticut) and the Company (as amended, supplemented, reaffirmed or
otherwise modified from time to time, the "Prior Security Agreement");
WHEREAS, the parties wish to amend and restate the obligations of the
Company and the other parties under the Prior Credit Agreement and the Prior
Security Agreement by entering into this Agreement, the Amended and Restated
Credit Agreement, and the other Credit Documents;
WHEREAS, in consideration of the Agent and the Lenders entering into
the Amended and Restated Credit Agreement and the making of other financial
accommodations to the Borrower and the other Credit Parties under the Amended
and Restated Credit Agreement and the other Credit Documents, the Company hereby
reaffirms and continues its grant of a security interest in the Collateral, and
hereby grants a security interest in the Collateral, to the Agent for the
benefit of itself, as Agent and for the benefit of the Lenders, on the terms set
forth herein; and
WHEREAS, it is a condition precedent to the effectiveness of the
Amended and Restated Credit Agreement that the Company and the other parties
hereto execute this Agreement;
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NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree to amend and restate the
Prior Security Agreement as follows:
Section 1. GRANT OF SECURITY INTEREST. To secure the due and prompt
payment and performance by the Company of the Obligations (as defined below),
the Company hereby confirms and reaffirms its pledge, assignment and grant to,
and hereby also pledges, assigns and grants to, the Agent, for itself and for
the benefit of the Lenders, a continuing security interest in and lien on all
properties, assets and rights of the Company of every kind and nature, wherever
located, whether now owned or hereafter acquired or arising (excluding all motor
vehicles), and all proceeds and products thereof, including, without limitation,
all goods, accounts (including all accounts receivable), contract rights, rights
to the payment of money (including tax refund claims, insurance proceeds and
tort claims), chattel paper, documents, instruments, general intangibles,
securities (together with all income therefrom, increases thereunder and
proceeds thereof), investment property (together with all income therefrom,
increases thereunder and proceeds thereof), patents, trademarks, tradenames,
copyrights, engineering drawings, service marks, customer lists, goodwill, and
all licenses, permits, agreements of any kind or nature pursuant to which the
Company possesses, uses or has authority to possess or use property (whether
tangible or intangible) of others or pursuant to which others possess, use or
have authority to possess or use property (whether tangible or intangible) of
the Company, books and records, equipment, furniture, fixtures, and all
inventory and all other capital assets, raw materials, work in progress and all
substitutions and replacements thereof (all such properties, assets and rights
hereinafter sometimes called, collectively, the "Collateral").
Section 2. OBLIGATIONS SECURED. The Collateral hereunder constitutes
and will constitute continuing security for all of the indebtedness, obligations
and liabilities of the Company to the Agent and/or the Lenders and their
permitted successors and assigns under the Amended and Restated Credit Agreement
and the other Credit Documents, in each case as such instrument is originally
executed on the date hereof or as modified, amended, restated, supplemented or
extended hereafter, whether such obligations are now existing or hereafter
arising, direct or indirect, absolute or contingent, due or to become due,
matured or unmatured, liquidated or unliquidated, arising by contract, operation
of law or otherwise, and all obligations of the Company to the Agent and/or the
Lenders arising out of any extension, refinancing or refunding of any of the
foregoing obligations (collectively, the "Obligations").
Section 3. PRO RATA SECURITY; APPLICATION OF PROCEEDS OF COLLATERAL.
All amounts owing with respect to the Obligations shall be secured pro rata by
the Collateral without distinction as to whether some Obligations are then due
and payable and other Obligations are not then due and payable. Upon any
realization upon the Collateral by the Agent and/or the Lenders, whether by
receipt of insurance proceeds pursuant to Section 4(e) hereof or upon
foreclosure and sale of all or part of the Collateral pursuant to Section 8
hereof or otherwise, the Company, the Agent and the Lenders agree that the
proceeds thereof shall be applied (i) first, to the payment of expenses incurred
with respect to maintenance and protection of the Collateral pursuant to Section
9 hereof and of expenses incurred pursuant to Section 12 hereof with respect to
the sale of or realization upon any of the Collateral or the perfection,
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enforcement or protection of the rights of the Agent and/or the Lenders
(including reasonable attorneys' fees and expenses of every kind, including,
without limitation, reasonable allocated costs of staff counsel), (ii) second,
to all amounts of interest, expenses and fees outstanding which constitute the
Obligations; (iii) third, to all amounts of principal outstanding under the
Obligations; and (iv) fourth, any proceeds remaining after the repayment of all
of the Obligations to be paid over to the Company or such other person or
persons as may be entitled thereto. The Company shall remain liable for any
deficiency remaining unpaid after the application of proceeds in accordance with
the foregoing provisions. The Company agrees that all amounts received with
respect to any of the Obligations, whether by realization on the Collateral or
otherwise, shall be applied to the payment of the Obligations in accordance with
the provisions of this Section 3.
Section 4 REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) Patents, Trademarks, Copyrights. The Company represents to the
Agent and the Lenders that as of the date hereof, except as set forth on
Schedule 1 hereto, it has no right, title or interest in any tradename, patent,
trademark registrations, copyright registrations or service ▇▇▇▇ registrations,
or in any pending applications for the same and agrees promptly to furnish to
the Agent written notice of each such tradename, patent, trademark, copyright or
service ▇▇▇▇ registrations, or any applications for same, in which it may
hereafter acquire any right, title or interest. The Company shall, on request by
the Agent and/or the Required Lenders, execute, acknowledge and deliver all such
documents and instruments as such Person may reasonably require to confirm the
Agent's and the Lenders' security interest in and to any such tradename, patent,
trademark or service ▇▇▇▇ registrations, or application for the same as part of
such Collateral hereunder and appoints the Agent as the Company's
attorney-in-fact to execute and file the same.
(b) Location of Chief Executive Offices; Domicile; Tax Identification
Numbers. The Company represents that (i) the location of its chief executive
office and the location where its books and records are kept is at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and (ii) it is a Delaware corporation. The
Company represents to the Agent and the Lenders that the federal tax
identification number of the Company is 060851857. The Company further
represents that Schedule 2 hereto is a true and correct list of all localities
where property comprising a part of the Collateral is located. The Company
agrees that it will not change its name, federal tax identification number, the
jurisdiction of its organization or the location of its chief executive office
or the location where its books and records are kept.
(c) Ownership of Collateral.
(i) The Company represents that it is the owner of the
Collateral free from any adverse lien, security interest or
encumbrance, except as expressly permitted by the Amended and Restated
Credit Agreement.
(ii) Except for the security interests herein granted and
except as expressly permitted by Section 6.1(b) of the Amended and
Restated Credit Agreement, the Company shall be the owner of the
Collateral free of any liens or other encumbrances, and the Company
shall defend the same against all claims and demands of all persons at
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any time claiming the same or any interest therein adverse to the Agent
and/or the Lenders. Except as otherwise expressly permitted by the
Amended and Restated Credit Agreement, the Company shall not pledge,
mortgage or create or suffer to exist a security interest in the
Collateral in favor of any person other than the Agent and the Lenders.
(d) Sale or Disposition of Collateral. The Company will not sell or
offer to sell or otherwise transfer the Collateral, any portion thereof, or any
interest therein except for sales of inventory in the ordinary course of
business and except as expressly permitted by the Amended and Restated Credit
Agreement.
(e) Insurance. The Company shall have and maintain at all times with
respect to the Collateral such insurance as is required by the Amended and
Restated Credit Agreement, such insurance to be payable to the Agent and the
Lenders and to the Company as their interests may appear. All policies of
insurance shall provide for a minimum of thirty (30) days' prior written
cancellation notice to the Agent. In the event of failure to provide and
maintain insurance as herein provided, the Agent may, at its option, provide
such insurance, and the Company hereby promises to pay to the Agent on demand
the amount of any reasonable disbursements made by the Agent for such purpose.
The Company shall furnish to the Agent certificates or other evidence
satisfactory to the Agent of compliance with the foregoing insurance provisions.
The Agent may act as attorney for the Company in obtaining, adjusting, settling
and canceling such insurance and endorsing any drafts; and any amounts collected
or received under any such policies shall be applied by the Agent to the
Obligations in accordance with the provisions of Section 3 hereof, or at the
option of the Agent and the Required Lenders, the same may be released to the
Company, but such application or release shall not cure or waive any default
hereunder and no amount so released shall be deemed a payment on any Obligation
secured hereby.
(f) Maintenance of Collateral. The Company will keep the Collateral in
good order and repair and will not use the same in violation of law or any
policy of insurance thereon. The Agent and any Lender may inspect the Collateral
at any reasonable time, wherever located. Except as otherwise provided in the
Amended and Restated Credit Agreement, the Company will pay promptly when due
all taxes and assessments upon the Collateral or for its use or operation or
upon this Agreement. In its discretion, the Agent may discharge taxes and other
encumbrances at any time levied or placed on the Collateral, which remain unpaid
in violation of the Amended and Restated Credit Agreement, make repairs thereof
and pay any necessary filing fees. The Company agrees to reimburse the Agent on
demand for any and all expenditures so made, and until paid, the amount thereof
shall be a debt secured by the Collateral. The Agent shall have no obligation to
the Company to make any such expenditures, nor shall the making thereof relieve
the Company of any default.
(g) Creation and Perfection of Lien. The Company represents and
warrants to the Agent and the Lenders and covenants with the Agent and the
Lenders that this Agreement creates a valid security interest in the Collateral
as security for the payment and performance of the Obligations. Upon the filing
of a UCC-l financing statement in the form attached hereto as Exhibit A (the
"Financing Statement") under the Uniform Commercial Code as the same may be in
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effect from time to time in the State of Delaware (the "UCC"), naming the
Company as debtor and the Agent, for itself and for the benefit of the Lenders,
as secured party, all filings, assignments, pledges and deposits of documents or
instruments will have been made and all other actions will have been taken that
are necessary or advisable, under applicable law, to establish and perfect the
Agent's and the Lenders' security interest in such of the Collateral as to which
a security interest may be perfected by filing under the UCC, and such security
interest shall remain prior to all other liens, except as contemplated by the
Amended and Restated Credit Agreement. No further filings, recordings or other
actions are or will be necessary to maintain the priority of such security
interest other than the filing of UCC continuation statements within six months
prior to the expiration of a period of five years after the original filing. The
Collateral and the Agent's and Lenders' rights with respect to the Collateral
are not subject to any setoff, claims, withholdings or other defenses. The
Company is the owner of the Collateral free from any adverse lien, security
interest or encumbrance, except as permitted by the Amended and Restated Credit
Agreement as such agreement is in effect on the date hereof.
(h) No Further Actions. Except for the filings referred to in paragraph
(g) above, no authorization, approval or other action by, and no notice of
filing with, any governmental authority or regulatory body or other Person that
has not been received, taken or made is required (i) for the grant by the
Company of the security interest granted hereby or for the execution, delivery
or performance of this Agreement by the Company, (ii) for the perfection and
maintenance of the security interest hereunder (including the first priority
nature of such security interest), or (iii) for the exercise by the Agent and/or
the Lenders of the rights or the remedies in respect of the Collateral pursuant
to this Agreement.
(i) Accounts Receivable. The Company shall keep or cause to be kept
separate records of accounts which are complete and accurate in all material
respects, and from time to time upon the request of the Agent, at reasonable
intervals and upon reasonable notice, shall deliver to the Agent and the Lenders
a list of the names, addresses, face value, and dates of invoices for each
debtor obligated on such an account receivable.
(j) Government Contracts. The Company agrees that, at the request of
the Agent and/or any Lender, it shall execute all such documents, and take all
such actions, as such Person shall reasonably determine to be necessary or
appropriate from time to time under the Federal Assignment of Claims Act of
1940, as amended, in order to confirm and assure to each of the Agent and the
Lenders its rights under this Agreement with respect to any and all Collateral
consisting of the Company's rights to monies due or to become due under any
contracts or agreements with or orders from the United States government or any
agency or department thereof, the assignment of which is not prohibited by such
contract or agreement (collectively, "Government Receivables"). Without limiting
the generality of the foregoing, the Company agrees that simultaneously with the
execution and delivery of this Agreement it shall execute and deliver to the
Agent a confirmatory assignment substantially in the form of Exhibit B attached
hereto (a "Confirmatory Assignment") with respect to each Government Receivable
existing on the date hereof where the aggregate proceeds payable to the Company
thereunder exceed $25,000, and within ten (10) Business Days after the creation
of any such new Government Receivable, the Company shall execute and deliver to
the Agent a Confirmatory Assignment with respect thereto. The Company hereby
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irrevocably authorizes the Agent, or its designee, at the Company's expense, to
file (on behalf of itself and the Lenders) with the United States government (or
the appropriate agency or instrumentality thereof) a notice of each assignment
of a Government Receivable substantially in the form of Exhibit C attached
hereto (a "Notice of Assignment"), to which a copy of the relevant Confirmatory
Assignment may be attached, and appoints the Agent as the Company's
attorney-in-fact to execute and file any such Confirmatory Assignments, Notices
of Assignment and any ancillary documents relating thereto.
(k) Securities. The Company agrees that it shall forthwith deliver and
pledge to the Agent, for itself and for the benefit of the Lenders, all
certificates representing securities which it shall acquire, whether by
purchase, stock dividend, distribution of capital or otherwise, along with stock
powers or other appropriate instruments of assignment with respect thereto, duly
executed in blank.
(l) Cooperation. The Company agrees, after the occurrence of an Event
of Default, to take any actions that the Agent and/or the Required Lenders may
reasonably request in order to enable the Agent and the Lenders to obtain and
enjoy the full rights and benefits granted to them by the Amended and Restated
Credit Agreement and the other Credit Documents. The Company further consents to
the transfer of control or assignment of all or any portion of the Collateral to
a receiver, trustee, transferee, or similar official or to any purchaser of the
Collateral pursuant to any public or private sale, judicial sale, foreclosure or
exercise of other remedies available to the Agent and/or the Lenders as
permitted by the Credit Documents, applicable law or otherwise.
(m) Further Assurances By the Company. The Company agrees to execute
and deliver to the Agent from time to time at its request all documents and
instruments, including financing statements, supplemental security agreements,
notices of assignments under the United States Assignment of Claims Act and
under similar or local statutes and regulations, and to take all action as the
Agent may reasonably deem necessary or proper to perfect or otherwise protect
the security interest and lien created hereby.
Section 5. POWER OF ATTORNEY.
(a) The Company acknowledges the Agent's right, to the extent permitted
by applicable law, singly to execute and/or file financing or continuation
statements and similar notices required by applicable law, and amendments
thereto, concerning the Collateral without execution by the Company. A carbon,
photographic or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(b) The Company hereby irrevocably appoints the Agent as the Company's
attorney-in-fact, effective at all times subsequent to the occurrence of an
Event of Default (as defined herein), and during the continuance thereof, with
full authority in the place and stead of the Company and in the name of the
Company or otherwise, to take any action and to execute any instrument which the
Agent may deem necessary or advisable to accomplish the purpose of this
Agreement, including, without limitation, the power and right (i) to endorse the
Company's name on any checks, notes, acceptances, money orders, drafts, filings
or other forms of payment or security that may come into the Agent's possession,
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and (ii) to do all other things which the Agent then determines to be necessary
to carry out the terms of this Agreement. The Company ratifies and approves all
acts of such attorney-in-fact. The power conferred on the Agent hereunder is
solely to protect the Agent's and the Lenders' interests in the Collateral and
shall not impose any duty upon the Agent to exercise such power.
Section 6. SECURITIES AS COLLATERAL.
(a) Upon the occurrence and during the continuance of an Event of
Default, the Agent may at any time, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations. If the
Agent so elects to exercise its right herein and gives notice of such election
to the Company, upon the occurrence and during the continuance of an Event of
Default to the extent permitted under applicable law, the Agent may vote any or
all of the securities constituting Collateral possessing voting rights (whether
or not the same shall have been transferred into its name or the name of its
nominee or nominees) and give all consents, waivers and ratifications in respect
of the securities constituting Collateral and otherwise act with respect thereto
as though it were the outright owner thereof, the Company hereby irrevocably
constituting and appointing the Agent the proxy and attorney-In-fact of the
Company, with full power of substitution, to do so. So long as no Event of
Default is continuing, the Company shall be entitled to receive all cash
dividends paid in respect of the securities of which the Company is the
registered owner, to vote such securities and to give consents, waivers and
ratifications in respect of such securities, provided that no vote shall be
cast, or consent, waiver or ratification given or action taken which would be
inconsistent with or violate any provisions of any of the Credit Documents or
this Agreement.
(b) Any sums paid upon or with respect to any of the securities upon
the liquidation or dissolution of the issuer thereof shall be paid over to the
Agent to be held by it as security for the Obligations; and in case any
distribution of capital shall be made on or in respect of any of the securities
or any property shall be distributed upon or with respect to any of the
securities pursuant to the recapitalization or reclassification of the capital
of the issuer thereof or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Agent to be held by it as security for the
Obligations. All sums of money and property paid or distributed in respect of
the securities upon such a liquidation, dissolution, recapitalization or
reclassification which are received by the Company shall, until paid or
delivered to the Agent, be held in trust for the Agent as security for the
Obligations.
Section 7. ACCOUNTS RECEIVABLE. Until the Agent requests (after the
occurrence of an Event of Default and during the continuation thereof) that
debtors on accounts receivable of the Company or obligors on accounts, chattel
paper or general intangibles of the Company or obligors on instruments for which
a Company is an obligee or lessees or conditional vendees under agreements
governing the leasing or selling by conditional sale of Collateral by the
Company, be notified of the Agent's and Lenders' security interest, the Company
shall continue to collect payment thereof. Upon the making of such a request by
the Agent (after the occurrence of an Event of Default and during the
continuation thereof), the Company shall hold the proceeds received from
collection as trustee for the Agent and shall turn the same over to the Agent,
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or to such other bank or Person as may be approved by the Agent, immediately
upon receipt in the identical form received. At the request of the Agent (after
the occurrence of an Event of Default and during the continuation thereof), the
Company shall so notify such account debtors and obligors that payment thereof
is to be made directly to the Agent, and the Agent may itself after the
occurrence of an Event of Default and during the continuation thereof, at any
time, without notice to or demand upon the Company, so notify such account
debtors and obligors. The making of such a request or the giving of any such
notification shall not affect the duties of the Company described above with
respect to proceeds of collection of accounts receivable received by the
Company. The Agent shall apply the proceeds of such collection received by the
Agent to the Obligations in accordance with Section 3 of this Agreement. The
application of the proceeds of such collection shall be conditional upon final
payment in cash or solvent credits of the items giving rise to them. If any item
is not so paid, the Agent in its discretion, whether or not the item is
returned, may either reverse any credit given for the item or charge it to any
deposit account maintained by the Company with the Agent.
Section 8. EVENTS OF DEFAULT; REMEDIES.
(a) Upon the occurrence of an Event of Default and during the
continuation thereof, whether or not the Obligations are due, the Agent may (on
behalf of itself and the Lenders) demand, ▇▇▇ for, collect, or make any
settlement or compromise it deems desirable with respect to the Collateral.
(b) An "Event of Default" hereunder shall mean (i) that a
representation, warranty or certification made by the Company in this Agreement
or in any document executed or delivered from time to time relating to this
Agreement is materially untrue, misleading or incomplete in its recital of any
facts at the time as of which such representation, warranty or certification, as
the case may be, is made or (ii) any Event of Default, as that term is defined
in any of the Credit Documents, whether or not any acceleration of the maturity
of the amounts due in respect of any of the Obligations shall have occurred.
(c) Upon the occurrence and during the continuance of an Event of
Default, to the fullest extent permitted by applicable law, in addition to the
remedies set forth elsewhere in this Agreement:
(i) The Agent shall have (on behalf of itself and the
Lenders), in addition to all other rights and remedies given it by any
instrument or other agreement evidencing, or executed and delivered in
connection with, any of the Obligations and otherwise allowed by law,
the rights and remedies of a secured party under the Uniform Commercial
Code as enacted in any jurisdiction in which the Collateral may be
located and without limiting the generality of the foregoing, the Agent
may immediately, without (to the fullest extent permitted by law)
demand of performance or advertisement or notice of intention to sell
or of time or place of sale or of redemption or other notice or demand
whatsoever (except that the Agent shall give to the Company at least
ten days' notice of the time and place of any proposed sale or other
disposition), all of which are hereby expressly waived to the fullest
extent permitted by law, sell at public or private sale or otherwise
realize upon, in the City of Hartford, Connecticut, or elsewhere, the
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whole or from time to time any part of the Collateral in or upon which
the Agent and/or the Lenders shall have a security interest or lien
hereunder, or any interest which the Company may have therein, and
after deducting from the proceeds of sale or other disposition of the
Collateral all expenses (including all reasonable expenses for legal
services, including, without limitation, reasonable allocated costs of
staff counsel) as provided in Section 12 hereof, shall apply the
residue of such proceeds toward the payment of the Obligations in
accordance with Section 3 of this Security Agreement, the Company
remaining liable for any deficiency remaining unpaid after such
application. If notice of any sale or other disposition is required by
law to be given to the Company, then the Company, the Agent and the
Lenders hereby agree that a notice given as hereinbefore provided shall
be reasonable notice of such sale or other disposition. The Company
also agrees to assemble the Collateral at such place or places as the
Agent reasonably designates by written notice. At any such sale or
other disposition the Agent and/or any Lender may itself, and any other
person or entity owed any Obligation may itself, purchase the whole or
any part of the Collateral sold, free from any right of redemption on
the part of the Company, which right is hereby waived and released to
the fullest extent permitted by law.
(ii) Furthermore, without limiting the generality of any of
the rights and remedies conferred upon the Agent and/or any Lender
under Section 8(c)(i) hereof, the Agent and/or any Lender to the
fullest extent permitted by law, may enter upon the premises of the
Company, exclude the Company or any guarantor therefrom and take
immediate possession of the Collateral, either personally or by means
of a receiver appointed by a court therefor, using all necessary force
to do so, and may, at its option, use, operate, manage and control the
Collateral in any lawful manner and may collect and receive all rents,
income, revenue, earnings, issues and profits therefrom, and may
maintain, repair, renovate, alter or remove the Collateral as the Agent
and/or such Lender may determine in its discretion, and any such monies
so collected or received by such Person shall be remitted to the Agent
and shall be applied to, or may be accumulated for application upon,
the Obligations in accordance with Section 3 of this Agreement.
(iii) Each of the Agent and the Lenders agrees that such
Person will give notice to the Company of any enforcement action taken
by it pursuant to this Section 8 promptly after commencing such action.
(iv) The Company recognizes that the Agent and/or the Lenders
may be unable to effect a public sale of securities constituting
Collateral by reason of certain prohibitions contained in the
Securities Act and may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers consistent with all
applicable laws. The Company agrees that any such private sales may be
at prices and other terms less favorable to the Company than if sold at
public sales and that such private sales shall not solely by reason
thereof be deemed not to have been made in a commercially reasonable
manner. Neither the Agent nor the Lenders shall be under any obligation
to delay a sale of any of the securities for the period of time
necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act of 1933, as
amended, even if the issuer would agree to do so.
Section 9. MARSHALLING. Neither the Agent nor any Lender shall be
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required to marshal any present or future security for (including but not
limited to this Agreement and the Collateral subject to the security interest
created hereby), or guarantees of, the Obligations or any of them, or to resort
to such security or guarantees in any particular order; and all of its rights
hereunder and in respect of such securities and guaranties shall be cumulative
and in addition to all other rights, however existing or arising. To the extent
that it lawfully may, the Company hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Agent's and/or any Lender's rights under this Agreement
or under any other instrument evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or guaranteed, and to the extent that it lawfully may do so the Company
hereby irrevocably waives the benefits of all such laws. Except as otherwise
provided by applicable law, neither the Agent nor the Lenders shall have any
duty as to the collection or protection of the Collateral or any income thereon,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the sole custody thereof.
Section 10. COMPANY'S OBLIGATIONS NOT AFFECTED. To the extent permitted
by law, the obligations of the Company under this Security Agreement shall
remain in full force and effect without regard to, and shall not be impaired by
(a) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Company, to the extent permitted by
law; (b) any exercise or nonexercise, or any waiver, by the Agent and/or any
Lender of any right, remedy, power or privilege under or in respect of any of
the Obligations or any security therefor (including this Agreement); (c) any
amendment to or modification of any instrument evidencing any of the Obligations
or pursuant to which any of them were issued; (d) any amendment to or
modification of any instrument or agreement (other than this Agreement) securing
any of the Obligations; or (e) the taking of additional security for or any
guaranty of any of the Obligations or the release or discharge or termination of
any security or guaranty for any of the Obligations; and whether or not the
Company shall have notice or knowledge of any of the foregoing.
Section 11. NO WAIVER. No failure on the part of the Agent and/or any
Lender to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by such Person of any right, remedy or power hereunder preclude any
other or future exercise of any other right, remedy or power. Each and every
right, remedy and power hereby granted to the Agent and/or any Lender or the
future holders of any of the Obligations or allowed to any of them by law or
other agreement, including, without limitation, each of the Credit Documents,
shall be cumulative and not exclusive of any other, and, subject to the
provisions of this Agreement, may be exercised by the Agent and/or any Lender or
the future holders of any of the Obligations from time to time.
Section 12. EXPENSES. The Company agrees to pay, on demand, all
reasonable costs and expenses (including reasonable attorneys' fees and expenses
for legal services of every kind, including, without limitation, reasonable
allocated costs of staff counsel) of the Agent and/or any Lender incidental to
the sale of, or realization upon, any of the Collateral or in any way relating
to the perfection, enforcement or protection of the rights of such Person
hereunder; and the Agent and/or such Lenders may at any time apply to the
payment of all such costs and expenses all monies of the Company or other
proceeds arising from its possession or disposition of all or any portion of the
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Collateral.
Section 13. CONSENTS, AMENDMENTS, WAIVERS. Any term of this Agreement
may be amended, and the performance or observance by the Company of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only in accordance with the terms of
Section 11.1 of the Amended and Restated Credit Agreement all of which are
incorporated herein by reference.
Section 14. GOVERNING LAW. Except as otherwise required by the laws of
any jurisdiction in which any Collateral is located, this Agreement shall for
all purposes be governed by and construed in accordance with the laws of the
State of New York.
Section 15. PARTIES IN INTEREST. All terms of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Company may not
assign or transfer its rights hereunder without the prior written consent of the
Agent and the Required Lenders. Any assignment or transfer by the Company of its
rights hereunder in violation of this Agreement shall be void.
Section 16. COUNTERPARTS. This Agreement and any amendment hereof may
be executed in several counterparts and by each party on a separate counterpart,
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
Section 17. TERMINATION. Upon payment in full of the Obligations in
accordance with their terms, this Agreement shall terminate and the Agent (on
behalf of itself and the Lenders) shall return to the Company, at the expense of
the Company, such Collateral in the possession or control of the Agent as has
not theretofore been disposed of pursuant to the provisions hereof and shall
deliver to the Company documents in recordable form sufficient to discharge the
liens and security interests granted hereunder.
Section 18. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications made or required to be given pursuant to this
Agreement shall be made in accordance with the provisions of Section 11.2 of the
Amended and Restated Credit Agreement.
