AMENDED AND RESTATED
REVOLVING CREDIT LOAN
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
INTELLIGROUP, INC.
AND
EMPOWER, INC.
(BORROWERS)
MAY 31, 2000
AMENDED AND RESTATED
REVOLVING CREDIT LOAN
AND
SECURITY AGREEMENT
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Amended and Restated Revolving Credit Loan and Security Agreement dated May
31, 2000 among INTELLIGROUP, INC., a corporation organized under the laws of the
State of New Jersey and EMPOWER, INC., a corporation organized under the laws of
the State of Michigan (each a "Borrower" and collectively "Borrowers"), the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
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1.1. Accounting Terms. As used in this Agreement, the Note, or any
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certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
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however, whenever such accounting terms are used for the purposes of determining
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compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended December 31,
1999.
1.2. General Terms. For purposes of this Agreement the following terms
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shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Advances" shall mean and include the Revolving Advances and Letters
of Credit.
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
hereof.
"Affiliate" of any Person shall mean (a) any Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any Person described
in clause (a) above. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (x) to vote 5% or more of the securities
having ordinary voting power for the election of directors of such Person, or
(y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Applicable Eurodollar Margin" shall mean as of the Closing Date,
250 basis points and thereafter, as at the end of each fiscal quarter commencing
with the quarter ending June 30, 2000, the Applicable Eurodollar Margin shall be
subject to adjustment based upon the formula set forth as follows:
Average Quarterly Funded Debt Applicable
Divided by Rolling 12 month Eurodollar
EBITDA (ASP+ only) Margin
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Greater than 2.00 to 1.00 250 basis points
Greater than 1.50 but less than or 225 basis points
equal to 2.00 to 1.00
Greater than 1.00 but less than or 200 basis points
equal to 1.50 to 1.00
Less than 1.00 to 1.00 175 basis points
which adjustment shall be calculated by Agent based upon the financial reports
submitted by Borrowers, which reports shall be determinative, absent manifest
error.
"ASP+" shall mean all the assets and operation of Borrowers and
their Subsidiaries and Affiliates, excepting only all assets and operations of
SeraNova and its Subsidiaries.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in the
preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
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"Borrowing Base Certificate" shall mean a certificate duly executed
by an officer of Borrowers appropriately completed and in substantially the form
of Exhibit A hereto.
"Borrowers on a consolidated basis" shall mean the consolidated
financial results of Borrowers and all Subsidiary Parties, limited to ASP+ only,
determined in accordance with GAAP applied on a consistent basis.
"Borrowers' Account" shall have the meaning set forth in Section
2.7.
"Business Day" shall mean any day other than Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required by law to be
closed for business in East Brunswick, New Jersey and, if the applicable
Business Day relates to any Eurodollar Rate Loans, such day must also be a day
on which dealings are carried on in the London interbank market.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"Change of Management" shall mean the failure of at least one of the
individuals identified as follows to actively hold the position of Chief
Executive Officer of Intelligroup, Inc: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (Chairman and
Co-Chief Executive Officer as of the Closing Date) and ▇▇▇▇▇ ▇▇▇▇▇▇ (Co-Chief
Executive Officer as of the Closing Date).
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property
taxes, custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, any Borrower or
any of its Affiliates.
"Closing Date" shall mean May 31, 2000 or such other date as may be
agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
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(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all Subsidiary Stock;
(g) all of each Borrower's right, title and interest in and to
(i) its respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Borrower's rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of each Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments,
documents, chattel paper, warehouse receipts, deposit accounts and money; (vi)
if and when obtained by any Borrower, all real and personal property of third
parties in which such Borrower has been granted a lien or security interest as
security for the payment or enforcement of Receivables; and (vii) any other
goods, personal property or real property now owned or hereafter acquired in
which any Borrower has expressly granted a security interest or may in the
future grant a security interest to Agent hereunder, or in any amendment or
supplement hereto or thereto, or under any other agreement between Agent and any
Borrower;
(h) all of each Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or
(g) of this Paragraph; and
(i) all proceeds and products of (a), (b), (c), (d), (e), (f),
(g) and (h) in whatever form, including, but not limited to: cash, deposit
accounts (whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 16.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form
of Exhibit 16.3 hereto, properly completed and otherwise in form and substance
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satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
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"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in Section 2.14
hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Base Rate.
"Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for any period the
sum of (i) net income (or loss) of Borrowers on a consolidated basis for such
period (excluding extraordinary gains and losses, plus (ii) all interest expense
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of Borrowers on a consolidated basis for such period, plus (iii) all charges
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against income of Borrowers on a consolidated basis for such period for federal,
state and local taxes accrued.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses for such
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period, plus (iii) amortization expenses for such period.
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"Eligible Receivables" shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the ordinary course of
such Borrower's business and which Agent, in its reasonable credit judgment,
shall deem to be an Eligible Receivable, based on such considerations as Agent
may from time to time deem appropriate. A Receivable shall not be deemed
eligible unless such Receivable is subject to Agent's first priority perfected
security interest and no other Lien (other than Permitted Encumbrances), and is
evidenced by an invoice or other documentary evidence satisfactory to Agent. In
addition, no Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an Affiliate
of any Borrower or to a Person controlled by an Affiliate of any Borrower;
(b) it is due or unpaid more than sixty (60) days after the
original due date or more than one-hundred fifty (150) days after the original
invoice date, whichever is less;
(c) fifty percent (50%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder. Such percentage may, in
Agent's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United States
of America, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a ▇▇▇▇-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(h) Agent believes, in its reasonable judgment, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay;
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(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Borrower assigns its right to payment of such Receivable to Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et
--
seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
--- -- ---
applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been shipped
to the Customer or the services giving rise to such Receivable have not been
performed by the applicable Borrower or the Receivable otherwise does not
represent a final sale;
(k) Intentionally Omitted;
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of a
Borrower to the extent of any amount due from a Borrower to such Customer or the
Receivable is contingent in any respect or for any reason;
(m) the applicable Borrower has made any agreement with any
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;
(n) any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed;
(o) such Receivable is not payable to a Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Eligible Unbilled Receivables" shall mean Eligible Receivables
which have not been invoiced but for which the work has been performed and which
shall be billed not more than forty-five (45) days after such Account is first
included on the Borrowing Base Certificate or otherwise reported to Agent as
Collateral.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
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"Equipment" shall mean and include as to each Borrower all of such
Borrower's goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the
then current Interest Period relating thereto the interest rate per annum
determined by PNC by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by PNC in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the average of the London
interbank offered rates for U.S. Dollars quoted by the British Bankers'
Association as set forth on Dow ▇▇▇▇▇ Markets Service (formerly known as
Telrate) (or appropriate successor or, if British Banker's Association or its
successor ceases to provide such quotes, a comparable replacement determined by
PNC) display page 3750 (or such other display page on the Dow ▇▇▇▇▇ Markets
Service system as may replace display page 3750) two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such
Eurodollar Rate Loan and having a borrowing date and a maturity comparable to
such Interest Period by (ii) a number equal to 1.00 minus the Reserve
Percentage. The Eurodollar Rate may also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA as shown
on Eurodollar Rate =Dow ▇▇▇▇▇ Markets Service display page 3750 or
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appropriate successor
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1.00 - Reserve Percentage]
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Event of Default" shall mean the occurrence of any of the events
set forth in Article X hereof.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include as to each Borrower all
of such Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to
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such Borrower to secure payment of any of the Receivables by a Customer, all
rights of indemnification and all other intangible property of every kind and
nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" shall mean any of Borrowers' Subsidiaries organized
under the laws of one of the United States identified as guarantors on Schedule
5.2(b) and any other Person who may hereafter guarantee payment or performance
of the whole or any part of the Obligations and "Guarantors" means collectively
all such Persons.
"Guarantor Security Agreement" shall mean any Security Agreement
executed by any Guarantor in favor of Agent securing the Guaranty of such
Guarantor.
"Guaranty" shall mean any guaranty of the obligations of Borrowers
executed by a Guarantor in favor of Agent for its benefit and for the ratable
benefit of Lenders.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
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the New Jersey State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
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"Ineligible Security" shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include as to each Borrower all of such
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service or
held for sale or lease, all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in such Borrower's business or used in selling or furnishing
such goods, merchandise and other personal property, and all documents of title
or other documents representing them.
"Investment Property" shall mean and include as to each Borrower,
all of such Borrower's now owned or hereafter acquired securities (whether
certificated or uncertificated), securities entitlements, securities accounts,
commodities contracts and commodities accounts.
"Issuer" shall mean any Person who issues a Letter of Credit
pursuant to the terms hereof.
"Lender" and "Lenders" shall have the meaning ascribed to such term
in the preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Letter of Credit Fees" shall have the meaning set forth in Section
3.2.
"Letters of Credit" shall have the meaning set forth in Section 2.9.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on or
with respect to (a) the condition, operations, assets, business or prospects of
the applicable Person or Persons, (b) any Borrower's ability to pay the
Obligations in accordance with the terms thereof, (c) the value of the
Collateral, or Agent's Liens on the Collateral or the priority of any such Lien
or (d) the practical realization of the benefits of Agent's and each Lender's
rights and remedies under this Agreement and the Other Documents.
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"Maximum Revolving Advance Amount" shall mean Twenty Million Dollars
($20,000,000.00).
"Monthly Advances" shall have the meaning set forth in Section 3.1
hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean and include any and all loans, advances,
debts, liabilities, obligations, covenants and duties owing by Borrowers to
Lenders or Agent or to any other direct or indirect subsidiary or affiliate of
Agent or any Lender of any kind or nature, present or future (including, without
limitation, any interest accruing thereon after maturity, or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to any Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including, without
limitation, this Agreement and the Other Documents) whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
of a letter of credit, loan, equipment lease or guarantee, under any interest or
currency swap, future, option or other similar agreement, or in any other
manner, whether arising out of overdrafts or deposit or other accounts or
electronic funds transfers (whether through automated clearing houses or
otherwise) or out of the Agent's or any Lenders non-receipt of or inability to
collect funds or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of any Borrower's Indebtedness and/or
liabilities under this Agreement, the Other Documents or under any other
agreement between Agent or Lenders and any Borrower and any amendments,
extensions, renewals or increases and all costs and expenses of Agent and any
Lender incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but
not limited to reasonable attorneys' fees and expenses and all obligations of
any Borrower to Agent or Lenders to perform acts or refrain from taking any
action.
"Other Documents" shall mean the Note, any Guaranty, any Guarantor
Security Agreement and any and all other agreements, instruments and documents,
including, without limitation, guaranties, pledges, powers of attorney,
consents, and all other writings heretofore, now or hereafter executed by any
Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of
the transactions contemplated by this Agreement.
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"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"Participant" shall mean each Person who shall be granted the right
by any Lender to participate in any of the Advances and who shall have entered
into a participation agreement in form and substance satisfactory to such
Lender.