Section 19. PREJUDGMENT REMEDY WAIVER. THE BORROWER ACKNOWLEDGES THAT
THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE BORROWER HEREBY WAIVES ITS
RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR
FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THAT EACH OF THE
AGENT AND/OR THE LENDERS MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER. MORE SPECIFICALLY, THE BORROWER ACKNOWLEDGES THAT THE AGENT'S AND/OR
ANY LENDER'S ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT. SECTION 52-278F, ISSUE A
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WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE BORROWER
ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE
ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND EACH OF THE AGENT AND
EACH LENDER ACKNOWLEDGES THE BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE
ISSUANCE OF SAID WRIT.
Section 20. Conflict. In the event that there is a conflict between any
provision of this Agreement and the Amended and Restated Credit Agreement, then
the provisions of the Amended and Restated Credit Agreement shall control.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed by its authorized representatives as of the date first written
above.
SCAN-OPTICS, INC.
By:_____________________________
Name:
Title:
PATRIARCH PARTNERS AGENCY
SERVICES, LLC, as Agent
By:_______________________________
Name:
Title:
ARK CLO 2000-1, LIMITED, as a Lender
By: Patriarch Partners, LLC,
its Collateral Manager
By:_______________________________
Name:
Title:
ZOHAR CDO 2003-1, LIMITED, as a Lender
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By:_______________________________
Name:
Title:
-96-
EXHIBIT A
[UCC-1 Form]
-98-
EXHIBIT A
Debtor: Secured Party:
------- -------------
Scan-Optics, Inc. Patriarch Partners Agency Services, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Agent"), for itself and for the
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ benefit of the Lenders party to that
certain Third Amended and Restated Credit
Agreement among the Debtor, the Agent and
the other parties thereto, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
All properties, assets and rights of the Debtor of every kind and
nature, wherever located, whether now owned or hereafter acquired or arising
(excluding motor vehicles), and all proceeds and products thereof, including,
without limitation, all goods, accounts (including all accounts receivable),
contract rights, rights to the payment of money (including tax refund claims,
insurance proceeds and tort claims), chattel paper, documents, instruments,
general intangibles, securities (together with all income therefrom, increases
thereunder and proceeds thereof), investment property (together with all income
therefrom, increases thereunder and proceeds thereof), patents, trademarks,
tradenames, copyrights, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which the Debtor possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or pursuant to which others possess,
use or have authority to possess or use property (whether tangible or
intangible) of the Debtor, books and records, equipment, furniture, fixtures,
and all inventory and all other capital assets, raw materials, work in progress
and all substitutions and replacements thereof (all such properties, assets and
rights hereinafter sometimes called, collectively, the "Collateral").
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EXHIBIT B
FORM OF CONFIRMATORY ASSIGNMENT OF CONTRACT
This ASSIGNMENT, dated as of March 24, 2004, is by SCAN-OPTICS, INC., a
Delaware corporation (the "Debtor") in favor of Patriarch Partners Agency
Services, LLC (the "Agent"), for itself and for the benefit of the Lenders (as
defined in the Security Agreement referred to below).
WHEREAS, the Debtor is party to Contract No. __________, dated
_____________, between the Debtor and ____________________ (the "Contract"); and
WHEREAS, the Debtor, the Agent and the Lenders have entered into a
certain Amended and Restated Security Agreement, dated as of March 24, 2004 (the
"Security Agreement"), pursuant to which the Debtor has granted to the Agent and
the Lenders, a security interest in certain assets of the Debtor, including all
of the Debtor's rights in, to and under the Contract, to secure the Obligations
referred to in the Security Agreement;
NOW, THEREFORE, the Debtor hereby confirms, acknowledges and agrees
that, pursuant to and subject to the terms of the Security Agreement, the Debtor
hereby assigns, transfers, pledges and grants to the Agent, for itself and for
the benefit of the Lenders, a security interest in all of the Debtor's right,
title and interest in and to all monies due or to become due under the Contract.
EXECUTED as of the date first above written.
SCAN-OPTICS, INC.
By:__________________________
Name:
Title:
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EXHIBIT C
FORM OF NOTICE OF ASSIGNMENT OF
ACCOUNTS RECEIVABLE AS SECURITY
Patriarch Partners Agency Services, LLC
Date:
To: [Contracting Official or Head of
Agency, and Disbursing Official]
Re: Payments to SCAN-OPTICS, INC.
Contract Number:
Made by the United States of America
Department:
Division:
For:
Dated:
Ladies and Gentlemen:
PLEASE TAKE NOTICE that monies due or to become due to SCAN-OPTICS,
INC. (the "Debtor") under the contract described above have been assigned to
Patriarch Partners Agency Services, LLC (the "Agent"), for itself and for the
benefit of certain other secured creditors, as security for certain obligations
of the Debtor to the Agent and such creditors, as described more particularly in
that certain Amended and Restated Security Agreement (a true and correct copy of
which is attached hereto), dated as of March 24, 2004, as in effect from time to
time. This notice is given pursuant to the provisions of the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Section 3727).
Payments due or to become due to the Debtor under the contract
described above should continue to be made to the Debtor until you receive
written notice from the Agent directing that such payments be made to another
party.
Please return to the undersigned (in the enclosed, self-addressed
stamped envelope) the enclosed extra copy of this notice with appropriate
notations showing the date and hour of receipt and duly signed by the person
acknowledging receipt on behalf of the addressee.
Very truly yours,
PATRIARCH PARTNERS AGENT
SERVICES, LLC, as Agent
By:______________________________
Authorized Official
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IRREVOCABLY ACKNOWLEDGED
AND AGREED TO:
SCAN-OPTICS, INC.
By:________________________
Its
ACKNOWLEDGMENT OF RECEIPT
Receipt of the above notice and a copy of the Amended and Restated
Security Agreement described above is hereby acknowledged. These were received
at _________ a.m./p.m. on _____________, 20___.
------------------------------
Signature
On Behalf of: [Name and Title of
Addressee of Notice]
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Schedule 1
Intellectual Property
Trademarks and Trademark Registrations
Trademark Registrations --
or United States Patent and Trademark Office
Service ▇▇▇▇ Registration No. Registration Date
SO & Design 946,297 10/31/1972
SCAN-OPTICS 949,308 12/26/1972
VISTAFORM 2360545 6/20/2000
VISTACAPTURE 2385948 9/12/2000
VISTASTAT 2385947 9/12/2000
Trademark Pending Application--
or United States Patent and Trademark Office
Service ▇▇▇▇ Serial No. Filing Date
None
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Schedule 1
Continued
Foreign Trademarks and Trademark Registrations
Trademark Registrations --
Country/ or
Reference Service ▇▇▇▇ Registration No. Registration Date
CANADA
SOI/T01/9/CA SO & Design 191,952 06/22/73
SOI/T02/9/CA SCAN-OPTICS 193,821 09/07/73
JAPAN
SOI/T01/11/JP SO & Design 1,225,188 10/07/76
ITALY
SOI/T01A/9/IT SO & Design T091C001933 9/12/91
SOI/T02A/9/IT SCAN-OPTICS T091C001939 9/12/91
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Schedule 1
Continued
ISSUED AND PENDING PATENTS
Patents Issued by U.S. Patent
and Trademark Office
Patent No. Issue Date Owner(s) Title
4,813,077 03/14/1989 Scan-Optics, Inc. Sales Transaction Record Processing
System and Method
4,817,179 03/28/1989 Scan-Optics, Inc. Digital Image Enhancement Meth. &
Apparatus
5,386,482 01/31/1995 Scan-Optics, Inc. Address block location method and
apparatus
6,212,130 04/03/2001 Scan-Optics, Inc. Method and apparatus for plural
document detection
5,850,480 12/15/1998 Scan-Optics, Inc. OCR error correction methods and
apparatus utilizing contextual
comparison
5,445,369 08/29/1995 Scan-Optics, Inc. Method of and apparatus for moving
documents
Patents Pending with U.S. Patent
and Trademark Office
Serial No. Filing Date Inventor(s) Title
SOI/125/US 01/12/2001 Scan-Optics, Inc.
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Schedule 2
Collateral Locations
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇., ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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Exhibit 3.1(i)(B)
Form of Amended and Restated Security Agreement (SOC)
AMENDED AND RESTATED SECURITY AGREEMENT
SCAN-OPTICS (CANADA), LTD.
This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of March 30,
2004, by and among SCAN-OPTICS (CANADA), LTD., a Canadian corporation organized
under the Business Corporations Act of Canada (the "Company"), and PATRIARCH
PARTNERS AGENCY SERVICES, LLC, a Delaware limited liability company (the
"Agent"), on behalf of itself, as Agent under the Third Amended and Restated
Credit Agreement, dated as of the date hereof, among Scan-Optics, Inc., the
Guarantors party thereto, the Lenders party thereto and the Agent, as the same
may be amended, restated, modified or supplemented from time to time (such
agreement, as in effect from time to time, the "Amended and Restated Credit
Agreement") and the Lenders. Capitalized terms which are used herein without
definition and which are defined in the Amended and Restated Credit Agreement
shall have the same meanings herein as in the Amended and Restated Credit
Agreement.
W I T N E S S E T H:
WHEREAS, Ark CLO 2000-1, Limited ("Ark") has extended certain loans to
the Borrower pursuant to the Prior Credit Agreement;
WHEREAS, the Company (i) has guaranteed all of the obligations of the
Borrower under the Prior Credit Agreement as a subsidiary guarantor thereunder,
(ii) shall continue to guarantee the obligations of the Borrower under the
Amended and Restated Credit Agreement and (iii) has granted a security interest
in substantially all of its assets to Ark pursuant to the terms of that certain
Security Agreement, dated as of April 7, 1993 between Ark (as assignee of Fleet
National Bank, formerly known as BankBoston, N.A., as successor/assignee of Bank
of Boston Connecticut) and the Company (as amended, supplemented, reaffirmed or
otherwise modified from time to time, the "Prior Security Agreement");
WHEREAS, the parties wish to amend and restate the obligations of the
Company and the other parties under the Prior Credit Agreement and the Prior
Security Agreement by entering into this Agreement, the Amended and Restated
Credit Agreement, and the other Credit Documents;
WHEREAS, in consideration of the Agent and the Lenders entering into
the Amended and Restated Credit Agreement and the making of other financial
accommodations to the Borrower and the other Credit Parties under the Amended
and Restated Credit Agreement and the other Credit Documents, the Company hereby
reaffirms and continues its grant of a security interest in the Collateral, and
hereby grants a security interest in the Collateral, to the Agent for the
benefit of itself, as Agent and for the benefit of the Lenders, on the terms set
forth herein; and
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WHEREAS, it is a condition precedent to the effectiveness of the
Amended and Restated Credit Agreement that the Company and the other parties
hereto execute this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree to amend and restate the
Prior Security Agreement as follows:
Section 1. GRANT OF SECURITY INTEREST. To secure the due and prompt
payment and performance by the Company of the Obligations (as defined below),
the Company hereby confirms and reaffirms its pledge, assignment and grant to,
and hereby also pledges, assigns and grants to, the Agent, for itself and for
the benefit of the Lenders, a continuing security interest in and lien on all
properties, assets and rights of the Company of every kind and nature, wherever
located, whether now owned or hereafter acquired or arising (excluding all motor
vehicles), and all proceeds and products thereof, including, without limitation,
all goods, accounts (including all accounts receivable), contract rights, rights
to the payment of money (including tax refund claims, insurance proceeds and
tort claims), chattel paper, documents, instruments, general intangibles,
securities (together with all income therefrom, increases thereunder and
proceeds thereof), investment property (together with all income therefrom,
increases thereunder and proceeds thereof), patents, trademarks, tradenames,
copyrights, engineering drawings, service marks, customer lists, goodwill, and
all licenses, permits, agreements of any kind or nature pursuant to which the
Company possesses, uses or has authority to possess or use property (whether
tangible or intangible) of others or pursuant to which others possess, use or
have authority to possess or use property (whether tangible or intangible) of
the Company, books and records, equipment, furniture, fixtures, and all
inventory and all other capital assets, raw materials, work in progress and all
substitutions and replacements thereof (all such properties, assets and rights
hereinafter sometimes called, collectively, the "Collateral").
Section 2. OBLIGATIONS SECURED. The Collateral hereunder constitutes
and will constitute continuing security for all of the indebtedness, obligations
and liabilities of the Company to the Agent and/or the Lenders and their
permitted successors and assigns under the Amended and Restated Credit Agreement
and the other Credit Documents, in each case as such instrument is originally
executed on the date hereof or as modified, amended, restated, supplemented or
extended hereafter, whether such obligations are now existing or hereafter
arising, direct or indirect, absolute or contingent, due or to become due,
matured or unmatured, liquidated or unliquidated, arising by contract, operation
of law or otherwise, and all obligations of the Company to the Agent and/or the
Lenders arising out of any extension, refinancing or refunding of any of the
foregoing obligations (collectively, the "Obligations").
Section 3. PRO RATA SECURITY; APPLICATION OF PROCEEDS OF COLLATERAL.
All amounts owing with respect to the Obligations shall be secured pro rata by
the Collateral without distinction as to whether some Obligations are then due
and payable and other Obligations are not then due and payable. Upon any
realization upon the Collateral by the Agent and/or the Lenders, whether by
receipt of insurance proceeds pursuant to Section 4(e)
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hereof or upon foreclosure and sale of all or part of the Collateral pursuant to
Section 8 hereof or otherwise, the Company, the Agent and the Lenders agree that
the proceeds thereof shall be applied (i) first, to the payment of expenses
incurred with respect to maintenance and protection of the Collateral pursuant
to Section 9 hereof and of expenses incurred pursuant to Section 12 hereof with
respect to the sale of or realization upon any of the Collateral or the
perfection, enforcement or protection of the rights of the Agent and/or the
Lenders (including reasonable attorneys' fees and expenses of every kind,
including, without limitation, reasonable allocated costs of staff counsel),
(ii) second, to all amounts of interest, expenses and fees outstanding which
constitute the Obligations; (iii) third, to all amounts of principal outstanding
under the Obligations; and (iv) fourth, any proceeds remaining after the
repayment of all of the Obligations to be paid over to the Company or such other
person or persons as may be entitled thereto. The Company shall remain liable
for any deficiency remaining unpaid after the application of proceeds in
accordance with the foregoing provisions. The Company agrees that all amounts
received with respect to any of the Obligations, whether by realization on the
Collateral or otherwise, shall be applied to the payment of the Obligations in
accordance with the provisions of this Section 3.
Section 4. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
(a) Patents, Trademarks, Copyrights. The Company represents to the
Agent and the Lenders that as of the date hereof, except as set forth on
Schedule 1 hereto, it has no right, title or interest in any tradename, patent,
trademark registrations, copyright registrations or service ▇▇▇▇ registrations,
or in any pending applications for the same and agrees promptly to furnish to
the Agent written notice of each such tradename, patent, trademark, copyright or
service ▇▇▇▇ registrations, or any applications for same, in which it may
hereafter acquire any right, title or interest. The Company shall, on request by
the Agent and/or the Required Lenders, execute, acknowledge and deliver all such
documents and instruments as such Person may reasonably require to confirm the
Agent's and the Lenders' security interest in and to any such tradename, patent,
trademark or service ▇▇▇▇ registrations, or application for the same as part of
such Collateral hereunder and appoints the Agent as the Company's
attorney-in-fact to execute and file the same.
(b) Location of Chief Executive Offices; Domicile; Tax Identification
Numbers. The Company represents that (i) the location of its chief executive
office and the location where its books and records are kept is at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ and (ii) it is a Canadian
corporation organized under the Business Corporations Act of Canada. The Company
represents to the Agent and the Lenders that the federal tax identification
number of the Company is 87176418. The Company further represents that Schedule
2 hereto is a true and correct list of all localities where property comprising
a part of the Collateral is located. The Company agrees that it will not change
its name, federal tax identification number, the jurisdiction of its
organization or the location of its chief executive office or the location where
its books and records are kept.
(c) Ownership of Collateral.
------------------------
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(i) The Company represents that it is the owner of the
Collateral free from any adverse lien, security interest or
encumbrance, except as expressly permitted by the Amended and Restated
Credit Agreement.
(ii) Except for the security interests herein granted and
except as expressly permitted by Section 6.1(b) of the Amended and
Restated Credit Agreement, the Company shall be the owner of the
Collateral free of any liens or other encumbrances, and the Company
shall defend the same against all claims and demands of all persons at
any time claiming the same or any interest therein adverse to the Agent
and/or the Lenders. Except as otherwise expressly permitted by the
Amended and Restated Credit Agreement, the Company shall not pledge,
mortgage or create or suffer to exist a security interest in the
Collateral in favor of any person other than the Agent and the Lenders.
(d) Sale or Disposition of Collateral. The Company will not sell or
offer to sell or otherwise transfer the Collateral, any portion thereof, or any
interest therein except for sales of inventory in the ordinary course of
business and except as expressly permitted by the Amended and Restated Credit
Agreement.
(e) Insurance. The Company shall have and maintain at all times with
respect to the Collateral such insurance as is required by the Amended and
Restated Credit Agreement, such insurance to be payable to the Agent and the
Lenders and to the Company as their interests may appear. All policies of
insurance shall provide for a minimum of thirty (30) days' prior written
cancellation notice to the Agent. In the event of failure to provide and
maintain insurance as herein provided, the Agent may, at its option, provide
such insurance, and the Company hereby promises to pay to the Agent on demand
the amount of any reasonable disbursements made by the Agent for such purpose.
The Company shall furnish to the Agent certificates or other evidence
satisfactory to the Agent of compliance with the foregoing insurance provisions.
The Agent may act as attorney for the Company in obtaining, adjusting, settling
and canceling such insurance and endorsing any drafts; and any amounts collected
or received under any such policies shall be applied by the Agent to the
Obligations in accordance with the provisions of Section 3 hereof, or at the
option of the Agent and the Required Lenders, the same may be released to the
Company, but such application or release shall not cure or waive any default
hereunder and no amount so released shall be deemed a payment on any Obligation
secured hereby.
(f) Maintenance of Collateral. The Company will keep the Collateral in
good order and repair and will not use the same in violation of law or any
policy of insurance thereon. The Agent and any Lender may inspect the Collateral
at any reasonable time, wherever located. Except as otherwise provided in the
Amended and Restated Credit Agreement, the Company will pay promptly when due
all taxes and assessments upon the Collateral or for its use or operation or
upon this Agreement. In its discretion, the Agent may discharge taxes and other
encumbrances at any time levied or placed on the Collateral, which remain unpaid
in violation of the Amended and Restated Credit Agreement, make repairs thereof
and pay any necessary filing fees. The Company agrees to reimburse the Agent on
demand for any and all expenditures so made, and until paid, the amount thereof
shall be a debt secured by the Collateral. The Agent
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shall have no obligation to the Company to make any such expenditures, nor shall
the making thereof relieve the Company of any default.
(g) Creation and Perfection of Lien. The Company represents and
warrants to the Agent and the Lenders and covenants with the Agent and the
Lenders that this Agreement creates a valid security interest in the Collateral
as security for the payment and performance of the Obligations. Upon the filing
of a UCC-l financing statement in the form attached hereto as Exhibit A (the
"Financing Statement") under the Uniform Commercial Code as the same may be in
effect from time to time in Washington, D.C. (the "UCC") and the filing of a
financing statement pursuant to the Personal Property Security Act (Ontario) in
Ontario, Canada, naming the Company as debtor and the Agent, for itself and for
the benefit of the Lenders, as secured party, all filings, assignments, pledges
and deposits of documents or instruments will have been made and all other
actions will have been taken that are necessary or advisable, under applicable
law, to establish and perfect the Agent's and the Lenders' security interest in
such of the Collateral as to which a security interest may be perfected by
filing under the UCC, and such security interest shall remain prior to all other
liens, except as contemplated by the Amended and Restated Credit Agreement. No
further filings, recordings or other actions are or will be necessary to
maintain the priority of such security interest other than the filing of UCC
continuation statements within six months prior to the expiration of a period of
five years after the original filing. The Collateral and the Agent's and
Lenders' rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Company is the owner of the
Collateral free from any adverse lien, security interest or encumbrance, except
as permitted by the Amended and Restated Credit Agreement as such agreement is
in effect on the date hereof.
(h) No Further Actions. Except for the filings referred to in paragraph
(g) above, no authorization, approval or other action by, and no notice of
filing with, any governmental authority or regulatory body or other Person that
has not been received, taken or made is required (i) for the grant by the
Company of the security interest granted hereby or for the execution, delivery
or performance of this Agreement by the Company, (ii) for the perfection and
maintenance of the security interest hereunder (including the first priority
nature of such security interest), or (iii) for the exercise by the Agent and/or
the Lenders of the rights or the remedies in respect of the Collateral pursuant
to this Agreement.
(i) Accounts Receivable. The Company shall keep or cause to be kept
separate records of accounts which are complete and accurate in all material
respects, and from time to time upon the request of the Agent, at reasonable
intervals and upon reasonable notice, shall deliver to the Agent and the Lenders
a list of the names, addresses, face value, and dates of invoices for each
debtor obligated on such an account receivable.
(j) Government Contracts. The Company agrees that, at the request of
the Agent and/or any Lender, it shall execute all such documents, and take all
such actions, as such Person shall reasonably determine to be necessary or
appropriate from time to time under the Federal Assignment of Claims Act of
1940, as amended, in order to confirm and assure to each of the Agent and the
Lenders its rights under this Agreement with respect to any and all Collateral
consisting of the Company's rights to monies due or to become due under any
contracts or
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agreements with or orders from the United States government or any agency or
department thereof, the assignment of which is not prohibited by such contract
or agreement (collectively, "Government Receivables"). Without limiting the
generality of the foregoing, the Company agrees that simultaneously with the
execution and delivery of this Agreement it shall execute and deliver to the
Agent a confirmatory assignment substantially in the form of Exhibit B attached
hereto (a "Confirmatory Assignment") with respect to each Government Receivable
existing on the date hereof where the aggregate proceeds payable to the Company
thereunder exceed $25,000, and within ten (10) Business Days after the creation
of any such new Government Receivable, the Company shall execute and deliver to
the Agent a Confirmatory Assignment with respect thereto. The Company hereby
irrevocably authorizes the Agent, or its designee, at the Company's expense, to
file (on behalf of itself and the Lenders) with the United States government (or
the appropriate agency or instrumentality thereof) a notice of each assignment
of a Government Receivable substantially in the form of Exhibit C attached
hereto (a "Notice of Assignment"), to which a copy of the relevant Confirmatory
Assignment may be attached, and appoints the Agent as the Company's
attorney-in-fact to execute and file any such Confirmatory Assignments, Notices
of Assignment and any ancillary documents relating thereto.
(k) Securities. The Company agrees that it shall forthwith deliver and
pledge to the Agent, for itself and for the benefit of the Lenders, all
certificates representing securities which it shall acquire, whether by
purchase, stock dividend, distribution of capital or otherwise, along with stock
powers or other appropriate instruments of assignment with respect thereto, duly
executed in blank.
(l) Cooperation. The Company agrees, after the occurrence of an Event
of Default, to take any actions that the Agent and/or the Required Lenders may
reasonably request in order to enable the Agent and the Lenders to obtain and
enjoy the full rights and benefits granted to them by the Amended and Restated
Credit Agreement and the other Credit Documents. The Company further consents to
the transfer of control or assignment of all or any portion of the Collateral to
a receiver, trustee, transferee, or similar official or to any purchaser of the
Collateral pursuant to any public or private sale, judicial sale, foreclosure or
exercise of other remedies available to the Agent and/or the Lenders as
permitted by the Credit Documents, applicable law or otherwise
(m) Further Assurances By the Company. The Company agrees to execute
and deliver to the Agent from time to time at its request all documents and
instruments, including financing statements, supplemental security agreements,
notices of assignments under the United States Assignment of Claims Act and
under similar or local statutes and regulations, and to take all action as the
Agent may reasonably deem necessary or proper to perfect or otherwise protect
the security interest and lien created hereby.
Section 5. POWER OF ATTORNEY.
-----------------
(a) The Company acknowledges the Agent's right, to the extent permitted
by applicable law, singly to execute and/or file financing or continuation
statements and similar notices required by applicable law, and amendments
thereto, concerning the Collateral without execution by the Company. A carbon,
photographic or other reproduction of this Agreement or
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any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(b) The Company hereby irrevocably appoints the Agent as the Company's
attorney-in-fact, effective at all times subsequent to the occurrence of an
Event of Default (as defined herein), and during the continuance thereof, with
full authority in the place and stead of the Company and in the name of the
Company or otherwise, to take any action and to execute any instrument which the
Agent may deem necessary or advisable to accomplish the purpose of this
Agreement, including, without limitation, the power and right (i) to endorse the
Company's name on any checks, notes, acceptances, money orders, drafts, filings
or other forms of payment or security that may come into the Agent's possession,
and (ii) to do all other things which the Agent then determines to be necessary
to carry out the terms of this Agreement. The Company ratifies and approves all
acts of such attorney-in-fact. The power conferred on the Agent hereunder is
solely to protect the Agent's and the Lenders' interests in the Collateral and
shall not impose any duty upon the Agent to exercise such power.
Section 6. SECURITIES AS COLLATERAL.
------------------------
(a) Upon the occurrence and during the continuance of an Event of
Default, the Agent may at any time, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations. If the
Agent so elects to exercise its right herein and gives notice of such election
to the Company, upon the occurrence and during the continuance of an Event of
Default to the extent permitted under applicable law, the Agent may vote any or
all of the securities constituting Collateral possessing voting rights (whether
or not the same shall have been transferred into its name or the name of its
nominee or nominees) and give all consents, waivers and ratifications in respect
of the securities constituting Collateral and otherwise act with respect thereto
as though it were the outright owner thereof, the Company hereby irrevocably
constituting and appointing the Agent the proxy and attorney-In-fact of the
Company, with full power of substitution, to do so. So long as no Event of
Default is continuing, the Company shall be entitled to receive all cash
dividends paid in respect of the securities of which the Company is the
registered owner, to vote such securities and to give consents, waivers and
ratifications in respect of such securities, provided that no vote shall be
cast, or consent, waiver or ratification given or action taken which would be
inconsistent with or violate any provisions of any of the Credit Documents or
this Agreement.
(b) Any sums paid upon or with respect to any of the securities upon
the liquidation or dissolution of the issuer thereof shall be paid over to the
Agent to be held by it as security for the Obligations; and in case any
distribution of capital shall be made on or in respect of any of the securities
or any property shall be distributed upon or with respect to any of the
securities pursuant to the recapitalization or reclassification of the capital
of the issuer thereof or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Agent to be held by it as security for the
Obligations. All sums of money and property paid or distributed in respect of
the securities upon such a liquidation, dissolution, recapitalization or
reclassification which are received by the Company shall, until paid or
delivered to the Agent, be held in trust for the Agent as security for the
Obligations.
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Section 7. ACCOUNTS RECEIVABLE. Until the Agent requests (after the
occurrence of an Event of Default and during the continuation thereof) that
debtors on accounts receivable of the Company or obligors on accounts, chattel
paper or general intangibles of the Company or obligors on instruments for which
a Company is an obligee or lessees or conditional vendees under agreements
governing the leasing or selling by conditional sale of Collateral by the
Company, be notified of the Agent's and Lenders' security interest, the Company
shall continue to collect payment thereof. Upon the making of such a request by
the Agent (after the occurrence of an Event of Default and during the
continuation thereof), the Company shall hold the proceeds received from
collection as trustee for the Agent and shall turn the same over to the Agent,
or to such other bank or Person as may be approved by the Agent, immediately
upon receipt in the identical form received. At the request of the Agent (after
the occurrence of an Event of Default and during the continuation thereof), the
Company shall so notify such account debtors and obligors that payment thereof
is to be made directly to the Agent, and the Agent may itself after the
occurrence of an Event of Default and during the continuation thereof, at any
time, without notice to or demand upon the Company, so notify such account
debtors and obligors. The making of such a request or the giving of any such
notification shall not affect the duties of the Company described above with
respect to proceeds of collection of accounts receivable received by the
Company. The Agent shall apply the proceeds of such collection received by the
Agent to the Obligations in accordance with Section 3 of this Agreement. The
application of the proceeds of such collection shall be conditional upon final
payment in cash or solvent credits of the items giving rise to them. If any item
is not so paid, the Agent in its discretion, whether or not the item is
returned, may either reverse any credit given for the item or charge it to any
deposit account maintained by the Company with the Agent.
Section 8. EVENTS OF DEFAULT; REMEDIES.
---------------------------
(a) Upon the occurrence of an Event of Default and during the
continuation thereof, whether or not the Obligations are due, the Agent may (on
behalf of itself and the Lenders) demand, ▇▇▇ for, collect, or make any
settlement or compromise it deems desirable with respect to the Collateral.
(b) An "Event of Default" hereunder shall mean (i) that a
representation, warranty or certification made by the Company in this Agreement
or in any document executed or delivered from time to time relating to this
Agreement is materially untrue, misleading or incomplete in its recital of any
facts at the time as of which such representation, warranty or certification, as
the case may be, is made or (ii) any Event of Default, as that term is defined
in any of the Credit Documents, whether or not any acceleration of the maturity
of the amounts due in respect of any of the Obligations shall have occurred.
(c) Upon the occurrence and during the continuance of an Event of
Default, to the fullest extent permitted by applicable law, in addition to the
remedies set forth elsewhere in this Agreement:
(i) The Agent shall have (on behalf of itself and the
Lenders), in addition to all other rights and remedies given it by any
instrument or other agreement evidencing, or executed and delivered in
connection with, any of the Obligations and otherwise allowed
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by law, the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Collateral
may be located and without limiting the generality of the foregoing,
the Agent may immediately, without (to the fullest extent permitted by
law) demand of performance or advertisement or notice of intention to
sell or of time or place of sale or of redemption or other notice or
demand whatsoever (except that the Agent shall give to the Company at
least ten days' notice of the time and place of any proposed sale or
other disposition), all of which are hereby expressly waived to the
fullest extent permitted by law, sell at public or private sale or
otherwise realize upon, in the City of Hartford, Connecticut, or
elsewhere, the whole or from time to time any part of the Collateral in
or upon which the Agent and/or the Lenders shall have a security
interest or lien hereunder, or any interest which the Company may have
therein, and after deducting from the proceeds of sale or other
disposition of the Collateral all expenses (including all reasonable
expenses for legal services, including, without limitation, reasonable
allocated costs of staff counsel) as provided in Section 12 hereof,
shall apply the residue of such proceeds toward the payment of the
Obligations in accordance with Section 3 of this Security Agreement,
the Company remaining liable for any deficiency remaining unpaid after
such application. If notice of any sale or other disposition is
required by law to be given to the Company, then the Company, the Agent
and the Lenders hereby agree that a notice given as hereinbefore
provided shall be reasonable notice of such sale or other disposition.
The Company also agrees to assemble the Collateral at such place or
places as the Agent reasonably designates by written notice. At any
such sale or other disposition the Agent and/or any Lender may itself,
and any other person or entity owed any Obligation may itself, purchase
the whole or any part of the Collateral sold, free from any right of
redemption on the part of the Company, which right is hereby waived and
released to the fullest extent permitted by law.
(ii) Furthermore, without limiting the generality of any of
the rights and remedies conferred upon the Agent and/or any Lender
under Section 8(c)(i) hereof, the Agent and/or any Lender to the
fullest extent permitted by law, may enter upon the premises of the
Company, exclude the Company or any guarantor therefrom and take
immediate possession of the Collateral, either personally or by means
of a receiver appointed by a court therefor, using all necessary force
to do so, and may, at its option, use, operate, manage and control the
Collateral in any lawful manner and may collect and receive all rents,
income, revenue, earnings, issues and profits therefrom, and may
maintain, repair, renovate, alter or remove the Collateral as the Agent
and/or such Lender may determine in its discretion, and any such monies
so collected or received by such Person shall be remitted to the Agent
and shall be applied to, or may be accumulated for application upon,
the Obligations in accordance with Section 3 of this Agreement.
(iii) Each of the Agent and the Lenders agrees that such
Person will give notice to the Company of any enforcement action taken
by it pursuant to this Section 8 promptly after commencing such action.
(iv) The Company recognizes that the Agent and/or the Lenders
may be unable to effect a public sale of securities constituting
Collateral by reason of certain prohibitions contained in the
Securities Act and may be compelled to resort to one or
-114-
more private sales thereof to a restricted group of purchasers
consistent with all applicable laws. The Company agrees that any such
private sales may be at prices and other terms less favorable to the
Company than if sold at public sales and that such private sales shall
not solely by reason thereof be deemed not to have been made in a
commercially reasonable manner. Neither the Agent nor the Lenders shall
be under any obligation to delay a sale of any of the securities for
the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of
1933, as amended, even if the issuer would agree to do so.
Section 9. MARSHALLING. Neither the Agent nor any Lender shall be
required to marshal any present or future security for (including but not
limited to this Agreement and the Collateral subject to the security interest
created hereby), or guarantees of, the Obligations or any of them, or to resort
to such security or guarantees in any particular order; and all of its rights
hereunder and in respect of such securities and guaranties shall be cumulative
and in addition to all other rights, however existing or arising. To the extent
that it lawfully may, the Company hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Agent's and/or any Lender's rights under this Agreement
or under any other instrument evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or guaranteed, and to the extent that it lawfully may do so the Company
hereby irrevocably waives the benefits of all such laws. Except as otherwise
provided by applicable law, neither the Agent nor the Lenders shall have any
duty as to the collection or protection of the Collateral or any income thereon,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the sole custody thereof.
Section 10. COMPANY'S OBLIGATIONS NOT AFFECTED. To the extent permitted
by law, the obligations of the Company under this Security Agreement shall
remain in full force and effect without regard to, and shall not be impaired by
(a) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Company, to the extent permitted by
law; (b) any exercise or nonexercise, or any waiver, by the Agent and/or any
Lender of any right, remedy, power or privilege under or in respect of any of
the Obligations or any security therefor (including this Agreement); (c) any
amendment to or modification of any instrument evidencing any of the Obligations
or pursuant to which any of them were issued; (d) any amendment to or
modification of any instrument or agreement (other than this Agreement) securing
any of the Obligations; or (e) the taking of additional security for or any
guaranty of any of the Obligations or the release or discharge or termination of
any security or guaranty for any of the Obligations; and whether or not the
Company shall have notice or knowledge of any of the foregoing.
Section 11. NO WAIVER. No failure on the part of the Agent and/or any
Lender to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by such Person of any right, remedy or power hereunder preclude any
other or future exercise of any other right, remedy or power. Each and every
right, remedy and power hereby granted to the Agent and/or any Lender or the
future holders of any of the Obligations or allowed to any of them by law or
other agreement, including, without limitation, each of the Credit Documents,
shall be cumulative and not
-115-
exclusive of any other, and, subject to the provisions of this Agreement, may be
exercised by the Agent and/or any Lender or the future holders of any of the
Obligations from time to time.
Section 12. EXPENSES. The Company agrees to pay, on demand, all
reasonable costs and expenses (including reasonable attorneys' fees and expenses
for legal services of every kind, including, without limitation, reasonable
allocated costs of staff counsel) of the Agent and/or any Lender incidental to
the sale of, or realization upon, any of the Collateral or in any way relating
to the perfection, enforcement or protection of the rights of such Person
hereunder; and the Agent and/or such Lenders may at any time apply to the
payment of all such costs and expenses all monies of the Company or other
proceeds arising from its possession or disposition of all or any portion of the
Collateral.
Section 13. CONSENTS, AMENDMENTS, WAIVERS. Any term of this Agreement
may be amended, and the performance or observance by the Company of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only in accordance with the terms of
Section 11.1 of the Amended and Restated Credit Agreement all of which are
incorporated herein by reference.
Section 14. GOVERNING LAW. Except as otherwise required by the laws of
any jurisdiction in which any Collateral is located, this Agreement shall for
all purposes be governed by and construed in accordance with the laws of the
State of New York.
Section 15. PARTIES IN INTEREST. All terms of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Company may not
assign or transfer its rights hereunder without the prior written consent of the
Agent and the Required Lenders. Any assignment or transfer by the Company of its
rights hereunder in violation of this Agreement shall be void.
Section 16. COUNTERPARTS. This Agreement and any amendment hereof may
be executed in several counterparts and by each party on a separate counterpart,
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
Section 17. TERMINATION. Upon payment in full of the Obligations in
accordance with their terms, this Agreement shall terminate and the Agent (on
behalf of itself and the Lenders) shall return to the Company, at the expense of
the Company, such Collateral in the possession or control of the Agent as has
not theretofore been disposed of pursuant to the provisions hereof and shall
deliver to the Company documents in recordable form sufficient to discharge the
liens and security interests granted hereunder.
Section 18. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications made or required to be given pursuant to this
Agreement shall be made in accordance with the provisions of Section 11.2 of the
Amended and Restated Credit Agreement.
Section 19. PREJUDGMENT REMEDY WAIVER. THE BORROWER ACKNOWLEDGES THAT
THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL
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TRANSACTION WITHIN THE MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES. THE BORROWER HEREBY WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING
OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS
AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL
PREJUDGMENT REMEDIES THAT EACH OF THE AGENT AND/OR THE LENDERS MAY EMPLOY TO
ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE BORROWER
ACKNOWLEDGES THAT THE AGENT'S AND/OR ANY LENDER'S ATTORNEY MAY, PURSUANT TO
CONN. GEN. STAT. SECTION 52-278F, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT
SECURING A COURT ORDER. THE BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO
NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY
AS AFORESAID AND EACH OF THE AGENT AND EACH LENDER ACKNOWLEDGES THE BORROWER'S
RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
Section 20. Conflict. In the event that there is a conflict between any
provision of this Agreement and the Amended and Restated Credit Agreement, then
the provisions of the Amended and Restated Credit Agreement shall control.
[Remainder of page intentionally left blank]
-117-
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed by its authorized representatives as of the date first written
above.
SCAN-OPTICS (CANADA), LTD.
By:_____________________________
Name:
Title:
PATRIARCH PARTNERS AGENCY
SERVICES, LLC, as Agent
By:_____________________________
Name:
Title:
ARK CLO 2000-1, LIMITED, as a Lender
By: Patriarch Partners, LLC,
its Collateral Manager
By:_____________________________
Name:
Title:
ZOHAR CDO 2003-1, LIMITED, as a Lender
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By:_____________________________
Name:
Title:
-118-
EXHIBIT A
---------
[UCC-1 Form]
-119-
EXHIBIT A
---------
Debtor: Secured Party:
------- -------------
Scan-Optics (Canada), Ltd. Patriarch Partners Agency Services, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ (the "Agent"), for itself and for the benefit
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ of the Lenders party to that certain Third
Amended and Restated Credit
Agreement among the Debtor,
the Agent and the other
parties thereto, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
All properties, assets and rights of the Debtor of every kind and
nature, wherever located, whether now owned or hereafter acquired or arising
(excluding motor vehicles), and all proceeds and products thereof, including,
without limitation, all goods, accounts (including all accounts receivable),
contract rights, rights to the payment of money (including tax refund claims,
insurance proceeds and tort claims), chattel paper, documents, instruments,
general intangibles, securities (together with all income therefrom, increases
thereunder and proceeds thereof), investment property (together with all income
therefrom, increases thereunder and proceeds thereof), patents, trademarks,
tradenames, copyrights, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature pursuant
to which the Debtor possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or pursuant to which others possess,
use or have authority to possess or use property (whether tangible or
intangible) of the Debtor, books and records, equipment, furniture, fixtures,
and all inventory and all other capital assets, raw materials, work in progress
and all substitutions and replacements thereof (all such properties, assets and
rights hereinafter sometimes called, collectively, the "Collateral").
-120-
EXHIBIT B
----------
FORM OF CONFIRMATORY ASSIGNMENT OF CONTRACT
-------------------------------------------
This ASSIGNMENT, dated as of March __, 2004, is by SCAN-OPTICS
(CANADA), LTD., a Canadian corporation organized under the Business Corporations
Act of Canada (the "Debtor") in favor of Patriarch Partners Agency Services, LLC
(the "Agent"), for itself and for the benefit of the Lenders (as defined in the
Security Agreement referred to below).
WHEREAS, the Debtor is party to Contract No. __________, dated
_____________, between the Debtor and ____________________ (the "Contract"); and
WHEREAS, the Debtor, the Agent and the Lenders have entered into a
certain Amended and Restated Security Agreement, dated as of March 24, 2004 (the
"Security Agreement"), pursuant to which the Debtor has granted to the Agent and
the Lenders, a security interest in certain assets of the Debtor, including all
of the Debtor's rights in, to and under the Contract, to secure the Obligations
referred to in the Security Agreement;
NOW, THEREFORE, the Debtor hereby confirms, acknowledges and agrees
that, pursuant to and subject to the terms of the Security Agreement, the Debtor
hereby assigns, transfers, pledges and grants to the Agent, for itself and for
the benefit of the Lenders, a security interest in all of the Debtor's right,
title and interest in and to all monies due or to become due under the Contract.
EXECUTED as of the date first above written.
SCAN-OPTICS (CANADA), LTD.
By:__________________________
Name:
Title:
-121-
EXHIBIT C
---------
FORM OF NOTICE OF ASSIGNMENT OF
ACCOUNTS RECEIVABLE AS SECURITY
Patriarch Partners Agency Services, LLC
Date:
To: [Contracting Official or Head of
Agency, and Disbursing Official]
Re: Payments to SCAN-OPTICS (CANADA), LTD.
Contract Number:
Made by the United States of America
Department:
Division:
For:
Dated:
Ladies and Gentlemen:
PLEASE TAKE NOTICE that monies due or to become due to SCAN-OPTICS
(CANADA), LTD. (the "Debtor") under the contract described above have been
assigned to Patriarch Partners Agency Services, LLC (the "Agent"), for itself
and for the benefit of certain other secured creditors, as security for certain
obligations of the Debtor to the Agent and such creditors, as described more
particularly in that certain Amended and Restated Security Agreement (a true and
correct copy of which is attached hereto), dated as of March 24, 2004, as in
effect from time to time. This notice is given pursuant to the provisions of the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727).
Payments due or to become due to the Debtor under the contract
described above should continue to be made to the Debtor until you receive
written notice from the Agent directing that such payments be made to another
party.
Please return to the undersigned (in the enclosed, self-addressed
stamped envelope) the enclosed extra copy of this notice with appropriate
notations showing the date and hour of receipt and duly signed by the person
acknowledging receipt on behalf of the addressee.
Very truly yours,
PATRIARCH PARTNERS AGENT
SERVICES, LLC, as Agent
By:______________________________
Authorized Official
-122-
>
IRREVOCABLY ACKNOWLEDGED
AND AGREED TO:
SCAN-OPTICS (CANADA), LTD.
By:________________________
Its
ACKNOWLEDGMENT OF RECEIPT
-------------------------
Receipt of the above notice and a copy of the Amended and Restated
Security Agreement described above is hereby acknowledged. These were received
at _______ a.m./p.m. on _____________, 20___.
------------------------------
Signature
n Behalf of: [Name and Title of
Addressee of Notice]
-123-
Schedule 1
----------
Intellectual Property
Trademarks and Trademark Registrations
--------------------------------------
None
-124-
Schedule 1
----------
Continued
---------
Foreign Trademarks and Trademark Registrations
----------------------------------------------
None
-125-
Schedule 1
----------
Continued
---------
ISSUED AND PENDING PATENTS
--------------------------
Patents Issued by U.S. Patent
-----------------------------
and Trademark Office
--------------------
None
-126-
Schedule 2
Collateral Locations
Scan-Optics (Canada), Ltd
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
-127-
Exhibit 3.1(i)(C)
Form of Amended and Restated Patent Collateral Assignment and Security Agreement
AMENDED AND RESTATED PATENT COLLATERAL ASSIGNMENT
----------------------------------------------------
AND SECURITY AGREEMENT
----------------------
AMENDED AND RESTATED PATENT COLLATERAL ASSIGNMENT AND SECURITY
AGREEMENT, dated as of March __, 2004, among SCAN-OPTICS, INC., a Delaware
corporation having its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Assignor"), PATRIARCH PARTNERS AGENCY
SERVICES, LLC (the "Agent"), for itself and for the benefit of the Lenders (as
defined in the Amended and Restated Credit Agreement (defined below)), and the
Lenders. Capitalized terms which are used herein without definition and which
are defined in the Third Amended and Restated Credit Agreement, dated as of the
date hereof, among SCAN-OPTICS, INC., as borrower, the Guarantors party thereto,
the Lenders party thereto and the Agent (as amended, restated, modified or
supplemented from time to time, the "Amended and Restated Credit Agreement")
shall have the same meanings herein as in the Amended and Restated Credit
Agreement.
W I T N E S S E T H:
WHEREAS, Ark CLO 2000-1, Limited ("Ark") has extended certain loans to
the Borrower pursuant to the Prior Credit Agreement;
WHEREAS, the Assignor has (i) granted a security interest in, and made
a collateral assignment of, the Assignor's interest in certain patents, patent
license rights and other patent rights in favor of Ark pursuant to the terms of
that certain Patent Collateral Assignment and Security Agreement, dated as of
April 7, 1993, between Ark (as assignee of Fleet National Bank, formerly known
as BankBoston, N.A., as successor/assignee of Bank of Boston Connecticut) and
the Assignor (as amended, supplemented, reaffirmed or otherwise modified from
time to time, the "Prior Patent Security Agreement");
WHEREAS, the parties wish to amend and restate the obligations of the
Assignor and the other parties under the Prior Credit Agreement and the Prior
Patent Security Agreement by entering into this Patent Agreement, the Amended
and Restated Credit Agreement, and the other Credit Documents;
WHEREAS, in consideration of the Agent and the Lenders entering into
the Amended and Restated Credit Agreement and the making of other financial
accommodations to the Borrower and the other Credit Parties under the Amended
and Restated Credit Agreement and the other Credit Documents, the Assignor
hereby reaffirms and continues its grant of security interest in, and collateral
assignment of, the Patent Collateral, and hereby grants a security interest in,
and collaterally assigns, the Patent Collateral, to the Agent, for itself and
for the benefit of the Lenders, on the terms set forth herein;
WHEREAS, it is a condition precedent to the Agent and the Lenders
making of any loans or otherwise extending credit to or making other financial
accommodations to the Assignor
-128-
under the Amended and Restated Credit Agreement and the other Credit Documents
that the Assignor execute and deliver to the Agent and the Lenders a patent
agreement in substantially the form hereof;
WHEREAS, the Assignor has executed and delivered to the Agent and the
Lenders an Amended and Restated Security Agreement, dated as of the date hereof
(the "Assignor Security Agreement"), pursuant to which the Assignor has granted
and continued to grant to the Agent and the Lenders a security interest in
substantially all of the Assignor's personal property and fixture assets,
including without limitation the patents and patent applications listed on
Schedule A attached hereto, all to secure the payment and performance of the
Obligations; and
WHEREAS, this Patent Agreement is supplemental to the provisions
contained in the Assignor Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to amend and restate
the Prior Patent Security Agreement as follows:
ss. 1. Definitions. The following terms shall have the meanings set
forth in thisss.1 or elsewhere in this Patent Agreement referred to below:
Patent Agreement. This Amended and Restated Patent Collateral
Assignment and Security Agreement, as amended and in effect from time to time.
Patent Collateral. All of the Assignor's right, title and interest in
and to all of the Patents, the Patent License Rights, and all other Patent
Rights, and all additions, improvements, and accessions to, all substitutions
for and replacements of, and all products and Proceeds (including insurance
proceeds) of any and all of the foregoing, and all books and records and
technical information and data describing or used in connection with any and all
such rights, interests, assets or property.
Patent License Rights. Any and all past, present or future rights and
interests of the Assignor pursuant to any and all past, present and future
licensing agreements in favor of the Assignor, or to which the Assignor is a
party, pertaining to any Patents, or Patent Rights, owned or used by third
parties in the past, present or future, including the right in the name of the
Assignor or the Agent to enforce, and ▇▇▇ and recover for, any past, present or
future breach or violation of any such agreement.
Patent Rights. Any and all past, present or future rights in, to and
associated with the Patents throughout the world, whether arising under federal
law, state law, common law, foreign law, or otherwise, including but not limited
to the following: all such rights arising out of or associated with the Patents;
the right (but not the obligation) to register claims under any federal, state
or foreign patent law or regulation; the right (but not the obligation) to ▇▇▇
or bring opposition or bring cancellation proceedings in the name of the
Assignor or the Agent for any and all past, present and future infringements of
or any other damages or injury to the Patents or the Patent Rights, and the
rights to damages or profits due or accrued arising out of or in
-129-
connection with any such past, present or future infringement, damage or injury;
and the Patent License Rights.
Patents. All patents and patent applications, whether United States or
foreign, that are owned by the Assignor or in which the Assignor has any right,
title or interest, now or in the future, including but not limited to:
(a) the patents and patent applications listed on Schedule A
hereto (as the same may be amended pursuant hereto from time to time);
(b) all letters patent of the United States or any other
country, and all applications for letters patent of the United States or any
other country;
(c) all re-issues, continuations, divisions,
continuations-in-part, renewals or extensions thereof;
(d) the inventions disclosed or claimed therein, including the
right to make, use, practice and/or sell (or license or otherwise transfer or
dispose of) the inventions disclosed or claimed therein; and
(e) the right (but not the obligation) to make and prosecute
applications for such Patents.
Proceeds. Any consideration received from the sale, exchange, license,
lease or other disposition or transfer of any right, interest, asset or property
which constitutes all or any part of the Patent Collateral, any value received
as a consequence of the ownership, possession, use or practice of any Patent
Collateral, and any payment received from any insurer or other person or entity
as a result of the destruction or the loss, theft or other involuntary
conversion of whatever nature of any right, interest, asset or property which
constitutes all or any part of the Patent Collateral.
PTO. The United States Patent and Trademark Office.
ss. 2. Grant of Security Interest. To secure the payment and
performance in full of all of the Obligations, the Assignor hereby grants,
assigns, transfers and conveys to the Agent, for itself and for the benefit of
the Lenders, BY WAY OF COLLATERAL SECURITY, all of the Patent Collateral.
NEITHER THE AGENT NOR ANY LENDER ASSUMES ANY LIABILITY ARISING IN ANY WAY BY
REASON OF ITS HOLDING SUCH COLLATERAL SECURITY.
ss. 3. Representations, Warranties and Covenants. The Assignor
represents, warrants and covenants that: (a) Schedule A attached hereto sets
forth a true and complete list of all the patents, rights to patents and patent
applications now owned, licensed, controlled or used by the Assignor; (b) the
issued Patents are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the issued Patents; (c) to
the best of the Assignor's knowledge, each of the issued Patents is valid and
enforceable; (d) to the best of the Assignor's knowledge,
-130-
there is no infringement by others of the issued Patents or Patent Rights; (e)
no claim has been made that the use of any of the Patents does or may violate
the rights of any third person, and to the best of the Assignor's knowledge
there is no infringement by the Assignor of the patent rights of others; (f) the
Assignor is the sole and exclusive owner of the entire and unencumbered right,
title and interest in and to each of the Patents (other than ownership and other
rights reserved by third party owners with respect to Patents which the Assignor
is licensed to practice or use), free and clear, of any liens, charges,
encumbrances and adverse claims, including without limitation pledges,
assignments, licenses, shop rights and covenants by the Assignor not to ▇▇▇
third persons, other than the security agreement and mortgage created by the
Assignor Security Agreement and this Patent Agreement; (g) the Assignor has the
unqualified right to enter into this Patent Agreement and perform its terms and
has entered and will enter into written agreements with each of its present and
future employees, agents, consultants, licensors and licensees which will enable
it to comply with the covenants herein contained; (h) this Patent Agreement,
together with the Assignor Security Agreement, will create in favor of the Agent
and the Lenders a valid and perfected first priority security interest in the
Patent Collateral upon making the filings referred to in clause (i) of this
ss.3; and (i) except for the filing of financing statements with the Delaware
Secretary of State under the Uniform Commercial Code and the filing of this
Patent Agreement with the PTO, no authorization, approval or other action by,
and no notice to or filing with, any governmental or regulatory authority,
agency or office is required either (1) for the grant by the Assignor or the
effectiveness of the security interest and assignment granted hereby or for the
execution, delivery and performance of this Patent Agreement by the Assignor, or
(2) for the perfection of or the exercise by Agent and/or the Lenders of any of
their rights and remedies hereunder.
ss. 4. No Transfer or Inconsistent Agreements. Without the prior
written consent of the Agent and the Required Lenders, the Assignor will not (a)
mortgage, pledge, assign, encumber, grant a security interest in, transfer,
license or alienate any of the Patent Collateral, or (b) enter into any
agreement (for example, a license agreement) that is inconsistent with the
Assignor's obligations under this Patent Agreement or the Assignor Security
Agreement.
ss. 5. After-acquired Patents, Etc.
(a) If, before the Obligations shall have been finally paid and
satisfied in full, the Assignor shall obtain any right, title or interest in or
to any other or new patents, patent applications or patentable inventions, or
become entitled to the benefit of any patent application or patent or any
reissue, division, continuation, renewal, extension, or continuation-in-part of
any of the Patent Collateral or any improvement on any of the Patent Collateral,
the provisions of this Patent Agreement shall automatically apply thereto and
the Assignor shall promptly give to the Agent notice thereof in writing and
execute and deliver to the Agent (for the benefit of the Agent and the Lenders)
such documents or instruments as the Agent may reasonably request further to
transfer title thereto to the Agent and the Lenders.
(b) The Assignor authorizes the Agent to modify this Patent Agreement,
without the necessity of the Assignor's further approval or signature, by
amending Schedule A hereto to include any future or other Patents or Patent
Rights under ss. 2 or ss. 5 hereof.
-131-
ss. 6. Patent Prosecution.
------------------
(a) The Assignor shall assume full and complete responsibility for the
prosecution, grant, enforcement or any other necessary or desirable actions in
connection with the Patent Collateral, and shall hold the Agent and the Lenders
harmless from any and all costs, damages, liabilities and expenses which may be
incurred by the Agent and/or the Lenders in connection with the Agent's and/or
the Lenders' title to any of the Patent Collateral or any other action or
failure to act in connection with this Patent Agreement or the transactions
contemplated hereby. In respect of such responsibility, the Assignor shall
retain patent counsel acceptable to the Agent.
(b) The Assignor shall have the duty, through patent counsel acceptable
to the Agent, to prosecute diligently any patent applications of the Patents
pending as of the date of this Patent Agreement or thereafter, to make
application for unpatented but reasonably patentable inventions and to preserve
and maintain all rights in the Patents, including without limitation the payment
when due of all maintenance fees and other fees, taxes and other expenses which
shall be incurred or which shall accrue with respect to any of the Patents. Any
expenses incurred in connection with such applications and actions shall be
borne by the Assignor. The Assignor shall not abandon any filed patent
application, or any pending patent application or patent, without the consent of
the Agent, which consent shall not be unreasonably withheld. The Agent hereby
appoints the Assignor as its agent for all matters referred to in the foregoing
provisions of this ss.6 and agrees to execute any documents necessary to confirm
such appointment. Upon the occurrence and during the continuance of an Event of
Default, the Agent may terminate such agency by providing written notice of
termination to the Assignor.