"Payment Office" shall mean initially ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; thereafter, such other office of Agent, if
any, which it may designate by notice to Borrowers and to each Lender to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" shall mean and include the acquisition by
either Borrower of all or substantially all of the assets or capital stock of a
Person at such time as the following conditions are satisfied:
(a) No Default or Event of Default shall have occurred and be
continuing;
(b) Undrawn Availability, after giving effect to the
acquisition in question, shall equal or exceed the sum of Three Million Dollars
($3,000,000.00);
(c) Any new Subsidiary of Borrower resulting from such
acquisition, if formed under the laws of a United States jurisdiction, shall
become a Guarantor and shall execute and deliver a Guaranty and a Guarantor's
Security Agreement in form and substance acceptable to Agent in its discretion;
(d) Such Borrower shall pledge one hundred percent (100%) of
the issued and Outstanding stock of such Subsidiary (or not less than sixty five
percent (65%) in the case of a Subsidiary formed in a jurisdiction outside the
United States) to Agent pursuant to a pledge agreement in form and substance
acceptable to Agent in its discretion;
(e) After giving effect to such acquisition, not more than
five million dollars ($5,000,000.00) of Revolving Advances in the aggregate
shall be outstanding with respect to funds used for the purpose of making
acquisitions; and
(f) The Required Lenders shall have given their prior written
consent to such acquisition after an examination of a Borrowing Base Certificate
to confirm Undrawn Availability which shall be delivered to Agent and Lenders
not less than five (5) Business Days prior to the acquisition.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not
12
delinquent or being contested in good faith and by appropriate proceedings and
with respect to which proper reserves have been taken by Borrowers; provided,
--------
that, with respect to any such contest, the Lien shall have no effect on the
----
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of any Borrower's business; (f)
judgment Liens that have been stayed or bonded and mechanics', workers',
materialmen's or other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property
of the Borrowers and (y) the aggregate amount of Indebtedness secured by such
Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6; and (h) Liens disclosed on
Schedule 1.2.
------------
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrowers or any member of
the Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Purchasing Lender" shall have the meaning set forth in Section 16.3
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
▇.▇.▇.▇▇.▇▇. 6901 et seq., as same may be amended from time to time.
------
"Real Property" shall mean all of each Borrower's right, title and
interest in and to the owned and leased premises identified on Schedule 4.19
--------------
hereto.
"Receivables" shall mean and include, as to each Borrower, all of
such Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrowers by their Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and acceptances,
and all other forms of obligations owing to such Borrower arising out of or in
connection with the sale or lease of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
13
"Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least fifty percent
(50%) of the Advances and, if no Advances are outstanding, shall mean Lenders
holding fifty percent (50%) of the Commitment Percentages.
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including,
without limitation, supplemental, marginal and emergency reserve requirements)
with respect to eurocurrency funding.
"Revolving Advances" shall mean Advances made other than Letters of
Credit.
"Revolving Credit Note" shall mean the promissory note referred to
in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum
equal to (a) the Base Rate with respect to Domestic Rate Loans and (b) the sum
of the Eurodollar Rate plus the Applicable Eurodollar Margin with respect to
Eurodollar Rate Loans.
"Section 20 Subsidiary" shall mean the Subsidiary of the bank
holding company controlling PNC, which Subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"SeraNova" shall mean SeraNova, Inc., a corporation of the State of
New Jersey and a majority-owned subsidiary of Intelligroup, Inc.
"SeraNova Spin-Off" shall mean the distribution by Intelligroup,
Inc. ("Intelligroup") to the holders of record of Intelligroup common stock on
May 18, 2000, of all of the outstanding shares of common stock of SeraNova held
by Intelligroup.
"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority
14
of the directors of such corporation, or other Persons performing similar
functions for such entity, are owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean with respect to all Subsidiaries of
Borrowers (except SeraNova and Empower, Inc.) (a) all of the issued and
outstanding shares in the case of domestic Subsidiaries and (b) sixty-five
percent (65%), or such lesser percentage actually owned, of the issued and
outstanding shares in the case of foreign Subsidiaries of stock owned by either
Borrower.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any
member of the Controlled Group from a Plan or Multiemployer Plan during a plan
year in which such entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan
in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Plan or Multiemployer
Plan; (v) any event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of any Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Total Stockholders Equity" shall mean, at a particular date, (a)
the aggregate amount of all assets of Borrowers on a consolidated basis as may
be properly classified as such in accordance with GAAP consistently applied
exclusive of Borrowers' investment in SeraNova, less (b) the aggregate amount of
all liabilities of the Borrowers on a consolidated basis. Notwithstanding
anything contained herein to the contrary, the computation of Total Stockholders
Equity shall exclude any changes thereto (positive or negative) other than from
the result of operations; specifically excluded from this computation are any
non-operational factors, events or circumstances, such as, but not limited to,
the issuance of stock, options, warrants or similar instruments, the repurchases
or redemption of stock or unrealized currency transactions, provided, however,
sales of assets not in the ordinary course of business shall be included in said
computation.
"Toxic Substance" shall mean and include any material present on the
Real Property which has been shown to have significant adverse effect on human
health or which is subject to regulation under the Toxic Substances Control Act
(TSCA), 15 U.S.C. ▇▇.▇▇. 2601 et seq., applicable state law, or any other
applicable Federal or state laws now in force or hereafter enacted relating to
toxic substances. "Toxic Substance" includes but is not limited to asbestos,
polychlorinated biphenyls (PCBs) and lead-based paints.
"Transferee" shall have the meaning set forth in Section 16.3(b)
hereof.
"Unbilled Receivables Advance Rate" shall have the meaning set forth
in Section
15
2.1(a)(y)(ii) hereof.
"Unconsolidated Stockholders Equity" shall mean, at a particular
date, (a) the aggregate amount of all assets of Borrowers and their respective
subsidiaries which are organized under the laws of one of the states of the
United States (exclusive of Borrower's investment in Sera Nova) on a
consolidated basis as may be properly classified as such in accordance with GAAP
consistently applied, less (b) the aggregate amount of all liabilities of the
Borrowers and such subsidiaries on a consolidated basis. Notwithstanding
anything contained hereto to the contrary, the definition of Unconsolidated
Stockholders Equity shall exclude any changes thereto (positive or negative)
other than from the results of operations; specifically excluded from this
computation are any non-operational factors, events or circumstances, such as,
but not limited to, the issuance of stock, options, warrants or similar
instruments, the repurchase or redemption of stock or unrealized currency
transactions, provided, however, sales of assets not in the ordinary course of
business shall be included in said computation.
"Undrawn Availability" at a particular date shall mean an amount
equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances plus
----- ----
(ii) all amounts due and owing to Borrowers' trade creditors which are
outstanding sixty (60) days beyond normal trade terms, plus (iii) fees and
----
expenses for which Borrowers are liable hereunder but which have not been paid
or charged to Borrowers' Account.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
-----------------------------
the Uniform Commercial Code as adopted in the State of New Jersey shall have the
meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
--------------------------------
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
---- -----
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
------------------
2.1. (a) Revolving Advances. Subject to the terms and conditions set forth
------------------
in this Agreement including, without limitation, Section 2.1(b), each Lender,
severally and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time equal
16
to such Lender's Commitment Percentage of the lesser of (x) the Maximum
Revolving Advance Amount less the aggregate amount of outstanding Letters of
Credit or (y) an amount equal to the sum of:
(i) up to eighty-five percent (85%), subject to the
provisions of Section 2.1(c) hereof ("Receivables Advance
Rate"), of Eligible Receivables which are not Eligible
Unbilled Receivables, plus
----
(ii) up to the lesser of (A) sixty percent (60%),
subject to the provisions of Section 2.1(c) hereof ("Unbilled
Receivables Advance Rate), of Eligible Unbilled Receivables
(the Receivables Advance Rate and the Unbilled Receivables
Advance Rate shall be referred to collectively, as the
"Advance Rates") or (B) Three Million Dollars ($3,000,000.00)
in the aggregate at any one time, minus
-----
(iii) the aggregate amount of outstanding Letters of
Credit, minus
-----
(iv) such reserves as Agent may reasonably deem proper
and necessary from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(iv) at any time and from time to time shall
be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the "Revolving
Credit Note") substantially in the form attached hereto as Exhibit 2.1(a).
--------------
(b) Individual Revolving Advances. Each Lender, severally and not
------------------------------
jointly, will make Revolving Advances to Borrowers in aggregate amounts
outstanding at any time not greater than such Lender's Commitment Percentage of
the lesser of the Maximum Revolving Advance Amount less the aggregate amount of
outstanding Letters of Credit or (y) the Formula Amount less the aggregate
amount of outstanding Letters of Credit.
(c) Discretionary Rights. The Advance Rates may be increased or
---------------------
decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Advance Rates or increasing the reserves
may limit or restrict Advances requested by Borrowers.
2.2. Procedure for Borrowing Advances.
--------------------------------
(a) Borrowers may notify Agent prior to 11:00 a.m. on a Business Day
of a Borrower's request to incur, on that day, a Revolving Advance hereunder.
Should any amount required to be paid as interest hereunder, or as fees or other
charges under this Agreement or any other agreement with Agent or Lenders, or
with respect to any other Obligation, become due, same shall be deemed a request
for a Revolving Advance as of the date such payment is due, in
17
the amount required to pay in full such interest, fee, charge or Obligation
under this Agreement or any other agreement with Agent or Lenders, and such
request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event any
Borrower desires to obtain a Eurodollar Rate Loan, Borrowers shall give Agent at
least three (3) Business Days' prior written notice, specifying (i) the date of
the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be in a minimum amount of One Million Dollars ($1,000,000.00) and
in integral multiples of One Hundred Thousand Dollars ($100,000.00) thereafter,
and (iii) the duration of the first Interest Period therefor. Interest Periods
for Eurodollar Rate Loans shall be for one, two, three or six months; provided,
--------
if an Interest Period would end on a day that is not a Business Day, it shall
end on the next succeeding Business Day unless such day falls in the next
succeeding calendar month in which case the Interest Period shall end on the
next preceding Business Day. No Eurodollar Rate Loan shall be made available to
Borrower during the continuance of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrowers may elect as set forth in subsection (b)(iii) above provided that the
exact length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the last day of the Term.
Borrowers shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowers shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrowers, Borrowers
shall be deemed to have elected to convert to a Domestic Rate Loan subject to
Section 2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and be
continuing, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
a Borrower desires to convert a loan, Borrowers shall give Agent not less than
three (3) Business Days' prior written notice to convert from a Domestic Rate
Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date
of such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than four (4) Eurodollar Rate Loans, in the aggregate.
18
(e) At its option and upon three (3) Business Days' prior written
notice, any Borrower may prepay the Eurodollar Rate Loans in whole at any time
or in part from time to time, without premium or penalty, but with accrued
interest on the principal being prepaid to the date of such repayment. Such
Borrower shall specify the date of prepayment of Advances which are Eurodollar
Rate Loans and the amount of such prepayment. In the event that any prepayment
of a Eurodollar Rate Loan is required or permitted on a date other than the last
Business Day of the then current Interest Period with respect thereto, such
Borrower shall indemnify Agent and Lenders therefor in accordance with Section
2.2(f) hereof.