(c) The Assignor shall have the right, with the consent of the Agent,
which shall not be unreasonably withheld, to bring suit or other action in the
Assignor's own name to enforce the Patents and the Patent Rights. The Agent
and/or Lenders shall be required to join in such suit or action as may be
necessary to ensure the Assignor's ability to bring and maintain any such suit
or action in any proper forum so long as the Agent and/or Lenders are completely
satisfied that such joinder will not subject the Agent and/or any Lender to any
risk of liability. The Assignor shall promptly, upon demand, reimburse and
indemnify the Agent and each Lender for all damages, costs and expenses,
including legal fees, incurred by such Person pursuant to this ss. 6.
(d) In general, the Assignor shall take any and all such actions
(including but not limited to institution and maintenance of suits, proceedings
or actions) as may be necessary or appropriate to properly maintain, protect,
preserve, care for and enforce the Patent Collateral. The Assignor shall not
take or fail to take any action, nor permit any action to be taken or not taken
by others under its control, which would affect the validity, grant or
enforcement of any of the Patent Collateral.
(e) Promptly upon obtaining knowledge thereof, the Assignor will notify
the Agent in writing of the institution of, or any final adverse determination
in, any proceeding in the PTO or any similar office or agency of the United
States or any foreign country, or any court, regarding the validity of any of
the Patents or the Assignor's rights, title or interests in and to any of the
Patent Collateral, and of any event which does or reasonably could materially
adversely affect
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the value of any of the Patent Collateral, the ability of the Assignor, the
Agent and/or the Lenders to dispose of any of the Patent Collateral or the
rights and remedies of the Agent and/or the Lenders in relation thereto
(including but not limited to the levy of any legal process against any of the
Patent Collateral).
ss. 7. License Back to Assignor. Unless and until there shall have
occurred and be continuing an Event of Default and the Agent has notified the
Assignor that the license granted hereunder is terminated, the Agent hereby
grants to the Assignor the sole and exclusive, nontransferable, royalty-free,
worldwide right and license under the Patents to make, have made for it, use,
sell and otherwise practice the inventions disclosed and claimed in the Patents
for the Assignor's own benefit and account and for none other; provided,
however, that the foregoing right and license shall be no greater in scope than,
and limited by, the rights assigned to the Agent, for itself and for the benefit
of the Lenders, by the Assignor hereby. The Assignor agrees not to sell, assign,
transfer, encumber or sublicense its interest in the license granted to the
Assignor in this ss.7, without the prior written consent of the Agent. Any such
sublicenses granted on or after the date hereof shall be terminable by the Agent
upon termination of the Assignor's license hereunder.
ss. 8. Remedies. If any Event of Default shall have occurred and be
continuing, then upon notice by the Agent to the Assignor: (a) the Assignor's
license with respect to the Patents as set forth in ss. 7 shall terminate; (b)
the Assignor shall immediately cease and desist from the practice, manufacture,
use and sale of the inventions claimed, disclosed or covered by the Patents; and
(c) the Agent and the Lenders shall have, in addition to all other rights and
remedies given it by this Patent Agreement, the Amended and Restated Credit
Agreement, the Security Agreements, and the other Credit Documents, those
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in the State of New York and, without limiting the
generality of the foregoing, the Agent may immediately, without demand of
performance and without other notice (except as set forth next below) or demand
whatsoever to the Assignor, all of which are hereby expressly waived, and
without advertisement, sell or license at public or private sale or otherwise
realize upon the whole or from time to time any part of the Patent Collateral,
or any interest which the Assignor may have therein, and after deducting from
the proceeds of sale or other disposition of the Patent Collateral all expenses
(including all reasonable expenses for broker's fees and legal services), shall
apply the residue of such proceeds toward the payment of the Obligations as set
forth in the Assignor Security Agreement. Notice of any sale, license or other
disposition of any of the Patent Collateral shall be given to the Assignor at
least five (5) days before the time that any intended public sale or other
disposition of such Patent Collateral is to be made or after which any private
sale or other disposition of such Patent Collateral may be made, which the
Assignor hereby agrees shall be reasonable notice of such public or private sale
or other disposition. At any such sale or other disposition, the Agent and/or
any Lender may, to the extent permitted under applicable law, purchase or
license the whole or any part of the Patent Collateral or interests therein
sold, licensed or otherwise disposed of.
ss. 9. Collateral Protection. If the Assignor shall fail to do any act
that it has covenanted to do hereunder, or if any representation or warranty of
the Assignor shall be breached, the Agent, in its own name or that of the
Assignor (in the sole discretion of the Agent),
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may (but shall not be obligated to) do such act or remedy such breach (or cause
such act to be done or such breach to be remedied), and the Assignor agrees
promptly to reimburse the Agent for any cost or expense incurred by the Agent in
so doing.
ss. 10. Power of Attorney. If any Event of Default shall have occurred
and be continuing, the Assignor does hereby make, constitute and appoint the
Agent (and any officer or agent of the Agent as the Agent may select in its
exclusive discretion) as the Assignor's true and lawful attorney-in-fact, with
the power to endorse the Assignor's name on all applications, documents, papers
and instruments necessary for the Agent and/or the Lenders to use any of the
Patent Collateral, to practice, make, use or sell the inventions disclosed or
claimed in any of the Patent Collateral, to grant or issue any exclusive or
nonexclusive license of any of the Patent Collateral to any third person, or
necessary for the Agent and/or any Lender to assign, pledge, convey or otherwise
transfer title in or dispose of the Patent Collateral or any part thereof or
interest therein to any third person, and, in general, to execute and deliver
any instruments or documents and do all other acts which the Assignor is
obligated to execute and do hereunder. The Assignor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof, and
releases the Agent and each Lender from any claims, liabilities, causes of
action or demands arising out of or in connection with any action taken or
omitted to be taken by the Agent and/or any Lender under this power of attorney
(except for the gross negligence or willful misconduct of the Agent and/or any
Lender, as applicable). This power of attorney shall be irrevocable for the
duration of this Patent Agreement.
ss. 11. Further Assurances. The Assignor shall, at any time and from
time to time, and at its expense, make, execute, acknowledge and deliver, and
file and record as necessary or appropriate with governmental or regulatory
authorities, agencies or offices, such agreements, assignments, documents and
instruments, and do such other and further acts and things (including, without
limitation, obtaining consents of third parties), as the Agent may request or as
may be necessary or appropriate in order to implement and effect fully the
intentions, purposes and provisions of this Patent Agreement, or to assure and
confirm to the Agent and the Lenders the grant, perfection and priority of the
Agent's and Lenders' security interest in any of the Patent Collateral.
ss. 12. Termination. At such time as all of the Obligations have been
finally paid and satisfied in full, this Patent Agreement shall terminate and
the Agent shall, upon the written request and at the expense of the Assignor,
execute and deliver to the Assignor all deeds, assignments and other instruments
as may be necessary or proper to reassign and reconvey to and re-vest in the
Assignor the entire right, title and interest to the Patent Collateral
previously granted, assigned, transferred and conveyed to the Agent and the
Lenders by the Assignor pursuant to this Patent Agreement, as fully as if this
Patent Agreement had not been made, subject to any disposition of all or any
part thereof which may have been made by the Agent and/or any Lender pursuant
hereto or the Assignor Security Agreement.
ss. 13. Course of Dealing. No course of dealing among the Assignor and
the Agent or the Lenders, nor any failure to exercise, nor any delay in
exercising, on the part of the Agent or the Lenders, any right, power or
privilege hereunder or under the Assignor Security Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
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privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
ss. 14. Expenses. Any and all fees, costs and expenses, of whatever
kind or nature, including the reasonable attorneys' fees and legal expenses
incurred by the Agent and/or any Lender in connection with the preparation of
this Patent Agreement and all other documents relating hereto, the consummation
of the transactions contemplated hereby or the enforcement hereof, the filing or
recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
fees, encumbrances or otherwise protecting, maintaining or preserving any of the
Patent Collateral, or in defending or prosecuting any actions or proceedings
arising out of or related to any of the Patent Collateral, shall be borne and
paid by the Assignor.
ss. 15. Overdue Amounts. Until paid, all amounts due and payable by the
Assignor hereunder shall be a debt secured by the Patent Collateral and other
Collateral and shall bear, whether before or after judgment, interest at the
rate of interest for overdue principal set forth in the Amended and Restated
Credit Agreement.
ss. 16. No Assumption of Liability; Indemnification. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, NEITHER THE AGENT NOR ANY LENDER
ASSUMES ANY LIABILITIES OF THE ASSIGNOR WITH RESPECT TO ANY CLAIM OR CLAIMS
REGARDING THE ASSIGNOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR
PURPORTED RIGHTS ARISING FROM, ANY OF THE PATENT COLLATERAL OR ANY PRACTICE,
USE, LICENSE OR SUBLICENSE THEREOF, OR ANY PRACTICE, MANUFACTURE, USE OR SALE OF
ANY OF THE INVENTIONS DISCLOSED OR CLAIMED THEREIN, WHETHER ARISING OUT OF ANY
PAST, CURRENT OR FUTURE EVENT, CIRCUMSTANCE, ACT OR OMISSION OR OTHERWISE. ALL
OF SUCH LIABILITIES SHALL BE EXCLUSIVELY BORNE BY THE ASSIGNOR, AND THE ASSIGNOR
SHALL INDEMNIFY THE AGENT AND THE LENDERS FOR ANY AND ALL COSTS, EXPENSES,
DAMAGES AND CLAIMS, INCLUDING LEGAL FEES, INCURRED BY THE AGENT AND THE LENDERS
WITH RESPECT TO SUCH LIABILITIES.
ss. 17. Rights and Remedies Cumulative. All of the Agent's and Lenders'
rights and remedies with respect to the Patent Collateral, whether established
hereby or by the Assignor Security Agreement or by any other agreements or by
law, shall be cumulative and may be exercised singularly or concurrently. This
Patent Agreement is supplemental to the Assignor Security Agreement, and nothing
contained herein shall in any way derogate from any of the rights or remedies of
the Agent and/or the Lenders contained therein. Nothing contained in this Patent
Agreement shall be deemed to extend the time of attachment or perfection of or
otherwise impair the security interest in any of the Patent Collateral granted
to the Agent and the Lenders under the Assignor Security Agreement.
ss. 18. Notices. All notices and other communications made or required
to be given pursuant to this Patent Agreement shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first-class
mail, postage prepaid, or sent by telegraph,
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telecopy or telex and confirmed by delivery via courier or postal service,
addressed as follows:
(a) if to the Assignor, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: President, Fax: ▇▇▇-▇▇▇-▇▇▇▇, or at such other
address for notice as the Assignor shall last have furnished in writing
to the person giving the notice; and
(b) if to the Agent and/or the Lenders, c/o Patriarch Partners Agency
Services, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, or at such
other address for notice as the Agent and/or any Lender shall last have
furnished in wiring to the person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand to a responsible
officer of the party to which it is directed, at the time of the receipt thereof
by such officer, (ii) if sent by registered or certified first-class mail,
postage prepaid, two (2) Business Days after the posting thereof, and (iii) if
sent by telegraph, telecopy, or telex, at the time of the dispatch thereof, if
in normal business hours in the country of receipt, or otherwise at the opening
of business on the following Business Day.
ss. 19. Amendment and Waiver. This Patent Agreement is subject to
modification only by a writing signed by the Agent, the Required Lenders and the
Assignor, except as provided in ss.5 (b). Neither the Agent nor any Lender shall
be deemed to have waived any right hereunder unless such waiver shall be in
writing and signed by such Person. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.
ss. 20. Governing Law; Consent to Jurisdiction. THIS PATENT AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK. The Assignor agrees that any suit for the enforcement of this Patent
Agreement may be brought in the courts of the City and State of New York or any
federal court sitting in the City and State of New York and consents to the
non-exclusive jurisdiction of such court and to service of process in any such
suit being made upon the Assignor by mail at the address specified in ss.18. The
Assignor hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient court.
ss. 21. Waiver of Jury Trial. THE ASSIGNOR WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS PATENT AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
the Assignor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Assignor (a) certifies that neither the Agent nor any
Lender, nor any representative, agent or attorney of the Agent or any Lender,
has represented, expressly or otherwise, that the Agent or any Lender would not,
in the event of litigation, seek to enforce the foregoing waivers, and (b)
acknowledges that, in entering into the Amended and Restated Credit Agreement
and the other Credit Documents to which the Agent and/or the Lenders are a
party,
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the Agent and the Lenders are relying upon, among other things, the waivers and
certifications contained in this ss. 21.
ss.22. Prejudgment Remedy Waiver. THE ASSIGNOR ACKNOWLEDGES THAT THE
FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE ASSIGNOR HEREBY WAIVES THE
RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR
FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE AGENT AND/OR
THE LENDERS MAY EMPLOY TO ENFORCE THEIR RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, THE ASSIGNOR ACKNOWLEDGES THAT THE AGENT'S AND/OR ANY LENDERS'
ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT. ss.52-278F, ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE ASSIGNOR ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT
FOR PREJUDGMENT REMEDY AS AFORESAID AND THE EACH OF THE AGENT AND THE LENDERS
ACKNOWLEDGES THE ASSIGNOR'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF
SAID WRIT.
ss. 23. Miscellaneous. The headings of each section of this Patent
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Patent Agreement and all rights and obligations hereunder shall be
binding upon the Assignor and its successors and assigns, and shall inure to the
benefit of the Agent and the Lenders and their successors and assigns. In the
event of any irreconcilable conflict between the provisions of this Patent
Agreement and the Amended and Restated Credit Agreement, or between this Patent
Agreement and the Assignor Security Agreement, the provisions of the Amended and
Restated Credit Agreement or the Assignor Security Agreement, as the case may
be, shall control. If any term of this Patent Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby, and this Patent Agreement shall be construed and
be enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Assignor acknowledges receipt of a copy of this Patent
Agreement.
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IN WITNESS WHEREOF, this Patent Agreement has been executed as of the
day and year first above written.
SCAN-OPTICS, INC.
By: _____________________________
Name:
Title:
PATRIARCH PARTNERS AGENCY
SERVICES, LLC, as Agent
By: _____________________________
Name:
Title:
ARK CLO 2000-1, LIMITED, as Lender
By: Patriarch Partners, LLC,
its Collateral Manager
By: _____________________________
Name:
Title:
ZOHAR CDO 2003-1, LIMITED, as Lender
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By: _____________________________
Name:
Title:
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CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ______________)
) ss:
COUNTY OF ____________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ___ day of ____________, personally appeared
___________________ to me known personally, and who, being by me duly sworn,
deposes and says that he/she is the ___________ of Scan-Optics, Inc., and that
said instrument was signed and sealed on behalf of said corporation by authority
of its Board of Directors, and said Scan-Optics, Inc. acknowledged said
instrument to be the free act and deed of said corporation.
Notary Public
My commission expires:
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Schedule A
ISSUED AND PENDING PATENTS
Patents Issued by U.S. Patent
and Trademark Office
--------------------
Patent No. Issue Date Owner (s) Title
---------- ---------- --------- -----
4,813,077 03/14/89 Scan-Optics, Inc. Sales Transaction Record
Processing System and Method
4,817,179 03/28/89 Scan-Optics, Inc. Digital Image Enhancement Meth. &
Apparatus
5,386,482 01/31/1995 Scan-Optics, Inc. Address block location method and
apparatus
6,212,130 04/03/2001 Scan-Optics, Inc. Method and apparatus for plural
document detection
5,850,480 12/15/1998 Scan-Optics, Inc. OCR error correction methods and
apparatus utilizing contextual
comparison
5,445,369 08/29/1995 Scan-Optics, Inc. Method of and apparatus for moving
documents
Patents Pending with U.S. Patent
and Trademark Office
Serial No. Filing Date Inventor(s) Title
---------- ----------- ----------- -----
SOI/125/US 01/12/2001 Scan-Optics, Inc.
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Exhibit 3.1(i)(D)
Form of Amended and Restated Trademark Collateral Security and Pledge Agreement
AMENDED AND RESTATED TRADEMARK COLLATERAL SECURITY
--------------------------------------------------
AND PLEDGE AGREEMENT
--------------------
AMENDED AND RESTATED TRADEMARK COLLATERAL SECURITY AND PLEDGE AGREEMENT
dated as of March __, 2004, between SCAN-OPTICS, INC., a Delaware corporation
having its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Assignor"), PATRIARCH PARTNERS AGENCY SERVICES, LLC (the
"Agent"), for itself and for the benefit of the Lenders (as defined in the
Amended and Restated Credit Agreement (defined below)), and the Lenders.
Capitalized terms which are used herein without definition and which are defined
in the Third Amended and Restated Credit Agreement, dated as of the date hereof,
among SCAN-OPTICS, INC., as borrower, the Guarantors party thereto, the Lenders
party thereto and the Agent (as amended, restated, modified or supplemented from
time to time, the "Amended and Restated Credit Agreement") shall have the same
meanings herein as in the Amended and Restated Credit Agreement.
W I T N E S S E T H:
WHEREAS, Ark CLO 2000-1, Limited ("Ark") has extended certain
loans to the Borrower pursuant to the Prior Credit Agreement;
WHEREAS, the Assignor has (i) granted a security interest in,
and made a collateral assignment of, the Assignor's interest in certain
trademarks, service marks and other rights in favor of Ark pursuant to the terms
of that certain Trademark Collateral Security and Pledge Agreement, dated as of
April 7, 1993, between Ark (as assignee of Fleet National Bank, formerly known
as BankBoston, N.A., as successor/assignee of Bank of Boston Connecticut) and
the Assignor (as amended, supplemented, reaffirmed or otherwise modified from
time to time, the "Prior Trademark Security Agreement");
WHEREAS, the parties wish to amend and restate the obligations
of the Assignor and the other parties under the Prior Credit Agreement and the
Prior Trademark Security Agreement by entering into this Trademark Agreement,
the Amended and Restated Credit Agreement, and the other Credit Documents;
WHEREAS, in consideration of the Agent and the Lenders
entering into the Amended and Restated Credit Agreement and the making of other
financial accommodations to the Borrower and the other Credit Parties under the
Amended and Restated Credit Agreement and the other Credit Documents, the
Assignor hereby reaffirms and continues its grant of security interest in, and
pledge and mortgage of, the Pledged Trademarks, and hereby grants a
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security interest in, and pledges and mortgages, the Pledged Trademarks, to the
Agent, for itself and for the benefit of the Lenders, on the terms set forth
herein;
WHEREAS, it is a condition precedent to the Agent and the Lenders
making of any loans or otherwise extending credit to or making other financial
accommodations to the Assignor under the Amended and Restated Credit Agreement
and the other Credit Documents that the Assignor execute and deliver to the
Agent and the Lenders a trademark agreement in substantially the form hereof;
WHEREAS, the Assignor has executed and delivered to the Agent and the
Lenders an Amended and Restated Security Agreement, dated as of the date hereof
(the "Assignor Security Agreement"), pursuant to which the Assignor has granted
and continued to grant to the Agent and the Lenders a security interest in
substantially all of the Assignor's personal property and fixture assets,
including without limitation the trademarks, service marks, trademark and
service ▇▇▇▇ registrations, and trademark and service ▇▇▇▇ registration
applications listed on Schedule A attached hereto, all to secure the payment and
performance of the Obligations; and
WHEREAS, this Trademark Agreement is supplemental to the provisions
contained in the Assignor Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to amend and restate
the Prior Trademark Security Agreement as follows:
Section 1. Definitions. The following terms shall have the meanings set
forth in this ss.1 or elsewhere in this Trademark Agreement referred to below:
Assignment of Marks. Seess.2(a).
Associated Goodwill. All goodwill of the Assignor and its business,
products and services appurtenant to, associated with or symbolized by the
Trademarks and the use thereof.
Pledged Trademarks. All of the Assignor's right, title and interest in
and to all of the Trademarks, the Trademark Registrations, the Trademark License
Rights, the Trademark Rights, the Associated Goodwill, the Related Assets, and
all accessions to, substitutions for, replacements of, and all products and
proceeds of any and all of the foregoing.
PTO. The United States Patent and Trademark Office.
Related Assets. All assets, rights and interests of the Assignor that
uniquely reflect or embody the Associated Goodwill, including the following:
(a) all patents, inventions, copyrights, trade secrets, confidential
information, formulae, methods or processes, compounds, recipes, know-how,
methods and operating systems, drawings, descriptions, formulations,
manufacturing and production and delivery procedures, quality control
procedures, product and service specifications, catalogs, price lists, and
advertising materials, relating to the manufacture, production, delivery,
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provision and sale of goods or services under or in association with any of the
Trademarks; and
(b) the following documents and things in the possession or under the
control of the Assignor, or subject to its demand for possession or control,
related to the production, delivery, provision and sale by the Assignor, or any
affiliate, franchisee, licensee or contractor, of products or services sold by
or under the authority of the Assignor in connection with the Trademarks or
Trademark Rights, whether prior to, on or subsequent to the date hereof:
(i) all lists, contracts, ancillary documents and other information
that identify, describe or provide information with respect to any customers,
dealers or distributors of the Assignor, its affiliates or franchisees or
licensees or contractors, for products or services sold under or in connection
with the Trademarks or Trademark Rights, including all lists and documents
containing information regarding each customer's, dealer's or distributor's name
and address, credit, payment, discount, delivery and other sale terms, and
history, pattern and total of purchases by brand, product, style, size and
quantity;
(ii) all agreements (including franchise agreements), product and
service specification documents and operating, production and quality control
manuals relating to or used in the design, manufacture, production, delivery,
provision and sale of products or services under or in connection with the
Trademarks or Trademark Rights;
(iii) all documents and agreements relating to the identity and
locations of all sources of supply, all terms of purchase and delivery, for all
materials, components, raw materials and other supplies and services used in the
manufacture, production, provision, delivery and sale of products or services
under or in connection with the Trademarks or Trademark Rights; and
(iv) all agreements and documents constituting or concerning the
present or future, current or proposed advertising and promotion by the Assignor
(or any of its affiliates, franchisees, licensees or contractors) of products or
services sold under or in connection with the Trademarks or Trademark Rights.
Trademark Agreement. This Amended and Restated Trademark Collateral
Security and Pledge Agreement, as amended and in effect from time to time.
Trademark License Rights. Any and all past, present or future rights
and interests of the Assignor pursuant to any and all past, present and future
franchising or licensing agreements in favor of the Assignor, or to which the
Assignor is a party, pertaining to any Trademarks, Trademark Registrations or
Trademark Rights owned or used by third parties in the past, present or future,
including the right (but not the obligation) in the name of the Assignor or the
Agent to enforce, and ▇▇▇ and recover for, any breach or violation of any such
agreement to which the Assignor is a party.
Trademark Registrations. All past, present or future federal, state,
local and foreign registrations of the Trademarks, all past, present and future
applications for any such registrations (and any such registrations thereof upon
approval of such applications), together
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with the right (but not the obligation) to apply for such registrations (and
prosecute such applications) in the name of the Assignor or the Agent, and to
take any and all actions necessary or appropriate to maintain such registrations
in effect and renew and extend such registrations.
Trademark Rights. Any and all past, present or future rights in, to and
associated with the Trademarks throughout the world, whether arising under
federal law, state law, common law, foreign law or otherwise, including the
following: all such rights arising out of or associated with the Trademark
Registrations; the right (but not the obligation) to register claims under any
state, federal or foreign trademark law or regulation; the right (but not the
obligation) to ▇▇▇ or bring opposition or cancellation proceedings in the name
of the Assignor or the Agent for any and all past, present and future
infringements or dilution of or any other damages or injury to the Trademarks,
the Trademark Rights, or the Associated Goodwill, and the rights to damages or
profits due or accrued arising out of or in connection with any such past,
present or future infringement, dilution, damage or injury; and the Trademark
License Rights.
Trademarks. All of the trademarks, service marks, designs, logos,
indicia, trade names, corporate names, company names, business names, fictitious
business names, trade styles, elements of package or trade dress, and other
source and product or service identifiers, used or associated with or
appurtenant to the products, services and businesses of the Assignor, that (a)
are set forth on Schedule A hereto, or (b) have been adopted, acquired, owned,
held or used by the Assignor or are now owned, held or used by the Assignor, in
the Assignor's business, or with the Assignor's products and services, or in
which the Assignor has any right, title or interest, or (c) are in the future
adopted, acquired, owned, held and used by the Assignor in the Assignor's
business or with the Assignor's products and services, or in which the Assignor
in the future acquires any right, title or interest.
Use. With respect to any Trademark, all uses of such Trademark by, for
or in connection with the Assignor or its business or for the direct or indirect
benefit of the Assignor or its business, including all such uses by the Assignor
itself, by any of the affiliates of the Assignor, or by any franchisee, licensee
or contractor of the Assignor.
Section 2. Grant of Security Interest.
(a) As collateral security for the payment and performance in full of
all of the Obligations, the Assignor hereby unconditionally grants to the Agent,
for itself and for the benefit of the Lenders, a continuing security interest in
and first priority lien on the Pledged Trademarks, and pledges and mortgages
(but does not transfer title to) the Pledged Trademarks to the Agent, for itself
and for the benefit of the Lenders. In addition, the Assignor has executed in
blank and delivered to the Agent (for itself and for the benefit of the Lenders)
an assignment of federally registered trademarks in substantially the form of
Exhibit 1 hereto (the "Assignment of Marks"). The Assignor hereby authorizes the
Agent (for itself and for the benefit of the Lenders) to complete as assignee
and record with the PTO the Assignment of Marks upon the occurrence and during
the continuance of an Event of Default and the proper exercise of the Agent's
and Lenders' remedies under this Trademark Agreement and the Assignor Security
Agreement.
(b) In addition to, and not by way of limitation of, the grant, pledge
and mortgage of
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the Pledged Trademarks provided in ss.2(a), the Assignor grants, assigns,
transfers, conveys and sets over to the Agent (for itself and for the benefit of
the Lenders) the Assignor's entire right, title and interest in and to the
Pledged Trademarks; provided that such grant, assignment, transfer and
conveyance shall be and become of force and effect only (i) upon or after the
occurrence and during the continuance of an Event of Default and (ii) either (A)
upon the written demand of the Agent at any time during such continuance or (B)
immediately and automatically (without notice or action of any kind by the
Agent) upon an Event of Default for which acceleration of the Loans is automatic
under the Amended and Restated Credit Agreement or upon the sale or other
disposition of or foreclosure upon the Collateral pursuant to the Assignor
Security Agreement and applicable law (including the transfer or other
disposition of the Collateral by the Assignor to the Agent or its nominee in
lieu of foreclosure).