(f) Each Borrower shall indemnify Agent and Lenders and hold Agent
and Lenders harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment, conversion
of or any default by any Borrower in the payment of the principal of or interest
on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing
of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, including, but not limited to, any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowers shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrowers shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from
Agent, either pay all such affected Eurodollar Rate Loans or convert such
affected Eurodollar Rate Loans into loans of another type. If any such payment
or conversion of any Eurodollar Rate Loan is made on a day that is not the last
day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers
shall pay Agent, upon Agent's request, such amount or amounts as may be
necessary to compensate Lenders for any loss or expense sustained or incurred by
Lenders in respect of such Eurodollar Rate Loan as a result of such payment or
conversion, including (but not limited to) any interest or other amounts payable
by Lenders to lenders of funds obtained by Lenders in order to make or maintain
such Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrowers shall be
conclusive absent manifest error.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
----------------------------------
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving
19
Advances to the extent Lenders make such Revolving Advances, be made available
to the applicable Borrower on the day so requested by way of credit to such
Borrower's operating account at PNC, or such other bank as Borrowers may
designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by any Borrower, be disbursed to Agent to
be applied to the outstanding Obligations giving rise to such deemed request.
2.4. Maximum Advances. The aggregate balance of Revolving Advances
-----------------
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount or (b) the Formula Amount.
2.5. Repayment of Advances.
---------------------
(a) The Revolving Advances shall be due and payable in full on the
last day of the Term subject to earlier prepayment as herein provided.
(b) Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrowers' Account as
of the Business Day on which Agent receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Agent on account of the Obligations one
(1) Business Day after the Business Day Agent receives such payments via wire
transfer or electronic depository check. Agent is not, however, required to
credit Borrowers' Account for the amount of any item of payment which is
unsatisfactory to Agent and Agent may charge Borrowers' Account for the amount
of any item of payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New Jersey Time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers' Account or by making Advances as provided in Section 2.2
hereof.
(d) Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.6. Repayment of Excess Advances. The aggregate balance of Advances
------------------------------
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.7. Statement of Account. Agent shall maintain, in accordance with its
--------------------
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be
20
recorded the date and amount of each Advance made by Agent and the date and
amount of each payment in respect thereof; provided, however, the failure by
-------- -------
Agent to record the date and amount of any Advance shall not adversely affect
Agent or any Lender. Each month, Agent shall send to Borrowers a statement
showing the accounting for the Advances made, payments made or credited in
respect thereof, and other transactions between Agent and Borrowers, during such
month. The monthly statements shall be deemed correct and binding upon Borrowers
in the absence of manifest error and shall constitute an account stated between
Lenders and Borrowers unless Agent receives a written statement of Borrowers'
specific exceptions thereto within thirty (30) days after such statement is
received by Borrowers. The records of Agent with respect to the loan account
shall be conclusive evidence absent manifest error of the amounts of Advances
and other charges thereto and of payments applicable thereto.
2.8. Letters of Credit. Subject to the terms and conditions hereof, Agent
-----------------
shall (a) issue or cause the issuance of Letters of Credit ("Letters of Credit")
on behalf of any Borrower; provided, however, that Agent will not be required to
-------- -------
issue or cause to be issued any Letters of Credit to the extent that the face
amount of such Letters of Credit would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) outstanding Letters of Credit to exceed the lesser
----
of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount; The
maximum amount of outstanding Letters of Credit shall not exceed Two Million
Dollars ($2,000,000.00) in the aggregate at any time. All disbursements or
payments related to Letters of Credit shall be deemed to be Domestic Rate Loans
consisting of Revolving Advances and shall bear interest at the Revolving
Interest Rate for Domestic Rate Loans; Letters of Credit that have not been
drawn upon shall not bear interest.
2.9. Issuance of Letters of Credit.
-----------------------------
(a) Borrowers may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent at the Payment Office, Agent's form of
Letter of Credit Application (the "Letter of Credit Application") completed to
the satisfaction of Agent; and, such other certificates, documents and other
papers and information as Agent may reasonably request. Borrowers, on behalf of
Borrowers, also have the right to give instructions and make agreements with
respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts or acceptances of usance drafts when presented for
honor thereunder in accordance with the terms thereof and when accompanied by
the documents described therein and (ii) have an expiry date not later than six
(6) months after such Letter of Credit's date of issuance and in no event later
than the last day of the Term. Each Letter of Credit shall be subject to the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or
revision thereof adhered to by the Issuer and, to the extent not inconsistent
therewith, the laws of the State of New Jersey.
21
(c) Agent shall use its reasonable efforts to notify Lenders of the
request by Borrowers for a Letter of Credit hereunder.
2.10. Requirements For Issuance of Letters of Credit.
----------------------------------------------
(a) In connection with the issuance of any Letter of Credit
Borrowers shall indemnify, save and hold Agent, each Lender and each Issuer
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any Issuer and expenses and
reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising out
of, or in connection with, any Letter of Credit to be issued or created for any
Borrower. Borrowers shall be bound by Agent's or any Issuer's regulations and
good faith interpretations of any Letter of Credit issued or created for
Borrowers' Account, although this interpretation may be different from its own;
and, neither Agent, nor any Lender, nor any Issuer nor any of their
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following any Borrower's instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Agent's, any Lender's, any Issuer's or such correspondents' willful misconduct.
(b) Borrowers shall authorize and direct any Issuer to name the
applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrowers shall
authorize and direct the Issuer to deliver to Agent all instruments, documents,
and other writings and property received by the Issuer pursuant to the Letter of
Credit and to accept and rely upon Agent's instructions and agreements with
respect to all matters arising in connection with the Letter of Credit, the
application therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or caused to be
issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority (i) to sign and/or
endorse such Borrower's name upon any warehouse or other receipts, letter of
credit applications and acceptances; (ii) to sign such Borrower's name on bills
of lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or Agent or Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower's
name or Agent's, or in the name of Agent's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof. Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's willful misconduct. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
(d) Each Lender shall to the extent of the percentage amount equal
to the product of such Lender's Commitment Percentage times the aggregate amount
of all unreimbursed reimbursement obligations arising from disbursements made or
obligations
22
incurred with respect to the Letters of Credit be deemed to have irrevocably
purchased an undivided participation in each such unreimbursed reimbursement
obligation. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of the Maximum Revolving Advance Amount or the Formula
Amount, and such disbursement is not reimbursed by Borrowers within two (2)
Business Days, Agent shall promptly notify each Lender and upon Agent's demand
each Lender shall pay to Agent such Lender's proportionate share of such
unreimbursed disbursement together with such Lender's proportionate share of
Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from any Borrower of any
amount disbursed by Agent for which Agent had already been reimbursed by
Lenders, Agent shall deliver to each Lender that Lender's pro rata share of such
repayment. Each Lender's participation commitment shall continue until the last
to occur of any of the following events: (A) Agent ceases to be obligated to
issue or cause to be issued Letters of Credit hereunder; (B) no Letter of Credit
issued hereunder remains outstanding and uncancelled or (C) all Persons (other
than the applicable Borrower) have been fully reimbursed for all payments made
under or relating to Letters of Credit .
2.11. Additional Payments. Any sums expended by Agent or any Lender due to
-------------------
any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' Account as a Revolving Advance and added to the
Obligations.
2.12. Manner of Borrowing and Payment.
-------------------------------
(a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers on account
of the principal of and interest on the Revolving Advances, shall be applied to
the Revolving Advances pro rata according to the applicable Commitment
Percentages of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by any Borrower on account of principal,
interest and fees shall be made without set off or counterclaim and shall be
made to Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 P.M., New Jersey time, in Dollars and in immediately available
funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.8(a) and (b) hereof, commencing with the first Business Day following
the Closing Date, each borrowing of Revolving Advances shall be advanced by
Agent and each payment by any Borrower on account of Revolving Advances shall be
applied first to those Revolving Advances advanced by Agent. On or before 1:00
P.M., New Jersey time, on each Settlement Date commencing with the first
Settlement Date following the Closing Date, Agent and Lenders shall make certain
payments as follows: (I) if the aggregate amount of new Revolving Advances made
by Agent during the preceding Week (if any) exceeds the aggregate amount of
repayments applied to outstanding Revolving Advances during such preceding Week,
then each Lender shall
23
provide Agent with funds in an amount equal to its applicable Commitment
Percentage of the difference between (w) such Revolving Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate amount of new
Revolving Advances made during such Week, then Agent shall provide each Lender
with funds in an amount equal to its applicable Commitment Percentage of the
difference between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefited Lender") shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender's Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
--------
however, that if all or any portion of such excess payment or benefits is
-------
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowers of its receipt of any such notice from a Lender.
If such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times (iii)
the number of days from and including such Settlement Date to the date on which
such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is not
in fact
24
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent's
-------- -------
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
2.13. Use of Proceeds. Borrowers shall apply the proceeds of Advances (i)
---------------
to pay fees and expenses relating to this transaction; (ii) to refinance certain
existing senior secured debt with Agent; (iii) to provide for their working
capital needs and capital expenditures in accordance herewith; (iv) for Letters
of Credit; and (v) for Permitted Acquisitions.
2.14. Defaulting Lender.
-----------------
(a) Notwithstanding anything to the contrary contained herein, in
the event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrowers that it does not intend to
make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.14 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions
to Agent or to approve, disapprove, consent to or vote on any matters relating
to this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(d) Other than as expressly set forth in this Section 2.14, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.14 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
25
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
-----------------
3.1. Interest. Interest on Advances shall be payable in arrears on the
--------
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months on the anniversary date of the commencement of such
Eurodollar Rate Loan or (b) the end of the Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month (the "Monthly Advances") at a rate per annum equal to with respect to
Revolving Advances, the applicable Revolving Interest Rate. Whenever, subsequent
to the date of this Agreement, the Base Rate is increased or decreased, the
Revolving Interest Rate for Domestic Rate Loans shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Base Rate during the time such change or changes remain in effect.
The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans
without notice or demand of any kind on the effective date of any change in the
Reserve Percentage as of such effective date. Upon and after the occurrence of
an Event of Default, and during the continuation thereof, all the Obligations
shall bear interest at the Revolving Interest Rate for Domestic Loans plus two
percent (2%) per annum (the "Default Rate").
3.2. Letter of Credit Fees.
---------------------
(a) Borrowers shall pay (x) to Agent, for the benefit of Lenders,
fees for each Letter of Credit for the period from and excluding the date of
issuance of same to and including the date of expiration or termination, equal
to the average daily face amount of each outstanding Letter of Credit multiplied
by two percent (2%) per annum, such fees to be calculated on the basis of a
360-day year for the actual number of days elapsed and to be payable monthly in
arrears on the first day of each month and on the last day of the Term and (y)
to the Issuer, any and all fees and expenses as agreed upon by the Issuer and
the Borrowers in connection with any Letter of Credit, including, without
limitation, in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder and shall reimburse
Agent for any and all such fees and expenses, if any, paid by Agent to the
Issuer (all of the foregoing fees, the "Letter of Credit Fees"). All such
charges shall be deemed earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason. Any such charge in effect at the
time of a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in the Issuer's prevailing charges for
that type of transaction. All Letter of
26
Credit Fees payable hereunder shall be deemed earned in full on the date when
the same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
3.3. (a) Closing Fee. Upon the execution of this Agreement, Borrowers
-----------
shall pay to Agent for the ratable benefit of Lenders a closing fee of Fifty
Thousand Dollars ($50,000.00) less that portion of any deposit or commitment fee
heretofore paid by Borrowers to Agent remaining after application of such fees
to out of pocket expenses.
(b) Facility Fee. If, for any month during the Term, the average
-------------
daily unpaid balance of the Revolving Advances for each day of such month does
not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to
Agent for the ratable benefit of Lenders a fee at a rate equal three-eighths of
one percent (3/8%) per annum calculated on the basis of a year of 360 days for
the actual number of days elapsed on the amount by which the Maximum Revolving
Advance Amount exceeds such average daily unpaid balance. Such fee shall be
payable to Agent in arrears on the last day of each month.
3.4. (a) Collateral Evaluation Fee. Borrowers shall pay Agent a collateral
-------------------------
evaluation fee equal to Two Thousand Five Hundred Dollars ($2,500.00) per month
commencing on the first day of the month following the Closing Date and on the
first day of each month thereafter during the Term. The collateral evaluation
fee shall be deemed earned in full on the date when same is due and payable
hereunder and shall not be subject to rebate or proration upon termination of
this Agreement for any reason.
(b) Collateral Monitoring Fee. Borrowers shall pay to Agent on the
--------------------------
first day of each month following any month in which Agent performs any
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit - a collateral
monitoring fee in an amount equal to Seven Hundred Fifty Dollars ($750.00) per
day for each person performing such monitoring, plus all reasonable costs and
disbursements incurred by Agent in the performance of such examination or
analysis.
3.5. Computation of Interest and Fees. Interest and fees hereunder shall
--------------------------------
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and other
----------------
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
27
3.7. Increased Costs. In the event that any applicable law, treaty or
----------------
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) with any request or directive (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or any Other Document or change the basis of
taxation of payments to Agent or any Lender of principal, fees, interest or any
other amount payable hereunder or under any Other Documents (except for changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be, provided that the
foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowers, and such certification shall be
conclusive absent manifest error.
3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the
-----------------------------------------------------------
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Eurodollar
Rate for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
28
then Agent shall give Borrowers prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowers
shall notify Agent no later than 10:00 a.m. (New Jersey time) two (2) Business
Days prior to the date of such proposed borrowing, that its request for such
borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of Eurodollar Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrowers shall notify Agent, no
later than 10:00 a.m. (New Jersey time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrowers shall notify Agent, no
later than 10:00 a.m. (New Jersey time) two (2) Business Days prior to the last
Business Day of the then current Interest Period applicable to such affected
Eurodollar Rate Loan, shall be converted into an unaffected type of Eurodollar
Rate Loan, on the last Business Day of the then current Interest Period for such
affected Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders
shall have no obligation to make an affected type of Eurodollar Rate Loan or
maintain outstanding affected Eurodollar Rate Loans and no Borrower shall have
the right to convert a Domestic Rate Loan or an unaffected type of Eurodollar
Rate Loan into an affected type of Eurodollar Rate Loan.
3.9. Capital Adequacy.
----------------
(a) In the event that Agent or any Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent or any Lender's capital as a consequence of its
obligations hereunder to a level below that which Agent or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this Section
3.9 shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount
or amounts as shall be necessary to compensate Agent or such Lender with respect
to Section 3.9(a) hereof when delivered to Borrowers shall be conclusive absent
manifest error.
29
IV. COLLATERAL: GENERAL TERMS
--------------------------
4.1. Security Interest in the Collateral. To secure the prompt payment and
-----------------------------------
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Each Borrower shall ▇▇▇▇ its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
Notwithstanding anything contained herein to the contrary, with respect to each
Borrower's grant of a security interest in the General Intangibles, such grant
shall be ineffective if the grant thereof to Agent in accordance with the terms
of this Agreement and the Other Documents would constitute a default of the
obligations of any Borrower under any agreements to which it is a party,
relating to such General Intangibles unless the person licensing, granting or
authorizing any Borrower's use thereof consents or approves of any Borrower's
grant of a security interest therein or if applicable law (whether now existing
or hereafter enacted) has the effect of authorizing the grant of such security
interest notwithstanding the contrary provisions in the operative agreements.
4.2. Perfection of Security Interest. Each Borrower shall take all action
-------------------------------
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of Uniform Commercial Code as adopted in the State of New
Jersey. All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrowers'
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent's option, shall be paid to Agent for the ratable
benefit of Lenders immediately upon demand.
4.3. Disposition of Collateral. Each Borrower will safeguard and protect
-------------------------
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise except the disposition or transfer of
obsolete and worn-out Equipment in the ordinary course of business during any
fiscal year having an aggregate fair market value of not more than Five
30
Hundred Thousand Dollars ($500,000.00).
4.4. Preservation of Collateral. In addition to the rights and remedies
---------------------------
set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral, including the hiring of such security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of any Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use any Borrower's owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrower's owned or leased property. Each Borrower shall
cooperate fully with all of Agent's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct. All of Agent's
expenses of preserving the Collateral, including any expenses relating to the
bonding of a custodian, shall be charged to Borrowers' Account as a Revolving
Advance of a Domestic Rate Loan and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the time
-----------------------
the Collateral becomes subject to Agent's security interest: (a) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Agent; and, except for Permitted Encumbrances, the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by each Borrower or delivered to Agent or
any Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) with the exception of lap-top computers owned
by Borrowers and utilized by their employees, each Borrower's Equipment and
Inventory shall be located as set forth on Schedule 4.5 and shall not be removed
------------
from such location(s) without the prior written consent of Agent except with
respect to Equipment to the extent permitted in Section 4.3 hereof.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
--------------------------------------------
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Equipment to the extent permitted in Section 4.3
hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or
allow or suffer to be encumbered in any way except for Permitted Encumbrances,
any part of the Collateral. Each Borrower shall defend Agent's interests in the
Collateral against any and all Persons whatsoever. At any time following demand
by Agent for payment of all Obligations, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral, Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral,
31
Agent and Lenders shall be entitled to all of the rights and remedies set forth
herein and further provided by the Uniform Commercial Code or other applicable
law. Each Borrower shall, and Agent may, at its option, instruct all suppliers,
carriers, forwarders, warehousers or others receiving or holding cash, checks,
Inventory, documents or instruments in which Agent holds a security interest to
deliver same to Agent and/or subject to Agent's order and if they shall come
into any Borrower's possession, they, and each of them, shall be held by such
Borrower in trust as Agent's trustee, and such Borrower will immediately deliver
them to Agent in their original form together with any necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books of
------------------
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes
--------------------
and directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
any Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise; however, Agent and each Lender will attempt
to obtain such information or materials directly from such Borrower prior to
obtaining such information or materials from such accountants or such
authorities.
4.9. Compliance with Laws. Each Borrower shall comply with all acts,
---------------------
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to its respective Collateral or any part thereof or
to the operation of such Borrower's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on such Borrower. The
assets of Borrowers at all times shall be maintained in accordance with the
requirements of all insurance carriers which provide insurance with respect to
the assets of Borrowers so that such insurance shall remain in full force and
effect.
4.10. Inspection of Premises. At all reasonable times Agent and each
------------------------
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower's business. Agent, any Lender and their agents may enter
32
upon any of each Borrower's premises at any time during business hours and at
any other reasonable time, and from time to time, for the purpose of inspecting
the Collateral and any and all records pertaining thereto and the operation of
such Borrower's business.
4.11. Insurance. Each Borrower shall bear the full risk of any loss of any
---------
nature whatsoever with respect to the Collateral. At each Borrower's own cost
and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption insurance; (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Borrower insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a) and (c) above, and providing (A) that all proceeds
thereunder shall be payable to Agent, (B) no such insurance shall be affected by
any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by Agent and the applicable Borrower to make payment for
such loss to Agent and not to such Borrower and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to any Borrower and
Agent jointly, Agent may endorse such Borrower's name thereon and do such other
things as Agent may deem advisable to reduce the same to cash. Agent is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above. All loss recoveries received by Agent upon any
such insurance may be applied to the Obligations, in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to Borrowers
or applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain insurance
------------------------
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor on behalf of such
Borrower, and charge Borrowers' Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes,
----------------
assessments and
33
other Charges lawfully levied or assessed upon such Borrower or any of the
Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes. If any tax by any governmental authority
is or may be imposed on or as a result of any transaction between any Borrower
and Agent or any Lender which Agent or any Lender may be required to withhold or
pay or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent's or any
Lender's opinion, may possibly create a valid Lien on the Collateral, Agent may
without notice to Borrowers pay the taxes, assessments or other Charges and each
Borrower hereby indemnifies and holds Agent and each Lender harmless in respect
thereof. The amount of any payment by Agent under this Section 4.13 shall be
charged to Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and
added to the Obligations and, until Borrowers shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Borrowers' credit and Agent shall retain its
security interest in any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Each Borrower shall at all times
---------------------------------
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so.
4.15. Receivables.
-----------
(a) Nature of Receivables. Each of the Receivables shall be a bona
---------------------
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of each
-----------------------
Borrower's knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of any Borrower who are not
solvent such Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
(c) Locations of Borrower. Each Borrower's chief executive office
---------------------
is located at the addresses set forth on Schedule 4.15(c) hereto. Until written
----------------
notice is given to Agent by Borrowers of any other office at which any Borrower
keeps its records pertaining to Receivables, all such records shall be kept at
such executive office.
(d) Collection of Receivables. Until any Borrower's authority to do
-------------------------
so is
34
terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or a Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so), each Borrower
will, at such Borrower's sole cost and expense, but on Agent's behalf and for
Agent's account, collect as Agent's property and in trust for Agent all amounts
received on Receivables, and shall not commingle such collections with any
Borrower's funds or use the same except to pay Obligations. Each Borrower shall
deliver to Agent, or deposit in the Blocked Account, in original form and on the
date of receipt thereof, all checks, drafts, notes, money orders, acceptances,
cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time after
-----------------------------------------
the occurrence of a Default, Agent shall have the right to send notice of the
assignment of, and Agent's security interest in, the Receivables to any and all
Customers or any third party holding or otherwise concerned with any of the
Collateral. Thereafter, Agent shall have the sole right to collect the
Receivables, take possession of the Collateral, or both. Agent's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrowers'
Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf. Agent shall have
------------------------------------------
the right to receive, endorse, assign and/or deliver in the name of Agent or any
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or ▇▇▇▇ of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the Collateral and to file
same; (v) to demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise all of
Borrowers' rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to prepare, file and sign such Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables; and (xii) to do all other acts and things necessary to carry out
this Agreement. It is expressly understood that Agent will not exercise the
aforesaid rights enumerated in clauses (v), (vi), (viii), (ix) and (x) of this
Section 4.15(f), unless there shall have occurred a Default or an Event of
Default. All acts of said attorney or designee are hereby ratified and approved,
and said attorney or designee shall not be liable for any acts of omission or
commission nor for any error of judgment or mistake of fact or of law, unless
done maliciously or with gross (not mere) negligence; this power being coupled
with an interest is irrevocable while any of the Obligations remain unpaid.
Agent shall have the right at any time following the
35
occurrence of an Event of Default or Default, to change the address for delivery
of mail addressed to any Borrower to such address as Agent may designate and to
receive, open and dispose of all mail addressed to any Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under any
------------
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Following the occurrence of an Event of Default
or Default, Agent may, without notice or consent from any Borrower, ▇▇▇ upon or
otherwise collect, extend the time of payment of, compromise or settle for cash,
credit or upon any terms any of the Receivables or any other securities,
instruments or insurance applicable thereto and/or release any obligor thereof.