(c) Pursuant to the Assignor Security Agreement the Assignor has
granted to the Agent (for itself and for the benefit of the Lenders) a
continuing security interest in and lien on the Collateral (including the
Pledged Trademarks). The Assignor Security Agreement, and all rights and
interests of the Agent and the Lenders in and to the Collateral (including the
Pledged Trademarks) thereunder, are hereby ratified and confirmed in all
respects. In no event shall this Trademark Agreement, the grant, assignment,
transfer and conveyance of the Pledged Trademarks hereunder, or the recordation
of this Trademark Agreement (or any document hereunder) with the PTO, adversely
affect or impair, in any way or to any extent, the Assignor Security Agreement,
the security interest of the Agent and/or the Lenders in the Collateral
(including the Pledged Trademarks) pursuant to the Assignor Security Agreement
and this Trademark Agreement, the attachment and perfection of such security
interest under the Uniform Commercial Code (including the security interest in
the Pledged Marks), or any present or future rights and interests of the Agent
and/or the Lenders in and to the Collateral under or in connection with the
Assignor Security Agreement, this Trademark Agreement or the Uniform Commercial
Code. Any and all rights and interests of the Agent and/or the Lenders in and to
the Pledged Trademarks (and any and all obligations of the Assignor with respect
to the Pledged Trademarks) provided herein, or arising hereunder or in
connection herewith, shall only supplement and be cumulative and in addition to
the rights and interests of the Agent and the Lenders (and the obligations of
the Assignor) in, to or with respect to the Collateral (including the Pledged
Trademarks) provided in or arising under or in connection with the Assignor
Security Agreement and shall not be in derogation thereof.
Section 3. Representations. Warranties and Covenants. The Assignor
represents, warrants and covenants that: (a) Schedule A sets forth a true and
complete list of all Trademarks and Trademark Registrations now owned, licensed,
controlled or used by the Assignor; (b) the Trademarks and Trademark
Registrations are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the Trademarks or Trademark
Registrations; (c) to the best of the Assignor's knowledge, each of the
Trademarks and Trademark Registrations is valid and enforceable; (d) to the best
of the Assignor's knowledge, there is no infringement by others of the
Trademarks, Trademark Registrations or Trademark Rights; (e) no claim has been
made that the use of any of the Trademarks does or may violate the rights of any
third person, and to the best of the Assignor's knowledge, there is no
infringement by the Assignor of the trademark rights of others; (f) the Assignor
is the sole and exclusive owner of the entire and unencumbered
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right, title and interest in and to each of the Trademarks (other than ownership
and other rights reserved by third party owners with respect to, Trademarks that
the Assignor is licensed to use), free and clear of any liens, charges,
encumbrances and adverse claims, including pledges, assignments, licenses,
registered user agreements and covenants by the Assignor not to ▇▇▇ third
persons, other than the security interest and assignment created by the Assignor
Security Agreement and this Trademark Agreement; (g) the Assignor has the
unqualified right to enter into this Trademark Agreement and to perform its
terms and has entered and will enter into written agreements with each of its
present and future employees, agents, consultants, licensors and licensees that
will enable them to comply with the covenants herein contained; (h) the Assignor
has used, and will continue to use, proper statutory and other appropriate
proprietary notices in connection with its use of the Trademarks; (i) the
Assignor has used, and will continue to use for the duration of this Trademark
Agreement, consistent standards of quality in its manufacture and provision of
products and services sold or provided under the Trademarks; (j) this Trademark
Agreement, together with the Assignor Security Agreement, will create in favor
of the Agent and the Lenders a valid and perfected first priority security
interest in the Pledged Trademarks upon making the filings referred to in clause
(k) of this ss.3; and (k) except for the filing of financing statements with the
Delaware Secretary of State under the Uniform Commercial Code and the recording
of this Trademark Agreement with the PTO, no authorization, approval or other
action by, and no notice to or filing with, any governmental or regulatory
authority, agency or office is required either (i) for the grant by the Assignor
or the effectiveness of the security interest and assignment granted hereby or
for the execution, delivery and performance of this Trademark Agreement by the
Assignor, or (ii) for the perfection of or the exercise by the Agent and/or the
Lenders of any of their rights and remedies hereunder.
Section 4. Inspection Rights. The Assignor hereby grants to the Agent,
the Lenders and their employees and agents the right to visit the Assignor's
plants and facilities that manufacture, inspect or store products sold under any
of the Trademarks, and to inspect the products and quality control records
relating thereto at reasonable times during regular business hours.
Section 5. No Transfer or Inconsistent Agreements. Without the prior
written consent of the Agent and the Required Lenders, the Assignor will not (a)
mortgage, pledge, assign, encumber, grant a security interest in, transfer,
license or alienate any of the Pledged Trademarks, or (b) enter into any
agreement (for example, a license agreement) that is inconsistent with the
Assignor's obligations under this Trademark Agreement or the Assignor Security
Agreement.
Section 6. After-acquired Trademarks, Etc.
(a) If, before the Obligations shall have been finally paid and
satisfied in full, the Assignor shall obtain any right, title or interest in or
to any other or new Trademarks, Trademark Registrations or Trademark Rights, the
provisions of this Trademark Agreement shall automatically apply thereto and the
Assignor shall promptly provide to the Agent notice thereof in writing and
execute and deliver to the Agent (for itself and for the benefit of the Lenders)
such documents or instruments as the Agent may reasonably request further to
implement, preserve or evidence the Agent's and Lenders' interest therein.
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(b) The Assignor authorizes the Agent to modify this Trademark
Agreement and the Assignment of Marks, without the necessity of the Assignor's
further approval or signature, by amending Exhibit A hereto and the Annex to the
Assignment of Marks to include any future or other Trademarks, Trademark
Registrations or Trademark Rights under ss.2 or ss.6.
Section 7. Trademark Prosecution.
(a) The Assignor shall assume full and complete responsibility for the
prosecution, defense, enforcement or any other necessary or desirable actions in
connection with the Pledged Trademarks, and shall hold the Agent and the Lenders
harmless from any and all costs, damages, liabilities and expenses that may be
incurred by the Agent and/or the Lenders in connection with the Agent's and/or
the Lenders' interest in the Pledged Trademarks or any other action or failure
to act in connection with this Trademark Agreement or the transactions
contemplated hereby. In respect of such responsibility, the Assignor shall
retain trademark counsel acceptable to the Agent.
(b) The Assignor shall have the right and the duty, through trademark
counsel acceptable to the Agent, to prosecute diligently any trademark
registration applications of the Trademarks pending as of the date of this
Trademark Agreement or thereafter, to preserve and maintain all rights in the
Trademarks and Trademark Registrations, including the filing of appropriate
renewal applications and other instruments to maintain in effect the Trademark
Registrations and the payment when due of all registration renewal fees and
other fees, taxes and other expenses that shall be incurred or that shall accrue
with respect to any of the Trademarks or Trademark Registrations. Any expenses
incurred in connection with such applications and actions shall be borne by the
Assignor. The Assignor shall not abandon any filed trademark registration
application, or any Trademark Registration or Trademark, without the consent of
the Agent, which consent shall not be unreasonably withheld.
(c) The Assignor shall have the right and the duty to bring suit or
other action in the Assignor's own name to maintain and enforce the Trademarks,
the Trademark Registrations and the Trademark Rights. The Assignor may require
the Agent and/or the Lenders to join in such suit or action as necessary to
ensure the Assignor's ability to bring and maintain any such suit or action in
any proper forum if (but only if) the Agent and/or the Lenders are completely
satisfied that such joinder will not subject the Agent and/or any Lender to any
risk of liability. The Assignor shall promptly, upon demand, reimburse and
indemnify the Agent and each Lender for all damages, costs and expenses,
including legal fees, incurred by such Persons pursuant to this ss.7 (c).
(d) In general, the Assignor shall take any and all such actions
(including institution and maintenance of suits, proceedings or actions) as may
be necessary or appropriate to properly maintain, protect, preserve, care for
and enforce the Pledged Trademarks. The Assignor shall not take or fail to take
any action, nor permit any action to be taken or not taken by others under its
control, that would adversely affect the validity, grant or enforcement of the
Pledged Trademarks.
(e) Promptly upon obtaining knowledge thereof, the Assignor will notify
the Agent in writing of the institution of, or any final adverse determination
in, any proceeding in the PTO or
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any similar office or agency of the United States or any foreign country, or any
court, regarding the validity of any of the Trademarks or Trademark
Registrations or the Assignor's rights, title or interests in and to the Pledged
Trademarks, and of any event that does or reasonably could materially adversely
affect the value of any of the Pledged Trademarks, the ability of the Assignor,
the Agent and/or the Lenders to dispose of any of the Pledged Trademarks or the
rights and remedies of the Agent and/or the Lenders in relation thereto
(including but not limited to the levy of any legal process against any of the
Pledged Trademarks).
Section 8. Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent and the Lenders shall have, in addition to all
other rights and remedies given it by this Trademark Agreement (including,
without limitation, those set forth in ss.2(b)), the Amended and Restated Credit
Agreement, the Assignor Security Agreement and the other Credit Documents, those
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in the State of New York and, without limiting the
generality of the foregoing, the Agent may immediately, without demand of
performance and without other notice (except as set forth next below) or demand
whatsoever to the Assignor, all of which are hereby expressly waived, sell or
license at public or private sale or otherwise realize upon the whole or from
time to time any part of the Pledged Trademarks, or any interest that the
Assignor may have therein, and after deducting from the proceeds of sale or
other disposition of the Pledged Trademarks all expenses incurred by the Agent
and/or any Lender in attempting to enforce this Trademark Agreement (including
all reasonable expenses for broker's fees and legal services), shall apply the
residue of such proceeds toward the payment of the Obligations as set forth in
or by reference in the Assignor Security Agreement. Notice of any sale, license
or other disposition of the Pledged Trademarks shall be given to the Assignor at
least five (5) days before the time that any intended public sale or other
public disposition of the Pledged Trademarks is to be made or after which any
private sale or other private disposition of the Pledged Trademarks may be made,
which the Assignor hereby agrees shall be reasonable notice of such public or
private sale or other disposition. At any such sale or other disposition, the
Agent and/or any Lender may, to the extent permitted under applicable law,
purchase or license the whole or any part of the Pledged Trademarks or interests
therein sold, licensed or otherwise disposed of.
Section 9. Collateral Protection. If the Assignor shall fail to do any
act that it has covenanted to do hereunder, or if any representation or warranty
of the Assignor shall be breached, the Agent, in its own name or that of the
Assignor (in the sole discretion of the Agent), may (but shall not be obligated
to) do such act or remedy such breach (or cause such act to be done or such
breach to be remedied), and the Assignor agrees promptly to reimburse the Agent
for any cost or expense incurred by the Agent in so doing.
Section 10. Power of Attorney. If any Event of Default shall have
occurred and be continuing, the Assignor does hereby make, constitute and
appoint the Agent (and any officer or agent of the Agent as the Agent may select
in its exclusive discretion) as the Assignor's true and lawful attorney-in-fact,
with full power of substitution and with the power to endorse the Assignor's
name on all applications, documents, papers and instruments necessary for the
Agent and/or the Lenders to use the Pledged Trademarks, or to grant or issue any
exclusive or nonexclusive license of any of the Pledged Trademarks to any third
person, or to take any and all actions necessary for the Agent and/or any Lender
to assign, pledge, convey or otherwise
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transfer title in or dispose of any of the Pledged Trademarks or any interest of
the Assignor therein to any third person, and, in general, to execute and
deliver any instruments or documents and do all other acts that the Assignor is
obligated to execute and do hereunder. The Assignor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof and
releases the Agent and each Lender from any claims, liabilities, causes of
action or demands arising out of or in connection with any action taken or
omitted to be taken by the Agent and/or any Lender under this power of attorney
(except for the gross negligence or willful misconduct of the Agent and/or any
Lender, as applicable). This power of attorney is coupled with an interest and
shall be irrevocable for the duration of this Trademark Agreement.
Section 11. Further Assurances. The Assignor shall, at any time and
from time to time, and at its expense, make, execute, acknowledge and deliver,
and file and record as necessary or appropriate with governmental or regulatory
authorities, agencies or offices, such agreements, assignments, documents and
instruments, and do such other and further acts and things (including, without
limitation, obtaining consents of third parties), as the Agent may request or as
may be necessary or appropriate in order to implement and effect fully the
intentions, purposes and provisions of this Trademark Agreement, or to assure
and confirm to the Agent and the Lenders the grant, perfection and priority of
the Agent's and Lenders' security interest in the Pledged Trademarks.
Section 12. Termination. At such time as all of the Obligations have
been finally paid and satisfied in full, this Trademark Agreement shall
terminate and the Agent shall, upon the written request and at the expense of
the Assignor, execute and deliver to the Assignor all deeds, assignments and
other instruments as may be necessary or proper to reassign and reconvey to and
re-vest in the Assignor the entire right, title and interest to the Pledged
Trademarks previously granted, assigned, transferred and conveyed to the Agent
and the Lenders by the Assignor pursuant to this Trademark Agreement, as fully
as if this Trademark Agreement had not been made, subject to any disposition of
all or any part thereof that may have been made by the Agent and/or any Lender
pursuant hereto or the Assignor Security Agreement.
Section 13. Course of Dealing. No course of dealing among the Assignor
and the Agent or the Lenders, nor any failure to exercise, nor any delay in
exercising, on the part of the Agent or the Lenders, any right, power or
privilege hereunder or under the Assignor Security Agreement or any other
agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
Section 14. Expenses. Any and all fees, costs and expenses, of whatever
kind or nature, including the reasonable attorneys' fees and expenses incurred
by the Agent and/or any Lender in connection with the preparation of this
Trademark Agreement and all other documents relating hereto, the consummation of
the transactions contemplated hereby or the enforcement hereof, the filing or
recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
or renewal fees, encumbrances, or otherwise protecting, maintaining or
preserving the Pledged Trademarks, or in defending or prosecuting any actions or
proceedings arising out of or related to the Pledged Trademarks, shall be borne
and paid by the Assignor.
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Section 15. Overdue Amounts. Until paid, all amounts due and payable by
the Assignor hereunder shall be a debt secured by the Pledged Trademarks and
other Collateral and shall bear, whether before or after judgment, interest at
the rate of interest for overdue principal set forth in the Amended and Restated
Credit Agreement.
Section 16. No Assumption of Liability; Indemnification.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, NEITHER THE AGENT NOR
ANY LENDER ASSUMES ANY LIABILITIES OF THE ASSIGNOR WITH RESPECT TO ANY CLAIM OR
CLAIMS REGARDING THE ASSIGNOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS
OR PURPORTED RIGHTS ARISING FROM, ANY OF THE PLEDGED TRADEMARKS OR ANY USE,
LICENSE OR SUBLICENSE THEREOF, WHETHER ARISING OUT OF ANY PAST, CURRENT OR
FUTURE EVENT, CIRCUMSTANCE, ACT OR OMISSION OR OTHERWISE. ALL OF SUCH
LIABILITIES SHALL BE EXCLUSIVELY THE RESPONSIBILITY OF THE ASSIGNOR, AND THE
ASSIGNOR SHALL INDEMNIFY THE AGENT AND THE LENDERS FOR ANY AND ALL COSTS,
EXPENSES, DAMAGES AND CLAIMS, INCLUDING LEGAL FEES, INCURRED BY THE AGENT AND
THE LENDERS WITH RESPECT TO SUCH LIABILITIES.
Section 17. Notices. All notices and other communications made or
required to be given pursuant to this Trademark Agreement shall be in writing
and shall be delivered in hand, mailed by United States registered or certified
first-class mail, postage prepaid, or sent by telegraph, telecopy or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Assignor, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: President, Fax: ▇▇▇-▇▇▇-▇▇▇▇ or at such other address for
notice as the Assignor shall last have furnished in writing to the person giving
the notice; and
(b) if to the Agent and/or the Lenders, c/o Patriarch Partners Agency
Services, LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, or at such other address for
notice as the Agent and/or any Lender shall last have furnished in writing to
the person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand to a responsible
officer of the party to which it is directed, at the time of the receipt thereof
by such officer, (ii) if sent by registered or certified first-class mail,
postage prepaid, two (2) Business Days after the posting thereof, and (iii) if
sent by telegraph, telecopy, or telex, at the time of the dispatch thereof, if
in normal business hours in the country of receipt, or otherwise at the opening
of business on the following Business Day.
Section 18. Amendment and Waiver. This Trademark Agreement is subject
to modification only by a writing signed by the Agent, the Required Lenders and
the Assignor, except as provided in ss.6 (b). Neither the Agent nor any Lender
shall be deemed to have waived any right hereunder unless such waiver shall be
in writing and signed by such Person. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.
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Section 19. Governing Law; Consent to Jurisdiction. THIS TRADEMARK
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK. The Assignor agrees that any suit for the enforcement of
this Trademark Agreement may be brought in the courts of the City and State of
New York or any federal court sitting in the City and State of New York and
consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Assignor by mail at the address
specified in ss.17. The Assignor hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient court.
Section 20. Waiver of Jury Trial. THE ASSIGNOR WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS TRADEMARK AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
the Assignor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Assignor (a) certifies that neither the Agent nor any Lender
nor any representative, agent or attorney of the Agent or any Lender, has
represented, expressly or otherwise, that the Agent or any Lender would not, in
the event of litigation, seek to enforce the foregoing waivers, and (b)
acknowledges that, in entering into the Amended and Restated Credit Agreement
and the other Credit Documents to which the Agent and/or the Lenders are a
party, the Agent and the Lenders are relying upon, among other things, the
waivers and certifications contained in this ss.20.
Section 21. Prejudgment Remedy Waiver. THE ASSIGNOR ACKNOWLEDGES THAT
THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE ASSIGNOR HEREBY WAIVES ITS
RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR
FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE AGENT AND/OR
THE LENDERS MAY EMPLOY TO ENFORCE THEIR RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, THE ASSIGNOR ACKNOWLEDGES THAT THE AGENT'S AND/OR ANY LENDER'S
ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT. ss.52-278F, ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE ASSIGNOR ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT
FOR PREJUDGMENT REMEDY AS AFORESAID AND EACH OF THE AGENT AND THE LENDERS
ACKNOWLEDGES THE ASSIGNOR'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF
SAID WRIT.
Section 22. Miscellaneous. The headings of each section of this
Trademark Agreement are for convenience only and shall not define or limit the
provisions thereof. This Trademark Agreement and all rights and obligations
hereunder shall be binding upon the Assignor and its respective successors and
assigns, and shall inure to the benefit of the Agent and the Lenders and their
successors and assigns. In the event of any irreconcilable conflict
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between the provisions of this Trademark Agreement and the Amended and Restated
Credit Agreement, or between this Trademark Agreement and the Assignor Security
Agreement, the provisions of the Amended and Restated Credit Agreement or the
Assignor Security Agreement, as the case may be, shall control. If any term of
this Trademark Agreement shall be held to be invalid, illegal or unenforceable,
the validity of all other terms hereof shall in no way be affected thereby, and
this Trademark Agreement shall be construed and be enforceable as if such
invalid, illegal or unenforceable term had not been included herein. The
Assignor acknowledges receipt of a copy of this Trademark Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Trademark Agreement has been executed as of
the day and year first above written.
SCAN-OPTICS, INC.
By:____________________
Name:
Title:
PATRIARCH PARTNERS AGENCY
SERVICES, LLC, as Agent
By:____________________
Name:
Title:
ARK CLO 2000-1, LIMITED, as a Lender
By: Patriarch Partners, LLC,
its Collateral Manager
By:____________________
Name:
Title:
ZOHAR CDO 2003-1, LIMITED, as a Lender
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By:____________________
Name:
Title:
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CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ______________)
) ss.
COUNTY OF ____________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of __________________, personally appeared
__________________ to me known personally, and who, being by me duly sworn,
deposes and says that he/she is the ____________________ of Scan-Optics, Inc.,
and that said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said corporation acknowledged said
instrument to be the free act and deed of said corporation.
-------------------------------
Notary Public
My commission expires:
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Schedule A
Trademarks and Trademark Registrations
Trademark Registrations - -
or United States Patent and Trademark Office
Service ▇▇▇▇ Registration No. Registration Date
------------ ---------------- -----------------
SO 946,297 10/31/1972
SCAN-OPTICS 949,308 12/26/1972
VISTAFORM 2360545 06/20/2000
VISTACAPTURE 2385948 06/20/2000
VISTASTAT 2385947 06/20/2000
Trademark Pending Applications - -
or United States Patent and Trademark Office
Service ▇▇▇▇ Serial No. Filing Date
------------ --------- -----------
None
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Schedule A
----------
Continued
---------
Foreign Trademarks and Trademark Registrations
----------------------------------------------
Trademark Registrations - -
Country/ Or
Reference Service ▇▇▇▇ Registration No. Registration Date
----------- ------------ ---------------- -----------------
CANADA
SOI/T01/9/CA SO & Design 191,952 06/22/73
SOI/T02/9/CA SCAN-OPTICS 193,821 09/07/73
JAPAN
SOI/T01/9/JP SO & Design 1,225,188 10/07/76
ITALY
SOI/T01A/9/IT SO & Design 09/12/91 T091C001933
SOI/T02A/9/IT SCAN-OPTICS 09/12/91 T091C001939
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Exhibit 1
ASSIGNMENT OF TRADEMARKS AND SERVICE MARKS (U. S.)
WHEREAS, SCAN-OPTICS, INC., a corporation organized and existing under
the laws of the State of Delaware, having a place of business at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Assignor"), has adopted and used and
is using the trademarks and service marks (the "Marks") identified on the Annex
hereto, and is the owner of the registrations of and pending registration
applications for such Marks in the United States Patent and Trademark Office
identified on such Annex; and
WHEREAS,_________________________________________________, a
____________organized and existing under the laws of the State of _____________,
having a place of business at _____________________________ (the "Assignee"), is
desirous of acquiring the Marks and the registrations thereof and registration
applications therefore;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign, sell and transfer unto
the Assignee all right, title and interest in and to the Marks, together with
(a) the registrations of and registration applications for the Marks, (b) the
goodwill of the business symbolized by and associated with the Marks and the
registrations thereof, and (c) the right to ▇▇▇ and recover for, and the right
to profits or damages due or accrued arising out of or in connection with, any
and all past, present or future infringements or dilution of or damage or injury
to the Marks or the registrations thereof or such associated goodwill.
This Assignment of Trademarks and Service Marks (U.S.) is intended to
and shall take effect as a sealed instrument at such time as the Assignee shall
complete this instrument by inserting its name in the second paragraph above and
signing its acceptance of this Assignment of Trademarks and Service Marks (U.S.)
below.
IN WITNESS WHEREOF, the Assignor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this _____ day of
March, 2004.
SCAN-OPTICS, INC.
By:_________________
Name:
Title:
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The foregoing assignment of the Marks and the registrations thereof and
registration applications thereof or by the Assignor to the Assignee is hereby
accepted as of the _______ day of ________ __, 20__.
[Assignee]
By: _____________________
Title:
STATE OF ______________)
) ss.
COUNTY OF ____________)
On this the _____ day of ________________, before me appeared
________________, the person who signed this instrument, who acknowledged that
he/she is the __________________ of Scan-Optics, Inc. and that being duly
authorized he/she signed such instrument as a free act on behalf of Scan-Optics,
Inc.
-----------------------
Notary Public
[Seal]
My commission expires:
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Annex
Trademark Registrations - -
or United States Patent and Trademark Office
Service ▇▇▇▇ Registration No. Registration Date
------------ ---------------- ----------------
SO & Design 946,297 10/31/72
SCAN-OPTICS 949,308 12/26/72
VISTAFORM 2360545 06/20/2000
VISTACAPTURE 2385948 09/12/2000
VISTASTAT 2385947 09/12/2000
Trademark Pending Applications - -
Or United States Patent and Trademark Office
Service ▇▇▇▇ Serial No. Filing Date
------------ --------- -----------
None
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Annex - Continued
Foreign Trademarks and Trademark Registration
Trademark Registrations - -
Country/ or
Reference Service ▇▇▇▇ Registration No. Registration Date
------------ ---------------- ----------------
CANADA
SOI/T01/9/CA SO & Design 191,952 06/22/1973
SOI/T02/9/CA SCAN-OPTICS 193,821 09/07/1973
JAPAN
SOI/T01/9/JP SO & Design 1,225,188 10/07/1976
ITALY
SOI/T01A/9/IT SO & Design T091C001933 09/12/1991
SOI/T02A/9/IT SCAN-OPTICS T091C001939 09/12/1991
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Exhibit 3.1(j)
Form of Amended and Restated Stock Pledge Agreement
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this "Pledge
Agreement") is made as of March 30, 2004, among SCAN-OPTICS, INC., a Delaware
corporation (the "Pledgor"), PATRIARCH PARTNERS AGENCY SERVICES, LLC (the
"Agent"), for itself and for the benefit of the Lenders (as defined in the
Amended and Restated Credit Agreement (defined below)), and the Lenders.
Capitalized terms which are used herein without definition and which are defined
in the Third Amended and Restated Credit Agreement, dated as of the date hereof,
among the Pledgor, as borrower, the Guarantors party thereto, the Lenders party
thereto and the Agent (as amended, restated, modified or supplemented from time
to time, the "Amended and Restated Credit Agreement") shall have the same
meanings herein as in the Amended and Restated Credit Agreement.
WITNESSETH:
WHEREAS, Ark CLO 2000-1, Limited ("Ark") has extended certain loans to
the Borrower pursuant to the Prior Credit Agreement;
WHEREAS, the Pledgor has granted a security interest in, and made a
pledge of, the Pledgor's interest in certain securities in favor of Ark pursuant
to the terms of that certain Stock Pledge Agreement, dated as of April 7, 1993,
between Ark (as assignee of Fleet National Bank, formerly known as BankBoston,
N.A., as successor/assignee of Bank of Boston Connecticut) and the Pledgor (as
amended, supplemented, reaffirmed or otherwise modified from time to time, the
"Prior Pledge Agreement");
WHEREAS, the parties wish to amend and restate the obligations of the
Pledgor and the other parties under the Prior Credit Agreement and the Prior
Pledge Agreement by entering into this Pledge Agreement, the Amended and
Restated Credit Agreement and the other Credit Documents;
WHEREAS, in consideration of the Agent and the Lenders entering into
the Amended and Restated Credit Agreement and the making of other financial
accommodations to the Borrower and the other Credit Parties under the Amended
and Restated Credit Agreement and the other Credit Documents, the Pledgor hereby
reaffirms and continues its grant of security interest in, and pledge of, the
Pledged Securities, and hereby grants a security interest in, and pledges, the
Pledged Securities, to the Agent, for itself and for the benefit of the Lenders,
on the terms set forth herein;
WHEREAS, it is a condition precedent to the Agent and the Lenders
making any loans or otherwise extending credit to or making other financial
accommodations to the Pledgor under the Amended and Restated Credit Agreement
and the other Credit Documents that the Pledgor execute and deliver to the Agent
and the Lenders a pledge agreement in substantially the form hereof;
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WHEREAS, the Pledgor has executed and delivered to the Agent and the
Lenders an Amended and Restated Security Agreement, dated as of the date hereof
(the "Pledgor Security Agreement"), pursuant to which the Pledgor has granted
and continues to grant to the Agent and the Lenders a security interest in
substantially all of the Pledgor's personal property and fixture assets,
including without limitation the securities listed on Exhibit A attached hereto,
all to secure the payment and performance of the Obligations (as hereinafter
defined); and
WHEREAS, this Pledge Agreement is supplemental to the provisions
contained in the Pledgor Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree to amend and restate the Prior
Pledge Agreement as follows:
Section 1. Pledge. As security for the due and punctual and
unconditional payment and performance of the Obligations (as hereinafter
defined), Pledgor hereby delivers and pledges to the Agent, for itself and for
the benefit of the Lenders, the securities listed on Exhibit A hereto and any
other or additional securities and any and all accretions, accessions and rights
relating thereto, at the time pledged with the Agent (for itself and for the
benefit of the Lenders) hereunder (the "Pledged Securities"), and Pledgor hereby
pledges, assigns, transfers and grants to the Agent (for itself and for the
benefit of the Lenders) a security interest in and lien on all of the Pledged
Securities. The certificates representing the Pledged Securities (whether now
existing or hereafter received as a result of stock dividends, stock splits or
otherwise) are accompanied by stock powers duly executed in blank by the Pledgor
as the registered owner of the Pledged Securities. The Pledgor will not cause or
permit certificated securities comprising any of the Pledged Securities to be
converted to uncertificated securities. The term "Pledged Securities" as used in
this Pledge Agreement shall include, in addition to the aforesaid securities,
any other securities or collateral which may from time to time be delivered
hereunder as security for the Obligations, together with all the proceeds of any
of the foregoing.
Section 2. Obligations. The Pledged Securities from time to time held
hereunder shall secure the following obligations (herein the "Obligations"):
(a) The prompt and complete payment when due (whether by acceleration
or otherwise) of all monies loaned (including interest and charges thereon) to
Pledgor under and pursuant to the Amended and Restated Credit Agreement; and
(b) Any and all other liabilities and obligations of every name and
nature whatsoever of Pledgor to the Agent and/or the Lenders under the Amended
and Restated Credit Agreement, the other Credit Documents and/or any other
agreement or instrument executed and delivered pursuant thereto whether such
liabilities and obligations be direct or indirect, absolute or contingent,
secured or unsecured, now existing or hereafter arising or acquired, due or to
become due.
Section 3. Representations and Warranties. The Pledgor hereby
represents and warrants to the Agent and the Lenders that:
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(a) The Pledgor is the legal, beneficial and record owner and has good
title to all of the Pledged Securities free and clear of all claims, mortgages,
pledges, liens, hypothecation, security interests and other encumbrances of
every nature whatsoever except to or in favor of the Agent and the Lenders
hereunder;
(b) All of the shares of Pledged Securities have been duly and validly
issued and are fully paid and non-assessable;
(c) The Pledged Securities constitute 100% of the issued and
outstanding shares of capital stock of the issuers thereof and there are
presently outstanding no options, warrants or other rights to purchase or
acquire any additional shares of the capital stock of any of such issuers;
(d) The Pledgor has and has duly exercised full power and authority to
enter into this Pledge Agreement and to pledge the Pledged Securities as herein
contemplated; and
(e) Upon the execution and delivery of the Pledged Securities to the
Agent and the Lenders hereunder, this Pledge Agreement shall create a valid
first lien upon and perfected security interest in the Pledged Securities and
the proceeds thereof, subject to no prior security interest, lien charge or
encumbrance, or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Pledgor which would include
the Pledged Securities.
Section 4. Issue or Sale of Pledged Securities. The Pledgor hereby
covenants and agrees that it will not:
(a) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of the Pledged Securities; or
(b) permit the issuer of any of the Pledged Securities, directly or
indirectly, to issue or sell any additional shares of capital stock or any
options, warrants or rights to acquire such shares.
Section 5. Voting Rights of Pledgor. Provided that there exists no
Event of Default (as hereinafter defined) and so long as the Pledgor shall be
the record owner of the Pledged Securities, the Pledgor shall be entitled, to
the extent permitted by applicable law, to exercise voting power with respect to
the Pledged Securities; provided, however, that in no event shall the Pledgor
exercise such voting power in any manner contrary to or inconsistent with the
terms hereof or with the terms of the Amended and Restated Credit Agreement or
any other Credit Document. Upon the occurrence of an Event of Default which is
continuing, the Agent and the Lenders shall have those rights specified in
Section 7.
Section 6. Distribution. Upon the dissolution, winding up, liquidation
or reorganization of any corporation or other entity which issued the Pledged
Securities, whether in bankruptcy, insolvency or receivership proceedings, or
upon an assignment for the benefit of creditors or otherwise, any sum to be paid
or any property to be distributed upon or with respect to any of the Pledged
Securities shall be paid over to the Agent (for itself and for the benefit of
the Lenders) to be held by the Agent as collateral security for the Obligations;
provided that any cash
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distribution shall be applied to the payment of Obligations in the order of
priorities set forth in Section 3 of the Pledgor Security Agreement. In the
event that any stock dividend shall be declared on any of the Pledged
Securities, or any shares of stock or fractions thereof shall be issued pursuant
to any stock split involving any of the Pledged Securities, or any distribution
of capital shall be made on any of the Pledged Securities, or any property shall
be distributed upon or with respect to any of the Pledged Securities, the shares
or other property so distributed shall be delivered (with any necessary
endorsements) to the Agent (for itself and for the benefit of the Lenders), to
be held as collateral security for the Obligations.
Section 7. Default. If any one or more of the following events, (herein
referred to as "Events of Default") shall occur:
(a) Default shall be made in the due performance or observance of any
provision of this Pledge Agreement;
(b) Any of the Obligations shall have become due by demand,
acceleration, maturity or otherwise and such Obligations have not been paid in
full; or
(c) An Event of Default (as defined in the Amended and Restated Credit
Agreement) shall have occurred under the Amended and Restated Credit Agreement;
thereafter, unless such Event of Default shall have been waived in writing by
the Agent and the Required Lenders, the Agent (for itself and for the benefit of
the Lenders) shall have full power and authority: (1) to sell or otherwise
dispose of the Pledged Securities or any part thereof; (2) to vote the Pledged
Securities with respect to any and all matters and to exercise all rights to
payments, conversion, exchange, subscription or otherwise with respect to the
Pledged Securities; and (3) to exercise any and all rights and remedies of a
secured party under the UCC.
To the extent permitted by any applicable law, any sale or other
disposition by the Agent and/or the Lenders may be by public or private
proceedings and may be made by one or more contracts, as a unit or in parcels,
at such time and place, by such method, in such manner and on such terms as the
Agent may determine. Except as required by law, such sale or other disposition
may be made without advertisement or notice of any kind or to any person. Where
reasonable notification of the time or place of such sale or other disposition
is required by law, such requirement shall have been met if such notice is
telegraphed, cabled or mailed, postage prepaid, at least ten (10) days before
the time of such sale or other disposition to each person entitled thereto at
such person's address as specified in Section 15 below. To the extent permitted
by any applicable law, the Agent and/or any Lender or any other holder of the
Obligations may buy any or all of the Pledged Securities upon any public or
private sale thereof. To the extent permitted by any applicable law, upon any
such sale or sales the Pledged Securities so purchased shall be held by the
purchaser absolutely free from any claims or rights of whatsoever kind or
nature, including any equity of redemption or any similar rights, all such
equity of redemption and any similar rights being hereby expressly waived and
released by the Pledgor to the extent permitted by applicable law. In the event
any consent, approval or authorization of any governmental agency shall be
necessary to effectuate any such sale or sales, the Pledgor shall execute, and
hereby agree to cause the issuer of any Pledged Securities to execute, as
necessary, all applications or other instruments as may be required; provided
that the
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foregoing shall not obligate the Pledgor to register the Pledged Securities
under the Securities Act of 1933. After deducting all reasonable costs and
expenses of collection, custody, sale or other disposition or delivery
(including legal costs and reasonable attorney's fees) and all other charges due
against the Pledged Securities (including any charges of the type described in
Section 9 below), the residue of the proceeds of any such sale or other
disposition shall be applied to the payment of the Obligations in the order of
priorities as set forth in Section 3 of the Pledgor Security Agreement. The
Pledgor shall be liable for any deficiency in payment of the Obligations,
including all costs and expenses of collection, custody, sale or other
disposition or delivery and all other charges due against the Pledged
Securities, as hereinbefore enumerated.
The Pledgor recognizes that the Lender may be unable to effect a public
sale of all or a part of the Pledged Securities by reason of certain
prohibitions contained in the Securities Act of 1933, but may be compelled to
resort to one or more private sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such Pledged Securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Pledgor agrees that private sales so made may be at a price
and on other terms less favorable to the seller than if such Pledged Securities
were sold at public sales, and that neither the Agent nor any Lender has any
obligation to delay the sale of any such Pledged Securities for the period of
time necessary to permit such Pledged Securities to be registered for public
sale under the Securities Act of 1933. The Pledgor agrees that sales made under
the foregoing circumstances shall not be deemed to have been made in a
commercially unreasonable manner by virtue of any sale made on terms less
favorable to the seller resulting from the private nature of the sale.
Section 8. Transfer of Pledged Stock and Notation on Books and Records.
The Pledgor hereby irrevocably appoints the Agent (for itself and for the
benefit of the Lenders) as agent to arrange for any and all transfers of the
Pledged Securities as the Agent (for itself and for the benefit of the Lenders)
may from time to time deem advisable and to assist the Agent in obtaining the
benefit of its security interest therein, including, but not limited to, the
transfer of the Pledged Securities into the name of the Agent or its nominee at
any time and/or the provision of instructions to the issuers of uncertificated
securities or financial intermediaries to initiate actions to enforce any of the
Agent's and/or Lenders' rights to the Pledged Securities, the foregoing
appointment being deemed a power coupled with an interest and irrevocable. The
right to vote the Pledged Securities is governed by Section 5 of this Pledge
Agreement. The Pledgor shall ▇▇▇▇ its books and records to indicate the pledge
of the Pledged Securities by the Pledgor to the Agent (for itself and for the
benefit of the Lenders).
Section 9. Payment of Taxes, Charges, Etc. The Agent, at its option,
may discharge any taxes, charges, assessments, security interests, liens or
other encumbrances upon the Pledged Securities or otherwise protect the value
thereof. All such expenditures incurred by the Agent shall become payable by the
Pledgor to the Agent upon demand and shall bear interest at the rate applicable
to the Revolving Loans.
Section 10. Duties with Respect to Collateral. Neither the Agent nor
any Lender shall have any duty to the Pledgor with respect to the Pledged
Securities other than the duty to use reasonable care in the safe custody of any
Pledged Securities in its possession. Without limiting the generality of the
foregoing, the Agent (for itself and for the benefit of the Lenders), although
it may do so at its option, shall be under no obligation to the Pledgor to take
any steps necessary
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to preserve rights in the Pledged Securities against other parties.
Section 11. Waivers. The Pledgor hereby waives demand, payment, notice
of dishonor or protest and all other notices of any kind in connection with the
Obligations except notices required by law or by this or any other agreement
between or among the Pledgor, the Agent and/or the Lenders. The Agent may
release, supersede, exchange or modify any other collateral security which it
may from time to time hold and may release, surrender or modify the liability of
any third party without giving notice hereunder to the Pledgor. Such
modifications, charges, renewals, releases or other actions shall in no way
affect the Pledgor's obligations hereunder.
Section 12. Expenses. The Pledgor agrees to pay, indemnify and hold
harmless the Agent and each Lender and the nominees of such Persons from and
against (i) after the occurrence of a Default, all costs and expenses (including
taxes, if any) out of or incurred in connection with any transfer of Pledged
Securities into or out of the name of the Agent's and/or any Lender's nominees
and (ii) all costs and expenses of the Agent and each Lender arising out of or
incurred in connection with the exercise by the Agent and/or any Lender of its
rights hereunder; provided, however, Pledgor shall not be responsible for
expenses arising out of or incurred as a result of willful misconduct by the
Agent and/or any Lender.
Section 13. Statement as to Default. The Pledgor and the Agent agree
that any written statement by an officer of the Agent asserting the occurrence
of an Event of Default as the authorization for the exercise by the Agent (for
itself and for the benefit of the Lenders) of its rights hereunder shall be
presumed to be true, and that any purchaser of the Pledged Securities at a
foreclosure sale shall have the right to rely on such a statement.
Section 14, Modification. This Pledge Agreement may not be modified or
amended without the prior written consent of the parties hereto.
Section 15. Notices. Except as otherwise expressly provided herein, all
notices and other communications made or required to be given pursuant to this
Pledge Agreement shall be made in accordance with the provisions of Section 11.2
of the Amended and Restated Credit Agreement.
Section 16. Rights. No course of dealing between the Pledgor, the Agent
and/or the Lenders nor any delay in exercising, on the part of the Agent and/or
any Lender of any right, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any rights, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law, including, without limitation, the rights
and remedies of a secured party under the UCC.
Section 17. Waiver of Subrogation. Pledgor hereby waives and releases
any right of subrogation it may have against the Credit Parties or the Pledged
Securities by reason of any of the actions taken by the Agent and/or any Lender
hereunder, until all Obligations have been paid in full.
Section 18. Binding Effect, Etc. This Pledge Agreement and the rights
and obligations
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of the parties hereunder shall be construed in accordance with and governed by
the laws of the State of New York. This Pledge Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, including any other holder or holders of any Obligations and may be
executed in two or more counterparts, each of which shall together constitute
one and the same agreement.
Section 19. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof.
Section 20. Further Assurances. The Pledgor at his sole cost and
expense will execute, acknowledge and deliver all such instruments and take all
such action as the Agent and/or the Required Lenders from time to time may
reasonably request in order to further effectuate the purposes of this Pledge
Agreement and to carry out the terms hereof, including without limitation, the
execution of stock transfer orders, stock powers, notifications to obligors on
the Pledged Securities, the providing of notification in connection with the
book entry security or general intangibles and the providing of instructions to
issuers of uncertificated securities or financial intermediaries, and will do
all such other acts as the Agent and/or the Required Lenders may reasonably
request with respect to the perfection and protection of the security interest
granted herein and the security interest effected hereby.
Section 21. Provisions to Survive. All representations, warranties,
covenants and agreements contained in this Pledge Agreement shall survive the
execution and delivery of the Amended and Restated Credit Agreement and shall
continue until payment in full of all Obligations.
Section 22. Captions. Captions and headings in this Pledge Agreement
are for convenience only and in no way define, limit or describe the scope or
intent of the provisions hereof.
Section 23. Termination. Upon payment in full of the Obligations in
accordance with their terms, this Pledge Agreement shall terminate and the Agent
(on behalf of itself and the Lenders) shall return to the Pledgor, at the
expense of the Pledgor, such Collateral in the possession or control of the
Agent as has not theretofore been disposed of pursuant to the provisions hereof,
together with any moneys and other property at the time held by the Agent
hereunder, and shall deliver to the Pledgor documents in recordable form
sufficient to discharge the liens and security interests granted hereunder.
Section 24. Conflict. In the event that there is a conflict between any
provision of this Pledge Agreement and the Amended and Restated Credit
Agreement, then the provisions of the Amended and Restated Credit Agreement
shall control.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement as of the date first above written.
SCAN-OPTICS, INC.
By: ________________________________
Name:
Title:
PATRIARCH PARTNERS AGENCY SERVICES, LLC, as Agent
By: ________________________________
Name:
Title:
ARK CLO 2000-1, LIMITED, as a Lender
By: Patriarch Partners, LLC,
its Collateral Manager
By: ________________________________
Name:
Title:
ZOHAR CDO 2003-1, LIMITED, as a Lender
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By: ________________________________
Name:
Title:
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EXHIBIT A
List of Pledged Securities
---------------------------
None of the issuers has any authorized, issued or outstanding shares of
its capital stock of any class or any commitments to issue any shares of its
capital stock of any class or any securities convertible into or exchangeable
for any shares of its capital stock of any class except as otherwise stated in
this Exhibit A.
Class of Number of Authorized Number of Issued Number of Par or
Issuer Record Owner Shares Shares Shares Outstanding Shares Liquidation Value
-------------------------- ------------- ---------- --------------------- ----------------- ------------------- -------------------
Scan-Optics, Limited1 Company Common 1,000,000 865,202 865,202 None
Scan-Optics (Canada), Ltd. Company Shares Unlimited number of 1 1 None
shares
--------
1 Certificate in the name: S.O. Systems Limited
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Exhibit 3.1(o)(A)
Form of Plan of Reorganization
SCAN-OPTICS, INC.
PLAN OF REORGANIZATION UNDER I.R.C. ss.368(a)(1)(E)
The Plan of Reorganization (the "Plan") as herein set forth, shall
become effective upon its adoption by the board of directors of SCAN-OPTICS,
INC. (the "Corporation") and the consent thereto by ARK CLO 2000-1, Limited, the
holder of the Series A Redeemable Preferred Stock of the Corporation.
The Corporation shall recapitalize by (i) exchanging each issued and
outstanding share of Series A Redeemable Preferred Stock of the Corporation,
having a par value of $0.02 per share and a stated face amount of $1.00 per
share, with one-tenth (1/10th) of one share of Series B Redeemable Preferred
Stock of the Corporation, having a par value of $0.02 per share and a stated
face amount of $10.00 per share and (ii) immediately following the above
referenced exchange, permanently canceling and retiring each issued and
outstanding share of Series A Redeemable Preferred Stock of the Corporation so
exchanged for Series B Redeemable Preferred Stock of the Corporation.
Such action shall be taken by the Corporation as shall be necessary or
appropriate to qualify the Plan as a plan of reorganization under ss.
368(a)(1)(E) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
Adopted this 10th day of March, 2004.
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Exhibit 3.1(o)(B)
Form of Certificate of Designations
SCAN-OPTICS, INC.
CERTIFICATE OF DESIGNATIONS,
PREFERENCES, RIGHTS AND RESTRICTIONS
FOR
SERIES B REDEEMABLE PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, the undersigned officers of Scan-Optics, a Delaware corporation (the
"Corporation") do hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation, the Board of Directors, by a vote taken at a meeting duly
called and duly held on March 10, 2004, duly adopted the following resolutions:
RESOLVED, that pursuant to Article Fourth of the Certificate of
Incorporation, the Board of Directors of the Corporation may provide for the
issuance of up to 5,000,000 shares of the Corporation's preferred stock, $.02
par value per share (the "Preferred Stock"); and further
RESOLVED, that the Board of Directors of the Corporation acknowledges
that the Corporation has previously designated 3,800,000 shares of such
Preferred Stock as "Series A Redeemable Preferred Stock" having a stated face
amount of $1.00 per share (such Preferred Stock is referred to herein as the
"Series A Preferred Stock"); and further
RESOLVED, that the Board of Directors of the Corporation hereby
designates 380,000 shares of such Preferred Stock as "Series B Redeemable
Preferred Stock" having a stated face amount of $10.00 per share (such Preferred
Stock is referred to herein as the "Series B Preferred Stock"); and further
RESOLVED, that each issued and outstanding share of Series A Preferred
Stock is being exchanged for one-tenth (1/10th) of one share of Series B
Preferred Stock and each share of Series A Preferred Stock so exchanged for
Series B Preferred Stock will be permanently cancelled and retired immediately
following said exchange; and further
RESOLVED, that the rights, preferences, privileges, and restrictions
granted to and imposed on the Series B Preferred Stock are as follows:
Section 1. Number of Shares. The maximum number of authorized shares of Series B
Preferred Stock shall be 380,000. All shares of Series B Preferred Stock shall
be identical with each other in all respects.
Section 2. Dividends. The holders of the Series B Preferred Stock shall
not be entitled to receive any dividends.
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Section 3. Liquidation Preference.
(a) Priority of Distributions. In the event (x) of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
or (y) a Liquidating Event (as defined below) shall occur, the assets of the
Corporation that may be legally distributed to the Corporation's stockholders
shall be distributed to the Corporation's stockholders in the following order of
priority:
(i) first, the holders of the shares of Series B Preferred Stock
shall be entitled to receive, prior to and in preference to any distribution of
any of the assets of the Corporation to the holders of any other Preferred Stock
or Common Stock of the Corporation, an amount per share of Series B Preferred
Stock equal to $10.00 (as such number may be adjusted for stock splits, stock
dividends, combinations, recapitalizations, reorganizations and other similar
transactions), plus interest on such amount calculated from December 31, 2001
through the date of payment of such amount at an interest rate per annum equal
to the prime rate of interest in effect from time to time during such period as
reported in the Wall Street Journal, plus 2% compounded annually (such aggregate
amount being referred to herein as the "Liquidation Preference"); and
(ii) second, after payment in full of the Liquidation Preference
to the holders of the Series B Preferred Stock, the remaining assets of the
Corporation that may legally be distributed to the Corporation's stockholders
shall be distributed ratably among the holders of the shares of Common Stock in
proportion to the aggregate number of shares owned by each such holder.
If, upon any such dissolution or distribution, the assets of the
Corporation distributable among the holders of the shares of Series B Preferred
Stock entitled to a preference shall be insufficient to pay in full the
Liquidation Preference, then such assets, or the proceeds thereof, shall be
distributed among the holders of the shares of Series B Preferred Stock ratably.
(b) Liquidating Events.
(i) For purposes hereof, a consolidation or merger of the
Corporation, a sale, lease or conveyance by the Corporation of at least 80% of
its assets, or any other transaction which results in the sale, transfer,
assignment, conveyance or other disposition of 50% or more of the voting power
of the Corporation to persons or entities other than the holders of the Series B
Preferred Stock or the Warrant shall be deemed to be a "Liquidating Event",
unless the holders of a majority of the then-outstanding shares of Series B
Preferred Stock shall otherwise agree.
(ii) This Corporation shall give each holder of Series B
Preferred Stock written notice of any transaction referred to in clause (i)
above no later than 10 business days prior to (A) the stockholders' meeting
called to approve such transaction, or (B) the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. Such notice shall describe the material terms and
conditions of the impending transaction and the holders' rights under this
Section, and the Corporation shall thereafter give such holders prompt notice of
any material changes. The transaction shall in no
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event take place sooner than 10 business days after the Corporation has given
the first notice provided for herein or sooner than 5 business days after the
Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened or waived upon the written
consent of the holders of a majority of the then-outstanding shares of Series B
Preferred Stock.
Section 4. Voting Rights; Protective Provisions.
(a) General Voting Rights. Except as otherwise required by law, from
and after the date on which the Warrant is exercised, the shares of Series B
Preferred Stock shall be entitled to vote with the shares of the Common Stock
together as a single class at any annual or special meeting of stockholders of
the Corporation, with each holder of Series B Preferred Stock being entitled to
61.459 votes (or such other number so that the holders of the Series B Preferred
Stock would have had an aggregate of 46.67% of the voting power of the
Corporation on a Fully-Diluted Basis determined as of March 30, 2004), as such
numbers may be adjusted for stock splits, stock dividends, combinations,
recapitalizations, reorganizations and other similar transactions, for each
share of Series B Preferred Stock held by such holder on the record date fixed
for such meeting, or on the effective date of such written consent.
(b) Protective Provisions. So long as any shares of Series B Preferred
Stock are outstanding, without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of two-thirds of the
then-outstanding shares of Series B Preferred Stock, voting together as a single
class, the Corporation shall not:
(i) increase or decrease the number of authorized shares of
Series B Preferred Stock;
(ii) amend, alter or repeal the Corporation's Certificate of
Incorporation, this Certificate of Designations or the Corporation's by-laws to
alter or change the rights, preferences or powers of the Series B Preferred
Stock, or any Senior Stock (as defined below) or Parity Stock (as defined below)
so as to adversely affect the Series B Preferred Stock;
(iii) authorize, create or issue any class or series, or any
shares of any class or series, of capital stock of the Corporation (A) having
any preference or priority as to dividends or conversion or upon redemption,
liquidation, dissolution or winding up over the Series B Preferred Stock (any
such capital stock being "Senior Stock") or (B) ranking on a parity (either as
to dividends or conversion or upon redemption, liquidation, dissolution or
winding up) with the Series B Preferred Stock (any such capital stock being
"Parity Stock"); or
(iv) reclassify, convert or exchange any of the Corporation's
shares of capital stock into Senior Stock or Parity Stock, or authorize, create
or issue any security exchangeable for, convertible into, or evidencing the
right to purchase any Senior Stock or Parity Stock.
Section 5. Redemption.
----------
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(a) Mandatory Redemption. On the earlier to occur of (i) June 1, 2005,
and (ii) the date on which both (A) an Event of Default (as defined in the
Credit Agreement (as defined below)) listed in Section 8.1(a) (so long as such
an Event of Default under Section 8.1(a) shall continue for a period of 5
business days), 8.1(b) (so long as an Event of Default under Section 8.1(b)
shall continue for a period of 120 consecutive days), 8.1(d) (so long as such an
Event of Default under Section 8.1(d) shall continue for a period of 5 business
days), 8.1(e) (so long as such an Event of Default under Section 8.1(e) shall
continue for a period of 5 business days), 8.1(f), 8.1(g) or 8.1(h) of the
Credit Agreement shall occur and be continuing, and (B) the holders of a
majority of the then outstanding shares of Series B Preferred Stock have
notified the Corporation that they wish the Corporation to redeem all of the
issued and outstanding shares of Series B Preferred Stock (such earlier date
being the "Mandatory Redemption Date"), the Corporation shall redeem all of the
issued and outstanding shares of Series B Preferred Stock by paying the holders
of record thereof an amount in cash per share equal to $10.00 (as such number
may be adjusted for stock splits, stock dividends, combinations,
recapitalizations, reorganizations and other similar transactions), plus
interest on such amount calculated from December 31, 2001 through the date of
payment of such amount at an interest rate per annum equal to the prime rate of
interest in effect from time to time during such period as reported in the Wall
Street Journal, plus 2% compounded annually (such aggregate amount being
referred to herein as the "Redemption Price").
(b) Optional Redemption. In addition, at any time following the payment
in full of the Loans (as defined in the Credit Agreement), the Corporation may
at its option redeem all of the issued and outstanding shares of Series B
Preferred Stock by paying the holders of record thereof an amount per share of
Series B Preferred Stock equal to the Redemption Price (the date upon which the
Corporation actually redeems the Series B Preferred Stock being the "Optional
Redemption Date").
(c) Redemption Terms. In order to receive payment of the Redemption
Price, the holder of any shares of Series B Preferred Stock redeemed pursuant to
this Section shall before or within 60 days after the Mandatory Redemption Date
or Optional Redemption Date, as the case may be, surrender the certificate or
certificates representing such shares to the Corporation or provide a lost stock
affidavit and indemnification to the Corporation.
(d) Waiver. Notwithstanding anything in this Section 5 to the contrary,
the holders of a majority of the then outstanding shares of Series B Preferred
Stock may agree to waive any provision in this Section 5, including, but not
limited to, the Mandatory Redemption Date, by notifying the Corporation in
writing of any such waiver pursuant to this Section 5(d).
Section 6. Definitions. As used herein, the following terms have the
meanings stated below.
"Common Stock" shall mean the Common Stock, par value $0.02 per share,
of the Corporation as authorized on the date hereof, and also any capital stock
of any class of the Corporation hereafter authorized which shall not be limited
to a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided,
however, that the shares purchasable pursuant to the Series B Preferred Stock
shall include only shares designated as Common Stock, par value $0.02 per share,
of the
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Corporation on the date hereof, or shares of any class or classes resulting from
any reclassification or reclassifications thereof which are not limited to any
such fixed sum or percentage and are not subject to redemption by the
Corporation and in case at any time there shall be more than one such resulting
class, the shares of each such class then so issuable shall be substantially in
the proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Convertible Securities" means any stock or securities convertible into
or exchangeable for Common Stock.
"Credit Agreement" means that certain Third Amended and Restated Credit
Agreement, dated as of March 30, 2004, among the Corporation, the guarantors
identified therein, the lenders identified therein and Patriarch Partners Agency
Services, LLC, as the same may be amended, modified and supplemented from time
to time in accordance with the terms thereof.
"Fully Diluted Basis" shall mean, for the Corporation, all outstanding
shares of Common Stock plus all shares which would be outstanding upon the
exercise in full of all Convertible Securities, Options and Stock Purchase
Rights.
"Options" means any rights to subscribe for or to purchase, or any
warrants or options for the purchase of, Common Stock or any Convertible
Security.
"Stock Purchase Rights" shall mean any warrants, options or other
rights of any kind to subscribe for, purchase or otherwise acquire any shares of
Common Stock, Options or any Convertible Securities.