Agent is authorized and empowered to accept, following the occurrence of an
Event of Default or Default, the return of the goods represented by any of the
Receivables, without notice to or consent by any Borrower, all without
discharging or in any way affecting any Borrower's liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All
---------------------------------------------------------
proceeds of Collateral shall, at the direction of Agent, be deposited by
Borrowers into a lockbox account, dominion account or such other "blocked
account" ("Blocked Accounts") as Agent may require pursuant to an arrangement
with such bank as may be selected by Borrowers and be acceptable to Agent.
Borrowers shall issue to any such bank, an irrevocable letter of instruction
directing said bank to transfer such funds so deposited to Agent, either to any
account maintained by Agent at said bank or by wire transfer to appropriate
account(s) of Agent. All funds deposited in such Blocked Account shall
immediately become the property of Agent and Borrowers shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
blocked account arrangement, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts ("Depository
Accounts") in the name of Agent at a bank or banks for the deposit of such funds
and Borrowers shall deposit all proceeds of Collateral or cause same to be
deposited, in kind, in such Depository Accounts of Agent in lieu of depositing
same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent,
-----------
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or grant any additional discounts, allowances or credits
thereon except for those compromises, adjustments, returns, discounts, credits
and allowances as have been heretofore customary in the business of such
Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease has been
---------
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in good
------------------------
operating condition and repair (reasonable wear and tear excepted) and all
necessary
36
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation.
4.18. Exculpation of Liability. Nothing herein contained shall be
--------------------------
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall ensure that the Real
----------------------
Property remains in compliance with all Environmental Laws and they shall not
place or permit to be placed any Hazardous Substances on any Real Property
except as permitted by applicable law or appropriate governmental authorities.
(b) Borrowers shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives notice of
any Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowers
shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
37
and the Collateral and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent copies of any request
for information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between any Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent's interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the reasonable written request of Agent from time
to time, Borrowers shall provide Agent, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, directors and officers
harmless from and against
38
all loss, liability, damage and expense, claims, costs, fines and penalties,
including attorney's fees, suffered or incurred by Agent or Lenders under or on
account of any Environmental Laws, including, without limitation, the assertion
of any Lien thereunder, with respect to any Hazardous Discharge, the presence of
any Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of Agent or any
Lender. Borrowers' obligations under this Section 4.19 shall arise upon the
discovery of the presence of any Hazardous Substances at the Real Property,
whether or not any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Substances. Borrowers' obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrowers' right, title and interest
in and to its owned and leased premises.
4.20. Financing Statements. Except as respects the financing statements
---------------------
filed by Agent and the financing statements described on Schedule 1.2, no
-------------
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal right
---------
to enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents constitute the legal, valid and binding obligation of such Borrower
enforceable in accordance with their terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally. The execution, delivery and performance
of this Agreement and of the Other Documents (a) are within such Borrower's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of such Borrower's by-laws, certificate of incorporation or other
applicable documents relating to such Borrower's formation or to the conduct of
such Borrower's business or of any material agreement or undertaking to which
such Borrower is a party or by which such Borrower is bound, and (b) will not
conflict with nor result in any breach in any of the provisions of or constitute
a default under or result in the creation of any Lien except Permitted
Encumbrances upon any asset of such Borrower under the provisions of any
agreement, charter document, instrument, by-law, or other instrument to which
such Borrower is a party or by which it or its property may be bound.
5.2. Formation and Qualification. (a) Each Borrower is duly incorporated
---------------------------
and in good standing under the laws of the state listed on Schedule 5.2(a) and
----------------
is qualified to do business and is in good standing in the states listed on
Schedule 5.2(a) which constitute all states in which
---------------
39
qualification and good standing are necessary for such Borrower to conduct its
business and own its property and where the failure to so qualify could
reasonably be expected to have a Material Adverse Effect on such Borrower. Each
Borrower has delivered to Agent true and complete copies of its certificate of
incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
(b) The only Subsidiaries of each Borrower are listed on Schedule 5.2
------------
(b).
---
5.3. Survival of Representations and Warranties. All representations and
-------------------------------------------
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
5.4. Tax Returns. Each Borrower's federal tax identification number is set
-----------
forth on Schedule 5.4. Each Borrower has filed or caused to be filed all
-------------
federal, state and local tax returns and other reports each is required by law
to file and has paid all taxes, assessments, fees and other governmental charges
that are due and payable. Federal, state and local income tax returns of each
Borrower have been examined and reported upon by the appropriate taxing
authority or closed by applicable statute and satisfied for all fiscal years
except as listed on Schedule 5.4(a). The provision for taxes on the books of
each Borrower are adequate for all years not closed by applicable statutes, and
for its current fiscal year, and no Borrower has any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
--------------------
The consolidated and consolidating balance sheets of the Borrowers,
their Subsidiaries and such other Persons described therein (including the
accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of December 31, 1999, and the related
statements of income, changes in stockholder's equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial position of the Borrowers
and their Subsidiaries at such date and the results of their operations for such
period. Since December 31, 1999, there has been no change in the condition,
financial or otherwise, of Borrowers or their Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Borrowers and their
respective Subsidiaries, except changes in the ordinary course of business, none
of which individually or in the aggregate has been materially adverse.
5.6. Corporate Name. Except as set forth on Schedule 5.6, no Borrower has
-------------- ------------
been known by any other corporate name in the past five years and does not sell
Inventory under any other name nor has any Borrower been the surviving
corporation of a merger or consolidation or
40
acquired all or substantially all of the assets of any Person during the
preceding five (5) years.
5.7. O.S.H.A. and Environmental Compliance.
-------------------------------------
(a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.
(c) (i) There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any Real Property; (ii) there are no
underground storage tanks or polychlorinated biphenyls on the Real Property;
(iii) the Real Property has never been used as a treatment, storage or disposal
facility of Hazardous Waste; and (iv) no Hazardous Substances are present on the
Real Property or any premises leased by any Borrower, excepting such quantities
as are handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
-----------------------------------------------------------
(a) Borrowers are solvent, able to pay their debts as they mature,
have capital sufficient to carry on their business and all businesses in which
they are about to engage, and (i) as of the Closing Date, the fair present
saleable value of their assets, calculated on a going concern basis, is in
excess of the amount of their liabilities and (ii) subsequent to the Closing
Date, the fair saleable value of their assets (calculated on a going concern
basis) will be in excess of the amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Borrower has (i) any
---------------
pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect on such Borrower,
and (ii) any liabilities nor indebtedness for borrowed money other than the
Obligations.
(c) To the knowledge of any Borrower, no Borrower is in violation
of any applicable statute, regulation or ordinance in any respect which could
reasonably be expected to have a Material Adverse Effect on such Borrower. No
Borrower is in violation of any order of any court, governmental authority or
arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled Group maintains or
contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
----------------
Except as set forth in
41
Schedule 5.8(d), (i) no Plan has incurred any "accumulated funding deficiency,"
---------------
as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether
or not waived, and each Borrower and each member of the Controlled Group has met
all applicable minimum funding requirements under Section 302 of ERISA in
respect of each Plan, (ii) each Plan which is intended to be a qualified plan
under Section 401(a) of the Code as currently in effect has been determined by
the Internal Revenue Service to be qualified under Section 401(a) of the Code
and the trust related thereto is exempt from federal income tax under Section
501(a) of the Code, (iii) no Borrower nor any member of the Controlled Group has
incurred any liability to the PBGC other than for the payment of premiums, and
there are no premium payments which have become due which are unpaid, (iv) no
Plan has been terminated by the plan administrator thereof nor by the PBGC, and
there is no occurrence which would cause the PBGC to institute proceedings under
Title IV of ERISA to terminate any Plan, (v) at this time, the current value of
the assets of each Plan exceeds the present value of the accrued benefits and
other liabilities of such Plan and no Borrower nor any member of the Controlled
Group knows of any facts or circumstances which would materially change the
value of such assets and accrued benefits and other liabilities, (vi) no
Borrower nor any member of the Controlled Group has breached any of the
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Plan, (vii) no Borrower nor any member of a Controlled Group has incurred
any liability for any excise tax arising under Section 4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability, (viii) no
Borrower nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any Plan, has engaged in a "prohibited transaction" described in
Section 406 of the ERISA or Section 4975 of the Code nor taken any action which
would constitute or result in a Termination Event with respect to any such Plan
which is subject to ERISA, (ix) each Borrower and each member of the Controlled
Group has made all contributions due and payable with respect to each Plan, (x)
there exists no event described in Section 4043(b) of ERISA, for which the
thirty (30) day notice period contained in 29 CFR ss.2615.3 has not been waived,
(xi) no Borrower nor any member of the Controlled Group has any fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than employees or former employees of any Borrower and any
member of the Controlled Group, and (xii) no Borrower nor any member of the
Controlled Group has withdrawn, completely or partially, from any Multiemployer
Plan so as to incur liability under the Multiemployer Pension Plan Amendments
Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. Except as set forth on
---------------------------------------------
Schedule 5.9: (a) All patents, patent applications, trademarks, trademark
-------------
applications, service marks, service ▇▇▇▇ applications, copyrights, copyright
applications, design rights, tradenames, assumed names and licenses owned or
utilized by any Borrower, if any, are set forth on Schedule 5.9 (except that
-------------
such licenses are not listed on Schedule 5.9), are, to the best of Borrowers'
knowledge, information and belief, valid and have been duly registered or filed
with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such patent, trademark, copyright, design right, tradename or license and no
Borrower is aware of any grounds for any challenge, except as set forth in
Schedule 5.9 hereto; (b) To the best of Borrowers' knowledge, information and
------------
belief, each patent, patent application, patent license, trademark, trademark
application, trademark license, service ▇▇▇▇, service ▇▇▇▇ application, service
▇▇▇▇ license, design right, copyright, copyright application and copyright
42
license owned or held by any Borrower and all trade secrets used by any Borrower
consist of original material or property developed by such Borrower or was
lawfully acquired by such Borrower from the proper and lawful owner thereof; (c)
Each of such items has been maintained so as to preserve the value thereof from
the date of creation or acquisition thereof; and (d) With respect to all
software used by any Borrower, such Borrower, to the extent its use of such
software requires source or object codes and/or source code escrow agreement, is
in possession of such source and object codes related to each piece of software
or is the beneficiary of applicable source code escrow agreements, except to the
extent that the failure to so possess or be a beneficiary will not result in a
Material Adverse Effect.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
-------------------- --------------
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits could have a Material
Adverse Effect on such Borrower.
5.11. Default of Indebtedness. No Borrower is in default in the payment of
-----------------------
the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.
5.12. No Default. No Borrower is in default in the payment or performance
----------
of any of its contractual obligations and no Default has occurred.
5.13. No Burdensome Restrictions. No Borrower is party to any contract or
--------------------------
agreement the performance of which could have a Material Adverse Effect on such
Borrower. No Borrower has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14. No Labor Disputes. Except as set forth on Schedule 5.14 hereto, no
----------------- -------------
Borrower is involved in any labor dispute; there are no strikes or walkouts or
union organization of any Borrower's employees threatened or in existence and no
labor contract is scheduled to expire during the Term other than as set forth on
Schedule 5.14 hereto.
-------------
5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
-------------------
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
43
5.16. Investment Company Act. No Borrower is an "investment company"
-----------------------
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by any Borrower in
----------
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
Borrowers or which reasonably should be known to Borrowers which Borrowers have
not disclosed to Agent in writing with respect to the transactions contemplated
by this Agreement which could reasonably be expected to have a Material Adverse
Effect on any Borrower.