"Warrant" means that certain Warrant No. W-1 to purchase 33.20% of the
Common Stock, dated as of December 31, 2001, originally issued to ARK CLO 2000-1
Limited, as amended, modified and supplemented from time to time in accordance
with the terms thereof.
Section 7. Reacquired Shares. The shares of Series A Preferred Stock exchanged
for Series B Preferred Stock will be permanently retired and cancelled
immediately following said exchange and shall not be reissued by the
Corporation. Any shares of Series B Preferred Stock acquired by the Corporation
in any manner shall be retired and canceled promptly after the acquisition
thereof.
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In witness whereof, the Corporation has caused this Certificate to be
executed as of this ____ day of March, 2004.
SCAN-OPTICS, INC.
By:________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
ATTEST:
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Assistant Secretary
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Exhibit 3.1(p)
Form of Second Amended to Master Agreement
SECOND AMENDMENT TO MASTER AGREEMENT
------------------------------------
This Second Amendment to Master Agreement (this "Agreement"), dated as
of March __, 2004, is by and between ARK CLO 2000-1, Limited (the "Lessor" or
"Ark") (as assignee of BancBoston Leasing Inc.) and Scan-Optics, Inc. (the
"Lessee"), as parties to that certain Master Agreement, dated as of August 2,
1999 (the "Original Master Agreement"), as amended pursuant to that certain
First Amendment to Master Agreement dated as of December 31, 2001 (the "First
Amendment", and together with the Original Master Agreement, collectively, the
"Master Agreement").
WITNESSETH:
----------
WHEREAS, Ark and Scan-Optics, Inc. are also parties to that certain
Third Amended and Restated Credit Agreement, dated as of March 30, 2004 (as
amended, modified and supplemented from time to time, the "Credit Agreement");
WHEREAS, the sum of all accrued and unpaid Daily Rent and Periodic
Rent due and owing from Lessee to Lessor under the Master Lease and all Lease
Schedules and Certificates of Acceptance (each as amended, modified or
supplemented from time to time (collectively, the "Lease Documents")) through
and including the date hereof plus the Daily Rent and Periodic Rent expected to
be paid by Lessee to Lessor under the Lease Documents for the remaining Initial
Terms of the leased Equipment equals $841,714 (the "Scheduled Lease Payments");
and
WHEREAS, in connection with the execution and delivery of the Credit
Agreement, the Lessor and Lessee wish to amend certain terms and conditions of
the Master Lease all on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. Capitalized terms used herein without
definition that are defined in the Master Agreement or Lease Schedule or
Certificates of Acceptance, as applicable, shall have the same meanings herein
as therein.
Section 2. Condition Precedent. The effectiveness of the amendments
contained herein shall be subject to the effectiveness of the Credit Amendment.
Section 3. Covenants and Amendments. Effective as of the date hereof,
without any prejudice or impairment whatsoever to any of the rights and remedies
of the Lessor contained in the Lease Documents or in any other documents related
thereto, the Lessee covenants and agrees with the Lessor as follows:
(a) All Scheduled Lease Payments shall be paid by Lessee to Lessor on
June 30, 2005.
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(b) On the first day of each month beginning on April 1, 2004 through
and including June 1, 2005 and on June 30, 2005, Lessee shall pay to Lessor an
amount equal to: the product of (i) the Base Rate (as defined in the Credit
Agreement) per annum plus two percent (2%) times (ii) the Scheduled Lease
Payments times (iii) a fraction the numerator of which is 558,064 and the
denominator of which is 664,375 divided by twelve (12).
(c) The Lessee shall comply with all of the terms, covenants and
provisions contained in the Lease Documents and all other documents related
thereto (including, without limitation, any and all payment obligations
thereunder), except as such terms, covenants and provisions are expressly
modified by this Agreement.
(d) The Lessee shall at any time and from time to time execute and
deliver such further instruments (including without limitation UCC-1 and other
security/perfection documents), and take such further action as the Lessor may
reasonably request, in each case further to effect the purposes of this
Agreement and/or the Lease Documents. Without limiting the generality of the
immediately preceding sentence, the Lessee shall permit the Lessor and/or its
designated representatives, upon reasonable notice, to visit and inspect any of
the Lessee's properties or any of its affiliates, to examine the Equipment
and/or the books of account of the Lessee and their affiliates (and to make
copies thereof and extracts therefrom), and to discuss the affairs, finances and
accounts of the Lessee and its affiliates with, and to be advised as to the same
by, its and their officers, all during normal business hours.
Section 4. Reserved.
Section 5. Representations and Warranties. The Lessee hereby represents
and warrants to the Lessor that all of the representations and warranties made
by the Lessee in the Lease Documents are true and correct on the date hereof as
if made on and as of the date hereof, except to the extent that any of such
representations and warranties expressly relate by their terms to a prior date.
Section 6. Ratification of Existing Agreements. Lessee agrees that the
obligations of Lessee to the Lessor as evidenced by or otherwise arising under
the Lease Documents, except as otherwise expressly modified in this Agreement
upon the terms set forth herein, are, by Lessee's execution of this Agreement,
ratified and confirmed in all respects. In addition, by the execution of this
Agreement, Lessee represents and warrants that it has no claim, counterclaim,
right of set-off or defense of any kind against Lessor (or its
predecessors-in-interest) with respect to the obligations under the Lease
Documents or otherwise.
Section 7. Release. The Lessee, on its own behalf and on behalf of its
successors and assigns, hereby waives, releases and discharges the Lessor,
Patriarch Partners, LLC and all affiliates of the Lessor and/or Patriarch
Partners, LLC, and all of their directors, officers, employees, attorneys and
agents, from any and all claims, demands, actions or causes of action whether
known or unknown, arising out of or in any way relating to this Agreement, the
Lease Documents and/or any documents, agreements, dealings or other matters
connected with this Agreement, the Lease Documents or the administration
thereof.
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Section 8. Expenses. The Lessee agrees to pay to the Lessor (a) on or
before the date hereof, Lessor's legal fees and disbursements incurred through
the date hereof in connection with the negotiation and preparation of this
Agreement and related matters, (b) on or before the date hereof, Lessor's
examiner and audit fees and disbursements incurred through the date hereof, and
(c) upon demand from time to time any and all reasonable out-of-pocket costs or
expenses (including consultants' fees, commercial examiner fees, audit fees and
reasonable legal fees and disbursements) hereafter incurred by the Lessor in
connection with the administration of the leases evidenced by the Lease
Documents or the preservation of or enforcement of its rights under the Lease
Documents or in respect of any of Lessee's other obligations to the Lessor.
Section 9. Marshalling. The Lessor shall not be required to marshal any
present or future collateral security for the Lessee's obligations to the Lessor
under the Lease Documents or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights in respect
of such collateral security shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, the
Lessee hereby agrees that it will not invoke any law relating to the marshalling
of collateral which might cause delay in or impede the Lessor's rights under any
document, agreement or instrument evidencing or securing any of the Lessee's
obligations to the Lessor under the Lease Documents and, to the extent that it
lawfully may, the Lessee hereby irrevocably waives the benefits of all such
laws.
Section 10. No Waiver. Nothing in this Agreement shall extend to or
affect in any way any of the rights or obligations of the Lessee or any of the
Lessor's obligations, rights and remedies arising under the Lease Documents, and
the Lessor shall not be deemed to have waived any or all of its rights or
remedies with respect to any default and which upon the execution and delivery
of this Agreement might otherwise exist or which might hereafter occur.
Section 11. Lien and Set-off. The Lessee hereby grants to the Lessor, a
lien, security interest and right of set-off as security for all of the Lessee's
liabilities and obligations to the Lessor or the Lessor's affiliates, whether
now existing or hereafter arising, upon and against all deposits, credits,
collateral and property of the Lessee (other than Lessee's payroll accounts),
now or hereafter in the possession, custody, safekeeping or control of the
Lessor or any entity under the control of the Lessor, or in transit to any of
them. At any time on or after the date hereof, without demand or notice, the
Lessor may set-off the same or any part thereof and apply the same to any
liability or obligation of the Lessee even though unmatured and regardless of
the adequacy of any other collateral securing the obligations. ANY AND ALL
RIGHTS OF THE LESSEE TO REQUIRE THE LESSOR TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SET-OFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE LESSEE, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
Section 12. Governing Law This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.
Section 13. Entitlement to Relief from Stay.
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Lessee hereby acknowledges and agrees, in further consideration for the
Lessor entering into this Agreement with the Lessee, that, in the event that
Lessee shall make application for or seek relief or protection under any of the
sections or chapters of the federal bankruptcy code, or in the event that any
involuntary petition is filed against Lessee under the federal bankruptcy code
and an order for relief is entered as a result thereof, then the Lessor shall
thereupon be entitled (upon notice to Lessee and a hearing thereon) to immediate
relief from any automatic stay imposed by Section 362 of the federal bankruptcy
code, or otherwise, on or against the exercise of the Lessor's rights and
remedies under this Agreement or any of the other Lease Documents. The Lessor in
turn acknowledges that this Section 13 shall not be construed as a restriction
or prohibition on the Lessee's right to make application for or seek relief or
protection under the federal bankruptcy code.
Section 14. Miscellaneous Provisions.
(a) Except as otherwise expressly provided by this Agreement, all of
the terms, conditions and provisions of the Lease Documents shall remain the
same. It is declared and agreed by each of the parties hereto and thereto that
the Lease Documents, as amended hereby, shall continue in full force and effect,
and that this Agreement and the Lease Documents shall be read and construed as
one instrument.
(b) This Agreement may be executed in any number of counterparts, but
all such counterparts shall together constitute but one instrument. In making
proof of this Agreement it shall not be necessary to produce or account for more
than one counterpart signed by each party hereto by and against which
enforcement hereof is sought. TIME IS OF THE ESSENCE AS TO ALL OF THE PROVISIONS
HEREIN.
(c) To the extent that any equipment or other property is being leased
by Lessor to Lessee on the date hereof and the terms of the lease of such
equipment or other property is not governed by the Lease Documents, the parties
hereto agree that they shall amend the terms of such other lease(s) in a manner
substantially the same as these amendments contained in this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed in its name and behalf by its duly authorized officer
as of the date first written above,
SCAN-OPTICS, INC.
By:_________________________
Name:
Title:
ARK CLO 2000-1, LIMITED, as assignee of
BancBoston Leasing Inc.
By: PATRIARCH PARTNERS, LLC,
its Collateral Manager
By:_________________________
Name:
Title:
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Exhibit 3.1(q)(A)
Form of Amended and Restated Unlimited Guaranty by Scan-Optics (Canada), Ltd.
AMENDED AND RESTATED UNLIMITED GUARANTY
AMENDED AND RESTATED GUARANTY, dated as of March __, 2004 (the
"Guaranty"), by SCAN-OPTICS (CANADA), LTD., a Canadian corporation organized
under the Business Corporations Act of Canada (the "Guarantor"), in favor of
PATRIARCH PARTNERS AGENCY SERVICES, LLC (the "Agent"), for itself as Agent and
on behalf of the Lenders (as defined in the Amended and Restated Credit
Agreement, hereinafter the "Lenders") under the Amended and Restated Credit
Agreement (as defined below).
RECITALS
--------
WHEREAS, Scan-Optics, Inc. (the "Borrower") and Ark CLO 2000-1, Limited
(as assignee of Fleet National Bank, formerly known as BankBoston, N.A.) are
parties to that certain Second Amended and Restated Loan Agreement, dated as of
May 10, 1999, as amended by that certain Amendment and Waiver Agreement, dated
as of January 29, 2001, that certain Second Amendment and Waiver Agreement,
dated as of July 1, 2001, that certain Third Amendment and Waiver Agreement,
dated as of September 1, 2001, that certain Fourth Amendment Agreement, dated as
of December 31, 2001, and that certain Fifth Amendment Agreement, dated as of
December 31, 2002 (as so amended and as further amended, restated, supplemented
or otherwise modified from time to time, the "Prior Credit Agreement");
WHEREAS, pursuant to (i) that certain Unlimited Guaranty, dated as of
April 7, 1993 (the "Original Guaranty"), by the Guarantor, (ii) that certain
Unlimited Guaranty, dated as of April 7, 1993, by Scan-Optics Limited, a United
Kingdom company limited by shares, and (iii) that certain Reaffirmation of
Guaranties, dated as of May 10, 1999, from the Guarantor to BankBoston, N.A.,
each of the Guarantor and Scan-Optics Limited previously guaranteed, among other
things, all of the obligations and liabilities of the Borrower under the Prior
Credit Agreement;
WHEREAS, the Guarantor, the Borrower and certain other Persons desire
to enter into a Third Amended and Restated Credit Agreement, dated on or about
the date hereof (the "Amended and Restated Credit Agreement"), to provide for,
among other things, (i) the restructuring of the Existing Indebtedness (as
defined in the Amended and Restated Credit Agreement), such that, among other
things, the Existing Indebtedness will be refinanced and replaced by (a)
$9,000,000 of Term Loans (as defined in the Amended and Restated Credit
Agreement) and (b) $2,500,000 of Revolving Loans (as defined in the Amended and
Restated Credit Agreement); and (ii) $2,000,000 of Overadvance Loans (as defined
in the Amended and Restated Credit Agreement);
NOW THEREFORE, in consideration of the credit, banking facilities
and/or accommodations to the Borrower and the other Credit Parties (as defined
in the Amended and Restated Credit Agreement) in connection with the Amended and
Restated Credit Agreement and the other Credit Documents, the Guarantor agrees
to continue, affirm, amend and restate the Original Guaranty as follows:
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1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees
to the Agent and the Lenders the full and punctual payment when due (whether at
maturity, by acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the Borrower to the Agent
and/or the Lenders, whether direct or indirect, absolute or contingent, due or
to become due, secured or unsecured, now existing or hereafter arising or
acquired (whether by way of discount, letter of credit, lease, loan, overdraft
or otherwise) (the "Obligations"). This guaranty is an absolute, unconditional
and continuing guaranty of the full and punctual payment and performance of the
Obligations and not of their collectibility only and is in no way conditioned
upon any requirement that the Agent and/or the Lenders first attempt to collect
any of the Obligations from the Borrower or resort to any security or other
means of obtaining their payment. Should the Borrower default in the payment or
performance of any of the Obligations, the obligations of the Guarantor
hereunder shall become immediately due and payable to the Agent and the Lenders,
without demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Agent
and/or the Lenders on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Agent and/or the
Lenders, on demand, all costs and expenses (including court costs and legal
expenses) incurred or expended by the Agent and/or the Lenders in connection
with the Obligations, this Guaranty and the enforcement thereof, together with
interest on amounts recoverable under this Guaranty from the time such amounts
become due until payment, at the rate per annum applicable under the Amended and
Restated Credit Agreement for Revolving Loans; provided that if such interest
exceeds the maximum amount permitted to be paid under applicable law, then such
interest shall be reduced to such maximum permitted amount.
3. UNLIMITED GUARANTY. The liability of the Guarantor hereunder shall
be unlimited.
4. WAIVERS BY GUARANTOR; AGENT'S AND LENDERS' FREEDOM TO ACT. The
Guarantor agrees that the Obligations will be paid and performed strictly in
accordance with their respective terms regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Agent and/or the Lenders with respect thereto. The
Guarantor waives presentment, demand, protest, notice of acceptance, notice of
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Borrower, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of the Agent and/or the Lenders to assert any claim or demand or to
enforce any right or remedy against the Borrower; (ii) any extensions or
renewals of any Obligation; (iii) any rescissions, waivers, amendments or
modifications of any of the terms or provisions of any agreement evidencing,
securing or otherwise executed in connection with any Obligation; (iv) the
substitution or release of any entity primarily or secondarily liable for any
Obligation; (v) the
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adequacy of any rights the Agent and/or the Lenders may have against
any collateral or other means of obtaining repayment of the Obligations; (vi)
the impairment of any collateral securing the Obligations, including without
limitation the failure to perfect or preserve any rights the Agent and/or the
Lenders might have in such collateral or the substitution, exchange, surrender,
release, loss or destruction of any such collateral; or (vii) any other act or
omission which might in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of the Guarantor, all
of which may be done without notice to the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER. If for any reason
the Borrower has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable
from the Borrower by operation of law or for any other reason, this Guaranty
shall nevertheless be binding on the Guarantor to the same extent as if the
Guarantor at all times had been the principal obligor on all such Obligations.
In the event that acceleration of the time for payment of the Obligations is
stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or for
any other reason, all such amounts otherwise subject to acceleration under the
terms of any agreement evidencing, securing or otherwise executed in connection
with any Obligation shall be immediately due and payable by the Guarantor.
6. SUBROGATION; SUBORDINATION. Until the payment and performance in
full of all Obligations and any and all obligations of the Borrower to the Agent
and/or the Lenders and/or any affiliate of the Agent and/or any Lender, the
Guarantor shall not exercise any rights against the Borrower arising as a result
of payment by the Guarantor hereunder, by way of subrogation or otherwise, and
will not prove any claim in competition with the Agent, the Lenders and/or their
affiliates in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature; the Guarantor will not claim any set-off or
counterclaim against the Borrower in respect of any liability of the Guarantor
to the Borrower; and the Guarantor waives any benefit of and any right to
participate in any collateral which may be held by the Agent, the Lenders and/or
their affiliates. The payment of any amounts due with respect to any
indebtedness of the Borrower now or hereafter held by the Guarantor is hereby
subordinated to the prior payment in full of the Obligations. The Guarantor
agrees that after the occurrence of any default in the payment or performance of
the Obligations, the Guarantor will not demand, ▇▇▇ for or otherwise attempt to
collect any such indebtedness of the Borrower to the Guarantor until the
Obligations shall have been paid in full. If, notwithstanding the foregoing
sentence, the Guarantor shall collect, enforce or receive any amounts in respect
of such indebtedness, such amounts shall be collected, enforced and received by
the Guarantor as trustee for the Agent and the Lenders and be paid over to the
Agent and the Lenders on account of the Obligations without affecting in any
manner the liability of the Guarantor under the other provisions of this
Guaranty.
7. SECURITY; SET-OFF. The Guarantor hereby grants to the Agent and the
Lenders, as security for the full and punctual payment and performance of the
Guarantor's obligations hereunder, a continuing lien on and security interest in
all securities or other property belonging to the Guarantor now or hereafter
held by the Agent and/or the Lenders and in all deposits (general or special,
time or demand, provisional or final) and other sums credited by or due from the
Agent and/or the Lenders to the Guarantor or subject to withdrawal by the
Guarantor; and regardless of the adequacy of any collateral or other means of
obtaining
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repayment of the Obligations, the Agent and each of the Lenders are hereby
authorized at any time and from time to time, without notice to the Guarantor
(any such notice being expressly waived by the Guarantor) and to the fullest
extent permitted by law, to set off and apply such deposits and other sums
against the obligations of the Guarantor under this Guaranty, whether or not the
Agent and/or the Lenders shall have made any demand under this Guaranty and
although such obligations may be contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees that it will, from time to
time at the request of the Agent and/or any Lender, provide to the Agent and the
Lenders its most recent audited and unaudited balance sheets and related
statements of income and changes in financial condition (prepared on a
consolidated basis with the Guarantor's subsidiaries, if any) and such other
information relating to the business and affairs of the Guarantor as the Agent
and/or any Lender may reasonably request. The Guarantor also agrees to do all
such things and execute all such documents, including financing statements, as
the Agent and/or any Lender may consider necessary or desirable to give full
effect to this Guaranty and to perfect and preserve the rights and powers of the
Agent and the Lenders hereunder.
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect until the Agent and the Lenders are given written notice of the
Guarantor's intention to discontinue this Guaranty, notwithstanding any
intermediate or temporary payment or settlement of the whole or any part of the
Obligations. No such notice shall be effective unless received and acknowledged
by an officer of the Agent at its head office. No such notice shall affect any
rights of the Agent and/or any Lender or of any affiliate hereunder including,
without limitation, the rights set forth in Sections 4 and 6, with respect to
Obligations incurred prior to the receipt of such notice or Obligations incurred
pursuant to any contract or commitment in existence prior to such receipt, and
all checks, drafts, notes, instruments (negotiable or otherwise) and writings
made by or for the account of the Borrower and drawn on the Agent and/or any
Lender or any of its agents purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by the Agent
and/or any Lender after that date, shall form part of the Obligations. This
Guaranty shall continue to be effective or be reinstated, notwithstanding any
such notice, if at any time any payment made or value received with respect to
an Obligation is rescinded or must otherwise be returned by the Agent and/or any
Lender upon the insolvency, bankruptcy or reorganization of the Borrower, or
otherwise, all as though such payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Agent and/or any Lender and their successors, transferees and
assigns. Without limiting the generality of the foregoing sentence, the Agent
and/or any Lender may assign or otherwise transfer any agreement or any note
held by it evidencing, securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein, to any other person
or entity, and such other person or entity shall thereupon become vested, to the
extent set forth in the agreement evidencing such assignment, transfer or
participation, with all the rights in respect thereof granted to the Agent
and/or the Lenders herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
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of this Guaranty nor consent to any departure by the Guarantor therefrom shall
be effective unless the same shall be in writing and signed by the Agent and the
Required Lenders (as defined in the Amended and Restated Credit Agreement). No
failure on the part of the Agent and/or the Lenders to exercise, and no delay in
exercising, any right hereunder shall operate as a wavier thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantor, at the address set forth beneath its signature hereto, and if to the
Agent and/or any Lender, to such Person c/o Patriarch Partners Agency Services,
LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇, or at such address as either party may designate in
writing.
13. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Guarantor agrees that any suit for the enforcement of this Guaranty
may be brought in the courts of the State of New York or any Federal Court
sitting in the City and State of New York and consents to the non-exclusive
jurisdiction of such court. The Guarantor hereby waives any objection that it
may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court. The Guarantor hereby agrees
that service of all writs, complaints, process and summonses in any such suit,
action or proceeding may be made upon the Guarantor c/o Scan-Optics, Inc., ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer (the "Process Agent"). The Guarantor hereby irrevocably appoints the
Process Agent its true and lawful attorney-in-fact in its name, place and stead
to accept such service of any and all such writs, complaints, process and
summonses. The Guarantor agrees that any election by the Agent and/or any Lender
to give notice of any such service to the Guarantor shall not impair or affect
the validity of such service or of the judgment based thereon. The Guarantor
hereby further irrevocably consents of the service of process in any suit,
action or proceeding in said courts by the mailing or hand delivery thereof to
the Guarantor in the manner described in Section 12 hereof. Nothing herein shall
in any way be deemed to limit the ability of the Agent and/or any Lender to
serve any such writ, complaint, process or summons in any other manner permitted
by applicable law or to obtain jurisdiction over the Guarantor in such other
jurisdictions, and in such manner, as may be permitted by applicable law.
14. JUDGMENT CURRENCY. If, for the purpose of obtaining judgment in any
court or obtaining an order enforcing a judgment, it becomes necessary to
convert any amount due under this Guaranty into any currency other than U.S.
dollars (hereinafter called the "Alternate Currency"), then the conversion shall
be made at the Agent's spot rate of exchange for buying U.S. dollars with the
Alternate Currency, in accordance with normal commercial procedure, prevailing
at the Agent's close of business on the business day immediately preceding the
day on which the judgment is given or (as the case may be) the order is made. In
the event that there is a difference between the rate of exchange on the basis
of which the amount of such
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judgment or order is determined and the rate of exchange prevailing on the date
of payment, the Guarantor hereby agrees to pay such additional amount as may be
necessary to ensure that the amount paid is the amount of such Alternate
Currency which permits the Agent to purchase the amount of U.S. dollars due
under this Guaranty when the judgment or order is issued at the Agent's spot
rate of exchange for buying U.S. dollars with the Alternate Currency, in
accordance with normal commercial procedures, prevailing at the Agent's opening
of business on the date of payment. Any amount due from the Guarantor to the
Agent and/or any Lender under the second sentence of this paragraph shall be due
as separate debt of the Guarantor to the Agent and/or any Lender and shall not
be affected by any judgment or order being obtained for any other sum. The
covenant contained in this paragraph shall survive the payment in full of all of
the other obligations of the Guarantor hereunder.
15. MISCELLANEOUS. This Guaranty constitutes the entire agreement of
the Guarantor with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of the Obligations. The invalidity or unenforceability of
any one or more sections of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are for the ease of
reference only and shall not affect the meaning of the relevant provisions. The
meanings of all defined terms used in this Guaranty shall be equally applicable
to the singular and plural forms of the terms defined.
16. NEGATIVE PLEDGE. Guarantor agrees that (i) Guarantor shall not
create or incur any liens on any of its assets except those liens in favor of
the Agent and the Lenders under the Credit Documents (as defined in the Amended
and Restated Credit Agreement) and (ii) Guarantor shall not agree with any other
entity to prohibit the creation of any liens on any of the assets of the
Guarantor.
17. WAIVER OF JURY TRIAL. The Guarantor hereby waives Guarantor's right
to a jury trial with respect to any action or claim arising out of any dispute
in connection with this Guaranty, any rights or obligations hereunder or the
performance of such rights and obligations. Except as prohibited by law, the
Guarantor hereby waives any right Guarantor may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Guarantor (a) certifies that no representative, agent or
attorney of the Agent and/or any Lender has represented, expressly or otherwise,
that it would not, in the event of litigation, seek to enforce the foregoing
waivers and (b) acknowledges that the Agent and the Lenders have been induced to
give credit and other accommodations to the Borrower by, among other things, the
waivers and certifications contained herein.
18. PREJUDGMENT REMEDY WAIVER; OTHER WAIVERS. THE GUARANTOR
ACKNOWLEDGES THAT THIS GUARANTY IS PART OF A COMMERCIAL TRANSACTION WITHIN THE
MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE GUARANTOR
HEREBY WAIVES GUARANTOR'S RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER
UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER
ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO
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ANY AND ALL PREJUDGMENT REMEDIES THE AGENT AND/OR ANY LENDER MAY EMPLOY TO
ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE GUARANTOR
ACKNOWLEDGES THAT THE ATTORNEY OF THE AGENT AND/OR ANY LENDER MAY, PURSUANT TO
CONN. GEN. STAT. ss. 52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT
SECURING A COURT ORDER. THE GUARANTOR ACKNOWLEDGES AND RESERVES GUARANTOR'S
RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR
PREJUDGMENT REMEDY AS AFORESAID AND THE AGENT AND THE LENDERS ACKNOWLEDGE THE
GUARANTOR'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
[Signature page follows on next page]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered by its duly authorized officer as of the date appearing
on page one.
SCAN-OPTICS (CANADA), LTD.
By:_________________________
Name:
Title:
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
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CERTIFICATE
The undersigned certifies to the Agent and the Lenders (each as defined
in the foregoing Guaranty) that:
1. He/she is the of the Guarantor who executed the foregoing Guaranty
and in such capacity has the authority to make this certificate on behalf of the
Guarantor.
2. The Guarantor is a Canadian corporation organized under the, validly
organized or formed and existing in good standing and in the full enjoyment of
its powers and franchises under the laws of Canada.
3. The foregoing Guaranty has been duly executed and delivered on
behalf of the Guarantor, such actions have been duly authorized by all necessary
corporate or other action, and the execution, delivery and performance of the
Guaranty by the Guarantor will not contravene any existing law, rule or
regulation, or any provision of its certificate of formation or operating
agreement or bylaws or other document or documents evidencing its establishment
or governing the conduct of its affairs or any agreement to which it is a party
or by which it is bound.
IN WITNESS WHEREOF, the undersigned has made this certificate on behalf
of the Guarantor this day of March, 2004.
--------------------------------
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Exhibit 3.1(q)(B)
Form of Amended and Restated Unlimited Guaranty by Scan-Optics Limited
AMENDED AND RESTATED UNLIMITED GUARANTY
AMENDED AND RESTATED GUARANTY, dated as of March 30, 2004 (the
"Guaranty"), by SCAN-OPTICS LIMITED, a United Kingdom company limited by shares
(the "Guarantor"), in favor of PATRIARCH PARTNERS AGENCY SERVICES, LLC (the
"Agent"), for itself as Agent and on behalf of the Lenders (as defined in the
Amended and Restated Credit Agreement, hereinafter the "Lenders") under the
Amended and Restated Credit Agreement (as defined below).
RECITALS
--------
WHEREAS, Scan-Optics, Inc. (the "Borrower") and Ark CLO 2000-1, Limited
(as assignee of Fleet National Bank, formerly known as BankBoston, N.A.) are
parties to that certain Second Amended and Restated Loan Agreement, dated as of
May 10, 1999, as amended by that certain Amendment and Waiver Agreement, dated
as of January 29, 2001, that certain Second Amendment and Waiver Agreement,
dated as of July 1, 2001, that certain Third Amendment and Waiver Agreement,
dated as of September 1, 2001, that certain Fourth Amendment Agreement, dated as
of December 31, 2001, and that certain Fifth Amendment Agreement, dated as of
December 31, 2002 (as so amended and as further amended, restated, supplemented
or otherwise modified from time to time, the "Prior Credit Agreement");
WHEREAS, pursuant to (i) that certain Unlimited Guaranty, dated as of
April 7, 1993 (the "Original Guaranty"), by the Guarantor, (ii) that certain
Unlimited Guaranty, dated as of April 7, 1993, by Scan-Optics (Canada), Ltd., a
Canadian corporation organized under the Business Corporations Act of Canada,
and (iii) that certain Reaffirmation of Guaranties, dated as of May 10, 1999,
from the Guarantor to BankBoston, N.A., each of the Guarantor and Scan-Optics
(Canada), Ltd. previously guaranteed, among other things, all of the obligations
and liabilities of the Borrower under the Prior Credit Agreement;
WHEREAS, the Guarantor, the Borrower and certain other Persons desire
to enter into a Third Amended and Restated Credit Agreement, dated on or about
the date hereof (the "Amended and Restated Credit Agreement"), to provide for,
among other things, (i) the restructuring of the Existing Indebtedness (as
defined in the Amended and Restated Credit Agreement), such that, among other
things, the Existing Indebtedness will be refinanced and replaced by (a)
$9,000,000 of Term Loans (as defined in the Amended and Restated Credit
Agreement) and (b) $2,500,000 of Revolving Loans (as defined in the Amended and
Restated Credit Agreement); and (ii) $2,000,000 of Overadvance Loans (as defined
in the Amended and Restated Credit Agreement);
NOW THEREFORE, in consideration of the credit, banking facilities
and/or accommodations to the Borrower and the other Credit Parties (as defined
in the Amended and Restated Credit Agreement) in connection with the Amended and
Restated Credit Agreement and the other Credit Documents, the Guarantor agrees
to continue, affirm, amend and restate the Original Guaranty as follows:
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1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees
to the Agent and the Lenders the full and punctual payment when due (whether at
maturity, by acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the Borrower to the Agent
and/or the Lenders, whether direct or indirect, absolute or contingent, due or
to become due, secured or unsecured, now existing or hereafter arising or
acquired (whether by way of discount, letter of credit, lease, loan, overdraft
or otherwise) (the "Obligations"). This guaranty is an absolute, unconditional
and continuing guaranty of the full and punctual payment and performance of the
Obligations and not of their collectibility only and is in no way conditioned
upon any requirement that the Agent and/or the Lenders first attempt to collect
any of the Obligations from the Borrower or resort to any security or other
means of obtaining their payment. Should the Borrower default in the payment or
performance of any of the Obligations, the obligations of the Guarantor
hereunder shall become immediately due and payable to the Agent and the Lenders,
without demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Agent
and/or the Lenders on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Agent and/or the
Lenders, on demand, all costs and expenses (including court costs and legal
expenses) incurred or expended by the Agent and/or the Lenders in connection
with the Obligations, this Guaranty and the enforcement thereof, together with
interest on amounts recoverable under this Guaranty from the time such amounts
become due until payment, at the rate per annum applicable under the Amended and
Restated Credit Agreement for Revolving Loans; provided that if such interest
exceeds the maximum amount permitted to be paid under applicable law, then such
interest shall be reduced to such maximum permitted amount.
3. UNLIMITED GUARANTY. The liability of the Guarantor hereunder shall
be unlimited.
4. WAIVERS BY GUARANTOR; AGENT'S AND LENDERS' FREEDOM TO ACT. The
Guarantor agrees that the Obligations will be paid and performed strictly in
accordance with their respective terms regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Agent and/or the Lenders with respect thereto. The
Guarantor waives presentment, demand, protest, notice of acceptance, notice of
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Borrower, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of the Agent and/or the Lenders to assert any claim or demand or to
enforce any right or remedy against the Borrower; (ii) any extensions or
renewals of any Obligation; (iii) any rescissions, waivers, amendments or
modifications of any of the terms or provisions of any agreement evidencing,
securing or otherwise executed in connection with any Obligation; (iv) the
substitution or release of any entity primarily or secondarily liable for any
Obligation; (v) the
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adequacy of any rights the Agent and/or the Lenders may have against any
collateral or other means of obtaining repayment of the Obligations; (vi) the
impairment of any collateral securing the Obligations, including without
limitation the failure to perfect or preserve any rights the Agent and/or the
Lenders might have in such collateral or the substitution, exchange, surrender,
release, loss or destruction of any such collateral; or (vii) any other act or
omission which might in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of the Guarantor, all
of which may be done without notice to the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER. If for any reason
the Borrower has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable
from the Borrower by operation of law or for any other reason, this Guaranty
shall nevertheless be binding on the Guarantor to the same extent as if the
Guarantor at all times had been the principal obligor on all such Obligations.
In the event that acceleration of the time for payment of the Obligations is
stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or for
any other reason, all such amounts otherwise subject to acceleration under the
terms of any agreement evidencing, securing or otherwise executed in connection
with any Obligation shall be immediately due and payable by the Guarantor.
6. SUBROGATION; SUBORDINATION. Until the payment and performance in
full of all Obligations and any and all obligations of the Borrower to the Agent
and/or the Lenders and/or any affiliate of the Agent and/or any Lender, the
Guarantor shall not exercise any rights against the Borrower arising as a result
of payment by the Guarantor hereunder, by way of subrogation or otherwise, and
will not prove any claim in competition with the Agent, the Lenders and/or their
affiliates in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature; the Guarantor will not claim any set-off or
counterclaim against the Borrower in respect of any liability of the Guarantor
to the Borrower; and the Guarantor waives any benefit of and any right to
participate in any collateral which may be held by the Agent, the Lenders and/or
their affiliates. The payment of any amounts due with respect to any
indebtedness of the Borrower now or hereafter held by the Guarantor is hereby
subordinated to the prior payment in full of the Obligations. The Guarantor
agrees that after the occurrence of any default in the payment or performance of
the Obligations, the Guarantor will not demand, ▇▇▇ for or otherwise attempt to
collect any such indebtedness of the Borrower to the Guarantor until the
Obligations shall have been paid in full. If, notwithstanding the foregoing
sentence, the Guarantor shall collect, enforce or receive any amounts in respect
of such indebtedness, such amounts shall be collected, enforced and received by
the Guarantor as trustee for the Agent and the Lenders and be paid over to the
Agent and the Lenders on account of the Obligations without affecting in any
manner the liability of the Guarantor under the other provisions of this
Guaranty.
7. SECURITY; SET-OFF. The Guarantor hereby grants to the Agent and the
Lenders, as security for the full and punctual payment and performance of the
Guarantor's obligations hereunder, a continuing lien on and security interest in
all securities or other property belonging to the Guarantor now or hereafter
held by the Agent and/or the Lenders and in all deposits (general or special,
time or demand, provisional or final) and other sums credited by or due from the
Agent and/or the Lenders to the Guarantor or subject to withdrawal by the
Guarantor; and regardless of the adequacy of any collateral or other means of
obtaining
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repayment of the Obligations, the Agent and each of the Lenders are hereby
authorized at any time and from time to time, without notice to the Guarantor
(any such notice being expressly waived by the Guarantor) and to the fullest
extent permitted by law, to set off and apply such deposits and other sums
against the obligations of the Guarantor under this Guaranty, whether or not the
Agent and/or the Lenders shall have made any demand under this Guaranty and
although such obligations may be contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees that it will, from time to
time at the request of the Agent and/or any Lender, provide to the Agent and the
Lenders its most recent audited and unaudited balance sheets and related
statements of income and changes in financial condition (prepared on a
consolidated basis with the Guarantor's subsidiaries, if any) and such other
information relating to the business and affairs of the Guarantor as the Agent
and/or any Lender may reasonably request. The Guarantor also agrees to do all
such things and execute all such documents, including financing statements, as
the Agent and/or any Lender may consider necessary or desirable to give full
effect to this Guaranty and to perfect and preserve the rights and powers of the
Agent and the Lenders hereunder.
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect until the Agent and the Lenders are given written notice of the
Guarantor's intention to discontinue this Guaranty, notwithstanding any
intermediate or temporary payment or settlement of the whole or any part of the
Obligations. No such notice shall be effective unless received and acknowledged
by an officer of the Agent at its head office. No such notice shall affect any
rights of the Agent and/or any Lender or of any affiliate hereunder including,
without limitation, the rights set forth in Sections 4 and 6, with respect to
Obligations incurred prior to the receipt of such notice or Obligations incurred
pursuant to any contract or commitment in existence prior to such receipt, and
all checks, drafts, notes, instruments (negotiable or otherwise) and writings
made by or for the account of the Borrower and drawn on the Agent and/or any
Lender or any of its agents purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by the Agent
and/or any Lender after that date, shall form part of the Obligations. This
Guaranty shall continue to be effective or be reinstated, notwithstanding any
such notice, if at any time any payment made or value received with respect to
an Obligation is rescinded or must otherwise be returned by the Agent and/or any
Lender upon the insolvency, bankruptcy or reorganization of the Borrower, or
otherwise, all as though such payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Agent and/or any Lender and their successors, transferees and
assigns. Without limiting the generality of the foregoing sentence, the Agent
and/or any Lender may assign or otherwise transfer any agreement or any note
held by it evidencing, securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein, to any other person
or entity, and such other person or entity shall thereupon become vested, to the
extent set forth in the agreement evidencing such assignment, transfer or
participation, with all the rights in respect thereof granted to the Agent
and/or the Lenders herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
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of this Guaranty nor consent to any departure by the Guarantor therefrom shall
be effective unless the same shall be in writing and signed by the Agent and the
Required Lenders (as defined in the Amended and Restated Credit Agreement). No
failure on the part of the Agent and/or the Lenders to exercise, and no delay in
exercising, any right hereunder shall operate as a wavier thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantor, at the address set forth beneath its signature hereto, and if to the
Agent and/or any Lender, to such Person c/o Patriarch Partners Agency Services,
LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇, or at such address as either party may designate in
writing.
13. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Guarantor agrees that any suit for the enforcement of this Guaranty
may be brought in the courts of the State of New York or any Federal Court
sitting in the City and State of New York and consents to the non-exclusive
jurisdiction of such court. The Guarantor hereby waives any objection that it
may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court. The Guarantor hereby agrees
that service of all writs, complaints, process and summonses in any such suit,
action or proceeding may be made upon the Guarantor c/o Scan-Optics, Inc., ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer (the "Process Agent"). The Guarantor hereby irrevocably appoints the
Process Agent its true and lawful attorney-in-fact in its name, place and stead
to accept such service of any and all such writs, complaints, process and
summonses. The Guarantor agrees that any election by the Agent and/or any Lender
to give notice of any such service to the Guarantor shall not impair or affect
the validity of such service or of the judgment based thereon. The Guarantor
hereby further irrevocably consents of the service of process in any suit,
action or proceeding in said courts by the mailing or hand delivery thereof to
the Guarantor in the manner described in Section 12 hereof. Nothing herein shall
in any way be deemed to limit the ability of the Agent and/or any Lender to
serve any such writ, complaint, process or summons in any other manner permitted
by applicable law or to obtain jurisdiction over the Guarantor in such other
jurisdictions, and in such manner, as may be permitted by applicable law.
14. JUDGMENT CURRENCY. If, for the purpose of obtaining judgment in any
court or obtaining an order enforcing a judgment, it becomes necessary to
convert any amount due under this Guaranty into any currency other than U.S.
dollars (hereinafter called the "Alternate Currency"), then the conversion shall
be made at the Agent's spot rate of exchange for buying U.S. dollars with the
Alternate Currency, in accordance with normal commercial procedure, prevailing
at the Agent's close of business on the business day immediately preceding the
day on which the judgment is given or (as the case may be) the order is made. In
the event that there is a difference between the rate of exchange on the basis
of which the amount of such
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judgment or order is determined and the rate of exchange prevailing on the date
of payment, the Guarantor hereby agrees to pay such additional amount as may be
necessary to ensure that the amount paid is the amount of such Alternate
Currency which permits the Agent to purchase the amount of U.S. dollars due
under this Guaranty when the judgment or order is issued at the Agent's spot
rate of exchange for buying U.S. dollars with the Alternate Currency, in
accordance with normal commercial procedures, prevailing at the Agent's opening
of business on the date of payment. Any amount due from the Guarantor to the
Agent and/or any Lender under the second sentence of this paragraph shall be due
as separate debt of the Guarantor to the Agent and/or any Lender and shall not
be affected by any judgment or order being obtained for any other sum. The
covenant contained in this paragraph shall survive the payment in full of all of
the other obligations of the Guarantor hereunder.
15. MISCELLANEOUS. This Guaranty constitutes the entire agreement of
the Guarantor with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of the Obligations. The invalidity or unenforceability of
any one or more sections of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are for the ease of
reference only and shall not affect the meaning of the relevant provisions. The
meanings of all defined terms used in this Guaranty shall be equally applicable
to the singular and plural forms of the terms defined.
16. NEGATIVE PLEDGE. Guarantor agrees that (i) Guarantor shall not
create or incur any liens on any of its assets except those liens in favor of
the Agent and the Lenders under the Credit Documents (as defined in the Amended
and Restated Credit Agreement) and (ii) Guarantor shall not agree with any other
entity to prohibit the creation of any liens on any of the assets of the
Guarantor.
17. WAIVER OF JURY TRIAL. The Guarantor hereby waives Guarantor's right
to a jury trial with respect to any action or claim arising out of any dispute
in connection with this Guaranty, any rights or obligations hereunder or the
performance of such rights and obligations. Except as prohibited by law, the
Guarantor hereby waives any right Guarantor may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Guarantor (a) certifies that no representative, agent or
attorney of the Agent and/or any Lender has represented, expressly or otherwise,
that it would not, in the event of litigation, seek to enforce the foregoing
waivers and (b) acknowledges that the Agent and the Lenders have been induced to
give credit and other accommodations to the Borrower by, among other things, the
waivers and certifications contained herein.
18. PREJUDGMENT REMEDY WAIVER; OTHER WAIVERS. THE GUARANTOR
ACKNOWLEDGES THAT THIS GUARANTY IS PART OF A COMMERCIAL TRANSACTION WITHIN THE
MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE GUARANTOR
HEREBY WAIVES GUARANTOR'S RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER
UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER
ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO
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ANY AND ALL PREJUDGMENT REMEDIES THE AGENT AND/OR ANY LENDER MAY EMPLOY TO
ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE GUARANTOR
ACKNOWLEDGES THAT THE ATTORNEY OF THE AGENT AND/OR ANY LENDER MAY, PURSUANT TO
CONN. GEN. STAT. ss. 52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT
SECURING A COURT ORDER. THE GUARANTOR ACKNOWLEDGES AND RESERVES GUARANTOR'S
RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR
PREJUDGMENT REMEDY AS AFORESAID AND THE AGENT AND THE LENDERS ACKNOWLEDGE THE
GUARANTOR'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
[Signature page follows on next page]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered by its duly authorized officer as of the date appearing
on page one.
SCAN-OPTICS LIMITED
By:_________________________
Name:
Title:
Address: ▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇ Brookside, Walford
England
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CERTIFICATE
The undersigned certifies to the Agent and the Lenders (each as defined in the
foregoing Guaranty) that:
1. He/she is the of the Guarantor who executed the foregoing Guaranty
and in such capacity has the authority to make this certificate on behalf of the
Guarantor.
2. The Guarantor is a company limited by shares, validly organized or
formed and in the full enjoyment of its powers and franchises under the laws of
the United Kingdom.
3. The foregoing Guaranty has been duly executed and delivered on
behalf of the Guarantor, such actions have been duly authorized by all necessary
corporate or other action, and the execution, delivery and performance of the
Guaranty by the Guarantor will not contravene any existing law, rule or
regulation, or any provision of its certificate of formation or operating
agreement or bylaws or other document or documents evidencing its establishment
or governing the conduct of its affairs or any agreement to which it is a party
or by which it is bound.
IN WITNESS WHEREOF, the undersigned has made this certificate on behalf
of the Guarantor this day of March, 2004.
--------------------------------
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Exhibit 3.2(a)
Form of Funding Notice
FORM OF FUNDING NOTICE
[Date]
Patriarch Partners Agency Services, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ark CLO 2000-1 Limited
c/o Patriarch Partners, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Zohar CDO 2003-1, Limited
c/o Patriarch Partners VIII, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Loan Request
Ladies and Gentlemen:
Reference is hereby made to that certain Third Amended and Restated
Credit Agreement, dated as of [March ___], 2004 (the "Credit Agreement"), among
Scan-Optics, Inc, as Borrower, Scan-Optics Limited ("SOL"), Scan-Optics
(Canada), Ltd. ("SOC"; and together with SOL and the subsidiaries of the
Borrower that from time to time become guarantors thereunder, the "Guarantors"),
Ark CLO 2000-1, Limited ("Ark"), Zohar CDO 2003-1, Limited ("Zohar"; and
together with Ark, the "Lenders") and Patriarch Partners Agency Services, LLC,
as Agent. Unless otherwise defined herein, capitalized terms used in this
Certificate shall have the meanings set forth in the Credit Agreement.
Pursuant to Sections [2.1(b)][2.1(c)] and 3.2 of the Credit Agreement,
we hereby request that [a Revolving Loan][the Overadvance Loan] in the principal
amount of $[__________] be made on [__________] (the "Borrowing Date").* We
understand that this request is irrevocable and binding on us and obligates us
to accept the requested loan on such date.
__________________________
* Each Revolving Loan request shall be in a minimum aggregate amount of $25,000
and an integral of $25,000 in excess thereof. The Overadvance Loan Amount shall
equal $1,500,000.
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We hereby certify (a) that according to our records the aggregate
outstanding principal amount of the Revolving Loans on and as of the Borrowing
Date is $[__________], (b) that we will use the proceeds of the requested
[Revolving Loan][Overadvance Loan] in accordance with the Section 2.3 of the
Credit Agreement, (c) that each of the representations, warranties and covenants
contained in the Credit Agreement or in any other Credit Document shall be true,
correct and complied with on and as of the Borrowing Date, (d) that all
conditions precedent under the Credit Agreement (including without limitation
Section 3.2 thereof) for a Borrowing have been satisfied and (e) that as of the
Borrowing Date, no event shall have occurred and be continuing or would result
from the consummation of the applicable Borrowing that would constitute a
Default or Event of Default.
Very truly yours,
SCAN-OPTICS, INC.
By:_________________________
Name:
Title:
-201-
Exhibit 11.4(b)
Form of Assignment Agreement
[Exhibit 11.4(b)]
FORM OF ASSIGNMENT AGREEMENT
_______________________, Assignee
Dated ____________ ___, 200__
Reference is made to that certain Third Amended and Restated Credit
Agreement, dated as of [March ___], 2004 (the "Credit Agreement"), among
Scan-Optics, Inc, as borrower thereunder (the "Borrower"), Scan-Optics Limited
("SOL"), Scan-Optics (Canada), Ltd. ("SOC"; and together with SOL and the
subsidiaries of the Borrower that from time to time become guarantors
thereunder, the "Guarantors"), Ark CLO 2000-1, Limited ("Ark"), Zohar CDO
2003-1, Limited ("Zohar"; and together with Ark, the "Lenders") and Patriarch
Partners Agency Services, LLC, as agent thereunder (the "Agent"). Unless
otherwise defined herein, capitalized terms used in this Assignment Agreement
shall have the meanings set forth in the Credit Agreement.
___________________________ (the "Assignor") and
__________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to such of the Assignor's rights and obligations as a [Revolving
Lender][Overadvance Lender][and/or][Term Lender] under the Credit Agreement as
of the Effective Date (as hereinafter defined) relating to a
[$____________][Revolving Credit Commitment (and a Pro Rata Share of the
Revolving Loans)][Overadvance Loan Commitment/Overadvance Loan][and/or][Term
Loan]. The Assignee shall have no interest in any interest that is payable with
respect to a period prior to the Effective Date.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Credit Document
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other Credit Document or any other
instrument or document furnished pursuant thereto, other than that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim, lien or encumbrance;
and (ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any Credit Party, or the
performance or observance by the Borrower or any Credit Party of any of its
obligations under the Credit Agreement or any other Credit Document or any other
instrument or document furnished pursuant thereto.
-202-
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment Agreement; (ii) confirms that it has
received a copy of the Credit Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (iii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iv) confirms that it is an Eligible
Assignee; (v) appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement and the other
Credit Documents as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (vi) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a lender under the
Credit Agreement; and (vii) specifies as its address for notices the office set
forth beneath its name on the signature pages hereof.
4. The effective date for this Assignment Agreement shall be
____________ ___, 200__ (the "Effective Date"). Following the execution of this
Assignment Agreement, it will be delivered to the Agent for acceptance and
recording by the Agent in the Register.
5. Upon such acceptance and recording, from and after the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment Agreement, shall have the rights and
obligations of a [Revolving Lender][Overadvance Lender][and/or][Term Lender]
thereunder, and (ii) the Assignor shall, to the extent provided in this
Assignment Agreement, relinquish its rights and be released from its obligations
under the Credit Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees and other amounts) to
the Assignee. Assignor and Assignee shall make all appropriate adjustments in
payments for periods prior to the Effective Date by the Agent or with respect to
the making of this Assignment Agreement directly between themselves.
[Signature page follows on next page]
-203-
7. This Assignment Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without reference to any
provision which would render such choice of law invalid.
ASSIGNOR:
By:
-----------------------------
Name:
Title:
ASSIGNEE:
By:
-----------------------------
Name:
Title:
Address:
-------------------------------
-------------------------------
-------------------------------
Accepted and Consented to this ____ day of
______________, 200__:
PATRIARCH PARTNERS AGENCY SERVICES, LLC, as Agent
By:
-----------------------------
Name:
Title:
cc: Scan-Optics, Inc.
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[Assignee's Administrative Details]
-205-
Schedule 4.1(f)
Legal and Other Proceedings
-206-
Subsidiaries/Capital Structure
------------------------------------------------------------------------------------------------------------------------------------
Entity Jurisdiction Jurisdictions in Capital Stock Percentage of Outstanding Percentage of Record
of which Entity is Outstanding Warrants Warrants Holder of
Organization Authorized to Do Shares Owned /Rights, /Rights, etc. Shares,
Business by etc. Owned by Options/
Scan-Optics, Scan-Optics, Warrants,
Inc. Inc. etc.
------------------------------------------------------------------------------------------------------------------------------------
Authorized Authorized Issued and
Number of Class Outstanding
Shares Shares
------------------------------------------------------------------------------------------------------------------------------------
Scan-Optics DE AL, AZ, CA, CO, 5,000,000 Preferred 3,800,000 N/A 3,800,000 0% Ark CLO 2000-1,
, Inc. CT, DE, DC, FL, Limited holds
GA, HI, ID, IL, all outstanding
IN, IA, KS, KY, Series-A
LA, ME, MD, MA, Preferred Stock
MI, MN, MS, MO,
NE, NH, NC, NJ,
NM, NY, OK, OH,
PA, SC, TN, TX,
UT, VA, WI
------------------------------------------------------------------------------------------------------------------------------------
15,000,000 Common 7,439,732 N/A 2,852,9551, 2 100% Scan-Optics
Stock Options,
see footnote
No.-1
------------------------------------------------------------------------------------------------------------------------------------
----------------------------------
2 Stock Option Information as of March 30, 2004:
Issued Directors 280,000
Officers 1,871,183
Employees 556,500
Total Shares Outstanding 2,707,683
Shares Available to Grant 145,272
Total Shares 2,852,955
3 Warrant No. W-1 issued to Ark CLO 2000-1, Limited for the purchase of
33.20% of Common Stock (determined on a fully diluted basis
as of December 31, 2003).
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------------------------------------------------------------------------------------------------------------------------------------
Entity Jurisdiction Jurisdictions in Capital Stock Percentage of Outstanding Percentage of Record
of which Entity is Outstanding Warrants Warrants Holder of
Organization Authorized to Do Shares Owned /Rights, /Rights, etc. Shares,
Business by etc. Owned by Options/
Scan-Optics, Scan-Optics, Warrants,
Inc. Inc. etc.
------------------------------------------------------------------------------------------------------------------------------------
Authorized Authorized Issued and
Number of Class Outstanding
Shares Shares
------------------------------------------------------------------------------------------------------------------------------------
Scan-Optics, Inc. 3,000,000 Common 0 N/A N/A N/A N/A
(continued) Class1
------------------------------------------------------------------------------------------------------------------------------------
Subsidiaries
------------------------------------------------------------------------------------------------------------------------------------
Scan-Optics Canada Canada Unlimited Common 1 100% N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
Scan-Optics UK UK 1,000,000 Common 865,202 100% N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
----------------------
4 No Class A Common Shares are outstanding and, pursuant to the
Borrower's Certificate of Incorporation, no such shares may be issued in the
future.
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Schedule 5.1(h)
Recapitalization Documents
1. Amendment(s) to and/or Amendment and Restatement(s) of Borrower's
Certificate of Incorporation.
2. Amendment(s) to and/or Amendment and Restatement(s) of Borrower's
By-laws.
3. Certificate of Designation, Preferences, Rights and Restrictions for
the New Preferred Stock.
4. Organizational Plan.
5. Registration Rights Agreement.
6. Stock Subscription Agreement
7. Common Stock Certificate(s)
8. New Preferred Stock Certificate(s)
9. Termination of Preferred Stock (Class B) Agreement
10. Termination of Warrant Agreement
11. Stock Option Plan Agreement with respect to management options and/or
amendment(s) to existing stock option plans.
-209-
Schedule 6.1(b)
Liens
(None)
-210-
Schedule 6.1(i)
Document Allowing Issuance of Securities
1. The Warrant (as defined in the Fourth Amendment).
2. Any document executed in connection with the Recapitalization and
approved in writing by the Required Lenders.
3. Series B Preferred Stock issued pursuant to the Share Exchange
Agreement, dated as of March 30, 2004, between Ark and the Borrower.
4. Stock Option Plans of the Borrower as such plans exist as of the
Closing Date (which plans are described in greater detail in the
Borrower's most recent Form 10K filed with the Securities and Exchange
Commission).
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