5.18. Swaps. No Borrower is a party to, nor will it be a party to, any
-----
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.19. Conflicting Agreements. No provision of any mortgage, indenture,
-----------------------
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.19. Application of Certain Laws and Regulations. No Borrower nor any
-----------------------
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.20. Business and Property of Borrowers. Borrowers did not prior to the
----------------------------------
Closing Date and upon and after the Closing Date do not propose to engage in any
business other than providing information technology consulting, system
integration and implementation, and outsourced application management services
and activities necessary to conduct the foregoing. On the Closing Date, each
Borrower will own all the property and possess all of the rights and Consents
necessary for the conduct of the business of such Borrower.
5.21. Year 2000. Borrowers and their respective Subsidiaries have reviewed
---------
the areas within their business and operations which could be adversely affected
by, and have developed a program to address on a timely basis, the risk that
certain computer applications used by Borrowers or their respective Subsidiaries
(or any of their respective material suppliers, customers or vendors) may be
unable to recognize and perform properly date-sensitive functions involving
dates after December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem
has not had and will not have a Material Adverse Effect on Borrowers.
44
5.22. Section 20 Subsidiaries. Borrowers do not intend to use and shall
------------------------
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
VI. AFFIRMATIVE COVENANTS.
---------------------
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
---------------
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers' Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
--------------------------------------------------------------
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof.
6.3. Violations. Promptly notify Agent in writing of any violation of any
----------
law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could reasonably be expected
to have a Material Adverse Effect on any Borrower.
6.4. Government Receivables. Take all steps necessary to protect Agent's
----------------------
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5. INTENTIONALLY OMITTED.
45
6.6 Execution of Supplemental Instruments. Execute and deliver to Agent
-------------------------------------
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
-----------------------
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
6.8. Standards of Financial Statements. Cause all financial statements
----------------------------------
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
VII. NEGATIVE COVENANTS.
------------------
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
-----------------------------------------------------
(a) Enter into any merger, consolidation or other reorganization
with or into any other Person or, except for Permitted Acquisitions, acquire all
or a substantial portion of the assets or stock of any Person or permit any
other Person to consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except: (i) in the ordinary course of its business; (ii)
as provided in Section 4.3; and (iii) in conjunction with the SeraNova Spin-Off.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer
------------------
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any Person by
----------
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except the endorsement of checks in the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or any
-----------
other interest in,
46
any Person, except (a) obligations issued or guaranteed by the United States of
America or any agency thereof, (b) commercial paper with maturities of not more
than 180 days and a published rating of not less than A-1 or P-1 (or the
equivalent rating), (c) certificates of time deposit and bankers' acceptances
having maturities of not more than 180 days and repurchase agreements backed by
United States government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency, and (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
-----
including without limitation, any Parent, Subsidiary or Affiliate except as
hereinafter provided and loans made in the ordinary course of business: (a) to
employees not to exceed the aggregate amount of Four Hundred Thousand Dollars
($400,000.00) at any time outstanding; (b) to SeraNova after the Closing Date,
except in connection with the SeraNova Spin-Off, as set forth in Section 7.5(c)
below; (c) to SeraNova prior to the SeraNova Spin-Off (i) not to exceed the
aggregate amount of Fifteen Million One Hundred Thousand Dollars
($15,100,000.00) at any time outstanding and (ii) to be repaid in full no later
than December 31, 2000; and (d) after the Closing Date to foreign subsidiaries
or divisions, not to exceed the aggregate amount of One Million Two Hundred
Fifty Thousand Dollars ($1,250,000.00) at any time outstanding. Notwithstanding
anything contained herein to the contrary, Borrowers may make advances, loans or
extensions of credit to their Subsidiaries which are organized under the laws of
a United States jurisdiction without restriction as to dollar amount, provided
Agent shall have received executed Guarantee, Guarantor Security Agreements and
such other documents as Agent may require all in form and substance satisfactory
to Agent.
7.6. Capital Expenditures. Contract for, purchase or make any expenditure
--------------------
or commitments for fixed or capital assets (including capitalized leases but
excluding capitalized internally developed software costs) in any fiscal year in
an aggregate amount for all Borrowers in excess: (a) Four Million Dollars
($4,000,000.00) during fiscal year 2000; (b) Five Million Dollars ($5,000,000.00
during fiscal year 2001; and (c) Five Million Five Hundred Thousand Dollars
($5,500,000.00) during fiscal year 2002.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
---------
shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof.; and (iii) Indebtedness incurred in connection with a
Permitted Acquisition, the terms and conditions of which must be reasonably
47
acceptable to Agent and Lenders, provided, however, (a) the Indebtedness of a
corporation which becomes a Subsidiary of a Borrower after the date hereof
existed at the time such corporation became a Subsidiary and was not created in
anticipation of the acquisition, and (b) immediately after giving effect to the
acquisition of such corporation by a Borrower, no Default or Event of Default
shall have occurred or be continuing.
7.9. Nature of Business. Substantially change the nature of the business
------------------
in which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
------------------------------
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions in the ordinary
course of business, on an arm's-length basis on terms no less favorable than
terms which would have been obtainable from a Person other than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real or
------
personal property (unless capitalized and permitted under Section 7.6 hereof or
leases directly associated with ASP+ and providing hosting services to Customers
pursuant to which said Customers are obligated to reimburse or pay to a Borrower
the payments due under said leases) if after giving effect thereto, aggregate
additional annual rental payments (after the Closing Date) for all leased
property would exceed Five Hundred Thousand Dollars ($500,000.00) in any one
fiscal year in the aggregate for all Borrowers.
7.12. Subsidiaries.
------------
(a) Form any Subsidiary unless (i) such Subsidiary expressly becomes
a Guarantor hereunder and Agent receives a pledge of all the stock of each
Subsidiary formed in a United States jurisdiction or not less than sixty five
percent (65%) of the stock of each Subsidiary formed in a jurisdiction outside
of the United States and (ii) Agent shall have received all documents, including
legal opinions, it may reasonably require to establish compliance with each of
the foregoing conditions.
(b) Enter into any partnership, joint venture or similar
arrangement, without Agent's prior written consent which shall not be
unreasonably withheld.
48
7.13. Fiscal Year and Accounting Changes. Change its fiscal year-end from
----------------------------------
December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
----------------
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or
------------------------------------------------
waive any material term or material provision of its Articles of Incorporation
or By-Laws unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
---------------------
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
----------------
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
---------------
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or indirectly,
---------------------------
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Borrower.
7.18. Total Stockholders Equity. Cause, suffer or permit the Total
---------------------------
Stockholders Equity to be or become: (a) as at June 30, 2000, September 30, 2000
and December 31, 2000, less than Forty-Two Million Dollars ($42,000,000.00); (b)
as at each fiscal quarter after Borrowers' December 31, 2000 fiscal year-end,
not less than ninety-five percent (95%) of the Total Stockholders Equity for the
immediately preceding fiscal year-end; and (c) as at each fiscal year-end
subsequent to Borrowers' December 31, 2000 fiscal year-end, at least one hundred
five percent (105%) of the Total Stockholders Equity as of the immediately
preceding fiscal year-end; provided, however, the foregoing covenants set forth
in Sections 7.18(a), (b) and (c) shall
49
not be tested for any quarter during the Term so long as Borrowers maintain at
all times during such fiscal quarter Undrawn Availability of more than Five
Million Dollars ($5,000,000.00).
7.19. Unconsolidated Stockholders Equity. Cause, suffer or permit the
------------------------------------
Unconsolidated Stockholders Equity to be or become: (a) as at June 30, 2000,
September 30, 2000 and December 31, 2000, less than Thirty-Nine Million Dollars
($39,000,000.00); (b) as at each fiscal quarter after Borrower's December 31,
2000 fiscal year-end, not less than ninety-five percent (95%) of the
Unconsolidated Stockholders Equity for the immediately preceding fiscal
year-end; and (c) as at each fiscal year-end subsequent to Borrowers' December
31, 2000 fiscal year-end, at least one hundred five percent (105%) of the
Unconsolidated Stockholders Equity as of the immediately preceding fiscal
year-end; provided, however, the foregoing covenants set forth in Sections
7.19(a), (b) and (c) shall not be tested for any quarter during the Term so long
as Borrowers maintain at all times during such fiscal quarter Undrawn
Availability of more than Five Million Dollars ($5,000,000.00).
VIII. CONDITIONS PRECEDENT.
--------------------
8.1. Conditions to Initial Advances. The agreement of Lenders to make the
------------------------------
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed and
----
delivered by an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each document (including,
-------------------------------------
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
the Agent to be filed, registered or recorded in order to create, in favor of
Agent, a perfected security interest in or lien upon the Collateral shall have
been properly filed, registered or recorded in each jurisdiction in which the
filing, registration or recordation thereof is so required or requested, and
Agent shall have received an acknowledgment copy, or other evidence satisfactory
to it, of each such filing, registration or recordation and satisfactory
evidence of the payment of any necessary fee, tax or expense relating thereto;
(c) Corporate Proceedings of Borrowers. Agent shall have received a
----------------------------------
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the Board of Directors of each Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Note and any related agreements,
(collectively the "Documents") and (ii) the granting by each Borrower of the
security interests in and liens upon the Collateral in each case certified by
the Secretary or an Assistant Secretary of each Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;
50
(d) Incumbency Certificates of Borrowers. Agent shall have received
------------------------------------
a certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(e) Intentionally Omitted;
---------------------
(f) Intentionally Omitted;
---------------------
(g) Certificates. Agent shall have received a copy of the Articles
------------
or Certificate of Incorporation of each Borrower, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation together with copies of the By-Laws of each
Borrower and all agreements of each Borrower's shareholders certified as
accurate and complete by the Secretary of each Borrower;
(h) Good Standing Certificates. Agent shall have received good
----------------------------
standing certificates for each Borrower dated not more than fifteen (15) days
prior to the Closing Date, issued by the Secretary of State or other appropriate
official of each Borrower's jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(i) Legal Opinion. Agent shall have received the executed legal
--------------
opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ in form and substance satisfactory to Agent
which shall cover such matters incident to the transactions contemplated by this
Agreement, the Note and related agreements as Agent may reasonably require and
each Borrower hereby authorizes and directs such counsel to deliver such
opinions to Agent and Lenders;
(j) No Litigation. (i) No litigation, investigation or proceeding
-------------
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Borrower or the conduct of its business
or inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(k) Financial Condition Certificates. Agent shall have received
----------------------------------
an executed Financial Condition Certificate in the form of Exhibit 8.1(k).
--------------
(l) Collateral Examination. Agent shall have completed Collateral
----------------------
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables, Inventory, General
Intangibles, and Equipment of each Borrower and all books and records in
connection therewith;
51
(m) Fees. Agent shall have received all fees payable to Agent and
----
Lenders on or prior to the Closing Date pursuant to Article III hereof;
(n) Insurance. Agent shall have received in form and substance
--------
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;
(o) Payment Instructions. Agent shall have received written
---------------------
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(p) Blocked Accounts. Agent shall have received duly executed
-----------------
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(q) Consents. Agent shall have received any and all Consents
--------
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(r) No Material Adverse Change. (i) since March 31, 2000, there
--------------------------
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(s) Leasehold Agreements. Agent shall have received landlord,
---------------------
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;
(t) Stock Pledge Agreements and Other Documents. Agent shall
----------------------------------------------
have received (i) the executed Stock Pledge Agreements by Borrowers; and (ii)
the executed Other Documents, all in form and substance satisfactory to Agent;
(u) Contract Review. Agent shall have reviewed all material
---------------
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(v) Closing Certificate. Agent shall have received a closing
-------------------
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no
52
Default or Event of Default has occurred or is continuing;
(w) Borrowing Base. Agent shall have received evidence from
---------------
Borrowers that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Advances in the amount
requested by Borrowers on the Closing Date;
(x) Undrawn Availability. After giving effect to the initial
---------------------
Advances hereunder, Borrowers shall have Undrawn Availability of at least Five
Million Dollars ($5,000,000.00); and
(y) SeraNova Note. Borrower shall have delivered to Agent and
-------------
endorsed to Agent a promissory note, in form and substance acceptable to Agent,
evidencing the obligation of SeraNova to repay to Intelligroup, Inc.
indebtedness outstanding as of the Closing Date in the sum of $15,100,000.00 and
the repayment schedule of and interest accruing upon such indebtedness.
(z) Other. All corporate and other proceedings, and all
-----
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
----------------------------
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Borrower in or pursuant to this Agreement and any related
agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have occurred
----------
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date, provided, however that Lenders, in
-------- -------
their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be
-----------------
made, after giving effect thereto, the aggregate Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
53
IX. INFORMATION AS TO BORROWERS.
---------------------------
Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
-------------------------------
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
9.2. Schedules. Deliver to Agent on or before the fifteenth (15th) day of
---------
each month as and for the prior month (a) accounts receivable ageings, (b)
accounts payable schedules and (c) a Borrowing Base Certificate (which shall be
calculated as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent's rights under this Agreement). In addition,
each Borrower will deliver to Agent at such intervals as Agent may require: (i)
confirmatory assignment schedules, (ii) copies of Customer's invoices, (iii)
evidence of shipment or delivery, and (iv) such further schedules, documents
and/or information regarding the Collateral as Agent may require including,
without limitation, trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are
to be in form satisfactory to Agent and executed by each Borrower and delivered
to Agent from time to time solely for Agent's convenience in maintaining records
of the Collateral, and any Borrower's failure to deliver any of such items to
Agent shall not affect, terminate, modify or otherwise limit Agent's Lien with
respect to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
---------------------
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any litigation, suit
---------
or administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect on any
Borrower.
9.5. Material Occurrences. Promptly notify Agent in writing upon the
---------------------
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding
54
deficiency which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject any Borrower to
a tax imposed by Section 4971 of the Code; (d) each and every default by any
Borrower which might result in the acceleration of the maturity of any
Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (e) any other development in the business or affairs of any
Borrower which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action Borrowers propose to
take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if any of its
-----------------------
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within ninety-five (95)
---------------------------
days after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a consolidating and consolidated basis including, but not limited
to, statements of income and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and satisfactory to Agent (the
"Accountants"). The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused the Loan
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 7.6 and 7.11 hereof. In addition, the reports shall be
accompanied by a certificate of each Borrower's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by such Borrower
with respect to such event, and such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 6.5, 7.5, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within forty-seven (47)
------------------------------
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers. The reports
shall be accompanied by a certificate signed by the
55
Chief Financial Officer of each Borrower, which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by Borrowers with respect to such default and, such
certificate shall have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by Sections 6.5, 7.5,
7.6 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days
----------------------------
after the end of each month, an unaudited balance sheet of Borrowers on a
consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers. The reports
shall be accompanied by a certificate of each Borrower's Chief Financial
Officer, which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 7.5, 7.6 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as available, but in any event
-------------
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as each Borrower shall send to its stockholders
and/or to the Securities Exchange Commission.
9.11. Additional Information. Furnish Agent with such additional
------------------------
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrowers including, without
limitation and without the necessity of any request by Agent, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of any Borrower's opening of any new office or place of business or any
Borrower's closing of any existing office or place of business, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30)
--------------------------
days subsequent to the beginning of each Borrower's fiscal years commencing with
fiscal year 2001, a quarter by quarter projected operating budget and cash flow
of Borrowers on a consolidated and consolidating basis for such fiscal year
(including an income statement and balance sheet for each fiscal quarter), such
projections to be accompanied by a certificate signed by the President or Chief
Financial Officer of each Borrower to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past
budgets and
56
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with
-------------------------------
the delivery of the financial statements referred to in Section 9.7 and each
monthly report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances, consistent with what is ordinarily
furnished to the Borrowers' Boards of Directors and management, unless otherwise
requested by Agent.
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
-------------------------------
(i) any lapse or other termination of any Consent issued to any Borrower by any
Governmental Body or any other Person that is material to the operation of any
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with immediate written
---------------------------
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group
57
knows that (a) a Multiemployer Plan has been terminated, (b) the administrator
or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer
Plan, or (c) the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan.
9.16 Account Debtor Information. On the first (1st) Business Day after
---------------------------
January 1 and July 1 of each year and at such other time as Agent may request,
provide to Agent a list of all Account Debtors to whom Borrowers have made a
sale within the last six (6) months including the name of each Account Debtor,
the current address of each Account Debtor, the name of each Borrowers' current
contact at each Account Debtor and the current telephone number of each Account
Debtor.
9.17. Additional Documents. Execute and deliver to Agent, upon request,
---------------------
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
-----------------
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
10.2. any representation or warranty made or deemed made by any Borrower
in this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information when
due or when requested, or (ii) permit the inspection of its books or records
upon reasonable prior notice;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property, which is not
discharged, terminated, satisfied or stayed within thirty (30) days of such
issuance;
10.5. except as otherwise provided for in Sections 10.1 and 10.3, failure
or neglect of any Borrower to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any other agreement or
arrangement, now or hereafter entered into between any Borrower and Agent or any
Lender except for a failure or neglect of any Borrower to perform, keep or
observe any term, provision, condition or covenant, contained in Sections
58
4.6, 4.7, 4.9, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within ten (10) days
from the occurrence of such failure or neglect;
10.6. any judgment or judgments are rendered or judgment liens filed
against any Borrower for an aggregate amount in excess of Five Hundred Thousand
Dollars ($500,000.00) which within thirty (30) days of such rendering or filing
is not either satisfied, stayed or discharged of record;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9. any Affiliate or any Subsidiary of any Borrower, or any Guarantor,
shall (i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in any Borrower's condition or affairs (financial or
otherwise) which in Agent's opinion has a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.12. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;
10.13. termination or breach of any Guaranty or Guaranty Security
Agreement or similar agreement executed and delivered to Agent in connection
with the Obligations of any Borrower, or if any Guarantor attempts to terminate,
challenges the validity of, or its liability under, any such Guaranty or
Guaranty Security Agreement or similar agreement;
59
10.14. any Change of Management shall occur;
10.15. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.16. (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of any
Borrower, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such license, permit, trademark, tradename or patent and such
proceedings shall not be dismissed or discharged within sixty (60) days, or (c)
schedule or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of any Borrower's business
and the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trademark, tradename or patent; (ii) any agreement which is
necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect on any Borrower;
10.17. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower or
any Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the opinion
of Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents; or
10.18. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect on any
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
------------------------------------------
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default
-------------------
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances. Upon the occurrence of any Event of
Default, Agent shall have the right to exercise any and all other rights and
remedies provided for herein, under the Uniform Commercial Code and at law or
equity generally, including, without limitation, the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available
60
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Agent may enter any of any
Borrower's premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and remove the same to such place as Agent may deem advisable and Agent may
require Borrowers to make the Collateral available to Agent at a convenient
place. With or without having the Collateral at the time or place of sale, Agent
may sell the Collateral, or any part thereof, at public or private sale, at any
time or place, in one or more sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as Agent may elect. Except as
to that part of the Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Agent
shall give Borrowers reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to Borrowers at least five (5)
days prior to such sale or sales is reasonable notification. At any public sale
Agent or any Lender may bid for and become the purchaser, and Agent, any Lender
or any other purchaser at any such sale thereafter shall hold the Collateral
sold absolutely free from any claim or right of whatsoever kind, including any
equity of redemption and such right and equity are hereby expressly waived and
released by each Borrower. In connection with the exercise of the foregoing
remedies, Agent is granted permission to use all of each Borrower's trademarks,
trade styles, trade names, patents, patent applications, licenses, franchises
and other proprietary rights which are used in connection with (a) Inventory for
the purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Agent for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the Collateral; second, to interest due upon any of the
Obligations and any fees payable under this Agreement; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrowers shall
remain liable to Agent and Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
-------------------
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
------
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any Borrower's
property held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
---------------------------------
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
61
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
--------------------------------
12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment
----------------
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
-----
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
-----------
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
------------------------------
13.1. Term. This Agreement, which shall inure to the benefit of and shall
----
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until May 31, 2003 (the "Term") unless
sooner terminated as herein provided. Borrowers may terminate this Agreement at
any time upon ninety (90) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the
second annual anniversary of the Closing Date (the date of such prepayment
hereinafter referred to as the "Early Termination Date"), Borrowers shall pay to
Agent for the benefit of Lenders an early termination fee in an amount equal to
one-half of one percent (1/2%) of the maximum Revolving Advance Amount if the
Early Termination Date occurs on or after the Closing Date to and including the
date immediately preceding the first anniversary of the Closing Date and
one-quarter of one percent (1/4%) of the Maximum Revolving Advance Amount if the
Early
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Termination Date occurs on or after the first anniversary of the Closing Date to
and including the date immediately preceding the second anniversary of the
Closing Date, provided, also, however, (a) no Early Termination Fee shall be due
in the event of a refinancing of the Obligations by PNC and (b) the Early
Termination Fee will be reduced to one-quarter of one percent (1/4%) and
one-eighth of one percent (1/8%) in years one and two, respectively, in the
event of a repayment of the Obligations out of the proceeds of equity invested
in Borrowers after the Closing Date.
13.2. Termination. The termination of the Agreement shall not affect any
-----------
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders
with an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under Section
9-404(1) of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such termination statements to each Borrower, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
---------------
14.1. Appointment. Each Lender hereby designates PNC to act as Agent for
-----------
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including without limitation, collection of the Note) Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
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required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an
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indemnification reasonably satisfactory to Agent with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
----------------
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness, due
execution, enforceability or sufficiency of this Agreement, or any of the Other
Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and without
-----------------------------------------
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of each Borrower in connection with the making and the continuance of
the Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of each Borrower.
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Advances or at
any time or times thereafter except as shall be provided by any Borrower
pursuant to the terms hereof. Agent shall not be responsible to any Lender for
any recitals, statements, information, representations or warranties herein or
in any agreement, document, certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Note, the Other Documents or the financial
condition of any Borrower, or the existence of any Event of Default or any
Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowers and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former
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Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent. After any Agent's
resignation as Agent, the provisions of this Article XIV shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
-----------------------
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
--------
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or a
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
-------- ----
directions, 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 Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
---------------
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
-------- ----
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation of
--------------------------------
Agent to lend
65
under this Agreement, the Advances made by it shall have the same rights and
powers hereunder as any other Lender and as if it were not performing the duties
as Agent specified herein; and the term "Lender" or any similar term shall,
unless the context clearly otherwise indicates, include Agent in its individual
capacity as a Lender. Agent may engage in business with any Borrower as if it
were not performing the duties specified herein, and may accept fees and other
consideration from any Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
-----------------------
statements required under Sections 9.7, 9.8, and 9.9 from any Borrower pursuant
to the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to their
----------------------------------
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. CO-BORROWERS/EXISTING DEBT..
---------------------------
15.1 Co-Borrowers. (a) The deletion of SeraNova, Inc. as a
------------
co-borrower with respect to the Existing Revolving Loan (as defined below) and
the handling of this credit facility as a co-borrowing facility is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowers or any other action taken by Agent or any Lender except due to
willful misconduct or gross (not mere) negligence by the indemnified party.
(b) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted to
Agent or any Lender to any Borrower, failure of Agent or any Lender to give any
Borrower notice of borrowing or any other notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
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15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
---------------------
rights of subrogation, reimbursement, indemnity, exoneration, contribution or
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
15.3 Existing Obligations. Each Borrower hereby acknowledges and agrees
--------------------
that:
(a) Intelligroup, Inc. and PNC Bank, National Association are
parties to that certain Revolving Credit Loan Agreement dated January 29, 1999
(the "Existing Loan Agreement") whereby certain loans, advances and other
accommodations have been made to Intelligroup, Inc.
(b) This Agreement is intended to amend and restate the Existing
Loan Agreement in its entirety.
(c) All Obligations of Intelligroup, Inc. incurred pursuant to the
Existing Loan Agreement shall, commencing the Closing Date, be governed by the
terms and conditions set forth in this Agreement and secured by the Collateral
granted by each of the Borrowers pursuant to this Agreement.
(d) As of the date hereof the principal sum of Three Million Forty
Thousand Four Hundred Eight Dollars ($3,040,408.00) is outstanding pursuant to
the Existing Loan Agreement, together with certain accrued and unpaid interest
(the "Existing Revolving Loan"). All such sums are due without any defense,
offset, counterclaim or recoupment whatsoever.
(e) In consideration for the Lenders' agreement to enter into this
Agreement, each Borrower agrees that it shall be jointly and severally liable
for the Existing Revolving Loan.
XVI. MISCELLANEOUS.
-------------
16.1. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New Jersey applied to contracts to be
performed wholly within the State of New Jersey. Any judicial proceeding brought
by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New Jersey, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it
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and consents that all such service of process may be made by registered mail
(return receipt requested) directed to Borrowers at the address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowers which each Borrower irrevocably appoints as such Borrower's Agent for
the purpose of accepting service within the State of New Jersey. Nothing herein
shall affect the right to serve process in any manner permitted by law or shall
limit the right of Agent or any Lender to bring proceedings against any Borrower
in the courts of any other jurisdiction. Each Borrower waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
---------
conveniens. Any judicial proceeding by any Borrower against Agent or any Lender
----------
involving, directly or indirectly, any matter or claim in any way arising out
of, related to or connected with this Agreement or any related agreement, shall
be brought only in a federal or state court located in the County of Middlesex,
State of New Jersey.
16.2. Entire Understanding. (a) This Agreement and the documents executed
--------------------
concurrently herewith contain the entire understanding between each Borrower,
Agent and each Lender and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each Borrower's, Agent's and each
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other than by an agreement in writing, signed by the party to be
charged. Each Borrower acknowledges that it has been advised by counsel in
connection with the execution of this Agreement and Other Documents and is not
relying upon oral representations or statements inconsistent with the terms and
provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrowers may, subject to the provisions of this Section
16.2 (b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Borrowers, for the purpose of
adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
-------- -------
consent of all Lenders:
(i) increase the Commitment Percentage or maximum dollar
commitment of any Lender.
(ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Lenders pursuant to this Agreement.
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(iii) alter the definition of the term Required Lenders or
alter, amend or modify this Section 16.2(b).
(iv) release any Collateral during any calendar year (other
than in accordance with the provisions of this Agreement) having an aggregate
value in excess of Five Million Dollars ($5,000,000.00).
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving
effect thereto the total of Revolving Advances outstanding hereunder would
exceed the Formula Amount for more than sixty (60) consecutive Business Days or
exceed one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in
effect on the Closing Date.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within ten (10) days of delivery of such request, such Lender shall be deemed to
have consented to matter that was the subject of the request. In the event that
Agent requests the consent of a Lender pursuant to this Section 16.2 and such
consent is denied, then PNC may, at its option, require such Lender to assign
its interest in the Advances to PNC or to another Lender or to any other Person
designated by the Agent (the "Designated Lender"), for a price equal to the then
outstanding principal amount thereof plus accrued and unpaid interest and fees
due such Lender, which interest and fees shall be paid when collected from
Borrowers. In the event PNC elects to require any Lender to assign its interest
to PNC or to the Designated Lender, PNC will so notify such Lender in writing
within forty five (45) days following such Lender's denial, and such Lender will
assign its interest to PNC or the Designated Lender no later than five (5) days
following receipt of such notice pursuant to a Commitment Transfer Supplement
executed by such Lender, PNC or the Designated Lender, as appropriate, and
Agent.
Notwithstanding the foregoing, Agent may at its discretion and without the
consent of the Required Lenders, voluntarily permit the outstanding Revolving
Advances at any time to exceed the Formula Amount by up to one hundred and ten
percent (110%) of the Formula Amount for up to thirty (30) consecutive Business
Days. For purposes of the preceding sentence, the discretion granted to Agent
hereunder shall not preclude involuntary overadvances that may
69
result from time to time due to the fact that the Formula Amount was
unintentionally exceeded for any reason, including, but not limited to,
Collateral previously deemed to be either "Eligible Receivables" or "Eligible
Inventory", as applicable, becomes ineligible, collections of Receivables
applied to reduce outstanding Revolving Advances are thereafter returned for
insufficient funds or overadvances are made to protect or preserve the
Collateral. In the event Agent involuntarily permits the outstanding Revolving
Advances to exceed the Formula Amount by more than ten percent (10%), Agent
shall endeavor to have Borrowers decrease such excess in as expeditious a manner
as is practicable under the circumstances and not inconsistent with the reason
for such excess. Revolving Advances made after Agent has determined the
existence of involuntary overadvances shall be deemed to be involuntary
overadvances and shall be decreased in accordance with the preceding sentence.
16.3. Successors and Assigns; Participations; New Lenders.
---------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Borrowers shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its Advances or other
Obligations payable hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall Borrowers be required to pay any such amount arising from the
same circumstances and with respect to the same Advances or other Obligations
payable hereunder to both such Lender and such Transferee. Each Borrower hereby
grants to any Transferee a continuing security interest in any deposits, moneys
or other property actually or constructively held by such Transferee as security
for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in minimum amounts of not less than Ten Million Dollars ($10,000,000.00)
pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender,
the transferor Lender, and Agent and delivered to Agent for recording. Upon such
execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer
70
Supplement, have the rights and obligations of a Lender thereunder with a
Commitment Percentage as set forth therein, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrowers hereby
consent to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Borrowers shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Advances owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrowers, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by Borrowers or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.
(e) Each Borrower authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
such Borrower which has been delivered to such Lender by or on behalf of such
Borrower pursuant to this Agreement or in connection with such Lender's credit
evaluation of such Borrower.
16.4. Application of Payments. Agent shall have the continuing and
-------------------------
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each
---------
of their respective officers, directors, Affiliates, employees and agents from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and
71
disbursements of counsel) which may be imposed on, incurred by, or asserted
against Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency or instrumentality or any
other Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement or the Other
Documents, whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing arises out of the gross negligence or willful
misconduct of the party being indemnified. Notwithstanding anything contained
herein to the contrary, the gross negligence exception to Borrowers' indemnity
obligations as set forth in the immediately preceding sentence shall not apply
to the specific indemnity obligations set forth in Section 2.10 above.
16.6. Notice. Any notice or request hereunder may be given to any Borrower
------
or to Agent or any Lender at their respective addresses set forth below or at
such other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:
(A) If to Agent or PNC Bank, National Association
PNC at: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, V.P.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Pitney, ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
(mailing address)
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(courier address)
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to a Lender other than Agent, as specified on the signature pages
hereof
72
(C) If to Borrowers
or any Borrower, at: Intelligroup, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, CFO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
--------
3.8, 3.9, 4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
------------
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including, without limitation,
--------
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent, Agent on behalf of Lenders and Lenders (a)
in all efforts made to enforce payment of any Obligation or effect collection of
any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with any Borrower, or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
related agreements, may be charged to Borrowers' Account and shall be part of
the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
-----------------
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent
---------------------
or
73
attorney for any of them, shall be liable to any Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.12. Captions. The captions at various places in this Agreement are
--------
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13. Counterparts; Telecopied Signatures. This Agreement may be executed
-----------------------------------
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14. Construction. The parties acknowledge that each party and its
------------
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15. Confidentiality; Sharing Information. (a) Agent, each Lender and
-------------------------------------
each Transferee shall hold all non-public information obtained by Agent, such
Lender or such Transferee pursuant to the requirements of this Agreement in
accordance with Agent's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; provided,
--------
however, Agent, each Lender and each Transferee may disclose such confidential
-------
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by applicable law or
-------- -------
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify the applicable Borrower of the applicable
request for disclosure of such non-public information (A) by a Governmental Body
or representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated.
(b) Each Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision
74
of Section 16.15 as if it were a Lender hereunder. Such authorization shall
survive the repayment of the other Obligations and the termination of the Loan
Agreement.
16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to
---------
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.
Each of the parties has signed this Agreement as of the day and year first
above written.
INTELLIGROUP, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
EMPOWER, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
c/o Intelligroup, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
PNC BANK, NATIONAL ASSOCIATION, as
Lender and as Agent
By: /s/ ▇▇▇▇▇ Raphaels
----------------------
Name: ▇▇▇▇▇ Raphaels
Title: Vice President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Commitment Percentage: 100%
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
) ss.
COUNTY OF ▇▇▇▇▇▇ )
On this 31st day of May, 2000, before me personally came ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
----
to me known, who, being by me duly sworn, did depose and say that he is the
Chief Financial Officer of INTELLIGROUP, INC., the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Notary Public
STATE OF NEW JERSEY )
) ss.
COUNTY OF ▇▇▇▇▇▇ )
On this 31st day of May, 2000, before me personally came ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
----
to me known, who, being by me duly sworn, did depose and say that he is the
Secretary of EMPOWER, INC., the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the board of directors of said corporation, and that he signed his name
thereto by like order.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Notary Public
STATE OF NEW JERSEY )
) ss.
COUNTY OF ▇▇▇▇▇▇ )
On this 31st day of May, 2000, before me personally came ▇▇▇▇▇ RAPHAELS,
----
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of PNC BANK, NATIONAL ASSOCIATION, the national banking association
described in and which executed the foregoing instrument and that he signed his
name thereto by on behalf of said national banking association.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Notary Public
76
List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(k) Financial Condition Certificate
Exhibit 16.3 Commitment Transfer Supplement
Exhibit A Borrowing Base Certificate
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.4(a) Tax Return Examination Status
Schedule 5.6 Prior Names
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
-i-